G.R. No. L-11491 August 23, 1918
Quiroga for
ANDRES QUIROGA, plaintiff-appellant,
vs.
PARSONS HARDWARE CO., defendant-appellee.
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for
appellant.
Crossfield & O'Brien for appellee.
AVANCEA, J.:
On January 24, 1911, in this city of manila, a contract in the
following tenor was entered 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 second part:
CONTRACT EXECUTED BY AND BETWEEN
ANDRES QUIROGA AND J. PARSONS, BOTH
MERCHANTS ESTABLISHED IN MANILA,
FOR THE EXCLUSIVE SALE OF "QUIROGA"
BEDS IN THE VISAYAN ISLANDS.
ARTICLE 1. Don Andres Quiroga grants the exclusive
right to sell his beds in the Visayan Islands to J.
Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to
Mr. Parsons for the latter's establishment in Iloilo, and
shall invoice them at the same price he has fixed for
sales, in Manila, and, in the invoices, shall make and
allowance of a 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 different styles.
(B) Mr. Parsons binds himself to pay Mr.
the beds received, within a period of sixty days from
the date of their shipment.
(C) The expenses for transportation and shipment shall
be borne by M. Quiroga, and the freight, insurance,
and cost of unloading from the vessel at the point
where the beds are received, shall be paid by Mr.
Parsons.
(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
deduction of 2 per cent shall be made from the amount
of the invoice.
The same discount shall be made on the amount of
any invoice which Mr. Parsons may deem convenient
to pay in cash.
(E) Mr. Quiroga binds himself to give notice at least
fifteen days before hand of any alteration in price which
he may plan to make in respect to his beds, and
agrees that if on the date when such alteration takes
effect he should have any order pending to be served
to Mr. Parsons, such order shall enjoy the advantage of
the alteration if the price thereby be lowered, but shall
not be affected by said alteration if the price thereby be
increased, for, in this latter case, Mr. Quiroga assumed
the obligation to invoice the beds at the price at which
the order was given.
(F) Mr. Parsons binds himself not to sell any other kind
except the "Quiroga" beds.
ART. 2. In compensation for the expenses of
advertisement which, for the benefit of both contracting
parties, Mr. Parsons may find himself obliged to make,
Mr. Quiroga assumes the obligation to offer and give
 the preference to Mr. Parsons in case anyone should
apply for the exclusive agency for any island not
comprised with the Visayan group.
ART. 3. Mr. Parsons may sell, or establish branches of
his agency for the sale of "Quiroga" beds in all the
towns of the Archipelago where there are no exclusive
agents, and shall immediately report such action to Mr.
Quiroga for his approval.
ART. 4. This contract is made for an unlimited period,
and may be terminated by either of the contracting
parties on a previous notice of ninety days to the other
party.
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.
G.R. No. 52267 January 24, 1996
ENGINEERING & MACHINERY CORPORATION, petitioner,
vs.
COURT OF APPEALS and PONCIANO L.
ALMEDA, respondent.
DECISION
PANGANIBAN, J.:
Is a contract for the fabrication and installation of a central air-
conditioning system in a building, one of "sale" or "for a piece
of work"? What is the prescriptive period for filing actions for
breach of the terms of such contract?
These are the legal questions brought before this Court in this
Petition for review on certiorari under Rule 45 of the Rules of
Court, to set aside the Decision1 of the Court of Appeals2 in
CA-G.R. No. 58276-R promulgated on November 28, 1978
(affirming in toto the decision3 dated April 15, 1974 of the then
Court of First Instance of Rizal, Branch II4 , in Civil Case No.
14712, which ordered petitioner to pay private respondent the
amount needed to rectify the faults and deficiencies of the air-
conditioning system installed by petitioner in private
respondent's building, plus damages, attorney's fees and
costs).
By a resolution of the First Division of this Court dated
November 13, 1995, this case was transferred to the Third.
After deliberating on the various submissions of the parties,
including the petition, record on appeal, private respondent's
comment and briefs for the petitioner and the private
respondent, the Court assigned the writing of this Decision to
the undersigned, who took his oath as a member of the Court
on October 10, 1995.
The Facts
Pursuant to the contract dated September 10, 1962 between
petitioner and private respondent, the former undertook to
fabricate, furnish and install the air-conditioning system in the
latter's building along Buendia Avenue, Makati in consideration
of P210,000.00. Petitioner was to furnish the materials, labor,
tools and all services required in order to so fabricate and
install said system. The system was completed in 1963 and
accepted by private respondent, who paid in full the contract
price.
On September 2, 1965, private respondent sold the building to
the National Investment and Development Corporation (NIDC).
The latter took possession of the building but on account of
NIDC's noncompliance with the terms and conditions of the
deed of sale, private respondent was able to secure judicial
rescission thereof. The ownership of the building having been
decreed back to private respondent, he re-acquired
possession sometime in 1971. It was then that he learned from
some NIDC, employees of the defects of the air-conditioning
system of the building.
Acting on this information, private respondent commissioned
Engineer David R. Sapico to render a technical evaluation of
the system in relation to the contract with petitioner. In his
report, Sapico enumerated the defects of the system and
concluded that it was "not capable of maintaining the desired
room temperature of 76F - 2F (Exhibit C)"5 .
On the basis of this report, private respondent filed on May 8,
1971 an action for damages against petitioner with the then
Court of First Instance of Rizal (Civil Case No. 14712). The
complaint alleged that the air-conditioning system installed by
petitioner did not comply with the agreed plans and
specifications. Hence, private respondent prayed for the
amount of P210,000.00 representing the rectification cost,
P100,000.00 as damages and P15,000.00 as attorney's fees.
Petitioner moved to dismiss the complaint, alleging that the
prescriptive period of six months had set in pursuant to Articles
1566 and 1567, in relation to Article 1571 of the Civil Code,
regarding the responsibility of a vendor for any hidden faults or
defects in the thing sold.
Private respondent countered that the contract dated
September 10, 1962 was not a contract for sale but a contract
for a piece of work under Article 1713 of the Civil Code. Thus,
in accordance with Article 1144 (1) of the same Code, the
complaint was timely brought within the ten-year prescriptive
period.
In its reply, petitioner argued that Article 1571 of the Civil Code
providing for a six-month prescriptive period is applicable to a
contract for a piece of work by virtue of Article 1714, which
provides that such a contract shall be governed by the
pertinent provisions on warranty of title and against hidden
defects and the payment of price in a contract of sale6 .
The trial court denied the motion to dismiss. In its answer to
the complaint, petitioner reiterated its claim of prescription as
an affirmative defense. It alleged that whatever defects might
have been discovered in the air-conditioning system could
have been caused by a variety of factors, including ordinary
wear and tear and lack of proper and regular maintenance. It
pointed out that during the one-year period that private
respondent withheld final payment, the system was subjected
to "very rigid inspection and testing and corrections or
modifications effected" by petitioner. It interposed a
compulsory counterclaim suggesting that the complaint was
filed "to offset the adverse effects" of the judgment in Civil
Case No. 71494, Court of First Instance of Manila, involving
the same parties, wherein private respondent was adjudged to
pay petitioner the balance of the unpaid contract price for the
air-conditioning system installed in another building of private
respondent, amounting to P138,482.25.
Thereafter, private respondent filed an ex-parte motion for
preliminary attachment on the strength of petitioner's own
statement to the effect that it had sold its business and was no
longer doing business in Manila. The trial court granted the
motion and, upon private respondent's posting of a bond of
F'50,000.00, ordered the issuance of a writ of attachment.
In due course, the trial court rendered a decision finding that
petitioner failed to install certain parts and accessories called
for by the contract, and deviated from the plans of the system,
thus reducing its operational effectiveness to the extent that 35
window-type units had to be installed in the building to achieve
a fairly desirable room temperature. On the question of
prescription, the trial court ruled that the complaint was filed
within the ten-year court prescriptive period although the
contract was one for a piece of work, because it involved the
"installation of an air-conditioning system which the defendant
itself manufactured, fabricated, designed and installed."
Petitioner appealed to the Court of Appeals, which affirmed the
decision of the trial court. Hence, it instituted the instant
petition.
The Submissions of the Parties
In the instant Petition, petitioner raised three issues. First, it
contended that private respondent's acceptance of the work
and his payment of the contract price extinguished any liability
with respect to the defects in the air-conditioning system.
Second, it claimed that the Court of Appeals erred when it held
that the defects in the installation were not apparent at the
time of delivery and acceptance of the work considering that
private respondent was not an expert who could recognize
such defects. Third, it insisted that, assuming arguendo that
there were indeed hidden defects, private respondent's
complaint was barred by prescription under Article 1571 of the
Civil Code, which provides for a six-month prescriptive period.
Private respondent, on the other hand, averred that the issues
raised by petitioner, like the question of whether there was an
acceptance of the work by the owner and whether the hidden
defects in the installation could have been discovered by
simple inspection, involve questions of fact which have been
passed upon by the appellate court.
The Court's Ruling
The Supreme Court reviews only errors of law in petitions for
review on certiorari under Rule 45. It is not the function of this
Court to re-examine the findings of fact of the appellate court
unless said findings are not supported by the evidence on
record or the judgment is based on a misapprehension of
facts7 of Appeals erred when it held that the defects in the
installation were not apparent at the time of delivery and
acceptance of the work considering that private respondent
was not an expert who could recognize such defects. Third. it
insisted that, assuming arguendo that there were indeed
hidden defects, private respondent's complaint was barred by
prescription under Article 1571 of the Civil Code, which
provides for a six-month prescriptive period.
Private respondent, on the other hand, averred that the issues
raised by petitioner, like the question of whether here was an
acceptance of the work by the owner and whether the hidden
defects in the installation could have been discovered by
simple inspection, involve questions of fact which have been
passed upon by the appellate court.
The Court has consistently held that the factual
findings of the trial court, as well as the Court of
Appeals, are final and conclusive and may not be
reviewed on appeal. Among the exceptional
circumstances where a reassessment of facts found by
the lower courts is allowed are when the conclusion is
a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly
absurd, mistaken or impossible; when there is grave
abuse of discretion in the appreciation of facts; when
the judgment is premised on a misapprehension of
facts; when the findings went beyond the issues of the
case and the same are contrary to the admissions of
both appellant and appellee. After a careful study of the
case at bench, we find none of the above grounds
present to justify the re-evaluation of the findings of fact
made by the courts below.8
We see no valid reason to discard the factual
conclusions of the appellate court. . . . (I)t is not the
function of this Court to assess and evaluate all over
again the evidence, testimonial and documentary,
adduced by the parties, particularly where, such as
here, the findings of both the trial court and the
appellate court on the matter coincide.9 (Emphasis
supplied)
Hence, the first two issues will not be resolved as they raise
questions of fact.
Thus, the only question left to be resolved is that of
prescription. In their submissions, the parties argued lengthily
on the nature of the contract entered into by them, viz.,
whether it was one of sale or for a piece of work.
Article 1713 of the Civil Code defines a contract for a piece of
work thus:
By the contract for a piece of work the contractor binds
himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. The
contractor may either employ only his labor or skill, or
also furnish the material.
A contract for a piece of work, labor and materials may be
distinguished from a contract of sale by the inquiry as to
whether the thing transferred is one not in existence and which
would never have existed but for the order, of the person
desiring it10 . In such case, the contract is one for a piece of
work, not a sale. On the other hand, if the thing subject of the
contract would have existed and been the subject of a sale to
some other person even if the order had not been given, then
the contract is one of sale11 .
Thus, Mr. Justice Vitug12 explains that -
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 (Art. 1467, Civil Code).
The mere fact alone that certain articles are made
upon previous orders of customers will not argue
against the imposition of the sales tax if such articles
are ordinarily manufactured by the taxpayer for sale to
the public (Celestino Co. vs. Collector, 99 Phil. 841).
To Tolentino, the distinction between the two contracts
depends on the intention of the parties. Thus, if the parties
intended that at some future date an object has to be
delivered, without considering the work or labor of the party
bound to deliver, the contract is one of sale. But if one of the
parties accepts the undertaking on the basis of some plan,
taking into account the work he will employ personally or
through another, there is a contract for a piece of work13 .
Clearly, the contract in question is one for a piece of work. It is
not petitioner's line of business to manufacture air-conditioning
systems to be sold "off-the-shelf." Its business and particular
field of expertise is the fabrication and installation of such
systems as ordered by customers and in accordance with the
particular plans and specifications provided by the customers.
Naturally, the price or compensation for the system
manufactured and installed will depend greatly on the
particular plans and specifications agreed upon with the
customers.
The obligations of a contractor for a piece of work are set forth
in Articles 1714 and 1715 of the Civil Code, which provide:
Art. 1714. If the contractor agrees to produce the work
from material furnished by him, he shall deliver the
thing produced to the employer and transfer dominion
over the thing. This contract shall be governed by the
following articles as well as by the pertinent provisions
on warranty of title and against hidden defects and the
payment of price in a contract of sale.
Art. 1715. The contractor shall execute the work in
such a manner that it has the qualities agreed upon
and has no defects which destroy or lessen its value or
fitness for its ordinary or stipulated use. Should the
work be not of such quality, the employer may require
that the contractor remove the defect or execute
another work. If the contractor fails or refuses to
comply with this obligation, the employer may have the
defect removed or another work executed, at the
contractor's cost.
The provisions on warranty against hidden defects, referred to
in Art. 1714 above-quoted, are found in Articles 1561 and
1566, which read as follows:
Art. 1561. The vendor shall be responsible for warranty
against the hidden defects which the thing sold may
have, should they render it unfit for the use for which it
is intended, or should they diminish its fitness for such
use to such an extent that, had the vendee been aware
thereof, he would not have acquired it or would have
given a lower price for it; but said vendor shall not be
answerable for patent defects or those which may be
visible, or for those which are not visible if the vendee
is an expert who, by reason of his trade or profession,
should have known them.
xxx xxx xxx
 Art. 1566. The vendor is responsible to the vendee for GROUND FLOOR:
any hidden faults or defects in the thing sold, even
though he was not aware thereof. "A. RIGHT WING:

This provision shall not apply if the contrary has been Equipped with Worthington Compressor, Model 2VC4
stipulated, and the vendor was not aware of the hidden directly driven by an Hp Elin electric motor 1750 rmp, 3
faults or defects in the thing sold. phase, 60 cycles, 220 volts, complete with starter
evaporative condenser, circulating water pump, air
The remedy against violations of the warranty against hidden handling unit air ducts.
defects is either to withdraw from the contract (redhibitory
action) or to demand a proportionate reduction of the price Defects Noted:
(accion quanti manoris), with damages in either case14 .
1. Deteriorated evaporative condenser panels, coils are
In Villostas vs. Court of Appeals15 , we held that, "while it is full of scales and heavy corrosion is very evident.
true that Article 1571 of the Civil Code provides for a
prescriptive period of six months for a redhibitory action, a 2. Defective gauges of compressors;
cursory reading of the ten preceding articles to which it refers
will reveal that said rule may be applied only in case of implied 3. No belt guard on motor;
warranties"; and where there is an express warranty in the
contract, as in the case at bench, the prescriptive period is the 4. Main switch has no cover;
one specified in the express warranty, and in the absence of
such period, "the general rule on rescission of contract, which
5. Desired room temperature not attained;
is four years (Article 1389, Civil Code) shall apply"16 .
Aside from the above defects, the following were noted
Consistent with the above discussion, it would appear that this
not installed although provided in the specifications.
suit is barred by prescription because the complaint was filed
more than four years after the execution of the contract and
the completion of the air-conditioning system. 1. Face by-pass damper of G.I. sheets No. 16. This
damper regulates the flow of cooled air depending on
room condition.
However, a close scrutiny of the complaint filed in the trial
court reveals that the original action is not really for
enforcement of the warranties against hidden defects, but one 2. No fresh air intake provision were provided which is
for breach of the contract itself. It alleged17 that the petitioner, very necessary for efficient comfort cooling..
"in the installation of the air conditioning system did not comply
with the specifications provided" in the written agreement 3. No motor to regulate the face and by-pass damper.
between the parties, "and an evaluation of the air-conditioning
system as installed by the defendant showed the following 4. Liquid level indicator for refrigerant not provided.
defects and violations of the specifications of the agreement,
to wit:
5. Suitable heat exchanger is not installed. This is an
important component to increase refrigeration
efficiency.
6. Modulating thermostat not provided.
7. Water treatment device for evaporative condenser
was not provided.
8. Liquid receiver not provided by sight glass.
B. LEFT WING:
Worthington Compressor Model 2VC4 is installed
complete with 15 Hp electric motor, 3 phase, 220 volts
60 cycles with starter.
Defects Noted:
Same as right wing. except No. 4, All other defects on
right wing are common to the left wing.
SECOND FLOOR: (Common up to EIGHT FLOORS)
Compressors installed are MELCO with 7.5 Hp V-belt
driven by 1800 RPM, -220 volts, 60 cycles, 3 phase,
Thrige electric motor with starters.
As stated in the specifications under, Section No. IV,
the MELCO compressors do not satisfy the conditions
stated therein due to the following:
1. MELCO Compressors are not provided with
automatic capacity unloader.
2. Not provided with oil pressure safety control.
3. Particular compressors do not have provision for
renewal sleeves.
Out of the total 15 MELCO compressors installed to
serve the 2nd floor up to 8th floors, only six (6) units
are in operation and the rest were already replaced. Of
the remaining six (6) units, several of them have been
replaced with bigger crankshafts.
NINTH FLOOR:
Two (2) Worthington 2VC4 driven by 15 Hp, 3 phase,
220 volts, 60 cycles, 1750 rpm, Higgs motors with
starters.
Defects Noted are similar to ground floor.
GENERAL REMARKS:
Under Section III, Design conditions of specification for
air conditioning work, and taking into account "A" & "B"
same, the present systems are not capable of
maintaining the desired temperature of 76 = 2F (sic).
The present tenant have installed 35 window type air
conditioning units distributed among the different floor
levels. Temperature measurements conducted on
March 29. 1971, revealed that 78F room (sic) is only
maintained due to the additional window type units.
The trial court, after evaluating the evidence presented, held
that, indeed, petitioner failed to install items and parts required
in the contract and substituted some other items which were
not in accordance with the specifications18 , thus:
From all of the foregoing, the Court is persuaded to
believe the plaintiff that not only had the defendant
failed to install items and parts provided for in the
 specifications of the air-conditioning system be
installed, like face and by-pass dampers and
modulating thermostat and many others, but also that
there are items, parts and accessories which were
used and installed on the air-conditioning system which
were not in full accord with contract specifications.
These omissions to install the equipments, parts and
accessories called for in the specifications of the
contract, as well as the deviations made in putting into
the air-conditioning system equipments, parts and
accessories not in full accord with the contract
specification naturally resulted to adversely affect the
operational effectiveness of the air-conditioning system
which necessitated the installation of thirty-five window
type of air-conditioning units distributed among the
different floor levels in order to be able to obtain a fairly
desirable room temperature for the tenants and actual
occupants of the building. The Court opines and so
holds that the failure of the defendant to follow the
contract specifications and said omissions and
deviations having resulted in the operational
ineffectiveness of the system installed makes the
defendant liable to the plaintiff in the amount necessary
to rectify to put the air conditioning system in its proper
operational condition to make it serve the purpose for
which the plaintiff entered into the contract with the
defendant.
The respondent Court affirmed the trial court's decision
thereby making the latter's findings also its own.
Having concluded that the original complaint is one for
damages arising from breach of a written contract - and not a
suit to enforce warranties against hidden defects - we here -
with declare that the governing law is Article 1715 (supra).
However, inasmuch as this provision does not contain a
specific prescriptive period, the general law on prescription,
which is Article 1144 of the Civil Code, will apply. Said
provision states, inter alia, that actions "upon a written
contract" prescribe in ten (10) years. Since the governing
contract was executed on September 10, 1962 and the
complaint was filed on May 8, 1971, it is clear that the action
has not prescribed.
What about petitioner's contention that "acceptance of the
work by the employer relieves the contractor of liability for any
defect in the work"? This was answered by respondent
Court19 as follows:
As the breach of contract which gave rise to the instant
case consisted in appellant's omission to install the
equipments (sic), parts and accessories not in
accordance with the plan and specifications provided
for in the contract and the deviations made in putting
into the air conditioning system parts and accessories
not in accordance with the contract specifications, it is
evident that the defect in the installation was not
apparent at the time of the delivery and acceptance of
the work, considering further that plaintiff is not an
expert to recognize the same. From the very nature of
things, it is impossible to determine by the simple
inspection of air conditioning system installed in an 8-
floor building whether it has been furnished and
installed as per agreed specifications.
Verily, the mere fact that the private respondent accepted the
work does not, ipso facto, relieve the petitioner from liability for
deviations from and violations of the written contract, as the
law gives him ten (10) years within which to file an action
based on breach thereof.
WHEREFORE, the petition is hereby DENIED and the
assailed Decision is AFFIRMED. No costs.
SO ORDERED.
Narvasa, C.J., Davide Jr., Melo and Francisco, JJ., concur.
ANTHONY ORDUA, DENNIS ORDUA, G.R. No. 176841 As gathered from the petition, with its enclosures, and
and ANTONITA ORDUA, the comments thereon of four of the five respondents, [5] the
Petitioners, Present: Court gathers the following relevant facts:

CORONA, C.J Sometime in 1996 or thereabouts, Gabriel Sr. sold the

- versus -
EDUARDO J. FUENTEBELLA, MARCOS S.
CID, BENJAMIN F. CID, BERNARD G.
BANTA, and ARMANDO GABRIEL, JR.,
Respondents.
x---------------------------------------------------------------------------------
--------x
DECISION
VELASCO, JR., J.:
In this Petition for Review[1] under Rule 45 of the Rules
of Court, Anthony Ordua, Dennis Ordua and
Antonita Ordua assail and seek to set aside the Decision[2] of
the Court of Appeals (CA) dated December 4, 2006 in CA-G.R.
CV No. 79680, as reiterated in its Resolution of March 6, 2007,
which affirmed the May 26, 2003 Decision [3] of the Regional
Trial Court (RTC), Branch 3 in Baguio City, in Civil Case No.
4984-R, a suit for annulment of title and reconveyance
commenced by herein petitioners against herein respondents.
Central to the case is a residential lot with an area of
74 square meters located at Fairview Subdivision, Baguio City,
originally registered in the name of Armando Gabriel, Sr.
(Gabriel Sr.) under Transfer Certificate of Title (TCT) No.
67181 of the Registry of Deeds of Baguio City.[4]
VELASCO, JR., subject lot to petitioner Antonita Ordua (Antonita), but no
LEONARDO-DE CASTRO,formal deed was executed to document the sale. The contract
DEL CASTILLO, and price was apparently payable in installments as Antonita
PEREZ, JJ. remitted from time to time and Gabriel Sr. accepted partial
payments. One of the Orduas would later testify that Gabriel
Promulgated: Sr. agreed to execute a final deed of sale upon full payment of
the purchase price.[6]
June 29, 2010
As early as 1979, however, Antonita and her sons,
Dennis and Anthony Ordua, were already occupying the
subject lot on the basis of some arrangement undisclosed in
the records and even constructed their house thereon. They
also paid real property taxes for the house and declared it for
tax purposes, as evidenced by Tax Declaration No. (TD) 96-
04012-111087[7] in which they place the assessed value of the
structure at PhP 20,090.
After the death of Gabriel Sr., his son and namesake,
respondent Gabriel Jr., secured TCT No. T-71499[8] over the
subject lot and continued accepting payments from the
petitioners. On December 12, 1996, Gabriel Jr. wrote Antonita
authorizing her to fence off the said lot and to construct a road
in the adjacent lot.[9] On December 13, 1996, Gabriel Jr.
acknowledged receipt of a PhP 40,000 payment from
petitioners.[10] Through a letter[11] dated May 1, 1997, Gabriel Jr.
acknowledged that petitioner had so far made an aggregate
payment of PhP 65,000, leaving an outstanding balance of
PhP 60,000. A receipt Gabriel Jr. issued dated November 24,
1997 reflected a PhP 10,000 payment.
Despite all those payments made for the subject lot,
Gabriel Jr. would later sell it to Bernard Banta (Bernard)
obviously without the knowledge of petitioners, as later
developments would show.
 As narrated by the RTC, the lot conveyance from
Gabriel Jr. to Bernard was effected against the following
backdrop: Badly in need of money, Gabriel Jr. borrowed from
Bernard the amount of PhP 50,000, payable in two weeks at a
fixed interest rate, with the further condition that the subject lot
would answer for the loan in case of default. Gabriel Jr. failed
to pay the loan and this led to the execution of a Deed of
Sale[12] dated June 30, 1999 and the issuance later of TCT No.
T-72782[13] for subject lot in the name of Bernard upon
cancellation of TCT No. 71499 in the name of Gabriel, Jr. As
the RTC decision indicated, the reluctant Bernard agreed to
acquire the lot, since he had by then ready buyers in
respondents Marcos Cid and Benjamin F. Cid (Marcos and
Benjamin or the Cids).
Subsequently, Bernard sold to the Cids the subject lot
for PhP 80,000. Armed with a Deed of Absolute Sale of a
Registered Land[14] dated January 19, 2000, the Cids were
able to cancel TCT No. T-72782 and secure TCT No.
72783[15] covering the subject lot. Just like in the immediately
preceding transaction, the deed of sale between Bernard and
the Cids had respondent Eduardo J. Fuentebella (Eduardo) as
one of the instrumental witnesses.
Marcos and Benjamin, in turn, ceded the subject lot to
Eduardo through a Deed of Absolute Sale[16] dated May 11,
2000. Thus, the consequent cancellation of TCT No. T-72782
and issuance on May 16, 2000 of TCT No. T-3276 [17] over
subject lot in the name of Eduardo.
As successive buyers of the subject lot, Bernard, then
Marcos and Benjamin, and finally Eduardo, checked, so each
claimed, the title of their respective predecessors-in-interest
with the Baguio Registry and discovered said title to be free
and unencumbered at the time each purchased the property.
Furthermore, respondent Eduardo, before buying the property,
was said to have inspected the same and found it unoccupied
by the Orduas.[18]
Sometime in May 2000, or shortly after his purchase of
the subject lot, Eduardo, through his lawyer, sent a letter
addressed to the residence of Gabriel Jr. demanding that all
persons residing on or physically occupying the subject lot
vacate the premises or face the prospect of being ejected.[19]
Learning of Eduardos threat, petitioners went to the
residence of Gabriel Jr. at No. 34 Dominican
Hill, Baguio City. There, they met Gabriel Jr.s estranged wife,
Teresita, who informed them about her having filed an
affidavit-complaint against her husband and the Cids for
falsification of public documents on March 30, 2000. According
to Teresita, her signature on the June 30, 1999 Gabriel Jr.
Bernard deed of sale was a forgery. Teresita further informed
the petitioners of her intent to honor the aforementioned 1996
verbal agreement between Gabriel Sr. and Antonita and the
partial payments they gave her father-in-law and her husband
for the subject lot.
On July 3, 2001, petitioners, joined by Teresita, filed a
Complaint[20] for Annulment of Title, Reconveyance with
Damages against the respondents before the RTC, docketed
as Civil Case No. 4984-R, specifically praying that TCT No. T-
3276 dated May 16, 2000 in the name of Eduardo be annulled.
Corollary to this prayer, petitioners pleaded that Gabriel Jr.s
title to the lot be reinstated and that petitioners be declared as
entitled to acquire ownership of the same upon payment of the
remaining balance of the purchase price therefor agreed upon
by Gabriel Sr. and Antonita.
While impleaded and served with summons, Gabriel Jr.
opted not to submit an answer.
Ruling of the RTC
By Decision dated May 26, 2003, the RTC ruled for the
respondents, as defendants a quo, and against the petitioners,
as plaintiffs therein, the dispositive portion of which reads:
 2. Under Arts. 1356[23] and 1358[24] of the Code,
WHEREFORE, the instant complaint is conveyance of real property must be in the proper form, else it
hereby DISMISSED for lack of merit. The four is unenforceable;
(4) plaintiffs are hereby ordered by this Court to
pay each defendant (except Armando Gabriel, 3. The verbal sale had no adequate consideration;
Jr., Benjamin F. Cid, and Eduardo J. and
Fuentebella who did not testify on these
damages), Moral Damages of Twenty 4. Petitioners right of action to assail Eduardos title
Thousand (P20,000.00) Pesos, so prescribes in one year from date of the issuance of such title
that each defendant shall receive Moral and the one-year period has already lapsed.
Damages of Eighty Thousand (P80,000.00)
Pesos each. Plaintiffs shall also pay all From the above decision, only petitioners appealed to
defendants (except Armando Gabriel, Jr., the CA, their appeal docketed as CA-G.R. CV No. 79680.
Benjamin F. Cid, and Eduardo J. Fuentebella
who did not testify on these damages), The CA Ruling
Exemplary Damages of Ten Thousand
(P10,000.00) Pesos each so On December 4, 2006, the appellate court rendered
that each defendant shall receive Forty the assailed Decision affirming the RTC
Thousand (P40,000.00) Pesos as Exemplary decision. The fallo reads:
Damages. Also, plaintiffs are ordered to WHEREFORE, premises considered,
pay each defendant (except Armando Gabriel, the instant appeal is hereby DISMISSED and
Jr., Benjamin F. Cid, and Eduardo J. the 26 May 2003 Decision of the Regional Trial
Fuentebella who did not testify on these Court, Branch 3 of Baguio City in Civil Case No.
damages), Fifty Thousand (P50,000.00) Pesos 4989-R is hereby AFFIRMED.
as Attorneys Fees, jointly and solidarily.
SO ORDERED.[25]
[21]
Cost of suit against the plaintiffs.

Hence, the instant petition on the submission that the

On the main, the RTC predicated its dismissal action on appellate court committed reversible error of law:
the basis of the following grounds and/or premises:
1. xxx WHEN IT HELD THAT
THE SALE OF THE SUBJECT LOT BY
1. Eduardo was a purchaser in good faith and, hence, ARMANDO GABRIEL, SR. AND
may avail himself of the provision of Article 1544 [22] of the Civil RESPONDENT ARMANDO GABRIEL,
Code, which provides that in case of double sale, the party in JR. TO THE PETITIONERS IS
good faith who is able to register the property has better right UNENFORCEABLE.
over the property;
 2. xxx IN NOT FINDING THAT the instant action has already prescribed; and, fourth, whether
THE SALE OF THE SUBJECT LOT BY or not respondents are purchasers in good faith.
RESPONDENT ARMANDO GABRIEL, The petition is meritorious.
JR. TO RESPONDENT BERNARD
BANTA AND ITS Statute of Frauds Inapplicable
SUBSEQUENT SALE BY THE LATTER to Partially Executed Contracts
TO HIS CO-RESPONDENTS ARE
NULL AND VOID.
It is undisputed that Gabriel Sr., during his lifetime, sold
3. xxx IN NOT FINDING THAT the subject property to Antonita, the purchase price payable on
THE RESPONDENTS ARE BUYERS IN installment basis. Gabriel Sr. appeared to have been a
BAD FAITH recipient of some partial payments. After his death, his son
duly recognized the sale by accepting payments and issuing
4. xxx IN FINDING THAT THE what may be considered as receipts therefor. Gabriel Jr., in a
SALE OF THE SUBJECT LOT gesture virtually acknowledging the petitioners dominion of the
BETWEEN GABRIEL, SR. AND property, authorized them to construct a fence around it. And
RESPONDENT GABRIEL, JR. AND no less than his wife, Teresita, testified as to the fact of sale
THE PETITIONERS HAS NO and of payments received.
ADEQUATE CONSIDERATION.
Pursuant to such sale, Antonita and her two sons
5. xxx IN RULING THAT THE established their residence on the lot, occupying the house
INSTANT ACTION HAD ALREADY they earlier constructed thereon. They later declared the
PRESCRIBED. property for tax purposes, as evidenced by the issuance of TD
96-04012-111087 in their or Antonitas name, and paid the real
6. xxx IN FINDING THAT THE estates due thereon, obviously as sign that they are
PLAINTIFFS-APPELLANTS ARE occupying the lot in the concept of owners.
LIABLE FOR MORAL AND
EXEMPLARY DAMAGES AND Given the foregoing perspective, Eduardos assertion
ATTORNEYS FEES.[26] in his Answer that persons appeared in the property[27] only
after he initiated ejectment proceedings [28] is clearly baseless.
If indeed petitioners entered and took possession of the
The Courts Ruling property after he (Eduardo) instituted the ejectment suit, how
could they explain the fact that he sent a demand letter to
The core issues tendered in this appeal may be vacate sometime in May 2000?
reduced to four and formulated as follows, to wit: first, whether
or not the sale of the subject lot by Gabriel Sr. to Antonita is With the foregoing factual antecedents, the question to
unenforceable under the Statute of Frauds; second, whether be resolved is whether or not the Statute of Frauds bars the
or not such sale has adequate consideration; third, whether enforcement of the verbal sale contract between Gabriel Sr.
and Antonita.
 The CA, just as the RTC, ruled that the contract is
unenforceable for non-compliance with the Statute of Frauds.
We disagree for several reasons. Foremost of these is
that the Statute of Frauds expressed in Article 1403, par. (2),
[29]
of the Civil Code applies only to executory contracts, i.e.,
those where no performance has yet been made. Stated a bit
differently, the legal consequence of non-compliance with the
Statute does not come into play where the contract in question
is completed, executed, or partially consummated.[30]
The Statute of Frauds, in context, provides that a
contract for the sale of real property or of an interest therein
shall be unenforceable unless the sale or some note or
memorandum thereof is in writing and subscribed by the party
or his agent. However, where the verbal contract of sale has
been partially executed through the partial payments made
by one party duly received by the vendor, as in the present
case, the contract is taken out of the scope of the Statute.
The purpose of the Statute is to prevent fraud and
perjury in the enforcement of obligations depending for their
evidence on the unassisted memory of witnesses, by requiring
certain enumerated contracts and transactions to be
evidenced by a writing signed by the party to be charged.
[31]
The Statute requires certain contracts to be evidenced by
some note or memorandum in order to be enforceable. The
term Statute of Frauds is descriptive of statutes that require
certain classes of contracts to be in writing. The Statute does
not deprive the parties of the right to contract with respect to
the matters therein involved, but merely regulates the
formalities of the contract necessary to render it enforceable.
[32]
Since contracts are generally obligatory in whatever
form they may have been entered into, provided all the
essential requisites for their validity are present,[33]the Statute
simply provides the method by which the contracts
enumerated in Art. 1403 (2) may be proved but does
not declare them invalid because they are not reduced to
writing. In fine, the form required under the Statute is for
convenience or evidentiary purposes only.
There can be no serious argument about the partial
execution of the sale in question. The records show that
petitioners had, on separate occasions, given Gabriel Sr. and
Gabriel Jr. sums of money as partial payments of the purchase
price. These payments were duly receipted by Gabriel Jr. To
recall, in his letter of May 1, 1997, Gabriel, Jr. acknowledged
having received the aggregate payment of PhP 65,000 from
petitioners with the balance of PhP 60,000 still remaining
unpaid. But on top of the partial payments thus made,
possession of the subject of the sale had been transferred to
Antonita as buyer. Owing thus to its partial execution, the
subject sale is no longer within the purview of the Statute of
Frauds.
Lest it be overlooked, a contract that infringes the
Statute of Frauds is ratified by the acceptance of benefits
under the contract.[34] Evidently, Gabriel, Jr., as his father
earlier, had benefited from the partial payments made by the
petitioners. Thus, neither Gabriel Jr. nor the other respondents
successive purchasers of subject lotscould plausibly set
up the Statute of Frauds to thwart petitioners efforts towards
establishing their lawful right over the subject lot and removing
any cloud in their title. As it were, petitioners need only to pay
the outstanding balance of the purchase price and that would
complete the execution of the oral sale.
There was Adequate Consideration
Without directly saying so, the trial court held that the
petitioners cannot sue upon the oral sale since in its own
words: x x x for more than a decade, [petitioners] have not
paid in full Armando Gabriel, Sr. or his estate, so that the sale
transaction between Armando Gabriel Sr. and [petitioners]
[has] no adequate consideration.
 The trial courts posture, with which the CA effectively
concurred, is patently flawed. For starters, they equated
incomplete payment of the purchase price with inadequacy of
price or what passes as lesion, when both are different civil
law concepts with differing legal consequences, the first being
a ground to rescind an otherwise valid and enforceable
contract. Perceived inadequacy of price, on the other hand, is
not a sufficient ground for setting aside a sale freely entered
into, save perhaps when the inadequacy is shocking to the
conscience.[35]
The Court to be sure takes stock of the fact that the
contracting parties to the 1995 or 1996 sale agreed to a
purchase price of PhP 125,000 payable on installments. But
the original lot owner, Gabriel Sr., died before full payment can
be effected. Nevertheless, petitioners continued remitting
payments to Gabriel, Jr., who sold the subject lot to Bernard
on June 30, 1999. Gabriel, Jr., as may be noted, parted with
the property only for PhP 50,000. On the other hand, Bernard
sold it for PhP 80,000 to Marcos and Benjamin. From the
foregoing price figures, what is abundantly clear is that what
Antonita agreed to pay Gabriel, Sr., albeit in installment, was
very much more than what his son, for the same lot, received
from his buyer and the latters buyer later. The Court,
therefore, cannot see its way clear as to how the RTC arrived
at its simplistic conclusion about the transaction between
Gabriel Sr. and Antonita being without adequate
consideration.
The Issues of Prescription and the Bona
Fides of the Respondents as Purchasers
Considering the interrelation of these two issues, we
will discuss them jointly.
There can be no quibbling about the fraudulent nature
of the conveyance of the subject lot effected by Gabriel Jr. in
favor of Bernard. It is understandable that after his fathers
death, Gabriel Jr. inherited subject lot and for which he was
issued TCT No. No. T-71499. Since the Gabriel Sr. Antonita
sales transaction called for payment of the contract price in
installments, it is also understandable why the title to the
property remained with the Gabriels. And after the demise of
his father, Gabriel Jr. received payments from the Orduas
and even authorized them to enclose the subject lot with a
fence. In sum, Gabriel Jr. knew fully well about the sale and is
bound by the contract as predecessor-in-interest of Gabriel Sr.
over the property thus sold.
Yet, the other respondents (purchasers of subject lot)
still maintain that they are innocent purchasers for value
whose rights are protected by law and besides which
prescription has set in against petitioners action for annulment
of title and reconveyance.
The RTC and necessarily the CA found the purchaser-
respondents thesis on prescription correct stating in this
regard that Eduardos TCT No. T-3276 was issued on May 16,
2000 while petitioners filed their complaint for annulment only
on July 3, 2001. To the courts below, the one-year prescriptive
period to assail the issuance of a certificate of title had already
elapsed.
We are not persuaded.
The basic complaint, as couched, ultimately seeks the
reconveyance of a fraudulently registered piece of residential
land. Having possession of the subject lot, petitioners right to
the reconveyance thereof, and the annulment of the covering
title, has not prescribed or is not time-barred. This is so for an
action for annulment of title or reconveyance based on fraud is
imprescriptible where the suitor is in possession of the
property subject of the acts,[36] the action partaking as it does
of a suit for quieting of title which is imprescriptible. [37] Such is
the case in this instance. Petitioners have possession of
subject lots as owners having purchased the same from
Gabriel, Sr. subject only to the full payment of the agreed
price.
The prescriptive period for the reconveyance of
fraudulently registered real property is 10 years, reckoned
from the date of the issuance of the certificate of title, if the
plaintiff is not in possession, but imprescriptible if he is in
possession of the property.[38] Thus, one who is in actual
possession of a piece of land claiming to be the owner thereof
may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right. [39] As it is,
petitioners action for reconveyance is imprescriptible.
This brings us to the question of whether or not the
respondent-purchasers, i.e., Bernard, Marcos and Benjamin,
and Eduardo, have the status of innocent purchasers for
value, as was the thrust of the trial courts disquisition and
disposition.
We are unable to agree with the RTC.
It is the common defense of the respondent-purchasers
that they each checked the title of the subject lot when it was
his turn to acquire the same and found it clean, meaning
without annotation of any encumbrance or adverse third party
interest. And it is upon this postulate that each claims to be an
innocent purchaser for value, or one who buys the property of
another without notice that some other person has a right to or
interest in it, and who pays therefor a full and fair price at the
time of the purchase or before receiving such notice.[40]
The general rule is that one dealing with a parcel of
land registered under the Torrens System may safely rely on
the correctness of the certificate of title issued therefor and is
not obliged to go beyond the certificate.[41] Where, in other
words, the certificate of title is in the name of the seller, the
innocent purchaser for value has the right to rely on what
appears on the certificate, as he is charged with notice only of
burdens or claims on the res as noted in the certificate.
Another formulation of the rule is that (a) in the absence of
anything to arouse suspicion or (b) except where the party has
actual knowledge of facts and circumstances that would impel
a reasonably cautious man to make such inquiry or (c) when
the purchaser has knowledge of a defect of title in his vendor
or of sufficient facts to induce a reasonably prudent man to
inquire into the status of the title of the property, [42] said
purchaser is without obligation to look beyond the certificate
and investigate the title of the seller.
Eduardo and, for that matter, Bernard and Marcos and
Benjamin, can hardly claim to be innocent purchasers for
value or purchasers in good faith. For each knew or was at
least expected to know that somebody else other than Gabriel,
Jr. has a right or interest over the lot. This is borne by the fact
that the initial seller, Gabriel Jr., was not in possession of
subject property. With respect to Marcos and Benjamin, they
knew as buyers that Bernard, the seller, was not also in
possession of the same property. The same goes with
Eduardo, as buyer, with respect to Marcos and Benjamin.
Basic is the rule that a buyer of a piece of land which is
in the actual possession of persons other than the seller must
be wary and should investigate the rights of those in
possession. Otherwise, without such inquiry, the buyer can
hardly be regarded as a buyer in good faith. When a man
proposes to buy or deal with realty, his duty is to read the
public manuscript, i.e., to look and see who is there upon it
and what his rights are. A want of caution and diligence which
an honest man of ordinary prudence is accustomed to
exercise in making purchases is, in contemplation of law, a
want of good faith. The buyer who has failed to know or
discover that the land sold to him is in adverse possession of
another is a buyer in bad faith.[43]
Where the land sold is in the possession of a person
other than the vendor, the purchaser must go beyond the
certificates of title and make inquiries concerning the rights of
the actual possessor.[44] And where, as in the instant case,
Gabriel Jr. and the subsequent vendors were not in
possession of the property, the prospective vendees are
obliged to investigate the rights of the one in
possession. Evidently, Bernard, Marcos and Benjamin, and
Eduardo did not investigate the rights over the subject lot of
the petitioners who, during the period material to this case,
were in actual possession thereof. Bernard, et al. are, thus,
not purchasers in good faith and, as such, cannot be accorded
the protection extended by the law to such purchasers.
[45]
Moreover, not being purchasers in good faith, their having
registered the sale, will not, as against the petitioners, carry
the day for any of them under Art. 1544 of the Civil Code
prescribing rules on preference in case of double sales of
immovable property. Occea v. Esponilla[46] laid down the
following rules in the application of Art. 1544: (1) knowledge by
the first buyer of the second sale cannot defeat the first
buyers rights except when the second buyer first register in
good faith the second sale; and (2) knowledge gained by the
second buyer of the first sale defeats his rights even if he is
first to register, since such knowledge taints his registration
with bad faith.
Resolution of the Court of Appeals in CA-G.R. CV No. 79680
affirming the May 26, 2003 Decision of the Regional Trial
Court, Branch 3 in Baguio City are
hereby REVERSED and SET ASIDE. Accordingly, petitioner
Antonita Ordua is hereby recognized to have the right of
ownership over subject lot covered by TCT No. T-3276 of the
Baguio Registry registered in the name of Eduardo J.
Fuentebella. The Register of Deeds of Baguio City is
hereby ORDERED to cancel said TCT No. T-3276 and to issue
a new one in the name of Armando Gabriel, Jr. with the proper
annotation of the conditional sale of the lot covered by said
title in favor of Antonita Ordua subject to the payment of the
PhP 50,000 outstanding balance. Upon full payment of the
purchase price by Antonita Ordua, Armando Gabriel, Jr.
is ORDERED to execute a Deed of Absolute Sale for the
transfer of title of subject lot to the name of Antonita Ordua,
within three (3) days from receipt of said payment.
No pronouncement as to costs.
SO ORDERED.

Upon the facts obtaining in this case, the act of

registration by any of the three respondent-purchasers was not
coupled with good faith. At the minimum, each was aware or is
at least presumed to be aware of facts which should put him
upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.

The award by the lower courts of damages and

attorneys fees to some of the herein respondents was
predicated on the filing by the original plaintiffs of what the
RTC characterized as an unwarranted suit. The basis of the
award, needless to stress, no longer obtains and, hence, the
same is set aside.

WHEREFORE, the petition is hereby GRANTED. The

appealed December 4, 2006 Decision and the March 6, 2007
G.R. No. L-37831 November 23, 1981
RESTITUTA V. VDA. DE GORDON, 1 petitioner,
vs.
THE COURT OF APPEALS 2 and ROSARIO
DUAZO, respondents.
TEEHANKEE, J.:
The Court affirms the appealed decision finding the same to
be in accordance with the applicable law. The appellate court
correctly upheld the tax sale of the real properties at which
respondent Rosario Duazo acquired the same and her
ownership upon petitioner Restituta V. Vda. de Gordon's
failure to redeem the same, having found the sale to have
been conducted "under the direction and supervision of the
City Treasurer of Quezon City after the proper procedure and
legal formalities had been duly accomplished."
The apppellate court's decision under review held as follows:
The opposition [to respondent Duazo's petition
for consolidation of ownership] has not
controverted by specific denials the material
averments in the petition. Hence the material
averments in the petition are deemed admitted.
(Section 1, Rule 9, Revised Rules of Court)
Moreover, the opposition has not raised the
issue of irregularity in the public sale of the two
parcels of land in question. This defense is
deemed waived. (Section 2, Rule 9, Id.)
The uncontested averments in the petition and
the annex attached to said petition disclose that
the two parcels of land in question were sold at
public auction at the City Hall, Quezon City on
December 3, 1964 under the direction and
supervision of the City Treasurer of Quezon
City after the proper procedures and legal
formalities had been duly accomplished; that
the taxes against the two parcels of land in
question for the years 1953 to 1963, inclusive,
remained unpaid; that the City Treasurer of
Quezon City, upon warrant of a certified copy of
the record of such delinquency, advertised for
sale the two parcels of land in question to
satisfy the taxes, penalties and costs for a
period of thirty (30) days prior to the sale on
December 3, 1964, by keeping a notice of sale
posted at the main entrance on the City Hall
and in a public and conspicuous place in the
district where the same is located and by
publication of said notice once a week for three
(3) weeks in the "DAILY MIRROR", a
newspaper of general circulation in Quezon
City, the advertisement stating the amount of
taxes and penalties due, time and place of sale,
name of the taxpayer against whom the taxes
are levied, approximate area, lot and block
number, location by district, street and street
number of the property; "hat at the public sale
on December 3, 1964, the two parcels of land in
question were sold to [Duazo] for the amount of
P10,500.00 representing the tax, penalty and
costs; that the certificate of sale executed by
the City treasurer was duly registered on
December 28, 1964 in the office of the Register
of Deeds of Quezon City; that upon the failure
of the registered owner to redeem the two
parcels of land in question within the one year
period prescribed by law, the City Treasurer of
Quezon City executed on January 4, 1966 a
final deed of sale of said lands and the
improvements thereon; and that said final deed
of sale was also registered in the Office of the
Register of Deeds of Quezon City on January
18, 1966.
The principal issues to be resolved in this
appeal are (1) whether the price is so grossly
inadequate as to justify the setting aside of the
public sale and (2) whether the oppositor
[Gordon] is entitled to redeem the two parcels
of land in question.
The combined assessed value of the two
parcels of land is P16,800.00. The price paid at
the public sale is P10,500.00. The residential
house on the land is assessed at P45,580.00.
But the assessment was made in 1961. The
present value of the residential house must be
much less now considering the depreciation for
over ten years.
While the price of P10,500.00 is less than the
total assessed value of the land and the
improvement thereon, said price cannot be
considered so grossly inadequate as to be
shocking to the conscience of the court.
In Director of Lands vs. Abarca, 61 Phil. 70,
cited by the lower court in the order appealed
from, the Supreme Court considered the price
of P877.25 as so inadequate to shock the
conscience of the court because the assessed
value of the property in question was
P60,000.00. The assessed value of the land
was more than sixty times the price paid at the
auction sale.
In the case at bar, the price of P10,500.00 is
about one sixth of the total assessed value of
the two parcels of land in question and the
residential house thereon. The finding of the
lower court that the house and land in question
have a fair market value of not less than
P200,000.00 has no factual basis. It cannot be
said, therefore, that the price of P10,500.00 is
so inadequate as to be shocking to the
conscience of the court.
Mere inadequacy of the price alone is not
sufficient ground to annul the public sale.
(Barrozo vs. Macaraeg, 83 Phil. 378).
Moreover, in Velasquez vs. Coronet, 5 SCRA
985, 988, the Supreme Court has held:
It is true that respondent
treasurer now claims that the
prices for which the lands were
sold are unconscionable
considering the wide divergence
between their assessed values
and the amounts for which they
had been actually sold. However,
while in ordinary sales for
reasons of equity a transaction
may be invalidated on the
ground of inadequacy of price, or
when such inadequacy shocks
one's conscience as to justify-
the courts to interfere, such does
not follow when the law gives to
the owner the right to redeem, as
when a sale is made at public
auction upon the theory that the
lesser the price the easier it is for
the owner to effect the
redemption. And so it was aptly
said:
 When there is the right to
redeem, inadequacy of pace
should not be material because
the judgment debtor may
reacquire the property or also
sell his right to redeeem and
thus recover the loss he claims
to have suffered by reason of the
price obtained at the auction
sale. (emphasis supplied).
The contention that the oppositor can still
redeem the two parcels of land in question
because the public sale has not been judicially
confirmed deserves scant consideration. The
cases cited by the oppositor and by the lower
court all refer to foreclosure of mortgage sales
which are by express provision of law subject to
judicial confirmation. The public sale in the
instant case is governed by Section 40 of
Commonwealth Act No. 470 which gives the
delinquent taxpayer a period of one year from
the date of the sale within which to repurchase
the property sold. In case the delinquent
taxpayer does not repurchase the property sold
within the period of one year from the date of
the sale, it becomes a mandatory duty of the
provincial treasurer to issue in favor of the
purchaser a final deed of sale. (Velasquez vs.
Coronel, supra) We find that the oppositor is not
entitled to repurchase the two parcels of land in
question because she failed to do so within one
year from the date of the sale thereof.
WHEREFORE, the order appealed from is
hereby reversed and the ownership of [Duazo]
over the two parcels of land in question and the
improvements thereon is declared consolidated.
The Register of Deeds of Quezon City is hereby
ordered to cancel Transfer Certificates of Title
Nos. 12204 and 12205 and to issue the
corresponding transfer certificates of title to
[Duazo] over the two parcels of land in
question, upon the payment of the prescribed
fees. No pronouncement as to costs. 3
The Court finds petitioner's assignment of errors to be without
merit.
Petitioner's first assignment of error as to alleged lack of
personal notice of the tax sale is negated by her own
averments in her own opposition filed in the court a quo that
"(T)he Oppositor in the above entitled petition is a woman 80
years of age. She was not aware of the auction sale
conducted by the City Treasurer of Quezon City on December
3, 1964 or if there was any notice sent to her, the same did not
reach her or it must have escaped her mind considering her
age. ... 4
Petitioner's second assignment of error that the period for
redemption should be the two-year period provided in Republic
Act No. 1275 likewise has no merit, since the specific law
governing tax sales of properties in Quezon City is the Quezon
City Charter, Commonwealth Act No. 502 which provides in
section 31 thereof for a one-year redemption period. The
special law covering Quezon City necessarily prevails over the
general law. Furthermore, as respondent has pointed out, as
of the time of filing in 1974 of respondent's brief, petitioner had
not then for a period of 10 years (and 17 years as of now)
sought to exercise her alleged right of redemption or make an
actual tender thereof, as follows:
Morever, even if we do concede, merely for the
sake of argument, that the provisions of Rep.
Act No. 1275 may be made applicable in this
case which is certainly not and Petitioner
should have been granted TWO (2) YEARS
from date of the public sale, within which to
 exercise her right of redemption, yet since the
sale of the questioned land to herein
Respondent in that public auction in 1964,
herein Petitioner never had shown any good
faith in exercising her right of redemption. Since
1964 when the auction sale took place, up to
the present, 1974, or a period of TEN (10)
YEARS have already elapsed and yet herein
Petitioner never made any tender of payments
with either the Court of First Instance of Quezon
City or the Court of Appeals, or the Supreme
Court, at least to show her good faith.
Furthermore, if herein Petitioner really believes
in good faith, that [she] had still that right of
redemption, then she should have paid the real
estate taxes, but as the records wig show, since
1964, Private Respondent Duazo is the one
paying the real estate taxes of the lands in
question 5
Petitioner's third and last assignment of error as to the alleged
gross inadequacy of the purchase price must likewise fail. As
the Court has held in Velasquez vs. Coronet 6 alleged gross
inadequacy of price is not material "when the law gives the
owner the right to redeem as when a sale is made at public
auction, upon the theory that the lesser the price the easier it
is for the owner to effect the redemption." As the Court further
stressed in the recent case of Tajonera vs. Court of
Appeals, 7 the law governing tax sales for delinquent taxes
may be "harsh and drastic, but it is a necessary means of
insuring the prompt collection of taxes so essential to the life of
the Government."
ACCORDINGLY, the appellate court's decision under review is
hereby affirmed. Without costs.
Makasiar, Guerrero, De Castro * and Melencio-Herrera, JJ.,
concur.
G.R. No. L-55322 February 16, 1989
MOISES JOCSON, petitioner,
vs.
HON. COURT OF APPEALS, AGUSTINA JOCSON-
VASQUEZ, ERNESTO VASQUEZ, respondents.
Dolorfino and Dominguez Law Officers for petitioner.
Gabriel G. Mascardo for private respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court of the decision of the Court of Appeals in CA-
G.R. No. 63474, promulgated on April 30, 1980, entitled
"MOISES JOCSON, plaintiff-appellee, versus AGUSTINA
JOCSON-VASQUEZ and ERNESTO VASQUEZ, defendant-
appellants," upholding the validity of three (3) documents
questioned by Moises Jocson, in total reversal of the decision
of the then Court of First Instance of Cavite, Branch I, which
declared them as null and void; and of its resolution, dated
September 30, 1980, denying therein appellee's motion for
reconsideration.
Petitioner Moises Jocson and respondent Agustina Jocson-
Vasquez are the only surviving offsprings of the spouses
Emilio Jocson and Alejandra Poblete, while respondent
Ernesto Vasquez is the husband of Agustina. Alejandra
Poblete predeceased her husband without her intestate estate
being settled. Subsequently, Emilio Jocson also died intestate
on April 1, 1972.
As adverted to above, the present controversy concerns the
validity of three (3) documents executed by Emilio Jocson
during his lifetime. These documents purportedly conveyed, by
sale, to Agustina Jocson-Vasquez what apparently covers
almost all of his properties, including his one-third (1/3) share
in the estate of his wife. Petitioner Moises Jocson assails
these documents and prays that they be declared null and void
and the properties subject matter therein be partitioned
between him and Agustina as the only heirs of their deceased
parents.
The documents, which were presented as evidence not by
Moises Jocson, as the party assailing its validity, but rather by
herein respondents, are the following:
1) "Kasulatan ng Bilihan ng Lupa," marked as
Exhibit 3 (pp. 12-13, Records) for the defendant
in the court a quo, dated July 27, 1968. By this
document Emilio Jocson sold to Agustina
Jocson-Vasquez six (6) parcels of land, all
located at Naic, Cavite, for the sum of ten
thousand P10,000.00 pesos. On the same
document Emilio Jocson acknowledged receipt
of the purchase price, thus:
Na ngayon, alang-alang sa halagang
SAMPUNG LIBONG PISO (P10,000) salaping
Pilipino na aking tinanggap ng buong
kasiyahan loob at ang pagkakatanggap ay
aking hayagang inaamin sa pamamagitan ng
kasulatang ito, sa aking anak na si Agustina
Jocson, na may sapat na gulang,
mamamayang Pilipino, asawa ni Ernesto
Vasquez, at naninirahan sa Poblacion, Naic,
Cavite, ay aking ipinagbile ng lubusan at kagyat
at walang ano mang pasubali ang nabanggit na
anim na pirasong lupa na nasa unang dahon ng
dokumentong ito, sa nabanggit na Agustina
Jocson, at sa kaniyang tagapagmana o
makakahalili at gayon din nais kong banggitin
na kahit na may kamurahan ang ginawa kong
pagbibile ay dahilan sa ang nakabile ay aking
anak na sa akin at mapaglingkod, madamayin
at ma-alalahanin, na tulad din ng isa ko pang
anak na lalaki. Ang kuartang tinanggap ko na
P10,000.00, ay gagamitin ko sa aking
katandaan at mga huling araw at sa aking mga
ibang mahahalagang pangangailangan.
[Emphasis supplied]
Na nais ko ring banggitin na ang ginawa kong
ito ay hindi labag sa ano mang batas o
kautusan, sapagkat ang aking pinagbile ay akin
at nasa aking pangalan. Ang mga lupang nasa
pangalan ng aking nasirang asawa ay hindi ko
ginagalaw ni pinakikialaman at iyon ay dapat na
hatiin ng dalawa kong anak alinsunod sa umiiral
na batas (p. 13, Records.)
2) "Kasulatan ng Ganap na Bilihan,"dated July
27,1968, marked as Exhibit 4 (p. 14, Records).
On the face of this document, Emilio Jocson
purportedly sold to Agustina Jocson-Vasquez,
for the sum of FIVE THOUSAND (P5,000.00)
PESOS, two rice mills and a camarin (camalig)
located at Naic, Cavite. As in the first document,
Moises Jocson acknowledged receipt of the
purchase price:
'Na alang-alang sa halagang LIMANG LIBONG
PISO (P5,000.00) salaping Pilipino na aking
tinanggap ng buong kasiyahan loob sa aking
anak na Agustina Jocson .... Na ang halagang
ibinayad sa akin ay may kamurahan ng kaunti
ngunit dahil sa malaking pagtingin ko sa
kaniya ... kaya at pinagbile ko sa kaniya ang
mga nabanggit na pagaari kahit na hindi
malaking halaga ... (p. 14, Records).
3) Lastly, the "Deed of Extrajudicial Partition
and Adjudication with Sale, "dated March 9,
1969, marked as Exhibit 2 (p. 10-11, Records),
whereby Emilio Jocson and Agustina Jocson-
Vasquez, without the participation and
 intervention of Moises Jocson, extrajudicially
partitioned the unsettled estate of Alejandra
Poblete, dividing the same into three parts, one-
third (1/3) each for the heirs of Alejandra
Poblete, namely: Emilio Jocson, Agustina
Jocson-Vasquez and Moises Jocson. By the
same instrument, Emilio sold his one- third (1/3)
share to Agustin for the sum of EIGHT
THOUSAND (P8,000.00) PESOS. As in the
preceding documents, Emilio Jocson
acknowledged receipt of the purchase price:
Now for and in consideration of the sum of only
eight thousand (P8,000.00) pesos, which I, the
herein Emilio Jocson had received from my
daughter Agustina Jocson, do hereby sell,
cede, convey and transfer, unto the said
Agustina Jocson, her heirs and assigns,
administrators and successors in interests, in
the nature of absolute and irrevocable sale, all
my rights, interest, shares and participation,
which is equivalent to one third (1/3) share in
the properties herein mentioned and described
the one third being adjudicated unto Agustina
Jocson and the other third (1/3) portion being
the share of Moises Jocson. (p. 11, Records).
These documents were executed before a notary public.
Exhibits 3 and 4 were registered with the Office of the Register
of Deeds of Cavite on July 29, 1968 and the transfer
certificates of title covering the properties therein in the name
of Emilio Jocson, married to Alejandra Poblete," were
cancelled and new certificates of title were issued in the name
of Agustina Jocson-Vasquez. Exhibit 2 was not registered with
the Office of the Register of Deeds.
Herein petitioner filed his original complaint (Record on
Appeal, p. 27, Rollo) on June 20,1973 with the then Court of
First Instance of Naic, Cavite (docketed as Civil Case No. TM-
531), and which was twice amended. In his Second Amended
Complaint (pp. 47-58, Record on Appeal), herein petitioner
assailed the above documents, as aforementioned, for being
null and void.
It is necessary to partly quote the allegation of petitioner in his
complaint for the reason that the nature of his causes of action
is at issue, thus:
8. [With regard the first document, that] the
defendants, through fraud, deceit, undue
pressure and influence and other illegal
machinations, were able to induce, led, and
procured their father ... to sign [the] contract of
sale ..., for the simulated price of P10,000.00,
which is a consideration that is shocking to the
conscience of ordinary man and despite the fact
that said defendants have no work or livelihood
of their own ...; that the sale is null and void,
also, because it is fictitious, simulated and
fabricated contract x x x (pp. 52-53, Record on
Appeal). [Emphasis supplied]
xxx xxx xxx
12. [With regards the second and third
document, that they] are null and void because
the consent of the father, Emilio Jocson, was
obtained with fraud, deceit, undue pressure,
misrepresentation and unlawful machinations
and trickeries committed by the defendant on
him; and that the said contracts are simulated,
fabricated and fictitious, having been made
deliberately to exclude the plaintiff from
participating and with the dishonest and selfish
motive on the part of the defendants to defraud
him of his legitimate share on said properties
[subject matter thereof]; and that without any
other business or employment or any other
 source of income, defendants who were just
employed in the management and
administration of the business of their parents,
would not have the sufficient and ample means
to purchase the said properties except by
getting the earnings of the business or by
simulated consideration ... (pp. 54-55, Record
on Appeal). [Emphasis supplied]
Petitioner explained that there could be no real sale between a
father and daughter who are living under the same roof,
especially so when the father has no need of money as the
properties supposedly sold were all income-producing.
Further, petitioner claimed that the properties mentioned in
Exhibits 3 and 4 are the unliquidated conjugal properties of
Emilio Jocson and Alejandra Poblete which the former,
therefore, cannot validly sell (pp. 53, 57, Record on Appeal).
As far as Exhibit 2 is concerned, petitioner questions not the
extrajudicial partition but only the sale by his father to Agustina
of the former's 1/3 share (p. 13, Rollo).
The trial court sustained the foregoing contentions of petitioner
(pp. 59-81, Record on Appeal). It declared that the
considerations mentioned in the documents were merely
simulated and fictitious because: 1) there was no showing that
Agustina Jocson-Vasquez paid for the properties; 2) the prices
were grossly inadequate which is tantamount to lack of
consideration at all; and 3) the improbability of the sale
between Emilio Jocson and Agustina Jocson-Vasquez, taking
into consideration the circumstances obtaining between the
parties; and that the real intention of the parties were
donations designed to exclude Moises Jocson from
participating in the estate of his parents. It further declared the
properties mentioned in Exhibits 3 and 4 as conjugal
properties of Emilio Jocson and Alejandra Poblete, because
they were registered in the name of "Emilio Jocson, married to
Alejandra Poblete" and ordered that the properties subject
matter of all the documents be registered in the name of
herein petitioners and private respondents.
On appeal, the Court of Appeals in CA-G.R. No. 63474-R
rendered a decision (pp. 29-42, Rollo) and reversed that of the
trial court's and ruled that:
1. That insofar as Exhibits 3 and 4 are
concerned the appellee's complaint for
annulment, which is indisputably based on
fraud, and undue influence, is now barred by
prescription, pursuant to the settled rule that an
action for annulment of a contract based on
fraud must be filed within four (4) years, from
the discovery of the fraud, ... which in legal
contemplation is deemed to be the date of the
registration of said document with the Register
of Deeds ... and the records admittedly show
that both Exhibits 3 and 4, were all registered
on July 29, 1968, while on the other hand, the
appellee's complaint was filed on June 20,
1973, clearly beyond the aforesaid four-year
prescriptive period provided by law;
2. That the aforesaid contracts, Exhibits 2, 3,
and 4, are decisively not simulated or fictitious
contracts, since Emilio Jocson actually and
really intended them to be effective and binding
against him, as to divest him of the full
dominion and ownership over the properties
subject of said assailed contracts, as in fact all
his titles over the same were all cancelled and
new ones issued to appellant Agustina Jocson-
Vasquez ...;
3. That in regard to Exhibit 2, the same is valid
and subsisting, and the partition with sale
therein made by and between Emilio Jocson
and Agustina Jocson-Vasquez, affecting the 2/3
portion of the subject properties described
therein have all been made in accordance with
Article 996 of the New Civil Code on intestate
 succession, and the appellee's (herein
petitioner) remaining 1/3 has not been
prejudiced (pp. 41-42, Rollo).
In this petition for review, Moises Jocson raised the following
assignments of errors:
1. HAS THE RESPONDENT COURT OF
APPEALS ERRED IN CONCLUDING THAT
THE SUIT FOR THE ANNULMENT OF
CONTRACTS FILED BY PETITIONERS WITH
THE TRIAL COURT IS "BASED ON FRAUD"
AND NOT ON ITS INEXISTENCE AND
NULLITY BECAUSE OF IT'S BEING
SIMULATED OR FICTITIOUS OR WHOSE
CAUSE IS CONTRARY TO LAW, MORALS
AND GOOD CUSTOMS?
II. HAS THE RESPONDENT COURT OF
APPEALS ERRED IN CONCLUDING THAT
THE COMPLAINT FILED BY PETITIONER IN
THE TRIAL COURT IS BARRED BY
PRESCRIPTION?
III. HAS THE RESPONDENT COURT OF
APPEALS ERRED IN NOT DECLARING AS
INEXISTENT AND NULL AND VOID THE
CONTRACTS IN QUESTION AND IN
REVERSING THE DECLARING DECISION OF
THE TRIAL COURT? (p. 2, Rollo)
I.
The first and second assignments of errors are related and
shall be jointly discussed.
According to the Court of Appeals, herein petitioner's causes
of action were based on fraud. Under Article 1330 of the Civil
Code, a contract tainted by vitiated consent, as when consent
was obtained through fraud, is voidable; and the action for
annulment must be brought within four years from the time of
the discovery of the fraud (Article 1391, par. 4, Civil Code),
otherwise the contract may no longer be contested. Under
present jurisprudence, discovery of fraud is deemed to have
taken place at the time the convenant was registered with the
Register of Deeds (Gerona vs. De Guzman, No. L-19060, May
29,1964, 11 SCRA 153). Since Exhibits 3 and 4 were
registered on July 29, 1968 but Moises Jocson filed his
complaint only on June 20, 1973, the Court of Appeals ruled
that insofar as these documents were concerned, petitioner's
"annulment suit" had prescribed.
If fraud were the only ground relied upon by Moises Jocson in
assailing the questioned documents, We would have
sustained the above pronouncement. But it is not so. As
pointed out by petitioner, he further assailed the deeds of
conveyance on the ground that they were without
consideration since the amounts appearing thereon as paid
were in fact merely simulated.
According to Article 1352 of the Civil Code, contracts without
cause produce no effect whatsoever. A contract of sale with a
simulated price is void (Article 1471; also Article 1409 [3]]),
and an action for the declaration of its nullity does not
prescribe (Article 1410, Civil Code; See also, Castillo v.
Galvan, No. L-27841, October 20, l978, 85 SCRA 526).
Moises Jocsons saction, therefore, being for the judicial
declaration of nullity of Exhibits 3 and 4 on the ground of
simulated price, is imprescriptible.
II.
For petitioner, however, the above discussion may be purely
academic. The burden of proof in showing that contracts lack
consideration rests on he who alleged it. The degree of proof
becomes more stringent where the documents themselves
show that the vendor acknowledged receipt of the price, and
more so where the documents were notarized, as in the case
at bar. Upon consideration of the records of this case, We are
of the opinion that petitioner has not sufficiently proven that the
questioned documents are without consideration.
Firstly, Moises Jocson's claim that Agustina Jocson-Vasquez
had no other source of income other than what she derives
from helping in the management of the family business
(ricefields and ricemills), and which was insufficient to pay for
the purchase price, was contradicted by his own witness,
Isaac Bagnas, who testified that Agustina and her husband
were engaged in the buy and sell of palay and rice (p. 10,
t.s.n., January 14, 1975). Amazingly, petitioner himself and his
wife testified that they did not know whether or not Agustina
was involved in some other business (p. 40, t.s.n., July 30,
1974; p. 36, t.s.n., May 24, 1974).
On the other hand, Agustina testified that she was engaged in
the business of buying and selling palay and rice even before
her marriage to Ernesto Vasquez sometime in 1948 and
continued doing so thereafter (p. 4, t.s.n., March 15, 1976).
Considering the foregoing and the presumption that a contract
is with a consideration (Article 1354, Civil Code), it is clear that
petitioner miserably failed to prove his allegation.
Secondly, neither may the contract be declared void because
of alleged inadequacy of price. To begin with, there was no
showing that the prices were grossly inadequate. In fact, the
total purchase price paid by Agustina Jocson-Vasquez is
above the total assessed value of the properties alleged by
petitioner. In his Second Amended Complaint, petitioner
alleged that the total assessed value of the properties
mentioned in Exhibit 3 was P8,920; Exhibit 4, P3,500; and
Exhibit 2, P 24,840, while the purchase price paid was
P10,000, P5,000, and P8,000, respectively, the latter for the
1/3 share of Emilio Jocson from the paraphernal properties of
his wife, Alejandra Poblete. And any difference between the
market value and the purchase price, which as admitted by
Emilio Jocson was only slight, may not be so shocking
considering that the sales were effected by a father to her
daughter in which case filial love must be taken into
consideration (Alsua-Betts vs. Court of Appeals, No. L-46430-
31, April 30, 1979, 92 SCRA 332).
Further, gross inadequacy of price alone does not affect a
contract of sale, except that it may indicate a defect in the
consent, or that the parties really intended a donation or some
other act or contract (Article 1470, Civil Code) and there is
nothing in the records at all to indicate any defect in Emilio
Jocson's consent.
Thirdly, any discussion as to the improbability of a sale
between a father and his daughter is purely speculative which
has no relevance to a contract where all the essential
requisites of consent, object and cause are clearly present.
There is another ground relied upon by petitioner in assailing
Exhibits 3 and 4, that the properties subject matter therein are
conjugal properties of Emilio Jocson and Alejandra Poblete. It
is the position of petitioner that since the properties sold to
Agustina Jocson-Vasquez under Exhibit 3 were registered in
the name of "Emilio Jocson, married to Alejandra Poblete," the
certificates of title he presented as evidence (Exhibits "E', to
"J', pp. 4-9, Records) were enough proof to show that the
properties covered therein were acquired during the marriage
of their parents, and, therefore, under Article 160 of the Civil
Code, presumed to be conjugal properties.
Article 160 of the Civil Code provides that:
All property of the marriage is presumed to
belong to the conjugal partnership, unless it be
proved that it pertains exclusively to the
husband or to the wife.
In Cobb-Perez vs. Hon. Gregorio Lantin, No. L-22320, May 22,
1968, 23 SCRA 637, 644, We held that:
 Anent their claim that the shares in question are
conjugal assets, the spouses Perez adduced
not a modicum of evidence, although they
repeatedly invoked article 160 of the New Civil
Code which provides that ... . As interpreted by
this Court, the party who invokes this
presumption must first prove that the property in
controversy was acquired during the marriage.
In other words, proof of acquisition during the
coverture is a condition sine qua non for the
operation of the presumption in favor of
conjugal ownership. Thus in Camia de Reyes
vs. Reyes de Ilano [62 Phil. 629, 639], it was
held that "according to law and jurisprudence, it
is sufficient to prove that the Property was
acquired during the marriage in order that the
same may be deemed conjugal property." In the
recent case of Maramba vs. Lozano, et. al. [L-
21533, June 29, 1967, 20 SCRA 474], this
Court, thru Mr. Justice Makalintal, reiterated
that "the presumption under Article 160 of the
Civil Code refers to property acquired during
the marriage," and then concluded that since
"there is no showing as to when the property in
question was acquired...the fact that the title is
in the wife's name alone is determinative."
Similarly, in the case at bar, since there is no
evidence as to when the shares of stock were
acquired, the fact that they are registered in the
name of the husband alone is an indication that
the shares belong exclusively to said spouse.'
This pronouncement was reiterated in the case of Ponce de
Leon vs. Rehabilitation Finance Corporation, No. L-24571,
December 18, 1970, 36 SCRA 289, and later in Torela vs.
Torela, No. 1,27843, October 11, 1979, 93 SCRA 391.
It is thus clear that before Moises Jocson may validly invoke
the presumption under Article 160 he must first present proof
that the disputed properties were acquired during the marriage
of Emilio Jocson and Alejandra Poblete. The certificates of
title, however, upon which petitioner rests his claim is
insufficient. The fact that the properties were registered in the
name of "Emilio Jocson, married to Alejandra Poblete" is no
proof that the properties were acquired during the spouses'
coverture. Acquisition of title and registration thereof are two
different acts. It is well settled that registration does not confer
title but merely confirms one already existing (See Torela vs.
Torela, supra). It may be that the properties under dispute
were acquired by Emilio Jocson when he was still a bachelor
but were registered only after his marriage to Alejandra
Poblete, which explains why he was described in the
certificates of title as married to the latter.
Contrary to petitioner's position, the certificates of title show,
on their face, that the properties were exclusively Emilio
Jocson's, the registered owner. This is so because the words
"married to' preceding "Alejandra Poblete' are merely
descriptive of the civil status of Emilio Jocson Litam v. Rivera,
100 Phil. 354; Stuart v. Yatco, No. L-16467, April 27, 1962, 4
SCRA 1143; Magallon v. Montejo, G.R. No. L-73733,
December 16, 1986, 146 SCRA 282). In other words, the
import from the certificates of title is that Emilio Jocson is the
owner of the properties, the same having been registered in
his name alone, and that he is married to Alejandra Poblete.
We are not unmindful that in numerous cases We consistently
held that registration of the property in the name of only one
spouse does not negate the possibility of it being conjugal
(See Bucoy vs. Paulino, No. L-25775, April 26, 1968, 23 SCRA
248). But this ruling is not inconsistent with the above
pronouncement for in those cases there was proof that the
properties, though registered in the name of only one spouse,
were indeed conjugal properties, or that they have been
acquired during the marriage of the spouses, and therefore,
presumed conjugal, without the adverse party having
presented proof to rebut the presumption (See Mendoza vs-
Reyes, No. L-31618, August 17, 1983, 124 SCRA 154).
In the instant case, had petitioner, Moises Jocson, presented
sufficient proof to show that the disputed properties were
acquired during his parents' coverture. We would have ruled
that the properties, though registered in the name of Emilio
Jocson alone, are conjugal properties in view of the
presumption under Article 160. There being no such proof, the
condition sine qua non for the application of the presumption
does not exist. Necessarily, We rule that the properties under
Exhibit 3 are the exclusive properties of Emilio Jocson.
There being no showing also that the camarin and the two
ricemills, which are the subject of Exhibit 4, were conjugal
properties of the spouses Emilio Jocson and Alejandra
Poblete, they should be considered, likewise, as the exclusive
properties of Emilio Jocson, the burden of proof being on
petitioner.
ACCORDINGLY, the petition is DISMISSED and the decision
of the Court of Appeals is AFFIRMED.
SO ORDERED.
Narvasa, Cruz, Gancayco and Grio-Aquino, JJ., concur.
G.R. No. L-69970 November 28, 1988
FELIX DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD,
assisted by her husband, JOSE TAGACAY,respondents.
Pedro R. Perez, Jr. for petitioner.
Teodoro B. Mallonga for private respondent.
CRUZ, J.:
The subject of this dispute is the two lots owned by Domingo
Melad which is claimed by both the petitioner and the
respondent. The trial court believed the petitioner but the
respondent court, on appeal, upheld the respondent. The case
is now before us for a resolution of the issues once and for all.
On January 29, 1962, the respondent filed a complaint against
the petitioner in the then Court of First Instance of Cagayan for
recovery of a farm lot and a residential lot which she claimed
she had purchased from Domingo Melad in 1943 and were
now being unlawfully withheld by the defendant. 1 In his
answer, the petitioner denied the allegation and averred that
he was the owner of the said lots of which he had been in
open, continuous and adverse possession, having acquired
them from Domingo Melad in 1941 and 1943. 2 The case was
dismissed for failure to prosecute but was refiled in 1967. 3
At the trial, the plaintiff presented a deed of sale dated
December 4, 1943, purportedly signed by Domingo Melad and
duly notarized, which conveyed the said properties to her for
the sum of P80.00. 4 She said the amount was earned by her
mother as a worker at the Tabacalera factory. She claimed to
be the illegitimate daughter of Domingo Melad, with whom she
and her mother were living when he died in 1945. She moved
out of the farm only when in 1946 Felix Danguilan approached
her and asked permission to cultivate the land and to stay
therein. She had agreed on condition that he would deliver
part of the harvest from the farm to her, which he did from that
year to 1958. The deliveries having stopped, she then
consulted the municipal judge who advised her to file the
complaint against Danguilan. The plaintiff 's mother, her only
other witness, corroborated this testimony. 5
For his part, the defendant testified that he was the husband of
Isidra Melad, Domingo's niece, whom he and his wife Juana
Malupang had taken into their home as their ward as they had
no children of their own. He and his wife lived with the couple
in their house on the residential lot and helped Domingo with
the cultivation of the farm. Domingo Melad signed in 1941 a
private instrument in which he gave the defendant the farm
and in 1943 another private instrument in which he also gave
him the residential lot, on the understanding that the latter
would take care of the grantor and would bury him upon his
death. 6 Danguilan presented three other witnesses 7 to
corroborate his statements and to prove that he had been
living in the land since his marriage to Isidra and had remained
in possession thereof after Domingo Melad's death in 1945.
Two of said witnesses declared that neither the plaintiff nor her
mother lived in the land with Domingo Melad. 8
The decision of the trial court was based mainly on the issue
of possession. Weighing the evidence presented by the
parties, the judge 9 held that the defendant was more
believable and that the plaintiff's evidence was "unpersuasive
and unconvincing." It was held that the plaintiff's own
declaration that she moved out of the property in 1946 and left
it in the possession of the defendant was contradictory to her
claim of ownership. She was also inconsistent when she
testified first that the defendant was her tenant and later in
rebuttal that he was her administrator. The decision concluded
that where there was doubt as to the ownership of the
property, the presumption was in favor of the one actually
occupying the same, which in this case was the defendant. 10
The review by the respondent court 11 of this decision was
manifestly less than thorough. For the most part it merely
affirmed the factual findings of the trial court except for an
irrelevant modification, and it was only toward the end that it
went to and resolved what it considered the lone decisive
issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue
of which Domingo Melad had conveyed the two parcels of land
to the petitioner, were null and void. The reason was that they
were donations of real property and as such should have been
effected through a public instrument. It then set aside the
appealed decision and declared the respondents the true and
lawful owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows: 12
I, DOMINGO MELAD, of legal age, married, do
hereby declare in this receipt the truth of my
giving to Felix Danguilan, my agricultural land
located at Barrio Fugu-Macusi, Penablanca,
Province of Cagayan, Philippine Islands; that
this land is registered under my name; that I
hereby declare and bind myself that there is no
one to whom I will deliver this land except to
him as he will be the one responsible for me in
the event that I will die and also for all other
things needed and necessary for me, he will be
responsible because of this land I am giving to
him; that it is true that I have nieces and
nephews but they are not living with us and
there is no one to whom I will give my land
except to Felix Danguilan for he lives with me
and this is the length175 m. and the width is
150 m.
IN WITNESS WHEREOF, I hereby sign my
name below and also those present in the
execution of this receipt this 14th day of
September 1941.
Penablanca Cagayan, September 14, 1941.
(SGD.) DOMINGO MELAD
WITNESSES:
1. (T.M.) ISIDRO MELAD
 2. (SGD.) FELIX DANGUILAN
3. (T.M.) ILLEGIBLE
EXHIBIT 3-a is quoted as follows: 13
I, DOMINGO MELAD, a resident of Centro,
Penablanca, Province of Cagayan, do hereby
swear and declare the truth that I have
delivered my residential lot at Centro,
Penablanca, Cagayan, to Felix Danguilan, my
son-in-law because I have no child; that I have
thought of giving him my land because he will
be the one to take care of SHELTERING me or
bury me when I die and this is why I have
thought of executing this document; that the
boundaries of this lot ison the east, Cresencio
Danguilan; on the north, Arellano Street; on the
south by Pastor Lagundi and on the west, Pablo
Pelagio and the area of this lot is 35 meters
going south; width and length beginning west to
east is 40 meters.
IN WITNESS HEREOF, I hereby sign this
receipt this 18th day of December 1943.
(SGD.) DOMINGO MELAD
WITNESSES:
(SGD.) ILLEGIBLE
(SGD.) DANIEL ARAO
It is our view, considering the language of the two instruments,
that Domingo Melad did intend to donate the properties to the
petitioner, as the private respondent contends. We do not
think, however, that the donee was moved by pure liberality.
While truly donations, the conveyances
were onerous donations as the properties were given to the
petitioner in exchange for his obligation to take care of the
donee for the rest of his life and provide for his burial. Hence, it
was not covered by the rule in Article 749 of the Civil Code
requiring donations of real properties to be effected through a
public instrument. The case at bar comes squarely under the
doctrine laid down in Manalo v. De Mesa, 14 where the Court
held:
There can be no doubt that the donation in
question was made for a valuable
consideration, since the donors made it
conditional upon the donees' bearing the
expenses that might be occasioned by the
death and burial of the donor Placida Manalo, a
condition and obligation which the donee
Gregorio de Mesa carried out in his own behalf
and for his wife Leoncia Manalo; therefore, in
order to determine whether or not said donation
is valid and effective it should be sufficient to
demonstrate that, as a contract, it embraces the
conditions the law requires and is valid and
effective, although not recorded in a public
instrument.
The private respondent argues that as there was no
equivalence between the value of the lands donated and the
services for which they were being exchanged, the two
transactions should be considered pure or gratuitous
donations of real rights, hence, they should have been
effected through a public instrument and not mere private
writings. However, no evidence has been adduced to support
her contention that the values exchanged were
disproportionate or unequal.
On the other hand, both the trial court and the respondent
court have affirmed the factual allegation that the petitioner did
take care of Domingo Melad and later arranged for his burial in
accordance with the condition imposed by the donor. It is
alleged and not denied that he died when he was almost one
hundred years old, 15which would mean that the petitioner
farmed the land practically by himself and so provided for the
donee (and his wife) during the latter part of Domingo Melad's
life. We may assume that there was a fair exchange between
the donor and the donee that made the transaction an onerous
donation.
Regarding the private respondent's claim that she had
purchased the properties by virtue of a deed of sale, the
respondent court had only the following to say: "Exhibit 'E'
taken together with the documentary and oral evidence shows
that the preponderance of evidence is in favor of the
appellants." This was, we think, a rather superficial way of
resolving such a basic and important issue.
The deed of sale was allegedly executed when the respondent
was only three years old and the consideration was
supposedly paid by her mother, Maria Yedan from her
earnings as a wage worker in a factory. 16 This was itself a
suspicious circumstance, one may well wonder why the
transfer was not made to the mother herself, who was after all
the one paying for the lands. The sale was made out in favor
of Apolonia Melad although she had been using the surname
Yedan her mother's surname, before that instrument was
signed and in fact even after she got married. 17 The averment
was also made that the contract was simulated and prepared
after Domingo Melad's death in 1945. 18 It was also alleged
that even after the supposed execution of the said contract,
the respondent considered Domingo Melad the owner of the
properties and that she had never occupied the same. 19
Considering these serious challenges, the appellate court
could have devoted a little more time to examining Exhibit "E"
and the circumstances surrounding its execution before
pronouncing its validity in the manner described above. While
it is true that the due execution of a public instrument is
presumed, the presumption is disputable and will yield to
contradictory evidence, which in this case was not refuted.
At any rate, even assuming the validity of the deed of sale, the
record shows that the private respondent did not take
possession of the disputed properties and indeed waited until
1962 to file this action for recovery of the lands from the
petitioner. If she did have possession, she transferred the
same to the petitioner in 1946, by her own sworn admission,
and moved out to another lot belonging to her step-
brother. 20 Her claim that the petitioner was her tenant (later
changed to administrator) was disbelieved by the trial court,
and properly so, for its inconsistency. In short, she failed to
show that she consummated the contract of sale by actual
delivery of the properties to her and her actual possession
thereof in concept of purchaser-owner.
As was held in Garchitorena v. Almeda: 21
Since in this jurisdiction it is a fundamental and
elementary principle that ownership does not
pass by mere stipulation but only by delivery
(Civil Code, Art. 1095; Fidelity and Surety Co. v.
Wilson, 8 Phil. 51), and the execution of a
public document does not constitute sufficient
delivery where the property involved is in the
actual and adverse possession of third persons
(Addison vs. Felix, 38 Phil. 404; Masallo vs.
Cesar, 39 Phil. 134), it becomes incontestable
that even if included in the contract, the
ownership of the property in dispute did not
pass thereby to Mariano Garchitorena. Not
having become the owner for lack of delivery,
Mariano Garchitorena cannot presume to
recover the property from its present
possessors. His action, therefore, is not one of
revindicacion, but one against his vendor for
specific performance of the sale to him.
In the aforecited case of Fidelity and Deposit Co. v.
Wilson, 22 Justice Mapa declared for the Court:
 Therefore, in our Civil Code it is a fundamental
principle in all matters of contracts and a well-
known doctrine of law that "non mudis pactis
sed traditione dominia rerum transferuntur". In
conformity with said doctrine as established in
paragraph 2 of article 609 of said code, that
"the ownership and other property rights are
acquired and transmitted by law, by gift, by
testate or intestate succession, and, in
consequence of certain contracts, by tradition".
And as the logical application of this disposition
article 1095 prescribes the following: "A creditor
has the rights to the fruits of a thing from the
time the obligation to deliver it arises. However,
he shall not acquire a real right" (and the
ownership is surely such) "until the property has
been delivered to him."
In accordance with such disposition and
provisions the delivery of a thing constitutes a
necessary and indispensable requisite for the
purpose of acquiring the ownership of the same
by virtue of a contract. As Manresa states in his
Commentaries on the Civil Code, volume 10,
pages 339 and 340: "Our law does not admit
the doctrine of the transfer of property by mere
consent but limits the effect of the agreement to
the due execution of the contract. ... The
ownership, the property right, is only derived
from the delivery of a thing ... "
As for the argument that symbolic delivery was effected
through the deed of sale, which was a public instrument, the
Court has held:
The Code imposes upon the vendor the
obligation to deliver the thing sold. The thing is
considered to be delivered when it is placed "in
the hands and possession of the vendee." (Civil
Code, art. 1462). It is true that the same article
declares that the execution of a public
instrument is equivalent to the delivery of the
thing which is the object of the contract, but, in
order that this symbolic delivery may produce
the effect of tradition, it is necessary that the
vendor shall have had such control over the
thing sold that, at the moment of the sale, its
material delivery could have been made. It is
not enough to confer upon the purchaser
the ownership and theright of possession. The
thing sold must be placed in his control. When
there is no impediment whatever to prevent the
thing sold passing into the tenancy of the
purchaser by the sole will of the vendor,
symbolic delivery through the execution of a
public instrument is sufficient. But if,
notwithstanding the execution of the instrument,
the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it
himself or through another in his name,
because such tenancy and enjoyment are
opposed by the interposition of another will,
then fiction yields to realitythe delivery has
not been effected. 23
There is no dispute that it is the petitioner and not the private
respondent who is in actual possession of the litigated
properties. Even if the respective claims of the parties were
both to be discarded as being inherently weak, the decision
should still incline in favor of the petitioner pursuant to the
doctrine announced in Santos & Espinosa v. Estejada 24 where
the Court announced:
If the claim of both the plaintiff and the
defendant are weak, judgment must be for the
defendant, for the latter being in possession is
presumed to be the owner, and cannot be
obliged to show or prove a better right.
WHEREFORE, the decision of the respondent court is SET
ASIDE and that of the trial court REINSTATED, with costs
against the private respondent. It is so ordered.
Narvasa (Chairman), Gancayco, Grio-Aquino and Medialdea,
JJ., concur.
G.R. No. 91029 February 7, 1991
NORKIS DISTRIBUTORS, INC., petitioner,
vs.
THE COURT OF APPEALS & ALBERTO
NEPALES, respondents.
Jose D. Palma for petitioner.
Public Attorney's Office for private respondent.
GRIO-AQUINO, J.:p
Subject of this petition for review is the decision of the Court of
Appeals (Seventeenth Division) in CA-G.R. No. 09149,
affirming with modification the judgment of the Regional Trial
Court, Sixth (6th) Judicial Region, Branch LVI. Himamaylan,
Negros Occidental, in Civil Case No. 1272, which was private
respondent Alberto Nepales' action for specific performance of
a contract of sale with damages against petitioner Norkis
Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the
distributor of Yamaha motorcycles in Negros Occidental with
office in Bacolod City with Avelino Labajo as its Branch
Manager. On September 20, 1979, private respondent Alberto
Nepales bought from the Norkis-Bacolod branch a brand new
Yamaha Wonderbike motorcycle Model YL2DX with Engine
No.
L2-329401K Frame No. NL2-0329401, Color Maroon, then
displayed in the Norkis showroom. The price of P7,500.00 was
payable by means of a Letter of Guaranty from the
Development Bank of the Philippines (DBP), Kabankalan
Branch, which Norkis' Branch Manager Labajo agreed to
accept. Hence, credit was extended to Nepales for the price of
the motorcycle payable by DBP upon release of his motorcycle
loan. As security for the loan, Nepales would execute a chattel
mortgage on the motorcycle in favor of DBP. Branch Manager
Labajo issued Norkis Sales Invoice No. 0120 (Exh.1) showing
that the contract of sale of the motorcycle had been perfected.
Nepales signed the sales invoice to signify his conformity with
the terms of the sale. In the meantime, however, the
motorcycle remained in Norkis' possession.
On November 6, 1979, the motorcycle was registered in the
Land Transportation Commission in the name of Alberto
Nepales. A registration certificate (Exh. 2) in his name was
issued by the Land Transportation Commission on November
6, 1979 (Exh. 2-b). The registration fees were paid by him,
evidenced by an official receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a
certain Julian Nepales who was allegedly the agent of Alberto
Nepales but the latter denies it (p. 15, t.s.n., August 2, 1984).
The record shows that Alberto and Julian Nepales presented
the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the
DBP offices in Kabankalan, Negros Occidental Branch (p.
12, Rollo). The motorcycle met an accident on February 3,
1980 at Binalbagan, Negros Occidental. An investigation
conducted by the DBP revealed that the unit was being driven
by a certain Zacarias Payba at the time of the accident (p.
33, Rollo). The unit was a total wreck (p. 36, t.s.n., August
2,1984; p. 13, Rollo), was returned, and stored inside Norkis'
warehouse.
On March 20, 1980, DBP released the proceeds of private
respondent's motorcycle loan to Norkis in the total sum of
P7,500. As the price of the motorcycle later increased to
P7,828 in March, 1980, Nepales paid the difference of P328
(p. 13, Rollo) and demanded the delivery of the motorcycle.
When Norkis could not deliver, he filed an action for specific
performance with damages against Norkis in the Regional Trial
Court of Himamaylan, Negros Occidental, Sixth (6th) Judicial
Region, Branch LVI, where it was docketed as Civil Case No.
1272. He alleged that Norkis failed to deliver the motorcycle
which he purchased, thereby causing him damages.
Norkis answered that the motorcycle had already been
delivered to private respondent before the accident, hence, the
risk of loss or damage had to be borne by him as owner of the
unit.
After trial on the merits, the lower court rendered a decision
dated August 27, 1985 ruling in favor of private respondent (p.
28, Rollo.) thus:
WHEREFORE, judgment is rendered in favor of
the plaintiff and against the defendants. The
defendants are ordered to pay solidarity to the
plaintiff the present value of the motorcycle
which was totally destroyed, plus interest
equivalent to what the Kabankalan Sub-Branch
of the Development Bank of the Philippines will
have to charge the plaintiff on fits account, plus
P50.00 per day from February 3, 1980 until full
payment of the said present value of the
motorcycle, plus P1,000.00 as exemplary
damages, and costs of the litigation. In lieu of
paying the present value of the motorcycle, the
defendants can deliver to the plaintiff a brand-
new motorcycle of the same brand, kind, and
quality as the one which was totally destroyed
in their possession last February 3, 1980. (pp.
28-29,Rollo.)
On appeal, the Court of appeals affirmed the appealed
judgment on August 21, 1989, but deleted the award of
damages "in the amount of Fifty (P50.00) Pesos a day from
February 3, 1980 until payment of the present value of the
damaged vehicle" (p35, Rollo). The Court of Appeals denied
Norkis' motion for reconsideration. Hence, this Petition for
Review.
The principal issue in this case is who should bear the loss of
the motorcycle. The answer to this question would depend on
whether there had already been a transfer of ownership of the
motorcycle to private respondent at the time it was destroyed.
Norkis' theory is that:
. . . After the contract of sale has been
perfected (Art. 1475) and even before delivery,
that is, even before the ownership is transferred
to the vendee, the risk of loss is shifted from the
vendor to the vendee. Under Art. 1262, the
obligation of the vendor to deliver
a determinate thing becomes extinguished if the
thing is lost by fortuitous event (Art. 1174), that
is, without the fault or fraud of the vendor and
before he has incurred in delay (Art. 11 65, par.
3). If the thing sold is generic, the loss or
destruction does not extinguish the obligation
(Art. 1263). A thing is determinate when it is
particularly designated or physically segregated
from all others of the same class (Art. 1460).
Thus, the vendor becomes released from his
obligation to deliver the determinate thing sold
while the vendee's obligation to pay the price
subsists. If the vendee had paid the price in
advance the vendor may retain the same. The
legal effect, therefore, is that the vendee
assumes the risk of loss by fortuitous event
(Art. 1262) after the perfection of the contract to
the time of delivery. (Civil Code of the
 Philippines, Ambrosio Padilla, Vol. 5,1987 Ed.,
p. 87.)
Norkis concedes that there was no "actual" delivery of the
vehicle. However, it insists that there was constructive delivery
of the unit upon: (1) the issuance of the Sales Invoice No.
0120 (Exh. 1) in the name of the private respondent and the
affixing of his signature thereon; (2) the registration of the
vehicle on November 6, 1979 with the Land Transportation
Commission in private respondent's name (Exh. 2); and (3) the
issuance of official receipt (Exh. 3) for payment of registration
fees (p. 33, Rollo).
That argument is not well taken. As pointed out by the private
respondent, the issuance of a sales invoice does not prove
transfer of ownership of the thing sold to the buyer. An invoice
is nothing more than a detailed statement of the nature,
quantity and cost of the thing sold and has been considered
not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of delivery
whether constructive or actual, be coupled with the intention of
delivering the thing. The act, without the intention, is
insufficient (De Leon, Comments and Cases on Sales, 1978
Ed., citing Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of
private respondent, Norkis did not intend yet to transfer the
title or ownership to Nepales, but only to facilitate the
execution of a chattel mortgage in favor of the DBP for the
release of the buyer's motorcycle loan. The Letter of
Guarantee (Exh. 5) issued by the DBP, reveals that the
execution in its favor of a chattel mortgage over the purchased
vehicle is a pre-requisite for the approval of the buyer's loan. If
Norkis would not accede to that arrangement, DBP would not
approve private respondent's loan application and,
consequently, there would be no sale.
In other words, the critical factor in the different modes of
effecting delivery, which gives legal effect to the act, is the
actual intention of the vendor to deliver, and its acceptance by
the vendee. Without that intention, there is no tradition (Abuan
vs. Garcia, 14 SCRA 759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408),
this Court held:
The Code imposes upon the vendor the
obligation to deliver the thing sold. The thing is
considered to be delivered when it is "placed in
the hands and possession of the vendee." (Civil
Code, Art. 1462). It is true that the same article
declares that the execution of a public
instrument is equivalent to the delivery of the
thing which is the object of the contract, but, in
order that this symbolic delivery may produce
the effect of tradition, it is necessary that the
vendor shall have had such control over the
thing sold that, at the moment of the sale, its
material delivery could have been made. It is
not enough to confer upon the purchaser
the ownership and the right of possession. The
thing sold must be placed in his control. When
there is no impediment whatever to prevent the
thing sold passing into the tenancy of the
purchaser by the sole will of the vendor,
symbolic delivery through the execution of a
public instrument is sufficient. But if
notwithstanding the execution of the
instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing
and make use of it himself or through another
in his name, because such tenancy and
enjoyment are opposed by the interposition of
another will, then fiction yields to reality-the
delivery has riot been effects .(Emphasis
supplied.)
The Court of Appeals correctly ruled that the purpose of the
execution of the sales invoice dated September 20, 1979 (Exh.
B) and the registration of the vehicle in the name of plaintiff-
appellee (private respondent) with the Land Registration
Commission (Exhibit C) was not to transfer to Nepales the
ownership and dominion over the motorcycle, but only to
comply with the requirements of the Development Bank of the
Philippines for processing private respondent's motorcycle
loan. On March 20, 1980, before private respondent's loan
was released and before he even paid Norkis, the motorcycle
had already figured in an accident while driven by one
Zacarias Payba. Payba was not shown by Norkis to be a
representative or relative of private respondent. The latter's
supposed relative, who allegedly took possession of the
vehicle from Norkis did not explain how Payba got hold of the
vehicle on February 3, 1980. Norkis' claim that Julian Nepales
was acting as Alberto's agent when he allegedly took delivery
of the motorcycle (p. 20, Appellants' Brief), is controverted by
the latter. Alberto denied having authorized Julian Nepales to
get the motorcycle from Norkis Distributors or to enter into any
transaction with Norkis relative to said motorcycle. (p. 5, t.s.n.,
February 6, 1985). This circumstances more than amply rebut
the disputable presumption of delivery upon which Norkis
anchors its defense to Nepales' action (pp. 33-34, Rollo).
Article 1496 of the Civil Code which provides that "in the
absence of an express assumption of risk by the buyer, the
things sold remain at seller's risk until the ownership thereof is
transferred to the buyer," is applicable to this case, for there
was neither an actual nor constructive delivery of the thing
sold, hence, the risk of loss should be borne by the seller,
Norkis, which was still the owner and possessor of the
motorcycle when it was wrecked. This is in accordance with
the well-known doctrine of res perit domino.
WHEREFORE, finding no reversible error in the decision of
the Court of Appeals in CA-G.R. No. 09149, we deny the
petition for review and hereby affirm the appealed decision,
with costs against the petitioner.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur
G.R. No. 109125 December 2, 1994
ANG YU ASUNCION, ARTHUR GO AND KEH
TIONG, petitioners,
vs.
THE HON. COURT OF APPEALS and BUEN REALTY
DEVELOPMENT CORPORATION, respondents.
Antonio M. Albano for petitioners.
Umali, Soriano & Associates for private respondent.
VITUG, J.:
Assailed, in this petition for review, is the decision of the Court
of Appeals, dated 04 December 1991, in CA-G.R. SP No.
26345 setting aside and declaring without force and effect the
orders of execution of the trial court, dated 30 August 1991
and 27 September 1991, in Civil Case No. 87-41058.
The antecedents are recited in good detail by the appellate
court thusly:
On July 29, 1987 a Second Amended
Complaint for Specific Performance was filed by
Ang Yu Asuncion and Keh Tiong, et al., against
Bobby Cu Unjieng, Rose Cu Unjieng and Jose
Tan before the Regional Trial Court, Branch 31,
Manila in Civil Case No. 87-41058, alleging,
among others, that plaintiffs are tenants or
lessees of residential and commercial spaces
owned by defendants described as Nos. 630-
638 Ongpin Street, Binondo, Manila; that they
have occupied said spaces since 1935 and
have been religiously paying the rental and
complying with all the conditions of the lease
contract; that on several occasions before
October 9, 1986, defendants informed plaintiffs
that they are offering to sell the premises and
are giving them priority to acquire the same;
that during the negotiations, Bobby Cu Unjieng
offered a price of P6-million while plaintiffs
made a counter offer of P5-million; that plaintiffs
thereafter asked the defendants to put their
offer in writing to which request defendants
acceded; that in reply to defendant's letter,
plaintiffs wrote them on October 24, 1986
asking that they specify the terms and
conditions of the offer to sell; that when plaintiffs
did not receive any reply, they sent another
letter dated January 28, 1987 with the same
request; that since defendants failed to specify
the terms and conditions of the offer to sell and
because of information received that
defendants were about to sell the property,
plaintiffs were compelled to file the complaint to
compel defendants to sell the property to them.
Defendants filed their answer denying the
material allegations of the complaint and
interposing a special defense of lack of cause
of action.
After the issues were joined, defendants filed a
motion for summary judgment which was
granted by the lower court. The trial court found
that defendants' offer to sell was never
accepted by the plaintiffs for the reason that the
parties did not agree upon the terms and
conditions of the proposed sale, hence, there
was no contract of sale at all. Nonetheless, the
lower court ruled that should the defendants
subsequently offer their property for sale at a
price of P11-million or below, plaintiffs will have
the right of first refusal. Thus the dispositive
portion of the decision states:
WHEREFORE, judgment is
hereby rendered in favor of the
defendants and against the
plaintiffs summarily dismissing
the complaint subject to the
aforementioned condition that if
the defendants subsequently
decide to offer their property for
sale for a purchase price of
Eleven Million Pesos or lower,
then the plaintiffs has the option
to purchase the property or of
first refusal, otherwise,
defendants need not offer the
property to the plaintiffs if the
purchase price is higher than
Eleven Million Pesos.
SO ORDERED.
Aggrieved by the decision, plaintiffs appealed to
this Court in
CA-G.R. CV No. 21123. In a decision
promulgated on September 21, 1990 (penned
by Justice Segundino G. Chua and concurred in
by Justices Vicente V. Mendoza and Fernando
A. Santiago), this Court affirmed with
modification the lower court's judgment,
holding:
In resume, there was no meeting
of the minds between the parties
concerning the sale of the
property. Absent such
requirement, the claim for
specific performance will not lie.
Appellants' demand for actual,
moral and exemplary damages
will likewise fail as there exists
no justifiable ground for its
award. Summary judgment for
defendants was properly
granted. Courts may render
summary judgment when there
is no genuine issue as to any
material fact and the moving
party is entitled to a judgment as
a matter of law (Garcia vs. Court
of Appeals, 176 SCRA 815). All
requisites obtaining, the decision
of the court a quo is legally
justifiable.
WHEREFORE, finding the
appeal unmeritorious, the
judgment appealed from is
hereby AFFIRMED, but subject
to the following modification: The
court a quo in the aforestated
decision gave the plaintiffs-
appellants the right of first
refusal only if the property is sold
for a purchase price of Eleven
Million pesos or lower; however,
considering the mercurial and
uncertain forces in our market
economy today. We find no
reason not to grant the same
right of first refusal to herein
appellants in the event that the
subject property is sold for a
price in excess of Eleven Million
pesos. No pronouncement as to
costs.
SO ORDERED.
The decision of this Court was brought to the
Supreme Court by petition for review
on certiorari. The Supreme Court denied the
appeal on May 6, 1991 "for insufficiency in form
and substances" (Annex H, Petition).
On November 15, 1990, while CA-G.R. CV No.
21123 was pending consideration by this Court,
the Cu Unjieng spouses executed a Deed of
Sale (Annex D, Petition) transferring the
property in question to herein petitioner Buen
Realty and Development Corporation, subject
to the following terms and conditions:
1. That for and in consideration
of the sum of FIFTEEN MILLION
PESOS (P15,000,000.00),
receipt of which in full is hereby
acknowledged, the VENDORS
hereby sells, transfers and
conveys for and in favor of the
VENDEE, his heirs, executors,
administrators or assigns, the
above-described property with all
the improvements found therein
including all the rights and
interest in the said property free
from all liens and encumbrances
of whatever nature, except the
pending ejectment proceeding;
 2. That the VENDEE shall pay
the Documentary Stamp Tax,
registration fees for the transfer
of title in his favor and other
expenses incidental to the sale
of above-described property
including capital gains tax and
accrued real estate taxes.
As a consequence of the sale, TCT No.
105254/T-881 in the name of the Cu Unjieng
spouses was cancelled and, in lieu thereof, TCT
No. 195816 was issued in the name of
petitioner on December 3, 1990.
On July 1, 1991, petitioner as the new owner of
the subject property wrote a letter to the
lessees demanding that the latter vacate the
premises.
On July 16, 1991, the lessees wrote a reply to
petitioner stating that petitioner brought the
property subject to the notice of lis
pendens regarding Civil Case No. 87-41058
annotated on TCT No. 105254/T-881 in the
name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated
August 27, 1991 of the Decision in Civil Case
No. 87-41058 as modified by the Court of
Appeals in CA-G.R. CV No. 21123.
On August 30, 1991, respondent Judge issued
an order (Annex A, Petition) quoted as follows:
Presented before the Court is a
Motion for Execution filed by
plaintiff represented by Atty.
Antonio Albano. Both defendants
Bobby Cu Unjieng and Rose Cu
Unjieng represented by Atty.
Vicente Sison and Atty. Anacleto
Magno respectively were duly
notified in today's consideration
of the motion as evidenced by
the rubber stamp and signatures
upon the copy of the Motion for
Execution.
The gist of the motion is that the
Decision of the Court dated
September 21, 1990 as modified
by the Court of Appeals in its
decision in CA G.R. CV-21123,
and elevated to the Supreme
Court upon the petition for
review and that the same was
denied by the highest tribunal in
its resolution dated May 6, 1991
in G.R. No.
L-97276, had now become final
and executory. As a
consequence, there was an
Entry of Judgment by the
Supreme Court as of June 6,
1991, stating that the aforesaid
modified decision had already
become final and executory.
It is the observation of the Court
that this property in dispute was
the subject of theNotice of Lis
Pendens and that the modified
decision of this Court
promulgated by the Court of
Appeals which had become final
to the effect that should the
defendants decide to offer the
 property for sale for a price of
P11 Million or lower, and
considering the mercurial and
uncertain forces in our market
economy today, the same right of
first refusal to herein
plaintiffs/appellants in the event
that the subject property is sold
for a price in excess of Eleven
Million pesos or more.
WHEREFORE, defendants are
hereby ordered to execute the
necessary Deed of Sale of the
property in litigation in favor of
plaintiffs Ang Yu Asuncion, Keh
Tiong and Arthur Go for the
consideration of P15 Million
pesos in recognition of plaintiffs'
right of first refusal and that a
new Transfer Certificate of Title
be issued in favor of the buyer.
All previous transactions
involving the same property
notwithstanding the issuance of
another title to Buen Realty
Corporation, is hereby set aside
as having been executed in bad
faith.
SO ORDERED.
On September 22, 1991 respondent Judge
issued another order, the dispositive portion of
which reads:
WHEREFORE, let there be Writ
of Execution issue in the above-
entitled case directing the
Deputy Sheriff Ramon Enriquez
of this Court to implement said
Writ of Execution ordering the
defendants among others to
comply with the aforesaid Order
of this Court within a period of
one (1) week from receipt of this
Order and for defendants to
execute the necessary Deed of
Sale of the property in litigation
in favor of the plaintiffs Ang Yu
Asuncion, Keh Tiong and Arthur
Go for the consideration of
P15,000,000.00 and ordering the
Register of Deeds of the City of
Manila, to cancel and set aside
the title already issued in favor of
Buen Realty Corporation which
was previously executed
between the latter and
defendants and to register the
new title in favor of the aforesaid
plaintiffs Ang Yu Asuncion, Keh
Tiong and Arthur Go.
SO ORDERED.
On the same day, September 27, 1991 the
corresponding writ of execution (Annex C,
Petition) was issued. 1
On 04 December 1991, the appellate court, on appeal to it by
private respondent, set aside and declared without force and
effect the above questioned orders of the court a quo.
In this petition for review on certiorari, petitioners contend that
Buen Realty can be held bound by the writ of execution by
virtue of the notice of lis pendens, carried over on TCT No.
195816 issued in the name of Buen Realty, at the time of the
latter's purchase of the property on 15 November 1991 from
the Cu Unjiengs.
We affirm the decision of the appellate court.
A not too recent development in real estate transactions is the
adoption of such arrangements as the right of first refusal, a
purchase option and a contract to sell. For ready reference, we
might point out some fundamental precepts that may find
some relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do
(Art. 1156, Civil Code). The obligation is constituted upon the
concurrence of the essential elements thereof, viz: (a)
The vinculum juris or juridical tie which is the efficient cause
established by the various sources of obligations (law,
contracts, quasi-contracts, delicts and quasi-delicts); (b)
the object which is the prestation or conduct; required to be
observed (to give, to do or not to do); and (c) the subject-
persons who, viewed from the demandability of the obligation,
are the active (obligee) and the passive (obligor) subjects.
Among the sources of an obligation is a contract (Art. 1157,
Civil Code), which is a meeting of minds between two persons
whereby one binds himself, with respect to the other, to give
something or to render some service (Art. 1305, Civil Code). A
contract undergoes various stages that include its negotiation
or preparation, its perfection and, finally, its
consummation. Negotiation covers the period from the time
the prospective contracting parties indicate interest in the
contract to the time the contract is concluded (perfected).
The perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract
which is consensual as to perfection is so established upon a
mere meeting of minds, i.e., the concurrence of offer and
acceptance, on the object and on the cause thereof. A contract
which requires, in addition to the above, the delivery of the
object of the agreement, as in a pledge or commodatum, is
commonly referred to as a real contract. In a solemn contract,
compliance with certain formalities prescribed by law, such as
in a donation of real property, is essential in order to make the
act valid, the prescribed form being thereby an essential
element thereof. The stage of consummationbegins when the
parties perform their respective undertakings under the
contract culminating in the extinguishment thereof.
Until the contract is perfected, it cannot, as an independent
source of obligation, serve as a binding juridical relation. In
sales, particularly, to which the topic for discussion about the
case at bench belongs, the contract is perfected when a
person, called the seller, obligates himself, for a price certain,
to deliver and to transfer ownership of a thing or right to
another, called the buyer, over which the latter agrees. Article
1458 of the Civil Code provides:
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.
When the sale is not absolute but conditional, such as in a
"Contract to Sell" where invariably the ownership of the thing
sold is retained until the fulfillment of a positive suspensive
condition (normally, the full payment of the purchase price),
the breach of the condition will prevent the obligation to
convey title from acquiring an obligatory force. 2 In Dignos vs.
Court of Appeals (158 SCRA 375), we have said that, although
denominated a "Deed of Conditional Sale," a sale is still
absolute where the contract is devoid of any proviso that title is
reserved or the right to unilaterally rescind is stipulated, e.g.,
until or unless the price is paid. Ownership will then be
transferred to the buyer upon actual or constructive delivery
(e.g., by the execution of a public document) of the property
sold. Where the condition is imposed upon the perfection of
the contract itself, the failure of the condition would prevent
such perfection. 3 If the condition is imposed on the obligation
of a party which is not fulfilled, the other party may either
waive the condition or refuse to proceed with the sale (Art.
1545, Civil Code). 4
An unconditional mutual promise to buy and sell, as long as
the object is made determinate and the price is fixed, can be
obligatory on the parties, and compliance therewith may
accordingly be exacted. 5
An accepted unilateral promise which specifies the thing to be
sold and the price to be paid, when coupled with a valuable
consideration distinct and separate from the price, is what may
properly be termed a perfected contract ofoption. This contract
is legally binding, and in sales, it conforms with the second
paragraph of Article 1479 of the Civil Code, viz:
Art. 1479. . . .
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.
(1451a) 6
Observe, however, that the option is not the contract of sale
itself. 7 The optionee has the right, but not the obligation, to
buy. Once the option is exercised timely, i.e., the offer is
accepted before a breach of the option, a bilateral promise to
sell and to buy ensues and both parties are then reciprocally
bound to comply with their respective undertakings. 8
Let us elucidate a little. A negotiation is formally initiated by an
offer. An imperfect promise (policitacion) is merely an offer.
Public advertisements or solicitations and the like are
ordinarily construed as mere invitations to make offers or only
as proposals. These relations, until a contract is perfected, are
not considered binding commitments. Thus, at any time prior
to the perfection of the contract, either negotiating party may
stop the negotiation. The offer, at this stage, may be
withdrawn; the withdrawal is effective immediately after its
manifestation, such as by its mailing and not necessarily when
the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil.
270). Where a period is given to the offeree within which to
accept the offer, the following rules generally govern:
(1) If the period is not itself founded upon or supported by a
consideration, the offeror is still free and has the right to
withdraw the offer before its acceptance, or, if an acceptance
has been made, before the offeror's coming to know of such
fact, by communicating that withdrawal to the offeree (see Art.
1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102
Phil. 948, holding that this rule is applicable to a unilateral
promise to sell under Art. 1479, modifying the previous
decision in South Western Sugar vs. Atlantic Gulf, 97 Phil.
249; see also Art. 1319, Civil Code; Rural Bank of Paraaque,
Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45
SCRA 368). The right to withdraw, however, must not be
exercised whimsically or arbitrarily; otherwise, it could give rise
to a damage claim under Article 19 of the Civil Code which
ordains that "every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith."
(2) If the period has a separate consideration, a contract of
"option" is deemed perfected, and it would be a breach of that
contract to withdraw the offer during the agreed period. The
option, however, is an independent contract by itself, and it is
to be distinguished from the projected main agreement
(subject matter of the option) which is obviously yet to be
concluded. If, in fact, the optioner-offeror withdraws the offer
before its acceptance(exercise of the option) by the optionee-
offeree, the latter may not sue for specific performance on the
proposed contract ("object" of the option) since it has failed to
reach its own stage of perfection. The optioner-offeror,
however, renders himself liable for damages for breach of the
option. In these cases, care should be taken of the real nature
of the consideration given, for if, in fact, it has been intended to
be part of the consideration for the main contract with a right of
withdrawal on the part of the optionee, the main contract could
be deemed perfected; a similar instance would be an "earnest
money" in a contract of sale that can evidence its perfection
(Art. 1482, Civil Code).
In the law on sales, the so-called "right of first refusal" is an
innovative juridical relation. Needless to point out, it cannot be
deemed a perfected contract of sale under Article 1458 of the
Civil Code. Neither can the right of first refusal, understood in
its normal concept, per se be brought within the purview of an
option under the second paragraph of Article 1479,
aforequoted, or possibly of an offer under Article 1319 9 of the
same Code. An option or an offer would require, among other
things, 10 a clear certainty on both the object and the cause or
consideration of the envisioned contract. In a right of first
refusal, while the object might be made determinate, the
exercise of the right, however, would be dependent not only on
the grantor's eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at
best be so described as merely belonging to a class of
preparatory juridical relations governed not by contracts (since
the essential elements to establish the vinculum juris would
still be indefinite and inconclusive) but by, among other laws of
general application, the pertinent scattered provisions of the
Civil Code on human conduct.
Even on the premise that such right of first refusal has been
decreed under a final judgment, like here, its breach cannot
justify correspondingly an issuance of a writ of execution under
a judgment that merely recognizes its existence, nor would it
sanction an action for specific performance without thereby
negating the indispensable element of consensuality in the
perfection of contracts. 11 It is not to say, however, that the right
of first refusal would be inconsequential for, such as already
intimated above, an unjustified disregard thereof, given, for
instance, the circumstances expressed in Article 19 12 of the
Civil Code, can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be
stressed, has merely accorded a "right of first refusal" in favor
of petitioners. The consequence of such a declaration entails
no more than what has heretofore been said. In fine, if, as it is
here so conveyed to us, petitioners are aggrieved by the
failure of private respondents to honor the right of first refusal,
the remedy is not a writ of execution on the judgment, since
there is none to execute, but an action for damages in a
proper forum for the purpose.
Furthermore, whether private respondent Buen Realty
Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and whether or
not it should, in any case, be considered bound to respect the
registration of the lis pendens in Civil Case No. 87-41058 are
matters that must be independently addressed in appropriate
proceedings. Buen Realty, not having been impleaded in Civil
Case No. 87-41058, cannot be held subject to the writ of
execution issued by respondent Judge, let alone ousted from
the ownership and possession of the property, without first
being duly afforded its day in court.
We are also unable to agree with petitioners that the Court of
Appeals has erred in holding that the writ of execution varies
the terms of the judgment in Civil Case No. 87-41058, later
affirmed in CA-G.R. CV-21123. The Court of Appeals, in this
regard, has observed:
Finally, the questioned writ of execution is in
variance with the decision of the trial court as
modified by this Court. As already stated, there
was nothing in said decision 13 that decreed the
execution of a deed of sale between the Cu
Unjiengs and respondent lessees, or the fixing
of the price of the sale, or the cancellation of
title in the name of petitioner (Limpin vs. IAC,
 147 SCRA 516; Pamantasan ng Lungsod ng
Maynila vs. IAC, 143 SCRA 311; De Guzman
vs. CA, 137 SCRA 730; Pastor vs. CA, 122
SCRA 885).
It is likewise quite obvious to us that the decision in Civil Case
No. 87-41058 could not have decreed at the time the
execution of any deed of sale between the Cu Unjiengs and
petitioners.
WHEREFORE, we UPHOLD the Court of Appeals in ultimately
setting aside the questioned Orders, dated 30 August 1991
and 27 September 1991, of the court a quo. Costs against
petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno and Mendoza, JJ., concur.
Kapunan, J., took no part.
Feliciano, J., is on leave.
G.R. No. 133879 November 21, 2001
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner,
vs.
MAYFAIR THEATER, INC., respondent.
PANGANIBAN, J.:
General propositions do not decide specific cases. Rather,
laws are interpreted in the context of the peculiar factual
situation of each proceeding. Each case has its own flesh and
blood and cannot be ruled upon on the basis of isolated
clinical classroom principles.
While we agree with the general proposition that a contract of
sale is valid until rescinded, it is equally true that ownership of
the thing sold is not acquired by mere agreement, but by
tradition or delivery. The peculiar facts of the present
controversy as found by this Court in an earlier relevant
Decision show that delivery was not actually effected; in fact, it
was prevented by a legally effective impediment. Not having
been the owner, petitioner cannot be entitled to the civil fruits
of ownership like rentals of the thing sold. Furthermore,
petitioner's bad faith, as again demonstrated by the specific
factual milieu of said Decision, bars the grant of such benefits.
Otherwise, bad faith would be rewarded instead of punished.
The Case
Filed before this Court is a Petition for Review1 under Rule 45
of the Rules of Court, challenging the March 11, 1998
Order2 of the Regional Trial Court of Manila (RTC), Branch 8,
in Civil Case No. 97-85141. The dispositive portion of the
assailed Order reads as follows:
"WHEREFORE, the motion to dismiss filed by
defendant Mayfair is hereby GRANTED, and the
complaint filed by plaintiff Equatorial is hereby
DISMISSED."3
Also questioned is the May 29, 1998 RTC Order4 denying
petitioner's Motion for Reconsideration.
The Facts
The main factual antecedents of the present Petition are
matters of record, because it arose out of an earlier case
decided by this Court on November 21, 1996,
entitled Equatorial Realty Development, Inc. v. Mayfair
Theater, Inc.5 (henceforth referred to as the "mother case"),
docketed as G.R No. 106063.
Carmelo & Bauermann, Inc. ("Camelo" ) used to own a parcel
of land, together with two 2-storey buildings constructed
thereon, located at Claro M. Recto Avenue, Manila, and
covered by TCT No. 18529 issued in its name by the Register
of Deeds of Manila.
On June 1, 1967, Carmelo entered into a Contract of Lease
with Mayfair Theater Inc. ("Mayfair") for a period of 20 years.
The lease covered a portion of the second floor and
mezzanine of a two-storey building with about 1,610 square
meters of floor area, which respondent used as a movie house
known as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered into a
second Contract of Lease with Carmelo for the lease of
another portion of the latter's property namely, a part of the
second floor of the two-storey building, with a floor area of
about 1,064 square meters; and two store spaces on the
ground floor and the mezzanine, with a combined floor area of
about 300 square meters. In that space, Mayfair put up
another movie house known as Miramar Theater. The Contract
of Lease was likewise for a period of 20 years.
Both leases contained a provision granting Mayfair a right of
first refusal to purchase the subject properties. However, on
July 30, 1978 within the 20-year-lease term the subject
properties were sold by Carmelo to Equatorial Realty
Development, Inc. ("Equatorial") for the total sum of
P11,300,000, without their first being offered to Mayfair.
As a result of the sale of the subject properties to Equatorial,
Mayfair filed a Complaint before the Regional Trial Court of
Manila (Branch 7) for (a) the annulment of the Deed of
Absolute Sale between Carmelo and Equatorial, (b) specific
performance, and (c) damages. After trial on the merits, the
lower court rendered a Decision in favor of Carmelo and
Equatorial. This case, entitled "Mayfair" Theater, Inc. v.
Carmelo and Bauermann, Inc., et al.," was docketed as Civil
Case No. 118019.
On appeal (docketed as CA-GR CV No. 32918), the Court of
Appeals (CA) completely reversed and set aside the judgment
of the lower court.
The controversy reached this Court via G.R No. 106063. In
this mother case, it denied the Petition for Review in this wise:
"WHEREFORE, the petition for review of the decision
of the Court of Appeals, dated June 23, 1992, in CA-
G.R. CV No. 32918, is HEREBY DENIED. The Deed of
Absolute Sale between petitioners Equatorial Realty
Development, Inc. and Carmelo & Bauermann, Inc. is
hereby deemed rescinded; Carmelo & Bauermann is
ordered to return to petitioner Equatorial Realty
Development the purchase price. The latter is directed
to execute the deeds and documents necessary to
return ownership to Carmelo & Bauermann of the
disputed lots. Carmelo & Bauermann is ordered to
allow Mayfair Theater, Inc. to buy the aforesaid lots for
P11,300,000.00."6
The foregoing Decision of this Court became final and
executory on March 17, 1997. On April 25, 1997, Mayfair filed
a Motion for Execution, which the trial court granted.
However, Carmelo could no longer be located. Thus, following
the order of execution of the trial court, Mayfair deposited with
the clerk of court a quo its payment to Carmelo in the sum of
P11,300,000 less; P847,000 as withholding tax. The lower
court issued a Deed of Reconveyance in favor of Carmelo and
a Deed of Sale in favor of Mayfair. On the basis of these
documents, the Registry of Deeds of Manila canceled
Equatorial's titles and issued new Certificates of Title7 in the
name of Mayfair.
Ruling on Equatorial's Petition for Certiorari and Petition
contesting the foregoing manner of execution, the CA in its
Resolution of November 20, 1998, explained that Mayfair had
no right to deduct the P847,000 as withholding tax. Since
Carmelo could no longer be located, the appellate court
ordered Mayfair to deposit the said sum with the Office of the
Clerk of Court, Manila, to complete the full amount of
P11,300,000 to be turned over to Equatorial.
Equatorial questioned the legality of the above CA ruling
before this Court in G.R No. 136221 entitled "Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc." In a Decision
promulgated on May 12, 2000,8 this Court directed the trial
court to follow strictly the Decision in GR. No. 106063, the
mother case. It explained its ruling in these words:
"We agree that Carmelo and Bauermann is obliged to
return the entire amount of eleven million three
hundred thousand pesos (P11,300,000.00) to
Equatorial. On the other hand, Mayfair may not deduct
from the purchase price the amount of eight hundred
forty-seven thousand pesos (P847,000.00) as
withholding tax. The duty to withhold taxes due, if any,
is imposed on the seller Carmelo and Bauermann,
Inc."9
Meanwhile, on September 18, 1997 barely five months after
Mayfair had submitted its Motion for Execution before the RTC
of Manila, Branch 7 Equatorial filed with the Regional Trial
Court of Manila, Branch 8, an action for the collection of a sum
of money against Mayfair, claiming payment of rentals or
reasonable compensation for the defendant's use of the
subject premises after its lease contracts had expired. This
action was the progenitor of the present case.
In its Complaint, Equatorial alleged among other things that
the Lease Contract covering the premises occupied by Maxim
Theater expired on May 31, 1987, while the Lease Contract
covering the premises occupied by Miramar Theater lapsed on
March 31, 1989.10 Representing itself as the owner of the
subject premises by reason of the Contract of Sale on July 30,
1978, it claimed rentals arising from Mayfair's occupation
thereof.
Ruling of the RTC Manila, Branch 8
As earlier stated, the trial court dismissed the Complaint via
the herein assailed Order and denied the Motion for
Reconsideration filed by Equatorial.11
The lower court debunked the claim of petitioner for unpaid
back rentals, holding that the rescission of the Deed of
Absolute Sale in the mother case did not confer on Equatorial
any vested or residual proprietary rights, even in expectancy.
In granting the Motion to Dismiss, the court a quo held that the
critical issue was whether Equatorial was the owner of the
subject property and could thus enjoy the fruits or rentals
therefrom. It declared the rescinded Deed of Absolute Sale as
avoid at its inception as though it did not happen."
The trial court ratiocinated as follows:
"The meaning of rescind in the aforequoted decision is
to set aside. In the case of Ocampo v. Court of
Appeals, G.R. No. 97442, June 30, 1994, the Supreme
Court held that, 'to rescind is to declare a contract void
in its inception and to put an end as though it never
were. It is not merely to terminate it and release parties
from further obligations to each other but to abrogate it
from the beginning and restore parties to relative
positions which they would have occupied had no
contract ever been made.'
 "Relative to the foregoing definition, the Deed of
Absolute Sale between Equatorial and Carmelo dated
July 31, 1978 is void at its inception as though it did not
happen.
"The argument of Equatorial that this complaint for
back rentals as 'reasonable compensation for use of
the subject property after expiration of the lease
contracts presumes that the Deed of Absolute Sale
dated July 30, 1978 from whence the fountain of
Equatorial's all rights flows is still valid and existing.
xxx xxx xxx
"The subject Deed of Absolute Sale having been
rescinded by the Supreme Court, Equatorial is not the
owner and does not have any right to demand
backrentals from the subject property. . .12
The trial court added: "The Supreme Court in the Equatorial
case, G.R No. 106063, has categorically stated that the Deed
of Absolute Sale dated July 31, 1978 has been rescinded
subjecting the present complaint to res judicata."13
Hence, the present recourse.14
Issues
Petitioner submits, for the consideration of this Court, the
following issues:15
"A
The basis of the dismissal of the Complaint by the
Regional Trial Court not only disregards basic concepts
and principles in the law on contracts and in civil law,
especially those on rescission and its corresponding
legal effects, but also ignores the dispositive portion of
the Decision of the Supreme Court in G.R. No. 106063
entitled 'Equatorial Realty Development, Inc. &
Carmelo & Bauermann, Inc. vs. Mayfair Theater, Inc.'
"B.
The Regional Trial Court erred in holding that the Deed
of Absolute Sale in favor of petitioner by Carmelo &
Bauermann, Inc., dated July 31, 1978, over the
premises used and occupied by respondent, having
been 'deemed rescinded' by the Supreme Court in
G.R. No. 106063, is 'void at its inception as though it
did not happen.'
"C.
The Regional Trial Court likewise erred in holding that
the aforesaid Deed of Absolute Sale, dated July 31,
1978, having been 'deemed rescinded' by the Supreme
Court in G.R. No. 106063, petitioner 'is not the owner
and does not have any right to demand backrentals
from the subject property,' and that the rescission of the
Deed of Absolute Sale by the Supreme Court does not
confer to petitioner 'any vested right nor any residual
proprietary rights even in expectancy.'
"D.
The issue upon which the Regional Trial Court
dismissed the civil case, as stated in its Order of March
11, 1998, was not raised by respondent in its Motion to
Dismiss.
"E.
The sole ground upon which the Regional Trial Court
dismissed Civil Case No. 97-85141 is not one of the
 grounds of a Motion to Dismiss under Sec. 1 of Rule 16
of the 1997 Rules of Civil Procedure."
Basically, the issues can be summarized into two: (1) the
substantive issue of whether Equatorial is entitled to back
rentals; and (2) the procedural issue of whether the court a
quo's dismissal of Civil Case No. 97-85141 was based on one
of the grounds raised by respondent in its Motion to Dismiss
and covered by Rule 16 of the Rules of Court.
This Court's Ruling
The Petition is not meritorious.
First Issue:
Ownership of Subject Properties
We hold that under the peculiar facts and circumstances of the
case at bar, as found by this Court en banc in its Decision
promulgated in 1996 in the mother case, no right of ownership
was transferred from Carmelo to Equatorial in view of a patent
failure to deliver the property to the buyer.
Rental a Civil
Fruit of Ownership
To better understand the peculiarity of the instant case, let us
begin with some basic parameters. Rent is a civil fruit16 that
belongs to the owner of the property producing it17 by right of
accession.18 Consequently and ordinarily, the rentals that fell
due from the time of the perfection of the sale to petitioner until
its rescission by final judgment should belong to the owner of
the property during that period.
By a contract of sale, "one of the contracting parties obligates
himself to transfer ownership of and to deliver a determinate
thing and the other to pay therefor a price certain in money or
its equivalent."19
Ownership of the thing sold is a real right,20 which the buyer
acquires only upon delivery of the thing to him "in any of the
ways specified in articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred
from the vendor to the vendee."21 This right is transferred, not
merely by contract, but also by tradition or delivery. 22 Non
nudis pactis sed traditione dominia rerum transferantur. And
there is said to be delivery if and when the thing sold "is placed
in the control and possession of the vendee."23 Thus, it has
been held that while the execution of a public instrument of
sale is recognized by law as equivalent to the delivery of the
thing sold,24 such constructive or symbolic delivery, being
merely presumptive, is deemed negated by the failure of the
vendee to take actual possession of the land sold.25
Delivery has been described as a composite act, a thing in
which both parties must join and the minds of both parties
concur. It is an act by which one party parts with the title to and
the possession of the property, and the other acquires the right
to and the possession of the same. In its natural sense,
delivery means something in addition to the delivery of
property or title; it means transfer of possession.26 In the Law
on Sales, delivery may be either actual or constructive, but
both forms of delivery contemplate "the absolute giving up of
the control and custody of the property on the part of the
vendor, and the assumption of the same by the vendee."27
Possession Never
Acquired by Petitioner
Let us now apply the foregoing discussion to the present
issue. From the peculiar facts of this case, it is clear that
petitioner never took actual control and possession of the
property sold, in view of respondent's timely objection to the
sale and the continued actual possession of the property. The
objection took the form of a court action impugning the sale
which, as we know, was rescinded by a judgment rendered by
this Court in the mother case. It has been held that the
execution of a contract of sale as a form of constructive
delivery is a legal fiction. It holds true only when there is no
impediment that may prevent the passing of the property from
the hands of the vendor into those of the vendee.28 When
there is such impediment, "fiction yields to reality the
delivery has not been effected."29
Hence, respondent's opposition to the transfer of the property
by way of sale to Equatorial was a legally sufficient
impediment that effectively prevented the passing of the
property into the latter's hands.
This was the same impediment contemplated in Vda. de
Sarmiento v. Lesaca,30 in which the Court held as follows:
"The question that now arises is: Is there any
stipulation in the sale in question from which we can
infer that the vendor did not intend to deliver outright
the possession of the lands to the vendee? We find
none. On the contrary, it can be clearly seen therein
that the vendor intended to place the vendee in actual
possession of the lands immediately as can be inferred
from the stipulation that the vendee 'takes actual
possession thereof . . . with full rights to dispose, enjoy
and make use thereof in such manner and form as
would be most advantageous to herself.' The
possession referred to in the contract evidently refers
to actual possession and not merely symbolical
inferable from the mere execution of the document.
"Has the vendor complied with this express
commitment? she did not. As provided in Article 1462,
the thing sold shall be deemed delivered when the
vendee is placed in the control and possession thereof,
which situation does not here obtain because from the
execution of the sale up to the present the vendee was
never able to take possession of the lands due to the
insistent refusal of Martin Deloso to surrender them
claiming ownership thereof. And although it is
postulated in the same article that the execution of a
public document is equivalent to delivery, this legal
fiction only holds true when there is no impediment that
may prevent the passing of the property from the
hands of the vendor into those of the vendee. x x x."31
The execution of a public instrument gives rise, therefore, only
to a prima facie presumption of delivery. Such presumption is
destroyed when the instrument itself expresses or implies that
delivery was not intended; or when by other means it is shown
that such delivery was not effected, because a third person
was actually in possession of the thing. In the latter case, the
sale cannot be considered consummated.
However, the point may be raised that under Article 1164 of
the Civil Code, Equatorial as buyer acquired a right to the fruits
of the thing sold from the time the obligation to deliver the
property to petitioner arose.32 That time arose upon the
perfection of the Contract of Sale on July 30, 1978, from which
moment the laws provide that the parties to a sale may
reciprocally demand performance.33 Does this mean that
despite the judgment rescinding the sale, the right to the
fruits34 belonged to, and remained enforceable by, Equatorial?
Article 1385 of the Civil Code answers this question in the
negative, because "[r]escission creates the obligation to return
the things which were the object of the contract, together with
their fruits, and the price with its interest; x x x" Not only the
land and building sold, but also the rental payments paid, if
any, had to be returned by the buyer.
Another point. The Decision in the mother case stated that
"Equatorial x x x has received rents" from Mayfair "during all
the years that this controversy has been litigated." The
Separate Opinion of Justice Teodoro Padilla in the mother
case also said that Equatorial was "deriving rental income"
from the disputed property. Even hereinponente's Separate
Concurring Opinion in the mother case recognized these
rentals. The question now is: Do all these statements concede
actual delivery?
The answer is "No." The fact that Mayfair paid rentals to
Equatorial during the litigation should not be interpreted to
mean either actual delivery or ipso facto recognition of
Equatorial's title.
The CA Records of the mother case 35 show that Equatorial
as alleged buyer of the disputed properties and as alleged
successor-in-interest of Carmelo's rights as lessor
submitted two ejectment suits against Mayfair. Filed in the
Metropolitan Trial Court of Manila, the first was docketed as
Civil Case No. 121570 on July 9, 1987; and thesecond, as
Civil Case No. 131944 on May 28, 1990. Mayfair eventually
won them both. However, to be able to maintain physical
possession of the premises while awaiting the outcome of the
mother case, it had no choice but to pay the rentals.
The rental payments made by Mayfair should not be construed
as a recognition of Equatorial as the new owner. They were
made merely to avoid imminent eviction. It is in this context
that one should understand the aforequoted factual statements
in the ponencia in the mother case, as well as the Separate
Opinion of Mr. Justice Padilla and the Separate Concurring
Opinion of the herein ponente.
At bottom, it may be conceded that, theoretically, a rescissible
contract is valid until rescinded. However, thisgeneral principle
is not decisive to the issue of whether Equatorial ever acquired
the right to collect rentals. What is decisive is the civil law rule
that ownership is acquired, not by mere agreement, but by
tradition or delivery. Under the factual environment of this
controversy as found by this Court in the mother case,
Equatorial was never put in actual and effective control or
possession of the property because of Mayfair's timely
objection.
As pointed out by Justice Holmes, general propositions do not
decide specific cases. Rather, "laws are interpreted in the
context of the peculiar factual situation of each case. Each
case has its own flesh and blood and cannot be decided on
the basis of isolated clinical classroom principles."36
In short, the sale to Equatorial may have been valid from
inception, but it was judicially rescinded before it could be
consummated. Petitioner never acquired ownership, not
because the sale was void, as erroneously claimed by the trial
court, but because the sale was not consummated by a legally
effective delivery of the property sold.
Benefits Precluded by
Petitioner's Bad Faith
Furthermore, assuming for the sake of argument that there
was valid delivery, petitioner is not entitled to any benefits from
the "rescinded" Deed of Absolute Sale because of its bad faith.
This being the law of the mother case decided in 1996, it may
no longer be changed because it has long become final and
executory. Petitioner's bad faith is set forth in the following
pertinent portions of the mother case:
"First and foremost is that the petitioners acted in bad
faith to render Paragraph 8 'inutile.'
xxx xxx xxx
"Since Equatorial is a buyer in bad faith, this finding
renders the sale to it of the property in question
rescissible. We agree with respondent Appellate Court
that the records bear out the fact that Equatorial was
aware of the lease contracts because its lawyers had,
prior to the sale, studied the said contracts. As such,
Equatorial cannot tenably claim to be a purchaser in
good faith, and, therefore, rescission lies.
xxx xxx xxx
 "As also earlier emphasized, the contract of sale
between Equatorial and Carmelo is characterized
by bad faith, since it was knowingly entered into in
violation of the rights of and to the prejudice of Mayfair.
In fact, as correctly observed by the Court of Appeals,
Equatorial admitted that its lawyers had studied the
contract of lease prior to the sale. Equatorial's
knowledge of the stipulations therein should have
cautioned it to look further into the agreement to
determine if it involved stipulations that would prejudice
its own interests.
xxx xxx xxx
"On the part of Equatorial, it cannot be a buyer in good
faith because it bought the property with notice and full
knowledge that Mayfair had a right to or interest in the
property superior to its own. Carmelo and Equatorial
took unconscientious advantage of Mayfair."37 (Italics
supplied)
Thus, petitioner was and still is entitled solely to he return of
the purchase price it paid to Carmelo; no more, no less. This
Court has firmly ruled in the mother case that neither of them
is entitled to any consideration of equity, as both "took
unconscientious advantage of Mayfair."38
In the mother case, this Court categorically denied the
payment of interest, a fruit of ownership. By the same token,
rentals, another fruit of ownership, cannot be granted without
mocking this Court's en banc Decision, which has long
become final.
Petitioner's claim of reasonable compensation for respondent's
use and occupation of the subject property from the time the
lease expired cannot be countenanced. If it suffered any loss,
petitioner must bear it in silence, since it had wrought that loss
upon itself. Otherwise, bad faith would be rewarded instead of
punished.@lawphil.net
We uphold the trial court's disposition, not for the reason it
gave, but for (a) the patent failure to deliver the property and
(b) petitioner's bad faith, as above discussed.
Second Issue:itc-alf
Ground in Motion to Dismiss
Procedurally, petitioner claims that the trial court deviated from
the accepted and usual course of judicial proceedings when it
dismissed Civil Case No. 97-85141 on a ground not raised in
respondent's Motion to Dismiss. Worse, it allegedly based its
dismissal on a ground not provided for in a motion to dismiss
as enunciated in the Rules of Court.@lawphil.net
We are not convinced A review of respondent's Motion to
Dismiss Civil Case No. 97-85141 shows that there were two
grounds invoked, as follows:
"(A)
Plaintiff is guilty of forum-shopping.itc-alf
"(B)
Plaintiff's cause of action, if any, is barred by prior
judgment."39
The court a quo ruled, inter alia, that the cause of action of
petitioner plaintiff in the case below) had been barred by a
prior judgment of this Court in G.R No. 106063, the mother
case.
Although it erred in its interpretation of the said Decision when
it argued that the rescinded Deed of Absolute Sale was avoid,"
we hold, nonetheless, that petitioner's cause of action is
indeed barred by a prior judgment of this Court. As already
discussed, our Decision in G.R No. 106063 shows that
petitioner is not entitled to back rentals, because it never
became the owner of the disputed properties due to a failure of
delivery. And even assuming arguendo that there was a valid
delivery, petitioner's bad faith negates its entitlement to the
civil fruits of ownership, like interest and rentals.
Under the doctrine of res judicata or bar by prior judgment, a
matter that has been adjudicated by a court of competent
jurisdiction must be deemed to have been finally and
conclusively settled if it arises in any subsequent litigation
between the same parties and for the same cause.40 Thus, "[a]
final judgment on the merits rendered by a court of competent
jurisdiction is conclusive as to the rights of the parties and their
privies and constitutes an absolute bar to subsequent actions
involving the same claim, demand, or cause of action."41 Res
judicata is based on the ground that the "party to be affected,
or some other with whom he is in privity, has litigated the same
matter in a former action in a court of competent jurisdiction,
and should not be permitted to litigate it again.42
"The Supreme Court in the Equatorial case, G.R. No.
106063 has categorically stated that the Deed of
Absolute Sale dated July 31, 1978 has been rescinded
subjecting the present complaint to res
judicata."43(Emphasis in the original)
Hence, the trial court decided the Motion to Dismiss on the
basis of res judicata, even if it erred in interpreting the
meaning of "rescinded" as equivalent to "void" In short, it ruled
on the ground raised; namely, bar by prior judgment. By
granting the Motion, it disposed correctly, even if its legal
reason for nullifying the sale was wrong. The correct reasons
are given in this Decision.
WHEREFORE, the Petition is hereby DENIED. Costs against
petitioner.itc-alf
SO ORDERED.

It frees the parties from undergoing all over again the rigors of
unnecessary suits and repetitive trials. At the same time, it
prevents the clogging of court dockets. Equally important, it
stabilizes rights and promotes the rule of law.@lawphil.net

We find no need to repeat the foregoing disquisitions on the

first issue to show satisfaction of the elements of res judicata.
Suffice it to say that, clearly, our ruling in the mother case bars
petitioner from claiming back rentals from respondent.
Although the court a quo erred when it declared "void from
inception" the Deed of Absolute Sale between Carmelo and
petitioner, our foregoing discussion supports the grant of the
Motion to Dismiss on the ground that our prior judgment in G.R
No. 106063 has already resolved the issue of back rentals.

On the basis of the evidence presented during the hearing of

Mayfair's Motion to Dismiss, the trial court found that the issue
of ownership of the subject property has been decided by this
Court in favor of Mayfair. We quote the RTC: