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
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 122544 January 28, 1999
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BLAZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON,
JR., petitioners,
vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.
G.R. No. 124741 January 28, 1999
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and Jose A. DIZON,
JR., petitioners,
vs.
COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and OVERLAND EXPRESS LINES,
INC., respondents.
MARTINEZ, J.:
Two consolidated petitions were filed before us seeking to set aside and annul the
decisions and resolutions of respondent Court of Appeals. What seemed to be a simple
ejectment suit was juxtaposed with procedural intricacies which finally found its way to
this Court.
G.R. No. 122544:
On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into
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
granted an option to purchase for the amount of P3,000.00 per square meter.
Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased rental of P8,000.00 per month
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
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
P624,000.00 representing rentals in arrears and/or as damages in the form of
reasonable compensation for the use and occupation of the premises during the period
of illegal detainer from June 1976 to November 1982 at the monthly rental of P8,000.00,
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
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
order enjoining the enforcement of said judgment and dismissal of the case for lack of
jurisdiction of the City Court.
On September 26, 1984, the then Intermidiate Appellate Court 3 (now Court of Appeals)
rendered a decision 4 stating that:
. . ., 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
private respondents in consideration of the option and, whether petitioner thereafter
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
consonance with the ruling in the case of Teodoro, Jr. vs. Mirasol (supra), the above
matters may be raised and decided in the unlawful detainer suit as, to rule otherwise,
would be a violation of the principle prohibiting multiplicity of suits. (Original Records,
pp. 38-39).
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
subsequent motion for reconsideration in a resolution dated September 9, 1985. 5
On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of
Quezon City (Civil Case No. Q-45541) an action for Specific Performance and Fixing of
Period for Obligation with prayer for the issuance of a restraining order pending hearing
on the prayer for a writ of preliminary injunction. It sought to compel the execution of a
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
court denied the issuance of a writ of preliminary injunction on the ground that the
decision of the then City Court for the ejectment of the private respondent, having been
affirmed by the then Intermediate Appellate Court and the Supreme Court, has become
final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of Quezon
City, Branch 102 (Civil Case No. Q-46487) on November 15, 1985 a complaint for
Annulment of and Relief from Judgment with injunction and damages. In its decision 6
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
dissolved. It also ordered private respondent to pay P3,000.00 as attorney's fees. As a
consequence of private respondent's motion for reconsideration, the preliminary
injunction was reinstated, thereby restraining the execution of the City Court's
judgment on the ejectment case.
The two cases were the after consolidated before the RTC of Quezon City, Branch 77. On
April 28, 1989, a decision 7 was rendered dismissing private respondent's complaint in
Civil Case No. Q-45541 (specific performance case) and denying its motion for
reconsideration in Civil Case No. 46487 (annulment of the ejectment case). The motion
for reconsideration of said decision was likewise denied.
On appeal, 8 respondent Court of Appeals rendered a decision 9 upholding the
jurisdiction of the City Court of Quezon City in the ejectment case. It also concluded that
there was a perfected contract of sale between the parties on the leased premises and
that pursuant to the option to buy agreement, private respondent had acquired the
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,
which petitioners accepted (through Alice A. Dizon) and for which an official receipt was
issued, was the operative act that gave rise to a perfected contract of sale, and that for
failure of petitioners to deny receipt thereof, private respondent can therefore assume
that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the
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
leased property shall not pass to the private respondent until it has fully paid the
purchase price. Since private respondent did not consign to the court the balance of the
purchase price and continued to occupy the subject premises, it had the obligation to
pay the amount of P1,700.00 in monthly rentals until full payment of the purchase price.
The dispositive portion of said decision reads:
WHEREFORE, the appealed decision in Case No. 46387 is AFFIRMED. The appealed
decision in Case No. 45541 is, on the other hand, ANNULLED and SET ASIDE. The
defendants-appellees are ordered to execute the deed of absolute sale of the property
in question, free from any lien or encumbrance whatsoever, in favor of the plaintiff-
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
purchase price by the plaintiff-appellant. The plaintiff-appellant is ordered to pay
P1,700.00 per month from June 1976, plus 6% interest per annum, until payment of the
balance of the purchase price, as previously agreed upon by the parties.
SO ORDERED.
Upon denial of the motion for partil reconsideration (Civil Case No. Q-45541) by
respondent Court of Appeals, 10 petitioners elevated the case via petition for certiorari
questioning the authority of Alice A. Dizon as agent of petitioners in receiving private
respondent's partial payment amounting to P300,000.00 pursuant to the Contract of
Lease with Option to Buy. Petitioner also assail the propriety of private respondent's
exercise of the option when it tendered the said amount on June 20, 1975 which
purportedly resulted in a perfected contract of sale.
G.R. No. 124741:
Petitioners filed with respondent Court of Appeals a motion to remand the records of
Civil Case No. 38-29155 (ejectment case) to the Metropolitan Trial Court (MTC), then
City Court of Quezon City, Branch 38, for execution of the judgment 11 dated November
22, 1982 which was granted in a resolution dated June 29, 1992. Private respondent
filed a motion to reconsider said resolution which was denied.
Aggrieved, private respondent filed a petition for certiorari, prohibition with preliminary
injunction and/or restraining order with this Court (G.R. Nos. 106750-51) which was
dismissed in a resolution dated September 16, 1992 on the ground that the same was a
refiled case previously dismissed for lack of merit. On November 26, 1992, entry of
judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of 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
execution. In denying private respondent's motion for reconsideration, it ordered the
immediate implementation of the third writ of execution without delay.
On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of
Quezon City, Branch 104 a petition for certiorari and prohibition with preliminary
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.
On January 11, 1994, RTC of Quezon City, Branch 104 issued an
order12 granting the issuance of a writ of preliminary injunction upon private
respondent's' posting of an injunction bond of P50,000.00.
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
temporary restraining order and/or preliminary injunction with the Court of Appeals. In
its decision, 14 the Court of Appeals dismissed the petition and ruled that:
The avowed purpose of this petition is to enjoin the public respondent from restraining
the ejectment of the private respondent. To grant the petition would be to allow the
ejectment of the private respondent. We cannot do that now in view of the decision of
this Court in CA-G.R. CV Nos. 25153-54. Petitioners' alleged right to eject private
respondent has been demonstrated to be without basis in the said civil case. The
petitioners have been shown, after all, to have no right to eject private respondents.
WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED.
SO ORDERED. 15
Petitioners' motion for reconsideration was denied in a resolution 16 by the Court of
Appeals stating that:
This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiff-
appellant (private respondent herein) acquired the rights of a vendee in a contract of
sale, in effect, recognizing the right of the private respondent to possess the subject
premises. Considering said decision, we should not allow ejectment; to do so would
disturb the status quo of the parties since the petitioners are not in possession of the
subject property. It would be unfair and unjust to deprive the private respondent of its
possession of the subject property after its rights have been established in a subsequent
ruling.
WHEREFORE, the motion for reconsideration is DENIED for lack of merit.
SO ORDERED. 17
Hence, this instant petition.
We find both petitions impressed with merit.
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
Buy was for a period of one (1) year (May 16, 1974 to May 15, 1975) during which the
private respondent was given an option to purchase said property at P3,000.00 square
meter. After the expiration thereof, the lease was for P3,000.00 per month.
Admittedly, no definite period beyond the one-year term of lease was agreed upon by
petitioners and private respondent. However, since the rent was paid on a monthly
basis, the period of lease is considered to be from month to month in accordance with
Article 1687 of the New Civil Code.18 Where the rentals are paid monthly, the lease,
even if verbal may be deemed to be on a monthly basis, expiring at the end of every
month pursuant to Article 1687, in relation to Article 1673 of the Civil Code. 19 In such
case, a demand to vacate is not even necessary for judicial action after the expiration of
every month. 20
When private respondent failed to pay the increased rental of P8,000.00 per month in
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
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
did not divest the then City Court of its jurisdiction to take cognizance over the
ejectment case. Of note is the fact that the decision of the City Court was affirmed by
both the Intermediate Appellate Court and this Court.
Second. Having failed to exercise the option within the stipulated one-year period,
private respondent cannot enforce its option to purchase anymore. Moreover, even
assuming arguendo that the right to exercise the option still subsists at the time private
respondent tendered the amount on June 20, 1975, the suit for specific performance to
enforce the option to purchase was filed only on October 7, 1985 or more than ten (10)
years after accrual of the cause of action as provided under Article 1144 of the New Civil
Code.21

In this case, there was a contract of lease for one (1) year with option to purchase. The
contract of lease expired without the private respondent, as lessee, purchasing the
property but remained in possession thereof. Hence, there was an implicit renewal of
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
Code 22 are only those terms which are germane to the lessee's right of continued
enjoyment of the property leased. 23 Therefore, an implied new lease does not ipso
facto carry with it any implied revival of private respondent's option to purchase (as
lessee thereof) the leased premises. The provision entitling the lessee the option to
purchase the leased premises is not deemed incorporated in the impliedly renewed
contract because it is alien to the possession of the lessee. Private respondent's right to
exercise the option to purchase expired with the termination of the original contract of
lease for one year. The rationale of this Court is that:
This is a reasonable construction of the provision, which is based on the presumption
that when the lessor allows the lessee to continue enjoying possession of the property
for fifteen days after the expiration of the contract he is willing that such enjoyment
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
the presumed will of the parties refers to the enjoyment of possession the presumption
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
repairs, etc. But no such presumption may be indulged in with respect to special
agreements which by nature are foreign to the right of occupancy or enjoyment
inherent in a contract of lease. 24
Third. There was no perfected contract of sale between petitioners and private
respondent. Private respondent argued that it delivered the check of P300,000.00 to
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
contended that petitioners' filing of the ejectment case against it based on the contract
of lease with option to buy holds petitioners in estoppel to question the authority of
petitioner Fidela Dizon. It insisted that the payment of P300,000.00 as partial payment
of the purchase price constituted a valid exercise of the option to buy.
Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the
moment there is a meeting of minds upon the thing which is the object of the contract
and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts."
Thus, the elements of a contract of sale are consent, object, and price in money or its
equivalent. It bears stressing that the absence of any of these essential elements
negates the existence of a perfected contract of sale. Sale is a consensual contract and
he who alleges it must show its existence by competent proof. 25
In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to
petitioners (thru Alice A. Dizon) on the erroneous presumption that the said amount
tendered would constitute a perfected contract of sale pursuant to the contract of lease
with option to buy. There was no valid consent by the petitioners (as co-owners of the
leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners'
alleged agent, and private respondent. The basis for agency is representation and a
person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent. 26 As provided in Article 1868 of the New Civil Code, 27 there
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
most prudent thing private respondent should have done was to ascertain the extent of
the authority of Alice A. Dizon. Being negligent in this regard, private respondent cannot
seek relief on the basis of a supposed agency.
In Bacaltos Coal Mines vs. Court of Appeals, 28 we explained the rule in dealing with an
agent:
Every person dealing with an agent is put upon inquiry and must discover upon his peril
the authority of the agent. If he does not make such inquiry, he is chargeable with
knowledge of the agent's authority, and his ignorance of that authority will not be any
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
ascertain not only the fact of the agency but also the nature and extent of the authority,
and in case either is controverted, the burden of proof is upon them to establish it.
For the long years that private respondent was able to thwart the execution of the
ejectment suit rendered in favor of petitioners, we now write finis to this controversy
and shun further delay so as to ensure that this case would really attain finality.
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated
March 29, 1994 and the resolution dated October 19, 1995 in CA-G.R. CV No. 25153-54,
as well as the decision dated December 11, 1995 and the resolution dated April 23, 1997
in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE.
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

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-59266 February 29, 1988
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,
vs.
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.
BIDIN, J.:
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
No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos
and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and
(2) its Resolution dated December 16, 1981, denying defendant-appellant's (Petitioner's)
motion for reconsideration, for lack of merit.
The undisputed facts as found by the Court of Appeals are as follows:
The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the
cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners)
Dignos spouses sold the said parcel of land to plaintiff-appellant (respondent Atilano J.
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
paid and acknowledged by the vendors in the deed of sale (Exh. C) executed in favor of
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
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.
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
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:
WHEREFORE, the Court hereby declares the deed of sale executed on November 25,
1965 by defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen
of the United States of America, null and void ab initio, and the deed of sale executed by
defendants Silvestre T. Dignos and Isabela Lumungsod de Dignos not rescinded.
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 plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and
Jovita L. de Cabigas, through their attorney-in-fact, Panfilo Jabalde, reasonable amount
corresponding to the expenses or costs of the hollow block fence, so far constructed.

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
expense of another.
The writ of preliminary injunction issued on September 23, 1966, automatically
becomes permanent in virtue of this decision.
With costs against the defendants.
From the foregoing, the plaintiff (respondent herein) and defendants-spouss
(petitioners herein) appealed to the Court of Appeals, which appeal was docketed
therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al."
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
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.
With costs against defendants-appellants.
SO ORDERED.
Judgment MODIFIED.
A motion for reconsideration of said decision was filed by the defendants- appellants
(petitioners) Dignos spouses, but on December 16, 1981, a resolution was issued by the
Court of Appeals denying the motion for lack of merit.
Hence, this petition.
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
filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August
9,1982, acting on the motion for reconsideration and on all subsequent pleadings filed,
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.
Petitioners raised the following assignment of errors:
I
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY,
INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS
AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN
QUESTION TO THE RESPONDENT AND NOT MERELY A CONTRACT TO SELL OR PROMISE
TO SELL; THE COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING
READING OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE
CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL.
II

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

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING

AND OR IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE
ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE There is no merit in this petition.
SINCE IT HAS NOT BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT.

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 COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE

APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE AND
ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES AND I.
ATTORNEY'S FEES TO PETITIONERS.

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

1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil.
PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, Philippine Currency as advance payment;
HE HAVING COME TO COURT WITH UNCLEAN HANDS.

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

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
over the above-mentioned property upon the payment of the balance of Four Thousand
Pesos. (Original Record, pp. 10-11)
In their motion for reconsideration, petitioners reiterated their contention that the
Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the
same is subject to two (2) positive suspensive conditions, namely: the payment of the
balance of P4,000.00 on or before September 15,1965 and the immediate assumption
of the mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further
contended that in said contract, title or ownership over the property was expressly
reserved in the vendor, the Dignos spouses until the suspensive condition of full and
punctual payment of the balance of the purchase price shall have been met. So that
there is no actual sale until full payment is made (Rollo, pp. 51-52).
In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners
aver that there is absolutely nothing in Exhibit "C" that indicates that the vendors
thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners insist
that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of
conveyance is a very strong indication that the parties did not intend "transfer of
ownership and title but only a transfer after full payment" (Rollo, p. 52). Moreover,
petitioners anchored their contention on the very terms and conditions of the contract,
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
reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned
property upon the payment of the balance of four thousand pesos."
Such contention is untenable.
By and large, the issues in this case have already been settled by this Court in analogous
cases.
Thus, it has been held that a deed of sale is absolute in nature although denominated as
a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso or
stipulation to the effect that title to the property sold is reserved in the vendor until full
payment of the purchase price, nor is there a stipulation giving the vendor the right to
unilaterally rescind the contract the moment the vendee fails to pay within a fixed
period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime
Building Co., Inc., 86 SCRA 305).
A careful examination of the contract shows that there is no such stipulation reserving
the title of the property on the vendors nor does it give them the right to unilaterally
rescind the contract upon non-payment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale under Article 1458 of the
Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate
subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477
of the same Code provides that "The ownership of the thing sold shall be transferred to
the vendee upon actual or constructive delivery thereof." As applied in the case of
Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the
absence of stipulation to the contrary, the ownership of the thing sold passes to the
vendee upon actual or constructive delivery thereof.
While it may be conceded that there was no constructive delivery of the land sold in the
case at bar, as subject Deed of Sale is a private instrument, it is beyond question that
there was actual delivery thereof. As found by the trial court, the Dignos spouses
delivered the possession of the land in question to Jabil as early as March 27,1965 so
that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach
Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's
Beach Resort on September 1, 1965. Such facts were admitted by petitioner spouses
(Decision, Civil Case No. 23-L; Record on Appeal, p. 108).
Moreover, the Court of Appeals in its resolution dated December 16,1981 found that
the acts of petitioners, contemporaneous with the contract, clearly show that an
absolute deed of sale was intended by the parties and not a contract to sell.
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.
II.
Petitioners claim that when they sold the land to the Cabigas spouses, the contract of
sale was already rescinded.
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours
with the case at bar, the contract of sale being absolute in nature is governed by Article
1592 of the Civil Code. It is undisputed that petitioners never notified private
respondents Jabil by notarial act that they were rescinding the contract, and neither did
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
price.

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

SO ORDERED.
Republic of the Philippines - versus -

SUPREME COURT

Manila DOMINADOR SALVADOR, SR., EMILIO FUERTE, FELIZA LOZADA, TRINIDAD LOZADA,
ROSALINA PADLAN, AURORA TOLENTINO, TRINIDAD L. CASTILLO, ROSARIO BONDOC,
SPOUSES EMMA H. VER REYES and RAMON REYES,
THIRD DIVISION

Respondents.
SPOUSES EMMA H. VER REYES and RAMON REYES,

Petitioners, G.R. No. 139047

- versus - G.R. No. 139365

DOMINADOR SALVADOR, SR., EMILIO FUERTE, FELIZA LOZADA, ROSALINA PADLAN, Present:
AURORA TOLENTINO, TRINIDAD L. CASTILLO, ROSARIO BONDOC, MARIA Q. CRISTOBAL
and DULOS REALTY & DEVELOPMENT CORPORATION, TRINIDAD LOZADA, JOHN DOE and
RICHARD DOE,
TINGA,* J.,

Respondents.
CHICO-NAZARIO,

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

MARIA Q. CRISTOBAL and DULOS REALTY & DEVELOPMENT CORPORATION,

VELASCO,*

Petitioners,
NACHURA, and

REYES, JJ.
Promulgated:
September 11, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
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
November 1991 of the Regional Trial Court (RTC) of Pasay City, Branch 119, in the
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
Rosario Bondoc to the disputed property, thus, overturning the finding of the RTC of
Pasay City that Maria Q. Cristobal and Dulos Realty & Development Corporation have a
registrable title to the same property.
The Contracts
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
(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
Declaration No. 2932.5
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
18877 and their marriage produced two children, namely Nicomedes and Pablo.
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
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
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
On 23 June 1965, Nicomedes executed a Deed of Conditional Sale11 over the subject
property in favor of Emma Ver Reyes (Emma), which provided:
That the Vendor [Nicomedes] is the true and lawful owner of a parcel of land situated at
Tungtong, Las Pinas, Rizal, more particularly described as follows:
"A parcel of land (Lot 1 of plan Psu-205035), x x x; containing an area of NINETEEN
THOUSAND FIVE HUNDRED FOURTY FIVE (19,545) SQUARE METERS, more or less, and
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."
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;
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
CONDITIONAL SALE the above-described parcel of land together with all the
improvements thereon to the said Vendee [Emma], her heirs, assigns and successors,
free from all liens and encumbrances, under the following terms and conditions, to wit:
1. That the Vendee [Emma] will pay the Vendor [Nicomedes] as follows:
(a). TWENTY FIVE PERCENT (25%) of the total price on the date of the signing of this
contract;
(b). The next TWENTY FIVE PERCENT (25%) of the total price upon the issuance of the
title for the land described above; and
(c). The balance of FIFTY PERCENT (50%) of the total price within one (1) year from the
issuance of the said title;
2. That if the Vendee [Emma] fails to pay the Vendor [Nicomedes] the sums stated in
paragraphs 1(b) and 1(c) above within the period stipulated and after the grace period
of one (1) month for each payment, this contract shall automatically be null and void
and of no effect without the necessity of any demand, notice or filing the necessary
action in court, and the Vendor [Nicomedes] shall have the full and exclusive right to
sell, transfer and convey absolutely the above-described property to any person, but the
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;
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
4. That the Vendor [Nicomedes] will execute a final deed of absolute sale covering the
said property in favor of the Vendee [Emma] upon the full payment of the total
consideration in accordance with the stipulations above. (Emphases ours.)
The Deed of Conditional Sale was registered in the Registry of Property for Unregistered
Lands in August 1965.12
It would appear from the records of the case that Emma was only able to pay the first
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.
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:
NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of
ONE HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00)
Philippine Currency, which the BUYER [Rosario] shall pay to the SELLER [Nicomedes] in
the manner and form hereinafter specified, the SELLER [Nicomedes] by these presents
hereby agreed and contracted to sell all his rights, interests, title and ownership over
the parcel of land x x x unto the BUYER [Rosario], who hereby agrees and binds herself
to purchase from the former, the aforesaid parcel of land, subject to the following terms
and conditions:
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.
2. [That] upon the delivery by the SELLER [Nicomedes] to the BUYER [Rosario] of a valid
title of the aforesaid parcel of land, free from any and all liens and encumbrances, and
the execution of the final Deed of Sale, the BUYER [Rosario] shall pay to the SELLER
[Nicomedes], the sum of THIRTY SEVEN THOUSAND SEVEN HUNDRED FIVE PESOS
(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
year from the date of execution of the final deed of sale, all without interest.
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
immediately thereafter the SELLER [Nicomedes] shall return to the BUYER [Rosario] the
sums of money he had received from the BUYER [Rosario] without any interests and
whatever improvement or improvements made or introduced by the BUYER [Rosario]
on the lot being sold shall accrue to the ownership and possession of the SELLER
[Nicomedes].
xxxx
6. The SELLER [Nicomedes] hereby warrants the useful and peaceful possession and
occupation of the lot subject matter of this agreement by the BUYER [Rosario].
(Emphasis ours.)
On 7 March 1969, Nicomedes and Rosario executed a Joint Affidavit,14 whereby they
confirmed the sale of the subject property by Nicomedes to Rosario through the
Agreement of Purchase and Sale dated 14 June 1968. They likewise agreed to have the
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
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
contract, Nicomedess application for the registration of the subject property was still
pending.
Five months thereafter, Nicomedes executed on 10 August 1969 a third contract, a Deed
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:
THAT I, NICOMEDES J. LOZADA, of legal age, Filipino citizen, married and a resident of
Las Pias, Rizal, Philippines, for and in consideration of the sum of TWENTY FIVE
THOUSAND (P25,000.00) PESOS, Philippine currency, receipt of which is hereby
acknowledged to my full and entire satisfaction, do hereby sell, transfer and convey to
MARIA Q. CRISTOBAL, likewise of legal age, Filipino citizen, married to Juan [Dulos], and
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
me, and more particularly described as follows:
"A parcel of land described under Tax Declaration No. 9575 (Lot No. 1, Psu 205035),
situated in the Barrio of Tuntong, Municipality of Las Pias, Province of Rizal,
Philippines. xxx [C]ontaining an area of 1.9545 hectares, more or less." (Emphasis ours.)
Nicomedes passed away on 29 June 1972. The Deed of Absolute Sale of Unregistered
Land between Nicomedes and Maria was registered only on 8 February 1973,18 or more
than seven months after the formers death.
On 10 August 1979, Nicomedess heirs, namely, the four children from his first
marriage,19 the six children from his second marriage,20 and his surviving second
spouse Genoveva Pallera Vda. De Lozada, executed a Deed of Extrajudicial Settlement of
the Estate of the Late Nicomedes J. Lozada with Ratification of a Certain Deed of
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
made by Nicomedes in favor of Maria, but they clarified that the actual area of the
portion sold as presented in the plan was 2,287 square meters, not 2,000 square
meters. After excluding the portion sold to Maria, the heirs claimed equal pro indiviso
shares in the remaining 17,258 square meters of the subject property.
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
of an Unregistered Land.23 The said Deed of Absolute Sale dated 30 July 1980, however,
was not registered.
The Cases
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.
The grandchildren of Domingo by his former marriage24 opposed the application for
registration and Emma and her husband Ramon filed their intervention.
Sometime in 1973, following the execution in her favor of the Agreement of Purchase
and Sale dated 14 June 1968 and Joint Affidavit dated 7 March 1969, Rosario filed a
motion to intervene in LRC Case No. N-6577 then pending before the CFI of Pasig;
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 view of the conflicting claims over the subject property, the CFI of Pasig dismissed
without prejudice LRC Case No. N-6577 on 21 November 1975 and ordered the parties
therein, namely, the applicant Nicomedes and the oppositors/intervenors, to litigate
first the issues of ownership and possession.26
Five years later, on 27 June 1980, Domingos grandchildren from his first marriage,
Dominador, et al.,27 filed an Application for Registration28 of title to the subject
property with the CFI of Rizal, docketed as LRC Case No. LP-553-P. In their Application,
Dominador, et al., alleged, inter alia, that they were the owners 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
same.
On 6 November 1980, Rosario, assisted by her husband Mariano Bondoc, invoking the
Agreement of Purchase and Sale executed in her favor by Nicomedes on 14 June 1968,
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
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 4 August 1981, the parties agreed to have LRC Case No. LP-553-P (the application for
land registration of Dominador, et al.) consolidated with Civil Case No. Pq-8557-P (the
action for declaration of ownership of Rosario).30
By subsequent events,31 and in consideration of the location of the subject property in
Las Pias, LRC Case No. LP-553-P and Civil Case No. Pq-8557-P, reinstated as Civil Case
No. 6914-P, were finally transferred to and decided by the RTC of Pasay City.
In its Decision dated 25 November 1991, the RTC of Pasay City, Branch 119, disposed of
the cases thus:

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,
confirming title and decreeing the registration of Lot 1 PSU-205035 containing a total
area of 19,545 square meters, 2,287 square meters of which appertains to Maria
Cristobal Dulos married to Juan Dulos and the remaining portion, in favor of Dulos
Realty and Development Corporation, without pronouncement as to costs.32 (Emphasis
ours.)
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,
properly pertained to Nicomedes as one of his sons in said marriage. Being Domingos
heirs from his first marriage, Dominador, et al., were not entitled to the subject
property.
The lower court also found that neither Emma nor Rosario acquired a better title to the
subject property as against Maria and Dulos Realty. No final deed of sale over the
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
July 1980, respectively.
Dominador, et al., Emma and her spouse Ramon Reyes (Ramon), and Rosario separately
appealed to the Court of Appeals the foregoing Decision dated 25 November 1991 of
the RTC of Pasay City.33 Their consolidated appeals were docketed as CA-G.R. CV No.
35688.
Dominador, et al., however, moved to withdraw their appeal in light of the amicable
settlement they entered into with Maria and Dulos Realty.34 In a Resolution dated 24
September 1992,35 the Court of Appeals granted their Motion to Withdraw Appeal.
Dominador, et al., later filed a motion to withdraw their earlier Motion to Withdraw
Appeal, but this was denied by the Court of Appeals in a Resolution dated 15 January
1993.36
In their respective Briefs before the appellate court,37 Emma and Rosario both faulted
the RTC of Pasay City for awarding the subject property to Maria and Dulos Realty. They
each claimed entitlement to the subject property and asserted the superiority of their
respective contracts as against those of the others.
On 17 June 1999, the Court of Appeals rendered its assailed Decision, ruling as follows:
As gathered above, both contracts [entered into with Emma and Rosario] gave
Nicomedes, as vendor, the right to unilaterally rescind the contract the moment the
buyer failed to pay within a fixed period (Pingol v. CA, 226 SCRA 118), after which he, as
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
vendor, in case of rescission, would become the owner and entitled to the possession of
whatever improvements introduced by the buyer.
Under the Deed of Conditional Sale [to Emma], there was no provision that possession
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
case of rescission, any improvements introduced by the vendee would become the
vendors implies that possession was transferred to the vendee and, therefore, it
appears to be a contract of sale.
That the Agreement of Purchase and Sale [with Rosario] was a contract of sale gains
light from the Joint Affidavit subsequently executed by Rosario and Nicomedes stating
that "an Agreement of Purchase and Sale wherein the former (Nicomedes J. Lozada)
sold to the latter (Rosario D. Bondoc) a parcel of land" had been executed but that the
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
the provision of Section 194 of the Revised Administrative Code, as amended by Act No.
3344."
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
Trinidad, et al., for declaration ownership.
Article 1371 of the Civil Code provides:
"Art. 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered."
From the provisions of the Agreement of Purchase and Sale [to Rosario] and the
subsequent acts of the parties then including the execution of the Joint Affidavit by
Rosario and Nicomedes stating that "an Agreement of Purchase and Sale wherein the
former (Nicomedes...) sold to the latter (Rosario...) a parcel of land", had been executed,
there is no mistaking that the lot was sold to Rosario xxx.
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
registered under Act No. 496 or under the Spanish Mortgage Law]) provides that any
registration made under Sec. 194 of the Administrative Code "shall be understood to be
without prejudice to a third party who has a better right".
"Better right", however, was not defined by law.
But author Narciso Pea is inclined to concur that "better right" should refer to a "right
which must have been acquired by a third party independently of the unregistered
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.
Given the fact that the contract in Emmas favor is a mere contract to sell, as against
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
earlier than Emmas, Rosario must prevail.
The lot having been previously sold to Rosario, there was no lot or portion thereof to be
later sold to Maria and to Dulos Realty in 1979 and 1980, respectively.
WHEREFORE, the appealed Joint Decision is hereby REVERSED and SET ASIDE and
another is rendered confirming the title of Rosario D. Bondoc over subject lot, Lot 1,
PSU-205035 containing an area of 19,545 sq.m., ordering its registration in her name,
and dismissing the claims of ownership of all other claimants. Appellees Maria Cristobal
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.
Upon issuance of title to subject lot, appellant Rosario D. Bondoc is ordered to pay the
balance of the purchase price to the heirs of Nicomedes Lozada in accordance with the
Agreement of Purchase and Sale executed by the latter in her favor. This judgment is
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.)
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
Court, docketed as G.R. No. 139047 and G.R. No. 139365, respectively, assailing the 17
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.
In their Petition, Emma and her husband Ramon raise the following issues:
I.
WHETHER OR NOT OWNERSHIP OF THE DISPUTED LOT WAS VALIDLY AND LEGALLY
TRANSFERRED TO EMMA VER REYES.
II.
WHETHER OR NOT MARIA CRISTOBAL DULOS AND DULOS REALTY AND DEVELOPMENT
CORPORATION ARE PURCHASERS IN BAD FAITH.
III.
WHETHER OR NOT EMMA VER REYES AND RAMON REYES ARE BARRED BY
PRESCRIPTION OR LACHES.
IV.
WHETHER OR NOT THE COURT OF APPEALS PATENTLY AND GRAVELY ERRED IN
CONFIRMING THE TITLE OF ROSARIO BONDOC OVER THE DISPUTED LOT, ORDERING ITS
REGISTRATION IN HER NAME AND DISMISSING THE CLAIM OF EMMA VER REYES AND
RAMON REYES.43
Maria and Dulos Realty, on the other hand, submitted in their Petition the following
issues for consideration of this Court:
I.
WHETHER OR NOT BONDOCS AGREEMENT OF PURCHASE AND SALE AND SPOUSES
REYES DEED OF CONDITIONAL SALE ARE REGISTRABLE ABSOLUTE CONVEYANCES IN FEE
SIMPLE TO SERVE AS BASIS FOR AN AWARD AND REGISTRATION OF THE SUBJECT LOT IN
THEIR FAVOR.
II.
WHETHER OR NOT RESPONDENTS BONDOC AND THE REYESES ARE BARRED BY LACHES
AND/OR PRESCRIPTION.
III.
WHETHER OR NOT RESPONDENT BONDOC IS BARRED BY RES JUDICATA.44
The fundamental issue that the Court is called upon to resolve is, in consideration of all
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
prospective seller does not as yet agree or consent to transfer ownership of the
property subject of the contract to sell until the happening of an event, which for
present purposes we shall take as the full payment of the purchase price. What the
seller agrees or obliges himself to do is to fulfill his promise to sell the subject property
when the entire amount of the purchase price is delivered to him. In other words the
full payment of the purchase price partakes of a suspensive condition, the non-
fulfillment of which prevents the obligation to sell from arising and thus, ownership is
retained by the prospective seller without further remedies by the prospective buyer. In
Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass
until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, the prospective sellers obligation to sell the subject
property by entering into a contract of sale with the prospective buyer becomes
demandable as provided in Article 1479 of the Civil Code which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from
the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional
contract of sale where the seller may likewise reserve title to the property subject of the
sale until the fulfillment of a suspensive condition, because in a conditional contract of
sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is completely abated (cf.
Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the
suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if
there had already been previous delivery of the property subject of the sale to the
buyer, ownership thereto automatically transfers to the buyer by operation of law
without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full
payment of the purchase price, ownership will not automatically transfer to the buyer
although the property may have been previously delivered to him. The prospective
seller still has to convey title to the prospective buyer by entering into a contract of
absolute sale. (Emphases ours.)
Also in Coronel v. Court of Appeals, the Court highlighted the importance of making the
distinction between a contract to sell and a contract of sale:
It is essential to distinguish between a contract to sell and a conditional contract of sale
specially in cases where the subject property is sold by the owner not to the party the
seller contracted with, but to a third person, as in the case at bench. In a contract to sell,
there being no previous sale of the property, a third person buying such property
despite the fulfillment of the suspensive condition such as the full payment of the
purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective
buyer cannot seek the relief of reconveyance of the property. There is no double sale in
such case. Title to the property will transfer to the buyer after registration because
there is no defect in the owner-sellers title per se, but the latter, of course, may be
sued for damages by the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive
condition, the sale becomes absolute and this will definitely affect the sellers title
thereto. In fact, if there had been previous delivery of the subject property, the sellers
ownership or title to the property is automatically transferred to the buyer such that,
the seller will no longer have any title to transfer to any third person. Applying Article
1544 of the Civil Code, such second buyer of the property who may have had actual or
constructive knowledge of such defect in the sellers title, or at least was charged with
the obligation to discover such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyers title. In case a title is issued to the second buyer,
the first buyer may seek reconveyance of the property subject of the sale.47
Even in the absence of an express stipulation to such effect, the intention of the parties
to execute a contract to sell may be implied from the provisions of the contract. While
Article 147848 of the Civil Code recognizes the right of the parties to agree that the
ownership of the thing shall not pass to the purchaser until he has fully paid the price
therefore, the same statutory provision does not require that such be expressly
stipulated in the contract.
In Adelfa Properties, Inc. v. Court of Appeals,49 the Court ruled that since the contract
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
ownership to the buyer prior to the completion of the payment of the purchase price.
Consequently, the contract involved in the aforementioned case was a mere contract to
sell.
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
purchase offers.50 In the same vein, where the seller promises to execute a deed of
absolute sale upon the completion by the buyer of the payment of the price, the
contract is only a contract to sell.51
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.
The Court looks beyond the title of said document, since the denomination or title given
by the parties in their contract is not conclusive of the nature of its contents.52 In the
construction or interpretation of an instrument, the intention of the parties is primordial
and is to be pursued.53 If the terms of the contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of its stipulations shall
control. If the words appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former.54
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
required therein; and, in such an event, it grants Nicomedes the exclusive right to
thereafter sell the subject property to a third person. As in Adelfa Properties, the
contract between Nicomedes and Emma does not provide for reversion or
reconveyance of the subject property to Nicomedes in the event of nonpayment by
Emma of the purchase price. More importantly, the Deed in question clearly states that
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
Nicomedes pending payment by Emma of the full purchase price for the same.
While the Deed of Conditional Sale dated 23 June 1965 was indeed contained in a public
instrument, it did not constitute constructive delivery of the subject property to Emma
in view of the contrary inference in the Deed itself that the ownership over the subject
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.
This Court also finds that, contrary to the ruling of the Court of Appeals, the Agreement
of Purchase and Sale executed by Nicomedes in favor of Rosario on 14 June 1968 is
likewise a mere contract to sell.
The Agreement itself categorically states that Nicomedes only undertakes to sell the
subject property to Rosario upon the payment of the stipulated purchase price and that
an absolute deed of sale is yet to be executed between the parties. Thus:
NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of
ONE HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00)
Philippine Currency, which the BUYER shall pay to the SELLER in the manner and form
hereinafter specified, the SELLER by these presents hereby agreed and contracted to sell
all his rights, interests, title and ownership over the parcel of land xxx unto the BUYER,
who hereby agrees and binds herself to purchase from the former, the aforesaid parcel
of land, subject to the following terms and conditions:
1. Upon the execution of this Agreement, the BUYER shall pay the SELLER, the sum of
FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency.
2. That upon the delivery by the SELLER to the BUYER of a valid title of the aforesaid
parcel of land, free from any and all liens and encumbrances, and the execution of the
final Deed of Sale, the BUYER shall pay to the SELLER, the sum of THIRTY SEVEN
THOUSAND SEVEN HUNDRED FIVE PESOS (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 year from the date of the execution of the final
deed of sale, all without interest.56 (Emphases ours.)
The Agreement additionally grants Nicomedes the right to automatically cancel the
same in the event of nonpayment by Rosario of any of the specified sums therein and
any improvement introduced in the subject property shall thereby accrue to Nicomedes,
viz:
3. That in the event the BUYER 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 immediately
thereafter the SELLER shall return to the buyer the sums of money he had received from
the BUYER without any interests and whatever improvement or improvements made or
introduced by the BUYER on the lot being sold shall accrue to the ownership and
possession of the SELLER.57
As can be clearly read above, only the rights to possess the property and construct
improvements thereon have been evidently given to Rosario. The provisions of the
Agreement do not in any way indicate that the ownership of the subject property has
likewise been transferred to Rosario. That Nicomedes shall appropriate the
improvements as his own should Rosario default in her payment of the purchase price
only further supports the conclusion that title to the subject property itself still
remained with Nicomedes.
The Court concludes that the Deed of Conditional Sale in favor of Emma and the
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
property to another buyer. This fact, however, is without prejudice to the rights of
Emma and Rosario to seek relief by way of damages against the estate and heirs of
Nicomedes to the extent that the latter were benefited by the sale to succeeding
buyers.58
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
thereof leave no doubt that the same were true contracts of sale. The total
considerations for the respective portions of the subject property were fully paid by the
buyers and no conditions whatsoever were stipulated upon by the parties as regards the
transmission of the ownership of the said property to the said buyers.
The fact that Rosario was the first among the parties to register her contract in the
Registry of Property for Unregistered Lands on 10 March 1969 is of no moment.
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
costs.

SO ORDERED.
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;
SUPREME COURT

Manila
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;
THIRD DIVISION

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.

GREGORIO FULE, petitioner, SO ORDERED.

vs.

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:

ROMERO, J.:
This petition for review on certiorari questions the affirmance by the Court of Appeals of
the decision 1 of the Regional Trial Court of San Pablo City, Branch 30, dismissing the
complaint that prayed for the nullification of a contract of sale of a 10-hectare property
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
follows:
WHEREFORE, premises considered, the Court hereby renders judgment dismissing the
complaint for lack of merit and ordering plaintiff to pay:
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.
Antonio Jacobe. The latter had mortgaged it earlier to the Rural Bank of Alaminos (the
Bank), Laguna, Inc. to secure a loan in the amount of P10,000.00, but the mortgage was
later foreclosed and the property offered for public auction upon his default.
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
happened that at the time, petitioner had shown interest in buying a pair of emerald-cut
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,
petitioner inspected said jewelry at the lobby of the Prudential Bank branch in San Pablo
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.
Subsequently, however, negotiations for the barter of the jewelry and the Tanay
property ensued. Dr. Cruz requested herein private respondent Atty. Juan Belarmino to
check the property who, in turn, found out that no sale or barter was feasible because
the one-year period for redemption of the said property had not yet expired at the time.
In an effort to cut through any legal impediment, petitioner executed on October 19,
1984, a deed of redemption on behalf of Fr. Jacobe purportedly in the amount of
P15,987.78, and on even date, Fr. Jacobe sold the property to petitioner for P75,000.00.
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
the jewelry.
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.
Belarmino was aware that she and petitioner had previously agreed to exchange a pair
of emerald-cut diamond earrings for the Tanay property. Atty. Belarmino accordingly
caused the preparation of a deed of absolute sale while petitioner and Dr. Cruz attended
to the safekeeping of the jewelry.
The following day, petitioner, together with Dichoso and Mendoza, arrived at the
residence of Atty. Belarmino to finally execute a deed of absolute sale. Petitioner signed
the deed and gave Atty. Belarmino the amount of P13,700.00 for necessary expenses in
the transfer of title over the Tanay property. Petitioner also issued a certification to the
effect that the actual consideration of the sale was P200,000.00 and not P80,000.00 as
indicated in the deed of absolute sale. The disparity between the actual contract price
and the one indicated on the deed of absolute sale was purportedly aimed at minimizing
the amount of the capital gains tax that petitioner would have to shoulder. Since the
jewelry was appraised only at P160,000.00, the parties agreed that the balance of
P40,000.00 would just be paid later in cash.
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
the bank. Dr. Cruz and Dichoso, therefore, looked for said cashier and found him having
a haircut. As soon as his haircut was finished, the cashier returned to the bank and
arrived there at 5:48 p.m., ahead of Dr. Cruz and Dichoso who arrived at 5:55 p.m. Dr.
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
bank's lobby, held the jewelry against the light and examined it for ten to fifteen
minutes. After a while, Dr. Cruz asked, "Okay na ba iyan?" Petitioner expressed his
satisfaction by nodding his head.
For services rendered, petitioner paid the agents, Dichoso and Mendoza, the amount of
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.
Later, at about 8:00 o'clock in the evening of the same day, petitioner arrived at the
residence of Atty. Belarmino complaining that the jewelry given to him was fake. He
then used a tester to prove the alleged fakery. Meanwhile, at 8:30 p.m., Dichoso and
Mendoza went to the residence of Dr. Cruz to borrow her car so that, with Atty.
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
petitioner had finally agreed to give them half of the pair of earrings, Dichoso went
posthaste to the residence of Atty. Belarmino only to find petitioner already
demonstrating with a tester that the earrings were fake. Petitioner then accused
Dichoso and Mendoza of deceiving him which they, however, denied. They countered
that petitioner could not have been fooled because he had vast experience regarding
jewelry. Petitioner nonetheless took back the US$300.00 and jewelry he had given
them.

Thereafter, the group decided to go to the house of a certain Macario Dimayuga, a
jeweler, to have the earrings tested. Dimayuga, after taking one look at the earrings,
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.
On October 26, 1984, petitioner filed a complaint before the Regional Trial Court of San
Pablo City against private respondents praying, among other things, that the contract of
sale over the Tanay property be declared null and void on the ground of fraud and
deceit.
On October 30, 1984, the lower court issued a temporary restraining order directing the
Register of Deeds of Rizal to refrain from acting on the pertinent documents involved in
the transaction. On November 20, 1984, however, the same court lifted its previous
order and denied the prayer for a writ of preliminary injunction.
After trial, the lower court rendered its decision on March 7, 1989. Confronting the issue
of whether or not the genuine pair of earrings used as consideration for the sale was
delivered by Dr. Cruz to petitioner, the lower court said:
The Court finds that the answer is definitely in the affirmative. Indeed, Dra. Cruz
delivered (the) subject jewelries (sic) into the hands of plaintiff who even raised the
same nearer to the lights of the lobby of the bank near the door. When asked by Dra.
Cruz if everything was in order, plaintiff even nodded his satisfaction (Hearing of Feb.
24, 1988). At that instance, plaintiff did not protest, complain or beg for additional time
to examine further the jewelries (sic). Being a professional banker and engaged in the
jewelry business plaintiff is conversant and competent to detect a fake diamond from
the real thing. Plaintiff was accorded the reasonable time and opportunity to ascertain
and inspect the jewelries (sic) in accordance with Article 1584 of the Civil Code. Plaintiff
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
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
jewelries (sic). The lapse of two (2) hours more or less before plaintiff complained is
considered by the Court as unreasonable delay.3
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
agreement between petitioner and Dr. Cruz was principally a barter contract. The lower
court explained thus:
. . . . 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
other hand, the ownership of Dra. Cruz over the subject jewelries (sic) transferred to the
plaintiff upon her actual personal delivery to him at the lobby of the Prudential Bank. It
is expressly provided by law that the thing sold shall be understood as delivered, when it
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
approval by nodding his head. Delivery or tradition, is one of the modes of acquiring
ownership (Art. 712, Civil Code).
Similarly, when Exhibit D was executed, it was equivalent to the delivery of the Tanay
property in favor of Dra. Cruz. The execution of the public instrument (Exh. D) operates
as a formal or symbolic delivery of the Tanay property and authorizes the buyer, Dra.
Cruz to use the document as proof of ownership (Florendo v. Foz, 20 Phil. 399). More so,
since Exhibit D does not contain any proviso or stipulation to the effect that title to the
property is reserved with the vendor until full payment of the purchase price, nor is
there a stipulation giving the vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period (Taguba v. Vda. De Leon, 132 SCRA
722; Luzon Brokerage Co. Inc. vs. Maritime Building Co. Inc. 86 SCRA 305; Froilan v. Pan
Oriental Shipping Co. et al. 12 SCRA 276). 4
Aside from concluding that the contract of barter or sale had in fact been consummated
when petitioner and Dr. Cruz parted ways at the bank, the trial court likewise dwelt on
the unexplained delay with which petitioner complained about the alleged fakery. Thus:
. . . . Verily, plaintiff is already estopped to come back after the lapse of considerable
length of time to claim that what he got was fake. He is a Business Management
graduate of La Salle University, Class 1978-79, a professional banker as well as a jeweler
in his own right. Two hours is more than enough time to make a switch of a Russian
diamond with the real diamond. It must be remembered that in July 1984 plaintiff made
a sketch of the subject jewelries (sic) at the Prudential Bank. Plaintiff had a tester at 8:00
p.m. at the residence of Atty. Belarmino. Why then did he not bring it out when he was
examining the subject jewelries (sic) at about 6:00 p.m. in the bank's lobby? Obviously,
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
performed by the parties thereto, its existence and binding effect can no longer be
disputed. It is irrelevant and immaterial to dispute the due execution of a contract if
both of them have in fact performed their obligations thereunder and their respective
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:
The Court finds that plaintiff acted in wanton bad faith. Exhibit 2-Belarmino purports to
show that the Tanay property is worth P25,000.00. However, also on that same day it
was executed, the property's worth was magnified at P75,000.00 (Exh. 3-Belarmino).
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
of emerald cut diamond worth P200,000.00 belonging to Dra. Cruz. He also retrieved
the US$300.00 and jewelries (sic) from his agents. But he was not satisfied in being able
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
the process. Both of them are near the twilight of their lives after maintaining and
nurturing their good reputation in the community only to be stunned with a court case.
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
runs her own hospital and defendant Belarmino is a well respected legal practitioner.
The length of time this case dragged on during which period their reputation were (sic)
tarnished and their names maligned by the pendency of the case, the Court is of the
belief that some of the damages they prayed for in their answers to the complaint are
reasonably proportionate to the sufferings they underwent (Art. 2219, New Civil Code).
Moreover, because of the falsity, malice and baseless nature of the complaint
defendants were compelled to litigate. Hence, the award of attorney's fees is warranted
under the circumstances (Art. 2208, New Civil Code).6
From the trial court's adverse decision, petitioner elevated the matter to the Court of
Appeals. On October 20, 1992, the Court of Appeals, however, rendered a decision 7
affirming in toto the lower court's decision. His motion for reconsideration having been
denied on October 19, 1993, petitioner now files the instant petition alleging that:
I. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFF'S COMPLAINT AND IN HOLDING
THAT THE PLAINTIFF ACTUALLY RECEIVED A GENUINE PAIR OF EMERALD CUT DIAMOND
EARRING(S) FROM DEFENDANT CRUZ . . . ;
II. THE TRIAL COURT ERRED IN AWARDING MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES IN FAVOR OF DEFENDANTS AND AGAINST THE PLAINTIFF IN THIS
CASE; and
III. THE TRIAL, COURT ERRED IN NOT DECLARING THE DEED OF SALE OF THE TANAY
PROPERTY (EXH. "D") AS NULL AND VOID OR IN NOT ANNULLING THE SAME, AND IN
FAILING TO GRANT REASONABLE DAMAGES IN FAVOR OF THE PLAINTIFF.8
As to the first allegation, the Court observes that petitioner is essentially raising a
factual issue as it invites us to examine and weigh anew the facts regarding the
genuineness of the earrings bartered in exchange for the Tanay property. This, of
course, we cannot do without unduly transcending the limits of our review power in
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
conjectures; (2) the inference is manifestly mistaken, absurd and impossible; (3) when
there is a grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; and (6) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admission of both parties. 9 We find nothing, however, that
warrants the application of any of these exceptions.
Consequently, this Court upholds the appellate court's findings of fact especially
because these concur with those of the trial court which, upon a thorough scrutiny of
the records, are firmly grounded on evidence presented at the trial. 10 To reiterate, this
Court's jurisdiction is only limited to reviewing errors of law in the absence of any
showing that the findings complained of are totally devoid of support in the record or
that they are glaringly erroneous as to constitute serious abuse of discretion. 11
Nonetheless, this Court has to closely delve into petitioner's allegation that the lower
court's decision of March 7, 1989 is a "ready-made" one because it was handed down a
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
March 6, 1989. He stressed that Judge Jaramillo replaced Judge Salvador de Guzman
and heard only his rebuttal testimony.
This allegation is obviously no more than a desperate effort on the part of petitioner to
disparage the lower court's findings of fact in order to convince this Court to review the
same. It is noteworthy that Atty. Belarmino clarified that Judge Jaramillo had issued the
first order in the case as early as March 9, 1987 or two years before the rendition of the
decision. In fact, Atty. Belarmino terminated presentation of evidence on October 13,
1987, while Dr. Cruz finished hers on February 4, 1989, or more than a month prior to
the rendition of the judgment. The March 6, 1989 hearing was conducted solely for the
presentation of petitioner's rebuttal testimony. 13 In other words, Judge Jaramillo had
ample time to study the case and write the decision because the rebuttal evidence
would only serve to confirm or verify the facts already presented by the parties.
The Court finds nothing anomalous in the said situation. No proof has been adduced
that Judge Jaramillo was motivated by a malicious or sinister intent in disposing of the
case with dispatch. Neither is there proof that someone else wrote the decision for him.
The immediate rendition of the decision was no more than Judge Jaramillo's compliance
with his duty as a judge to "dispose of the court's business promptly and decide cases
within the required periods." 14 The two-year period within which Judge Jaramillo
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
judgment and leaving the dispositive portion for typing at a time close to the date of
promulgation, provided that no malice or any wrongful conduct attends its adoption. 15
The practice serves the dual purposes of safeguarding the confidentiality of draft
decisions and rendering decisions with promptness. Neither can Judge Jaramillo be
made administratively answerable for the immediate rendition of the decision. The acts
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
performed his job in accordance with law and should instead be commended for his
close attention to duty.
Having disposed of petitioner's first contention, we now come to the core issue of this
petition which is whether the Court of Appeals erred in upholding the validity of the
contract of barter or sale under the circumstances of this case.
The Civil Code provides that contracts are perfected by mere consent. From this
moment, the parties are bound not only to the fulfillment of what has been expressly
stipulated but also to all the consequences which, according to their nature, may be in
keeping with good faith, usage and law. 17 A contract of sale is perfected at the
moment there is a meeting of the minds upon the thing which is the object of the
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
respective contractual commitments. Article 1358 of the Civil Code which requires the
embodiment of certain contracts in a public instrument, is only for convenience, 19 and
registration of the instrument only adversely affects third parties. 20 Formal
requirements are, therefore, for the benefit of third parties. Non-compliance therewith
does not adversely affect the validity of the contract nor the contractual rights and
obligations of the parties thereunder.
It is evident from the facts of the case that there was a meeting of the minds between
petitioner and Dr. Cruz. As such, they are bound by the contract unless there are
reasons or circumstances that warrant its nullification. Hence, the problem that should
be addressed in this case is whether or not under the facts duly established herein, the
contract can be voided in accordance with law so as to compel the parties to restore to
each other the things that have been the subject of the contract with their fruits, and
the price with interest.21
Contracts that are voidable or annullable, even though there may have been no damage
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
this Court that he entered into the contract in the belief that the pair of emerald-cut
diamond earrings was genuine. On the pretext that those pieces of jewelry turned out
to be counterfeit, however, petitioner subsequently sought the nullification of said
contract on the ground that it was, in fact, "tainted with fraud" 23 such that his consent
was vitiated.
There is fraud when, through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them,
he would not have agreed to. 24 The records, however, are bare of any evidence
manifesting that private respondents employed such insidious words or machinations to
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
initially accede to petitioner's proposal to buy the said jewelry. Rather, it appears that it
was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay property
was worth exchanging for her jewelry as he represented that its value was P400,000.00
or more than double that of the jewelry which was valued only at P160,000.00. If indeed
petitioner's property was truly worth that much, it was certainly contrary to the nature
of a businessman-banker like him to have parted with his real estate for half its price. In
short, it was in fact petitioner who resorted to machinations to convince Dr. Cruz to
exchange her jewelry for the Tanay property.
Moreover, petitioner did not clearly allege mistake as a ground for nullification of the
contract of sale. Even assuming that he did, petitioner cannot successfully invoke the
same. To invalidate a contract, mistake must "refer to the substance of the thing that is
the object of the contract, or to those conditions which have principally moved one or
both parties to enter into the contract." 25 An example of mistake as to the object of
the contract is the substitution of a specific thing contemplated by the parties with
another. 26 In his allegations in the complaint, petitioner insinuated that an inferior one
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
substitution.
Likewise, the facts as proven do not support the allegation that petitioner himself could
be excused for the "mistake." On account of his work as a banker-jeweler, it can be
rightfully assumed that he was an expert on matters regarding gems. He had the
intellectual capacity and the business acumen as a banker to take precautionary
measures to avert such a mistake, considering the value of both the jewelry and his
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.
Indeed, the finger of suspicion of switching the genuine jewelry for a fake inevitably
points to him. Such a mistake caused by manifest negligence cannot invalidate a juridical
act. 27 As the Civil Code provides, "(t)here is no mistake if the party alleging it knew the
doubt, contingency or risk affecting the object of the contract."28
Furthermore, petitioner was afforded the reasonable opportunity required in Article
1584 of the Civil Code within which to examine the jewelry as he in fact accepted them
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
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
one he intended in exchange for his Tanay property, could not sever the juridical tie that
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.
Both the trial and appellate courts, therefore, correctly ruled that there were no legal
bases for the nullification of the contract of sale. Ownership over the parcel of land and
the pair of emerald-cut diamond earrings had been transferred to Dr. Cruz and
petitioner, respectively, upon the actual and constructive delivery thereof. 30 Said
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
period. 31 Such stipulations are not manifest in the contract of sale.
While it is true that the amount of P40,000.00 forming part of the consideration was still
payable to petitioner, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate
the contract or bar the transfer of ownership and possession of the things exchanged
considering the fact that their contract is silent as to when it becomes due and
demandable. 32
Neither may such failure to pay the balance of the purchase price result in the payment
of interest thereon. Article 1589 of the Civil Code prescribes the payment of interest by
the vendee "for the period between the delivery of the thing and the payment of the
price" in the following cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial demand for the
payment of the price.
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
for payment of interest. In the case at bar, there is no stipulation for the payment of
interest in the contract of sale nor proof that the Tanay property produced fruits or
income. Neither did petitioner demand payment of the price as in fact he filed an action
to nullify the contract of sale.
All told, petitioner appears to have elevated this case to this Court for the principal
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
party" because "no specific claim for damages against him" was alleged in the
complaint. When he filed the case, all that petitioner wanted was that Atty. Belarmino
should return to him the owner's duplicate copy of TCT No. 320725, the deed of sale
executed by Fr. Antonio Jacobe, the deed of redemption and the check alloted for
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,
petitioner asserts that there was no firm basis for damages except for Atty. Belarmino's
uncorroborated testimony.34
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
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
data rather than mere conclusions or opinions of witnesses. 37 Thus:
. . . . For moral damages to be awarded, it is essential that the claimant must have
satisfactorily proved during the trial the existence of the factual basis of the damages
and its causal connection with the adverse party's acts. If the court has no proof or
evidence upon which the claim for moral damages could be based, such indemnity could
not be outrightly awarded. The same holds true with respect to the award of exemplary
damages where it must be shown that the party acted in a wanton, oppressive or
malevolent manner. 38
In this regard, the lower court appeared to have awarded damages on a ground
analogous to malicious prosecution under Article 2219 (8) of the Civil Code 39 as shown
by (1) petitioner's "wanton bad faith" in bloating the value of the Tanay property which
he exchanged for "a genuine pair of emerald-cut diamond worth P200,00.00;" and (2)
his filing of a "malicious and unfounded case" against private respondents who were
"well known, respected and held in high esteem in San Pablo City where everybody
practically knows everybody" and whose good names in the "twilight of their lives" were
soiled by petitioner's coming to court with "unclean hands," thereby affecting their
earning capacity in the exercise of their respective professions and besmirching their
reputation.
For its part, the Court of Appeals affirmed the award of damages to private respondents
for these reasons:
The malice with which Fule filed this case is apparent. Having taken possession of the
genuine jewelry of Dra. Cruz, Fule now wishes to return a fake jewelry to Dra. Cruz and,
more than that, get back the real property, which his bank owns. Fule has obtained a
genuine jewelry which he could sell anytime, anywhere and to anybody, without the
same being traced to the original owner for practically nothing. This is plain and simple,
unjust enrichment.40
While, as a rule, moral damages cannot be recovered from a person who has filed a
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
he was the victim of fraud; that he could not have been such a victim because he should
have examined the jewelry in question before accepting delivery thereof, considering
his exposure to the banking and jewelry businesses; and that he filed the action for the
nullification of the contract of sale with unclean hands, all deserve full faith and credit to
support the conclusion that petitioner was motivated more by ill will than a sincere
attempt to protect his rights in commencing suit against respondents.
As pointed out earlier, a closer scrutiny of the chain of events immediately prior to and
on October 24, 1984 itself would amply demonstrate that petitioner was not simply
negligent in failing to exercise due diligence to assure himself that what he was taking in
exchange for his property were genuine diamonds. He had rather placed himself in a
situation from which it preponderantly appears that his seeming ignorance was actually
just a ruse. Indeed, he had unnecessarily dragged respondents to face the travails of
litigation in speculating at the possible favorable outcome of his complaint when he
should have realized that his supposed predicament was his own making. We, therefore,
see here no semblance of an honest and sincere belief on his part that he was swindled
by respondents which would entitle him to redress in court. It must be noted that
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
genuineness despite the large consideration involved has never been explained at all by
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
minimize the capital gains tax for its exchange, it was actually gross recklessness for him
to have merely conducted a cursory examination of the jewelry when every opportunity
for doing so was not denied him. Apparently, he carried on his person a tester which he
later used to prove the alleged fakery but which he did not use at the time when it was
most needed. Furthermore, it took him two more hours of unexplained delay before he
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
deliberate.

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.

SO ORDERED.
 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
Case No. 681, dated November 29, 1966, assessing a compensating tax of P174,441.62
on the Engineering Equipment and Supply Company.
As found by the Court of Tax Appeals, and as established by the evidence on record,
the facts of this case are as follows:
On July 30, 1959, Engineering appealed the case to the Court of Tax Appeals and during
the pendency of the case the investigating revenue examiners reduced Engineering's
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
and Auditor.
On November 29, 1966, the Court of Tax Appeals rendered its decision, the dispositive
portion of which reads as follows:
For ALL THE FOREGOING CONSIDERATIONS, the decision of
respondent appealed from is hereby modified, and petitioner, as a
contractor, is declared exempt from the deficiency manufacturers
sales tax covering the period from June 1, 1948. to September 2,
1956. However, petitioner is ordered to pay respondent, or his duly
authorized collection agent, the sum of P174,141.62 as
compensating tax and 25% surcharge for the period from 1953 to
September 1956. With costs against petitioner.
The Commissioner, not satisfied with the decision of the Court of Tax Appeals, appealed
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
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.
Since the two cases, G.R. No. L-27044 and G.R. No. L-27452, involve the same parties
and issues, We have decided to consolidate and jointly decide them.
Engineering in its Petition claims that the Court of Tax Appeals committed the following
errors:
1. That the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company liable to the 30% compensating tax
on its importations of equipment and ordinary articles used in the
central type air conditioning systems it designed, fabricated,
constructed and installed in the buildings and premises of its
customers, rather than to the compensating tax of only 7%;
2. That the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company guilty of fraud in effecting the said
importations on the basis of incomplete quotations from the
contents of alleged photostat copies of documents seized illegally
from Engineering Equipment and Supply Company which should not
have been admitted in evidence;
3. That the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company liable to the 25% surcharge
prescribed in Section 190 of the Tax Code;
4. That the Court of Tax Appeals erred in holding the assessment as
not having prescribed;
5. That the Court of Tax Appeals erred in holding Engineering
Equipment & Supply Company liable for the sum of P174,141.62 as
30% compensating tax and 25% surcharge instead of completely
absolving it from the deficiency assessment of the Commissioner.
The Commissioner on the other hand claims that the Court of Tax Appeals erred:
1. In holding that the respondent company is a contractor and not a
manufacturer.
2. In holding respondent company liable to the 3% contractor's tax
imposed by Section 191 of the Tax Code instead of the 30% sales tax
prescribed in Section 185(m) in relation to Section 194(x) both of the
same Code;
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
30% advance sales tax imposed by section 183 (b), in relation to
section 185(m) both of the same Code, on its importations of parts
and accessories of air conditioning units;
4. In not holding the company liable to the 50% fraud surcharge
under Section 183 of the Tax Code on its importations of parts and
accessories of air conditioning units, notwithstanding the finding of
said court that the respondent company fraudulently misdeclared
the said importations;
5. In holding the respondent company liable for P174,141.62 as
compensating tax and 25% surcharge instead of P740,587.86 as
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
manufacturer of air conditioning units under Section 185(m), supra, in relation to
Sections 183(b) and 194 of the Code, or a contractor under Section 191 of the same
Code.
The Commissioner contends that Engineering is a manufacturer and seller of air
conditioning units and parts or accessories thereof and, therefore, it is subject to the
30% advance sales tax prescribed by Section 185(m) of the Tax Code, in relation to
Section 194 of the same, which defines a manufacturer as follows:
Section 194. Words and Phrases Defined. In applying the
provisions of this Title, words and phrases shall be taken in the sense
and extension indicated below:
xxx xxx xxx
(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
manufactured products in such manner as to prepare it for a special
use or uses to which it could not have been put in its original
condition, or who by any such process alters the quality of any such
material or manufactured or partially manufactured product so as to
reduce it to marketable shape, or prepare it for any of the uses of
industry, or who by any such process combines any such raw
material or manufactured or partially manufactured products with
other materials or products of the same or of different kinds and in
such manner that the finished product of such process of
manufacture can be put to special use or uses to which such raw
material or manufactured or partially manufactured products in
their original condition could not have been put, and who in addition
alters such raw material or manufactured or partially manufactured
products, or combines the same to produce such finished products
for the purpose of their sale or distribution to others and not for his
own use or consumption.
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
under Section 185(m) of the Tax Code, but a contractor engaged in the design, supply
and installation of the central type of air-conditioning system subject to the 3% tax
imposed by Section 191 of the same Code, which is essentially a tax on the sale of
services or labor of a contractor rather than on the sale of articles subject to the tax
referred to in Sections 184, 185 and 186 of the 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
for furnishing services, labor and materials. The distinction between a contract of sale
and one for work, labor and materials is tested by the inquiry whether the thing
transferred is one not in existence and which never would have existed but for the order
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
article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand
for sale to anyone, and no change or modification of it is made at defendant's request, it
is a contract of sale, even though it may be entirely made after, and in consequence of,
the defendants order for it.3
Our New Civil Code, likewise distinguishes a contract of sale from a contract for a piece
of work thus:
Art. 1467. A contract for the delivery at a certain price of an article
which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same
is on hand at the time or not, is a contract of sale, but if the goods
are to be manufactured specially for the customer and upon his
special order and not for the general market, it is a contract for a
piece of work.
The word "contractor" has come to be used with special reference to a person who, in
the pursuit of the independent business, undertakes to do a specific job or piece of work
for other persons, using his own means and methods without submitting himself to
control as to the petty details. (Araas, Annotations and Jurisprudence on the National
Internal Revenue Code, p. 318, par. 191 (2), 1970 Ed.) The true test of a contractor as
was held in the cases of Luzon Stevedoring Co., vs. Trinidad, 43, Phil. 803, 807-808, and
La Carlota Sugar Central vs. Trinidad, 43, Phil. 816, 819, would seem to be that he
renders service in the course of an independent occupation, representing the will of his
employer only as to the result of his work, and not as to the means by which it is
accomplished.
With the foregoing criteria as guideposts, We shall now examine whether Engineering
really did "manufacture" and sell, as alleged by the Commissioner to hold it liable to the
advance sales tax under Section 185(m), or it only had its services "contracted" for
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
After going over the three volumes of stenographic notes and the voluminous record of
the BIR and the CTA as well as the exhibits submitted by both parties, We find that
Engineering did not manufacture air conditioning units for sale to the general public, but
imported some items (as refrigeration compressors in complete set, heat exchangers or
coils, t.s.n. p. 39) which were used in executing contracts entered into by it. Engineering,
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.
"F", "G", "H", "I", "J", "K", "L", and "M"), taking into consideration in the process such
factors as the area of the space to be air conditioned; the number of persons occupying
or would be occupying the premises; the purpose for which the various air conditioning
areas are to be used; and the sources of heat gain or cooling load on the plant such as
sun load, lighting, and other electrical appliances which are or may be in the plan. (t.s.n.
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
engineered complete each particular plant and that no two plants were identical but
each had to be engineered separately.
As found by the lower court, which finding4 We adopt
Engineering, in a nutshell, fabricates, assembles, supplies and installs
in the buildings of its various customers the central type air
conditioning system; prepares the plans and specifications therefor
which are distinct and different from each other; the air conditioning
units and spare parts or accessories thereof used by petitioner are
not the window type of air conditioner which are manufactured,
assembled and produced locally for sale to the general market; and
the imported air conditioning units and spare parts or accessories
thereof are supplied and installed by petitioner upon previous
orders of its customers conformably with their needs and
requirements.
The facts and circumstances aforequoted support the theory that Engineering is a
contractor rather than a manufacturer.
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
installed in his premises and who is in a position and willing to pay the price can order
the same from the company (Engineering) and, therefore, Engineering could have mass
produced and stockpiled air conditioning units for sale to the public or to any customer
conditioning units, packaged, or what we know as self-contained air conditioning units,
are distinct from the central system which Engineering dealt in. To Our mind, the
distinction as explained by Engineering, in its Brief, quoting from books, is not an idle
play of words as claimed by the Commissioner, but a significant fact which We just
cannot ignore. As quoted by Engineering Equipment & Supply Co., from an Engineering
handbook by L.C. Morrow, and which We reproduce hereunder for easy reference:
... there is a great variety of equipment in use to do this job (of air
conditioning). Some devices are designed to serve a specific type of
space; others to perform a specific function; and still others as
components to be assembled into a tailor-made system to fit a
particular building. Generally, however, they may be grouped into
two classifications unitary and central system.
The unitary equipment classification includes those designs such as
room air conditioner, where all of the functional components are
included in one or two packages, and installation involves only
making service connection such as electricity, water and drains.
Central-station systems, often referred to as applied or built-up
systems, require the installation of components at different points in
a building and their interconnection.
The room air conditioner is a unitary equipment designed
specifically for a room or similar small space. It is unique among air
conditioning equipment in two respects: It is in the electrical
appliance classification, and it is made by a great number of
manufacturers.
There is also the testimony of one Carlos Navarro, a licensed Mechanical and Electrical
Engineer, who was once the Chairman of the Board of Examiners for Mechanical
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
conditioning system is an engineering job that requires planning and meticulous layout
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:
I don't think I have seen central type of air conditioning machinery
room that are exactly alike because all our buildings here are
designed by architects dissimilar to existing buildings, and usually
they don't coordinate and get the advice of air conditioning and
 refrigerating engineers so much so that when we come to design,
we have to make use of the available space that they are assigning
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
the space assigned and afterwards the system may be considered as
a definite portion of the building. ...
Definitely there is quite a big difference in the operation because
the window type air conditioner is a sort of compromise. In fact it
cannot control humidity to the desired level; rather the
manufacturers, by hit and miss, were able to satisfy themselves that
the desired comfort within a room could be made by a definite
setting of the machine as it comes from the factory; whereas the
central type system definitely requires an intelligent operator. (t.s.n.
pp. 301-305, Vol. II)
The point, therefore, is this Engineering definitely did not and was not engaged in the
manufacture of air conditioning units but had its services contracted for the installation
of a central system. The cases cited by the Commissioner (Advertising Associates, Inc. vs.
Collector of Customs, 97, Phil. 636; Celestino Co & Co. vs. Collector of Internal Revenue,
99 Phil. 841 and Manila Trading & Supply Co. vs. City of Manila, 56 O.G. 3629), are not in
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
to be a manufacturer rather than a contractor of sash, doors and windows
manufactured in its factory. Indeed, from the very start, Celestino Co intended itself to
be a manufacturer of doors, windows, sashes etc. as it did register a special trade name
for its sash business and ordered company stationery carrying the bold print "ORIENTAL
SASH FACTORY (CELESTINO CO AND COMPANY, PROP.) 926 Raon St., Quiapo, Manila,
Tel. No. etc., Manufacturers of All Kinds of Doors, Windows ... ." Likewise, Celestino Co
never put up a contractor's bond as required by Article 1729 of the Civil Code. Also, as a
general rule, sash factories receive orders for doors and windows of special design only
in particular cases, but the bulk of their sales is derived from ready-made doors and
windows of standard sizes for the average home, which "sales" were reflected in their
books of accounts totalling P118,754.69 for the period from January, 1952 to September
30, 1952, or for a period of only nine (9) months. This Court found said sum difficult to
have been derived from its few customers who placed special orders for these items.
Applying the abovestated facts to the case at bar, We found them to he inapposite.
Engineering advertised itself as Engineering Equipment and Supply Company, Machinery
Mechanical Supplies, Engineers, Contractors, 174 Marques de Comillas, Manila (Exh. "B"
and "15" BIR rec. p. 186), and not as manufacturers. It likewise paid the contractors tax
on all the contracts for the design and construction of central system as testified to by
Mr. Rey Parker, its President and General Manager. (t.s.n. p. 102, 103) Similarly,
Engineering did not have ready-made air conditioning units for sale but as per testimony
of Mr. Parker upon inquiry of Judge Luciano of the CTA
Q Aside from the general components, which
go into air conditioning plant or system of the
central type which your company undertakes,
and the procedure followed by you in obtaining
and executing contracts which you have already
testified to in previous hearing, would you say
that the covering contracts for these different
projects listed ... referred to in the list, Exh. "F"
are identical in every respect? I mean every plan
or system covered by these different contracts
are identical in standard in every respect, so that
you can reproduce them?
A No, sir. They are not all standard. On the
contrary, none of them are the same. Each one
must be designed and constructed to meet the
particular requirements, whether the application
is to be operated. (t.s.n. pp. 101-102)
What We consider as on all fours with the case at bar is the case of S.M. Lawrence Co.
vs. McFarland, Commissioner of Internal Revenue of the State of Tennessee and
McCanless, 355 SW 2d, 100, 101, "where the cause presents the question of whether
one engaged in the business of contracting for the establishment of air conditioning
system in buildings, which work requires, in addition to the furnishing of a cooling unit,
the connection of such unit with electrical and plumbing facilities and the installation of
ducts within and through walls, ceilings and floors to convey cool air to various parts of
the building, is liable for sale or use tax as a contractor rather than a retailer of tangible
personal property. Appellee took the Position that appellant was not engaged in the
business of selling air conditioning equipment as such but in the furnishing to its
customers of completed air conditioning systems pursuant to contract, was a contractor
engaged in the construction or improvement of real property, and as such was liable for
sales or use tax as the consumer of materials and equipment used in the consummation
of contracts, irrespective of the tax status of its contractors. To transmit the warm or
cool air over the buildings, the appellant installed system of ducts running from the
basic units through walls, ceilings and floors to registers. The contract called for
completed air conditioning systems which became permanent part of the buildings and
improvements to the realty." The Court held the appellant a contractor which used the
materials and the equipment upon the value of which the tax herein imposed was levied
in the performance of its contracts with its customers, and that the customers did not
purchase the equipment and have the same installed.
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
machineries were in hand or not, was especially made for each customer and installed
in his building upon his special order. The air conditioning units installed in a central
type of air conditioning system would not have existed but for the order of the party
desiring to acquire it and if it existed without the special order of Engineering's
customer, the said air conditioning units were not intended for sale to the general
public. Therefore, We have but to affirm the conclusion of the Court of Tax Appeals that
Engineering is a contractor rather than a manufacturer, subject to the contractors tax
prescribed by Section 191 of the Code and not to the advance sales tax imposed by
Section 185(m) in relation to Section 194 of the same Code. Since it has been proved to
Our satisfaction that Engineering imported air conditioning units, parts or accessories
thereof for use in its construction business and these items were never sold, resold,
bartered or exchanged, Engineering should be held liable to pay taxes prescribed under
Section 1905 of the Code. This compensating tax is not a tax on the importation of
goods but a tax on the use of imported goods not subject to sales tax. Engineering,
therefore, should be held liable to the payment of 30% compensating tax in accordance
with Section 190 of the Tax Code in relation to Section 185(m) of the same, but without
the 50% mark up provided in Section 183(b).
II
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
as to make them subject to a lower rate of percentage tax (7%) under Section 186 of the
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
its decision found adversely and said"
... We are amply convinced from the evidence presented by
respondent that petitioner deliberately and purposely misdeclared
its importations. This evidence consists of letters written by
petitioner to its foreign suppliers, instructing them on how to
invoice and describe the air conditioning units ordered by petitioner.
... (p. 218 CTA rec.)
Despite the above findings, however, the Court of Tax Appeals absolved Engineering
from paying the 50% surcharge prescribe by Section 183(a) of the Tax Code by reasoning
out as follows:
The imposition of the 50% surcharge prescribed by Section 183(a) of
the Tax Code is based on willful neglect to file the monthly return
within 20 days after the end of each month or in case a false or
fraudulent return is willfully made, it can readily be seen, that
petitioner cannot legally be held subject to the 50% surcharge
imposed by Section 183(a) of the Tax Code. Neither can petitioner
be held subject to the 50% surcharge under Section 190 of the Tax
Code dealing on compensating tax because the provisions thereof
do not include the 50% surcharge. Where a particular provision of
the Tax Code does not impose the 50% surcharge as fraud penalty
we cannot enforce a non-existing provision of law notwithstanding
the assessment of respondent to the contrary. Instances of the
exclusion in the Tax Code of the 50% surcharge are those dealing on
tax on banks, taxes on receipts of insurance companies, and
franchise tax. However, if the Tax Code imposes the 50% surcharge
as fraud penalty, it expressly so provides as in the cases of income
tax, estate and inheritance taxes, gift taxes, mining tax, amusement
tax and the monthly percentage taxes. Accordingly, we hold that
petitioner is not subject to the 50% surcharge despite the existence
of fraud in the absence of legal basis to support the importation
thereof. (p. 228 CTA rec.)
We have gone over the exhibits submitted by the Commissioner evidencing fraud
committed by Engineering and We reproduce some of them hereunder for clarity.
As early as March 18, 1953, Engineering in a letter of even date wrote to Trane Co. (Exh.
"3-K" pp. 152-155, BIR rec.) viz:
Your invoices should be made in the name of Madrigal & Co., Inc.,
Manila, Philippines, c/o Engineering Equipment & Supply Co.,
Manila, Philippines forwarding all correspondence and shipping
papers concerning this order to us only and not to the customer.
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
conditioning equipment should be made on any shipping documents
as well as on the cases. Please give this matter your careful
attention, otherwise great difficulties will be encountered with the
Philippine Bureau of Customs when clearing the shipment on its
arrival in Manila. All invoices and cases should be marked "THIS
EQUIPMENT FOR RIZAL CEMENT CO."
The same instruction was made to Acme Industries, Inc., San Francisco, California in a
letter dated March 19, 1953 (Exh. "3-J-1" pp. 150-151, BIR rec.)
On April 6, 1953, Engineering wrote to Owens-Corning Fiberglass Corp., New York,
U.S.A. (Exh. "3-1" pp. 147-149, BIR rec.) also enjoining the latter from mentioning or
referring to the term 'air conditioning' and to describe the goods on order as Fiberglass
pipe and pipe fitting insulation instead. Likewise on April 30, 1953, Engineering
threatened to discontinue the forwarding service of Universal Transcontinental
Corporation when it wrote Trane Co. (Exh. "3-H" p. 146, BIR rec.):
It will be noted that the Universal Transcontinental Corporation is
not following through on the instructions which have been covered
by the above correspondence, and which indicates the necessity of
discontinuing the use of the term "Air conditioning Machinery or Air
Coolers". Our instructions concerning this general situation have
been sent to you in ample time to have avoided this error in
terminology, and we will ask that on receipt of this letter that you
again write to Universal Transcontinental Corp. and inform them
that, if in the future, they are unable to cooperate with us on this
requirement, we will thereafter be unable to utilize their forwarding
service. Please inform them that we will not tolerate another failure
to follow our requirements.
And on July 17, 1953 (Exh- "3-g" p. 145, BIR rec.) Engineering wrote Trane Co. another
letter, viz:
In the past, we have always paid the air conditioning tax on climate
changers and that mark is recognized in the Philippines, as air
conditioning equipment. This matter of avoiding any tie-in on air
conditioning is very important to us, and we are asking that from
hereon that whoever takes care of the processing of our orders be
carefully instructed so as to avoid again using the term "Climate
changers" or in any way referring to the equipment as "air
conditioning."
And in response to the aforequoted letter, Trane Co. wrote on July 30, 1953, suggesting
a solution, viz:
We feel that we can probably solve all the problems by following the
procedure outlined in your letter of March 25, 1953 wherein you
stated that in all future jobs you would enclose photostatic copies of
your import license so that we might make up two sets of invoices:
one set describing equipment ordered simply according to the way
that they are listed on the import license and another according to
our ordinary regular methods of order write-up. We would then
include the set made up according to the import license in the
shipping boxes themselves and use those items as our actual
shipping documents and invoices, and we will send the other regular
invoice to you, by separate correspondence. (Exh- No. "3-F-1", p.
144 BIR rec.)
Another interesting letter of Engineering is one dated August 27, 1955 (Exh. "3-C" p. 141
BIR rec.)
In the process of clearing the shipment from the piers, one of the
Customs inspectors requested to see the packing list. Upon
presenting the packing list, it was discovered that the same was
prepared on a copy of your letterhead which indicated that the
Trane Co. manufactured air conditioning, heating and heat transfer
equipment. Accordingly, the inspectors insisted that this equipment
was being imported for air conditioning purposes. To date, we have
not been able to clear the shipment and it is possible that we will be
required to pay heavy taxes on equipment.
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
any way that the equipment could possibly be used for air
conditioning.
It is realized that this a broad request and fairly difficult to
accomplish and administer, but we believe with proper caution it
 can be executed. Your cooperation and close supervision concerning
these matters will be appreciated. (Emphasis supplied)
The aforequoted communications are strongly indicative of the fraudulent intent of
Engineering to misdeclare its importation of air conditioning units and spare parts or
accessories thereof to evade payment of the 30% tax. And since the commission of
fraud is altogether too glaring, We cannot agree with the Court of Tax Appeals in
absolving Engineering from the 50% fraud surcharge, otherwise We will be giving
premium to a plainly intolerable act of tax evasion. As aptly stated by then Solicitor
General, now Justice, Antonio P. Barredo: 'this circumstance will not free it from the
50% surcharge because in any case whether it is subject to advance sales tax or
compensating tax, it is required by law to truly declare its importation in the import
entries and internal revenue declarations before the importations maybe released from
customs custody. The said entries are the very documents where the nature, quantity
and value of the imported goods declared and where the customs duties, internal
revenue taxes, and other fees or charges incident to the importation are computed.
These entries, therefore, serve the same purpose as the returns required by Section
183(a) of the Code.'
Anent the 25% delinquency surcharge, We fully agree to the ruling made by the Court of
Tax Appeals and hold Engineering liable for the same. As held by the lower court:
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
and tenable. However, a serious study and critical analysis of the
historical provisions of Section 190 of the Tax Code dealing on
compensating tax in relation to Section 183(a) of the same Code, will
show that the contention of petitioner is without merit. The original
text of Section 190 of Commonwealth Act 466, otherwise known as
the National Internal Revenue Code, as amended by Commonwealth
Act No. 503, effective on October 1, 1939, does not provide for the
filing of a compensation tax return and payment of the 25 %
surcharge for late payment thereof. Under the original text of
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%
surcharge appears to be legally tenable. However, Section 190 of the
Tax Code was subsequently amended by the Republic Acts Nos. 253,
361, 1511 and 1612 effective October 1, 1946, July 1, 1948, June 9,
1949, June 16, 1956 and August 24, 1956 respectively, which
invariably provides among others, the following:
... If any article withdrawn from the
customhouse or the post office without payment
of the compensating tax is subsequently used by
the importer for other purposes, corresponding
entry should be made in the books of accounts if
any are kept or a written notice thereof sent to
the Collector of Internal Revenue and payment
of the corresponding compensating tax made
within 30 days from the date of such entry or
notice and if tax is not paid within such period
the amount of the tax shall be increased by 25%
the increment to be a part of the tax.
Since the imported air conditioning units-and spare parts or accessories thereof are
subject to the compensating tax of 30% as the same were used in the construction
business of Engineering, it is incumbent upon the latter to comply with the aforequoted
requirement of Section 190 of the Code, by posting in its books of accounts or notifying
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
petitioner within the time prescribed by Section 190 of the Tax Code as amended, it is
therefore subject to the 25% surcharge for delinquency in the payment of the said tax.
(pp. 224-226 CTA rec.)
III
Lastly the question of prescription of the tax assessment has been put in issue.
Engineering contends that it was not guilty of tax fraud in effecting the importations
and, therefore, Section 332(a) prescribing ten years is inapplicable, claiming that the
pertinent prescriptive period is five years from the date the questioned importations
were made. A review of the record however reveals that Engineering did file a tax return
or declaration with the Bureau of Customs before it paid the advance sales tax of 7%.
And the declaration filed reveals that it did in fact misdeclare its importations. Section
332 of the Tax Code which provides:
Section 332. Exceptions as to period of limitation of assessment
and collection of taxes.
(a) In the case of a false or fraudulent return with intent to evade tax
or of a failure to file a return, the tax may be assessed, or a
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
Government.

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

SO ORDERED.
 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
AVANCEA, J.:
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:
beds.

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J.

ART. 2. In compensation for the expenses of advertisement which, for the
PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE
benefit of both contracting parties, Mr. Parsons may find himself obliged to
EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.
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
higher prices than those of the invoices; to have an open establishment in Iloilo; itself to
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
other manner. As may be seen, with the exception of the obligation on the part of the
defendant to order the beds by the dozen and in no other manner, none of the
obligations imputed to the defendant in the two causes of action are expressly set forth
in the contract. But the plaintiff alleged that the defendant was his agent for the sale of
his beds in Iloilo, and that said obligations are implied in a contract of commercial
agency. The whole question, therefore, reduced itself to a determination as to whether
the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or
an agent of the plaintiff for the sale of his beds.
In order to classify a contract, due regard must be given to its essential clauses. In the
contract in question, what was essential, as constituting its cause and subject matter, is
that the plaintiff was to furnish the defendant with the beds which the latter might
order, at the price stipulated, and that the defendant was to pay the price in the manner
stipulated. The price agreed upon was the one determined by the plaintiff for the sale of
these beds in Manila, with a discount of from 20 to 25 per cent, according to their class.
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
was to be allowed for prompt payment. These are precisely the essential features of a
contract of purchase and sale. There was the obligation on the part of the plaintiff to
supply the beds, and, on the part of the defendant, to pay their price. These features
exclude the legal conception of an agency or order to sell whereby the mandatory or
agent received the thing to sell it, and does not pay its price, but delivers to the principal
the price he obtains from the sale of the thing to a third person, and if he does not
succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the
defendant, the latter, on receiving the beds, was necessarily obliged to pay their price
within the term fixed, without any other consideration and regardless as to whether he
had or had not sold the beds.
It would be enough to hold, as we do, that the contract by and between the defendant
and the plaintiff is one of purchase and sale, in order to show that it was not one made
on the basis of a commission on sales, as the plaintiff claims it was, for these contracts
are incompatible with each other. But, besides, examining the clauses of this contract,
none of them is found that substantially supports the plaintiff's contention. Not a single
one of these clauses necessarily conveys the idea of an agency. The words commission
on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself,
than a mere discount on the invoice price. The word agency, also used in articles 2 and
3, only expresses that the defendant was the only one that could sell the plaintiff's beds
in the Visayan Islands. With regard to the remaining clauses, the least that can be said is
that they are not incompatible with the contract of purchase and sale.
The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of
the defendant corporation and who established and managed the latter's business in
Iloilo. It appears that this witness, prior to the time of his testimony, had serious trouble
with the defendant, had maintained a civil suit against it, and had even accused one of
its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted
the contract Exhibit A, and, when questioned as to what was his purpose in contracting
with the plaintiff, replied that it was to be an agent for his beds and to collect a
commission on sales. However, according to the defendant's evidence, it was Mariano
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 contracting with the plaintiff is of no importance, inasmuch as the agreements
contained in Exhibit A which he claims to have drafted, constitute, as we have said, a
contract of purchase and sale, and not one of commercial agency. This only means that
Ernesto Vidal was mistaken in his classification of the contract. But it must be
understood that a contract is what the law defines it to be, and not what it is called by
the contracting parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it
could not sell; that, without previous notice, it forwarded to the defendant the beds
that it wanted; and that the defendant received its commission for the beds sold by the
plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part
of both of them, there was mutual tolerance in the performance of the contract in
disregard of its terms; and it gives no right to have the contract considered, not as the
parties stipulated it, but as they performed it. Only the acts of the contracting parties,
subsequent to, and in connection with, the execution of the contract, must be
considered for the purpose of interpreting the contract, when such interpretation is
necessary, but not when, as in the instant case, its essential agreements are clearly set
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
exchange for the price paid for them, but was for other beds of another kind; and for
the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds,
which shows that it was not considered that the defendant had a right, by virtue of the
contract, to make this return. As regards the shipment of beds without previous notice,
it is insinuated in the record that these brass beds were precisely the ones so shipped,
and that, for this very reason, the plaintiff agreed to their return. And with respect to
the so-called commissions, we have said that they merely constituted a discount on the
invoice price, and the reason for applying this benefit to the beds sold directly by the
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.
SECOND DIVISION
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:
DAO HENG BANK, INC., now BANCO DE ORO UNIVERSAL BANK, petitioner
vs.
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:
DECISION

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

CARPIO MORALES, J.:
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
showing your conformity thereto at the space provided below. (Emphasis and
underscoring in the original; italics supplied)
Nothing was heard from respondents, hence, petitioner by its Manager, Property
Management & Credit Services Department, advised her by letter of December 26,
20013 that in view of their failure to conform to the conditions set by it for the
redemption of the properties, it would proceed to consolidate the titles immediately
after the expiration of the redemption period on January 2, 2002.
Six days before the expiration of the redemption period or on December 27, 2001,
respondents filed a complaint before the Regional Trial Court (RTC) of Quezon City, for
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
and for them to be allowed "to deliver by way of dacion en pago' one of the mortgaged
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
ownership over their properties.
By respondents' claim, Dao Heng verbally agreed to enter into a dacion en pago.
In its Opposition to respondents' Application for a TRO,4 petitioner claimed that there
was no meeting of the minds between the parties on the settlement of respondents'
loan via dacion en pago.
A hearing on the application for a TRO was conducted by Branch 215 of the RTC of
Quezon City following which it denied the same.
Petitioner thereupon filed a Motion to Dismiss the complaint on the ground that the
claim on which respondents' action is founded is unenforceable under the Statute of
Frauds and the complaint states no cause of action. Respondents opposed the motion,
contending that their delivery of the titles to the mortgaged properties constituted
partial performance of their obligation under the dacion en pago to take it out from the
coverage of the Statute of Frauds.
The trial court granted petitioner's Motion to Dismiss in this wise:
[P]laintiffs' claim must be based on a document or writing evidencing the
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
an exception to the operation of the rule on statute of frauds because of their
partial performance of the obligation in the dacion en pago consisting of the
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
dacion en pago but by reason of the execution of the mortgage loan
agreement. If indeed a dacion en pago agreement was entered into between
the parties, it is inconceivable that a written document would not be drafted
considering the magnitude of the amount involved.5 (Emphasis and
underscoring supplied)
Respondents assailed the dismissal of their complaint via Petition for Review before this
Court which referred it to the Court of Appeals for disposition.
Reversing the trial court's dismissal of the complaint, the appellate court, by Decision of
January 26, 2006,6 reinstated respondents' complaint.7
In ordering the reinstatement of respondents' complaint, the appellate court held that
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
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
appellate court ratiocinated:
Particularly, in seeking exception to the application of the Statute of Frauds,
petitioners[-herein respondents] averred partial performance of the supposed
verbal dacion en pago. In paragraph 5 of their complaint, they stated: "As part
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
P5,000.00 for the appraisal expense. As reported by the appraiser
commissioned by Defendant Dao Heng, the appraised value of the mortgaged
properties were as follows: x x x" Having done so, petitioners are at least
entitled to a reasonable opportunity to prove their case in the course of a full
trial, to which the respondents may equally present their evidence in
refutation of the formers' case. (Underscoring supplied)
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
ruling:
 I.
. . . THAT THE COMPLAINT ALLEGED A SUFFICIENT CAUSE OF ACTION DESPITE
THE ALLEGATIONS, AS WELL AS ADMISSIONS FROM THE RESPONDENTS, THAT
THERE WAS NO PERFECTED DACION EN PAGO CONTRACT;
II.
. . . THAT THE ALLEGED DACION EN PAGO IS NOT UNENFORCEABLE UNDER
THE STATUTE OF FRAUDS, DESPITE THE ABSENCE OF A WRITTEN & BINDING
CONTRACT;
III.
. . . THAT THE COMPLAINT SUFFICIENTLY STATED A CAUSE OF ACTION. 9
Generally, the presence of a cause of action is determined from the facts alleged in the
complaint.
In their complaint, respondents alleged:
xxxx
4. Sometime in the middle of the year 2000, defendant Dao Heng Bank as the
creditor bank agreed to the full settlement of plaintiffs' mortgage obligation of
P9 Million through the assignment of one of the two (2) mortgaged
properties;
[5] As part of the agreement, defendant Dao Heng Bank had the mortgaged
properties appraised to determine which of the two (2) mortgaged properties
shall be delivered as full payment of the mortgage obligation; Also as part of
the deal, plaintiffs for their part paid P5,000.00 for the appraisal expense; As
reported by the appraiser commissioned by defendant Dao Heng, the
appraised value of the mortgaged properties were as follows:
(a) Property No. 1 - T.C.T. No. 92257: P12,518,000.00
L2A Blk 12 Don Mariano Marcos Ave., Fairview, QC
(b) Property No. 2 - T.C.T. No. 146289: P8,055,000.00 L36 Blk 87
Regalado Ave. Cor. Ipil St., Neopolitan, QC
[6] Sometime in December, year 2000, the protest of plaintiffs
notwithstanding and in blatant breach of the agreed "Dacion en pago" as the
mode of full payment of plaintiffs' mortgage obligation, defendant Dao Heng
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
supplied)
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
hearing, by taking into account the discussions in said motion to dismiss and the
disposition thereto.10
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
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
mortgaged properties was improper because there was an agreement to
dacion one of the two (2) mortgaged properties as full settlement of the loan
obligation and that defendant Dao Heng Bank and Banco de Oro were already
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
between defendant Dao Heng Bank and the plaintiffs to dacion any of the
mortgaged properties as full settlement of the loan. Although there was a
PROPOSAL and NEGOTIATIONS to settle the loan by way of dacion, nothing
came out of said proposal, much less did the negotiations mature into the
execution of a dacion en pago instrument. Defendant Dao Heng Bank found
the offer to settle by way of dacion not acceptable and thus, it opted to
foreclose on the mortgage.
The law clearly provides that "the debtor of a thing cannot compel the
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
as stipulated" (Palmares v. Court of Appeals, 288 SCRA 422 at p. 444 [1998]).
"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
Appellate Court, 146 SCRA 205, at 213 [1986]) Defendant Dao Heng Bank
merely opted to exercise such prerogative.12 (Emphasis in the original;
capitalization and underscoring supplied)
Dacion en pago as a mode of extinguishing an existing obligation partakes of the nature
of sale whereby property is alienated to the creditor in satisfaction of a debt in money.13
It is an objective novation of the obligation, hence, common consent of the parties is
required in order to extinguish the obligation.
title to a property is not delivered to the mortgagee, what will prevent the mortgagor
from again encumbering it also by mortgage or even by sale to a third party.
Finally, that respondents did not deny proposing to redeem the mortgages,17 as
reflected in petitioner's June 29, 2001 letter to them, dooms their claim of the existence
of a perfected dacion en pago.
WHEREFORE, the Court of Appeals Decision of January 26, 2006 is REVERSED and SET
ASIDE. The Resolution of July 2, 2002 of the Regional Trial Court of Quezon City, Branch
215 dismissing respondents' complaint is REINSTATED.
SO ORDERED.

. . . 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.
A
P70.00 P14.00 P56.00 P5.00 Once meses
.............
LAUREL, J.:
B
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,
1937.
(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 .
paid.
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
case.
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
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36902 January 30, 1982
LUIS PICHEL, petitioner,
vs.
PRUDENCIO ALONZO, respondent.
GUERRERO, J.:
This is a petition to review on certiorari the decision of the Court of First Instance of
Basilan City dated January 5, 1973 in Civil Case No. 820 entitled "Prudencio Alonzo,
plaintiff, vs. Luis Pichel, defendant."
This case originated in the lower Court as an action for the annulment of a "Deed of
Sale" dated August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of
Luis Pichel, as vendee, involving property awarded to the former by the Philippine
Government under Republic Act No. 477. Pertinent portions of the document sued upon
read as follows:
That the VENDOR for and in consideration of the sum of FOUR
THOUSAND TWO HUNDRED PESOS (P4,200.00), Philippine Currency,
in hand paid by the VENDEE to the entire satisfaction of the
VENDOR, the VENDOR hereby sells transfers, and conveys, by way of
absolute sale, all the coconut fruits of his coconut land, designated
as Lot No. 21 - Subdivision Plan No. Psd- 32465, situated at
Balactasan Plantation, Lamitan, Basilan City, Philippines;
That for the herein sale of the coconut fruits are for all the fruits on
the aforementioned parcel of land presently found therein as well as
for future fruits to be produced on the said parcel of land during the
years period; which shag commence to run as of SEPTEMBER
15,1968; up to JANUARY 1, 1976 (sic);
That the delivery of the subject matter of the Deed of Sale shall be
from time to time and at the expense of the VENDEE who shall do
the harvesting and gathering of the fruits;
That the Vendor's right, title, interest and participation herein
conveyed is of his own exclusive and absolute property, free from
any liens and encumbrances and he warrants to the Vendee good
title thereto and to defend the same against any and all claims of all
persons whomsoever. 1
After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972
which in part read thus:
The following facts are admitted by the parties:
Plaintiff Prudencio Alonzo was awarded by the Government that
parcel of land designated as Lot No. 21 of Subdivision Plan Psd
32465 of Balactasan, Lamitan, Basilan City in accordance with
Republic Act No. 477. The award was cancelled by the Board of
Liquidators on January 27, 1965 on the ground that, previous
thereto, plaintiff was proved to have alienated the land to another,
in violation of law. In 197 2, plaintiff's rights to the land were
reinstated.
On August 14, 1968, plaintiff and his wife sold to defendant an the
fruits of the coconut trees which may be harvested in the land in
question for the period, September 15, 1968 to January 1, 1976, in
consideration of P4,200.00. Even as of the date of sale, however, the
land was still under lease to one, Ramon Sua, and it was the
agreement that part of the consideration of the sale, in the sum of
P3,650.00, was to be paid by defendant directly to Ramon Sua so as
to release the land from the clutches of the latter. Pending said
payment plaintiff refused to snow the defendant to make any
harvest.
In July 1972, defendant for the first time since the execution of the
deed of sale in his favor, caused the harvest of the fruit of the
coconut trees in the land.
xxx xxx xxx
 Considering the foregoing, two issues appear posed by the
complaint and the answer which must needs be tested in the
crucible of a trial on the merits, and they are:
First. Whether or nor defendant actually paid to plaintiff the full
sum of P4,200.00 upon execution of the deed of sale.
Second. Is the deed of sale, Exhibit 'A', the prohibited
encumbrance contemplated in Section 8 of Republic Act No. 477? 2
Anent the first issue, counsel for plaintiff Alonzo subsequently 'stipulated and agreed
that his client ... admits fun payment thereof by defendant. 3 The remaining issue being
one of law, the Court below considered the case submitted for summary judgment on
the basis of the pleadings of the parties, and the admission of facts and documentary
evidence presented at the pre-trial conference.
The lower court rendered its decision now under review, holding that although the
agreement in question is denominated by the parties as a deed of sale of fruits of the
coconut trees found in the vendor's land, it actually is, for all legal intents and purposes,
a contract of lease of the land itself. According to the Court:
... the sale aforestated has given defendant complete control and
enjoyment of the improvements of the land. That the contract is
consensual; that its purpose is to allow the enjoyment or use of a
thing; that it is onerous because rent or price certain is stipulated;
and that the enjoyment or use of the thing certain is stipulated to be
for a certain and definite period of time, are characteristics which
admit of no other conclusion. ... The provisions of the contract itself
and its characteristics govern its nature. 4
The Court, therefore, concluded that the deed of sale in question is an encumbrance
prohibited by Republic Act No. 477 which provides thus:
Sec. 8. Except in favor of the Government or any of its branches,
units, or institutions, land acquired under the provisions of this Act
or any permanent improvements thereon shall not be thereon and
for a term of ten years from and after the date of issuance of the
certificate of title, nor shall they become liable to the satisfaction of
any debt contracted prior to the expiration of such period.
Any occupant or applicant of lands under this Act who transfers
whatever rights he has acquired on said lands and/or on the
improvements thereon before the date of the award or signature of
the contract of sale, shall not be entitled to apply for another piece
of agricultural land or urban, homesite or residential lot, as the case
may be, from the National Abaca and Other Fibers Corporation; and
such transfer shall be considered null and void. 5
The dispositive portion of the lower Court's decision states:
WHEREFORE, it is the judgment of this Court that the deed of sale,
Exhibit 'A', should be, as it is, hereby declared nun and void; that
plaintiff be, as he is, ordered to pay back to defendant the
consideration of the sale in the sum of P4,200.00 the same to bear
legal interest from the date of the filing of the complaint until paid;
that defendant shall pay to the plaintiff the sum of P500.00 as
attorney's fees.
Costs against the defendant. 6
Before going into the issues raised by the instant Petition, the matter of whether, under
the admitted facts of this case, the respondent had the right or authority to execute the
"Deed of Sale" in 1968, his award over Lot No. 21 having been cancelled previously by
the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras
vs. Sua 7 wherein it was categorically stated by this Court that a cancellation of an award
granted pursuant to the provisions of Republic Act No. 477 does not automatically
divest the awardee of his rights to the land. Such cancellation does not result in the
immediate reversion of the property subject of the award, to the State. Speaking
through Mr. Justice J.B.L. Reyes, this Court ruled that "until and unless an appropriate
proceeding for reversion is instituted by the State, and its reacquisition of the ownership
and possession of the land decreed by a competent court, the grantee cannot be said to
have been divested of whatever right that he may have over the same property." 8
There is nothing in the record to show that at any time after the supposed cancellation
of herein respondent's award on January 27, 1965, reversion proceedings against Lot
No. 21 were instituted by the State. Instead, the admitted fact is that the award was
reinstated in 1972. Applying the doctrine announced in the above-cited Ras case,
therefore, herein respondent is not deemed to have lost any of his rights as grantee of
Lot No. 21 under Republic Act No. 477 during the period material to the case at bar, i.e.,
from the cancellation of the award in 1965 to its reinstatement in 1972. Within said
period, respondent could exercise all the rights pertaining to a grantee with respect to
Lot No. 21.
This brings Us to the issues raised by the instant Petition. In his Brief, petitioner
contends that the lower Court erred:
1. In resorting to construction and interpretation of the deed of sale
in question where the terms thereof are clear and unambiguous and
leave no doubt as to the intention of the parties;
2. In declaring granting without admitting that an interpretation is
necessary the deed of sale in question to be a contract of lease
over the land itself where the respondent himself waived and
abandoned his claim that said deed did not express the true
agreement of the parties, and on the contrary, respondent admitted
at the pre-trial that his agreement with petitioner was one of sale of
the fruits of the coconut trees on the land;
3. In deciding a question which was not in issue when it declared the
deed of sale in question to be a contract of lease over Lot 21;
4. In declaring furthermore the deed of sale in question to be a
contract of lease over the land itself on the basis of facts which were
not proved in evidence;
5. In not holding that the deed of sale, Exhibit "A" and "2", expresses
a valid contract of sale;
6. In not deciding squarely and to the point the issue as to whether
or not the deed of sale in question is an encumbrance on the land
and its improvements prohibited by Section 8 of Republic Act 477;
and
7. In awarding respondent attorney's fees even granting, without
admitting, that the deed of sale in question is violative of Section 8
of Republic Act 477.
The first five assigned errors are interrelated, hence, We shall consider them together.
To begin with, We agree with petitioner that construction or interpretation of the
document in question is not called for. A perusal of the deed fails to disclose any
ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the
contracting parties. The terms of the agreement are clear and unequivocal, hence the
literal and plain meaning thereof should be observed. Such is the mandate of the Civil
Code of the Philippines which provides that:
Art. 1370. If the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of
its stipulation shall control ... .
Pursuant to the afore-quoted legal provision, the first and fundamental duty of the
courts is the application of the contract according to its express terms, interpretation
being resorted to only when such literal application is impossible. 9
Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it
purports to be. It is a document evidencing the agreement of herein parties for the sale
of coconut fruits of Lot No. 21, and not for the lease of the land itself as found by the
lower Court. In clear and express terms, the document defines the object of the contract
thus: "the herein sale of the coconut fruits are for an the fruits on the aforementioned
parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976."
Moreover, as petitioner correctly asserts, the document in question expresses a valid
contract of sale. It has the essential elements of a contract of sale as defined under
Article 1485 of the New Civil Code which provides thus:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
The subject matter of the contract of sale in question are the fruits of the coconut trees
on the land during the years from September 15, 1968 up to January 1, 1976, which
subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things
having a potential existence may be the object of the contract of sale. And in Sibal vs.
Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject
matter of the sale. Here, the Supreme Court, citing Mechem on Sales and American
cases said which have potential existence may be the subject matter of sale. Here, the
Supreme Court, citing Mechem on Sales and American cases said:
 Mr. Mechem says that a valid sale may be made of a thing, which
though not yet actually in existence, is reasonably certain to come
into existence as the natural increment or usual incident of
something already in existence, and then belonging to the vendor,
and the title will vest in the buyer the moment the thing comes into
existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting
vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature are
said to have a potential existence. A man may sell property of which
he is potentially and not actually possess. He may make a valid sale
of the wine that a vineyard is expected to produce; or the grain a
field may grow in a given time; or the milk a cow may yield during
the coming year; or the wool that shall thereafter grow upon sheep;
or what may be taken at the next case of a fisherman's net; or fruits
to grow; or young animals not yet in existence; or the goodwill of a
trade and the like. The thing sold, however, must be specific and
Identified. They must be also owned at the time by the vendor. (Hull
vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523).
We do not agree with the trial court that the contract executed by and between the
parties is "actually a contract of lease of the land and the coconut trees there." (CFI
Decision, p. 62, Records). The Court's holding that the contract in question fits the
definition of a lease of things wherein one of the parties binds himself to give to another
the enjoyment or use of a thing for a price certain and for a period which may be
definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. The essential
difference between a contract of sale and a lease of things is that the delivery of the
thing sold transfers ownership, while in lease no such transfer of ownership results as
the rights of the lessee are limited to the use and enjoyment of the thing leased.
In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held:
Since according to article 1543 of the same Code the contract of
lease is defined as the giving or the concession of the enjoyment or
use of a thing for a specified time and fixed price, and since such
contract is a form of enjoyment of the property, it is evident that it
must be regarded as one of the means of enjoyment referred to in
said article 398, inasmuch as the terms enjoyment, use, and benefit
involve the same and analogous meaning relative to the general
utility of which a given thing is capable. (104 Jurisprudencia Civil,
443)
In concluding that the possession and enjoyment of the coconut trees can therefore be
said to be the possession and enjoyment of the land itself because the defendant-lessee
in order to enjoy his right under the contract, he actually takes possession of the land, at
least during harvest time, gather all of the fruits of the coconut trees in the land, and
gain exclusive use thereof without the interference or intervention of the plaintiff-lessor
such that said plaintiff-lessor is excluded in fact from the land during the period
aforesaid, the trial court erred. The contract was clearly a "sale of the coconut fruits."
The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut
fruits of his land," thereby divesting himself of all ownership or dominion over the fruits
during the seven-year period. The possession and enjoyment of the coconut trees
cannot be said to be the possession and enjoyment of the land itself because these
rights are distinct and separate from each other, the first pertaining to the accessory or
improvements (coconut trees) while the second, to the principal (the land). A transfer of
the accessory or improvement is not a transfer of the principal. It is the other way
around, the accessory follows the principal. Hence, the sale of the nuts cannot be
interpreted nor construed to be a lease of the trees, much less extended further to
include the lease of the land itself.
The real and pivotal issue of this case which is taken up in petitioner's sixth assignment
of error and as already stated above, refers to the validity of the "Deed of Sale", as such
contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No. 477. The lower Court did not
rule on this question, having reached the conclusion that the contract at bar was one of
lease. It was from the context of a lease contract that the Court below determined the
applicability of Sec. 8, R.A. No. 477, to the instant case.
Resolving now this principal issue, We find after a close and careful examination of the
terms of the first paragraph of Section 8 hereinabove quoted, that the grantee of a
parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the
natural and/or industrial fruits of the land awarded to him. What the law expressly
disallows is the encumbrance or alienation of the land itself or any of the permanent
improvements thereon. Permanent improvements on a parcel of land are things
incorporated or attached to the property in a fixed manner, naturally or artificially. They
include whatever is built, planted or sown on the land which is characterized by fixity,
immutability or immovability. Houses, buildings, machinery, animal houses, trees and
plants would fall under the category of permanent improvements, the alienation or
encumbrance of which is prohibited by R.A. No. 477. While coconut trees are
permanent improvements of a land, their nuts are natural or industrial fruits which are
meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise
disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21
from the Government, had the right and prerogative to sell the coconut fruits of the
trees growing on the property.
By virtue of R.A. No. 477, bona fide occupants, veterans, members of guerilla 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
interest;
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
attorney's fees made by the lower Court need not be passed upon, such award having
been apparently based on the erroneous finding and conclusion that the contract at bar
is one of lease. We shall limit Ourselves to the question of whether or not in accordance
with Our ruling in this case, respondent is entitled to an award of attorney's fees. The
Civil Code provides that:
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable
that attorney's fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be
reasonable.
We find that none of the legal grounds enumerated above exists to justify or warrant
the grant of attorney's fees to herein respondent.

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

SO ORDERED.
II Object of the contract
Republic of the Philippines
SUPREME COURT
Manila
The background facts are stated by the Court of Appeals as follows:
FIRST DIVISION
G.R. No. L-31271 April 29, 1974
ROMEO MARTINEZ and LEONOR SUAREZ, spouses, petitioners-appellants,
vs.
HON. COURT OF APPEALS, SECRETARY and UNDERSECRETARY OF PUBLIC WORKS &
COMMUNICATIONS, respondents-appellees.
Flores Macapagal, Ocampo and Balbastro for petitioners-appellants.
Office of the Solicitor General Felix Q. Antonio, Acting Assistant Solicitor General
Dominador L. Quiroz and Solicitor Concepcion T. Agapinan for respondents-appellees.
ESGUERRA, J.:p
Petition for review by certiorari of the judgment of the Court of Appeals dated
November 17, 1969 in its CA-G.R. 27655-R which reverses the judgment of the Court of
First Instance of Pampanga in favor of petitioners-appellants against the Secretary and
Undersecretary of Public Works & Communications in the case instituted to annul the
order of November 25, 1958 of respondent Secretary of Public Works &
Communications directing the removal by the petitioners of the dikes they had
constructed on Lot No. 15856 of the Register of Deeds of Pampanga, which order was
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:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment
appealed from is hereby reversed, and another entered: [1]
upholding the validity of the decision reached by the respondent
officials in the administrative case; [2] dissolving the injunction
issued by the Court below; and [3] cancelling the registration of Lot
No. 2, the disputed area, and ordering its reconveyance to the public
domain. No costs in this instance.
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
of land are fishponds. The property involved in the instant case is
the second parcel mentioned in the above-named transfer
certificate of title.
The disputed property was originally owned by one Paulino
Montemayor, who secured a "titulo real" over it way back in 1883.
After the death of Paulino Montemayor the said property passed to
his successors-in-interest, Maria Montemayor and Donata
Montemayor, who in turn, sold it, as well as the first parcel, to a
certain Potenciano Garcia.
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,
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,
and on even date, applied for a writ of preliminary injunction, which
was issued against said municipal president. The Court, by decision
promulgated June 12, 1916, declared permanent the preliminary
injunction, which, decision, on appeal, was affirmed by the Supreme
Court on August 21, 1918. From June 22, 1914, the dikes around the
property in question remained closed until a portion thereof was
again opened just before the outbreak of the Pacific War.
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
Pampanga, sitting as land registration court, granted the registration
over and against the opposition of the Attorney-General and the
Director of Forestry. Pursuant to the Court's decision, original
certificate of title No. 14318, covering said parcels 1 and 2 was
issued to the spouses Potenciano Garcia and Lorenza Sioson.
These parcels of land were subsequently bought by Emilio Cruz de
Dios in whose name transfer certificate of title No. 1421 was first
issued on November 9, 1925.
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.
To avoid any untoward incident, the disputants agreed to refer the
matter to the Committee on Rivers and Streams, by then composed
of the Honorable Pedro Tuason, at that time Secretary of Justice, as
chairman, and the Honorable Salvador Araneta and Vicente Orosa,
Secretary of Agriculture and National Resources and Secretary of
Public Works and Communications, respectively, as members. This
committee thereafter appointed a Sub-Committee to investigate the
case and to conduct an ocular inspection of the contested property,
and on March 11, 1954, said Sub-Committee submitted its report to
the Committee on Rivers and Streams to the effect that Parcel No. 2
of transfer certificate of title No. 15856 was not a public river but a
private fishpond owned by the herein spouses.
On July 7, 1954, the Committee on Rivers and Streams rendered its
decision the dispositive part of which reads:
"In view of the foregoing considerations, the
spouses Romeo Martinez and Leonor Suarez
should be restored to the exclusive possession,
use and enjoyment of the creek in question
which forms part of their registered property
and the decision of the courts on the matter be
given full force and effect."
The municipal officials of Lubao, led by Acting Mayor Mariano Zagad,
apparently refused to recognize the above decision, because on
September 1, 1954, the spouses Romeo Martinez and Leonor Suarez
instituted Civil Case No. 751 before the Court of First Instance of
Pampanga against said Mayor Zagad, praying that the latter be
enjoined from molesting them in their possession of their property
and in the construction of the dikes therein. The writ of preliminary
injunction applied for was issued against the respondent municipal
Mayor, who immediately elevated the injunction suit for review to
the Supreme Court, which dismissed Mayor Zagad's petition on
September 7, 1953. With this dismissal order herein appellee
spouses proceeded to construct the dikes in the disputed parcel of
land.
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
said parcel of land, directing the appellees herein to remove the
dikes they had constructed, on the strength of the authority vested
in him by Republic Act No. 2056, approved on June 13, 1958,
entitled "An Act To Prohibit, Remove and/or Demolish the
Construction of Dams. Dikes, Or Any Other Walls In Public Navigable
Waters, Or Waterways and In Communal Fishing Grounds, To
Regulate Works in Such Waters or Waterways And In Communal
Fishing Grounds, And To Provide Penalties For Its Violation, And For
Other Purposes. 1 The said order which gave rise to the instant
proceedings, embodied a threat that the dikes would be demolished
should the herein appellees fail to comply therewith within thirty
(30) days.
The spouses Martinez replied to the order by commencing on
January 2, 1959 the present case, which was decided in their favor
by the lower Court in a decision dated August 10, 1959, the
dispositive part of which reads:
"WHEREFORE, in view of the foregoing
considerations, the Court hereby declares the
decision, Exhibit S, rendered by the
Undersecretary of Public Works and
Communications null and void; declares the
preliminary injunction, hereto for issued,
permanent, and forever enjoining both
respondents from molesting the spouses Romeo
Martinez and Leonor Suarez in their possession,
use and enjoyment of their property described in
Plan Psu-9992 and referred to in their petition."
 "Without pronouncement as to costs."
"SO ORDERED."
As against this judgment respondent officials of the Department of
Public Works and Communications took the instant appeal,
contending that the lower Court erred:
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
the respondent Undersecretary of Public Works and
Communications to investigate the said administrative case;
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
land;
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;
6. In not sustaining respondent's claim that the petition should not
have been entertained on the ground that the petitioners have not
exhausted administrative remedies; and
7. In holding that the decision of the respondents is illegal on the
ground that it violates the principles that laws shall have no
retroactive effect unless the contrary is provided and in holding that
the said Republic Act No. 2056 is unconstitutional on the ground
that respondents' threat of prosecuting petitioners under Section 3
thereof for acts done four years before its enactment renders the
said law ex post facto.
The Court of Appeals sustained the above-mentioned assignment of errors committed
by the Court of First Instance of Pampanga and, as previously stated, reversed the
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. THE COURT OF APPEALS ERRED IN DECLARING IN THE INSTANT
CASE THAT PARCEL NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO.
15856 IS A PUBLIC RIVER AND ORDERING THE CANCELLATION OF ITS
REGISTRATION BECAUSE THIS CONSTITUTES A COLLATERAL ATTACK
ON A TORRENS TITLE IN VIOLATION OF THE LAW AND THE WELL-
SETTLED JURISPRUDENCE ON THE MATTER.
2. THE COURT OF APPEALS ERRED IN REOPENING AND RE-
LITIGATING THE ISSUE AS TO WHETHER OR NOT LOT NO. 2 OF
TRANSFER CERTIFICATE OF TITLE NO. 15856 REGISTER OF DEEDS OF
PAMPANGA, IS A PUBLIC RIVER NOTWITHSTANDING THE FACT THAT
THIS ISSUE HAS BEEN LONG RESOLVED AND SETTLED BY THE LAND
REGISTRATION COURT OF PAMPANGA IN LAND REGISTRATION
PROCEEDING NO. 692 AND IS NOW RES JUDICATA.
3. THE COURT OF APPEALS ERRED IN ORDERING THE CANCELLATION
OF THE REGISTRATION OF LOT NO. 2 OF TRANSFER CERTIFICATE OF
TITLE NO. 15856 NOTWITHSTANDING THE FACT THAT THE TORRENS
TITLE COVERING IT HAS BEEN VESTED IN THE PETITIONERS WHO ARE
THE SEVENTH OF THE SUCCESSIVE INNOCENT PURCHASERS
THEREOF AND WHO IN PURCHASING THE SAME RELIED ON THE
PRINCIPLE THAT THE PERSONS DEALING WITH REGISTERED LAND
NEED NOT GO BEHIND THE REGISTER TO DETERMINE THE
CONDITION OF THE PROPERTY.
The 1st and 2nd assignment of errors, being closely related, will be taken up together.
The ruling of the Court of Appeals that Lot No. 2 covered by Transfer Certificate of Title
No. 15856 of the petitioners-appellants is a public stream and that said title should be
cancelled and the river covered reverted to public domain, is assailed by the petitioners-
appellants as being a collateral attack on the indefeasibility of the torrens title originally
issued in 1925 in favor of the petitioners-appellants' predecessor-in-interest, Potenciano
Garcia, which is violative of the rule of res judicata. It is argued that as the decree of
registration issued by the Land Registration Court was not re-opened through a petition
for review filed within one (1) year from the entry of the decree of title, the certificate
of title issued pursuant thereto in favor of the appellants for the land covered thereby is
no longer open to attack under Section 38 of the Land Registration Act (Act 496) and the
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
ordinarily makes the title absolute and indefeasible, subject to the exemption stated in
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
statute of the Philippine Islands cannot require to appear of record in the registry."
At the time of the enactment of Section 496, one right recognized or existing under the
law is that provided for in Article 339 of the old Civil Code which reads as follows:
Property of public ownership is:
1. That destined to the public use, such as roads, canals, rivers,
torrents, ports, and bridges constructed by the State, and banks
shores, roadsteads, and that of a similar character. (Par. 1)
The above-mentioned properties are parts of the public domain intended for public use,
are outside the commerce of men and, therefore, not subject to private appropriation. (
3 Manresa, 6th ed. 101-104.)
In Ledesma v. Municipality of Iloilo, 49 Phil. 769, this Court held:
A simple possession of a certificate of title under the Torrens system
does not necessarily make the possessor a true owner of all the
property described therein. If a person obtains title under the
Torrens system which includes by mistake or oversight, lands which
cannot be registered under the Torrens system, he does not by
virtue of said certificate alone become the owner of the land illegally
included.
In Mercado v. Municipal President of Macabebe, 59 Phil. 592, it was also said:
It is useless for the appellant now to allege that she has obtained
certificate of title No. 329 in her favor because the said certificate
does not confer upon her any right to the creek in question,
inasmuch as the said creek, being of the public domain, is included
among the various exceptions enumerated in Section 39 of Act 496
to which the said certificate is subject by express provision of the
law.
The same ruling was laid down in Director of Lands v. Roman Catholic Bishop of
Zamboanga, 61 Phil. 644, as regards public plaza.
In Dizon, et al. v. Rodriguez, et al., G.R. No. L-20300-01 and G.R. No. L-20355-56, April
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
capable of registration.
It is, therefore, clear that the authorities cited by the appellants as to the conclusiveness
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
navigable rivers which are parts of the public domain, and cannot validly adjudge the
registration of title in favor of a private applicant. Hence, the judgment of the Court of
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
collaterally, by the State which is not bound by any prescriptive period provided for by
the Statute of Limitations (Article 1108, par. 4, new Civil Code). The right of reversion or
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,
G.R. No.
L-15484, January 31, 1963, 7 SCRA 47.)
When it comes to registered properties, the jurisdiction of the Secretary of Public Works
& Communications under Republic Act 2056 to order the removal or obstruction to
navigation along a public and navigable creek or river included therein, has been
definitely settled and is no longer open to question (Lovina v. Moreno, G.R. No L-17821,
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).
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
of Pampanga, from which the present Transfer Certificate of Title No. 15856 was
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.
1247 for injunction filed by the petitioners' predecessors-in-interest against the
Municipal Mayor of Lubao and decided in 1916 (Exh. "L"), Lot No. 2 is a branch of the
main river that has been covered with water since time immemorial and, therefore, part
of the public domain. This finding having been affirmed by the Supreme Court, there is
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
prescription. (Palanca v. Com. of the Philippines, 69 Phil. 449; Meneses v. Com. of the
Philippines, 69 Phil. 647). Consequently, appellants' title does not include said river.
II
As regards the 3rd assignment of error, there is no weight in the appellants' argument
that, being a purchaser for value and in good faith of Lot No. 2, the nullification of its
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
registration. Appellants cannot be deemed purchasers for value and in good faith as in
the deed of absolute conveyance executed in their favor, the following appears:
6. Que la segunda parcela arriba descrita y mencionada esta
actualmente abierta, sin malecones y excluida de la primera parcela
en virtud de la Orden Administrative No. 103, tal como fue
enmendada, del pasado regimen o Gobierno.
7. Que los citados compradores Romeo Martinez y Leonor Suarez se
encargan de gestionar de las autoridades correspondientes para que
la citada segunda parcela pueda ser convertida de nuevo en
pesqueria, corriendo a cuenta y cargo de los mismos todos los
gastos.
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
exhibits)
These stipulations were accepted by the petitioners-appellants in the same conveyance
in the following terms:
Romeo Martinez y Leonor Suarez, mayores de edad, filipinos y
residentes en al Barrio de Julo Municipio de Malabon, Provincia de
Rizal, por la presente, declaran que estan enterados del contenido
de este documento y lo aceptan en los precisos terminos en que
arriba uedan consignados. (Exh. 13-a, ibid)
Before purchasing a parcel of land, it cannot be contended that the appellants who
were the vendees did not know exactly the condition of the land that they were buying
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.
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
cannot claim that he acquired it in good faith (Leung Lee v. Strong Machinery Co., et al.,
37 Phil. 664).
The ruling that a purchaser of a registered property cannot go beyond the record to
make inquiries as to the legality of the title of the registered owner, but may rely on the
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
public domain for public use and not capable of private appropriation or acquisition by
prescription.
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-
appellants.
Makalintal, C.J., Castro, Teehankee and Muoz Palma, JJ., concur.
 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.
vs.
CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS,
Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de
respondents.
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.
BENGZON, J.P., J.:
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.
7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D.
On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of
Iloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B
or of its value.
The defendants answered, contending that Lot 1214-B was included in the public
instrument executed by Juliana Melliza in favor of Iloilo municipality in 1932. After
stipulation of facts and trial, the Court of First Instance rendered its decision on August
15, 1957, dismissing the complaint. Said court ruled that the instrument executed by
Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B. In
support of this conclusion, it referred to the portion of the instrument stating:
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
los mismos que son objeto de la presente, hago constar que dichos lotes y
porciones son los que necesita el Gobierno municipal de Iloilo para la
construccion de avenidas, parques y City Hall site del Municipal Government
Center de Iloilo, segun el plano Arellano.
and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and 1214-D but
also such other portions of lots as were necessary for the municipal hall site, such as Lot
1214-B. And thus it held that Iloilo City had the right to donate Lot 1214-B to the U.P.
Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, 1965, the
Court of Appeals affirmed the interpretation of the Court of First Instance, that the
portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters
specifically mentioned but included whatever was needed for the construction of
avenues, parks and the city hall site. Nonetheless, it ordered the remand of the case for
reception of evidence to determine the area actually taken by Iloilo City for the
construction of avenues, parks and for city hall site.
The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant
maintains that the public instrument is clear that only Lots Nos. 1214-C and 1214-D with
a total area of 10,788 square meters were the portions of Lot 1214 included in the sale;
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
render the contract invalid because the law requires as an essential element of sale, a
"determinate" object (Art. 1445, now 1448, Civil Code).
Appellees, on the other hand, contend that the present appeal improperly raises only
questions of fact. And, further, they argue that the parties to the document in question
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
absurd, because said lot is contiguous to the others admittedly included in the
conveyance, lying directly in front of the city hall, separating that building from Lots
1214-C and 1214-D, which were included therein. And, finally, appellees argue that the
sale's object was determinate, because it could be ascertained, at the time of the
execution of the contract, what lots were needed by Iloilo municipality for avenues,
parks and city hall site "according to the Arellano Plan", since the Arellano plan was then
already in existence.
The appeal before Us calls for the interpretation of the public instrument dated
November 15, 1932. And interpretation of such contract involves a question of law,
since the contract is in the nature of law as between the parties and their successors-in-
interest.
At the outset, it is well to mark that the issue is whether or not the conveyance by
Juliana Melliza to Iloilo municipality included that portion of Lot 1214 known as Lot
1214-B. If not, then the same was included, in the instrument subsequently executed by
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
title did not specifically designate Lot 1214-B, but only such portions of Lot 1214 as
were not included in the previous sale to Iloilo municipality (Stipulation of Facts, par. 5,
Record on Appeal, p. 23). And thus, if said Lot 1214-B had been included in the prior
conveyance to Iloilo municipality, then it was excluded from the sale to Remedios Sian
Villanueva and, later, to Pio Sian Melliza.
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
instrument aforequoted and its purpose, i.e., whether it was intended merely to further
describe the lots already specifically mentioned, or whether it was intended to cover
other lots not yet specifically mentioned.
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
of the area of the lot donated.
Secondly, reading the public instrument in toto, with special reference to the
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
describe, not only those lots already mentioned, but the lots object of the sale, by
stating that said lots are the ones needed for the construction of the city hall site,
avenues and parks according to the Arellano plan. If the parties intended merely to
cover the specified lots Lots 2, 5, 1214-C and 1214-D, there would scarcely have been
any need for the next paragraph, since these lots are already plainly and very clearly
described by their respective lot number and area. Said next paragraph does not really
add to the clear description that was already given to them in the previous one.
It is therefore the more reasonable interpretation, to view it as describing those other
portions of land contiguous to the lots aforementioned that, by reference to the Arellano
plan, will be found needed for the purpose at hand, the construction of the city hall site.
Appellant however challenges this view on the ground that the description of said other
lots in the aforequoted second paragraph of the public instrument would thereby be
legally insufficient, because the object would allegedly not be determinate as required
by law.
Such contention fails on several counts. The requirement of the law that a sale must
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
necessity of a new or further agreement between the parties (Art. 1273, old Civil Code;
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
execution of the contract, for rendering determinate said lots without the need of a new
and further agreement of the parties.
The Arellano plan was in existence as early as 1928. As stated, the previous donation of
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
the said lots specifically mentioned in the public instrument Exhibit "D", and the
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
specifically named, were needed for the construction of the city hall site.
And, moreover, there is no question either that Lot 1214-B is contiguous to Lots 1214-C
and 1214-D, admittedly covered by the public instrument. It is stipulated that, after
execution of the contract Exhibit "D", the Municipality of Iloilo possessed it together
with the other lots sold. It sits practically in the heart of the city hall site. Furthermore,
Pio Sian Melliza, from the stipulation of facts, was the notary public of the public
instrument. As such, he was aware of its terms. Said instrument was also registered with
the Register of Deeds and such registration was annotated at the back of the
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
chargeable with knowledge of them; that knowing so, he should have examined the
Arellano plan in relation to the public instrument Exhibit "D"; that, furthermore, he
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
thereto if it was his position that the same was not included in the same. The fact
remains that, instead, for twenty long years, Pio Sian Melliza and his predecessors-in-
interest, did not object to said possession, nor exercise any act of possession over Lot
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
municipality, now Iloilo City.
WHEREFORE, the decision appealed from is affirmed insofar as it affirms that of the
Court of First Instance, and the complaint in this case is dismissed. No costs. So ordered.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and
Fernando, JJ., concur.
Concepcion , C.J., is on leave.
Footnotes
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-9935 February 1, 1915
YU TEK and CO., plaintiff-appellant,
vs.
BASILIO GONZALES, defendant-appellant.
Beaumont, Tenney and Ferrier for plaintiff.
Buencamino and Lontok for defendant.
TRENT, J.:
The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of
which follow:
1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of
P3,000 Philippine currency from Messrs. Yu Tek and Co., and that in
consideration of said sum be obligates himself to deliver to the said Yu Tek
and Co., 600 piculs of sugar of the first and second grade, according to the
result of the polarization, within the period of three months, beginning on the
1st day of January, 1912, and ending on the 31st day of March of the same
year, 1912.
2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said
Messrs. Yu Tek and Co., of this city the said 600 piculs of sugar at any place
within the said municipality of Santa Rosa which the said Messrs. Yu Tek and
Co., or a representative of the same may designate.
3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek
and Co. the 600 piculs of sugar within the period of three months, referred to
in the second paragraph of this document, this contract will be rescinded and
the said Mr. Basilio Gonzales will then be obligated to return to Messrs. Yu Tek
and Co. the P3,000 received and also the sum of P1,200 by way of indemnity
for loss and damages.
Plaintiff proved that no sugar had been delivered to it under this contract nor had it
been able to recover the P3,000. Plaintiff prayed for judgment for the P3,000 and, in
addition, for P1,200 under paragraph 4, supra. Judgment was rendered for P3,000 only,
and from this judgment both parties appealed.
The points raised by the defendant will be considered first. He alleges that the court
erred in refusing to permit parol evidence showing that the parties intended that the
sugar was to be secured from the crop which the defendant raised on his plantation,
and that he was unable to fulfill the contract by reason of the almost total failure of his
crop. This case appears to be one to which the rule which excludes parol evidence to
add to or vary the terms of a written contract is decidedly applicable. There is not the
slightest intimation in the contract that the sugar was to be raised by the defendant.
Parties are presumed to have reduced to writing all the essential conditions of their
contract. While parol evidence is admissible in a variety of ways to explain the meaning
of written contracts, it cannot serve the purpose of incorporating into the contract
additional contemporaneous conditions which are not mentioned at all in the writing,
unless there has been fraud or mistake. In an early case this court declined to allow
parol evidence showing that a party to a written contract was to become a partner in a
firm instead of a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in
Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of employment provided
that the plaintiff should receive from the defendant a stipulated salary and expenses.
The defendant sought to interpose as a defense to recovery that the payment of the
salary was contingent upon the plaintiff's employment redounding to the benefit of the
defendant company. The contract contained no such condition and the court declined
to receive parol evidence thereof.
In the case at bar, it is sought to show that the sugar was to be obtained exclusively
from the crop raised by the defendant. There is no clause in the written contract which
even remotely suggests such a condition. The defendant undertook to deliver a
specified quantity of sugar within a specified time. The contract placed no restriction
upon the defendant in the matter of obtaining the sugar. He was equally at liberty to
purchase it on the market or raise it himself. It may be true that defendant owned a
plantation and expected to raise the sugar himself, but he did not limit his obligation to
his own crop of sugar. Our conclusion is that the condition which the defendant seeks to
add to the contract by parol evidence cannot be considered. The rights of the parties
must be determined by the writing itself.
The second contention of the defendant arises from the first. He assumes that the
contract was limited to the sugar he might raise upon his own plantation; that the
contract represented a perfected sale; and that by failure of his crop he was relieved
from complying with his undertaking by loss of the thing due. (Arts. 1452, 1096, and
1182, Civil Code.) This argument is faulty in assuming that there was a perfected sale.
Article 1450 defines a perfected sale as follows:
The sale shall be perfected between vendor and vendee and shall be binding
on both of them, if they have agreed upon the thing which is the object of the
contract and upon the price, even when neither has been delivered.
Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract
has been perfected, be governed by the provisions of articles 1096 and 1182."
This court has consistently held that there is a perfected sale with regard to the "thing"
whenever the article of sale has been physically segregated from all other articles Thus,
a particular tobacco factory with its contents was held sold under a contract which did
not provide for either delivery of the price or of the thing until a future time.
McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite similar was the recent case of
Barretto vs. Santa Marina (26 Phil. Rep., 200) where specified shares of stock in a
tobacco factory were held sold by a contract which deferred delivery of both the price
and the stock until the latter had been appraised by an inventory of the entire assets of
the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was
held perfected between the vendor and vendee, although the delivery of the price was
withheld until the necessary documents of ownership were prepared by the vendee. In
Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp
into the warehouse of the defendant. The defendant drew a bill of exchange in the sum
of P800, representing the price which had been agreed upon for the hemp thus
delivered. Prior to the presentation of the bill for payment, the hemp was destroyed.
Whereupon, the defendant suspended payment of the bill. It was held that the hemp
having been already delivered, the title had passed and the loss was the vendee's. It is
our purpose to distinguish the case at bar from all these cases.
In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs
of sugar of the first and second classes. Was this an agreement upon the "thing" which
was the object of the contract within the meaning of article 1450, supra? Sugar is one of
the staple commodities of this country. For the purpose of sale its bulk is weighed, the
customary unit of weight being denominated a "picul." There was no delivery under the
contract. Now, if called upon to designate the article sold, it is clear that the defendant
could only say that it was "sugar." He could only use this generic name for the thing
sold. There was no "appropriation" of any particular lot of sugar. Neither party could
point to any specific quantity of sugar and say: "This is the article which was the subject
of our contract." How different is this from the contracts discussed in the cases referred
to above! In the McCullough case, for instance, the tobacco factory which the parties
dealt with was specifically pointed out and distinguished from all other tobacco
factories. So, in the Barretto case, the particular shares of stock which the parties
desired to transfer were capable of designation. In the Tan Leonco case, where a
quantity of hemp was the subject of the contract, it was shown that that quantity had
been deposited in a specific warehouse, and thus set apart and distinguished from all
other hemp.
A number of cases have been decided in the State of Louisiana, where the civil law
prevails, which confirm our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and
Co. (122 La., 145; 47 Sou., 444). In this case a contract was entered into by a traveling
salesman for a quantity of shoes, the sales having been made by sample. The court said
of this contract:
But it is wholly immaterial, for the purpose of the main question, whether
Mitchell was authorized to make a definite contract of sale or not, since the
only contract that he was in a position to make was an agreement to sell or an
executory contract of sale. He says that plaintiff sends out 375 samples of
shoes, and as he was offering to sell by sample shoes, part of which had not
been manufactured and the rest of which were incorporated in plaintiff's
stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should
at that time have agreed upon the specific objects, the title to which was to
pass, and hence there could have been no sale. He and Seegars and Co. might
have agreed, and did (in effect ) agree, that the identification of the objects
and their appropriation to the contract necessary to make a sale should
thereafter be made by the plaintiff, acting for itself and for Seegars and Co.,
and the legend printed in red ink on plaintiff's billheads ("Our responsibility
ceases when we take transportation Co's. receipt `In good order'" indicates
plaintiff's idea of the moment at which such identification and appropriation
would become effective. The question presented was carefully considered in
the case of State vs. Shields, et al. (110 La., 547, 34 Sou., 673) (in which it was
absolutely necessary that it should be decided), and it was there held that in
receiving an order for a quantity of goods, of a kind and at a price agreed on,
to be supplied from a general stock, warehoused at another place, the agent
receiving the order merely enters into an executory contract for the sale of
the goods, which does not divest or transfer the title of any determinate
object, and which becomes effective for that purpose only when specific
goods are thereafter appropriated to the contract; and, in the absence of a
more specific agreement on the subject, that such appropriated takes place
only when the goods as ordered are delivered to the public carriers at the
place from which they are to be shipped, consigned to the person by whom
the order is given, at which time and place, therefore, the sale is perfected
and the title passes.
This case and State vs. Shields, referred to in the above quotation are amply illustrative
of the position taken by the Louisiana court on the question before us. But we cannot
refrain from referring to the case of Larue and Prevost vs. Rugely, Blair and Co. (10 La.
Ann., 242) which is summarized by the court itself in the Shields case as follows:
. . . It appears that the defendants had made a contract for the sale, by weight,
of a lot of cotton, had received $3,000 on account of the price, and had given
an order for its delivery, which had been presented to the purchaser, and
recognized by the press in which the cotton was stored, but that the cotton
had been destroyed by fire before it was weighed. It was held that it was still
at the risk of the seller, and that the buyer was entitled to recover the $3,000
paid on account of the price.
interpretation or construction. Under the provisions of article 1255 of the Civil Code
contracting parties are free to execute the contracts that they may consider suitable,
provided they are not in contravention of law, morals, or public order. In our opinion
there is nothing in the contract under consideration which is opposed to any of these
principles.
For the foregoing reasons the judgment appealed from is modified by allowing the
recovery of P1,200 under paragraph 4 of the contract. As thus modified, the judgment
appealed from is affirmed, without costs in this instance.
Arellano, C.J., Torres, Carson and Araullo, JJ., concur.
Johnson, J., dissents.

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

KNOW ALL MEN BY THESE PRESENTS:
That we, Aurora B. Camacho, widow, of legal age and resident of Balanga, Bataan, and
Angelino M. Banzon, have agreed on the following:
That I, Aurora B. Camacho is the registered owner of Lot No. 261 Balanga Cadastre, has
secured the legal services of Atty. Angelino M. Banzon to perform the following:
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
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
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,
filed a complaint8 for forcible entry on November 18, 1969 before the Municipal Trial
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
preliminary mandatory injunction ordering Tuazon to "discontinue entering the subject
premises until further orders of the court."9
On September 1, 1973, the plaintiffs, through Atty. Banzon, and Tuazon entered into an
"Agreement to Stay Court Order."10 Under the agreement, Tuazon was allowed to
cultivate specific portions of the property as indicated in a sketch plan which the parties
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
agreement shall in no way affect the merits of Civil Case No. 3512 and CAR Case No.
520-B73; and that no part shall be construed as impliedly creating new tenancy
relationship."
On December 6, 1973, Camacho filed a Manifestation11 in Civil Case No. 3512 declaring
that she had terminated the services of Atty. Banzon and had retained the services of
new counsel, Atty. Victor De La Serna.
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
B65 (where a favorable decision was rendered) and in Civil Case No. 3512. Under the
Contract of Attorneys Fee which they had both signed, Camacho would compensate
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
the National Urban Planning Commission. Atty. Banzon further claimed that as a
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
acquired from Camacho by purchase an 80-sq-m portion of the subject lot as evidenced
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
remained unheeded, and that of the seven cases14 he had handled for Camacho, four
had been decided in her favor while three are pending. Atty. Banzon thus prayed for the
following relief:
1. Ordering the ejectment of Defendant Silvestre Tuazon, in so far as (6880)
square meters is concerned, INTERVENORS claim over Lot 261;
2. The First Cause of Action, ordering the Plaintiff Aurora B. Camacho to
deliver (5000) square meters as per Annex "A"; EIGHTY square meters as per
Annex "C"; EIGHT HUNDRED (800) square meters which the INTERVENOR
purchased from third parties;
3. On the Second Cause of Action, ordering the Plaintiff Aurora B. Camacho to
pay the sum of P8,820.00, corresponding to the lease rental of (5880) square
meters a month, counted from July, 1973, until the same is delivered to the
INTERVENOR;
4. On the Third Cause of Action, ordering the Plaintiff Aurora B. Camacho to
deliver (1000) square meters, as attorneys fee in handling seven (7) cases;
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
services to the INTERVENOR; cost and litigation expenses of P1,000. until the
case is terminated.
6. To grant such relief, just and equitable in the premises.15
Camacho opposed16 Atty. Banzons motion on the ground that the admission of the
complaint-in-intervention would merely serve to delay the case. She also claimed that
his interest could be fully ventilated in a separate case for recovery of property or for
damages.
On April 5, 1974, the RTC granted17 the motion and subsequently admitted the
complaint-in-intervention.
On December 31, 1973, Atty. Banzon and Tuazon entered into the following amicable
settlement:
1. That for and in consideration of the sum of TWO THOUSAND PESOS
(P2,000.00), Philippine currency, which have been received from the
INTERVENOR and acknowledged to have been received by the Defendant
Silvestre Tuazon, the latter hereby acknowledges, waives his defenses against
the claim of the INTERVENOR ANGELINO M. BANZON over a portion of Lot No.
261, portion of the lot in question, to the extent of SIX THOUSAND EIGHT
HUNDRED EIGHTY (6880) SQUARE METERS as claimed and contained in the
COMPLAINT IN INTERVENTION and to give effect to this AMICABLE
SETTLEMENT hereby surrenders the actual possession of the said portion,
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
whatever rights or claims, including future claims that each may have against
each other;
3. That the parties herein bind themselves to comply with the conditions of
the foregoing settlement;
4. That the foregoing AMICABLE SETTLEMENT was realized and achieved
between the herein parties, thru the prior intercession of the Defendants
counsel Atty. Narciso V. Cruz, Jr.
WHEREFORE, it is respectfully prayed that the foregoing AMICABLE SETTLEMENT be
approved and made as the basis of this Hon. Courts decision between the herein
INTERVENOR and DEFENDANT Silvestre Tuazon.18
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
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
also told her that her lot appeared to be the most ideal location, and that he would take
care of all the legal problems.
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
municipal councilors "for formalitys sake" to prove his authority to act for and in behalf
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;
they never discussed attorneys fees. The cases stemmed from his assurance that he
would take care of any legal problem resulting from the donation of her property. She
was not even a party in some of the cases cited by Atty. Banzon.21 Lastly, she denied
that he had made demands to deliver the mentioned portions of the property.22
In his Reply,23 Atty. Banzon countered that the Balanga Municipal Council Resolution No.
128 transferring the market site to Camachos property was enacted precisely because
of his letter-proposal24 to the municipal council.
On August 14, 1977, Camacho and Tuazon entered into a Compromise Agreement,25
whereby Camacho agreed to transfer a 1,000-sq-m portion of Lot 261-B in favor of
Tuazon; for his part, Tuazon moved to dismiss Civil Case No. 3805 and to remove all the
improvements outside the portion of the property which Camacho had agreed to
convey to him. Thus, the RTC rendered a partial decision26 approving the compromise
agreement.
On September 12, 1978, Camacho filed a Motion to Dismiss27 the Complaint-in-
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
denied the motion in its Order28 dated March 16, 1979. It held that Atty. Banzon had an
interest over the subject property which he had to protect and that the compromise
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
in Camacho v. Court of Appeals29 where this Court affirmed the denial of the motion.
After trial on the merits, the RTC rendered a Decision30 on September 1, 1992 in favor of
Atty. Banzon. The fallo reads:
ACCORDINGLY, judgment is hereby rendered:
1. Ordering plaintiff Aurora B. Camacho under the Contract of Attorneys Fees,
[to deliver] 5000 square meters of the subject landholding, Lot 261-B-1,
covered by Transfer Certificate of Title No. T-76357, or any other derivative
sublots of the original Lot 261-B;
2. Declaring the dismissal of said intervenor from the case at bar as
unjustified;
3. Ordering said plaintiff to pay and deliver to said intervenor 1000 square
meters of the property in question, Lot 261-B-1 or any other derivative sublots
of the original Lot 261-B in case of deficiency, for legal services rendered in
seven (7) cases;
4. Directing said plaintiff to deliver to said intervenor, under a Provisional
Deed of Sale, 80 square meters of the subject property, Lot 261-B-1 or any
other derivative sublots of the original Lot 261 in case of deficiency, after
payment of the balance of the purchase price;
5. Ordering said plaintiff to execute the corresponding Deed of Sale in favor of
said intervenor for the aforesaid 80 square meters;
 6. Condemning said plaintiff to pay moral damages to said intervenor in the
amount of 100,000.00; attorneys fees in the sum of 30,000.00; and the
costs of the suit.
SO ORDERED.31
According to the RTC, Camacho had indeed read the contract and freely affixed her
signature thereon. Applying the provisions of Section 7 (now section 9), Rule 13032 of
the Rules of Court, it concluded that the terms of the contract were embodied in the
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
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
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
suffered.
On October 8, 1992, Atty. Banzon filed a Motion for Execution Pending Appeal.35
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
be assailed via petition for review. On November 20, 1992, the court issued an Order36
denying the motion for execution pending appeal for failure to state good reasons
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 appeal to the CA, Camacho raised the following errors:
I.
THE LOWER COURT ERRED IN ALLOWING JUDGE ABRAHAM VERA TO SIGN THE
DECISION IN THE INSTANT CASE, CONSIDERING THAT JUDGE VERA HAD LONG
CEASED TO BE THE JUDGE OF THAT COURT AND WAS THE PRESIDING JUDGE
OF BRANCH 90 OF THE REGIONAL TRIAL COURT OF QUEZON CITY WHEN THE
INSTANT DECISION WAS SIGNED ON SEPTEMBER 1, 1992.
II.
THE LOWER COURT ERRED IN UPHOLDING THE VALIDITY AND DUE EXECUTION
OF CONTRACT EXH. "C" AND IN ORDERING PLAINTIFF TO DELIVER TO
INTERVENOR 5,000 SQUARE METERS OF LOT 261-B-1, T.C.T. T-76357,
CONSIDERING THAT THIS LOT IS NOT SPECIFIED IN EXH. "C".
III.
THE LOWER COURT ERRED IN DECLARING THAT INTERVENORS DISCHARGE AS
PLAINTIFFS COUNSEL IN THE CASE AT BAR WAS UNJUSTIFIED, IN AWARDING
INTERVENOR MORAL DAMAGES, AND IN DISMISSING PLAINTIFFS
COUNTERCLAIMS.
IV.
THE LOWER COURT ERRED IN AWARDING INTERVENOR 1,000 SQUARE
METERS OF PLAINTIFFS LAND FOR HIS HANDLING OF ALLEGED SEVEN CASES.
V.
THE LOWER COURT ERRED IN ORDERING PLAINTIFF TO EXECUTE A FINAL DEED
OF SALE FOR 80 SQUARE METERS OUT OF LOT 261-B-1, CONSIDERING THAT
LOT 261-B-1 IS NOT SPECIFIED IN THE PROVISIONAL DEED OF SALE.37
On October 29, 1996, the CA rendered a decision38 affirming with modification the RTC
ruling. The fallo reads:
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
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
within thirty (30) days from the finality of this decision.
SO ORDERED.39
The CA held that all the elements of a valid contract were present: Camacho (a dentistry
graduate and an experienced businesswoman conversant in English) cannot plead that
she did not understand the undertaking she had entered into; the object of the contract
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
and offer a site where the public market will be constructed is not unlawful and
cannot be considered as influence peddling. As to the alleged violation of the terms of
the special power of attorney, the court held that Camacho was estopped from claiming
damages by reason thereof.
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
way deprive him of his right to attorneys fees. Lastly, the CA held that the RTC erred in
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
Camacho as substitute for the deceased Aurora B. Camacho.
Atty. Banzon filed a Motion for Partial Reconsideration of the CA Decision, as well as a
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
filed the petition before this Court. Thus, the CA no longer acted on the motions on the
ground that it had already lost jurisdiction over the case. 41
In the present petition, petitioner raises the following issues:
1. WHETHER OR NOT INTERVENOR CAN BE AWARDED A FAVORABLE
JUDGMENT DESPITE ABSENCE OF ANY FINDINGS OF FACT IN THE DECISION
WHICH SHOW THAT HE WAS ABLE TO PROVE THE (SIC) HIS MATERIAL
ALLEGATIONS UPON WHICH HE BASIS (SIC) HIS CLAIM UNDER CONTRACT OF
ATTORNEYS FEE, EXH. "C," ESPECIALLY PAR. 7 OF THE COMPLAINT-IN-
INTERVENTION.
CAN THE BURDEN OF PROVING THE AND (SIC) DUE EXECUTION OF CONTRACT
EXH. "C" BE SHIFTED TO PLAINTIFF CAMACHO WITHOUT VIOLATING SECT. 1,
RULE 131, OF THE RULES OF COURT?
2. DID THE COURT OF APPEALS CORRECTLY APPLY THE PROVISION OF ART.
1246 OF THE CIVIL CODE TO THE INSTANT CASE IN RULING THAT CONTRACT
EXH. "C" IS VALID AS TO OBJECT?
WILL THE DECISION REQUIRING THE DELIVERY OF 5,000 SQUARE METERS OF
LOT 261 BASED ON THE SAID ART. 1246, IN WHICH INTERVENOR CANNOT
DEMAND A THING OF SUPERIOR QUALITY AND NEITHER CAN PLAINTIFF
CAMACHO DELIVER A THING OF INFERIOR QUALITY, BE SUSCEPTIBLE OF
IMPLEMENTATION WITHOUT NEED OF A NEW CONTRACT OR AGREEMENT
BETWEEN THE PARTIES?
IF SO, WILL THAT NOT ALL THE MORE PROVE THAT TE OBJECT OF CONTRACT
EXH. "C" IS INDETERMINATE PURSUANT [TO] ART. 1349 OF THE CIVIL CODE?
3. WHETHER OR NOT THE COURT OF APPEALS WAS IN A POSITION TO
PROCLAIM THE LEGALITY OR ILLEGALITY OF THE ALLEGED CONTRACT
WITHOUT FIRST REVEALING OR SETTING FORTH THE REAL NATURE OF THIS OR
THESE UNDERTAKINGS BASED ON THE ALLEGATIONS AND TESTIMONIES OF
INTERVENOR. HENCE, WHETHER OR NOT THE TWO UNDERTAKINGS IN
CONTRACT EXH. "C" ARE LAWFUL.
4. WHETHER OR NOT THE COURT OF APPEALS COMMIT A GRAVE ABUSE OF
DISCRETION BY TREATING LIKE A MATTER OUT OF RECORD THE ALLEGED
REASONS OF PLAINTIFF CAMACHO FOR DISMISSING INTERVENOR AS HER
COUNSEL IN THE CASE AT BAR, WHICH WERE ENUMERATED AND DISCUSSED
ON PAGES 42-60 OF HER APPELLANTS BRIEF, ANNEX "B," AND WHICH WERE
PRINCIPALLY AND SPECIFICALLY COVERED IN HER THIRD ASSIGNMENT OF
ERRORS AND CONSIDERING THAT ONE OF THESE ALLEGED REASONS ALSO
CONSTITUTE PLAINTIFF CAMACHOS COUNTERCLAIM FOR WHICH SHE IS
SEEKING MORAL DAMAGES OF 100,000.
DID NOT THE COURT OF APPEALS COMMIT GRAVE ABUSE OF DISCRETION IN
REPRESENTING PLAINTIFF CAMACHOS THIRD ASSIGNED ERROR AS REFERRING
MERELY TO THE ISSUE OF WHETHER OR NOT THE AWARD OF MORAL
DAMAGES TO INTERVENOR IS JUSTIFIED.
WAS NOT PLAINTIFF CAMACHO THEREBY DEPRIVED OF HER CONSTITUTIONAL
RIGHT TO DUE PROCESS OF LAW?
 5. WHETHER OR NOT THE AWARD OF 1,000 SQ. M. OF LOT 261 ATTORNEYS
FEE FOR ALLEGED HANDLING OF SEVEN CASES HAS ANY LEGAL BASIS
CONSIDERING THAT THERE IS NO SHOWING IN THE DECISION THAT THE ORAL
CONTRACT ALLEGED BY INTERVENOR TO BE THE BASIS OF THE SAID
ATTORNEYS FEE WAS DULY POROVEN (SIC).42
Petitioner argues that the findings of facts in the assailed decision are mere conclusions,
without citation of evidence to support them. She likewise avers that consent was not
clearly proven; the conclusion of the CA was based on the presumption that the
document was read prior to being signed. Petitioner insists that there is no "object
certain" to speak of since the exact location of the subject property cannot be
determined; in short, the issue is not the quality of the property but its identity.
Petitioner further asserts that the cause of the contract pirating of the municipalitys
market project and ejecting the tenant to convert the property into a commercial
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
that the CA erred in awarding moral damages because respondent did not ask for it in
his complaint-in-intervention. Lastly, she asserts that the CA erred in affirming the
award of the 1,000-sq-m lot pursuant to a verbal contract between Camacho and
respondent, especially considering the prevailing jurisprudence against a lawyers
acquisition of a clients lot in litigation without the latters consent.
In his Comment,43 respondent counters that the elements of a valid contract are
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
agreement between the parties; as to the validity of the cause of the contract, the
general principle of estoppel applies.
The Ruling of the Court
Article 1305 of the New Civil Code defines a contract as a "meeting of minds between
two persons whereby one binds himself, with respect to the other, to give something or
to render some service." Contracts shall be obligatory in whatever form they may have
been entered into, provided all the essential requisites for their validity are present. 44
In general, there are three (3) essential requisites for a valid contract: (1) consent of the
contracting parties; (2) an object certain which is the subject of the contract; and (3) the
cause of the obligation which is established.45
The first element
Consent of the contracting parties
Is shown by their signatures on the Contract
Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the agreement.46 In this case, Camacho admitted
the existence of the contract as well as the genuineness of her signature. However, she
claimed that she signed only upon the request of Atty. Banzon, who told her that the
document would only be shown to the municipal councilors ("for formalitys sake") to
prove his authority in her behalf. It was never intended to bind her to pay him
attorneys fees;47 in short, petitioner insists that Camacho had not given her consent to
the contract.
We, however, do not agree. The contract between Camacho and respondent is
evidenced by a written document signed by both parties denominated as Contract of
Attorneys Fee. It is an established rule that written evidence is so much more certain
and accurate than that which rests in fleeting memory only; that it would be unsafe,
when parties have expressed the terms of their contract in writing, to admit weaker
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
stipulated therein and is open to all the legal obligations that may arise from their
breach.49
In the instant case, Camacho voluntarily signed the document evidencing the contract.
Camachos claim that the document was intended only to show respondents authority
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
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
held by the CA, Camacho was an experienced businesswoman, a dentistry graduate and
is conversant in the English language. We note that the words and phrases used in the
Contract of Attorneys Fee are very simple and clear; thus, she cannot plead that she did
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
been more vigilant in protecting her rights.
Even assuming that the contract did not reflect the true intention of the parties as to
their respective obligations, it is nevertheless binding. The existence of the written
contract, coupled with Camachos admission that the signature appearing thereon was
hers, constitute ineluctable evidence of her consent to the agreement. It cannot be
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
instrument in order to reflect what, according to her, was the true agreement.
Camachos consent to the contract was further manifested in the following events that
transpired after the contract was executed: the execution of the agreement with
voluntary surrender signed by Tuazon; the execution of the Deed of Donation where
Atty. Banzon was authorized to sign the same on behalf of Camacho; and the sale of
1200 sq. m. portion of the property right at the market site. In all these transactions,
Atty. Banzon represented Camacho pursuant to the Contract of Attorneys Fee.
The object of the contract is still certain despite the parties failure to indicate the
specific portion of the property to be given as compensation for services
Articles 1349 and 1460 of the Civil Code provide the guidelines in determining whether
or not the object of the contract is certain:
Article 1349. The object of every contract must be determinate as to its kind. The fact
that the quantity is not determinate shall not be an obstacle to the existence of the
contract, provided it is possible to determine the same, without the need of a new
contract between the parties.
xxxx
Article 1460. A thing is determinate when it is particularly designated and/or physically
segregated from all others of the same class.
The requisite that a thing be determinate is satisfied if at the time the contract is
entered into, the thing is capable of being made determinate without the necessity of a
new or further agreement between the parties.
In this case, the object of the contract is the 5,000-sq-m portion of Lot 261, Balanga
Cadastre. The failure of the parties to state its exact location in the contract is of no
moment; this is a mere error occasioned by the parties failure to describe with
particularity the subject property, which does not indicate the absence of the principal
object as to render the contract void.52 Since Camacho bound herself to deliver a
portion of Lot 261 to Atty. Banzon, the description of the property subject of the
contract is sufficient to validate the same.
The Cause or Consideration of the contract is not illegal
In general, the cause is the why of the contract or the essential reason which moves the
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
policy.54 Petitioner insists that the cause of the subject contract is illegal. However,
under the terms of the contract, Atty. Banzon was obliged to negotiate with the
municipal government of Balanga for the transfer of the proposed new public market to
Camachos property (Lot 261); to sell 1,200 square meters right at the market site; and
to take charge of the legal phases incidental to the transaction which include the
ejectment of persons unlawfully occupying the property (whether through amicable
settlement or court action), and the execution of the Deed of Donation and other
papers necessary to consummate the transaction. There was thus nothing wrong with
the services which respondent undertook to perform under the contract. They are not
contrary to law, morals, good customs, public order or public policy.
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
establishment. This is premised on the fact that the construction of the new public
market at Doa Francisca Subdivision had originally been approved by the municipal
council of Balanga, the Development Bank of the Philippines, and the National Urban
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
negotiated for and in Camachos behalf. There were other terms to be negotiated, such
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
necessary to consummate the transaction.
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
municipality; the 5,000-sq-m portion given to respondent as attorneys fees; and the
1,200-sq-m portion which was sold) were either in exchange for services rendered or for
monetary consideration. In fact, all these transactions resulted in the increase in the
economic value of her remaining properties.
Thus, the defense of the illegality of respondents undertaking is baseless. The municipal
council had the authority to choose the best site for its project. We also note that the
market site was transferred with the active participation of Camacho, who agreed to
donate the 17,000-sq-m portion of her property; the new public market was
constructed and became operational; and the sale of the 1,200-sq-m lot was
consummated when Camacho executed the deeds herself. Thus, petitioner cannot be
allowed to evade the payment of Camachos liabilities under the contract with
respondent; a contrary conclusion would negate the rule of estoppel and unjust
enrichment.
As to the additional 1,000-sq-m-portion of Lot 261, however, we find and so hold that
respondent is not entitled thereto.
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
attorneys fees for the other cases:
Civil Case No. C-1773 10,000.0055
Civil Case No. 424 1,000.0056
CAR Case No. 278-B70 2,000.0057
CAR Case No. 520-B73 P5,000.0058
Civil Case No. 3281 5,000.0059
This clearly negates respondents claim of an additional 1,000-sq-m share as
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
entitled to this portion of the property.
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
had merely executed a Provisional Deed of Sale,61 we agree with the RTC that
respondent has the right to require the execution of a public instrument evidencing the
sale.
It must be understood that a retainer contract is the law that governs the relationship
between a client and a lawyer.62 Unless expressly stipulated, rendition of professional
services by a lawyer is for a fee or compensation and is not gratuitous.63 Whether the
lawyers services were solicited or they were offered to the client for his assistance,
inasmuch as these services were accepted and made use of by the latter, we must
consider that there was a tacit and mutual consent as to the rendition of the services,
and thus gives rise to the obligation upon the person benefited by the services to make
compensation therefor.64 Lawyers are thus as much entitled to judicial protection
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
lawful manner, but also to see that lawyers are paid their just and lawful fees.65 If
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.
In her fourth assigned error, petitioner claims that the CA failed to rule on the propriety
of the dismissal of respondent as Camachos counsel.
We do not agree. We uphold the following pronouncement of the CA on the matter:
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.
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
be the best. But these do not in any way prove that Intervenor was working to the
prejudice of plaintiff Camacho.
Failure of plaintiff Camacho to prove that Intervenor intended to damage her, We
consider the charges of plaintiff Camacho as mere honest difference of opinions.
As to the charge that Intervenor failed to account the money he collected in behalf of
plaintiff Camacho, the same is not supported by any evidence. Suffice it to say that mere
allegations cannot prove a claim.66
The ruling of the CA on the award of moral damages is likewise in accordance with the
facts and established jurisprudence:
The act of plaintiff Camacho is a clear case of breach of contract.1avvphi1.net 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.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-46892 September 30, 1981
HEIRS OF AMPARO DEL ROSARIO, plaintiffs-appellees,
vs.
AURORA O. SANTOS, JOVITA SANTOS GONZALES, ARNULFO O. SANTOS, ARCHIMEDES
O. SANTOS, ERMELINA SANTOS RAVIDA, and ANDRES O. SANTOS, JR., defendants-
appellants.
GUERRERO, J.:
The Court of Appeals, 1 in accordance with Section 31 of the Judiciary Act of 1948, as
amended, certified to Us the appeal docketed as CA-G.R. No. 56674-R entitled "Amparo
del Rosario, plaintiff-appellee, vs. Spouses Andres Santos and Aurora Santos, defendants-
appellants," as only questions of law are involved.
On January 14, 1974, Amparo del Rosario filed a complaint against the spouses Andres
F. Santos and Aurora O. Santos, for specific performance and damages allegedly for
failure of the latter to execute the Deed of Confirmation of Sale of an undivided 20,000
square meters of land, part of Lot 1, Psu-206650, located at Barrio Sampaloc, Tanay,
Rizal, in malicious breach of a Deed of Sale (Exhibit A or 1) dated September 28, 1964.
Amparo del Rosario died on Sept. 21, 1980 so that she is now substituted by the heirs
named in her will still undergoing probate proceedings. Andres F. Santos also died, on
Sept. 5, 1980, and he is substituted by the following heirs: Jovita Santos Gonzales,
Arnulfo O. Santos, Archimedes O. Santos, Germelina Santos Ravida, and Andres O.
Santos, Jr.
The Deed of Sale (Exh. A or 1) is herein reproduced below:
DEED OF SALE
KNOW ALL MEN BY THESE PRESENTS:
I, ANDRES F. SANTOS, of legal age, married to Aurora 0. Santos,
Filipino and resident cf San Dionisio, Paranaque, Rizal, Philippines,
for and in consideration of the sum of TWO THOUSAND (P 2,000.00)
PESOS, Philippine Currency, the receipt whereof is hereby
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,
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
follows:
A parcel of land (Lot 1 as shown on plan Psu-
206650, situated in the Barrio of Sampaloc,
Municipality of Tanay, Province of Rizal.
Bounded on the SW., along lines 1-2-3, by Lot 80
of Tanay Public Land Subdivision, Pls-39; on the
NW., along lines 3-4-5, by Lot 2; and along lines
5-6-7-8-9-10-11, by Lot 6; on the NE., along lines
11-12-13, by Lot 3: and along lines 13-1415, by
Lot 4, all of plan Psu-206650; and on the SE.,
along line 15-1, by Lot 5 of plan Psu- 206650 ... ;
containing an area of ONE HUNDRED EIGHTY
ONE THOUSAND FOUR HUNDRED TWENTY
(181,420) SQUARE METERS. All points referred
to are indicated on the plan and are marked on
the ground as follows: ...
of which above-described property, I own one-half (1/2) interest
thereof being my attorney's fee, and the said 20,000 square meters
will be transferred unto the VENDEE as soon as the title thereof has
been released by the proper authority or authorities concerned:
That the parties hereto hereby agree that the VENDOR shall execute
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
Commissioner.
 IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of
September, 1964, in the City of Manila, Philippines.
s/ ANDRES F. SANTOS t/ ANDRES F. SANTOS
With My Marital Consent:
s/ Aurora O. Santos (Wife) t/ Aurora O. Santos (Wife)
SIGNED IN THE PRESENCE OF: s/ Felicitas C. Moro s/ Corona C. Venal
REPUBLIC OF THE PHILIPPINES) ) SS.
BEFORE ME, a Notary Public for and in Rizal, Philippines, personally
appeared Andres F. Santos, with Res. Cert. No. 4500027 issued at
Paranaque, Rizal, on Jan. 9, 1964, B-0935184 issued at Paranaque,
Rizal on April 15, 1964, and Aurora 0. Santos, with Res. Cert. No. A-
4500028 issued at Paranaque, Rizal, on Jan. 9, 1964, giving her
marital consent to this instrument, both of whom are known to me
and to me known to be the same persons who executed the
foregoing instruments and they acknowledged to me that the same
is their free act and voluntary deed.
IN WITNESS WHEREOF, I have hereunto signed this instrument and
affixed my notarial seal this lst day of October, 1964, in Pasig, Rizal,
Philippines.
Doc. No. 1792; Page No. 85; Book No. 19; Series of 1964.
s/ FLORENCIO LANDRITO t/ FLORENCIO LANDRITO
NOTARY PUBLIC Until December 31, 1965 2
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
subdivision plan of said lot by the Land Registration Commission. She even enumerated
the titles with their corresponding land areas derived by defendants from the aforesaid
lot, to wit:
(a) TCT 203580 30,205 sq. meters
(b) TCT 203581 19, 790 sq. meters
(c) TCT 167568 40,775 sq. meters
In a motion to dismiss, defendants pleaded, inter alia, the defenses of lack of jurisdiction
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,
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
five years from 1964 in accordance with Article 1149, New Civil Code.
Defendant also claimed that the demand set forth in the complaint has been waived,
abandoned or otherwise extinguished. It is alleged that the deed of sale was "only an
accommodation graciously extended, out of close friendship between the defendants
and the plaintiff and her casual business partner in the buy and sell of real estate, one
Erlinda Cortez;" 3 that in order to allay the fears of plaintiff over the non-collection of
the debt of Erlinda Cortez to plaintiff in various sums exceeding P 2,000.00, defendants,
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
question, the same to be considered as part payment of Erlinda Cortez' indebtedness;
that as Erlinda Cortez later on paid her creditor what was then due, the deed of sale had
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
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
unenforceable under the statute of frauds and that the cause or object of the contract
did not exist at the time of the transaction.
After an opposition and a reply were filed by the respective parties, the Court a quo
resolved to deny the motion to dismiss of defendants. Defendants filed their answer
with counterclaim interposing more or less the same defenses but expounding on them
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
meters
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
registration proceedings in court, to appear and represent him in all
government office relative thereto, to advance all expenses for
surveys, taxes to the government, court fees, registration fees ... up
to the issuance of title in the name" of Custodia. They agreed that
after the registration of the title in Custodio's name, and "after
deducting all expenses from the total area of the property,"
On December 27, 1965, a decree of registration No. N-108022 was
issued in Land Registration Case No. N-5023, of the Court of First
Instance of Rizal, LRC Record No. N-27513, in favor of Teofilo
Custodia married to Miguela Perrando resident of Tanay, Rizal. On
March 23, 1966, Original Certificate of Title No. 5134 (Exh. Q or 17)
was issued to Custodio for Lots 1, 2, 3, 4 and 5, Psu- 206650, with a
total area of 206,853 square meters. The areas of the five (5) lots
Road Lot 6 5,303 square
were as follows:
meters

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
meters
(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
meters
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.
meters
Q).
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.
meters

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
meters
Lot 5-A 30,205
square
Lot 4 40,775 square
meters
meters
Lot 5-B 19,795
Lot 5 50,000 square
square
meters
meters
 TOTAL 50,000
square
meters
Upon registration of Psd-78008 on October 3, 1967, Santos' TCT No.
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
Santos (See Entry 6311 in Exh. J or 10). Actually, TCT No. 203580 was
issued for Lot 5-A (Exh. K or 1 1), and TCT No. 203581 for Lot 5-B
(Exh. L or 12), both in the name of Andres F. Santos.
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
Custodio (Exh. B & E) 6
The court a quo thereupon concluded that there are no serious factual issues involved
so the motion for summary judgment may be properly granted. Thereafter, it proceeded
to dispose of the legal issues raised by defendants and rendered judgment in favor of
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
for SO ORDERED. 7

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.
for

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
Cortez' conformity is not required to validate the appellants'
obligation.
IV. The lower court erred in holding that Exh. "l" or "A" is not
infirmed and expressed the true intent of the parties.
V. The lower court erred in declaring that the appellants are co-
owners of the lone registered owner Teofilo Custodia.
VI. The lower court erred in ordering the appellants to execute and
convey to the appellee 20,000 sq. m. of land to be taken from the
southeastern portion of either their lot 4, Pcs-5273, which has an
area of 40,775 sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or
from their lot No. 5-A, with an area of 30,205 sq.m. described in
T.C.T. No. 203580 (Exh. 11 or K), the expenses of segregation to be
borne equally by the appellants and the appellee and the expenses
of execution and registration to be borne by the appellants.
VII. Thelowercourterredinorderingtheappellantstopayto the
appellee the sum of P2,000. 00 as attorney's fee and costs. 8
The first four revolve on the issue of the propriety of the rendition of summary
judgment by the court a quo, which concededly is a question of law. The last three assail
the summary judgment itself. Accordingly, the Court of Appeals, with whom the appeal
was filed, certified the records of the case to this Court for final determination.
For appellants herein, the rendition of summary judgment has deprived them of their
right to procedural due process. They claim that a trial on the merits is indispensable in
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",
thereby putting in issue the due execution of said deed.
Appellants in their opposition to the motion for summary judgment and/or judgment on
the pleadings, however, do not deny the genuineness of their signatures on the deed of
sale.
(Par. 3 of said Motion, p. 101, Record on Appeal). They do not contest the words and
figures in said deed except in the acknowledgment portion thereof where certain words
were allegedly cancelled and changed without their knowledge and consent and where,
apparently, they appeared before Notary Public Florencio Landrito when, in fact, they
claimed that they did not. In effect, there is an admission of the due execution and
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
signed it or that it was signed by another for him and with his authority; and the
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
required by law, such as swearing and acknowledgment or revenue stamps which it
requires, are waived by him. 9
As correctly pointed out by the court a quo, the alleged false notarization of the deed of
sale is of no consequence. For a sale of real property or of an interest therein to be
enforceable under the Statute of Frauds, it is enough that it be in writing. 10 It need not
be notarized. But the vendee may avail of the right under Article 1357 of the New Civil
Code to compel the vendor to observe the form required by law in order that the
instrument may be registered in the Registry of Deeds. 11 Hence, the due execution and
genuineness of the deed of sale are not really in issue in this case. Accordingly, assigned
error I is without merit.
What appellants really intended to prove through the alleged false notarization of the
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
merely entrusted to appellee's care and custody in order that: first, the latter may
secure the approval of one Erlinda Cortez to their (appellants') offer to pay a debt owing
to her in the amount of P2,000.00 to appellee instead of paying directly to her as she
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
Erlinda showing in particular the consideration of P2,000.00 of the deed of sale duly
credited to Erlinda's account.
According to appellants, they intended to prove at a full dress trial the material facts: (1)
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
paid by appellant included; and (3) that said Erlinda decided to forego, renounce and
refrain from collecting the P2,000.00 the appellants owed her as a countervance
reciprocity of the countless favors she also owes them.
Being conditions which alter and vary the terms of the deed of sale, such conditions
cannot, however, be proved by parol evidence in view of the provision of Section 7, Rule
130 of the Rules of Court which states as follows:
 Sec. 7. Evidence of written agreements when the terms of an
agreement have been reduced to writing, it is to be considered as
containing all such terms, and, therefore, there can be, between the
parties and their successors in interest, no evidence of the terms of
the agreement other than the contents of the writing, except in the
following cases:
(a) Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties, or the validity
of the agreement is put in issue by the pleadings;
(b) When there is an intrinsic ambiguity in the writing. The term
"agreement" includes wills."
The parol evidence rule forbids any addition to or contradiction of the terms of a written
instrument by testimony purporting to show that, at or before the signing of the
document, other or different terms were orally agreed upon by the parties. 12
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,
morals, good customs, public order, or public policy" and that consequently, appellants
and appellee could freely enter into an agreement imposing as conditions thereof the
following: that appellee secure the written conformity of Erlinda Cortez and that she
render an accounting of all collections from her, said conditions may not be proved as
they are not embodied in the deed of sale.
The only conditions imposed for the execution of the Deed of Confirmation of Sale by
appellants in favor of appellee are the release of the title and the approval of the
subdivision plan. Thus, appellants may not now introduce other conditions allegedly
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
abandoned." 13
Neither can appellants invoke any of the exceptions to the parol evidence rule, more
particularly, the alleged failure of the writing to express the true intent and agreement
of the parties. Such an exception obtains where the written contract is so ambiguous or
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
matter of the contract, of the relations of the parties to each other, and of the facts and
circumstances surrounding them when they entered into the. contract may be received
to enable the court to make a proper interpretation of the instrumental. 14 In the case
at bar, the Deed of Sale (Exh. A or 1) is clear, without any ambiguity, mistake or
imperfection, much less obscurity or doubt in the terms thereof. We, therefore, hold
and rule that assigned errors III and IV are untenable.
According to the court a quo, "(s)ince Santos, in his Opposition to the Motion for
Summary Judgment failed to meet the plaintiff's evidence with countervailing evidence,
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
the trial court.
Indeed, where a motion for summary judgment and/or judgment on the pleadings has
been filed, as in this case, supporting and opposing affidavits shall be made on personal
knowledge, shall set forth such facts as may be admissible in evidence, and shall show
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
Examining the pleadings, affidavits and exhibits in the records, We find that appellants
have not submitted any categorical proof that Erlinda Cortez had paid the P2,000.00 to
appellee, hence, appellants failed to substantiate the claim that the cause of action of
appellee has been extinguished. And while it is true that appellants submitted a receipt
for P14,160.00 signed by appellee, appellants, however, have stated in their answer
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
no proof that Erlinda Cortez subsequently paid her P2,000.00 debt to appellee. As
correctly observed by the court a quo, it is improbable that Cortez would still pay her
debt to appellee since Santos had already paid it.
Appellants' claim that their P2,000.00 debt to Erlinda Cortez had been waived or
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
period provided under Arts. 1144 and 155 in cases of actions for specific performance of
the written contract of sale had elapsed and that the action had not yet prescribed, is in
accordance with law and, therefore, We affirm the same.
The action of the court a quo in rendering a summary judgment has been taken in
faithful compliance and conformity with Rule 34, Section 3, Rules of Court, which
provides that "the judgment sought shall be rendered forthwith if the pleadings,
depositions, and admissions on file together with the affidavits, show that, except as to
the amount of damages, there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law. "
Resolving assignments of errors, V, VI, and VII which directly assail the summary
judgment, not the propriety of the rendition thereof which We have already resolved to
be proper and correct, it is Our considered opinion that the judgment of the court a quo
is but a logical consequence of the failure of appellants to present any bona fide defense
to appellee's claim. Said judgment is simply the application of the law to the undisputed
facts of the case, one of which is the finding of the court a quo, to which We agree, that
appellants are owners of one-half (1/2) interest of Lot I and, therefore, the fifth
assignment of error of appellants is without merit.
By the terms of the Deed of Sale itself, which We find genuine and not infirmed,
appellants declared themselves to be owners of one-half (1/2) interest thereof. But in
order to avoid appellee's claim, they now contend that Plan Psu-206650 where said Lot I
appears is in the exclusive name of Teofilo Custodio as the sole and exclusive owner
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
the lack of any title to the said lot by appellants at the time of the execution of the deed
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:
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 .
We further reject the contention of the appellants that the lower court erred in ordering
the appellants to execute and convey to the appellee 20,000 sq.m. of land to be taken
from the southeastern portion of either their Lot 4, Pcs-5273, which has an area of
40,775 sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or from their Lot No. 5-A, with
an area of 30,205 sq.m. described in T.C.T. No. 203580 (Exh. 11 or K), the expenses of
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
southeastern portion of Lot 4 or Lot 5-A is no longer the southeastern portion of the
bigger Lot 1, the latter portion belonging to the lone registered owner, Teofilo Custodia
is not impressed with merit. The subdivision of Lot I between the appellants and Teofilo
Custodio was made between themselves alone, without the intervention, knowledge
and consent of the appellee, and therefore, not binding upon the latter. Appellants may
not violate nor escape their obligation under the Deed of Sale they have agreed and
signed with the appellee b3 simply subdividing Lot 1, bisecting the same and segregating
portions to change their sides in relation to the original Lot 1.
Finally, considering the trial court's finding that the appellants compelled the appellee
to litigate and they failed to heed appellee's just demand, the order of the court
awarding the sum of P2,000.00 as attorney's fees is just and lawful, and We affirm the
same.
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby
AFFIRMED in toto, with costs against the appellants.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-31586 February 28, 1972
ERNESTO, FORTUNATA, MONTANO, ZOSIMA, RAMON, GUADALUPE, LUIS, JOSEFINA
and ROSALIA all surnamed YTURRALDE petitioners-appellants,
vs.
THE HONORABLE COURT OF APPEALS, HONORABLE VICENTE G. ERICTA, in his capacity
as Judge of the Court of First Instance of Zamboanga del Sur, and ISABELO REBOLLOS,
respondents-appellees.
Jose A. Ambrosia and Patrio C. Avedano for petitioners-appellants.
Geronimo G. Pajarito for respondents-appellees.
MAKASIAR, J.:p
Petitioners-appellants in this appeal by certiorari seek the reversal of the decision of the
Court of Appeals dated December 24, 1969.
The Court of Appeals narrated the facts thus: .
It appears that the spouses Francisco Yturralde and Margarita de los
Reyes, owned a parcel of agricultural land located in Guilinan,
Tungawan, Zamboanga del Sur, containing an area of 14.1079
hectares, more or less, and registered in their names under Original
Certificate of Title No. 2356 of the Office of the Register of Deeds of
Zamboanga del Sur. Sometime in the year 1944, Francisco Yturralde
died intestate, survived by his wife, Margarita de los Reyes, and their
children who are the petitioners herein, Ernesto, Fortunata,
Montano, Zosimo, Ramon, Guadalupe, Luis, Josefina and Rosalia, all
surnamed Yturralde. In 1950, Margarita de los Reyes contracted a
second marriage with her brother-in-law and uncle of the
petitioners herein, Damaso Yturralde .
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
the three-year period agreed upon, which expired on May 30, 1955.
In 1961, Margarita de los Reyes died.
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 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,
Ernesto, Fortunata, Montano, Guadalupe, Luis and Rosalia, all
surnamed Yturralde (Annexes C and F, Petition). However, summons
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,
directed that summons be served upon the said three respondents
therein (Annex C, Petition). The copies of the petition sent to said
three respondents, but returned without service, were then
delivered by Rebollos to the Clerk of Court of the Court of First
Instance of Zamboanga del Sur to complete the delivery thereof
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
dated November 13, 1965, declaring all the respondents therein in
default, after which Rebollos presented his evidence (Annexes F and
G, Petition). On November 20, 1965, the Court rendered a decision
consolidating the ownership of the subject property in favor of
Rebollos, and ordering the Register of Deeds of Zamboanga del Sur
to cancel Original Certificate of Title No. 2356 covering said property
and, in lieu thereof, to issue a transfer certificate of title in the name
of Rebollos (Annex H, Petition).
On June 3, 1966, Rebollos filed a motion to order the petitioner
Montano Yturralde herein to surrender and deliver to the Register of
Deeds the owner's duplicate of Original Certificate of Title No. 2356,
which motion was granted by the Court presided at the time by
Judge Antonio Montilla (Annexes I and H, Petition). Due to the
failure of petitioner Montano Yturralde to comply with the order
(Annex J) and on the motion filed by Rebollos, the Court, then
presided by the respondent Judge ordered the arrest of said
Montano Yturralde, but the order of arrest was subsequently lifted
on motion filed by Montano Yturralde (Annexes K, L, M, N, O and P,
Petition).
On motion filed by Rebollos, dated January 6, 1969, the respondent
Judge ordered the execution of the judgment in Civil Case No. 436,
and on January 20, 1969, the corresponding writ of execution was
issued (Annexes Q, R and S, Petition). The petitioners herein then
filed a motion for reconsideration of the order granting execution
and for the quashing of the writ of execution, which was denied by
the respondent Judge in his order of March 21, 1969 (Annex T, U, V
and W, Petition). On petition filed by Rebollos, the respondent
Judge, ordered the demolition of all buildings not belonging to said
Rebollos found on the premises in question (Annexes X and Y,
Petition).The petitioners then filed a motion for reconsideration of
the order of demolition, which was denied by the respondent Judge,
who, however, on motion of said petitioners, directed the
respondent Sheriff to defer the implementation of the writ of
execution and the order of demolition until after June 23, 1969
(Annexes Z and AA, Petition). Thereafter, the petitioners instituted
the present proceedings.
The petition was given due course by this Court, and on June 19,
1969, a writ of preliminary injunction was issued, restraining the
respondents from enforcing the decision and the orders complained
of in Civil Case No. 436, until further orders. In his answer to the
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
Certificate of Title was issued in favor of said vendee covering the
subject property by the Register of Deeds (Answers and Annexes 4
and 5 thereto).
The case before us is one for prohibition. (Section 2 of Rule 65, Rules
of Court). (Pp. 16-19, rec.).
The Court of Appeals held that the action for prohibition before it seeking to restrain the
enforcement of the decision in Civil Case No. 436 and the implementing orders issued
subsequent thereto by the respondent Judge of the Court of First Instance of
Zamboanga del Sur, will not prosper; because prohibition is a preventive remedy to
restrain the exercise of a power or the performance of an act and not a remedy against
acts already accomplished, which cannot be undone through a writ of prohibition, and
in the instant case, the judgment of the lower trial court consolidates the ownership of
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,
and directs the issuance of a new certificate of title in the name of respondent Rebollos.
By virtue of an absolute deed of sale executed on January 3, 1968 by respondent Isabelo
Rebollos, a new certificate of title was issued in the name of the vendee, Pilar M. Vda.
de Reyes (citing Annexes 4 and 5 of the Answer). The respondent Court of Appeals then
concluded that "As the thing sought to be restrained had already been done, and since a
certificate of title is conclusive evidence of the ownership of the land referred to therein
(Section 47, Act No. 496, as amended; Aldecoa & Co. vs. Warner, Barnes & Co., 30 Phil.
153; Yumul vs. Rivera, et a1., 64 Phil. 13), and the same cannot be collaterally attacked,
but can only be challenged in a direct proceeding (Menderson vs. Garrido, 90 Phil. 624),
prohibition in this case is not the proper remedy." .
Petitioners-appellants claim that the Court of Appeals erred (1) in sustaining the
actuation of the trial court in allowing service of summons upon appellants Josefina,
Zosima and Ramon Yturralde by registered mail pursuant to Section 6, Rule 13, of the
Rules of Court; (2) in sustaining the ruling of the trial court that it properly acquired
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
with its implementing orders, at least insofar as the aforenamed three appellants are
concerned on the ground that they were not given their day in court.
The three assigned errors shall be discussed jointly.
I
The respondent Court of Appeals erred in holding that the petition for prohibition
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
6, 1969, January 20, 1969 and May 15, 1969 in Special Civil Case No. 436 were not
enforced by the respondent trial judge, who in his order dated May 26, 1969 directed
the provincial sheriff to defer the implementation thereof (Annex "AA", p. 66, record of
C.A. G.R. No. 43310; pp. 19-26, rec.). The petitioners herein reiterated that they are still
in possession of the property in question, which possession was recognized and
protected by the respondent Court of Appeals itself when it issued the writ of
preliminary injunction dated June 19, 1969 against private respondent Isabelo Rebollos
pursuant to its resolution dated June 17, 1969 (pp. 67-74, rec. of C.A. G.R. No. 43310).
It should be noted that the petition for prohibition filed with the Court of Appeals
prayed for the issuance of the writ of preliminary injunction.
enjoining herein respondents from enforcing the Decision dated
November 20, 1965, the orders dated January 15, 1969, March 21,
1969, May 15, 1969 and May 26, 1969, Annexes "H", "R", "W", "Y",
and "AA" hereof, and after due hearing ..., the preliminary writ of
injunction be made permanent and so with the writ of prohibition.
Petitioners also pray for such other and further reliefs to which they
may be entitled under the law.
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
issued in the name of Pilar V. vda. de Reyes by virtue of the deed of absolute sale
executed on January 3, 1968 by private respondent Isabelo Rebollos in her favor; the
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
land. Moreover, the general prayer for such other reliefs as herein petitioners may be
entitled to under the law, includes a prayer for the nullification of the decision of
November 20, 1965 as well as the questioned orders above-mentioned.
II
Unlike the old Civil Code, Article 1607 of the new Civil Code of 1950 provides that
consolidation of ownership in the vendee a retro of real property by virtue of the failure
of the vendor a retro "to comply with the provisions of Article 1616 shall not be
recorded in the Registry of Property without a judicial order, after the vendor has been
duly heard." In the case of Teodoro vs. Arcenas,1 this Court, through Mr. Justice Jose B.
L. Reyes, ruled that under the aforesaid Article 1607 of the new Civil Code, such
consolidation shall be effected through an ordinary civil action, not by a mere motion,
and that the vendor a retro should be made a party defendant, who should be served
with summons in accordance with Rule 14 of the Revised Rules of Court; and that the
failure on the part of the court to cause the service of summons as prescribed in Rule
14, is sufficient cause for attacking the validity of the judgment and subsequent orders
on jurisdictional grounds.2 The Court in said case stressed that the reason behind the
requirement of a judicial order for consolidation as directed by Article 1067 of the new
Civil Code is because "experience has demonstrated too often that many sales with right
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-
64). When, therefore, Article 1607 speaks of a judicial order after the vendor shall have
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
requiring a judicial confirmation of the consolidation in the vendee a retro of the
ownership over the property sold, is not only to have all doubts over the true nature of
the transaction speedily ascertained, and decided, but also to prevent the interposition
of buyers in good faith while such determination is being made. Under the former
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
consolidation, to strangers in good faith and without notice. The chances of the seller a
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
The doctrine in the aforesaid case of Teodoro vs. Arcenas was reiterated by this
Supreme Tribunal through Mr. Justice Jose P. Bengzon in the case of Ongcoco, et al. vs.
Honorable Judge, et al. 4
The jurisdiction over the persons of herein petitioners Josefina, Zosima and Ramon all
surnamed Yturralde, was not properly acquired by the court because they were not
properly served with summons in the manner directed by Rule 14 of the Revised Rules
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
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
complaint, the Clerk of Court shall forthwith issue the corresponding summons to the
defendants" (Section 1, Rule 14), which summons shall be served by the sheriff or other
proper court officer or for special reason by any person specially authorized by the court
issuing the summons by personally handing a copy of the same to the defendants
(Sections 5 & 7, Rule 14). If the residence of the defendant is unknown or cannot be
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
have made a diligent inquiry as to the whereabouts of the three petitioners
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
Zamboanga del Sur, Roxas Street in Basilan City, and Washington, D.C., U.S.A. There is
no showing that such a diligent inquiry was made to justify a substituted service of
summons by publication. The return dated June 18, 1965, of the acting chief of police of
Tungawan, Zamboanga del Sur, to the clerk of court and ex-officio provincial sheriff
"that Josefina, Zosima and Ramon are no longer residing in this municipality" (Annex "B"
to Petition of Court of Appeals, p. 20, rec. of C.A. G.R. No. 43310), does not suffice to
indicate that a careful investigation of their whereabouts was made. And even if it did,
substituted service of summon by publication should have been required. Aside from
the fact that the said return of service is a nullity as it is not under oath, there is no
showing even that the acting chief of police was especially authorized by the court to
serve the summons (Sections5 & 20, Rule 14, Revised Rules of Court.)6
To emphasize, Section 3 of Rule 14 of the Revised Rules of Court commands the service
of summons together with a copy of the petition, on each of the defendants who must
be specifically named in the summons, upon the filing of such petition, like the petition
in Special Civil Case No. 436 filed by privaterespondent Isabelo Rebollos for
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." .
III
The action for consolidation should be brought against all the indispensable parties,
without whom no final determination can be had of the action; and such indispensable
parties who are joined as party defendants must be properly summoned pursuant to
Rule 14 of the Revised Rules of Court. If anyone of the party defendants, who are all
indispensable parties is not properly summoned, the court acquires no jurisdiction over
the entire case and its decision and orders therein are null and void. 7
The pacto de retro sale executed by Margarita de los Reyes "casada en segundas nuptias
con Damaso Yturralde," expressly stipulates that she only sold all her rights, interests
and participation in the lot covered by O.C.T. No. 2356 (Annex "I", p. 66, rec.). Margarita
therefore, could not, for she had no right to, sell the entire lot, which is registered under
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
Margarita (p. 2, rec. of C.A. G.R. No. 43310). What she validly disposed of under the
aforesaid pacto de retro sale of 1952 was only her conjugal share in the lot plus her
successional right as heir in the conjugal share of her deceased husband Francisco.
Consequently, the vendee a retro, Isabelo Rebollos, cannot legally petition for the
consolidation of his ownership over the entire lot.
But in the petition he filed in Special Civil Case No. 436 on May 3, 1965 against herein
nine petitioners as children and heirs of the deceased spouses Francisco Yturralde (who
died in 1944) and Margarita de los Reyes (who died in 1961), and Damaso Yturralde,
stepfather of herein petitioners, Rebollos prayed for the consolidation of his ownership
over the entire lot covered by O.C.T. No. 2356, and not merely over the interest
conveyed to him by Margarita. As the petition of private respondent Rebollos sought to
divest all of them of their undivided interest in the entire agricultural land, which
undivided interest was never alienated by them to Rebollos, herein petitioners became
indispensable parties. Rebollos himself acknowledged that they are indispensable
parties, for he included them as party-defendants in his petition in order to acquire their
undivided interest in the lot. While summons were served properly on all the other
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
of Court on service of summons on indispensable parties, as heretofore stated, the
trialcourt did not validly acquire jurisdiction over the case; because no complete and
final determination of the action can be had without the aforesaid three petitioners
Josefina, Zosima and Ramon.
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
indispensable party; for without him no valid judgment for partition may be rendered. 8
That the three children, herein petitioners Josefina, Zosima and Ramon, are essential
parties, without whom no valid judgment may be rendered, is further underscored by
the fact that the agricultural land in question was owned by them in common and pro
indiviso with their mother and their brothers and sisters and was not then as now
physically partitioned among them.
For attempting to acquire the entire parcel by foisting upon the court the
misrepresentation that the whole lot was sold to him, private respondent Isabelo
Rebollos must suffer the consequences of his deceit by the nullification of the entire
decision in his favor granting the consolidation of his title over the entire land in
question. This Court condemns such deception.
It should be noted that herein petitioners in 1967 also filed an action against only
Isabelo Rebollos for the recovery of ownership, annulment of judgment, redemption
and damages in the Court of First Instance of Zamboanga del Sur docketed as Civil Case
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
SUPREME COURT
Manila
EN BANC
G.R. No. L-12957 March 24, 1961
CONSTANCIO SIENES, ET AL., plaintiffs-appellants,
vs.
FIDEL ESPARCIA, ET AL., defendants-appellees.
Proceso R. Remollo for plaintiffs-appellants.
Leonardo D. Mancao for defendants-appellees.
DIZON, J.:
Appellants commenced this action below to secure judgment (1) declaring null and void
the sale executed by Paulina and Cipriana Yaeso in favor of appellees, the spouses Fidel
Esparcia and Paulina Sienes; (2) ordering the Esparcia spouses to reconvey to appellants
Lot 3368 of the Cadastral Survey of Ayuquitan (now Amlan), Oriental Negros; and (3)
ordering all the appellees to pay, jointly and severally, to appellants the sum of P500.00
as damages, plus the costs of suit. In their answer appellees disclaimed any knowledge
or information regarding the sale allegedly made on April 20, 1951 by Andrea Gutang in
favor of appellants and alleged that, if such sale was made, the same was void on the
ground that Andrea Gutang had no right to dispose of the property subject matter
thereof. They further alleged that said property had never been in possession of
appellants, the truth being that appellees, as owners, had been in continuous
possession thereof since the death of Francisco Yaeso. By way of affirmative defense
and counterclaim, they further alleged that on July 30, 1951, Paulina and Cipriana Yaeso,
as the only surviving heirs of Francisco Yaeso, executed a public instrument of sale in
favor of the spouses Fidel Esparcia and Paulina Sienes, the said sale having been
registered together with an affidavit of adjudication executed by Paulina and Cipriana
on July 18, 1951, as sole surviving heirs of the aforesaid deceased; that since then the
Esparcias had been in possession of the property as owners.
After trial upon the issues thus joined, the lower court rendered judgment as follows:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered declaring (1)
that the sale of Lot No. 3368 made by Andrea Gutang to the plaintiff spouses
Constancio Sienes and Genoveva Silay is void, and the reconveyance prayed
for by them is denied; (2) that the sale made by Paulina and Cipriana Yaeso in
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
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.
From the above decision the Sienes spouse interposed the present appeal, their
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
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.
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
wife, Andrea Gutang, he had an only son named Francisco. According to the cadastral
records of Ayuquitan, the properties left by Saturnino upon his death the date of
which does not clearly appear of record were left to his children as follows: Lot 3366
to Cipriana, Lot 3367 to Fernando, Lot 3375 to Agaton, Lot 3377 (southern portion) to
Paulina, and Lot 3368 (western portion) to Francisco. As a result of the cadastral
proceedings, Original Certificate of Title No. 10275 covering Lot 3368 was issued in the
name of Francisco. Because Francisco was a minor at the time, his mother administered
the property for him, declared it in her name for taxation purposes (Exhs A & A-1), and
paid the taxes due thereon (Exhs. B, C, C-1 & C-2). When Francisco died on May 29, 1932
at the age of 20, single and without any descendant, his mother, as his sole heir,
executed the public instrument Exhibit F entitled EXTRAJUDICIAL SETTLEMENT AND
SALE whereby, among other things, for and in consideration of the sum of P800.00 she
sold the property in question to appellants. When thereafter said vendees demanded
from Paulina Yaeso and her husband Jose Esparcia, the surrender of Original Certificate
of Title No. 10275 which was in their possession the latter refused, thus giving rise
to the filing of the corresponding motion in the cadastral record No. 507. The same,
however, was denied (Exhs. 8 & 9).
Thereafter, or more specifically, on July 30, 1951, Cipriana and Paulina Yaeso, the
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
and Paulina Sienes (Exh. 2) who, in turn, declared it in their name for tax purposes and
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:
SUPREME COURT
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
period.
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.

MEDIALDEA, J.:
This petition seeks to review on certiorari the decision of the Court of Appeals, dated
March 1, 1988, which modified and/or amended the decision of the Regional Trial Court
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
trial court) as follows:
WHEREFORE, IN VIEW OF THE ABOVE, the appealed decision is
hereby MODIFIED and TCT-12456 issued in the names of Thomas S.
Ong and Celso Uy is hereby declared valid without prejudice on the
part of plaintiff-appellee to file a separate action for reimbursement
for the value of said property from appellant Lilia Sevilla.
Despite the lapse of several months, and repeated demands, Mrs. Sevilla failed to
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
(Civil Case 1755, CFI, Br. XXXII Kalookan City) for the issuance of title over the entire area
of Lot B-2, Psd-4350 (Dimzon's land) which includes Mrs. Tirado's 73,000 sq. m.
On December 23, 1976, TCT No. 4128 (covering both Mrs. Tirado and Dimson's lands, or
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
(TCT Nos. C-5374, C-5379 and C-5380) were issued in lieu of TCT-4128, likewise in the
name of Mrs. Sevilla.
On March 29, 1977, TCT No. C-5380 was cancelled and in its stead Transfer Certificate of
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
December 23, 1977, this case (CC No. 6667, RTC, Br. XXXIII, Kalookan City) for the
annulment of the judgment in Civil Case 1755 and the corresponding cancellation of TCT
No. 4128. Respondent Sevilla was declared in default for failure to file her answer and
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
counterclaim and crossclaim against Lilia Sevilla, on September 12, 1980.
On February 20, 1984, Ong and Uy were likewise declared in default for failure of their
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
Ong and Uy.
On April 25, 1984, the trial court rendered a decision, the dispositive portion of which
provides:
WHEREFORE, judgment is rendered in favor of petitioner and against
respondent Lilia Sevilla, ordering the questioned decision partly
nullified and transfer certificate of title No. 4128 issued therefrom is
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-
5380, C-10298, C-10299 and C-12456, involving the property
awarded to herein petitioner are declared null and void ab initio. As
to petitioner's prayer that the Register of Deeds for the City of
Kalookan be directed to issue separate transfer certificate of title in
the name of herein petitioner for the area claimed by her totalling
seventy three thousand (73,000) square meters, this Court cannot
rule on this prayer considering that the issuance of such title by the
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
following:
1. The amount of P30,000.00 for moral damages and the further
sum of P20,000.00 as exemplary damages;
2. The amount of P10,000.00 for and as attorney's fees; and
3. The costs of suit.
With regards (sic) to the cross-claim interposed against respondent
Liha D. Sevilla and as aforestated, respondent Lilia D. Sevilla is
further ordered to pay respondents Thomas S. Ong and Celso Uy the
following:
1. The amount of the purchase price of the parcel of land purchased
by respondents Thomas S. Ong and Celso Uy from respondent Lilia
D. Sevilla and which property is more particularly described in the
herein cancelled TCT No. C-12456;
2. The amount of P10,000.00 for and as attorney's fees; and
3. Costs of suit.
The counterclaim as interposed by respondents Thomas Ong and
Celso Uy are hereby DISMISSED for lack of basis to support the
same.
SO ORDERED. (pp. 55-56, RTC Decision, Rollo)
A motion for reconsideration filed by Ong and Uy was denied on October 23, 1984.
On appeal by Mrs. Sevilla, Ong and Uy, the Court of Appeals modified the decision by
declaring Ong and Uy purchasers in good faith and for value, in effect depriving Mrs.
Tirado of that portion of land to the extent covered by TCT No. 12456.
Hence, this petition by Mrs. Tirado questioning the validity of TCT No. C-12456 issued in
the names of Ong and Uy.
We affirm the ruling of the Court of Appeals.
Mrs. Tirado anchors her argument on the lis pendens earlier inscribed in TCT Nos. 10298
and 10299 on July 29, 1977. This was, however, done at the instance of the counsel of
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
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
(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
inscribed on TCT No. 5380 on July 29, 1977, and subsequently carried over to TCT Nos.
10298 and 10299, Ong and Uy had been duly forwarned about an infirmity in said title;
hence, at the time they purchased subject property in November, 1977, they could not
be considered purchasers in good faith, and the subsequent issuance of TCT 12456 was
an error.
The purpose of filing notice of lis pendens is to charge strangers with notice of the
particular litigation referred to in the notice; and if the notice is effective, a third person
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
pendens loses its efficacy (Atkins Kroll & Co. vs. Domingo, 46 Phil. 362, 1924) cited in
Noblejas and Noblejas, Registration of Land Titles and Deeds, Ann., 1986 Ed., p. 304)
Thus, the Court of Appeals correctly ruled:
... at the time appellants Ong and Uy purchased the realty in
question (TCT No. C-10299), they were well aware that it was
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
and Uy) took a calculated risk and brought (sic) it just the same from
Lilia Sevilla, hoping all the while mayhap, that a decision would be
rendered favorable to their predecessor-in-interest, Lilia Sevilla in
Civil Case No. C-1836. And true enough and as per their expectation,
after said sale to appellants (Ong and Uy), said notice of lis pendens
was cancelled by virtue of the order of the Court of First Instance of
Rizal, Caloocan, Branch XII on December 17, 1977, by virtue of a
favorable decision rendered in favor of said Lilia Sevilla. On February
14, 1978, T.C.T. No. C-12456 was issued in the names of defendants-
appellants Thomas S. Ong and Celso S. Uy (Exh. C. Uy-Ong; p. 177,
Records). Said Torrens Title does not also show any notice (sic) lis
pendens annotated therein, (pp. 39-40, Rollo, CA Decision)
xxx xxx xxx
At bar, it is beyond question that at the beginning, Lilia Sevilla's title
to said property was contested by Roqueta Rodriguez, However,
once the Court of First Instance of Caloocan, Branch XII rendered its
decision in favor of said Lilia Sevilla, her title thereto became
judicially settled so that it ineluctably follows that the title awarded
to her is a legal title. It also logically follows that appellants Uy and
Ong then stepped into the shoes of Lilia Sevilla so that the latter (Uy
and Ong) are to all intents and purposes purchasers in good faith
and for value because their predecessor's title was held valid by the
court in Civil Case No. 1836. (p. 72, Rollo, CA Resolution on Motion
for Reconsideration)
To require Ong and Uy to go beyond the lis pendens annotation or to look beyond TCT
No. 10299 would be to impose an additional burden on Ong and Uy since the lis
pendens annotation sufficiently served its purpose.
Moreover, the lis pendens annotation, although considered a "general notice to all the
world, . . . it is not correct to speak of it as a part of the doctrine of notice, the purchaser
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
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
Law, the Public Land Act and the Property Registration Decree, 1983 Ed., Central
Lawbook Publishing Co., Inc., pp. 118-119) (emphasis supplied).
It is now pointed out that Mrs. Tirado had likewise caused to be inscribed a lis pendens
on TCT No. 10298 which had remained titled in Sevilla's name. The parcel of land
covered by said title however was never the subject of any deed of sale between her
and Ong and Uy. Moreover, such lis pendens was inscribed only on August 31, 1979, two
years after Ong and Uy had brought the land covered by TCT No. 10299 in 1977, and a
year after TCT No. 10299 was cancelled on February 14, 1978 to give way to TCT No.
12456 in Ong and Uy's name.
Petitioner again points out that she had likewise caused to be inscribed a lis pendens on
TCT No. 12456 (p. 8, Rollo). This move however is irrelevant since the inscription was
made on April 22, 1980, or two years after TCT 12456 had long become indefeasible. We
quote from the CA decision:
In a host of cases, our Supreme Court has enunciated the well-
settled rule that "The Certificate serves as evidence of an
indefeasible title to the property in favor of the person whose name
appears therein. After the expiration of the one year period from
the issuance of the decree of registration upon which it is based, it
becomes incontrovertible (Pamintuan vs. San Agustin, 43 Phil. 558;
Reyes and Nadres vs. Borbon and Director of Lands, 50 Phil. 791;
Manuel Syjuco et al. vs. Luis Francisco, 53 O.G. 2186, April 15, 1957;
 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.

SO ORDERED.

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

III price
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21489 and L-21628 May 19, 1966
MIGUEL MAPALO, ET AL., petitioners,
vs.
MAXIMO MAPALO, ET AL., respondents.
Pedro P. Tuason for petitioners.
Primicias and Del Castillo for respondents.
BENGZON, J.P., J.:
The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were
registered owners, with Torrens title certificate O.C.T. No. 46503, of a 1,635-square-
meter residential land in Manaoag, Pangasinan. Said spouses-owners, out of love and
affection for Maximo Mapalo a brother of Miguel who was about to get married
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
absolute sale over the entire land in his favor. Their signatures thereto were procured by
fraud, that is, they were made to believe by Maximo Mapalo and by the attorney who
acted as notary public who "translated" the document, that the same was a deed of
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
aforesaid spouses did not receive anything of value for the land. The attorney's
misbehaviour was the subject of an investigation but its result does not appear on
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.
Following the execution of the afore-stated document, the spouses Miguel Mapalo and
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
spouses have always been in continued possession over the western half of the land up
to the present.
Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938, registered the
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
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.
The Narcisos took possession only of the eastern portion of the land in 1951, after the
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,
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
who had a house on the western part of the land with the consent of the spouses
Mapalo and Quiba.
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 land, on the grounds that their (Mapalo spouses) signatures to the deed of sale of
1936 was procured by fraud and that the Narcisos were buyers in bad faith. They asked
for reconveyance to them of the western portion of the land and issuance of a Transfer
Certificate of Title in their names as to said portion.
In addition, the Mapalo spouses filed on December 16, 1957 their own complaint in the
Court of First Instance of Pangasinan (Civil Case No. U-133) against the aforestated
Narcisos and Maximo Mapalo. They asked that the deeds of sale of 1936 and of 1951
over the land in question be declared null and void as to the western half of said land.
Judge Amado Santiago of the Court of First Instance of Pangasinan located in the
municipality of Urdaneta tried the two cases jointly. Said court rendered judgment on
January 18, 1961, as follows:
WHEREFORE, judgment is hereby rendered as follows, to wit:
(a) dismissing the complaint in Civil Case No. 11991;
(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
thereof;
(c) declaring as null and void and without legal force and effect Transfer
Certificate of Title No. 12829 issued in favor of Maximo Mapalo as regards the
western half portion of the land covered therein;
(d) declaring as null and void Transfer Certificate of Title No. 11350 in the
names of the Narcisos insofar as the western half portion of the land covered
therein is concerned;
(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;
(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
subdivision plan, one in favor of the spouses Miguel Mapalo and Candida
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;
meanwhile the right of the spouses Mapalo and Quiba is hereby ordered to be
annotated on the back of Transfer Certificate of Title No. 11350; and
(g) sentencing Maximo Mapalo and the Narcisos to pay the costs.
IT IS SO ORDERED.
The Narcisos appealed to the Court of Appeals. In its decision on May 28, 1963, the
Court of Appeals reversed the judgment of the Court of First Instance, solely on the
ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been
obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action
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
the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on
prescription that they lost in the Court of Appeals.
From said decision of the Court of Appeals, the Mapalo spouses appealed to this Court.
And here appellants press the contention that the document dated October 15, 1936,
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
fictitious.
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,
and (3) cause or consideration.1 The Court of Appeals is right in that the element of
consent is present as to the deed of sale of October 15, 1936. For consent was
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.
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.
Not so, however, as to the third element of cause or consideration. And on this point
the decision of the Court of Appeals is silent.
As regards the eastern portion of the land, the Mapalo spouses are not claiming the
same, it being their stand that they have donated and freely given said half of their land
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
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
donation by the Mapalo spouses obtained as to said portion. Accordingly, we start with
the fact that liberality as a cause or consideration does not exist as regards the western
portion of the land in relation to the deed of 1936; that there was no donation with
respect to the same.
It is reduced, then, to the question whether there was an onerous conveyance of
ownership, that is, a sale, by virtue of said deed of October 15, 1936, with respect to
said western portion. Specifically, was there a cause or consideration to support the
existence of a contrary of sale?
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
proven that it is supported by another real and licit consideration.3 And it is further
provided by the Old Civil Code that the action for annulment of a contract on the ground
of falsity of consideration shall last four years, the term to run from the date of the
consummation of the contract.4
Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should
be asked whether its case is one wherein there is no consideration, or one with a
statement of a false consideration. If the former, it is void and inexistent; if the latter,
only voidable, under the Old Civil Code. As observed earlier, the deed of sale of 1936
stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact, however,
said consideration was totally absent. The problem, therefore, is whether a deed which
states a consideration that in fact did not exist, is a contract without consideration, and
therefore void ab initio, or a contract with a false consideration, and therefore, at least
under the Old Civil Code, voidable.
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:
En primer lugar, nor interesa recordar la diferencia entre simulacion y el
contrato con proposito fraudulento. Este aunque ilicito es real; mas el primero
es falso en realidad, aunque se le presente como verdadero. (Manresa, Codigo
Civil, Tomo VIII, Vol. II, p. 354.)
And citing a decision of the Supreme Court of Spain on the matter, Manresa further
clarifies the difference of false cause and no cause, thus:
Insiste en el distingo con mas detenida descripcion la sentencia de 25 de mayo
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,
no ha de deducirse de esta doctrina, fundamentalmente recogida en el
articulo 1.261 y concordantes del Codigo civil, que cualquier falta de
adecuacion entre cualquier incongruencia entre la causa expresada y la
verdadera, y, en general, entre la estructuracion y la finalidad economica;
hayan de producir la ineficacia del negocio, pues por el contrario, puede este
ser valido y producir sus efectos tanto en el caso de la mera disonancia entre
el medio juridico adoptado y el fin practico perseguido, por utilizacion de una
via oblicua o combinacion de formas juridicas entrelazadas que permita la
obtencion de un resultado no previsto en los cuadros de la ley negocios
indirectos y negocios fiduciarlos, validos cuando no envuelven fraude de ley,
como en el caso de la verdadera disconformidad entre la apariencia del acto y
su real contenido, preparada deliberadamente por las partes negocio
simulado , ya que, cuando esta divergencia implica no una ausencia total de
voluntad y de acto real, sino mera ocultacion de un negocio verdadero bajo la
falsa apariencia de un negocio fingido "sirulacion relativa", la ineficacia de la
forma externa simulada, no es obstaculo para la posible validez del negocio
disimulado que contiene, en tanto este ultimo sea licito y reuna no solo los
requisitos generales, sino tambien los que corresponden a su naturaleza
especial, doctrina, en obligada aplicacion de los preceptos de nuestra Ley civil,
especialmente en su art. 1.276, que, al establecer el principio de nulidad de
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)
Sanchez Roman says:
Ya hemos dicho que la intervencion de causa en los contratos es necesaria, y
que sin ellos son nulos; solo se concibe que un hombre perturbado en su
razon pueda contratar sin causa. ...
Por la misma razon de la necesidad de la intervencion de causa en el contrato,
es preciso que esta sea verdadera y no supuesta, aparente o figurada. Que la
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
Civil, Tomo IV, p. 206.).
2.. La causa ha de ser verdadera. La causa falsa puede ser erronea o simulada.
Es erronea como dice Giorgi, la causa que tiene por base la credulidad en un
hecho no existente; y simulada la que tiene lugar cuando se hace aparecer
artificiosamente una distinta de la verdadera. La erronea produce siempre la
inexistencia del contrato; la simulada no siempre produce este efecto, porque
puede suceder que la causa oculta, pero verdadera, baste para sostener el
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
Derecho Civil Espaol, Tomo II, pp. 618-619)
From the foregoing it can be seen that where, as in this case, there was in fact no
consideration, the statement of one in the deed will not suffice to bring it under the rule
of Article 1276 of the Old Civil Code as stating a false consideration. Returning to
Manresa:
Figurando en nuestro Derecho positivo la causa, como un elemento esential
del contrato, es consecuencia ineludible, se reputar simulada la entrega del
precio en la compraventa de autos, el que haya que declararla nula por
inexistente haciendose aplicacion indebida de art. 1.276 por el Tribunal
sentenciador al cohonestar la falta de precio admitiendo se pueda tratar de
una donacion, ya que la recta aplicacion del citado precepto exige que los
negocios simulados, o sea con causa falsa, se justifique la verdadera y licita en
que se funda el acto que las partes han querido ocultar y el cumplimiento de
las formalidades impuestas por la Ley y, cual dice la sentencia de 3 de marzo
de 1932, esta rigurosa doctrina ha de ser especialmente impuesta en la
donaciones puras y simples; de los que deduce que la sentencia recurrida al
no decretar la nulidad instada por falta de causa, incide en la infraccion de los
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)
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil.
921, is squarely applicable herein. In that case we ruled that a contract of purchase and
sale is null and void and produces no effect whatsoever where the same is without
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.
Needless to add, the inexistence of a contract is permanent and incurable and cannot be
the subject of prescription. In the words of Castan: "La inexistencia es perpetua e
insubsanable no pudiendo ser objecto de confirmacion ni prescripcion (Op. cit., p. 644.)
In Eugenio v. Perdido, 97 Phil. 41, 42-43, involving a sale dated 1932, this Court,
speaking through Justice Cesar Bengzon, now Chief Justice, stated:
Under the existing classification, such contract would be "inexisting" and "the
action or defense for declaration" of such inexistence "does not prescribe".
(Art. 1410, New Civil Code). While it is true that this is a new provision of the
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".
Anent the matter of whether the Narcisos were purchasers in good faith, the trial court
in its decision resolved this issue, thus:
With regard to the second issue, the Narcisos contend that they are the
owners of the above-described property by virtue of the deed of sale (Exh. B,
plaintiffs in 11991 and Exh. 2, defendants in U-133) executed in their favor by
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
theory of the Narcisos on the following reasons: Firstly, it has been positively
shown by the undisputed testimony of Candida Quiba that Pacifico Narciso
and Evaristo Narciso stayed for some days on the western side (the portion in
question) of the above-described land until their house was removed in 1940
by the spouses Mapalo and Quiba; secondly, Pacifica Narciso admitted in his
testimony in chief that when they bought the property, Miguel Mapalo was
still in the premises in question (western part) which he is occupying and his
house is still standing thereon; and thirdly, said Pacifico Narciso when
presented as a rebuttal and sub-rebuttal witness categorically declared that
before buying the land in question he went to the house of Miguel Mapalo
and Candida Quiba and asked them if they will permit their elder brother
Maximo to sell the property.
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
that the Narcisos were aware of the nature and extent of the interest of
Maximo Mapalo their vendor, over the above-described land before and at
the time the deed of sale in their favor was executed.
Upon the aforestated declaration of Pacifico Narciso the following question
arises: What was the necessity, purpose and reason of Pacifico Narciso in still
going to the spouses Mapalo and asked them to permit their brother Maximo
to dispose of the above-described land? To this question it is safe to state that
this act of Pacifico Narciso is a conclusive manifestation that they (the
Narcisos) did not only have prior knowledge of the ownership of said spouses
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
also of the flaw of his title thereto. Under this situation, the Narcisos may be
considered purchasers in value but certainly not as purchasers in good faith. ...
(pp. 97-98, Record on Appeal.)
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'
case.

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
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-38498 August 10, 1989
ISAAC BAGNAS, ENCARNACION BAGNAS, SILVESTRE BAGNAS MAXIMINA BAGNAS,
SIXTO BAGNAS and AGATONA ENCARNACION, petitioners,
vs.
HON. COURT OF APPEALS, ROSA L. RETONIL TEOFILO ENCARNACION, and JOSE B.
NAMBAYAN respondents.
Beltran, Beltran & Beltran for petitioners.
Jose M. Legaspi for private respondents.
NARVASA, J.:
The facts underlying this appeal by certiorari are not in dispute. Hilario Mateum of
Kawit, Cavite, died on March 11, 1964, single, without ascendants or descendants, and
survived only by collateral relatives, of whom petitioners herein, his first cousins, were
the nearest. Mateum left no will, no debts, and an estate consisting of twenty-nine
parcels of land in Kawit and Imus, Cavite, ten of which are involved in this appeal. 1
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
Deeds for the Province of Cavite two deeds of sale purportedly executed by Mateum in
their (respondents') favor covering ten parcels of land. Both deeds were in Tagalog, save
for the English descriptions of the lands conveyed under one of them; and each recited
the reconsideration of the sale to be" ... halagang ISANG PISO (Pl.00), salaping Pilipino,
at mga naipaglingkod, ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO
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,
antedating Mateum's death by more than a year. 3 It is asserted by the petitioners, but
denied by the respondents, that said sales notwithstanding, Mateum continued in the
possession of the lands purportedly conveyed until his death, that he remained the
declared owner thereof and that the tax payments thereon continued to be paid in his
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
over three of the ten parcels of land conveyed thereby. 5
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
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
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
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
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
validity and effectivity, ... that defendants were collateral relatives of Hilario Mateum
and had done many good things for him, nursing him in his last illness, which services
constituted the bulk of the consideration of the sales; and (by way of affirmative
defense) that the plaintiffs could not question or seek annulment of the sales because
they were mere collateral relatives of the deceased vendor and were not bound,
principally or subsidiarily, thereby. 8
After the plaintiffs had presented their evidence, the defendants filed a motion for
dismissal in effect, a demurrer to the evidence reasserting the defense set up in their
answer that the plaintiffs, as mere collateral relatives of Hilario Mateum, had no light to
impugn the latter's disposition of his properties by means of the questioned
conveyances and submitting, additionally, that no evidence of fraud maintaining said
transfers had been presented. 9
The Trial Court granted the motion to dismiss, holding (a) on the authority of Armentia
vs. Patriarca, 10 that the plaintiffs, as mere collateral relatives, not forced heirs, of
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
dispositions were valid or not; and (b) that the plaintiffs evidence of alleged fraud was
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
On appeal by the plaintiffs to the Court of Appeals, that court affirmed, adverting with
approval to the Trial Court's reliance on the Armentia ruling which, it would appear,
both courts saw as denying, without exception, to collaterals, of a decedent, not forced
heirs, the right to impugn the latter's dispositions inter vivos of his property. The
Appellate Court also analyzed the testimony of the plaintiffs' witnesses, declared that it
failed to establish fraud of any kind or that Mateum had continued paying taxes on the
lands in question even after executing the deeds conveying them to the defendants, and
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
allegations of the appellants that the said deed of sale were (sic) in reality donations. 12
One issue clearly predominates here. It is whether, in view of the fact that, for
properties assuredly worth in actual value many times over their total assessed
valuation of more than P10,000.00, the questioned deeds of sale each state a price of
only one peso (P1.00) plus unspecified past, present and future services to which no
value is assigned, said deeds were void or inexistent from the beginning ("nulo") or
merely voidable, that is, valid until annulled. If they were only voidable, then it is a
correct proposition that since the vendor Mateum had no forced heirs whose legitimes
may have been impaired, and the petitioners, his collateral relatives, not being bound
either principally or subsidiarily to the terms of said deeds, the latter had and have no
actionable right to question those transfers.
On the other hand, if said deeds were void ab initio because to all intents and purposes
without consideration, then a different legal situation arises, and quite another result
obtains, as pointed out by the eminent civil law authority, Mr. Justice J.B.L. Reyes who,
in his concurring opinion in Armentia, said:
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
consideration, or for a false and fictitious consideration. For under
the Civil Code of the Philippines, Art. 1409, par. 3, contracts with a
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
false cause (consideration) unless the persons interested in
upholding the contract should prove that there is another true and
lawful consideration therefor. (lbid., Art. 1353).
If therefore the contract has no causa or consideration, or the causa
is false and fictitious (and no true hidden causa is proved) the
property allegedly conveyed never really leaves the patrimony of the
transferor, and upon the latter's death without a testament, such
property would pass to the transferor's heirs intestate and be
recoverable by them or by the Administrator of the transferor's
estate. In this particular regard, I think Concepcion vs. Sta. Ana, 87
Phil. 787 and Sobs vs. Chua Pua Hermanos, 50 Phil. 536, do not
correctly state the present law, and must be clarified.
To be sure the quoted passage does not reject and is not to be construed as rejecting
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.
1276 of the Civil Code of 1889 under which the statement of a false cause in a contract
rendered it voidable only, not void ab initio. In observing that they "... do not correctly
state the present law and must be clarified," Justice Reyes clearly had in mind the fact
that the law as it is now (and already was in the time Armentia) no longer deems
contracts with a false cause, or which are absolutely simulated or fictitious, merely
voidable, but declares them void, i.e., inexistent ("nulo") unless it is shown that they are
supported by another true and lawful cause or consideration. 14 A logical consequence
of that change is the juridical status of contracts without, or with a false, cause is that
conveyances of property affected with such a vice cannot operate to divest and transfer
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
succession, said heirs may bring an action to recover the property from the purported
transferee. As pointed out, such an action is not founded on fraud, but on the premise
that the property never leaves the estate of the transferor and is transmitted upon his
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.
In Armentia the Court determined that the conveyance questioned was merely
annullable not void ab initio, and that the plaintiff s action was based on fraud vitiating
said conveyance. The Court said:
Hypothetically admitting the truth of these allegations (of plaintiffs
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
were minors, makes the contract, at worst, annullable by them,
Then again, inadequacy of consideration does not imply total want
of consideration. Without more, the parted acts of Marta Armentia
after the sale did not indicate that the said sale was void from the
being.
The sum total of all these is that, in essence, plaintiffs case is
bottomed on fraud, which renders the contract voidable.
It therefore seems clear that insofar as it may be considered as setting or reaffirming
precedent, Armentia only ruled that transfers made by a decedent in his lifetime, which
are voidable for having been fraudulently made or obtained, cannot be posthumously
impugned by collateral relatives succeeding to his estate who are not principally or
subsidiarily bound by such transfers. For the reasons already stated, that ruling is not
extendible to transfers which, though made under closely similar circumstances, are
void ab initio for lack or falsity of consideration.
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
character of said sales. They:
1. advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59 O.G. No. 47,
pp, 8101, 8118) holding that a price of P l.00 for the sale of things worth at least
P20,000.00 is so insignificant as to amount to no price at all, and does not satisfy the law
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
case and the present one in stated price and actual value of the property sold;
2. cite Manresa to the same effect: that true price, which is essential to the validity of a
sale, means existent, real and effective price, that which does not consist in an
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
of price against all the factors that determine the value of the thing sold; but that there
is no need of such a close examination when the immense disproportion between such
economic values is patent a case of insignificant or ridiculous price, the unbelievable
amount of which at once points out its inexistence; 15
3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for a ... price
certain in money or its equivalent ... requires that "equivalent" be something
representative of money, e.g., a check or draft, again citing Manresa 16 to the effect
that services are not the equivalent of money insofar as said requirement is concerned
and that a contract is not a true sale where the price consists of services or prestations;
4. once more citing Manresa 17 also point out that the "services" mentioned in the
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
parties to said deeds.
Without necessarily according all these assertions its full concurrence, but upon the
consideration alone that the apparent gross, not to say enormous, disproportion
between the stipulated price (in each deed) of P l.00 plus unspecified and unquantified
services and the undisputably valuable real estate allegedly sold worth at least
P10,500.00 going only by assessments for tax purposes which, it is well-known, are
notoriously low indicators of actual value plainly and unquestionably demonstrates that
they state a false and fictitious consideration, and no other true and lawful cause having
been shown, the Court finds both said deeds, insofar as they purport to be sales, not
merely voidable, but void ab initio.
Neither can the validity of said conveyances be defended on the theory that their true
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
valid, must be made and accepted in a public instrument, and it is not denied by the
respondents that there has been no such acceptance which they claim is not required.
20
The transfers in question being void, it follows as a necessary consequence and
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
Mateum, said transfers notwithstanding, recoverable by his intestate heirs, the
petitioners herein, whose status as such is not challenged.
The private respondents have only themselves to blame for the lack of proof that might
have saved the questioned transfers from the taint of invalidity as being fictitious and
without ilicit cause; proof, to be brief, of the character and value of the services, past,
present, and future, constituting according to the very terms of said transfers the
principal consideration therefor. The petitioners' complaint (par. 6) 21 averred that the
transfers were "... fraudulent, fictitious and/or falsified and (were) ... in reality donations
of immovables ...," an averment that the private respondents not only specifically
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.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 130115 July 16, 2008
FELIX TING HO, JR., MERLA TING HO BRADEN, JUANA TING HO & LYDIA TING HO
BELENZO, Petitioners,
vs.
VICENTE TENG GUI, Respondent.
DECISION
PUNO, C.J.:
This is a Petition for Review on Certiorari1 assailing the Decision2 of the Court of Appeals
(CA) in CA-G.R. CV No. 42993 which reversed and set aside the Decision of the Regional
Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 558-0-88.
The instant case traces its origin to an action for partition filed by petitioners Felix Ting
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
controversy revolves around a parcel of land, and the improvements established
thereon, which, according to petitioners, should form part of the estate of their
deceased father, Felix Ting Ho, and should be partitioned equally among each of the
siblings.
In their complaint before the RTC, petitioners alleged that their father Felix Ting Ho died
intestate on June 26, 1970, and left upon his death an estate consisting of the following:
a) A commercial land consisting of 774 square meters, more or less, located at
Nos. 16 and 18 Afable St., East Bajac-Bajac, Olongapo City, covered by Original
Certificate of Title No. P-1064 and Tax Declaration No. 002-2451;
b) A two-storey residential house on the aforesaid lot;
c) A two-storey commercial building, the first floor rented to different persons
and the second floor, Bonanza Hotel, operated by the defendant also located
on the above described lot; and
d) A sari-sari store (formerly a bakery) also located on the above described
lot.3
According to petitioners, the said lot and properties were titled and tax declared under
trust in the name of respondent Vicente Teng Gui for the benefit of the deceased Felix
Ting Ho who, being a Chinese citizen, was then disqualified to own public lands in the
Philippines; and that upon the death of Felix Ting Ho, the respondent took possession of
the same for his own exclusive use and benefit to their exclusion and prejudice.4
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,
1978, Original Certificate of Title No. P-1064 covering the subject lot was issued to him
pursuant to a miscellaneous sales patent granted to him on January 3, 1978.6
The undisputed facts as found by the trial court (RTC), and affirmed by the appellate
court (CA), are as follows:
[T]he plaintiffs and the defendant are all brothers and sisters, the defendant being the
oldest.lavvphi1 They are the only legitimate children of the deceased Spouses Felix Ting
Ho and Leonila Cabasal. Felix Ting Ho died on June 26, 1970 while the wife Leonila
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
1947, the father of the plaintiffs and defendant, Felix Ting Ho, who was already then
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,
East Bajac-Bajac, Olongapo City, by virtue of the permission granted him by the then
U.S. Naval Reservation Office, Olongapo, Zambales. The couple thereafter introduced
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
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,
Olongapo, Zambales, specifically described in Tax Dec. No. 5432, in favor of Victoria
Cabasal his sister-in-law (Exh. C). This Deed of Sale cancelled the Tax Dec. of Felix Ting
Ho over the said building (Exh. C-1) and the building was registered in the name of the
buyer Victoria Cabasal, as per Tax Dec. No. 7579 (Exh. C-2). On the same date, October
11, 1958 the said Felix Ting Ho also sold a building of strong material located at 18
Afable Street, described in Tax Dec. No. 5982, in favor of Gregorio Fontela, of legal age,
an American citizen, married (Exh. D). This Deed of Sale, in effect, cancelled Tax Dec. No.
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
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)
were accordingly cancelled and the said buildings were registered in the name of the
defendant Vicente Teng Gui (Exhs. C-3 and D-3). On October 25, 1966 the father of the
parties Felix Ting Ho executed an Affidavit of Transfer, Relinquishment and
Renouncement of Rights and Interest including Improvements on Land in favor of his
eldest son the defendant Vicente Teng Gui. On the basis of the said document the
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
the applicant Vicente Teng Gui and accordingly on the 24th of January, 1978 Original
Certificate of Title No. P-1064 covering the lot in question was issued to the defendant
Vicente Teng Gui. Although the buildings and improvements on the land in question
were sold by Felix Ting Ho to Victoria Cabasal and Gregorio Fontela in 1958 and who in
turn sold the buildings to the defendant in 1961 the said Felix Ting Ho and his wife
remained in possession of the properties as Felix Ting Ho continued to manage the
bakery while the wife Leonila Cabasal continued to manage the sari-sari store. During all
the time that the alleged buildings were sold to the spouses Victoria Cabasal and
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
under the custody of their parents until their father Felix Ting Ho died in 1970 and their
mother Leonila Cabasal died in 1978.7 (Emphasis supplied)
In light of these factual findings, the RTC found that Felix Ting Ho, being a Chinese
citizen and the father of the petitioners and respondent, resorted to a series of
simulated transactions in order to preserve the right to the lot and the properties
thereon in the hands of the family. As stated by the trial court:
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
inclined to believe that Felix Ting Ho, the father of the plaintiffs and the defendant, and
the husband of Leonila Cabasal thought of preserving the properties in question by
transferring the said properties to his eldest son as he thought that he cannot acquire
the properties as he was a Chinese citizen. To transfer the improvements on the land to
his eldest son the defendant Vicente Teng Gui, he first executed simulated Deeds of
Sales in favor of the sister and brother-in-law of his wife in 1958 and after three (3)
years it was made to appear that these vendees had sold the improvements to the
defendant Vicente Teng Gui who was then 18 years old. The Court finds that these
transaction (sic) were simulated and that no consideration was ever paid by the
vendees.
xxx xxx xxx
With regards (sic) to the transfer and relinquishment of Felix Ting Hos right to the land
in question in favor of the defendant, the Court believes, that although from the face of
the document it is stated in absolute terms that without any consideration Felix Ting Ho
was transferring and renouncing his right in favor of his son, the defendant Vicente Teng
Gui, still the Court believes that the transaction was one of implied trust executed by
Felix Ting Ho for the benefit of his family8
Notwithstanding such findings, the RTC considered the Affidavit of Transfer,
Relinquishment and Renouncement of Rights and Interests over the land as a donation
which was accepted by the donee, the herein respondent. With respect to the
properties in the lot, the trial court held that although the sales were simulated,
pursuant to Article 1471 of the New Civil Code9 it can be assumed that the intention of
Felix Ting Ho in such transaction was to give and donate such properties to the
respondent. As a result, it awarded the entire conjugal share of Felix Ting Ho in the
subject lot and properties to the respondent and divided only the conjugal share of his
wife among the siblings. The dispositive portion of the RTC decision decreed:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant as the Court orders the partition and the adjudication of the subject
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
described in Tax Decs. Nos. 9179 and 9180 in the name of Vicente Teng Gui in the
following manner, to wit: To the defendant Vicente Teng Gui is adjudicated an
undivided six-tenth (6/10) of the aforementioned properties and to each of the plaintiffs
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
From this decision, both parties interposed their respective appeals. The petitioners
claimed that the RTC erred in awarding respondent the entire conjugal share of their
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
that the RTC erred in not ruling that the lot and properties do not form part of the
estate of Felix Ting Ho and are owned entirely by him.
On appeal, the CA reversed and set aside the decision of the RTC. The appellate court
held that the deceased Felix Ting Ho was never the owner and never claimed ownership
of the subject lot since he is disqualified under Philippine laws from owning public lands,
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:
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
(Exh. A; Record, p. 104). As stated by Felix Ting Ho no less in the "Affidavit of Transfer,
Relinquishment and Renouncement of Rights and Interest" etc. (Exh. B: Record, p. 107),
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
Reservation Office, Olongapo, Zambales". The late Felix Ting Ho was never the owner
and never claimed ownership of the land. (Emphasis supplied)1avvphi1
The affidavit, Exhibit B, was subscribed and sworn to before a Land Investigator of the
Bureau of Lands and in the said affidavit, the late Felix Ting Ho expressly acknowledged
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
rights and interests in the subject land, including all the improvements thereon to his
son, the defendant Vicente Teng Gui, who is of legal age, single, Filipino citizen and
qualified under the public land law to acquire lands.
these properties should form part of the estate of the late spouses Felix Ting Ho and
Leonila Cabasal.
Thus, while the appellate court dismissed the complaint for partition with respect to the
lot in question, it awarded the petitioners a four-fifths (4/5) share of the subject
properties erected on the said lot. The dispositive portion of the CA ruling reads as
follows:
WHEREFORE, premises considered, the decision appealed from is REVERSED and SET
ASIDE and NEW JUDGMENT rendered:
1. DISMISSING plaintiff-appellants complaint with respect to the subject
parcel of land, identified as Lot No. 418, Ts-308, covered by OCT No. P-1064, in
the name of plaintiff-appellants [should be defendant-appellant];
2. DECLARING that the two-storey commercial building, the two-storey
residential building and sari-sari store (formerly a bakery), all erected on the
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
four-fifths (4/5) thereof, the remaining one-fifth (1/5) being the share of the
defendant-appellant;
3. DIRECTING the court a quo to partition the said two-storey commercial
building, two-storey residential building and sari-sari store (formerly a bakery)
in accordance with Rule 69 of the Revised Rules of Court and pertinent
provisions of the Civil Code;

xxx xxx xxx

4. Let the records of this case be remanded to the court of origin for further
proceedings;
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
and
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
this ruling, which were summarily denied by the CA in its Resolution13 dated August 5,
1997. Hence, this petition.
According to the petitioners, the CA erred in declaring that Lot No. 418, Ts-308 does not
form part of the estate of the deceased Felix Ting Ho and is owned alone by respondent.
Respondent, on the other hand, contends that he should be declared the sole owner not
only of Lot No. 418, Ts-308 but also of the properties erected thereon and that the CA
erred in not dismissing the complaint for partition with respect to the said properties.
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
Ho.
We affirm the CA ruling.
With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of the 1935 Constitution states:
Section 1. All agricultural timber, and mineral lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential energy and
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
to corporations or associations at least sixty per centum of the capital of which is owned
by such citizens, subject to any existing right, grant, lease, or concession at the time of
the inauguration of the Government established under this Constitution (Emphasis
supplied)
Our fundamental law cannot be any clearer. The right to acquire lands of the public
domain is reserved for Filipino citizens or corporations at least sixty percent of the
capital of which is owned by Filipinos. Thus, in Krivenko v. Register of Deeds,14 the Court
enunciated that:
Perhaps the effect of our construction is to preclude aliens, admitted freely into the
Philippines from owning sites where they may build their homes. But if this is the
solemn mandate of the Constitution, we will not attempt to compromise it even in the
name of amity or equity. We are satisfied, however, that aliens are not completely
excluded by the Constitution from the use of lands for residential purposes. Since their
residence in the Philippines is temporary, they may be granted temporary rights such as
a lease contract which is not forbidden by the Constitution. Should they desire to
remain here forever and share our fortunes and misfortunes, Filipino citizenship is not
impossible to acquire.15
In the present case, the father of petitioners and respondent was a Chinese citizen;
therefore, he was disqualified from acquiring and owning real property in the
Philippines. In fact, he was only occupying the subject lot by virtue of the permission
granted him by the then U.S. Naval Reservation Office of Olongapo, Zambales. As
correctly found by the CA, the deceased Felix Ting Ho was never the owner of the
subject lot in light of the constitutional proscription and the respondent did not at any
instance act as the dummy of his father.
On the other hand, the respondent became the owner of Lot No. 418, Ts-308 when he
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
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
respondent possesses all the qualifications and none of the disqualifications to acquire
alienable and disposable lands of the public domain. These issuances bear the
presumption of regularity in their performance in the absence of evidence to the
contrary.
Registration of grants and patents involving public lands is governed by Section 122 of
Act No. 496, which was subsequently amended by Section 103 of Presidential Decree
No. 1529, viz:
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
forthwith under the operation of this Decree. It shall be the duty of the official issuing
the instrument of alienation, grant, patent or conveyance in behalf of the Government
to cause such instrument to be filed with the Register of Deeds of the province or city
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
an owners duplicate issued to the grantee. The deeds, grant, patent or instrument of
conveyance from the Government to the grantee shall not take effect as a conveyance
or bind the land, but shall operate only as a contract between the Government and the
grantee and as evidence of authority to the Register of Deeds to make registration. It is
the act of registration that shall be the operative act to affect and convey the land, and
in all cases under this Decree registration shall be made in the office of the Register of
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
(Emphasis supplied)
Under the law, a certificate of title issued pursuant to any grant or patent involving
public land is as conclusive and indefeasible as any other certificate of title issued to
private lands in the ordinary or cadastral registration proceeding. The effect of the
registration of a patent and the issuance of a certificate of title to the patentee is to vest
in him an incontestable title to the land, in the same manner as if ownership had been
determined by final decree of the court, and the title so issued is absolutely conclusive
and indisputable, and is not subject to collateral attack.17
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
to the subject lot should be upheld.
This contention must fail because the prohibition against an alien from owning lands of
the public domain is absolute and not even an implied trust can be permitted to arise on
equity considerations.
In the case of Muller v. Muller,18 wherein the respondent, a German national, was
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
rejecting the claim, ruled that:
Respondent was aware of the constitutional prohibition and expressly admitted his
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
asserting or claiming a right on the said property cannot be sustained.
The Court of Appeals erred in holding that an implied trust was created and resulted by
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
lands in the Philippines is absolute. Not even an ownership in trust is allowed. Besides,
where the purchase is made in violation of an existing statute and in evasion of its
express provision, no trust can result in favor of the party who is guilty of the fraud. To
hold otherwise would allow circumvention of the constitutional prohibition.
Invoking the principle that a court is not only a court of law but also a court of equity, is
likewise misplaced. It has been held that equity as a rule will follow the law and will not
permit that to be done indirectly which, because of public policy, cannot be done
directly...19
Coming now to the issue of ownership of the properties erected on the subject lot, the
Court agrees with the finding of the trial court, as affirmed by the appellate court, that
the series of transactions resorted to by the deceased were simulated in order to
preserve the properties in the hands of the family. The records show that during all the
time that the properties were allegedly sold to the spouses Victoria Cabasal and
Gregorio Fontela in 1958 and the subsequent sale of the same to respondent in 1961,
the petitioners and respondent, along with their parents, remained in possession and
continued to live in said properties.
However, the trial court concluded that:
In fairness to the defendant, although the Deeds of Sale executed by Felix Ting Ho
regarding the improvements in favor of Victoria Cabasal and Gregorio Fontela and the
subsequent transfer of the same by Gregorio Fontela and Victoria Cabasal to the
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
the improvements to his eldest son the defendant Vicente Teng Gui 20
Its finding was based on Article 1471 of the Civil Code, which provides that:
Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have
been in reality a donation, or some other act or contract.211avvph!1
The Court holds that the reliance of the trial court on the provisions of Article 1471 of
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
law requires positive proof.
The respondent was unable to show, and the records are bereft of any evidence, that
the simulated sales of the properties were intended by the deceased to be a donation to
him. Thus, the Court holds that the two-storey residential house, two-storey residential
building and sari-sari store form part of the estate of the late spouses Felix Ting Ho and
Leonila Cabasal, entitling the petitioners to a four-fifths (4/5) share thereof.
IN VIEW WHEREOF, the petition is DENIED. The assailed Decision dated December 27,
1996 of the Court of Appeals in CA-G.R. CV No. 42993 is hereby AFFIRMED.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 132864 October 24, 2005
PHILIPPINE FREE PRESS, INC., Petitioner,
vs.
COURT OF APPEALS (12th Division) and LIWAYWAY PUBLISHING, INC., Respondents.
DECISION
GARCIA, J.:
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner
Philippine Free Press, Inc. seeks the reversal of the Decision1 dated February 25, 1998 of
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
deeds of sale thereat instituted by petitioner against the Presidential Commission for
Good
Government (PCGG) and the herein private respondent, Liwayway Publishing, Inc.
As found by the appellate court in the decision under review, the facts are:
xxx [Petitioner] . . . is a domestic corporation engaged in the publication of Philippine
Free Press Magazine, one of the . . . widely circulated political magazines in the
Philippines. Due to its wide circulation, the publication of the Free Press magazine
enabled [petitioner] to attain considerable prestige prior to the declaration of Martial
Law as well as to achieve a high profit margin. . . .
Sometime in . . . 1963, [petitioner] purchased a parcel of land situated at No. 2249,
Pasong Tamo Street, Makati which had an area of 5,000 square meters as evidenced by .
. . (TCT) No. 109767 issued by the Register of Deeds of Makati (Exh. Z). Upon taking
possession of the subject land, [petitioner] constructed an office building thereon to
house its various machineries, equipment, office furniture and fixture. [Petitioner]
thereafter made the subject building its main office . . . .
During the 1965 presidential elections, [petitioner] supported the late President
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
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
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
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
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
Camp Crame and was subsequently transferred to the maximum security bloc at Fort
Bonifacio.
Sometime in December, 1972, Locsin, Sr. was informed . . . that no charges were to be
filed against him and that he was to be provisionally released subject to the following
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
administration . . . .
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;
stipulated). The cessation of the publication of the ... magazine led to the financial ruin
of [petitioner] . . . . [Petitioners] situation was further aggravated when its employees
demanded the payment of separation pay as a result of the cessation of its operations.
[Petitioners] minority stockholders, furthermore, made demands that Locsin, Sr. buy
out their shares. xxx.
On separate occasions in 1973, Locsin, Sr. was approached by the late Atty. Crispin
Baizas with offers from then President Marcos for the acquisition of the [petitioner].
However, Locsin, Sr. refused the offer stating that [petitioner] was not for sale (TSN, 2
May 1988, pp. 8-9, 40; 27 May 1993, pp. 66-67).
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
Menzi, the former aide-de-camp of then President Marcos concerning the sale of the
[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
meeting, Menzi once more reiterated Marcoss offer to purchase both the name and the
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
made a counteroffer that he will sell the land, the building and all the machineries and
equipment therein but he will be allowed to keep the name of the [petitioner]. Menzi
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
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-
leave-it" basis (TSN, 2 May 1988, pp.42-43; 27 May 1993, p. 88).
On August 22, 1973, Menzi tendered to Locsin, Sr. a check for One Million (P1,
000,000.00) Pesos downpayment for the sale, . . . Locsin, Sr. accepted the check, subject
to the condition that he will refund the same in case the sale will not push through.
(Exh. 7).
On August 23, 1973, the Board of Directors of [petitioner] held a meeting and
reluctantly passed a resolution authorizing Locsin, Sr. to sell the assets of the
[petitioner] to Menzi minus the name "Philippine Free Press (Exhs. A-1 and 1; TSN, 27
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
of Sale covering the land, building and the machineries of the [petitioner]. Menzi paid
the balance of the purchase price in the amount of . . . (P4,750,000.00) Pesos (Exhs. A
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
settle all its obligations.
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
motion of defendant PCGG, the complaint against it was dismissed on October 22, 1987.
(Words in bracket and underscoring added)
In a decision dated October 31, 1995,2 the trial court dismissed petitioners complaint
and granted private respondents counterclaim, to wit:
WHEREFORE, in view of all the foregoing premises, the herein complaint for annulment
of sales is hereby dismissed for lack of merit.
On [respondent] counterclaim, the court finds for [respondent] and against [petitioner]
for the recovery of attorneys fees already paid for at P1,945,395.98, plus a further
P316,405.00 remaining due and payable.
SO ORDERED. (Words in bracket added)
In time, petitioner appealed to the Court of Appeals (CA) whereat its appellate recourse
was docketed as CA-G.R. C.V. No. 52660.
As stated at the outset hereof, the appellate court, in a decision dated February 25,
1998, affirmed with modification the appealed decision of the trial court, the
modification consisting of the deletion of the award of attorneys fees to private
respondent, thus:
WHEREFORE, with the sole modification that the award of attorneys fees in favor of
[respondent] be deleted, the Decision appealed from is hereby AFFIRMED in all
respects.
SO ORDERED.
Hence, petitioners present recourse, urging the setting aside of the decision under
review which, to petitioner, decided questions of substance in a way not in accord with
law and applicable jurisprudence considering that the appellate court gravely erred:
I
xxx IN ITS MISAPPLICATION OF THE DECISIONS OF THE HONORABLE COURT THAT
RESULTED IN ITS ERRONEOUS CONCLUSION THAT PETITIONER'S CAUSE OF ACTION HAD
ALREADY PRESCRIBED.
II
 xxx IN CONCLUDING THAT THE UNDISPUTED FACTS AND CIRCUMSTANCES PRECEDING
THE EXECUTION OF THE CONTRACTS OF SALE FOR THE PETITIONER'S PROPERTIES DID
NOT ESTABLISH THE FORCE, INTIMIDATION, DURESS AND UNDUE INFLUENCE WHICH
VITIATED PETITIONER'S CONSENT.
A. xxx IN CONSIDERING AS HEARSAY THE TESTIMONIAL EVIDENCE WHICH CLEARLY
ESTABLISHED THE THREATS MADE UPON PETITIONER AND THAT RESPONDENT
LIWAYWAY WILL BE USED AS THE CORPORATE VEHICLE FOR THE FORCED ACQUISITION
OF PETITIONER'S PROPERTIES.
B. xxx IN CONCLUDING THAT THE ACTS OF THEN PRESIDENT MARCOS DURING MARTIAL
LAW DID NOT CONSTITUTE THE FORCE, INTIMIDATION, DURESS AND UNDUE INFLUENCE
WHICH VITIATED PETITIONER'S CONSENT.
C. xxx IN RESOLVING THE INSTANT CASE ON THE BASIS OF MERE SURMISES AND
SPECULATIONS INSTEAD OF THE UNDISPUTED EVIDENCE ON RECORD.
III
xxx IN CONCLUDING THAT THE GROSSLY INADEQUATE PURCHASE PRICE FOR
PETITIONER'S PROPERTIES DOES NOT INDICATE THE VITIATION OF PETITIONER'S
CONSENT TO THE CONTRACTS OF SALE.
IV
xxx IN CONCLUDING THAT PETITIONER'S USE OF THE PROCEEDS OF THE SALE FOR ITS
SURVIVAL CONSTITUTE AN IMPLIED RATIFICATION [OF] THE CONTRACTS OF SALE.
V
xxx IN EXCLUDING PETITIONER'S EXHIBITS "X-6" TO "X-7" AND "Y-3" (PROFFER) WHICH
ARE ADMISSIBLE EVIDENCE WHICH COMPETENTLY PROVE THAT THEN PRESIDENT
MARCOS OWNED PRIVATE RESPONDENT LIWAYWAY, WHICH WAS USED AS THE
CORPORATE VEHICLE FOR THE ACQUISITION OF PETITIONER'S PROPERTIES.
The petition lacks merit.
Petitioner starts off with its quest for the allowance of the instant recourse on the
submission that the martial law regime tolled the prescriptive period under Article 1391
of the Civil Code, which pertinently reads:
Article 391. The action for annulment shall be brought within four years.
This period shall begin:
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",
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
conveying deed, i.e., October 23, 1973. Petitioner contends, however, that the 4-year
prescriptive period could not have commenced to run on October 23, 1973, martial law
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
which should be considered as force majeure - ceased only after the February 25, 1986
People Power uprising.
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
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
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
under Article 1154 [of the Civil Code] xxx fortuitous events have the effect of tolling the
period of prescription. However, we can not say, as a universal rule, that the period from
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
necessity, suspending all liabilities, however demandable, incurred during that period,
including perhaps those ordered by this Court to be paid. While this Court is cognizant of
acts of the last regime, especially political acts, that might have indeed precluded the
enforcement of liability against that regime and/or its minions, the Court is not inclined
to make quite a sweeping pronouncement, . . . . It is our opinion that claims should be
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
oppositionists, or, for that matter, innocent of any crime or wrongdoing. Indeed, not a
few of them were manipulators and scoundrels. [Italization in the original; Underscoring
and words in bracket added]
According to petitioner, the appellate court misappreciated and thus misapplied the
correct thrust of the Tan case, as reiterated in DBP which, per petitioners own
formulation, is the following:9
The prevailing rule, therefore, is that on a case-to-case basis, the Martial Law regime
may be treated as force majeure that suspends the running of the applicable
prescriptive period provided that it is established that the party invoking the imposition
of Martial Law as a force majeure are true oppositionists during the Martial Law regime
and that said party was so circumstanced that is was impossible for said party to
commence, continue or to even resist an action during the dictatorial regime.
(Emphasis and underscoring in the original)
We are not persuaded.
It strains credulity to believe that petitioner found it impossible to commence and
succeed in an annulment suit during the entire stretch of the dictatorial regime. The
Court can grant that Mr. Locsin, Sr. and petitioner were, in the context of DBP and Tan,
"true oppositionists" during the period of material law. Petitioner, however, has failed to
convincingly prove that Mr. Locsin, Sr., as its then President, and/or its governing board,
were so circumstanced that it was well-nigh impossible for him/them to successfully
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,
Mr. Locsin, Sr., together with several other journalists10, dared to file suits against
powerful figures of the dictatorial regime and veritably challenged the legality of the
declaration of martial law. Docketed in this Court as GR No. L-35538, the case, after its
consolidation with eight (8) other petitions against the martial law regime, is now
memorialized in books of jurisprudence and cited in legal publications and case studies
as Aquino vs. Enrile.11
Incidentally, Mr. Locsin Sr., as gathered from the ponencia of then Chief Justice Querube
Makalintal in Aquino, was released from detention notwithstanding his refusal to
withdraw from his petition in said case. Judging from the actuations of Mr. Locsin, Sr.
during the onset of martial law regime and immediately thereafter, any suggestion that
intimidation or duress forcibly stayed his hands during the dark days of martial law to
seek judicial assistance must be rejected.12
Given the foregoing perspective, the Court is not prepared to disturb the ensuing ruling
of the appellate court on the effects of martial law on petitioners right of action:
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
justice to be done because according to them, Marcos controlled every part of the
government, including the courts, (TSN, 2 May 1988, pp. 23-24; 27 May 1993, p. 121).
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
unchanged until 1986, a span of fourteen (14) years. The unfolding of subsequent
events would show that while dissent was momentarily stifled, it was not totally
silenced. On the contrary, it steadily simmered and smoldered beneath the political
surface and culminated in that groundswell of popular protest which swept the
dictatorship from power.13
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
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
persons who sought redress before it . . . during the Martial Law years is a sweeping and
unwarranted generalization as well as an unfounded indictment. The Judiciary, . . . did
not lack in gallant jurists and magistrates who refused to be cowed into silence by the
Marcos administration. Be that as it may, the Locsins mistrust of the courts and of
judicial processes is no excuse for their non-observance of the prescriptive period set
down by law.
Corollary to the presented issue of prescription of action for annulment of contract
voidable on account of defect of consent14 is the question of whether or not duress,
intimidation or undue influence vitiated the petitioners consent to the subject contracts
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
testimonial evidence that may prove the element of "threat" against petitioner or Mr.
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
President Marcos during the martial law years did not have a consent-vitiating effect on
petitioner; and third, in resolving the case on the basis of mere surmises and
speculations.
The evidence referred to as hearsay pertains mainly to the testimonies of Messrs.
Locsin, Sr. and Teodoro Locsin, Jr. (the Locsins, collectively), which, in gist, established
the following facts: 1) the widely circulated Free Press magazine, which, prior to the
declaration of Martial Law, took the strongest critical stand against the Marcos
administration, was closed down on the eve of such declaration, which closure
eventually drove petitioner to financial ruin; 2) upon Marcos orders, Mr. Locsin, Sr. was
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
condition that he refrains from reopening Free Press and writing anything critical of the
Marcos administration; and 4) Mr. Locsin, Sr. and his family remained fearful of reprisals
from Marcos until the 1986 EDSA Revolution.
Per the Locsins, it was amidst the foregoing circumstances that petitioners property in
question was sold to private respondent, represented by Gen. Menzi, who, before the
sale, allegedly applied the squeeze on Mr. Locsin, Sr. thru the medium of the "Marcos
cannot be denied" and "[you] have no choice but to sell" line.
The appellate court, in rejecting petitioners above posture of vitiation of consent,
observed:
It was under the above-enumerated circumstances that the late Hans Menzi, allegedly
acting on behalf of the late President Marcos, made his offer to purchase the Free Press.
It must be noted, however, that the testimonies of Locsin, Sr. and Locsin, Jr. regarding
Menzis alleged implied threat that "Marcos cannot be denied" and that [respondent]
was to be the corporate vehicle for Marcoss takeover of the Free Press is hearsay as
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
Guillermo de Vega who are also both dead. It is clear from the provisions of Section 36,
Rule 130 of the 1989 Revised Rules on Evidence that any evidence, . . . is hearsay if its
probative value is not based on the personal knowledge of the witness but on the
knowledge of some other person not on the witness stand. Consequently, hearsay
evidence, whether objected to or not, has no probative value unless the proponent can
show that the evidence falls within the exceptions to the hearsay evidence rule
(Citations omitted)
The appellate courts disposition on the vitiation-of-consent angle and the ratio therefor
commends itself for concurrence.
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
evidence is excluded precisely because the party against whom it is presented is
deprived of or is bereft of opportunity to cross-examine the persons to whom the
statements or writings are attributed.15 And there can be no quibbling that because
death has supervened, the late Gen Menzi, like the other purported Marcos subalterns,
Messrs. Baizas and De Vega, cannot cross-examine the Locsins for the threatening
statements allegedly made by them for the late President.
Like the Court of Appeals, we are not unmindful of the exception to the hearsay rule
provided in Section 38, Rule 130 of the Rules of Court, which reads:
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
declaration was at the time it was made so far contrary to the declarant's own interest,
that a reasonable man in his position would not have made the declaration unless he
believed it to be true, may be received in evidence against himself or his successors-in-
interest and against third persons.
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
evidentiary weight petitioner endeavors to impress upon us. For, the Locsins can hardly
be considered as disinterested witnesses. They are likely to gain the most from the
annulment of the subject contracts. Moreover, allegations of duress or coercion should,
like fraud, be viewed with utmost caution. They should not be laid lightly at the door of
men whose lips had been sealed by death.16 Francisco explains why:
[I]t has been said that "of all evidence, the narration of a witness of his conversation
with a dead person is esteemed in justice the weakest." One reason for its unreliability
is that the alleged declarant can not recall to the witness the circumstances under which
his statement were made. The temptation and opportunity for fraud in such cases also
operate against the testimony. Testimony to statements of a deceased person, at least
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
probable under the circumstances taken in connection with actual known facts. And a
court should be very slow to act upon the statement of one of the parties to a supposed
agreement after the death of the other party; such corroborative evidence should be
adduced as to satisfy the court of the truth of the story which is to benefit materially the
person telling it. 17
Excepting, petitioner insists that the testimonies of its witnesses the Locsins - are not
hearsay because:
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
that the other parties to the conversations testified to by the witness are already
deceased does [not] render such testimony inadmissible for being hearsay. 18
xxx xxx xxx
The testimonies of Teodoro Locsin, Sr. and Teodoro Locsin, Jr. that the late Atty. Baizas,
Gen. Menzi and Secretary de Vega stated that they were representing Marcos, that
"Marcos cannot be denied", and the fact that Gen. Menzi stated that private respondent
Liwayway was to be the corporate vehicle for the then President Marcos' take-over of
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
Again, we disagree.
Even if petitioner succeeds in halving its testimonial evidence, one-half purporting to
quote the words of a live witness and the other half purporting to quote what the live
witness heard from one already dead, the other pertaining to the dead shall
nevertheless remain hearsay in character.
The all too familiar rule is that "a witness can testify only to those facts which he knows
of his own knowledge". 20 There can be no quibbling that petitioners witnesses cannot
testify respecting what President Marcos said to Gen. Menzi about the acquisition of
petitioners newspaper, if any there be, precisely because none of said witnesses ever
had an opportunity to hear what the two talked about.
Neither may petitioner circumvent the hearsay rule by invoking the exception under the
declaration-against-interest rule. In context, the only declaration supposedly made by
Gen. Menzi which can conceivably be labeled as adverse to his interest could be that he
was acting in behalf of Marcos in offering to acquire the physical assets of petitioner. Far
from making a statement contrary to his own interest, a declaration conveying the
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.
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 other words, the act of the ruling power, in this case the martial law administration,
was not an act of mere trespass but a trespass in law - not a perturbacion de mero hecho
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
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
Code). It is, therefore, incumbent on [petitioner] to present clear and convincing
evidence showing that the late President Marcos, acting through the late Hans Menzi,
abused his martial law powers by forcing plaintiff-appellant to sell its assets. In view of
the largely hearsay nature of appellants evidence on this point, appellants cause must
fall.
According to petitioner, the reasoning of the appellate court is "flawed" because:22
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
members of his family will be arrested as legal acts done by a dictator under the Martial
Law regime. The same flawed reasoning led the Court of Appeals to the erroneous
conclusion that such acts do not constitute force, intimidation, duress and undue
influence that vitiated petitioner's consent to the Contracts of Sale.
The contention is a rehash of petitioners bid to impute on private respondent acts of
force and intimidation that were made to bear on petitioner or Mr. Locsin, Sr. during the
early years of martial law. It failed to take stock of a very plausible situation depicted in
the appellate courts decision which supports its case disposition on the issue respecting
vitiation. Wrote that court:
Even assuming that the late president Marcos is indeed the owner of [respondent], it
does not necessarily follow that he, acting through the late Hans Menzi, abused his
power by resorting to intimidation and undue influence to coerce the Locsins into selling
the assets of Free Press to them (sic).
It is an equally plausible scenario that Menzi convinced the Locsins to sell the assets of
the Free Press without resorting to threats or moral coercion by simply pointing out to
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
creditors. Given such a state of affairs, the Locsins had no choice but to sell their
assets.23
Petitioner laments that the scenario depicted in the immediately preceding quotation as
a case of a court resorting to "mere surmises and speculations", 24 oblivious that
petitioner itself can only offer, as counterpoint, also mere surmises and speculations,
such as its claim about Eugenio Lopez Sr. and Imelda R. Marcos offering "enticing
amounts" to buy Free Press.25
It bears stressing at this point that even after the imposition of martial law, petitioner,
represented by Mr. Locsin, Sr., appeared to have dared the ire of the powers-that-be.
He did not succumb to, but in fact spurned offers to buy, lock-stock-and-barrel, the Free
Press magazine, dispatching Marcos emissaries with what amounts to a curt "Free Press
is not for sale". This reality argues against petitioners thesis about vitiation of its
contracting mind, and, to be sure, belying the notion that Martial Law worked as a
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-
explanatory: 26
Noteworthy is the fact that although the threat of arrest hung over his head like the
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
President Marcos, without being subjected to reprisals. In fact, the Locsins testified that
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
secure a compromise that only the assets of the Free Press will be sold. It is, therefore,
quite possible that plaintiff-appellants financial condition, albeit caused by the
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
proceeded with the sale even in the absence of the alleged intimidation and undue
influence because of the absence of other buyers.
Petitioners third assigned error centers on the gross inadequacy of the purchase price,
referring to the amount of P5,775,000.00 private respondent paid for the property in
question. To petitioner, the amount thus paid does not even approximate the actual
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
erroneous, the ruling of the Court of Appeals on purchase price inadequacy, stating in
this regard as follows: 29
Furthermore, the Court of Appeals in determining the adequacy of the price for the
properties and assets of petitioner Free Press relied heavily on the claim that the
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
(P237,500.00). However, the Court of Appeals' reliance on the book value of said assets
is clearly misplaced. It should be noted that the book value of fixed assets bears very
little correlation with the actual market value of an asset. (Emphasis and underscoring
in the original).
With the view we take of the matter, the book or actual market value of the property at
the time of sale is presently of little moment. For, petitioner is effectively precluded, by
force of the principle of estoppel ,30 from cavalierly disregarding with impunity its own
books of account in which the property in question is assigned a value less than what
was paid therefor. And, in line with the rule on the quantum of evidence required in civil
cases, neither can we cavalierly brush aside private respondents evidence, cited with
approval by the appellate court, that tends to prove that-31
xxx the net book value of the Properties was actually only 994,723.66 as appearing in
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
Press actually realized a hefty profit of 4,755,276.34 from the sale to Liwayway.
Lest it be overlooked, gross inadequacy of the purchase price does not, as a matter of
civil law, per se affect a contract of sale. Article 1470 of the Civil Code says so. It reads:
Article 1470. Gross inadequacy of price does not affect a contract of sale, except as it
may indicate a defect in the consent, or that the parties really intended a donation or
some other act or contract.
Following the aforequoted codal provision, it behooves petitioner to first prove "a
defect in the consent", failing which its case for annulment contract of sale on ground
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
Appeals AFFIRMED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-45969 May 4, 1939
TAN TIAH (alias T. SUYA), petitioner,
vs.
YU JOSE (alias JOSE Y. NAVARRO), respondent.
Pastor Salazar and Vamenta and Vamenta for petitioner.
Norberto Romualdez for respondent.
VILLA-REAL, J.:
This is an appeal by way of certiorari taken by Tan Tiah (alias T. Suya), wherein he prays,
on the grounds alleged therein, for the review of the decision rendered in the case by
the Court of Appeals reversing that of the Court of First Instance of Leyte, for the
reversal thereof, and for the affirmance of the decision of said Court of First Instance.
As grounds for the allowance of the appeal, petitioner assigns the following alleged
errors of law committed by said Court of Appeals in its decision, to wit:
1. The Court of Appeals erred in finding in its decision, subject of the present
petition for certiorari, that the 5th paragraph of the contract of lease Exhibit A
establishes rights for the petitioner and for the respondent, which are
antagonistic and, therefore, unenforceable by action.
2. The Court of Appeals likewise erred in finding in its decision that the
promise, if any, made by respondent to sell to petitioner the land in question
is not enforceable by action for lack of a price.
3. The Court of Appeals also erred in finding in its decision that the 5th
paragraph of the contract of lease entered into by petitioner and respondent
does not state two promises to buy and to sell which are mutually
demandable.
4. Lastly, the Court of Appeals erred in holding that the herein petitioner has
no cause of action against defendant-respondent.
5. On May 14, 1923 petitioner and respondent entered into a contract of lease
in the fifth clause of which, pertinent to the question at issue, provides:
5th. That upon termination of the period of this contract, namely, ten years, the lessor
shall have the option to buy the building or improvement which the lessee may have
built upon the lots, reimbursing the latter ninety per cent (90%) of the original net cost
of the construction; but should the lessor be unable or unwilling to buy said building or
improvement, the income or rent derived therefrom shall be equally divided between
said lessor and lessee, and the latter shall no longer have the obligation to pay the rent
agreed upon for the lots in the second paragraph of this contract; provided, however,
that the present contract, with the modification just mentioned, with respect to the
income from the building and the rent from the lot, shall continue in force until the
lessor buys the building or improvement or the lessee buys the land.
The judgment rendered by the Court of First Instance of Leyte and reversed by the Court
of Appeals, which absolved the defendant is as follows:
Wherefore, judgment is rendered sentencing defendant to buy the house of
plaintiff or to sell to plaintiff the land on which the latter's house is built. Each
of the parties must submit the name of a person to be appointed
commissioner for the assessment and appraisal of the land on which plaintiff's
house is built.
Defendant is sentenced to pay the costs of the suit.
The main question to be decided in this appeal is whether plaintiff, as lessee, has a right,
by virtue of the aforecited fifth clause of the contract of lease, to compel defendant as
lessor, to sell to him the land on which he built his house in accordance with said
contract.
It will be seen that the lessor is given the preference of buying the building erected on
the leased land at a price equivalent to 90 per cent of the original net cost of the
construction upon the termination of the ten years fixed in the contract as the duration
of the lease. As ten years have elapsed and the lessor has not exercised his right to buy
the building, and has no intention to do so, may the lessee compel the lessor to sell to
him the leased land? The lessee is not given the option to buy the land. The grant of said
right may not be inferred from the conditional clause of paragraph 5 and from
paragraph 4 of the contract since neither in the conditional clause aforecited nor in the
fourth paragraph of the contract is the lessor bound to sell the questioned land to the
lessee. Furthermore, in the said conditional clause the price which the lessee would
have to pay should he decide to buy the land is not fixed. Article 1445 of the Civil Code
provides that "By the contract of purchase and sale one of the contracting parties binds
himself to deliver a determinate thing and the other to pay a certain price therefor in
money or in something representing the same." According to article 1451, "a promise to
sell or buy, when there is an agreement as to the thing and the price, entitles the
contracting parties reciprocally to demand the fulfillment of the contract." And article
1447 of the same Code provides that in order that the price may be considered certain,
it shall be sufficient that it be so in relation to some certain thing, or that its
determination be left to the judgment of some particular person, and should the latter
be unable or unwilling to fix the price, the contract shall be inoperative. And according
to article 1449 of the same Code, the designation of the price can never be left to the
determination of one of the contracting parties.

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

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

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

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

 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-31018 June 29, 1973
LORENZO VELASCO AND SOCORRO J. VELASCO, petitioners,
vs.
HONORABLE COURT OF APPEALS and MAGDALENA ESTATE, INC., respondents.
Napoleon G. Rama for petitioners.
Dominador L. Reyes for private respondent.
CASTRO, J.:
This is a petition for certiorari and mandamus filed by Lorenzo Velasco and Socorro J.
Velasco (hereinafter referred to as the petitioners) against the resolution of the Court of
Appeals dated June 28, 1969 in CA-G.R. 42376, which ordered the dismissal of the
appeal interposed by the petitioners from a decision of the Court of First Instance of
Quezon City on the ground that they had failed seasonably to file their printed record on
appeal.
Under date of November 3, 1968, the Court of First Instance of Quezon City, after
hearing on the merits, rendered a decision in civil case 7761, dismissing the complaint
filed by the petitioners against the Magdalena Estate, Inc. (hereinafter referred to as the
respondent) for the purpose of compelling specific performance by the respondent of
an alleged deed of sale of a parcel of residential land in favor of the petitioners. The
basis for the dismissal of the complaint was that the alleged purchase and sale
agreement "was not perfected".
On November 18, 1968, after the perfection of their appeal to the Court of Appeals, the
petitioners received a notice from the said court requiring them to file their printed
record on appeal within sixty (60) days from receipt of said notice. This 60-day term was
to expire on January 17, 1969.
Allegedly under date of January 15, 1969, the petitioners allegedly sent to the Court of
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. ..."
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
following resolution:
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
DENY the said motion to dismiss.
Upon consideration of the registry-mailed motion of counsel for
plaintiffs appellants praying on the grounds therein stated for an
extension of 30 days from January 15, 1969 within which to file the
printed record on appeal, the Court RESOLVED to GRANT the said
motion and the printed record on appeal which has already been
filed is ADMITTED.
On March 11, 1969, the respondent prayed for a reconsideration of the above-
mentioned resolution, averring that the Court of Appeals had been misled bythe
petitioners' "deceitful allegation that they filed the printed record on appeal within the
reglementary period," because according to a certification issued by the postmaster of
Makati, Rizal, the records of the said post office failed to reveal that on January 15, 1969
the date when their motion for extension of time to file the printed record on appeal
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
stampled January 15, 1969, which were issued by the receiving clerk of the registry
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
clerk Juanito D. Quiachon, to prove that their motion for extension was timely filed and
served on the Court of Appeals and the respondent, respectively. After several other
pleadings and manifestations were filed by the parties relative to the issue raised by the
respondent's above-mentioned motion for reconsideration, the Court of Appeals
promulgated on June 28, 1969, its questioned resolution, the dispositive portion of
which reads as follows:
WHEREFORE, the motion for reconsideration filed on March 11,
1969 is granted and appeal interposed by plaintiff-appellants from
the judgment of the court below is hereby dismissed for their failure
to file their printed Record on Appeal within the period authorized
by this Court. Atty. Patrocino R. Corpuz [counsel of the petitioner] is
required to show cause within ten (10) days from notice why he
should not be suspended from the practice of his necessary
investigation against Juanito D. Quiachon of the Salonga, Ordoez,
Yap, Sicat & Associates Law Office, Suite 319 337 Rufino Building,
Ayala Avenue, Makati Post Office, to file the appropriate criminal
action against them as may be warranted in the premises, and to
report to this Court within thirty (30) days the action he has taken
thereon.
The foregoing desposition was based on the following findings of the Court of Appeals:
An examination of the Rollo of this case, particularly the letter
envelope on page 26 thereof, reveals that on January 15, 1969,
plaintiffs supposedly mailed via registered mail from the Post Office
of Makati, Rizal their motion for extension of 30 days from that date
to file their printed Record on Appeal, under registered letter No.
0216. However, in an official certification, the Postmaster of Makati
states that the records of his office disclose: (a) that there were no
registered letters Nos. 0215 and 0216 from the Salonga, Ordoez,
Yap, Sicat & Associates addressed to Atty. Abraham F. Sarmiento,
202 Magdalena Building, Espaa Ext., Quezon City, and to the Court
of Appeals, Manila, respectively, that were posted in the Post Office
of Makati, Rizal, on January 15, 1969; (b) that there is a registered
letter numbered 215 but that the same was posted on January 3,
1969 by Enriqueta Amada of 7 Angel, Pasillo F-2, Cartimar, Pasay
City, as sender, and Giral Amasan of Barrio Cabuniga-an, Sto. Nio,
Samar, as addressee; and that there is also a registered letter
numbered 216; but that the same was likewise posted on January 3,
1969 with E.B.A. Construction of 1049 Belbar Building, Metropolitan,
Pasong Tamo, Makati, as sender, and Pres. R. Nakaya of the United
Pacific Trading Co., Ltd., 79, 6 Chamo, Nakatu, Yokohari, Japan, as
addressee; (c) that on January 15, 1969, the registered letters
posted at the Makati Post Office were numbered consecutively from
1001-2225, inclusive, and none of these letters was addressed to
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,
corresponding to February 7, 1969, there are entries covering
registered letters Nos. 0215 and 0216 for dispatch to Quezon City
and Manila, respectively; however, such registry book for February
7, 1969 shows no letters with such numbers posted on the said date.
The Acting Postmaster of the Commercial Center Post Office of
Makati, Rizal, further certifies that "Registry Receipts Nos. 0215 and
0216 addressed to Atty. Abraham F. Sarmiento of the Magdalena
Estate, Quezon City and the Honorable Court of Appeals,
respectively, does not appear in our Registry Record Book which was
allegedly posted at this office on January 15, 1969."
From the foregoing, it is immediately apparent that the motion for
extension of time to file their Record on Appeal supposedly mailed
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
is further confirmed by the affidavit of Flaviano Malindog, a letter
carrier of the Makati Post Office, which defendant attached as
Annex 1 to its supplemental reply to plaintiffs' opposition to the
motion for reconsideration. In his said affidavit, Malindog swore
among others:
'That on February 7, 1969, between 12:00
o'clock noon and 1:00 o'clock in the afternoon,
JUANITO D. QUIACHON approached me at the
Makati Post Office and talked to me about
certain letters which his employer had asked him
to mail and that I should help him do something
about the matter; but I asked him what they
were all about, and he told me that they were
letters for the Court of Appeals and for Atty.
Abraham Sarmiento and that his purpose was to
show that they were posted on January 15,
 1969; that I inquired further, and he said that
the letters were not so important and that his
only concern was to have them post maker
January 15, 1969;
'That believing the word of JUANITO D.
QUIACHON that the letters were not really
important I agreed to his request; whereupon, I
got two (2) registry receipts from an old registry
receipt booklet which is no longer being used
and I numbered them 0215 for the letter
addressed to Atty. Abraham Sarmiento in
Quezon City and 0216 for the letter addressed to
the Court of Appeals, Manila; that I placed the
same numbering on the respective envelopes
containing the letters; and that I also post maker
them January 15, 1969;
'That to the best of my recollection I wrote the
correct date of posting, February 7, 1969, on the
back of one or both of the registry receipts
above mentioned;
'That the correct date of posting, February 7,
1969 also appears in the Registry Bill Books for
Quezon City and Manila where I entered the
subject registered letters;
Of course, plaintiff's counsel denies the sworn statement of
Malindog and even presented the counter-affidavit of one of his
clerk by the name of Juanito D. Quiachon. But between Malindog,
whose sworn statement is manifestly a declaration against interest
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
two (2) official certifications above mentioned by the Postmakers of
Makati, Rizal. These two (2) certifications alone, even without to
move this Court to reconsider its resolution of February 25, 1969
and order the dismissal of this appeal.
On September 5, 1969, after the rendition of the foregoing resolution, the Court of
Appeals promulgated another, denying the motion for reconsideration of the petitioner,
but, at the same time, accepting as satisfactory the explanation of Atty. Patrocino R.
Corpuz why he should not be suspended from the practice of the legal profession.
On September 20, 1969, the First Assistant Fiscal of Rizal notified the Court of Appeals
that he had found a prima facie case against Flaviano C. Malindog and would file the
corresponding information for falsification of public documents against him. The said
fiscal, however, dismissed the complaint against Quiachon for lack of sufficient
evidence. The information subsequently filed against Malindog by the first Assistance
Fiscal of Rizal reads as follow:
That on or about the 7th day of February 1969, in the municipality of
Makati, province of Rizal, and a place within the jurisdiction of this
Honorable Court, the above-named accused, conspiring and
confederating together and mutually helping and aiding with John
Doe, whose true identity and present whereabout is still unknown,
did then and there willfully, unlawfully and feloniously falsify two
registry receipts which are public documents by reason of the fact
that said registry receipts are printed in accordance with the
standard forms prescribed by the Bureau of Posts, committed as
follows: the above-named accused John Doe, on the date above-
mentioned approached and induced the accused Malindog, a letter-
carrier at the Makati Post Office, to postmark on Abraham
Sarmiento in Quezon City, and the other to the Court of Appeals,
Manila, and the accused Malindog, acceding to the inducement of,
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
said sealed envelopes addressed to Atty. Sarmiento and the Court of
Appeals were actually posted, and causing it to appear that the
Postmaster of Makati participated therein by posting said mail
matters on January 15, 1969, when in truth and in fact he did not so
participate.
The petitioner contend that in promulgating its questioned resolution, the Court of
Appeals acted without or in excess of jurisdiction, or with such whimsical and grave
abuse of discretion as to amount to lack of jurisdiction, because (a) it declared that the
motion for extension of time to file the printed record on appeal was not mailed on
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
conclusion of the appellate court are not supported by the records of the case, because
the said court ignored the affidavit of the mailing clerk of the petitioners' counsel, the
registry receipts and postmarked envelopes (citing Henning v. Western Equipment, 62
Phil. 579, and Caltex Phil., Inc. v. Katipunan Labor Union, 52 O.G. 6209), and, instead,
chose to rely upon the affidavit of the mail carrier Malindog, which affidavit was
prepared by counsel for the respondent at the affiant himself so declared at the
preliminary investigation at the Fiscal's office which absolved the petitioners' counsel
mailing clerk Quiachon from any criminal liability; (d) section 1, Rule 50 of the Rules of
Court, which enumerates the grounds upon which the Court of Appeals may dismiss an
appeal, does not include as a ground the failure to file a printed record on appeal; (e)
the said section does not state either that the mismailing of a motion to extend the time
to file the printed record on appeal, assuming this to be the case, may be a basis for the
dismissal of the appeal; (f) the Court of Appeals has no jurisdiction to revoke the
extention of time to file the printed record on appeal it had granted to the petitioners
based on a ground not specified in section 1, Rule 50 of the Rules of Court; and (g) the
objection to an appeal may be waived as when the appellee has allowed the record on
appeal to be printed and approved (citing Moran, Vol. II, p. 519).
Some of the objections raised by the petitioners to the questioned resolution of the
Court of Appeals are obviously matters involving the correct construction of our rules of
procedure and, consequently, are proper subjects of an appeal by way of certiorari
under Rule 45 of the Rules of Court, rather than a special civil action for certiorari under
Rule 65. The petitioners, however, have correctly appreciated the nature of its
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
deem that an appeal is an adequate remedy ..." The nature of the case at bar permits, in
our view, a disquisition of both types of assignments.
We do not share the view of the petitioners that the Court of Appeals acted without or
in excess of jurisdiction or gravely abused its discretion in promulgating the questioned
resolution.
While it is true that stamped on the registry receipts 0215 and 0215 as well as on the
envelopes covering the mails in question is the date "January 15, 1969," this, by itself,
does not establish an unrebuttable presumption of the fact of date of mailing. Henning
and Caltex, cited by the petitioners, are not in point because the specific adjective issue
resolved in those cases was whether or not the date of mailing a pleading is to be
considered as the date of its filing. The issue in the case at bar is whether or not the
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.
In resolving this issue in favor of the respondent, this Court finds, after a careful study
and appraisal of the pleadings, admissions and denials respectively adduced and made
by the parties, that the Court of Appeals did not gravely abuse its discretion and did not
act without or in excess of its jurisdiction. We share the view of the appellate court that
the certifications issued by the two postmasters of Makati, Rizal and the sworn
declaration of the mail carrier Malindog describing how the said registry receipts came
to be issued, are worthy of belief. It will be observed that the said certifications explain
clearly and in detail how it was improbable that the petitioners' counsel in the ordinary
course of official business, while Malindog's sworn statement, which constitutes a very
grave admission against his own interest, provides ample basis for a finding that where
official duty was not performed it was at the behest of a person interested in the
petitioners' side of the action below. That at the preliminary investigation at the Fiscal's
office, Malindog failed to identify Quiachon as the person who induced him to issue
falsified receipts, contrary to what he declared in his affidavit, is of no moment since the
findings of the inquest fiscal as reflected in the information for falsification filed against
Malindog indicate that someone did induce Malindog to make and issue false registry
receipts to the counsel for the petitioners.
This Court held in Bello vs. Fernando1 that the right to appeal is nota natural right nor a
part of due process; it is merely a statutory privilege, and may be exercised only in the
manner provided by law. In this connection, the Rule of Court expressly makes it the
duty of an appellant to file a printed record on appeal with the Court of Appeals within
sixty (60) record on appeal approved by the trial court has already been received by the
said court. Thus, section 5 of Rule 46 states:
Sec. 5. Duty of appellant upon receipt of notice. It shall be the
duty of the appellant within fifteen (15) days from the date of the
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
sixty (60) days from such notice to submit to the court forty (40)
printed copies of the record on appeal, together with proof of
service of fifteen (15) printed copies thereof upon the appelee.
As the petitioners failed to comply with the above-mentioned duty which the Rules of
Court enjoins, and considering that, as found by the Court of Appeals, there was a
deliberate effort on their part to mislead the said Court in grating them an extension of
time within which to file their printed record on appeal, it stands to reason that the
appellate court cannot be said to have abused its discretion or to have acted without or
in excess of its jurisdiction in ordering the dismissal of their appeal.
Our jurisprudence is replete with cases in which this Court dismissed an appeal on
grounds not mentioned specifically in Section 1, Rule 50 of the Rules of Court. (See, for
example, De la Cruz vs. Blanco, 73 Phil. 596 (1942); Government of the Philippines vs.
Court of Appeals, 108 Phil. 86 (1960); Ferinion vs. Sta. Romana, L-25521, February 28,
1966, 16 SCRA 370, 375).
It will likewise be noted that inasmuch as the petitioners' motion for extension of the
period to file the printed record on appeal was belated filed, then, it is as though the
same were non-existent, since as this Court has already stated in Baquiran vs. Court of
Appeals,2 "The motion for extension of the period for filing pleadings and papers in
court must be made before the expiration of the period to be extended." The soundness
of this dictum in matters of procedure is self-evident. For, were the doctrine otherwise,
the uncertainties that would follow when litigants are left to determine and
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
grievances they are intended to redness.
The argument raised by the petitioner that the objection to an appeal maybe waived,
as when the appellee allows the record on appeal to be printed and approved is
likewise not meritorious considering that the respondent did file a motion in the Court
of Appeals on February 8, 1969 praying for the dismissal of the below of the petitioners
had not yet filed their record on appeal and, therefore, must be considered to have
abandoned their appeal.
In further assailing the questioned resolution of the Court of Appeals, the petitioners
also point out that on the merits the equities of the instant case are in their favor. A
reading of the record, however, persuades us that the judgment a quo is substantially
correct and morally just.
The appealed decision of the court a quo narrates both the alleged and proven facts of
the dispute between the petitioners and the respondent, as follows:
This is a suit for specific performance filed by Lorenzo Velasco
against the Magdalena Estate, Inc. on the allegation that on
November 29, 1962 the plaintiff and the defendant had entered into
a contract of sale (Annex A of the complaint) by virtue of which the
defendant offered to sell the plaintiff and the plaintiff in turn agreed
to buy a parcel of land with an area of 2,059 square meters more
particularly described as Lot 15, Block 7, Psd-6129, located at No. 39
corner 6th Street and Pacific Avenue, New Manila, this City, for the
total purchase price of P100,000.00.
It is alleged by the plaintiff that the agreement was that the plaintiff
was to give a down payment of P10,000.00 to be followed by
P20,000.00 and the balance of P70,000.00 would be paid in
installments, the equal monthly amortization of which was to be
determined as soon as the P30,000.00 down payment had been
completed. It is further alleged that the plaintiff paid down payment
of P10,000.00 on November 29, 1962 as per receipt No. 207848
(Exh. "A")and that when on January 8, 1964 he tendered to the
defendant the payment of the additional P20,000.00 to complete
the P30,000.00 the defendant refused to accept and that eventually
it likewise refused to execute a formal deed of sale obviously agreed
upon. The plaintiff demands P25,000.00 exemplary damages,
P2,000.00 actual damages and P7,000.00 attorney's fees.
The defendant, in its Answer, denies that it has had any direct
dealings, much less, contractual relations with the plaintiff regarding
the property in question, and contends that the alleged contract
described in the document attached to the complaint as Annex A is
entirely unenforceable under the Statute of Frauds; that the truth of
the matter is that a portion of the property in question was being
leased by a certain Socorro Velasco who, on November 29, 1962,
went to the office of the defendant indicated her desire to purchase
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
to be paid on November 31, 1962, and that the balance of
P70,000.00 including interest a 9% per annum was to be paid on
installments for a period of ten years at the rate of P5,381.32 on
June 30 and December of every year until the same shall have been
fully paid; that on November 29, 1962 Socorro Velasco offered to
pay P10,000.00 as initial payment instead of the agreed P20,000.00
but because the amount was short of the alleged P20,000.00 the
same was accepted merely as deposited and upon request of
Socorro Velasco the receipt was made in the name of her brother-in-
law the plaintiff herein; that Socorro Velasco failed to complete the
down payment of P30,000.00 and neither has she paid any
installments on the balance of P70,000.00 up to the present time;
that it was only on January 8, 1964 that Socorro Velasco tendered
payment of P20,000.00, which offer the defendant refused to accept
because it had considered the offer to sell rescinded on account of
her failure to complete the down payment on or before December
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
SUPREME COURT of June.
Manila
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,

vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.

DAVIDE, JR., J.:

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

4
J
u
n
e
1
9
8
9

AGREEMENTS BETWEEN MR. SOSA

& POPONG BERNARDO OF TOYOTA
SHAW, INC.

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

(POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from
 a) A
downpayment P 53,148.00
R
b) insurance P 13,970.00
D
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
CONDITIONS OF SALES
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
check voucher of Toyota,5 which Sosa signed with the reservation, "without prejudice to
our future claims for damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and
signed by him, he demanded the refund, within five days from receipt, of the
downpayment of P100,000.00 plus interest from the time he paid it and the payment of
damages with a warning that in case of Toyota's failure to do so he would be
constrained to take legal action. 6 The second, dated 4 November 1989 and signed by
M. O. Caballes, Sosa's counsel, demanded one million pesos representing interest and
damages, again, with a warning that legal action would be taken if payment was not
made within three days.7 Toyota's counsel answered through a letter dated 27
November 1989 8 refusing to accede to the demands of Sosa. But even before this
answer was made and received by Sosa, the latter filed on 20 November 1989 with
Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota
for damages under Articles 19 and 21 of the Civil Code in the total amount of
P1,230,000.00.9 He alleges, inter alia, that:
9. As a result of defendant's failure and/or refusal to deliver the
vehicle to plaintiff, plaintiff suffered embarrassment, humiliation,
ridicule, mental anguish and sleepless nights because: (i) he and his
family were constrained to take the public transportation from
Manila to Lucena City on their way to Marinduque; (ii) his
balikbayan-guest canceled his scheduled first visit to Marinduque in
order to avoid the inconvenience of taking public transportation;
and (iii) his relatives, friends, neighbors and other provincemates,
continuously irked him about "his Brand-New Toyota Lite Ace that
never was." Under the circumstances, defendant should be made
liable to the plaintiff for moral damages in the amount of One
Million Pesos (P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no sale was entered into between it
and Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its behalf, and
that Bernardo signed Exhibit "A" in his personal capacity. As special and affirmative
defenses, it alleged that: the VSP did not state date of delivery; Sosa had not completed
the documents required by the financing company, and as a matter of policy, the vehicle
could not and would not be released prior to full compliance with financing
requirements, submission of all documents, and execution of the sales
agreement/invoice; the P100,000.00 was returned to and received by Sosa; the venue
was improperly laid; and Sosa did not have a sufficient cause of action against it. It also
interposed compulsory counterclaims.
After trial on the issues agreed upon during the pre-trial session, 11 the trial court
rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A,"
the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid
perfected contract of sale between Sosa and Toyota which bound Toyota to deliver the
vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to
another the unit already reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A,"
the trial court held that the extent of Bernardo's authority "was not made known to
plaintiff," for as testified to by Quirante, "they do not volunteer any information as to
the company's sales policy and guidelines because they are internal matters." 13
Moreover, "[f]rom the beginning of the transaction up to its consummation when the
downpayment was made by the plaintiff, the defendants had made known to the
plaintiff the impression that Popong Bernardo is an authorized sales executive as it
permitted the latter to do acts within the scope of an apparent authority holding him
out to the public as possessing power to do these acts." 14 Bernardo then "was an agent
of the defendant Toyota Shaw, Inc. and hence bound the defendants." 15
The court further declared that "Luna Sosa proved his social standing in the community
and suffered besmirched reputation, wounded feelings and sleepless nights for which
he ought to be compensated." 16 Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby
rendered in favor of the plaintiff and against the defendant:
1. ordering the defendant to pay to the plaintiff
the sum of P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the
sum of P10,000.00 for exemplary damages;
3. ordering the defendant to pay the sum of
P30,000.00 attorney's fees plus P2,000.00
lawyer's transportation fare per trip in attending
to the hearing of this case;
4. ordering the defendant to pay the plaintiff the
sum of P2,000.00 transportation fare per trip of
the plaintiff in attending the hearing of this case;
and
 5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals.
The case was docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July
1994,17 the Court of Appeals affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition and raises the core issue stated at
the beginning of the ponencia and also the following related issues: (a) whether or not
the standard VSP was the true and documented understanding of the parties which
would have led to the ultimate contract of sale, (b) whether or not Sosa has any legal
and demandable right to the delivery of the vehicle despite the non-payment of the
consideration and the non-approval of his credit application by B.A. Finance, (c) whether
or not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d)
whether or not Toyota may be held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit
"A" is a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed perfected:
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract
and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
form of contracts.
What is clear from Exhibit "A" is not what the trial court and the Court of Appeals
appear to see. It is not a contract of sale. No obligation on the part of Toyota to transfer
ownership of a determinate thing to Sosa and no correlative obligation on the part of
the latter to pay therefor a price certain appears therein. The provision on the
downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was
intended for a contract of sale, it could only refer to a sale on installment basis, as the
VSP executed the following day confirmed. But nothing was mentioned about the full
purchase price and the manner the installments were to be paid.
This Court had already ruled that a definite agreement on the manner of payment of the
price is an essential element in the formation of a binding and enforceable contract of
sale. 18 This is so because the agreement as to the manner of payment goes into the
price such that a disagreement on the manner of payment is tantamount to a failure to
agree on the price. Definiteness as to the price is an essential element of a binding
agreement to sell personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and
Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from its
title, written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG
BERNARDO OF TOYOTA SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo and that the latter did
not misrepresent that he had the authority to sell any Toyota vehicle. He knew that
Bernardo was only a sales representative of Toyota and hence a mere agent of the
latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's authority as an
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
At the most, Exhibit "A" may be considered as part of the initial phase of the generation
or negotiation stage of a contract of sale. There are three stages in the contract of sale,
namely:
 (a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of
the parties;
(b) perfection or birth of the contract, which is the moment when
the parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance
of the terms agreed upon in the contract.22
The second phase of the generation or negotiation stage in this case was the execution
of the VSP. It must be emphasized that thereunder, the downpayment of the purchase
price was P53,148.00 while the balance to be paid on installment should be financed by
B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp. was
acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D.
No. 1454 and P.D. No. 1793, as "corporations or partnerships, except those regulated by
the Central Bank of the Philippines, the Insurance Commission and the Cooperatives
Administration Office, which are primarily organized for the purpose of extending credit
facilities to consumers and to industrial, commercial, or agricultural enterprises, either
by discounting or factoring commercial papers or accounts receivables, or by buying and
selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by
leasing of motor vehicles, heavy equipment and industrial machinery, business and
office machines and equipment, appliances and other movable property." 23
Accordingly, in a sale on installment basis which is financed by a financing company,
three parties are thus involved: the buyer who executes a note or notes for the unpaid
balance of the price of the thing purchased on installment, the seller who assigns the
notes or discounts them with a financing company, and the financing company which is
subrogated in the place of the seller, as the creditor of the installment buyer. 24 Since
B.A. Finance did not approve Sosa's application, there was then no meeting of minds on
the sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's
application for which reason it suggested to Sosa that he pay the full purchase price.
When the latter refused, Toyota cancelled the VSP and returned to him his P100,000.00.
Sosa's version that the VSP was cancelled because, according to Bernardo, the vehicle
was delivered to another who was "mas malakas" does not inspire belief and was
obviously a delayed afterthought. It is claimed that Bernardo said, "Pasensiya kayo,
nasulot ang unit ng ibang malakas," while the Sosas had already been waiting for an
hour for the delivery of the vehicle in the afternoon of 17 June 1989. However, in
paragraph 7 of his complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's
sales representative, Mr. Popong Bernardo, called plaintiff's house
and informed the plaintiff's son that the vehicle will not be ready for
pick-up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day
instead. Plaintiff and his son went to defendant's office on June 17
1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant
for reasons known only to its representatives, refused and/or failed
to release the vehicle to the plaintiff. Plaintiff demanded for an
explanation, but nothing was given; . . . (Emphasis supplied). 25
The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows
that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle
to him, and its non-delivery did not cause any legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees and costs of suit is
without legal basis. Besides, the only ground upon which Sosa claimed moral damages is
that since it was known to his friends, townmates, and relatives that he was buying a
Toyota Lite Ace which they expected to see on his birthday, he suffered humiliation,
shame, and sleepless nights when the van was not delivered. The van became the
subject matter of talks during his celebration that he may not have paid for it, and this
created an impression against his business standing and reputation. At the bottom of
this claim is nothing but misplaced pride and ego. He should not have announced his
plan to buy a Toyota Lite Ace knowing that he might not be able to pay the full purchase
price. It was he who brought embarrassment upon himself by bragging about a thing
which he did not own yet.
Since Sosa is not entitled to moral damages and there being no award for temperate,
liquidated, or compensatory damages, he is likewise not entitled to exemplary damages.
Under Article 2229 of the Civil Code, exemplary or corrective damages are imposed by
way of example or correction for the public good, in addition to moral, temperate,
liquidated, or compensatory damages.
Also, it is settled that for attorney's fees to be granted, the court must explicitly state in
the body of the decision, and not only in the dispositive portion thereof, the legal
reason for the award of attorney's fees. 26 No such explicit determination thereon was
made in the body of the decision of the trial court. No reason thus exists for such an
award.
WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of
Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court
of Marinduque in Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint in
Civil Case No. 89-14 is DISMISSED. The counterclaim therein is likewise DISMISSED.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-10141 January 31, 1958
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the COURT OF APPEALS,
respondents.
Office of the Solicitor General Ambrosio Padilla, and Solicitor Frine C. Zaballero for
petitioner.
Vicente L. Santiago for respondent Corporation.
PADILLA, J.:
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
Hon. Judge Magno Gatmaitan et al.
The findings of the Court of Appeals are, as follows.
It appears that on May 6, 1955, the Republic of the Philippines in
representation of the Bureau of Prisons instituted against Macario Apostol
and the Empire Insurance Co. a complaint docketed as Civil Case No. 26166 of
the Court of First instance of Manila. The complaint alleges as the first cause
of action, that defendant Apostol submitted the highest bid the amount
P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the
Bureau of Prisons; that a contract therefor was drawn and by virtue of which,
Apostol obtained goods from the Bureau of Prisons valued P15,878.59; that of
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
Apostol submitted the best bid with the Bureau of Prisons for the purchase of
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
contract Apostol obtained deliveries of logs valued at P65.830.00, and that
Apostol failed to pay a balance account Of P18,827.57. All told, for the total
demand set forth in complaint against Apostol is for P34,015.06 with legal
interests thereon from January 8, 1952. The Empire lnsurance Company was
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
dismissal of the complaint.
On July 19, 1955, the Philippine Resources Development Corporation moved
to intervene, appending to its motion, the complaint in the intervention of
even date. The complaint recites that for sometime prior to Apostol's
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
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
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
to return said goods, the corporation sought leave to intervene in Civil Case
No. 26166.
As aforestated, His Honor denied the motion for intervention and thereby
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
same was likewise denied by His Honor on August 18, 1955 . . . (Annex L.).
On 3 September 1955, in a petition for a writ of certiorari filed in the Court of Appeals,
the herein respondent corporation prayed for the setting aside of the order of the Court
of First Instance that had denied the admission of its complaint-in-intervention and for
an order directing the latter Court to allow the herein respondent corporation to
intervene in the action (Annex G). On 12 December 1955 the Court of Appeals set aside
the order denying the motion to intervene and ordered the respondent court to admit
the herein respondent corporation's complaint-in-intervention with costs against
Macario Apostol.
On 9 January 1956 the Republic of the Philippines filed this petition in this Court for the
purpose stated at the beginning of this opinion.
The Goverment contends that the intervenor has no legal interest in the matter in
litigation, because the action brought in the Court of First Instance of Manila against
Macario Apostol and the Empire Insurance Company (Civil Case No. 26166, Annex A) is
just for the collection from the defendant Apostol of a sum of money, the unpaid
balance of the purchase price of logs and almaciga bought by him from the Bureau of
Prisons, whereas the intervenor seeks to recover ownership and possession of G. I.
sheets, black sheets, M. S. plates, round bars and G. I. pipes that it claims its owns-an
intervention which would change a personal action into one ad rem and would unduly
delay the disposition of the case.
The Court of Appeals held that:
Petitioner ardently claims that the reason behind its motion to intervene is the
desire to protect its rights and interests over some materials purportedly
belonging to it; that said material were unauthorizedly and illegally assigned
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
petitioner's demands to do so.
Petitioner refers to the particulars recited in Apostol's answer dated July 12,
1955 to the effect that Apostol had paid unto the Bureau of Prisons his
accounts covered, among others, by BPPO 1077 for the sum of P4,638.40 and
BPPO 1549 for the amount of P4,398.54. Petitioner moreover, points to the
State of Paid and Unpaid accounts of Apostol dated January 16, 1954 prepared
by the accounting of officer of the Bureau of Prisons (Annex B. Complaint in
Intervention), wherein it appears that the aforementioned accounts covered
respectively by BPPO Nos. 1077 for 892 pieces of GI sheets and 1549 for 399
pieces of GI pipes in the total sum of P9,036.94 have not been credited to
Apostol's account in view of lack of supporting papers; and that according to
the reply letter of the Undersecretary of Justice, said GI sheets and pipes were
delivered by Macario Apostol to the Bureau of Prisons allegedly in Apostol's
capacity as owner and that the black iron sheets were delivered by Apostol as
President of the petitioner corporation.
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
Macario Apostol and not the goods or the materials reportedly turned over by
Apostol as payment of his private debts to the Bureau of Prisons and the
recovery of which is sought by the petitioner; and that for this reason,
petitioner has no legal interest in the very subject matter in litigation as to
entitle it to intervene.
We find no merit in respondents' contention. It is true that the very subject
matter of the original case is a sum of money. But it is likewise true as borne
out by the records, that the materials purportedly belonging to the petitioner
corporation have been assessed and evaluated and their price equivalent in
terms of money have been determined; and that said materials for whatever
price they have been assigned by defendant now respondent Apostol as
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
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,
therefore, is inescapable that the petitioner possesses a legal interest in the
matter in litigation and that such interest is of an actual, material, direct and
immediate nature as to entitle petitioner to intervene.
xxx xxx xxx
Section 3 of Rule 13 of the Rules of Court endows the lower Court with
discretion to allow or disapprove the motion for intrvention (Santarromana et
al. vs. Barrios, 63 Phil. 456); and that in the exercise of such discretion, the
court shall consider whether or not the intervention will unduly delay or
prejudice the adjudicatio of the rights of the original parties and whether or
not the intervenors the rights may be fully protected in a separate proceeding.
The petitioner in the instant case positively authorized to a separate action
against any of all the respondents. But considering that the resolution of the
issues raised in and enjoined by the pleadings in the main case, would virtally
affect the rights not only the original parties but also of the berein petitioner:
that far from unduly delaying or prejudicing the adjudication of the rights of
the original parties or bringing about confusion in the original case, the
adnission of the complaint in intervention would help clarify the vital issue of
the true and real ownership of the materials involved, besides preventing an
abhorrent munltiplicity of suit, we believe that the motion to intervene should
be given due to cause.
We find no reason for disturbing the foregoing pronouncements. The Government
argues that "Price . . . is always paid in terms of money and the supposed payment
beeing in kind, it is no payment at all, "citing Article 1458 of the new Civil Code.
However, the same Article provides that the purschaser may pay "a price certain in
money or its equivalent," which means that they meant of the price need not be in
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
for the court to pass upon and decide after hearing all the parties in the case. Should the
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
adversely if its claim of ownership of such sheets, plates, bars and pipes is true.
The Government reiterates in its original stand that counsel appearing for the
respondent corporation has no authority to represent it or/and sue in its behalf, the
Court of Appeals held that:
Respondents aver also that petitioner lacks legal capacity to sue and that its
counsel is acting merely in an individual capacity without the benefit of the
corporate act authorizing him to bring sue. In this connection, respondents
invoked among others section 20 of Rule 127 which provision, in our opinion,
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
refuted.
in its behalf, hte resolution of the Court of Appeals on this point should not be
disturbed.
Granting that counsel has not been actually authorized by the board of directors to
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
directors; and that the other members of the board, namely, Macario Apostol, the
president, and his wife Pacita R. Apostol, who shuold normally initiate the action to
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
corporation.2 Counsel as a stockholder and director of the respondent corporation may
sue in its behalf and file the complaint in intervention in the proper court.
The judgment under review is affirmed, without pronouncements as to costs.

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
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 139173 February 28, 2007
SPOUSES ONNIE SERRANO AND AMPARO HERRERA, Petitioners
vs.
GODOFREDO CAGUIAT, Respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the Decision1 of the Court of Appeals dated January
29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824.
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot
located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905.
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot.
Petitioners agreed to sell it at 1,500.00 per square meter. Respondent then gave
petitioners 100,000.00 as partial payment. In turn, petitioners gave respondent the
corresponding receipt stating that respondent promised to pay the balance of the
purchase price on or before March 23, 1990, thus:
Las Pias, Metro Manila
March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS
PIAS, METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED
THOUSAND PESOS (100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS
PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE
METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE
MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON
THIS DATE.
SIGNED THIS 19th DAY OF MARCH, 1990 AT LAS PIAS, M.M.
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO"2
On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote
petitioners informing them of his readiness to pay the balance of the contract price and
requesting them to prepare the final deed of sale.3
On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter 4 to respondent
stating that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990
and that they are canceling the transaction. Petitioners also informed respondent that
he can recover the earnest money of 100,000.00 anytime.
Again, on April 6, 1990,5 petitioners wrote respondent stating that they delivered to his
counsel Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the
amount of 100,000.00 payable to him.
In view of the cancellation of the contract by petitioners, respondent filed with the
Regional Trial Court, Branch 63, Makati City a complaint against them for specific
performance and damages, docketed as Civil Case No. 90-1067.6
On June 27, 1994, after hearing, the trial court rendered its Decision7 finding there was a
perfected contract of sale between the parties and ordering petitioners to execute a
final deed of sale in favor of respondent. The trial court held:
xxx
In the evaluation of the evidence presented by the parties as to the issue as to who was
ready to comply with his obligation on the verbal agreement to sell on March 23, 1990,
shows that plaintiffs position deserves more weight and credibility. First, the
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
Philippines, reads as follows, to wit:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered
as part of the price and as proof of the perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to push through with the
sale by sending defendants the letter dated March 25, 1990. (Exh. D) and reiterated
the same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the
balance of the purchase price ready for payment (Exh. C). Defendants mere allegation
that it was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants
letters (Exhs. 2 and 5) appear to be mere afterthought.
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed
the trial courts judgment.
Forthwith, petitioners filed their motion for reconsideration but it was denied by the
appellate court in its Resolution8 dated July 14, 1999.
Hence, the present recourse.
The basic issue to be resolved is whether the document entitled "Receipt for Partial
Payment" signed by both parties earlier mentioned is a contract to sell or a contract of
sale.
Petitioners contend that the Receipt is not a perfected contract of sale as provided for in
Article 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
agreement between the parties as to the amount of consideration.
Generally, the findings of fact of the lower courts are entitled to great weight and
should not be disturbed except for cogent reasons.14 Indeed, they should not be
changed on appeal in the absence of a clear showing that the trial court overlooked,
disregarded, or misinterpreted some facts of weight and significance, which if
considered would have altered the result of the case.1awphi1.net12 In the present
case, we find that both the trial court and the Court of Appeals interpreted some
significant facts resulting in an erroneous resolution of the issue involved.
In holding that there is a perfected contract of sale, both courts mainly relied on the
earnest money given by respondent to petitioners. They invoked Article 1482 of the Civil
Code which provides that "Whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and as proof of the perfection of the contract."
We are not convinced.
In San Miguel Properties Philippines, Inc. v. Spouses Huang,13 we held that the stages of
a contract of sale are: (1) negotiation, covering the period from the time the prospective
contracting parties indicate interest in the contract to the time the contract is perfected;
(2) perfection, which takes place upon the concurrence of the essential elements of the
sale, which is the meeting of the minds of the parties as to the object of the contract
and upon the price; and (3) consummation, which begins when the parties perform their
respective undertakings under the contract of sale, culminating in the extinguishment
thereof.
With the above postulates as guidelines, we now proceed to determine the real nature
of the contract entered into by the parties.
It is a canon in the interpretation of contracts that the words used therein should be
given their natural and ordinary meaning unless a technical meaning was intended. 14
Thus, when petitioners declared in the said "Receipt for Partial Payment" that they
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED
THOUSAND PESOS (100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS
PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE
METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE
MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON
THIS DATE.
there can be no other interpretation than that they agreed to a conditional contract of
sale, consummation of which is subject only to the full payment of the purchase price.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of
the vendor's obligation to transfer title is subordinated to the happening of a future and
uncertain event, so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed. The suspensive condition
is commonly full payment of the purchase price.15
The differences between a contract to sell and a contract of sale are well-settled in
jurisprudence. As early as 1951, in Sing Yee v. Santos,16 we held that:
x x x [a] distinction must be made between a contract of sale in which title passes to the
buyer upon delivery of the thing sold and a contract to sell x x x where by agreement the
ownership is reserved in the seller and is not to pass until the full payment, of the
purchase price is made. In the first case, non-payment of the price is a negative
resolutory condition; in the second case, full payment is a positive suspensive condition.
Being contraries, their effect in law cannot be identical. In the first case, the vendor has
lost and cannot recover the ownership of the land sold until and unless the contract of
sale is itself resolved and set aside. In the second case, however, the title remains in the
vendor if the vendee does not comply with the condition precedent of making payment
at the time specified in the contract.
earnest money forms part of the consideration only if the sale is consummated upon full
payment of the purchase price.21 Now, since the earnest money was given in a contract
to sell, Article 1482, which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the balance by
respondent) did not take place. Clearly, respondent cannot compel petitioners to
transfer ownership of the property to him.
WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the
Court of Appeals is REVERSED and respondents complaint is DISMISSED.
SO ORDERED.

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
SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner,
vs.
SPOUSES ALFREDO HUANG and GRACE HUANG, respondents.
DECISION
MENDOZA, J.:
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
dismissing the complaint brought by respondents against petitioner for enforcement of
a contract of sale.
The facts are not in dispute.
Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in
the purchase and sale of real properties. Part of its inventory are two parcels of land
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 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
clients interest in purchasing the properties for the amount for which they were offered
by petitioner, under the following terms: the sum of 500,000.00 would be given as
earnest money and the balance would be paid in eight equal monthly installments from
May to December, 1994. However, petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter3 proposing the following terms for
the purchase of the properties, viz:
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
representing earnest-deposit money, subject to the following conditions.
1. We will be given the exclusive option to purchase the property within the
30 days from date of your acceptance of this offer.
2. During said period, we will negotiate on the terms and conditions of the
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
said amount of 1,000,000.00 shall be refundable to us in full upon demand. .
..
Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate
real estate, indicated his conformity to the offer by affixing his signature to the letter
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.
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
properties on a 90-day term. Atty. Dauz countered with an offer of six months within
which to pay.
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 April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to
June 13, 1994 within which to exercise her option to purchase the property, adding that
within that period, "[we] hope to finalize [our] agreement on the matter."4 Her request
was granted.
On July 7, 1994, petitioner, through its president and chief executive officer, Federico
Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the
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
On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the
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
against petitioner before the Regional Trial Court, Branch 133, Pasig City where it was
docketed as Civil Case No. 64660.
Within the period for filing a responsive pleading, petitioner filed a motion to dismiss
the complaint alleging that (1) the alleged "exclusive option" of respondent spouses
lacked a consideration separate and distinct from the purchase price and was thus
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
sale. The motion was opposed by respondents.
On December 12, 1994, the trial court granted petitioners motion and dismissed the
action. Respondents filed a motion for reconsideration, but it was denied by the trial
court. They then appealed to the Court of Appeals which, on April 8, 1997, rendered a
decision6 reversing the judgment of the trial court. The appellate court held that all the
requisites of a perfected contract of sale had been complied with as the offer made on
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
court cited Art. 1482 of the Civil Code which provides that "[w]henever earnest money is
given in a contract of sale, it shall be considered as part of the price and as proof of the
perfection of the contract." The fact the parties had not agreed on the mode of
payment did not affect the contract as such is not an essential element for its validity. In
addition, the court found that Sobrecarey had authority to act in behalf of petitioner for
the sale of the properties.7
Petitioner moved for reconsideration of the trial courts decision, but its motion was
denied. Hence, this petition.
Petitioner contends that the Court of Appeals erred in finding that there was a perfected
contract of sale between the parties because the March 29, 1994 letter of respondents,
which petitioner accepted, merely resulted in an option contract, albeit it was
unenforceable for lack of a distinct consideration. Petitioner argues that the absence of
agreement as to the mode of payment was fatal to the perfection of the contract of
sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had
authority to sell the subject real properties.8
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,
respondents failed to file their comment. They were thus considered to have waived the
filing of a comment.
The petition is meritorious.
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
by petitioner through its vice-president and operations manager, Isidro A. Sobrecarey;
and (2) the documentary evidence in the records show that there was a perfected
contract of sale.
With regard to the alleged payment and acceptance of earnest money, the Court holds
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
eventually become the earnest money or downpayment should a contract of sale be
made by them. The amount was thus given not as a part of the purchase price and as
proof of the perfection of the contract of sale but only as a guarantee that respondents
would not back out of the sale. Respondents in fact described the amount as an
"earnest-deposit." In Spouses Doromal, Sr. v. Court of Appeals,9 it was held:
. . . While the 5,000 might have indeed been paid to Carlos in October, 1967, there is
nothing to show that the same was in the concept of the earnest money contemplated
in Art. 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the sale.
Viewed in the backdrop of the factual milieu thereof extant in the record, We are more
inclined to believe that the said 5,000.00 were paid in the concept of earnest money as
the term was understood under the Old Civil Code, that is, as a guarantee that the buyer
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
property should respondent Javellana refuse to agree to part with her 1/7 share.10
In the present case, the 1 million "earnest-deposit" could not have been given as
earnest money as contemplated in Art. 1482 because, at the time when petitioner
accepted the terms of respondents offer of March 29, 1994, their contract had not yet
been perfected. This is evident from the following conditions attached by respondents
to their letter, to wit: (1) that they be given the exclusive option to purchase the
property within 30 days from acceptance of the offer; (2) that during the option period,
the parties would negotiate the terms and conditions of the purchase; and (3) petitioner
would secure the necessary approvals while respondents would handle the
documentation.
The first condition for an option period of 30 days sufficiently shows that a sale was
never perfected.1wphi1 As petitioner correctly points out, acceptance of this condition
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
to buy the properties within the period agreed upon is separate and distinct from the
contract of sale which the parties may enter.11 All that respondents had was just the
option to buy the properties which privilege was not, however, exercised by them
because there was a failure to agree on the terms of payment. No contract of sale may
thus be enforced by respondents.
Furthermore, even the option secured by respondents from petitioner was fatally
defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to
buy or sell a determinate thing for a price certain is binding upon the promisor only if
the promise is supported by a distinct consideration. Consideration in an option contract
may be anything of value, unlike in sale where it must be the price certain in money or
its equivalent. There is no showing here of any consideration for the option. Lacking any
proof of such consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second condition
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
the period from the time the prospective contracting parties indicate interest in the
contract to the time the contract is perfected; (2) perfection, which takes place upon the
concurrence of the essential elements of the sale which are the meeting of the minds of
the parties as to the object of the contract and upon the price; and (3) consummation,
which begins when the parties perform their respective undertakings under the contract
of sale, culminating in the extinguishment thereof.12 In the present case, the parties
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-
offers which did not amount to any final arrangement containing the essential elements
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
petitioner.
the manner of payment is tantamount to a failure to agree on the price.16 In Velasco v.
Court of Appeals,17 the parties to a proposed sale had already agreed on the object of
sale and on the purchase price. By the buyers own admission, however, the parties still
had to agree on how and when the downpayment and the installments were to be paid.
It was held:
. . . Such being the situation, it can not, therefore, be said that a definite and firm sales
agreement between 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 is an essential element in the formation of a binding and
enforceable contract of sale. The fact, therefore, that the petitioners delivered to the
respondent the sum of P10,000 as part of the down-payment that they had to pay
cannot be considered as sufficient proof of the perfection of any purchase and sale
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 -
still had to be mutually covenanted.18
Thus, it is not the giving of earnest money, but the proof of the concurrence of all the
essential elements of the contract of sale which establishes the existence of a perfected
sale.
In the absence of a perfected contract of sale, it is immaterial whether Isidro A.
Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This
issue, therefore, needs no further discussion.
WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents
complaint is DISMISSED.
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