Pichel v.

Alonzo
G.R. Number - Date
Ponente

Topic: Requisites of a Valid Subject Matter – Must be existing, future or contingent

(Emptio rei speratae / Emptio spei)

Petitioners: Luis Pichel

Respondents: Prudencio Alonzo

FACTS:
• This case originated in the CFI Basilan City, as an action for the annulment of a “Deed of Sale”
dated August 14, 1968
o The Deed of Sale was executed by vendor Prudencio Alonzo, in favor of vendee Luis
Pichel
o It involved a property awarded to Alonzo by the Philippine Government under RA 477
• Alonzo, in consideration of Php4,200 paid by Pichel … Alonzo hereby sells,
transfers, convets, by way of absolute sale, all the coconut fruits of his coconut
land.
• The sale is for all the fruits on the aforementioned land presently found therein as
well as for future fruits to be produced.
• Time: September 15, 1968 up to January 1, 1976
• It will be Pichel (vendee) who will do the harvesting and gathering of the fruits.

• November 9, 1972: The pre-trial conference was concluded, where the following facts were
admitted by the parties:
o Alonzo was awarded that particular land (Lot 21 of a Subdivision Plan in Balactasan,
Lamitan, Basilan City), by the PH Government in accordance with RA 477.
o Jan 7, 1965: The award was CANCELLED by the Board of Liquidators, because Alonzo
was proved to have alienated the land to another, in violation of the law.
• In August 14, 1968: Alonzo and his wife sold to Pichel all the fruits of the coconut
tress which may be harvested from Lot 21 (Php 4,200)
• Even as of the date of sale, the land was still under lease to one Ramon Sua
• Pichel had to pay Php 3650 to Sua so that Sua would release the land.
• July 1972: Pichel, for the first time since the execution of the deed of sale, caused the
harvest of coconut in the land.
o 1972: the rights of Alonzo to the land was reinstated* (important for issue 1 later).

• Two issues were raised in the lower court:

o Whether or not the defendant (Pichel) actually paid to plaintiff (Alonzo) the full sum of
Php 4,200 upon execution of the deed of sale
• YES. Alonzo “stipulated and agreed that his client … admits full payment by the
defendant (Pichel)”
o Is the deed of sale the prohibited encumbrance contemplated in Sec 8 of RA 477
(This is now the issue under review by SC)?
• The lower court held that the deed of sale of the coconut trees found in Lot 21 is, for
all legal intents and purposes, a contract of lease of the land itself.
• The court concluded that the deed of sale in question is the encumbrance
PROHIBITED under RA 477 Section8.
  Sec 8 – “any permanent improvements thereon shall not be subject to
encumbrance or alienation from the date of the award of the land or the
improvements thereon and for a term of ten years from and after the date of
issuance.”
• The lower court declared the deed of sale null and void, and Alonzo was ordered to
pay back to Pichel the amount of Php 4,200.

ISSUES + HELD:
1. W/N the cancellation of the award automatically divests awardee of his rights over the lot.
[NO]
 Such cancellation DOES NOT result in the immediate reversion of the property subject to
the award to the State.
 JBL Reyes in Ras v. Sua: “until and unless an appropriate proceeding for the reversion is
instituted by the State, and its reacquisition of the ownership and possession of the land
decreed by the competent court, the grantee cannot be said to have been divested of
whatever right that he may have over the same property.”
o There is nothing on record showing that there were reversion proceedings
instituted by the State against Lot 21
o Instead, the admitted fact even is that the award was reinstated in 1972!!
 With this, Alonzo is not deemed to gave lost any of hs rights as grantee of Lot 21, during
the period material to the case at bar.

2. W/N the interpretation of the document (Deed of Sale) is called for. [NO] *impt. to topic*
 Petitioners are correct that construction or interpretation of the deed of sale in question is
NOT called for.
 Looking at the deed of sale, the Court finds no ambiguity nor obscurity in the provisions.
o There is really no doubt as to the real intentions of the contracting parties.
o The terms of the agreement are clear and unequivocal.
 With this, literal and plain meaning thereof should be observed.
o NCC 1370: If the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall
control.
 The first and fundamental duty of the courts is to apply the contract in accordance to its
express terms, interpretation being resorted to onlu when literal application is impossible.
o Deed of Sale is precisely what it purports to be
o It is a sale of coconut fruits, not the lease of the land.
o The object of the contract thus, are the coconut fruits from September 15,
1968 to January 1, 1976.
o Such is a valid contract of sale with all the essential elements of a contract
(NCC1485)
 The subject matter of the contract of sale in question are the FRUITS of the coconut
trees in Lot 21 (Important to the Topic on subject matter).
o Subject matter is a determinate thing.
o Under NCC 1461, things having a potential existence may be the object of the
contract of sale
o Sibal v. Valdez: pending crops which have potential existence may be the subject
matter of sale.
o Citing US Cases: Things that may potentially exist, but reasonably certain to come
into existence as the natural increment or usual incident of something already in
 existence; – may be subject of the sale, so long as it is specific and identified, and
owned by the vendor.

 The Court also disagrees with the trial court that this is actually a contract of lease.
o The essential difference between a sale and lease is that the delivery of the thing
sold (sale) transfers ownership; no transfer of ownership in lease.
o The possession and enjoyment of the coconut trees =/= possession and enjoyment
of the land itself.
 These rights are distict and separate from each other
 The first pertaining to accessory/improvements (coconut), while the
second is the principal (land).
 A transfer of accessory/improvement does NOT transfer the principal.
It is the accessory which follows the principal.

3. W/N the deed of sale in question is an encumbrance on the land and its improvements
prohibited by Sec 8 RA 477
 The Court, upon close and careful examination of Sec 8 RA 477, held that the grantee of
the parcel of land under RA 477 is NOT prohibited from alienating or disposing of the
natural and/or industrial fruits of the land awarded to him.
 It is the alienation of the land or permanent improvements itself which is prohibited.
o Permanent improvements = things incorporated, attached to the property in a fixed
manner, artificially or naturally
o While coconut trees are natural permanent improvements, the nuts/fruits which
are intended to be gathered or severed may be used, enjoyed, sold or disposed
by the owner.
 Here, the owner of Lot 21 had the right and prerogative to sell the coconut fruits of
the trees growing on the property.
o It was intended for awardees to make good and productive use of the lands
awarded to the,
o This will improve their standard of living AND ensure that they would be able to
pay annual payments to the gov’t of the purchase price of the lots awarded to them.
o The aim of the law is achieved, grantees are encouraged to be industrious and
productive; government is also assured of payment on annual installments of the
land.
o If this was not allowed, then it would lead to an absurd situation where grantee is
not allowed to receive and enjoy the fruits of the property in the real and complete
sense.
 The respondent here, is also NOT allowed to change his mind and claim that it is an
implied lease.
o The respondent after receiving consideration for the fruits, cannot be allowed to
impugn the validity of the contracts he entered into, to the prejudice of petitioner
who contracted in good faith and for a consideration.

4. W/N awarding respondent attorney’s fees even if the deed of sale in question is violative
of Sec 8 RA 477
 Court did not pass upon this issue because this question is apparently based on the
erroneous finding and conclusion that the contract at bar is one of lease.
RULING: IN VIEW OF THE FOREGOING, the judgment of the lower court is hereby SET
ASIDE and another one is entered DISMISSING the complaint. Without costs.