Sales Part III Page |1
G.R. No. L-22487 May 21, 1969
ASUNCION ATILANO, CRISTINA ATILANO, ROSARIO ATILANO,
assisted by their respective husbands, HILARIO ROMANO, FELIPE
BERNARDO, and MAXIMO LACANDALO, ISABEL ATILANO and
GREGORIO ATILANO, plaintiffs-appellees,
vs.
LADISLAO ATILANO and GREGORIO M. ATILANO, defendants-
appellants.
Civil law; Contracts; Reformation of instruments; Remedy where there is
simple mistake in the drafting of the document.—The remedy where there
is simple mistake in the drafting of the document of sale in designating the
land object of the sale, is reformation of the instrument, there being a
meeting of the minds of the parties to a contract.
Same; Same; Mistake; When not a ground for annulment of contract of
sale.—Where the real intention of the parties is the sale of a piece of land
but there is a mistake in designating the particular lot to be sold in the
document, the mistake does not vitiate the consent of the parties, or affect
the validity and binding effect of the contract.
Same; Same; Same; Same; Reason.—The reason is that when one sells or
buys real property—a piece of land, for example—one sells or buys the
property as he sees it, in its actual setting and by its physical metes and
bounds, and not by the mere lot number assigned to it in the certif icate of
title.
Same; Same; When reconveyance, not reformation of instrument, is
proper.—In this case, the deed of sale need not be reformed. The parties
have retained possession of their respective properties conformably to the
real intention of the parties to that sale, and all they should do is to
execute mutual deeds of conveyance.
Climaco and Azcarraga for plaintiff-appellee.
T. de los Santos for defendants-appellants.
MAKALINTAL, J.:
In 1916 Eulogio Atilano I acquired, by purchase from one Gerardo
Villanueva, lot No. 535 of the then municipality of Zamboanga cadastre.
The vendee thereafter obtained transfer certificate of title No. 1134 in his
name. In 1920 he had the land subdivided into five parts, identified as lots
Nos. 535-A, 535-B, 535-C, 535-D and 535-E, respectively. On May 18 of
the same year, after the subdivision had been effected, Eulogio Atilano I,
for the sum of P150.00, executed a deed of sale covering lot No. 535-E in
favor of his brother Eulogio Atilano II, who thereupon obtained transfer
certificate of title No. 3129 in his name. Three other portions, namely lots
Nos. 535-B, 535-C and 535-D, were likewise sold to other persons, the
original owner, Eulogio Atilano I, retaining for himself only the remaining
portion of the land, presumably covered by the title to lot No. 535-A. Upon
his death the title to this lot passed to Ladislao Atilano, defendant in this
case, in whose name the corresponding certificate (No. T-5056) was
issued.
On December 6, 1952, Eulogio Atilano II having become a widower upon
the death of his wife Luisa Bautista, he and his children obtained transfer
certificate of title No. 4889 over lot No. 535-E in their names as co-
owners. Then, on July 16, 1959, desiring to put an end to the co-
ownership, they had the land resurveyed so that it could properly be
subdivided; and it was then discovered that the land they were actually
occupying on the strength of the deed of sale executed in 1920 was lot No.
535-A and not lot 535-E, as referred to in the deed, while the land which
remained in the possession of the vendor, Eulogio Atilano I, and which
passed to his successor, defendant Ladislao Atilano, was lot No. 535-E and
not lot No. 535-A.
On January 25, 1960, the heirs of Eulogio Atilano II, who was by then also
deceased, filed the present action in the Court of First Instance of
Zamboanga, alleging, inter alia, that they had offered to surrender to the
defendants the possession of lot No. 535-A and demanded in return the
possession of lot No. 535-E, but that the defendants had refused to accept
the exchange. The plaintiffs' insistence is quite understandable, since lot
No. 535-E has an area of 2,612 square meters, as compared to the 1,808
square-meter area of lot No. 535-A.

In their answer to the complaint the defendants alleged that the reference
to lot No. 535-E in the deed of sale of May 18, 1920 was an involuntary
error; that the intention of the parties to that sale was to convey the lot
correctly identified as lot No. 535-A; that since 1916, when he acquired
the entirety of lot No. 535, and up to the time of his death, Eulogio Atilano
I had been possessing and had his house on the portion designated as lot
No. 535-E, after which he was succeeded in such possession by the
defendants herein; and that as a matter of fact Eulogio Atilano I even
increased the area under his possession when on June 11, 1920 he bought
a portion of an adjoining lot, No. 536, from its owner Fruto del Carpio. On
the basis of the foregoing allegations the defendants interposed a
counterclaim, praying that the plaintiffs be ordered to execute in their
favor the corresponding deed of transfer with respect to lot No. 535-E.
The trial court rendered judgment for the plaintiffs on the sole ground that
since the property was registered under the Land Registration Act the
defendants could not acquire it through prescription. There can be, of
course, no dispute as to the correctness of this legal proposition; but the
defendants, aside from alleging adverse possession in their answer and
counterclaim, also alleged error in the deed of sale of May 18, 1920, thus:
"Eulogio Atilano 1.o, por equivocacion o error involuntario, cedio y
traspaso a su hermano Eulogio Atilano 2.do el lote No. 535-E en vez del
Lote No. 535-A."lawphi1.ñet
The logic and common sense of the situation lean heavily in favor of the
defendants' contention. When one sells or buys real property — a piece of
land, for example — one sells or buys the property as he sees it, in its
actual setting and by its physical metes and bounds, and not by the mere
lot number assigned to it in the certificate of title. In the particular case
before us, the portion correctly referred to as lot No. 535-A was already in
the possession of the vendee, Eulogio Atilano II, who had constructed his
residence therein, even before the sale in his favor even before the
subdivision of the entire lot No. 535 at the instance of its owner, Eulogio
Atillano I. In like manner the latter had his house on the portion correctly
identified, after the subdivision, as lot No. 535-E, even adding to the area
thereof by purchasing a portion of an adjoining property belonging to a
different owner. The two brothers continued in possession of the
respective portions the rest of their lives, obviously ignorant of the initial
Sales Part III Page |2
mistake in the designation of the lot subject of the 1920 until 1959, when
the mistake was discovered for the first time.
The real issue here is not adverse possession, but the real intention of the
parties to that sale. From all the facts and circumstances we are convinced
that the object thereof, as intended and understood by the parties, was
that specific portion where the vendee was then already residing, where he
reconstructed his house at the end of the war, and where his heirs, the
plaintiffs herein, continued to reside thereafter: namely, lot No. 535-A;
and that its designation as lot No. 535-E in the deed of sale was simple
mistake in the drafting of the document.1âwphi1.ñet The mistake did not
vitiate the consent of the parties, or affect the validity and binding effect of
the contract between them. The new Civil Code provides a remedy for such
a situation by means of reformation of the instrument. This remedy is
available when, there having been a meeting of the funds of the parties to
a contract, their true intention is not expressed in the instrument
purporting to embody the agreement by reason of mistake, fraud,
inequitable conduct on accident (Art. 1359, et seq.) In this case, the deed
of sale executed in 1920 need no longer reformed. The parties have
retained possession of their respective properties conformably to the real
intention of the parties to that sale, and all they should do is to execute
mutual deeds of conveyance.
WHEREFORE, the judgment appealed from is reversed. The plaintiffs are
ordered to execute a deed of conveyance of lot No. 535-E in favor of the
defendants, and the latter in turn, are ordered to execute a similar
document, covering lot No. 595-A, in favor of the plaintiffs. Costs against
the latter.

No. L-24732. April 30, 1968.
Pio SIAN MELLIZA, petitioner, vs. CITY OF ILOILO, UNIVERSITY OF
THE PHILIPPINES and THE COURT OF APPEALS, respondents.
Contracts; Interpretation of contracts involves question of law.—The
appeal before the Supreme Court calls for the interpretation of a contract,
a public instrument dated November 15, 1932. Interpretation of such
contract involves a question of law since the contract is in the nature of
law as between the parties and their successors-in-interest.
Sale; Object of sale must be determinate- or capable of being
determinate.—The requirement of the law is that a sale must have for its
object a determinate thing and this requirement is fulfilled as long as, at
the time the contract is entered into, the object of the sale is capable of
being made determinate without the necessity of a new or further
agreement between the parties (Art. 1273, old Civil Code; Art. 1460, new
Civil Code).
APPEAL from a decision of the Court of Appeals.
BENGZON, J.P., J.:
Juliana Melliza during her lifetime owned, among other properties, three
parcels of residential land in Iloilo City registered in her name under
Original Certificate of Title No. 3462. Said parcels of land were known as
Lots Nos. 2, 5 and 1214. The total area of Lot No. 1214 was 29,073 square
meters.
On November 27, 1931 she donated to the then Municipality of Iloilo,
9,000 square meters of Lot 1214, to serve as site for the municipal
hall. 1 The donation was however revoked by the parties for the reason that
the area donated was found inadequate to meet the requirements of the
development plan of the municipality, the so-called "Arellano Plan". 2
Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc.
into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further
Sales Part III Page |3
divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved
by the Bureau of Lands, Lot 1214-B-1 with 4,562 square meters, became
known as Lot 1214-B; Lot 1214-B-2, with 6,653 square meters, was
designated as Lot 1214-C; and Lot 1214-B-13, with 4,135 square meters,
became Lot 1214-D.
On November 15, 1932 Juliana Melliza executed an instrument without any
caption containing the following:
Que en consideracion a la suma total de SEIS MIL CUATRO
CIENTOS VEINTIDOS PESOS (P6,422.00), moneda filipina que por
la presente declaro haber recibido a mi entera satisfaccion del
Gobierno Municipal de Iloilo, cedo y traspaso en venta real y
difinitiva a dicho Gobierno Municipal de Iloilo los lotes y porciones
de los mismos que a continuacion se especifican a saber: el lote
No. 5 en toda su extension; una porcion de 7669 metros cuadrados
del lote No. 2, cuya porcion esta designada como sub-lotes Nos. 2-
B y 2-C del piano de subdivision de dichos lotes preparado por la
Certeza Surveying Co., Inc., y una porcion de 10,788 metros
cuadrados del lote No. 1214 — cuya porcion esta designada como
sub-lotes Nos. 1214-B-2 y 1214-B-3 del mismo plano de
subdivision.
Asimismo nago constar que la cesion y traspaso que ariba se
mencionan es de venta difinitiva, y que para la mejor identificacion
de los lotes y porciones de los mismos que son objeto de la
presente, hago constar que dichos lotes y porciones son los que
necesita el Gobierno Municipal de Iloilo para la construccion de
avenidas, parques y City Hall site del Municipal Government Center
de iloilo, segun el plano Arellano.
On January 14, 1938 Juliana Melliza sold her remaining interest in Lot
1214 to Remedios Sian Villanueva who thereafter obtained her own
registered title thereto, under Transfer Certificate of Title No. 18178.
Remedios in turn on November 4, 1946 transferred her rights to said
portion of land to Pio Sian Melliza, who obtained Transfer Certificate of
Title No. 2492 thereover in his name. Annotated at the back of Pio Sian
Melliza's title certificate was the following:

... (a) that a portion of 10,788 square meters of Lot 1214 now
designated as Lots Nos. 1214-B-2 and 1214-B-3 of the subdivision
plan belongs to the Municipality of Iloilo as per instrument dated
November 15, 1932....
On August 24, 1949 the City of Iloilo, which succeeded to the Municipality
of Iloilo, donated the city hall site together with the building thereon, to
the University of the Philippines (Iloilo branch). The site donated consisted
of Lots Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350
square meters, more or less.
Sometime in 1952, the University of the Philippines enclosed the site
donated with a wire fence. Pio Sian Melliza thereupon made
representations, thru his lawyer, with the city authorities for payment of
the value of the lot (Lot 1214-B). No recovery was obtained, because as
alleged by plaintiff, the City did not have funds (p. 9, Appellant's Brief.)
The University of the Philippines, meanwhile, obtained Transfer Certificate
of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-
D.
On December 10, 1955 Pio Sian Melliza filed an action in the Court of First
Instance of Iloilo against Iloilo City and the University of the Philippines for
recovery of Lot 1214-B or of its value.
The defendants answered, contending that Lot 1214-B was included in the
public instrument executed by Juliana Melliza in favor of Iloilo municipality
in 1932. After stipulation of facts and trial, the Court of First Instance
rendered its decision on August 15, 1957, dismissing the complaint. Said
court ruled that the instrument executed by Juliana Melliza in favor of Iloilo
municipality included in the conveyance Lot 1214-B. In support of this
conclusion, it referred to the portion of the instrument stating:
Asimismo hago constar que la cesion y traspaso que arriba se
mencionan es de venta difinitiva, y que para la major identificacion
de los lotes y porciones de los mismos que son objeto de la
presente, hago constar que dichos lotes y porciones son los que
Sales Part III Page |4
necesita el Gobierno municipal de Iloilo para la construccion de
avenidas, parques y City Hall site del Municipal Government Center
de Iloilo, segun el plano Arellano.
and ruled that this meant that Juliana Melliza not only sold Lots 1214-C
and 1214-D but also such other portions of lots as were necessary for the
municipal hall site, such as Lot 1214-B. And thus it held that Iloilo City had
the right to donate Lot 1214-B to the U.P.
Pio Sian Melliza appealed to the Court of Appeals. In its decision on May
19, 1965, the Court of Appeals affirmed the interpretation of the Court of
First Instance, that the portion of Lot 1214 sold by Juliana Melliza was not
limited to the 10,788 square meters specifically mentioned but included
whatever was needed for the construction of avenues, parks and the city
hall site. Nonetheless, it ordered the remand of the case for reception of
evidence to determine the area actually taken by Iloilo City for the
construction of avenues, parks and for city hall site.
The present appeal therefrom was then taken to Us by Pio Sian Melliza.
Appellant maintains that the public instrument is clear that only Lots Nos.
1214-C and 1214-D with a total area of 10,788 square meters were the
portions of Lot 1214 included in the sale; that the purpose of the second
paragraph, relied upon for a contrary interpretation, was only to better
identify the lots sold and none other; and that to follow the interpretation
accorded the deed of sale by the Court of Appeals and the Court of First
Instance would render the contract invalid because the law requires as an
essential element of sale, a "determinate" object (Art. 1445, now 1448,
Civil Code).
Appellees, on the other hand, contend that the present appeal improperly
raises only questions of fact. And, further, they argue that the parties to
the document in question really intended to include Lot 1214-B therein, as
shown by the silence of the vendor after Iloilo City exercised ownership
thereover; that not to include it would have been absurd, because said lot
is contiguous to the others admittedly included in the conveyance, lying
directly in front of the city hall, separating that building from Lots 1214-C
and 1214-D, which were included therein. And, finally, appellees argue
that the sale's object was determinate, because it could be ascertained, at

the time of the execution of the contract, what lots were needed by Iloilo
municipality for avenues, parks and city hall site "according to the Arellano
Plan", since the Arellano plan was then already in existence.
The appeal before Us calls for the interpretation of the public instrument
dated November 15, 1932. And interpretation of such contract involves a
question of law, since the contract is in the nature of law as between the
parties and their successors-in-interest.
At the outset, it is well to mark that the issue is whether or not the
conveyance by Juliana Melliza to Iloilo municipality included that portion of
Lot 1214 known as Lot 1214-B. If not, then the same was included, in the
instrument subsequently executed by Juliana Melliza of her remaining
interest in Lot 1214 to Remedios Sian Villanueva, who in turn sold what
she thereunder had acquired, to Pio Sian Melliza. It should be stressed,
also, that the sale to Remedios Sian Villanueva — from which Pio Sian
Melliza derived title — did not specifically designate Lot 1214-B, but only
such portions of Lot 1214 as were not included in the previous sale to Iloilo
municipality (Stipulation of Facts, par. 5, Record on Appeal, p. 23). And
thus, if said Lot 1214-B had been included in the prior conveyance to Iloilo
municipality, then it was excluded from the sale to Remedios Sian
Villanueva and, later, to Pio Sian Melliza.
The point at issue here is then the true intention of the parties as to the
object of the public instrument Exhibit "D". Said issue revolves on the
paragraph of the public instrument aforequoted and its purpose, i.e.,
whether it was intended merely to further describe the lots already
specifically mentioned, or whether it was intended to cover other lots not
yet specifically mentioned.
First of all, there is no question that the paramount intention of the parties
was to provide Iloilo municipality with lots sufficient or adequate in area
for the construction of the Iloilo City hall site, with its avenues and parks.
For this matter, a previous donation for this purpose between the same
parties was revoked by them, because of inadequacy of the area of the lot
donated.
Sales Part III Page |5
Secondly, reading the public instrument in toto, with special reference to
the paragraphs describing the lots included in the sale, shows that said
instrument describes four parcels of land by their lot numbers and area;
and then it goes on to further describe, not only those lots already
mentioned, but the lots object of the sale, by stating that said lots are the
ones needed for the construction of the city hall site, avenues and
parks according to the Arellano plan. If the parties intended merely to
cover the specified lots — Lots 2, 5, 1214-C and 1214-D, there would
scarcely have been any need for the next paragraph, since these lots are
already plainly and very clearly described by their respective lot number
and area. Said next paragraph does not really add to the clear description
that was already given to them in the previous one.
It is therefore the more reasonable interpretation, to view it as describing
those other portions of land contiguous to the lots aforementioned that, by
reference to the Arellano plan, will be found needed for the purpose at
hand, the construction of the city hall site.
Appellant however challenges this view on the ground that the description
of said other lots in the aforequoted second paragraph of the public
instrument would thereby be legally insufficient, because the object would
allegedly not be determinate as required by law.
Such contention fails on several counts. The requirement of the law that a
sale must have for its object a determinate thing, is fulfilled as long as, at
the time the contract is entered into, the object of the sale is capable of
being made determinate without the necessity of a new or further
agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New
Civil Code). The specific mention of some of the lots plus the statement
that the lots object of the sale are the ones needed for city hall site,
avenues and parks, according to the Arellano plan, sufficiently provides a
basis, as of the time of the execution of the contract, for rendering
determinate said lots without the need of a new and further agreement of
the parties.
The Arellano plan was in existence as early as 1928. As stated, the
previous donation of land for city hall site on November 27, 1931 was
revoked on March 6, 1932 for being inadequate in area under said Arellano
 Sales Part III Page |6

plan. Appellant claims that although said plan existed, its metes and WHEREFORE, the decision appealed from is affirmed insofar as it affirms
bounds were not fixed until 1935, and thus it could not be a basis for that of the Court of First Instance, and the complaint in this case is
determining the lots sold on November 15, 1932. Appellant however fails dismissed. No costs. So ordered.
to consider that the area needed under that plan for city hall site was then
already known; that the specific mention of some of the lots covered by
the sale in effect fixed the corresponding location of the city hall site under
the plan; that, therefore, considering the said lots specifically mentioned in
the public instrument Exhibit "D", and the projected city hall site, with its
area, as then shown in the Arellano plan (Exhibit 2), it could be
determined which, and how much of the portions of land contiguous to
those specifically named, were needed for the construction of the city hall
site.

And, moreover, there is no question either that Lot 1214-B is contiguous

to Lots 1214-C and 1214-D, admittedly covered by the public instrument.
It is stipulated that, after execution of the contract Exhibit "D", the
Municipality of Iloilo possessed it together with the other lots sold. It sits
practically in the heart of the city hall site. Furthermore, Pio Sian Melliza,
from the stipulation of facts, was the notary public of the public
instrument. As such, he was aware of its terms. Said instrument was also
registered with the Register of Deeds and such registration was annotated
at the back of the corresponding title certificate of Juliana Melliza. From
these stipulated facts, it can be inferred that Pio Sian Melliza knew of the
aforesaid terms of the instrument or is chargeable with knowledge of
them; that knowing so, he should have examined the Arellano plan in
relation to the public instrument Exhibit "D"; that, furthermore, he should
have taken notice of the possession first by the Municipality of Iloilo, then
by the City of Iloilo and later by the University of the Philippines of Lot
1214-B as part of the city hall site conveyed under that public instrument,
and raised proper objections thereto if it was his position that the same
was not included in the same. The fact remains that, instead, for twenty
long years, Pio Sian Melliza and his predecessors-in-interest, did not object
to said possession, nor exercise any act of possession over Lot 1214-B.
Applying, therefore, principles of civil law, as well as laches, estoppel, and
equity, said lot must necessarily be deemed included in the conveyance in
favor of Iloilo municipality, now Iloilo City.

G.R. No. 74470 March 8, 1989
NATIONAL GRAINS AUTHORITY and WILLLAM CABAL, petitioners
vs.
THE INTERMEDIATE APPELLATE COURT and LEON
SORIANO, respondents.
Civil Law; Sale; Contract; Definitions; Requisites of Contract.—Article 1458
of the Civil Code of the Philippines defines sale as a contract whereby one
of the contracting parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other party to pay therefore a
price certain in money or its equivalent. A contract, on the other hand, is a
meeting of minds between two (2) persons whereby one binds himself,
with respect to the other, to give something or to render some service
(Art. 1305, Civil Code of the Philippines). The essential requisites of
contracts are: (1) consent of the contracting parties, (2) object certain
which is the subject matter of the contract, and (3) cause of the obligation
which is established.
Same; Same; Same; When the offer of Soriano was accepted by the NFA,
there was already a meeting of the minds between the parties.—In case at
bar, Soriano initially offered to sell palay grains produced in his farmland
to NFA. When the latter accepted the offer by noting in Soriano’s Farmer’s
Information Sheet a quota of 2,640 cavans, there was already a meeting
of the minds between the parties. The object of the contract, being the
palay grains produced in Soriano’s farmland and the NFA was to pay the
same depending upon its quality. The fact that the exact number of cavans
of palay to be delivered has not been determined does not affect the
perfection of the contract.
Same; Same; Same; Contention that there was no contract of sale
because of the absence of consent not correct; acceptance referred to is
the acceptance of the offer and not of the goods delivered.—The above
contention of petitioner is not correct. Sale is a consensual contract, “x x
x, there is perfection when there is consent upon the subject matter and
price, even if neither is delivered.” (Obana vs. C.A., L-36249, March 29,
1985, 135 SCRA 557, 560). This is provided by Article 1475 of the Civil
Code which states: “Art. 1475. The contract of sale is perfected at the
Sales Part III Page |7
moment there is a meeting of minds upon the thing which is the object of
the contract and upon the price. “x x x.” The acceptance referred to which
determines consent is the acceptance of the offer of one party by the other
and not of the goods delivered as contended by petitioners.
Same; Same; Same; Once the contract is perfected, the parties are bound
to comply with their mutual obligations.—From the moment the contract of
sale is perfected, it is incumbent upon the parties to comply with their
mutual obligations or “the parties may reciprocally demand performance”
thereof. National Grains Authority vs. IAC, 171 SCRA 131, G.R. No. 74470
March 8, 1989Cordoba, Zapanta, Rola & Garcia for petitioner National
Grains Authority.
Plaridel Mar Israel for respondent Leon Soriano.
MEDIALDEA, J.:
This is a petition for review of the decision (pp. 9-21, Rollo) of the
Intermediate Appellate Court (now Court of Appeals) dated December 23,
1985 in A.C. G.R. CV No. 03812 entitled, "Leon Soriano, Plaintiff- Appellee
versus National Grains Authority and William Cabal, Defendants
Appellants", which affirmed the decision of the Court of First Instance of
Cagayan, in Civil Case No. 2754 and its resolution (p. 28, Rollo) dated
April 17, 1986 which denied the Motion for Reconsideration filed therein.
The antecedent facts of the instant case are as follows:
Petitioner National Grains Authority (now National Food Authority, NFA for
short) is a government agency created under Presidential Decree No. 4.
One of its incidental functions is the buying of palay grains from qualified
farmers.
On August 23, 1979, private respondent Leon Soriano offered to sell palay
grains to the NFA, through William Cabal, the Provincial Manager of NFA
stationed at Tuguegarao, Cagayan. He submitted the documents required
by the NFA for pre-qualifying as a seller, namely: (1) Farmer's Information
Sheet accomplished by Soriano and certified by a Bureau of Agricultural
Extension (BAEX) technician, Napoleon Callangan, (2) Xerox copies of four

(4) tax declarations of the riceland leased to him and copies of the lease
contract between him and Judge Concepcion Salud, and (3) his Residence
Tax Certificate. Private respondent Soriano's documents were processed
and accordingly, he was given a quota of 2,640 cavans of palay. The quota
noted in the Farmer's Information Sheet represented the maximum
number of cavans of palay that Soriano may sell to the NFA.
In the afternoon of August 23, 1979 and on the following day, August 24,
1979, Soriano delivered 630 cavans of palay. The palay delivered during
these two days were not rebagged, classified and weighed. when Soriano
demanded payment of the 630 cavans of palay, he was informed that its
payment will be held in abeyance since Mr. Cabal was still investigating on
an information he received that Soriano was not a bona tide farmer and
the palay delivered by him was not produced from his farmland but was
taken from the warehouse of a rice trader, Ben de Guzman. On August 28,
1979, Cabal wrote Soriano advising him to withdraw from the NFA
warehouse the 630 cavans Soriano delivered stating that NFA cannot
legally accept the said delivery on the basis of the subsequent certification
of the BAEX technician, Napoleon Callangan that Soriano is not a bona fide
farmer.
Instead of withdrawing the 630 cavans of palay, private respondent
Soriano insisted that the palay grains delivered be paid. He then filed a
complaint for specific performance and/or collection of money with
damages on November 2, 1979, against the National Food Authority and
Mr. William Cabal, Provincial Manager of NFA with the Court of First
Instance of Tuguegarao, and docketed as Civil Case No. 2754.
Meanwhile, by agreement of the parties and upon order of the trial court,
the 630 cavans of palay in question were withdrawn from the warehouse
of NFA. An inventory was made by the sheriff as representative of the
Court, a representative of Soriano and a representative of NFA (p. 13,
Rollo).
On September 30, 1982, the trial court rendered judgment ordering
petitioner National Food Authority, its officers and agents to pay
respondent Soriano (as plaintiff in Civil Case No. 2754) the amount of P
47,250.00 representing the unpaid price of the 630 cavans of palay plus
Sales Part III Page |8
legal interest thereof (p. 1-2, CA Decision). The dispositive portion reads
as follows:
WHEREFORE, the Court renders judgment in favor of the plaintiff and
against the defendants National Grains Authority, and William Cabal and
hereby orders:
1. The National Grains Authority, now the National Food Authority, its
officers and agents, and Mr. William Cabal, the Provincial Manager of the
National Grains Authority at the time of the filing of this case, assigned at
Tuguegarao, Cagayan, whomsoever is his successors, to pay to the
plaintiff Leon T. Soriano, the amount of P47,250.00, representing the
unpaid price of the palay deliveries made by the plaintiff to the defendants
consisting of 630 cavans at the rate Pl.50 per kilo of 50 kilos per cavan of
palay;
2. That the defendants National Grains Authority, now National Food
Authority, its officer and/or agents, and Mr. William Cabal, the Provincial
Manager of the National Grains Authority, at the time of the filing of this
case assigned at Tuguegarao, Cagayan or whomsoever is his successors,
are likewise ordered to pay the plaintiff Leon T. Soriano, the legal interest
at the rate of TWELVE (12%) percent per annum, of the amount of P
47,250.00 from the filing of the complaint on November 20, 1979, up to
the final payment of the price of P 47,250.00;
3. That the defendants National Grains Authority, now National Food
Authority, or their agents and duly authorized representatives can now
withdraw the total number of bags (630 bags with an excess of 13 bags)
now on deposit in the bonded warehouse of Eng. Ben de Guzman at
Tuguegarao, Cagayan pursuant to the order of this court, and as appearing
in the written inventory dated October 10, 1980, (Exhibit F for the plaintiff
and Exhibit 20 for the defendants) upon payment of the price of P
47,250.00 and TWELVE PERCENT (12%) legal interest to the plaintiff,
4. That the counterclaim of the defendants is hereby dismissed;

5. That there is no pronouncement as to the award of moral and
exemplary damages and attorney's fees; and
6. That there is no pronouncement as to costs.
SO ORDERED (pp. 9-10, Rollo)
Petitioners' motion for reconsideration of the decision was denied on
December 6, 1982.
Petitioners' appealed the trial court's decision to the Intermediate
Appellate Court. In a decision promulgated on December 23, 1986 (pp. 9-
21, Rollo) the then Intermediate Appellate Court upheld the findings of the
trial court and affirmed the decision ordering NFA and its officers to pay
Soriano the price of the 630 cavans of rice plus interest. Petitioners'
motion for reconsideration of the appellate court's decision was denied in a
resolution dated April 17, 1986 (p. 28, Rollo).
Hence, this petition for review filed by the National Food Authority and Mr.
William Cabal on May 15, 1986 assailing the decision of the Intermediate
Appellate Court on the sole issue of whether or not there was a contract of
sale in the case at bar.
Petitioners contend that the 630 cavans of palay delivered by Soriano on
August 23, 1979 was made only for purposes of having it offered for sale.
Further, petitioners stated that the procedure then prevailing in matters of
palay procurement from qualified farmers were: firstly, there is a
rebagging wherein the palay is transferred from a private sack of a farmer
to the NFA sack; secondly, after the rebagging has been undertaken,
classification of the palay is made to determine its variety; thirdly, after
the determination of its variety and convinced that it passed the quality
standard, the same will be weighed to determine the number of kilos; and
finally, it will be piled inside the warehouse after the preparation of the
Warehouse Stock Receipt (WSP) indicating therein the number of kilos, the
variety and the number of bags. Under this procedure, rebagging is the
initial operative act signifying acceptance, and acceptance will be
considered complete only after the preparation of the Warehouse Stock
Sales Part III Page |9
Receipt (WSR). When the 630 cavans of palay were brought by Soriano to
the Carig warehouse of NFA they were only offered for sale. Since the
same were not rebagged, classified and weighed in accordance with the
palay procurement program of NFA, there was no acceptance of the offer
which, to petitioners' mind is a clear case of solicitation or an unaccepted
offer to sell.
The petition is not impressed with merit.
Article 1458 of the Civil Code of the Philippines defines sale as a contract
whereby one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing, and the other party to
pay therefore a price certain in money or its equivalent. A contract, on the
other hand, is a meeting of minds between two (2) persons whereby one
binds himself, with respect to the other, to give something or to render
some service (Art. 1305, Civil Code of the Philippines). The essential
requisites of contracts are: (1) consent of the contracting parties, (2)
object certain which is the subject matter of the contract, and (3) cause of
the obligation which is established (Art. 1318, Civil Code of the Philippines.
In the case at bar, Soriano initially offered to sell palay grains produced in
his farmland to NFA. When the latter accepted the offer by noting in
Soriano's Farmer's Information Sheet a quota of 2,640 cavans, there was
already a meeting of the minds between the parties. The object of the
contract, being the palay grains produced in Soriano's farmland and the
NFA was to pay the same depending upon its quality. The fact that the
exact number of cavans of palay to be delivered has not been determined
does not affect the perfection of the contract. Article 1349 of the New Civil
Code provides: ". . .. The fact that the quantity is not determinate shall
not be an obstacle to the existence of the contract, provided it is possible
to determine the same, without the need of a new contract between the
parties." In this case, there was no need for NFA and Soriano to enter into
a new contract to determine the exact number of cavans of palay to be
sold. Soriano can deliver so much of his produce as long as it does not
exceed 2,640 cavans.
In its memorandum (pp. 66-71, Rollo) dated December 4, 1986,
petitioners further contend that there was no contract of sale because of
 S a l e s P a r t I I I P a g e | 10

the absence of an essential requisite in contracts, namely, consent. It cited ACCORDINGLY, the instant petition for review is DISMISSED. The assailed
Section 1319 of the Civil Code which states: "Consent is manifested by the decision of the then Intermediate Appellate Court (now Court of Appeals)
meeting of the offer and the acceptance of the thing and the cause which is affirmed. No costs.
are to constitute the contract. ... " Following this line, petitioners contend
that there was no consent because there was no acceptance of the 630
cavans of palay in question.

The above contention of petitioner is not correct Sale is a consensual

contract, " ... , there is perfection when there is consent upon the subject
matter and price, even if neither is delivered." (Obana vs. C.A., L-36249,
March 29, 1985, 135 SCRA 557, 560) This is provided by Article 1475 of
the Civil Code which states:

Art. 1475. The contract of sale is perfected at the moment

there is a meeting of minds upon the thing which is the
object of the contract and upon the price.

xxx

The acceptance referred to which determines consent is the acceptance of

the offer of one party by the other and not of the goods delivered as
contended by petitioners.

From the moment the contract of sale is perfected, it is incumbent upon

the parties to comply with their mutual obligations or "the parties may
reciprocally demand performance" thereof. (Article 1475, Civil Code, 2nd
par.).

The reason why NFA initially refused acceptance of the 630 cavans of palay
delivered by Soriano is that it (NFA) cannot legally accept the said delivery
because Soriano is allegedly not a bona fide farmer. The trial court and the
appellate court found that Soriano was a bona fide farmer and therefore,
he was qualified to sell palay grains to NFA.

Both courts likewise agree that NFA's refusal to accept was without just
cause. The above factual findings which are supported by the record
should not be disturbed on appeal.

G.R. No. 105387 November 11, 1993
JOHANNES SCHUBACK & SONS PHILIPPINE TRADING
CORPORATION, petitioner,
vs.
THE HON. COURT OF APPEALS, RAMON SAN JOSE, JR., doing
business under the name and style "PHILIPPINE SJ INDUSTRIAL
TRADING," respondents.
Civil Law; Obligations and Contracts; When contract of sale is perfected; A
contract of sale is perfected at the moment there is a meeting of minds
upon the thing which is the object of the contract and upon the price.—We
reverse the decision of the Court of Appeals and reinstate the decision of
the trial court. It bears emphasizing that a “contract of sale is perfected at
the moment there is a meeting of minds upon the thing which is the object
of the contract and upon the price x x x.”
Same; Same; Same; Letter of Credit; The opening of a letter of credit in
favor of a vendor is only a mode of payment; It is not among the essential
requirements of a contract of sale enumerated in Arts. 1305 and 1474 of
the Civil Code and therefore does not prevent the perfection of the
contract between the parties.—On the part of the buyer, the situation
reveals that private respondent failed to open an irrevocable letter of
credit without recourse in favor of Johannes Schuback of Hamburg,
Germany. This omission, however, does not prevent the perfection of the
contract between the parties, for the opening of a letter of credit is not to
be deemed a suspensive condition. The facts herein do not show that
petitioner reserved title to the goods until private respondent had opened
a letter of credit. Petitioner, in the course of its dealings with private
respondent, did not incorporate any provision declaring their contract of
sale without effect until after the fulfillment of the act of opening a letter of
credit. The opening of a letter of credit in favor of a vendor is only a mode
of payment. It is not among the essential requirements of a contract of
sale enumerated in Articles 1305 and 1474 of the Civil Code, the absence
of any of which will prevent the perfection of the contract from taking
place. Johannes Schuback & Sons Philippine Trading Corporation vs. Court
of Appeals, 227 SCRA 717, G.R. No. 105387 November 11, 1993
S a l e s P a r t I I I P a g e | 11
Hernandez, Velicaria, Vibar & Santiago for petitioner.
Ernesto M. Tomaneng for private respondent.
ROMERO, J.:
In this petition for review on certiorari, petitioner questions the reversal by
the Court of Appeals 1 of the trial court's ruling that a contract of sale had
been perfected between petitioner and private respondent over bus spare
parts.
The facts as quoted from the decision of the Court of Appeals are as
follows:
Sometime in 1981, defendant 2 established contact with
plaintiff 3 through the Philippine Consulate General in Hamburg,
West Germany, because he wanted to purchase MAN bus spare
parts from Germany. Plaintiff communicated with its trading
partner. Johannes Schuback and Sohne Handelsgesellschaft m.b.n.
& Co. (Schuback Hamburg) regarding the spare parts defendant
wanted to order.
On October 16, 1981, defendant submitted to plaintiff a list of the
parts (Exhibit B) he wanted to purchase with specific part numbers
and description. Plaintiff referred the list to Schuback Hamburg for
quotations. Upon receipt of the quotations, plaintiff sent to
defendant a letter dated 25 November, 1981 (Exh. C) enclosing its
offer on the items listed by defendant.
On December 4, 1981, defendant informed plaintiff that he
preferred genuine to replacement parts, and requested that he be
given 15% on all items (Exh. D).
On December 17, 1981, plaintiff submitted its formal offer (Exh. E)
containing the item number, quantity, part number, description,
unit price and total to defendant. On December, 24, 1981,
defendant informed plaintiff of his desire to avail of the prices of

the parts at that time and enclosed Purchase Order No. 0101 dated
14 December 1981 (Exh. F to F-4). Said Purchase Order contained
the item number, part number and description. Defendant
promised to submit the quantity per unit he wanted to order on
December 28 or 29 (Exh. F).
On December 29, 1981, defendant personally submitted the
quantities he wanted to Mr. Dieter Reichert, General Manager of
plaintiff, at the latter's residence (t.s.n., 13 December, 1984, p.
36). The quantities were written in ink by defendant in the same
Purchase Order previously submitted. At the bottom of said
Purchase Order, defendant wrote in ink above his signature:
"NOTE: Above P.O. will include a 3% discount. The above will serve
as our initial P.O." (Exhs. G to G-3-a).
Plaintiff immediately ordered the items needed by defendant from
Schuback Hamburg to enable defendant to avail of the old prices.
Schuback Hamburg in turn ordered (Order No. 12204) the items
from NDK, a supplier of MAN spare parts in West Germany. On
January 4, 1982, Schuback Hamburg sent plaintiff a proforma
invoice (Exhs. N-1 to N-3) to be used by defendant in applying for
a letter of credit. Said invoice required that the letter of credit be
opened in favor of Schuback Hamburg. Defendant acknowledged
receipt of the invoice (t.s.n., 19 December 1984, p. 40).
An order confirmation (Exhs. I, I-1) was later sent by Schuback
Hamburg to plaintiff which was forwarded to and received by
defendant on February 3, 1981 (t.s.n., 13 Dec. 1984, p. 42).
On February 16, 1982, plaintiff reminded defendant to open the
letter of credit to avoid delay in shipment and payment of interest
(Exh. J). Defendant replied, mentioning, among others, the
difficulty he was encountering in securing: the required dollar
allocations and applying for the letter of credit, procuring a loan
and looking for a partner-financier, and of finding ways 'to proceed
with our orders" (Exh. K).
S a l e s P a r t I I I P a g e | 12
In the meantime, Schuback Hamburg received invoices from, NDK
for partial deliveries on Order No.12204 (Direct Interrogatories., 07
Oct, 1985, p. 3). Schuback Hamburg paid NDK. The latter
confirmed receipt of payments made on February 16, 1984 (Exh.C-
Deposition).
On October 18, 1982, Plaintiff again reminded defendant of his
order and advised that the case may be endorsed to its lawyers
(Exh. L). Defendant replied that he did not make any valid
Purchase Order and that there was no definite contract between
him and plaintiff (Exh. M). Plaintiff sent a rejoinder explaining that
there is a valid Purchase Order and suggesting that defendant
either proceed with the order and open a letter of credit or cancel
the order and pay the cancellation fee of 30% of F.O.B. value, or
plaintiff will endorse the case to its lawyers (Exh. N).
Schuback Hamburg issued a Statement of Account (Exh. P) to
plaintiff enclosing therewith Debit Note (Exh. O) charging plaintiff
30% cancellation fee, storage and interest charges in the total
amount of DM 51,917.81. Said amount was deducted from
plaintiff's account with Schuback Hamburg (Direct Interrogatories,
07 October, 1985).
Demand letters sent to defendant by plaintiff's counsel dated March
22, 1983 and June 9, 1983 were to no avail (Exhs R and S).
Consequently, petitioner filed a complaint for recovery of actual or
compensatory damages, unearned profits, interest, attorney's fees and
costs against private respondent.
In its decision dated June 13, 1988, the trial court4 ruled in favor of
petitioner by ordering private respondent to pay petitioner, among others,
actual compensatory damages in the amount of DM 51,917.81, unearned
profits in the amount of DM 14,061.07, or their peso equivalent.
Thereafter, private respondent elevated his case before the Court of
Appeals. On February 18, 1992, the appellate court reversed the decision

of the trial court and dismissed the complaint of petitioner. It ruled that
there was no perfection of contract since there was no meeting of the
minds as to the price between the last week of December 1981 and the
first week of January 1982.
The issue posed for resolution is whether or not a contract of sale has been
perfected between the parties.
We reverse the decision of the Court of Appeals and reinstate the decision
of the trial court. It bears emphasizing that a "contract of sale is perfected
at the moment there is a meeting of minds upon the thing which is the
object of the contract and upon the price. . . . " 5
Article 1319 of the Civil Code states: "Consent is manifested by the
meeting of the offer and acceptance upon the thing and the cause which
are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter offer."
The facts presented to us indicate that consent on both sides has been
manifested.
The offer by petitioner was manifested on December 17, 1981 when
petitioner submitted its proposal containing the item number, quantity,
part number, description, the unit price and total to private respondent.
On December 24, 1981, private respondent informed petitioner of his
desire to avail of the prices of the parts at that time and simultaneously
enclosed its Purchase Order No. 0l01 dated December 14, 1981. At this
stage, a meeting of the minds between vendor and vendee has occurred,
the object of the contract: being the spare parts and the consideration, the
price stated in petitioner's offer dated December 17, 1981 and accepted by
the respondent on December 24,1981.
Although said purchase order did not contain the quantity he wanted to
order, private respondent made good, his promise to communicate the
same on December 29, 1981. At this juncture, it should be pointed out
that private respondent was already in the process of executing the
agreement previously reached between the parties.
S a l e s P a r t I I I P a g e | 13
Below Exh. G-3, marked as Exhibit G-3-A, there appears this statement
made by private respondent: "Note. above P.O. will include a 3% discount.
The above will serve as our initial P.O." This notation on the purchase
order was another indication of acceptance on the part of the vendee, for
by requesting a 3% discount, he implicitly accepted the price as first
offered by the vendor. The immediate acceptance by the vendee of the
offer was impelled by the fact that on January 1, 1982, prices would go up,
as in fact, the petitioner informed him that there would be a 7% increase,
effective January 1982. On the other hand, concurrence by the vendor
with the said discount requested by the vendee was manifested when
petitioner immediately ordered the items needed by private respondent
from Schuback Hamburg which in turn ordered from NDK, a supplier of
MAN spare parts in West Germany.
When petitioner forwarded its purchase order to NDK, the price was still
pegged at the old one. Thus, the pronouncement of the Court Appeals that
there as no confirmed price on or about the last week of December 1981
and/or the first week of January 1982 was erroneous.
While we agree with the trial court's conclusion that indeed a perfection of
contract was reached between the parties, we differ as to the exact date
when it occurred, for perfection took place, not on December 29, 1981.
Although the quantity to be ordered was made determinate only on
December 29, 1981, quantity is immaterial in the perfection of a sales
contract. What is of importance is the meeting of the minds as to
the object and cause, which from the facts disclosed, show that as of
December 24, 1981, these essential elements had already occurred.
On the part of the buyer, the situation reveals that private respondent
failed to open an irrevocable letter of credit without recourse in favor of
Johannes Schuback of Hamburg, Germany. This omission, however. does
not prevent the perfection of the contract between the parties, for the
opening of the letter of credit is not to be deemed a suspensive condition.
The facts herein do not show that petitioner reserved title to the goods
until private respondent had opened a letter of credit. Petitioner, in the
course of its dealings with private respondent, did not incorporate any
provision declaring their contract of sale without effect until after the
fulfillment of the act of opening a letter of credit.
 S a l e s P a r t I I I P a g e | 14

The opening of a etter of credit in favor of a vendor is only a mode of

payment. It is not among the essential requirements of a contract of sale
enumerated in Article 1305 and 1474 of the Civil Code, the absence of any
of which will prevent the perfection of the contract from taking place.

To adopt the Court of Appeals' ruling that the contract of sale was
dependent on the opening of a letter of credit would be untenable from a
pragmatic point of view because private respondent would not be able to
avail of the old prices which were open to him only for a limited period of
time. This explains why private respondent immediately placed the order
with petitioner which, in turn promptly contacted its trading partner in
Germany. As succinctly stated by petitioner, "it would have been
impossible for respondent to avail of the said old prices since the
perfection of the contract would arise much later, or after the end of the
year 1981, or when he finally opens the letter of credit." 6

WHEREFORE, the petition is GRANTED and the decision of the trial court
dated June 13, 1988 is REINSTATED with modification.

SO ORDERED.

[G.R. No. 116635. July 24, 1997]
CONCHITA NOOL and GAUDENCIO ALMOJERA, petitioner,
vs. COURT OF APPEALS, ANACLETO NOOL and EMILIA
NEBRE, respondents.
Contracts; Sales; Void Contracts; Article 1370 of the Civil Code is
applicable only to valid and enforceable contracts.—We cannot sustain
petitioners’ view. Article 1370 of the Civil Code is applicable only to valid
and enforceable contracts. The Regional Trial Court and the Court of
Appeals ruled that the principal contract of sale contained in Exhibit C and
the auxiliary contract of repurchase in Exhibit D are both void. This
conclusion of the two lower courts appears to find support in Dignos vs.
Court of Appeals, where the Court held: “Be that as it may, it is evident
that when petitioners sold said land to the Cabigas spouses, they were no
longer owners of the same and the sale is null and void.”
Same; Same; Same; A void contract cannot give rise to a valid one.—In
the present case, it is clear that the sellers no longer had any title to the
parcels of land at the time of sale. Since Exhibit D, the alleged contract of
repurchase, was dependent on the validity of Exhibit C, it is itself void. A
void contract cannot give rise to a valid one. Verily, Article 1422 of the
Civil Code provides that “(a) contract which is the direct result of a
previous illegal contract, is also void and inexistent.”
Same; Same; Same; Where the sellers can no longer deliver the object of
the sale to the buyers, as the buyers themselves have already acquired
title and delivery thereof from the rightful owner, such contract may be
deemed to be inoperative and may thus fall, by analogy, under item No. 5
of Article 1409 of the Civil Code—“Those which contemplate an impossible
service.”—In the present case however, it is likewise clear that the sellers
can no longer deliver the object of the sale to the buyers, as the buyers
themselves have already acquired title and delivery thereof from the
rightful owner, the DBP. Thus, such contract may be deemed to be
inoperative and may thus fall, by analogy, under item No. 5 of Article 1409
of the Civil Code: “Those which contemplate an impossible service.” Article
1459 of the Civil Code provides that “the vendor must have a right to
transfer the ownership thereof [object of the sale] at the time it is
S a l e s P a r t I I I P a g e | 15
delivered.” Here, delivery of ownership is no longer possible. It has
become impossible.
Same; Same; Same; Pacto de Retro; The right to repurchase presupposes
a valid contract of sale between the same parties.—One “repurchases” only
what one has previously sold. In other words, the right to repurchase
presupposes a valid contract of sale between the same parties.
Undisputedly, private respondents acquired title to the property from DBP,
and not from petitioners.
Same; Same; Same; Options; An accepted unilateral promise to buy or
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.—
Assuming arguendo that Exhibit D is separate and distinct from Exhibit C
and is not affected by the nullity of the latter, still petitioners do not
thereby acquire a right to repurchase the property. In that scenario,
Exhibit D ceases to be a “right to repurchase” ancillary and incidental to
the contract of sale; rather, it becomes an accepted unilateral promise to
sell. Article 1479 of the Civil Code, however, provides that “an accepted
unilateral promise to buy or 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.” In the present case, the alleged written contract of
repurchase contained in Exhibit D is bereft of any consideration distinct
from the price. Accordingly, as an independent contract, it cannot bind
private respondents. The ruling in Diamante vs. CA supports this.
Same; Same; Same; Estoppel; One is not estopped in impugning the
validity of void contracts; It is a well-settled doctrine that “as between
parties to a contract, validity cannot be given to it by estoppel if it is
prohibited by law or it is against public policy.”—Petitioners argue that
“when Anacleto Nool took the possession of the two hectares, more or
less, and let the other two hectares to be occupied and cultivated by
plaintiffs-appellants, Anacleto Nool cannot later on disclaim the terms or
contions (sic) agreed upon and his actuation is within the ambit of estoppel
x x x.” We disagree. The private respondents cannot be estopped from
raising the defense of nullity of contract, specially in this case where they
acted in good faith, believing that indeed petitioners could sell the two
parcels of land in question. Article 1410 of the Civil Code mandates that
“(t)he action or defense for the declaration of the inexistence of a contract

does not prescribe.” It is a well-settled doctrine that “as between parties to
a contract, validity cannot be given to it by estoppel if it is prohibited by
law or it is against public policy (19 Am. Jur. 802). It is not within the
competence of any citizen to barter away what public policy by law seeks
to preserve.” Thus, it is immaterial that private respondents initially acted
to implement the contract of sale, believing in good faith that the same
was valid. We stress that a contract void at inception cannot be validated
by ratification or prescription and certainly cannot be binding on or
enforceable against private respondents.
Same; Same; Same; If a void contract has already been performed, the
restoration of what has been given is in order, and, corollarily, interest
thereon will run only from the time of the aggrieved party’s demand for
the return of this amount.—We are not persuaded. Based on the previous
discussion, the balance of P14,000.00 under the void contract of sale may
not be enforced. Petitioners are the ones who have an obligation to return
what they unduly and improperly received by reason of the invalid contract
of sale. Since they cannot legally give title to what they “sold,” they cannot
keep the money paid for the object of the sale. It is basic that “(e)very
person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same.” Thus, if a
void contract has already “been performed, the restoration of what has
been given is in order.” Corollarily and as aptly ordered by respondent
appellate court, interest thereon will run only from the time of private
respondents’ demand for the return of this amount in their counterclaim.
In the same vein, petitioners’ possession and cultivation of the two
hectares are anchored on private respondents’ tolerance. Clearly, the
latter’s tolerance ceased upon their counterclaim and demand on the
former to vacate. Hence, their right to possess and cultivate the land ipso
facto ceased.
DECISION
PANGANIBAN, J.:
A contract of repurchase arising out of a contract of sale where the seller
did not have any title to the property sold is not valid. Since nothing was
sold, then there is also nothing to repurchase.
S a l e s P a r t I I I P a g e | 16
Statement of the Case
This postulate is explained by this Court as it resolves this petition for
review on certiorari assailing the January 20, 1993 Decision[1] of
Respondent Court of Appeals[2] in CA-G.R. CV No. 36473, affirming the
decision[3] of the trial court[4] which disposed as follows:[5]
WHEREFORE, judgment is hereby rendered dismissing the complaint for no
cause of action, and hereby:
1. Declaring the private writing, Exhibit C, to be an option to sell, not
binding and considered validly withdrawn by the defendants for want of
consideration;
2. Ordering the plaintiffs to return to the defendants the sum
of P30,000.00 plus interest thereon at the legal rate, from the
time of filing of defendants counterclaim until the same is fully
paid;
3. Ordering the plaintiffs to deliver peaceful possession of the two
hectares mentioned in paragraph 7 of the complaint and in
paragraph 31 of defendants answer (counterclaim);
4. Ordering the plaintiffs to pay reasonable rents on said two
hectares at P5,000.00 per annum or at P2,500.00 per cropping
from the time of judicial demand mentioned in paragraph 2 of the
dispositive portion of this decision, until the said two hectares
shall have been delivered to the defendants; and
5. To pay the costs.
SO ORDERED.
The Antecedent Facts
The facts, which appear undisputed by the parties, are narrated by the
Court of Appeals as follows:

Two (2) parcels of land are in dispute and litigated upon here. The
first has an area of 1 hectare . It was formerly owned by Victorino
Nool and covered by Transfer Certificate of Title No. T-
74950. With an area of 3.0880 hectares, the other parcel was
previously owned by Francisco Nool under Transfer Certificate of
Title No. T-100945. Both parcels are situated in San Manuel,
Isabela. The plaintiff spouses, Conchita Nool and Gaudencio
Almojera, now the appellants, seek recovery of the
aforementioned parcels of land from the defendants, Anacleto
Nool, a younger brother of Conchita, and Emilia Nebre, now the
appellees.
In their complaint, plaintiff-appellants alleged inter alia that they are
the owners of subject parcels of land, and they bought the same from
Conchitas other brothers, Victorino Nool and Francisco Nool; that as
plaintiffs were in dire need of money, they obtained a loan from the
Iligan Branch of the Development Bank of the Philippines, in Ilagan,
Isabela, secured by a real estate mortgage on said parcels of land,
which were still registered in the names of Victorino Nool and Francisco
Nool, at the time, and for the failure of plaintiffs to pay the said loan,
including interest and surcharges, totaling P56,000.00, the mortgage
was foreclosed; that within the period of redemption, plaintiffs
contacted defendant Anacleto Nool for the latter to redeem the
foreclosed properties from DBP, which the latter did; and as a result,
the titles of the two (2) parcels of land in question were transferred to
Anacleto Nool; that as part of their arrangement or understanding,
Anacleto Nool agreed to buy from the plaintiff Conchita Nool the two
(2) parcels of land under controversy, for a total price
of P100,000.00, P30,000.00 of which price was paid to Conchita, and
upon payment of the balance of P14,000.00, plaintiffs were to regain
possession of the two (2) hectares of land, which amounts defendants
failed to pay, and the same day the said arrangement[6] was made;
another covenant[7] was entered into by the parties, whereby
defendants agreed to return to plaintiffs the lands in question, at
anytime the latter have the necessary amount; that plaintiffs asked
the defendants to return the same but despite the intervention of the
Barangay Captain of their place, defendants refused to return the said
parcels of land to plaintiffs; thereby impelling them (plaintiffs) to come
to court for relief.
S a l e s P a r t I I I P a g e | 17
In their answer defendants-appellees theorized that they acquired the
lands in question from the Development Bank of the Philippines,
through negotiated sale, and were misled by plaintiffs when defendant
Anacleto Nool signed the private writing agreeing to return subject
lands when plaintiffs have the money to redeem the same; defendant
Anacleto having been made to believe, then, that his sister, Conchita,
still had the right to redeem the said properties.
The pivot of inquiry here, as aptly observed below, is the nature and
significance of the private document, marked Exhibit D for plaintiffs,
which document has not been denied by the defendants, as defendants
even averred in their Answer that they gave an advance payment
of P30,000.00 therefor, and acknowledged that they had a balance
of P14,000.00 to complete their payment. On this crucial issue, the
lower court adjudged the said private writing (Exhibit D) as an option
to sell not binding upon and considered the same validly withdrawn by
defendants for want of consideration; and decided the case in the
manner abovementioned.
There is no quibble over the fact that the two (2) parcels of land in dispute
were mortgaged to the Development Bank of the Philippines, to secure a
loan obtained by plaintiffs from DBP (Ilagan Branch), Ilagan, Isabela. For
the non-payment of said loan, the mortgage was foreclosed and in the
process, ownership of the mortgaged lands was consolidated in DBP
(Exhibits 3 and 4 for defendants). After DBP became the absolute owner of
the two parcels of land, defendants negotiated with DBP and succeeded in
buying the same. By virtue of such sale by DBP in favor of defendants, the
titles of DBP were cancelled and corresponding Transfer Certificates of Title
(Annexes C and D to the complaint) issued to the dependants.[8]
It should be stressed that Manuel S. Mallorca, authorized officer of DBP,
certified that the one-year redemption period was from March 16, 1982 up
to March 15, 1983 and that the Mortgagors right of redemption was not
exercised within this period.[9] Hence, DBP became the absolute owner of
said parcels of land for which it was issued new certificates of title, both
entered on May 23, 1983 by the Registry of Deeds for the Province of
Isabela.[10] About two years thereafter, on April 1, 1985, DBP entered into
a Deed of Conditional Sale[11] involving the same parcels of land with

Private Respondent Anacleto Nool as vendee. Subsequently, the latter was
issued new certificates of title on February 8, 1988.[12]
The Court of Appeals ruled:[13]
WHEREFORE, finding no reversible error infirming it, the appealed
Judgment is hereby AFFIRMED in toto. No pronouncement as to costs.
The Issues
Petitioners impute to Respondent Court the following alleged errors:
1. The Honorable Court of Appeals, Second Division has
misapplied the legal import or meaning of Exhibit C in a way
contrary to law and existing jurisprudence in stating that it
has no binding effect between the parties and considered
validly withdrawn by defendants-appellees for want of
consideration.
2. The Honorable Court of Appeals, Second Division has
miserably failed to give legal significance to the actual
possession and cultivation and appropriating exclusively the
palay harvest of the two (2) hectares land pending the
payment of the remaining balance of fourteen thousand
pesos (P14,000.00) by defendants-appellees as indicated in
Exhibit C.
3. The Honorable Court of Appeals has seriously erred in affirming
the decision of the lower court by awarding the payment of rents
per annum and the return of P30,000.00 and not allowing the
plaintiffs-appellants to re-acquire the four (4) hectares, more or
less upon payment of one hundred thousand pesos
(P100,000.00) as shown in Exhibit D.[14]
The Courts Ruling
The petition is bereft of merit.
First Issue: Are Exhibits C and D Valid and Enforceable?
S a l e s P a r t I I I P a g e | 18
The petitioner-spouses plead for the enforcement of their agreement with
private respondents as contained in Exhibits C and D, and seek damages
for the latters alleged breach thereof. In Exhibit C, which was a private
handwritten document labeled by the parties as Resibo ti Katulagan or
Receipt of Agreement, the petitioners appear to have sold to private
respondents the parcels of land in controversy covered by TCT No. T-
74950 and TCT No. T-100945. On the other hand, Exhibit D, which was
also a private handwritten document in Ilocano and labeled as Kasuratan,
private respondents agreed that Conchita Nool can acquire back or
repurchase later on said land when she has the money.[15]
In seeking to enforce her alleged right to repurchase the parcels of land,
Conchita (joined by her co-petitioner-husband) invokes Article 1370 of the
Civil Code which mandates that (i)f 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. Hence, petitioners contend that the
Court of Appeals erred in affirming the trial courts finding and conclusion
that said Exhibits C and D were not merely voidable but utterly void and
inexistent.
We cannot sustain petitioners view. Article 1370 of the Civil Code is
applicable only to valid and enforceable contracts. The Regional Trial Court
and the Court of Appeals ruled that the principal contract of sale contained
in Exhibit C and the auxilliary contract of repurchase in Exhibit D are both
void. This conclusion of the two lower courts appears to find support
in Dignos vs. Court of Appeals,[16] where the Court held:
Be that as it may, it is evident that when petitioners sold said land
to the Cabigas spouses, they were no longer owners of the same
and the sale is null and void.
In the present case, it is clear that the sellers no longer had any title to
the parcels of land at the time of sale. Since Exhibit D, the alleged contract
of repurchase, was dependent on the validity of Exhibit C, it is itself void. A
void contract cannot give rise to a valid one.[17] Verily, Article 1422 of the
Civil Code provides that (a) contract which is the direct result of a previous
illegal contract, is also void and inexistent.
We should however add that Dignos did not cite its basis for ruling that a
sale is null and void where the sellers were no longer the owners of the

property. Such a situation (where the sellers were no longer owners) does
not appear to be one of the void contracts enumerated in Article 1409 of
the Civil Code.[18] Moreover, the Civil Code[19] itself recognizes a sale where
the goods are to be acquired x x x by the seller after the perfection of the
contract of sale, clearly implying that a sale is possible even if the seller
was not the owner at the time of sale, provided he acquires title to the
property later on.
In the present case however, it is likewise clear that the sellers can no
longer deliver the object of the sale to the buyers, as the buyers
themselves have already acquired title and delivery thereof from the
rightful owner, the DBP. Thus, such contract may be deemed to be
inoperative[20] and may thus fall, by analogy, under item no. 5 of Article
1409 of the Civil Code: Those which contemplate an impossible
service. Article 1459 of the Civil Code provides that the vendor must have
a right to transfer the ownership thereof [object of the sale] at the time it
is delivered. Here, delivery of ownership is no longer possible. It has
become impossible.
Furthermore, Article 1505 of the Civil Code provides that where goods are
sold by a person who is not the owner thereof, and who does not sell them
under authority or with consent of the owner, the buyer acquires no better
title to the goods than the seller had, unless the owner of the goods is by
his conduct precluded from denying the sellers authority to sell. Here,
there is no allegation at all that petitioners were authorized by DBP to sell
the property to the private respondents. Jurisprudence, on the other hand,
teaches us that a person can sell only what he owns or is authorized to
sell; the buyer can as a consequence acquire no more than what the seller
can legally transfer.[21] No one can give what he does not have neno dat
quod non habet. On the other hand, Exhibit D presupposes that petitioners
could repurchase the property that they sold to private respondents. As
petitioners sold nothing, it follows that they can also repurchase
nothing. Nothing sold, nothing to repurchase. In this light, the contract of
repurchase is also inoperative and by the same analogy, void.
Contract of Repurchase Dependent on Validity of Sale
As borne out by the evidence on record, the private respondents bought
the two parcels of land directly from DBP on April 1, 1985 after discovering
that petitioners did not own said property, the subject of Exhibits C and D
S a l e s P a r t I I I P a g e | 19
executed on November 30, 1984. Petitioners, however, claim that they can
exercise their alleged right to repurchase the property, after private
respondents had acquired the same from DBP.[22] We cannot accede to
this, for it clearly contravenes the intention of the parties and the nature of
their agreement. Exhibit D reads:
WRITING
Nov. 30, 1984
That I, Anacleto Nool have bought from my sister Conchita Nool a
land an area of four hectares (4 has.) in the value of One Hundred
Thousand (100,000.00) Pesos. It is our agreement as brother and
sister that she can acquire back or repurchase later on said land
when she has the money. [Underscoring supplied]
As proof of this agreement we sign as brother and sister this
written document this day of Nov. 30, 1984, at District 4, San
Manuel, Isabela.
Sgd ANACLETO NOOL
Anacleto Nool
Sgd Emilio Paron
Witness
Sgd Conchita Nool
Conchita Nool[23]
One repurchases only what one has previously sold. In other words, the
right to repurchase presupposes a valid contract of sale between
the same parties. Undisputedly, private respondents acquired title to the
property from DBP, and not from the petitioners.
Assuming arguendo that Exhibit D is separate and distinct from Exhibit C
and is not affected by the nullity of the latter, still petitioners do not
thereby acquire a right to repurchase the property. In that scenario,
Exhibit D ceases to be a right to repurchase ancillary and incidental to the
contract of sale; rather, it becomes an accepted unilateral promise to

sell. Article 1479 of the Civil Code, however, provides that an accepted
unilateral promise to buy or 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. In the present case, the alleged written contract of
repurchase contained in Exhibit D is bereft of any consideration distinct
from the price. Accordingly, as an independent contract, it cannot bind
private respondents. The ruling in Diamante vs. CA[24] supports this. In
that case, the Court through Mr. Justice Hilario G. Davide, Jr. explained:
Article 1601 of the Civil Code provides:
Conventional redemption shall take place when the
vendor reserves the right to repurchase the thing sold,
with the obligation to comply with the provisions of article
1616 and other stipulations which may have been agreed
upon.
In Villarica, et al. Vs. Court of Appeals, et al., decided on
29 November 1968, or barely seven (7) days before the
respondent Court promulgated its decisions in this case,
this Court, interpreting the above Article, held:
The right of repurchase is not a right granted the vendor
by the vendee in a subsequent instrument, but is a right
reserved by the vendor in the same instrument of sale as
one of the stipulations of the contract. Once the
instrument of absolute sale is executed, the vendor can
not longer reserve the right to repurchase, and any right
thereafter granted the vendor by the vendee in a
separate instrument cannot be a right of repurchase but
some other right like the option to buy in the instant
case. x x x.
In the earlier case of Ramos, et al. vs. Icasiano, et al.,
decided in 1927, this Court had already ruled that an
agreement to repurchase becomes a promise to sell when
made after the sale, because when the sale is made
without such an agreement, the purchaser acquires the
thing sold absolutely, and if he afterwards grants the
S a l e s P a r t I I I P a g e | 20
vendor the right to repurchase, it is a new contract
entered into by the purchaser, as absolute owner already
of the object. In that case the vendor has nor reserved to
himself the right to repurchase.
In Vda. De Cruzo, et al. vs. Carriaga, et al. this Court
found another occasion to apply the foregoing principle.
Hence, the Option to Repurchase executed by private respondent in
the present case, was merely a promise to sell, which must be
governed by Article 1479 of the Civil Codewhich reads as follows:
Art. 1479. A promise to buy and sell a determinate thing
for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the
promissor if the promise is supported by a consideration
distinct from the price.
Right to Repurchase Based on Homestead or Trust Non-
Existent
Petitioners also base their alleged right to repurchase on (1) Sec. 119 of
the Public Land Act[25] and (2) an implied trust relation as brother and
sister.[26]
The Court notes that Victorino Nool and Francisco Nool mortgaged the land
to DBP. The brothers, together with Conchita Nool and Anacleto Nool, were
all siblings and heirs qualified to repurchase the two parcels of land under
Sec. 119 of the Public Land Act which provides that (e)very conveyance of
land acquired under the free patent or homestead provisions, when
proper, shall be subject to repurchase by the applicant, his widow or legal
heirs, within a period of five years from the date of conveyance. Assuming
the applicability of this statutory provision to the case at bar, it is
indisputable that Private Respondent Anacleto Nool already repurchased
from DBP the contested properties. Hence, there was no more right of
repurchase that his sister Conchita or brothers Victorino and Francisco
could exercise. The properties were already owned by an heir of the
homestead grantee and the rationale of the of the provision to keep
homestead lands within the family of the grantee was thus fulfilled.[27]

The claim of a trust relation is likewise without merit. The records show
that private respondents did not purchase the contested properties from
DBP in trust for petitioners. The former, as previously mentioned, in fact
bought the land from DBP upon realization that the latter could not validly
sell the same. Obviously, petitioners bought it for themselves. There is no
evidence at all in the records that they bought the land in trust for private
respondents. The fact that Anacleto Nool was the younger brother of
Conchita Nool and that they signed a contract of repurchase, which as
discussed earlier was void, does not prove the existence of an implied trust
in favor of petitioners.
Second Issue: No Estoppel in Impugning the Validity of Void
Contracts
Petitioners argue that when Anacleto Nool took the possession of the two
hectares, more or less, and let the other two hectares to be occupied and
cultivated by plaintiffs-appellants, Anacleto Nool cannot later on disclaim
the terms or contions (sic) agreed upon and his actuation is within the
ambit of estoppel x x x.[28] We disagree. The private respondents cannot
be estopped from raising the defense of nullity of contract, specially in this
case where they acted in good faith, believing that indeed petitioners could
sell the two parcels of land in question.Article 1410 of the Civil Code
mandates that (t)he action or defense for the declaration of the
inexistence of a contract does not prescribe. It is well-settled doctrine that
as between parties to a contract, validity cannot be given to it by estoppel
if it is prohibited by law or it is against public policy (19 Am. Jur. 802). It is
not within the competence of any citizen to barter away what public policy
by law seeks to preserve.[29] Thus, it is immaterial that private respondents
initially acted to implement the contract of sale, believing in good faith that
the same was valid.We stress that a contract void at inception cannot be
validated by ratification or prescription and certainly cannot be binding on
or enforceable against private respondents.[30]
Third Issue: Return of P30,000.00 with Interest and Payment of
Rent
Petitioners further argue that it would be a miscarriage of justice to order
them (1) to return the sum of P30,000.00 to private respondents when
allegedly it was Private Respondent Anacleto Nool who owed the former a
S a l e s P a r t I I I P a g e | 21
balance of P14,000.00 and (2) to order petitioners to pay rent when they
were allowed to cultivate the said two hectares.[31]
We are not persuaded. Based on the previous discussion, the balance
of P14,000.00 under the void contract of sale may not be
enforced. Petitioners are the ones who have an obligation to return what
they unduly and improperly received by reason of the invalid contract of
sale. Since they cannot legally give title to what they sold, they cannot
keep the money paid for the object of the sale. It is basic that (e)very
person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same.[32] Thus, if a
void contract has already been performed, the restoration of what has
been given is in order.[33] Corollarily and as aptly ordered by respondent
appellate court, interest thereon will run only from the time of private
respondents demand for the return of this amount in their
counterclaim.[34] In the same vein, petitioners possession and cultivation of
the two hectares are anchored on private respondents tolerance. Clearly,
the latters tolerance ceased upon their counterclaim and demand on the
former to vacate. Hence, their right to possess and cultivate the land ipso
facto ceased.
WHEREFORE, the petition is DENIED and the assailed Decision of the
Court of Appeals affirming that of the trial court is hereby AFFIRMED.
SO ORDERED.