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1458-1492 1544 RA 8556

[G.R. No. 123581. August 29, 1997] RODRIGO B. BANGAYAN, BENJAMIN B. BANGAYAN, ET. AL., petitioners, vs. THE HONORABLE COURT OF APPEALS and ANGELITA OCAMPO LIM, respondents. DECISION PUNO, J.: In this petition for review, petitioners assail the decision of the Court of Appeals dated February 21, 1995, in CA-G.R. SP No. 136101 reversing and setting aside the decision of the Regional Trial Court of Manila, Branch 10, dated February 9, 1994, in Civil Case No. 90-54459. The facts show that on July 6, 1988, Teofista Ocampo and Petronilla Lingat entered into a Contract of Lease involving a piece of land with a two storey building of mixed materials located at 2309 Severino Street, Sta. Cruz, Manila, at a monthly rental of P7,000.00. The lease contract contains the following provisions: "x x x "4. The lessee hereby expressly warrants that the leased premises shall be used exclusively by her for an automobile supply and parts company and partly as a dwelling place for her employees only and the lessee is strictly prohibited from using the said premises for any other purpose without the written consent of the lessor. "5. The lessee shall not directly or indirectly sublease, assign, transfer, convey, mortgage or in any manner encumber its (sic) right of lease over the leased premises or any portion thereof under any circumstances whatsoever. "8. The lessee hereby expressly acknowledges the right of the lessor to sell the leased premises, but in the event of the sale, the lessee shall be given by the lessor the FIRST OPTION to purchase the property. And in the event that it is sold to a third person, the lessor is duty bound to place a condition on the deed of sale to the effect that this Lease Contract shall be binding and shall be honored by the vendee.

"x x x" On January 2, 1990, Atty. Almario Amador, counsel of Petronilla Lingat, notified Teofista Ocampo by mail that she could exercise her right of first option within 30 days from receipt of his letter. In response, Ocampo asked Atty. Amador for the selling price of the property. In a letter dated February 3, 1990, Atty. Amador informed Ocampo that she should make a written offer to buy and indicate the price she was willing to pay for the property. The parties' negotiation appears to have bogged down on who should first make the offer with a price. In a letter dated February 9, 1990, Ocampo reiterated to Atty. Amador her desire to buy the property and again inquired about its price. On February 22, 1990, Atty. Amador terminated the negotiation by sending the following letter to Ocampo's counsel, viz: "Since she failed and refused and still failing and refusing to exercise her FIRST OPTION within the period stated in our letter, our client is now free to offer the subject property to other interested buyers and to entertain and receive offers for her consideration. Meanwhile, your client is not precluded to make the offer. Moreover, it shall now be on a 'FIRST COME, FIRST SERVE' basis as your client has waived her above mentioned privilege." In March 1990, Petronilla Lingat agreed to sell the above property to Rodrigo, Roberto, and Benjamin, Jr., all surnamed Bangayan, at P1,000,000.00. The Bangayans partially paid the consideration. On April 5, 1990, Atty. Amador advised Ocampo of the sale of the property to the Bangayans. He also cancelled the Contract of Lease for breach of its terms and conditions. Ocampo was asked to vacate the premises and to pay the rentals in arrears. Ocampo did not heed the demand and an ejectment case against her was filed by the Bangayans before the Metropolitan Trial Court. On May 7, 1990, Petronilla Lingat executed a Deed of Absolute Sale involving the said property to the Bangayans. A new Transfer Certificate of Title No. 193035 was issued by the Register of Deeds of Manila in favor of the Bangayans with the adverse claim of Teofista Ocampo annotated therein. On September 18, 1990, Ocampo filed a complaint against Petronilla Lingat and the Bangayans for the annulment of their deed of sale, cancellation of title issued to the Bangayans, reconveyance of title and damages before the Regional Trial Court of Manila, Branch 10. The case was docketed as Civil Case No. 90-54459. While Civil Case No. 90-54459 was pending in the Regional Trial Court, the ejectment case was decided against Ocampo by the Metropolitan Trial Court on February 21, 1991. The assailed decision was affirmed by the Regional Trial Court, the Court of Appeals and by this Court on October 2, 1991. It appears that Teofista Ocampo died in October 1991. She was substituted in Civil Case No. 9054459 by her daughter, Angelita Ocampo Lim. Allegedly, Teofista Ocampo assigned her right of first option to buy the leased property to Angelita Ocampo Lim before she died. On February 9, 1994, the Regional Trial Court of Manila dismissed the case of Ocampo. It found that

Teofista Ocampo cannot be substituted by her daughter. It held that the death of Ocampo terminated her lease contract with Lingat and extinguished all her rights therein, including her right of first option. Angelita Ocampo Lim appealed to the Court of Appeals. In a Decision dated February 21, 1995, the appellate court reversed the trial court. The dispositive portion of the Decision states: "x x x "WHEREFORE, this petition is GRANTED. The challenged decision of the Regional Trial Court of Manila, Branch 10, is hereby REVERSED and SET ASIDE. A new judgment is entered (1) declaring the deed of absolute sale between Petronilla Lingat and the Bangayans to be null and void; (2) directing the Register of Deeds of Manila to cancel Transfer Certificate of Title No. 193035; and (3) ordering Petronilla Lingat to offer to sell the property to the petitioner in accordance with the above discussion." In this petition for review, the Bangayans pose the following issues for resolution: (1) whether or not the termination of the Contract of Lease pursuant to the decision in the ejectment case extinguished Teofista Ocampo's right of first option; (2) whether or not Teofista Ocampo's right of first option provided for under the Contract of Lease was violated by Petronilla Lingat and the Bangayans; and (3) whether or not the Court of Appeals decided the case in a way not in accord with the applicable decision of the Supreme Court. We find merit in the petition. The threshold issue is whether the late Teofista Ocampo has the right to assign her right of first option under the lease contract to her daughter, Angelita Ocampo Lim. If Ocampo's right is assignable, then her daughter, Angelita Ocampo Lim, can continue Civil Case No. 90-54459. The respondent Court of Appeals held that the said right of Ocampo is transmissible, viz: "x x x "We found no legal or factual basis for concluding that the lease contract between Teofista Ocampo and Lingat was automatically extinguished upon the death of the former. There is no provision in the law which so provides. It also appears from the pleadings and the decision of the trial court that the lease contract in question does not provide for such an eventuality. "Indeed, the right to continue a lease contract either as lessor or lessee is not automatically extinguished by death of either of the contracting parties without any express provision either by will or agreement in this regard. It becomes part of the inheritance so that the heirs of the decedent succeed to the rights and obligations of the latter arising from the lease contract (III Tolentino: Civil Code of the Philippines 14-15, 1979 ed.; III Paras: Civil Code of the Philippines Annotated 7, 12th ed.)."

We find this ruling erroneous. Firstly, the respondent Court of Appeals harbored the wrong notion that Angelita Ocampo Lim inherited from Teofista Ocampo her right of first option upon the latter's death. The evidence, however, shows that Ocampo assigned her right of first option to Angelita even during her lifetime. The assignment was made on August 23, 1990. This assignment has no legal warrant. Article 1311 of the Civil Code is too clear to be misinterpreted. It provides that "contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. x x x" In the case at bar, paragraphs 4 and 5 of the lease contract specifically provide: "4. The lessee hereby expressly warrants that the leased premises shall be used exclusively by her for an automobile supply and parts company and partly as a dwelling place for her employees only and the latter is strictly prohibited from using the said premises for any other purpose without the written consent of the lessor. "5. The lessee shall not directly or indirectly sublease, assign, transfer, convey, mortgage or in any manner encumber its (sic) right of lease over the leased premises or any portion thereof under any circumstances whatsoever." These stipulations are consistent with Article 1649 of the Civil Code which provides that "the lessee cannot assign the lease without the consent of the lessor, unless there is a stipulation to the contrary." We have held that the consent of the lessor is necessary because the assignment of the lease would involve the transfer, not only of rights but also of obligations. It constitutes novation by a substitution of the person of one of the parties. A reasonable perusal of paragraphs 4 and 5 of the lease contract reveals the intent of the parties to limit their lease relationship to themselves alone. Paragraph 4 provides that "the leased premises shall be used exclusively by her," referring to the late Teofista Ocampo. Paragraph 5 prohibits Ocampo from directly or indirectly assigning, transferring or conveying her right of lease over the leased premises or any portion thereof under any circumstances whatsoever. It cannot be denied that Ocampo's right of first option to buy the leased property in case of its sale is but part of the bigger right to lease said property from Lingat. The option was given to Ocampo because she was the lessee of the subject property. It was a component of the consideration of the lease. The option was by no means an independent right which can be exercised by Ocampo. It ought to follow that if Ocampo is barred by the contract from assigning her right to lease the subject property to any other party, she is similarly barred from assigning her first option to buy the leased property to her daughter, Angelita Ocampo Lim. Needless to state, Angelita Ocampo Lim had no right to substitute her mother, Teofista Ocampo, in Civil Case No. 90-54459. IN VIEW WHEREOF, the decision of the respondent Court of Appeals dated February 21, 1995 is reversed and the decision of the RTC of Manila, Branch 10, dated February 9, 1994 in Civil Case No. 90-54459 is reinstated. No costs. SO ORDERED.

G.R. No. 103338 January 4, 1994 FEDERICO SERRA, petitioner, vs. THE HON. COURT OF APPEALS AND RIZAL COMMERCIAL BANKING CORPORATION, respondents. Andres R. Amante, Jr. for petitioner. R.C. Domingo, Jr. & Associates for private respondent.

NOCON, J.: A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy and sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. (Article 1479, New Civil Code) The first is the mutual promise and each has the right to demand from the other the fulfillment of the obligation. While the second is merely an offer of one to another, which if accepted, would create an obligation to the offeror to make good his promise, provided the acceptance is supported by a consideration distinct from the price. Disputed in the present case is the efficacy of a "Contract of Lease with Option to Buy", entered into between petitioner Federico Serra and private respondent Rizal Commercial Banking Corporation. (RCBC). Petitioner is the owner of a 374 square meter parcel of land located at Quezon St., Masbate, Masbate. Sometime in 1975, respondent bank, in its desire to put up a branch in Masbate, Masbate, negotiated with petitioner for the purchase of the then unregistered property. On May 20, 1975, a contract of LEASE WITH OPTION TO BUY was instead forged by the parties, the pertinent portion of which reads:
1. The LESSOR leases unto the LESSEE, an the LESSEE hereby accepts in lease, the parcel of land described in the first WHEREAS clause, to have and to hold the same for a period of twenty-five (25) years commencing from June 1, 1975 to June 1, 2000. The LESSEE, however, shall have the option to purchase said parcel of land within a period of ten (10) years from the date of the signing of this Contract at a price not greater than TWO HUNDRED TEN PESOS (P210.00) per square meter. For this purpose, the LESSOR undertakes, within such ten-year period, to register said parcel of land under the TORRENS SYSTEM and all expenses appurtenant thereto shall be for his sole account. If, for any reason, said parcel of land is not registered under the TORRENS SYSTEM within the aforementioned ten-year period, the LESSEE shall have the right, upon termination of the lease to be paid by the LESSOR the market value of the building and improvements constructed on said parcel of land.

The LESSEE is hereby appointed attorney-in-fact for the LESSOR to register said parcel of land under the TORRENS SYSTEM in case the LESSOR, for any reason, fails to comply with his obligation to effect said registration within reasonable time after the signing of this Agreement, and all expenses appurtenant to such registration shall be charged by the LESSEE against the rentals due to the LESSOR. 2. During the period of the lease, the LESSEE covenants to pay the LESSOR, at the latter's residence, a monthly rental of SEVEN HUNDRED PESOS (P700.00), Philippine Currency, payable in advance on or before the fifth (5th) day of every calendar month, provided that the rentals for the first four (4) months shall be paid by the LESSEE in advance upon the signing of this Contract. 3. The LESSEE is hereby authorized to construct as its sole expense a building and such other improvements on said parcel of land, which it may need in pursuance of its business and/or operations; provided, that if for any reason the LESSEE shall fail to exercise its option mentioned in paragraph (1) above in case the parcel of land is registered under the TORRENS SYSTEM within the ten-year period mentioned therein, said building and/or improvements, shall become the property of the LESSOR after the expiration of the 25-year lease period without the right of reimbursement on the part of the LESSEE. The authority herein granted does not, however, extend to the making or allowing any unlawful, improper or offensive used of the leased premises, or any use thereof, other than banking and office purposes. The maintenance and upkeep of such building, structure and improvements shall likewise be for the sole account of the 1 LESSEE.

The foregoing agreement was subscribed before Notary Public Romeo F. Natividad. Pursuant to said contract, a building and other improvements were constructed on the land which housed the branch office of RCBC in Masbate, Masbate. Within three years from the signing of the contract, petitioner complied with his part of the agreement by having the property registered and placed under the TORRENS SYSTEM, for which Original Certificate of Title No. 0-232 was issued by the Register of Deeds of the Province of Masbate. Petitioner alleges that as soon as he had the property registered, he kept on pursuing the manager of the branch to effect the sale of the lot as per their agreement. It was not until September 4, 1984, however, when the respondent bank decided to exercise its option and informed petitioner, through a letter, 2 of its intention to buy the property at the agreed price of not greater than P210.00 per square meter or a total of P78,430.00. But much to the surprise of the respondent, petitioner replied that he is no longer selling the property. 3 Hence, on March 14, 1985, a complaint for specific performance and damages were filed by respondent against petitioner. In the complaint, respondent alleged that during the negotiations it made clear to petitioner that it intends to stay permanently on property once its branch office is opened unless the exigencies of the business requires otherwise. Aside from its prayer for specific performance, it likewise asked for an award of P50,000.00 for attorney's fees P100,000.00 as exemplary damages and the cost of the suit. 4

A special and affirmative defenses, petitioner contended:


1. That the contract having been prepared and drawn by RCBC, it took undue advantage on him when it set in lopsided terms. 2. That the option was not supported by any consideration distinct from the price and hence not binding upon him. 3. That as a condition for the validity and/or efficacy of the option, it should have been exercised within the reasonable time after the registration of the land under the Torrens System; that its delayed action on the option have forfeited whatever its claim to the same. 4. That extraordinary inflation supervened resulting in the unusual decrease in the purchasing power of the currency that could not reasonably be forseen or was manifestly beyond the contemplation of the parties at the time of the establishment of the obligation, thus, rendering the terms of the contract unenforceable, inequitable and to the undue 5 enrichment of RCBC.

and as counterclaim petitioner alleged that:


1. The rental of P700.00 has become unrealistic and unreasonable, that justice and equity will require its adjustment. 2. By the institution of the complaint he suffered moral damages which may be assessed at P100,000.00 and award of attorney's fee of P25,000.00 and exemplary damages at 6 P100,000.00.

Initially, after trial on the merits, the court dismissed the complaint. Although it found the contract to be valid, the court nonetheless ruled that the option to buy in unenforceable because it lacked a consideration distinct from the price and RCBC did not exercise its option within reasonable time. The prayer for readjustment of rental was denied, as well as that for moral and exemplary damages. 7 Nevertheless, upon motion for reconsideration of respondent, the court in the order of January 9, 1989, reversed itself, the dispositive portion reads:
WHEREFORE, the Court reconsiders its decision dated June 6, 1988, and hereby renders judgment as follows: 1. The defendant is hereby ordered to execute and deliver the proper deed of sale in favor of plaintiff selling, transferring and conveying the property covered by and described in the Original Certificate of Title 0-232 of the Registry of Deeds of Masbate for the sum of Seventy Eight Thousand Five Hundred Forty Pesos (P78,540,00), Philippine Currency; 2. Defendant is ordered to pay plaintiff the sum of Five Thousand (P5,000.00) Pesos as attorney's fees; 3. The counter claim of defendant is hereby dismissed; and

4. Defendants shall pay the costs of suit.

In a decision promulgated on September 19, 1991, 9 the Court of Appeals affirmed the findings of the trial court that:
1. The contract is valid and that the parties perfectly understood the contents thereof; 2. The option is supported by a distinct and separate consideration as embodied in the agreement; 3. There is no basis in granting an adjustment in rental.

Assailing the judgment of the appellate court, petitioner would like us to consider mainly the following:
1. The disputed contract is a contract of adhesion. 2. There was no consideration to support the option, distinct from the price, hence the option cannot be exercised. 3. Respondent court gravely abused its discretion in not granting currency adjustment on the already eroded value of the stipulated rentals for twenty-five years.

The petition is devoid of merit. There is no dispute that the contract is valid and existing between the parties, as found by both the trial court and the appellate court. Neither do we find the terms of the contract unfairly lopsided to have it ignored. A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his "adhesion" thereto. These types of contracts are as binding as ordinary contracts. Because in reality, the party who adheres to the contract is free to reject it entirely. Although, this Court will not hesitate to rule out blind adherence to terms where facts and circumstances will show that it is basically one-sided. 10 We do not find the situation in the present case to be inequitable. Petitioner is a highly educated man, who, at the time of the trial was already a CPA-Lawyer, and when he entered into the contract, was already a CPA, holding a respectable position with the Metropolitan Manila Commission. It is evident that a man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties. He is amply equipped to drive a hard bargain if he would be so minded to. Petitioner contends that the doctrines laid down in the cases of Atkins Kroll v. Cua Hian Tek, 11 Sanchez v. Rigos, 12 and Vda. de Quirino v. Palarca 13 were misapplied in the present case, because 1) the option given to the respondent

bank was not supported by a consideration distinct from the price; and 2) that the stipulated price of "not greater than P210.00 per square meter" is not certain or definite. Article 1324 of the Civil Code provides that when an offeror has allowed the offeree a certain period to accept, the offer maybe withdrawn at anytime before acceptance by communicating such withdrawal, except when the option is founded upon consideration, as something paid or promised. On the other hand, Article 1479 of the Code provides that an accepted unilateral promise to buy and sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. In a unilateral promise to sell, where the debtor fails to withdraw the promise before the acceptance by the creditor, the transaction becomes a bilateral contract to sell and to buy, because upon acceptance by the creditor of the offer to sell by the debtor, there is already a meeting of the minds of the parties as to the thing which is determinate and the price which is certain. 14 In which case, the parties may then reciprocally demand performance. Jurisprudence has taught us that an optional contract is a privilege existing only in one party the buyer. For a separate consideration paid, he is given the right to decide to purchase or not, a certain merchandise or property, at any time within the agreed period, at a fixed price. This being his prerogative, he may not be compelled to exercise the option to buy before the time expires. 15 On the other hand, what may be regarded as a consideration separate from the price is discussed in the case of Vda. de Quirino v. Palarca 16 wherein the facts are almost on all fours with the case at bar. The said case also involved a lease contract with option to buy where we had occasion to say that "the consideration for the lessor's obligation to sell the leased premises to the lessee, should he choose to exercise his option to purchase the same, is the obligation of the lessee to sell to the lessor the building and/or improvements constructed and/or made by the former, if he fails to exercise his option to buy leased premises." 17 In the present case, the consideration is even more onerous on the part of the lessee since it entails transferring of the building and/or improvements on the property to petitioner, should respondent bank fail to exercise its option within the period stipulated.
18

The bugging question then is whether the price "not greater than TWO HUNDRED PESOS" is certain or definite. A price is considered certain if it is so with reference to another thing certain or when the determination thereof is left to the judgment of a specified person or persons. 19 And generally, gross inadequacy of price does not affect a contract of sale. 20 Contracts are to be construed according to the sense and meaning of the terms which the parties themselves have used. In the present dispute, there is evidence to show that

the intention of the parties is to peg the price at P210 per square meter. This was confirmed by petitioner himself in his testimony, as follows:
Q. Will you please tell this Court what was the offer? A. It was an offer to buy the property that I have in Quezon City (sic). Q. And did they give you a specific amount? xxx xxx xxx A. Well, there was an offer to buy the property at P210 per square meters (sic). Q. And that was in what year? A . 1975, sir. Q. And did you accept the offer? A. Yes, sir.
21

Moreover, by his subsequent acts of having the land titled under the Torrens System, and in pursuing the bank manager to effect the sale immediately, means that he understood perfectly the terms of the contract. He even had the same property mortgaged to the respondent bank sometime in 1979, without the slightest hint of wanting to abandon his offer to sell the property at the agreed price of P210 per square meter. 22 Finally, we agree with the courts a quo that there is no basis, legal or factual, in adjusting the amount of the rent. The contract is the law between the parties and if there is indeed reason to adjust the rent, the parties could by themselves negotiate for the amendment of the contract. Neither could we consider the decline of the purchasing power of the Philippine peso from 1983 to the time of the commencement of the present case in 1985, to be so great as to result in an extraordinary inflation. Extraordinary inflation exists when there in an unimaginable increase or decrease of the purchasing power of the Philippine currency, or fluctuation in the value of pesos manifestly beyond the contemplation of the parties at the time of the establishment of the obligation. 23 Premises considered, we find that the contract of "LEASE WITH OPTION TO BUY" between petitioner and respondent bank is valid, effective and enforceable, the price being certain and that there was consideration distinct from the price to support the option given to the lessee. WHEREFORE, this petition is hereby DISMISSED, and the decision of the appellate court is hereby AFFIRMED. SO ORDERED.

G.R. No. 147575

October 22, 2004

TERESITA B. MENDOZA, petitioner, vs. BETH DAVID, respondent. DECISION CARPIO, J.: The Case This is a petition for review1 of the Decision2 dated 10 October 2000 and the Resolution dated 20 March 2001 of the Court of Appeals in CA-G.R. SP No. 58087. The Court of Appeals dismissed Teresita B. Mendozas ("Mendoza") petition for review for being insufficient in form and substance and denied her motion to reconsider the Decision. The Facts This case3 arose from an action for collection of money with damages that Mendoza filed against Beth David ("David") before the Metropolitan Trial Court of Quezon City ("MTC"), Branch 35. In her complaint, Mendoza alleged that on 17 February 1997, she ordered three sets of furniture from David worth P185,650 and paid an initial deposit of P40,650. Mendoza and David agreed on the specifications of the dining set, sofa set and tea set including the material and quality. On 18 February 1997, Mendoza cancelled some of the furniture she ordered and David agreed to the cancellation. On 12 April 1997, Mendoza paid an additional deposit of P40,000. When David delivered the dining set to Mendoza on 17 April 1997, Mendoza rejected the set because of inferior material and poor quality. Mendoza likewise rejected the sala set and the tea set for the same reason. When Mendoza requested a refund of her total deposit of P80,650, David refused. Mendoza then sent David a letter dated 27 May 1997 demanding the refund of her deposit but David ignored the demand letter.4 The parties failed to arrive at an amicable settlement. Thus, Mendoza filed a complaint for collection of money with damages.5 In her Answer, David admitted that she and Mendoza agreed on the material and quality of the furniture Mendoza ordered since that was the normal practice for "made to order" furniture. David stated that on 17 April 1997, she delivered some of the furniture which was received by Mendozas father. However, Mendoza could not pay the balance of the price and requested payment on installment which David rejected. As a result of Mendozas non-payment, David reclaimed the furniture already delivered and informed Mendoza she could get the furniture upon payment of the balance of P105,000. In the meantime, David stored the furniture in her warehouse. When David received Mendozas demand letter, she refused to comply with Mendozas request for a refund of the deposit since all the three sets of furniture Mendoza ordered were already finished and delivered on the agreed date. David only retrieved the furniture due to non-payment of the balance.6

On 2 August 1999, the MTC dismissed Mendozas complaint for lack of merit. The MTC held that David is not liable to return the deposit Mendoza paid. The MTC found there was already a perfected contract of sale which imposes reciprocal obligations on the parties. Mendoza is obligated to pay the balance of the purchase price while David is obligated to deliver the three sets of furniture to Mendoza upon payment of the purchase price. The MTC found no proof of breach of contract on Davids part. Mendoza failed to present any evidence that the furniture David delivered to her on 17 April 1997 was not in accordance with the agreed specifications. Besides, the order receipt for the sofa set, tea set and dining set contained no specifications on the required material or the quality of workmanship. Mendoza appealed to the Regional Trial Court of Quezon City ("RTC"), Branch 105, which modified the decision of the MTC. The dispositive portion of the RTCs decision reads: WHEREFORE, in the light of the foregoing, the decision appealed from is affirmed with MODIFICATION in that the plaintiff-appellant is ordered to pay to the defendant within sixty (60) days from receipt of this decision the amount of P55,850.00, with legal interest from 17 April 1997 until fully paid; otherwise, the deposit of P80,650.00 will be deemed forfeited and the defendant-appellee shall, thereafter, be authorized to dispose of the subject furniture. Upon timely payment of said obligation by the plaintiff-appellant to the defendant-appellee, the latter is ordered to deliver the subject furniture to the former.7 The RTC agreed with the MTC that there was a perfected contract of sale. The RTC found that Mendoza failed to present any proof to show that the furniture delivered was not in accordance with the agreed specifications. Applying the doctrine of caveat emptor, the RTC held that Mendoza should have specified in writing the details of her order. However, the RTC held that the remaining balance for the furniture ordered was only P55,850 since the total purchase price was reduced to P136,5008 because of the cancelled orders. Mendoza filed a petition for review with the Court of Appeals. On 10 October 2000, the Court of Appeals dismissed the petition for being insufficient in form and substance. The Court of Appeals held that failure to append the complaint, answer, position papers, memoranda and other evidence is sufficient ground to dismiss the petition, citing Sections 2 and 3, Rule 42 of the 1997 Rules of Civil Procedure. Nevertheless, despite the absence of pleadings and other pertinent documents, the Court of Appeals ruled that there is no basis for Mendozas claim that the furniture sets did not meet the agreed specifications. Relying merely on the decisions of the MTC and the RTC, the Court of Appeals held that factual findings of the lower courts are entitled to great weight and should not be disturbed except for cogent reasons.9 On 6 November 2000, Mendoza filed a motion for reconsideration which the Court of Appeals denied. Hence, the instant petition. The Issues Mendoza raises the following issues:

1. Whether the Court of Appeals erred in dismissing the petition for review on the ground that Mendoza failed to attach the required documents to the petition despite subsequent compliance by Mendoza in her motion for reconsideration. 2. Whether the Court of Appeals erred in dismissing the petition despite the fact that the transaction between the parties was one of sale by description or sample. The Ruling of the Court We find the petition partly meritorious. Mendoza substantially complied with the formal requirements when she filed her motion for reconsideration with the Court of Appeals. However, to avoid further delay, the Court will resolve the petition on the merits instead of remanding the case to the Court of Appeals. Compliance with the Formal Requirements The Court of Appeals dismissed the case based on Sections 2 and 3, Rule 42 of the 1997 Rules of Civil Procedure which read: SEC. 2. Form and contents. The petition shall be filed in seven (7) legible copies, with the original copy intended for the court being indicated as such by the petitioner, and shall (a) state the full names of the parties to the case, without impleading the lower courts or judges thereof either as petitioners or respondents; (b) indicate the specific material dates showing that it was filed on time; (c) set forth concisely a statement of the matters involved, the issues raised, the specification of errors of fact or law, or both, allegedly committed by the Regional Trial Court, and the reasons or arguments relied upon for the allowance of the appeal; (d) be accompanied by clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified correct by the clerk of court of the Regional Trial Court, the requisite number of plain copies thereof and of the pleadings and other material portions of the record as would support the allegations of the petition. xxx SEC. 3. Effect of failure to comply with requirements. The failure of the petitioner to comply with any of the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof. (Emphasis supplied) However, Section 6, Rule 1 of the 1997 Rules of Civil Procedure also provides that rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding. Indeed, rules of procedure should be used to promote, not frustrate justice.10 This Court has ruled against the dismissal of appeals based solely on technicalities in several cases, especially when the appellant had substantially complied with the formal requirements.11

In Donato v. Court of Appeals,12 the Court of Appeals dismissed the petition on two grounds: (a) the certificate of non-forum shopping was signed by petitioners counsel and not by petitioner himself;13 and (b) only a certified copy of the questioned decision was annexed to the petition leaving out copies of the pleadings and other material portions of the record to support the allegations of the petition. This Court reversed the Court of Appeals dismissal of the case since in petitioners motion for reconsideration, he submitted a certificate of non-forum shopping signed by him and attached copies of the pleadings and material portions of the records. This Court considered the subsequent filing of the certification of non-forum shopping duly signed by petitioner himself as substantial compliance which justifies relaxation of the rule. As regards the failure to attach the necessary pleadings and material portions of the records, this Court held: In like manner, the failure of the petitioner to comply with Section 3, paragraph b, Rule 6 of the RIRCA, that is, to append to his petition copies of the pleadings and other material portions of the records as would support the petition, does not justify the outright dismissal of the petition. It must be emphasized that the RIRCA gives the appellate court a certain leeway to require parties to submit additional documents as may be necessary in the interest of substantial justice. Under Section 3, paragraph d of Rule 3 of the RIRCA, the CA may require the parties to complete the annexes as the court deems necessary, and if the petition is given due course, the CA may require the elevation of a complete record of the case as provided for under Section 3(d)(5) of Rule 6 of the RIRCA. At any rate, petitioner attached copies of the pleadings and other material portions of the records below with his motion for reconsideration. In Jaro vs. Court of Appeals, the Court reiterated the doctrine laid down in Cusi-Hernandez vs. Diaz and Piglas-Kamao vs. National Labor Relations Commission that subsequent submission of the missing documents with the motion for reconsideration amounts to substantial compliance which calls for the relaxation of the rules of procedure. xxx (Emphasis supplied) Similarly, in this case, although Mendoza failed to append the pleadings and pertinent documents in her petition to the Court of Appeals, Mendoza rectified her error by filing a motion for reconsideration and appending the pleadings and documents required by the Court of Appeals. Mendoza appended copies of the following pleadings and documents in her motion for reconsideration: 1. Complaint filed in the MTC (Annex A) 2. Davids Answer (Annex B) 3. Pre-Trial Order of the MTC (Annex C) 4. Mendozas Memorandum filed in the MTC (Annex D) 5. Davids Memorandum filed in the MTC (Annex E) 6. Mendozas Memorandum filed in the RTC (Annex F) 7. Davids Comment to the Motion for Reconsideration of Mendoza (Annex G)

The Complaint that Mendoza appended also contained the following annexes: (a) the sales invoice dated 17 February 1997 which indicated the total deposit for the furniture ordered; (b) the letter of Mendoza to David dated 27 May 1997 demanding the return of the P80,650 deposit; and (c) the certification to file action from the Office of the Barangay Captain of Barangay Pasong Tamo, Quezon City. Instead of denying the Motion for Reconsideration, the Court of Appeals should have ruled on the merits of the case considering that Mendoza already submitted the pleadings and documents required by the Court of Appeals. The rules of procedure are designed to ensure a fair, orderly and expeditious disposition of cases.14 As much as possible, appeals should not be dismissed on a mere technicality in order to afford the litigants the maximum opportunity for the adjudication of their cases on the merits.15 Reliance on the Factual Findings of the Lower Courts Likewise, the Court of Appeals should have refrained from hastily dismissing the petition through the expediency of applying the doctrine that factual findings of the lower courts are entitled to great weight. The doctrine is applicable where there is substantial evidence to support the findings of fact by the lower court as borne by the records of the case.16 In this case, the Court of Appeals admitted that without the pertinent documents and pleadings, it is deprived of a full opportunity to know all the facts and issues involved in the case.17 The doctrine therefore is not applicable considering the absence of the records of the case to determine whether substantial evidence supports the factual findings of the lower court. Instead of relying on the doctrine, the Court of Appeals could have required Mendoza to submit additional documents in accordance with Section 3 (d), Rule 3 of the Revised Internal Rules of the Court of Appeals18 so that it would have a basis for its ruling. Furthermore, the Court of Appeals could order the Clerk of the RTC to elevate the original records of the case for a complete adjudication of the case.19 Made to Order or Sale by Description or Sample? David alleges that the three sets of furniture were "made to order" in accordance with the usual practice of furniture stores. On the other hand, Mendoza insists that the transaction was a sale by sample or description which can be rescinded as provided under Article 148120 of the Civil Code. There is a sale by sample when a small quantity is exhibited by the seller as a fair specimen of the bulk, which is not present and there is no opportunity to inspect or examine the same.21 To constitute a sale by sample, it must appear that the parties treated the sample as the standard of quality and that they contracted with reference to the sample with the understanding that the product to be delivered would correspond with the sample.22 In a contract of sale by sample, there is an implied warranty that the goods shall be free from any defect which is not apparent on reasonable examination of the sample and which would render the goods unmerchantable.23 There is a sale of goods by description where "a seller sells things as being of a particular kind, the buyer not knowing whether the sellers representations are true or false, but relying on them as true; or as otherwise stated, where the buyer has not seen the article sold and relies on the description given to him by the seller, or has seen the goods, but the want of identity is not

apparent on inspection."24 A sellers description of the goods which is made part of the basis of the transaction creates a warranty that the goods will conform to that description.25 Where the goods are bought by description from a seller who deals in the goods of that description, there is an implied warranty that the goods are of merchantable quality.26 Whether a transaction is a sale by sample, a sale by description or "made to order" is a question of fact for the trial court to decide from the evidence presented. In this case, the MTC found that there was a consummated "made to order" agreement between Mendoza and David. The Court agrees with the MTC that the transaction in this case was a "made to order" agreement. There is nothing in the records which would show that the intent of the parties was for a sale by sample or description. Whether a sale is by sample or description depends upon the facts disclosing the intention of the parties. Other than Mendozas bare allegations that the transaction was a sale by sample or description, Mendoza failed to produce evidence to substantiate her claim. The sale of furniture in this case is not a sale by sample. The term sale by sample does not include an agreement to manufacture goods to correspond with the pattern.27 In this case, the three sets of furniture were manufactured according to the specifications provided by the buyer. Mendoza did not order the exact replica of the furniture displayed in Davids shop but made her own specifications on the measurement, material and quality of the furniture she ordered. Neither is the transaction a sale by description. Mendoza did not rely on any description made by David when she ordered the furniture. Mendoza inspected the furniture displayed in Davids furniture shop and made her own specifications on the three sets of furniture she ordered. Breach of Contract Not Proven It is undisputed that there was a perfected contract of sale of furniture between Mendoza and David. The three sets of furniture were delivered or ready for delivery within the agreed period. The issue for resolution is whether there was breach of contract on Davids part. The Court finds none. Part of the exhibits David submitted to the MTC were pictures of the sets of furniture Mendoza ordered. The MTC found the furniture to be strictly in accordance with the tenor of the contract between Mendoza and David. The MTC and the RTC, noting the lack of written specifications on the material and quality of the furniture ordered, held that Mendoza failed to present any proof to show that the furniture was not in accordance with the agreed specifications. The records show that the parties agreed that the furniture should be made of narra. Mendoza admitted that the furniture delivered was made of narra but was of inferior quality. She also complained of deep nail marks and rough surface at the back of the table and chairs. However, Mendoza failed to prove these allegations. In civil cases, the burden of proof28 rests on the party who asserts the affirmative of an issue based on the pleadings or the nature of the case.29 In this case, the burden lies on Mendoza who must prove her allegation that there was breach of contract. After reviewing the records of the

case, the Court finds that Mendoza failed to substantiate her claim of breach of contract. Mendoza failed to present any evidence to overcome the presumption that the transaction was fair and regular.30 WHEREFORE, the Decision of the Court of Appeals dated 10 October 2000 and the Resolution dated 20 March 2001 are MODIFIED. Petitioner Teresita B. Mendoza is ordered to pay respondent Beth David the amount of P55,850 with interest at 6% per annum from 17 April 1997 until finality of this Decision and 12% per annum thereafter until full payment. Beth David is ordered to deliver to Teresita B. Mendoza the three sets of furniture Mendoza ordered upon her payment of the balance of the purchase price with interest. SO ORDERED. G.R. No. 128573. January 13, 2003] NAAWAN COMMUNITY RURAL BANK INC., Petitioner, vs. THE COURT OF APPEALS and SPOUSES ALFREDO AND ANNABELLE LUMO, Respondents. DECISION CORONA, J.: Under the established principles of land registration, a person dealing with registered land may generally rely on the correctness of a certificate of title and the law will in no way oblige him to go beyond it to determine the legal status of the property. Before us is a Petition for Review on Certiorari challenging the February 7, 1997 Decision[1 of the Court of Appeals in CA-G.R. CV No. 55149, which in turn affirmed the decision[2 of the Regional Trial Court of Misamis Oriental, Branch 18 as follows: WHEREFORE, the plaintiffs-spouses are adjudged the absolute owners and possessors of the properties in question (Lot 18583, under TCT No. T-50134, and all improvements thereon) and quieting title thereto as against any and all adverse claims of the defendant. Further, the sheriffs certificate of sale, Exhibit 4; 4-A; Sheriffs deed of final conveyance, Exhibit 5, 5-A; Tax Declarations No. 71211, Exhibit 7, and any and all instrument, record, claim, encumbrance or proceeding in favor of the defendant, as against the plaintiffs, and their predecessor-in-interest, which may be extant in the office of the Register of Deeds of Province of Misamis Oriental, and of Cagayan de Oro City, and in the City Assessors Office of Cagayan de Oro City, are declared as invalid and ineffective as against the plaintiffs title. The counterclaim is dismissed for lack of merit. SO ORDERED.[3 The facts of the case, as culled from the records, are as follows:

On April 30, 1988, a certain Guillermo Comayas offered to sell to private respondent-spouses Alfredo and Annabelle Lumo, a house and lot measuring 340 square meters located at Pinikitan, Camaman-an, Cagayan de Oro City. Wanting to buy said house and lot, private respondents made inquiries at the Office of the Register of Deeds of Cagayan de Oro City where the property is located and the Bureau of Lands on the legal status of the vendors title. They found out that the property was mortgaged for P8,000 to a certain Mrs. Galupo and that the owners copy of the Certificate of Title to said property was in her possession. Private respondents directed Guillermo Comayas to redeem the property from Galupo at their expense, giving the amount of P10,000 to Comayas for that purpose. On May 30, 1988, a release of the adverse claim of Galupo was annotated on TCT No. T-41499 which covered the subject property. In the meantime, on May 17, 1988, even before the release of Galupos adverse claim, private respondents and Guillermo Comayas, executed a deed of absolute sale. The subject property was allegedly sold for P125,000 but the deed of sale reflected the amount of only P30,000 which was the amount private respondents were ready to pay at the time of the execution of said deed, the balance payable by installment. On June 9, 1988, the deed of absolute sale was registered and inscribed on TCT No. T-41499 and, on even date, TCT No. T-50134 was issued in favor of private respondents. After obtaining their TCT, private respondents requested the issuance of a new tax declaration certificate in their names. However, they were surprised to learn from the City Assessors Office that the property was also declared for tax purposes in the name of petitioner Naawan Community Rural Bank Inc. Records in the City Assessors Office revealed that, for the lot covered by TCT No. T-50134, Alfredo Lumos T/D # 83324 bore the note: This lot is also declared in the name of Naawan Community Rural Bank Inc. under T/D # 71210. Apparently, on February 7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner Bank using the subject property as security. At the time said contract of mortgage was entered into, the subject property was then an unregistered parcel of residential land, tax-declared in the name of a certain Sergio A. Balibay while the residential one-storey house was tax-declared in the name of Comayas. Balibay executed a special power of attorney authorizing Comayas to borrow money and use the subject lot as security. But the Deed of Real Estate Mortgage and the Special Power of Attorney were recorded in the registration book of the Province of Misamis Oriental, not in the registration book of Cagayan de Oro City. It appears that, when the registration was made, there was only one Register of Deeds for the entire province of Misamis Oriental, including Cagayan de Oro City. It was only in 1985 when the Office of the Register of Deeds for Cagayan de Oro City was established separately from the Office of the Register of Deeds for the Province of Misamis Oriental.

For failure of Comayas to pay, the real estate mortgage was foreclosed and the subject property sold at a public auction to the mortgagee Naawan Community Rural Bank as the highest bidder in the amount of P16,031.35. Thereafter, the sheriffs certificate of sale was issued and registered under Act 3344 in the Register of Deeds of the Province of Misamis Oriental. On April 17, 1984, the subject property was registered in original proceedings under the Land Registration Act. Title was entered in the registration book of the Register of Deeds of Cagayan de Oro City as Original Certificate of Title No. 0-820, pursuant to Decree No. N-189413. On July 23, 1984, Transfer Certificate of Title No. T-41499 in the name of Guillermo P. Comayas was entered in the Register of Deeds of Cagayan de Oro City. Meanwhile, on September 5, 1986, the period for redemption of the foreclosed subject property lapsed and the MTCC Deputy Sheriff of Cagayan de Oro City issued and delivered to petitioner bank the sheriffs deed of final conveyance. This time, the deed was registered under Act 3344 and recorded in the registration book of the Register of Deeds of Cagayan de Oro City. By virtue of said deed, petitioner Bank obtained a tax declaration for the subject house and lot. Thereafter, petitioner Bank instituted an action for ejectment against Comayas before the MTCC which decided in its favor. On appeal, the Regional Trial Court affirmed the decision of the MTCC in a decision dated April 13, 1988. On January 27, 1989, the Regional Trial Court issued an order for the issuance of a writ of execution of its judgment. The MTCC, being the court of origin, promptly issued said writ. However, when the writ was served, the property was no longer occupied by Comayas but herein private respondents, the spouses Lumo who had, as earlier mentioned, bought it from Comayas on May 17, 1988 Alarmed by the prospect of being ejected from their home, private respondents filed an action for quieting of title which was docketed as Civil Case No. 89-138. After trial, the Regional Trial Court rendered a decision declaring private respondents as purchasers for value and in good faith, and consequently declaring them as the absolute owners and possessors of the subject house and lot. Petitioner appealed to the Court of Appeals which in turn affirmed the trial courts decision. Hence, this petition. Petitioner raises the following issues: I. WHETHER OR NOT THE SHERIFFS DEED OF FINAL CONVEYANCE WAS DULY EXECUTED AND REGISTERED IN THE REGISTER OF DEEDS OF CAGAYAN DE ORO CITY ON DECEMBER 2, 1986;

II. WHETHER OR NOT REGISTRATION OF SHERIFFS DEED OF FINAL CONVEYANCE IN THE PROPER REGISTRY OF DEEDS COULD BE EFFECTIVE AS AGAINST SPOUSES LUMO. Both parties cite Article 1544 of the Civil Code which governs the double sale of immovable property. Article 1544 provides: x x x. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Petitioner bank contends that the earlier registration of the sheriffs deed of final conveyance in the day book under Act 3344 should prevail over the later registration of private respondents deed of absolute sale under Act 496,[4 as amended by the Property Registration Decree, PD 1529. This contention has no leg to stand on. It has been held that, where a person claims to have superior proprietary rights over another on the ground that he derived his title from a sheriffs sale registered in the Registry of Property, Article 1473 (now Article 1544) of the Civil Code will apply only if said execution sale of real estate is registered under Act 496.[5 Unfortunately, the subject property was still untitled when it was acquired by petitioner bank by virtue of a final deed of conveyance. On the other hand, when private respondents purchased the same property, it was already covered by the Torrens System. Petitioner also relies on the case of Bautista vs. Fule[6 where the Court ruled that the registration of an instrument involving unregistered land in the Registry of Deeds creates constructive notice and binds third person who may subsequently deal with the same property. However, a close scrutiny of the records reveals that, at the time of the execution and delivery of the sheriffs deed of final conveyance on September 5, 1986, the disputed property was already covered by the Land Registration Act and Original Certificate of Title No. 0-820 pursuant to Decree No. N189413 was likewise already entered in the registration book of the Register of Deeds of Cagayan De Oro City as of April 17, 1984. Thus, from April 17, 1984, the subject property was already under the operation of the Torrens System. Under the said system, registration is the operative act that gives validity to the transfer or creates a lien upon the land. Moreover, the issuance of a certificate of title had the effect of relieving the land of all claims except those noted thereon. Accordingly, private respondents, in dealing with the subject registered land, were not required by law to go beyond the register to determine the legal condition of the property. They were only charged with notice of such burdens on the property as were noted on the register or the certificate of title. To have required them to do more would have been to defeat the primary object of the Torrens System which is to make the Torrens Title indefeasible and valid against the whole world.

Private respondents posit that, even assuming that the sheriffs deed of final conveyance in favor of petitioner bank was duly recorded in the day book of the Register of Deeds under Act 3344, ownership of the subject real property would still be theirs as purchasers in good faith because they registered the sale first under the Property Registration Decree. The rights created by the above-stated statute of course do not and cannot accrue under an inscription in bad faith. Mere registration of title in case of double sale is not enough; good faith must concur with the registration.[7 Petitioner contends that the due and proper registration of the sheriffs deed of final conveyance on December 2, 1986 amounted to constructive notice to private respondents. Thus, when private respondents bought the subject property on May 17, 1988, they were deemed to have purchased the said property with the knowledge that it was already registered in the name of petitioner bank. Thus, the only issue left to be resolved is whether or not private respondents could be considered as buyers in good faith. The priority in time principle being invoked by petitioner bank is misplaced because its registration referred to land not within the Torrens System but under Act 3344. On the other hand, when private respondents bought the subject property, the same was already registered under the Torrens System. It is a well-known rule in this jurisdiction that persons dealing with registered land have the legal right to rely on the face of the Torrens Certificate of Title and to dispense with the need to inquire further, except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.[8 Did private respondents exercise the required diligence in ascertaining the legal condition of the title to the subject property so as to be considered as innocent purchasers for value and in good faith? We answer in the affirmative. Before private respondents bought the subject property from Guillermo Comayas, inquiries were made with the Registry of Deeds and the Bureau of Lands regarding the status of the vendors title. No liens or encumbrances were found to have been annotated on the certificate of title. Neither were private respondents aware of any adverse claim or lien on the property other than the adverse claim of a certain Geneva Galupo to whom Guillermo Comayas had mortgaged the subject property. But, as already mentioned, the claim of Galupo was eventually settled and the adverse claim previously annotated on the title cancelled. Thus, having made the necessary inquiries, private respondents did not have to go beyond the certificate of title. Otherwise, the efficacy and conclusiveness of the Torrens Certificate of Title would be rendered futile and nugatory. Considering therefore that private respondents exercised the diligence required by law in ascertaining the legal status of the Torrens title of Guillermo Comayas over the subject property

and found no flaws therein, they should be considered as innocent purchasers for value and in good faith. Accordingly, the appealed judgment of the appellate court upholding private respondents Alfredo and Annabelle Lumo as the true and rightful owners of the disputed property is affirmed. WHEREFORE, petition is hereby DENIED. SO ORDERED. Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Morales, JJ., concur.

G.R. No. 145878

April 25, 2006

MARCIANO BLANCO, Petitioner, vs. FELIMON RIVERA, Respondent. RESOLUTION CORONA, J.: Assailed in this petition for review1 are the decision2 and resolution3 of the Court of Appeals which affirmed the decision4 of Branch 70, Regional Trial Court (RTC) of Binangonan, Rizal in a civil case5 for quieting of title filed by respondent Felimon Rivera against his half-brother, petitioner Marciano Blanco. The subject matter of the controversy is a parcel of residential land consisting of 217 square meters. It was formerly co-owned in equal undivided shares by respondent and Eugenia Reyes vda. de Rivera, the mother of both petitioner and respondent. On February 21, 1977, Eugenia sold her undivided share to petitioner. The sale could not be registered because the original owners copy of the title was allegedly in the custody of respondent who refused to surrender the same. The deed of sale6 did not have the consent of respondent. Eugenia, however, executed an affidavit7 alleging that she had already notified her co-owner Felimon and other possible redemptioners of the sale of the property. Three years later, on April 19, 1980, Eugenia again sold her undivided share, this time to her coowner, respondent Felimon, through a quitclaim deed8 and for a consideration of P9,785. Respondent registered the sale with the register of deeds of Rizal. He was issued TCT No.

501585 9 on May 21, 1980. He thereafter took actual and physical possession of the property and had since then paid the real property tax thereon.10 Sometime in 1982, petitioner, who was residing on one-fourth (1/4) of the property, heard about the sale of the property to respondent. He confronted their mother Eugenia who sought the assistance of barangay authorities in San Pedro, Angono, Rizal. In the barangay proceedings,11 petitioner exhibited the deed of sale and the affidavit executed by Eugenia attesting to the sale of the property and the prior notice to her co-owner Felimon Rivera. Petitioner maintained that he tried unsuccessfully to register his deed of sale but, when asked by the registrar of deeds to produce the original TCT as a requirement for registration, all he could show was a photocopy inasmuch as the original was in respondents possession. He claimed that he requested the original TCT from his mother and respondent but they refused. After several days, petitioner reiterated his request to respondent but the latter ignored him. For his part,12 respondent denied that he knew of the alleged prior sale of the property to petitioner. When he learned about petitioners claim, he filed an ejectment case to oust him from the property.13 Unfortunately, the ejectment suit was decided in favor of petitioner. On March 3, 1991, respondent filed the present civil case for quieting of title. Eugenia failed to testify because of her untimely demise. The court a quo gave no weight to the tape-recorded barangay proceedings for being hearsay. Likewise, the court did not consider the dismissal of the ejectment case because the sole issue in that proceeding was possession, not ownership. It decided the case mostly on documentary evidence. It ruled: WHEREFORE, in view of all the foregoing, Judgment is rendered[:] 1. Declaring the plaintiff Felimon Rivera, married to Gliceria Diaz as the true and lawful owner of the property covered by Transfer Certificate of Title No. 501585 of the Registry of Deeds of Rizal. 2. Ordering the defendant to pay the costs. SO ORDERED.14 On appeal, the Court of Appeals affirmed the RTC decision. It also denied petitioners motion for reconsideration. Hence, this petition. Essentially, the issue before us is who, between petitioner and respondent, has the better right over Eugenias portion of the property.

Petitioner contends that respondent did not act in good faith when he purchased it from their mother and had the sale registered in his name. Being the first buyer, petitioner claimed to have a better right to own the property. When immovable property is sold to two different buyers at different times, ownership is determined in accordance with Article 1544 of the Civil Code15 which provides: ART. 1544. xxx Should it be immovable property, the ownership shall pertain to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person, who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. The requirement of the law is two-fold: acquisition in good faith and registration in good faith.16 The rationale behind this was laid out in Uraca v. Court of Appeals:17 The prior registration of the disputed property by the second buyer does not by itself confer ownership or a better right over the property. Article 1544 requires that such registration must be coupled with good faith. Jurisprudence teaches us that "the governing principle is primus in tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyers rights except where the second buyer registers in good faith the second sale ahead of the first, as provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge gained by the second buyer of the first sale defeats his right even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyers right) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession.) The vendee who first registers the sale in good faith in the registry of property has a preferred right over another vendee who has not registered his title. This is true even if the latter is in actual possession of the immovable property. More credit is given to registration than to actual possession.18 But the law is clear mere registration of title is not enough. Good faith must concur with registration.19 To be in a priority status, the second purchaser must be in good faith, that is, without knowledge of the previous alienation by the vendor to another.20 What holds relevance and materiality is not whether the second buyer is a buyer in good faith but whether he registers such second sale in good faith, meaning, without knowledge of any defect in the title of the property sold.21

Here, both the trial and appellate courts declared respondent to be the true owner of the property. He was uncontestedly the first to register his ownership over the property, untainted by proof of any knowledge of the prior sale. Respondents acquisition and registration of the property were therefore in good faith. The appellate court elucidated: xxx. Although defendant-appellant (petitioner) claims that he asked the owners copy of the title from the plaintiff-appellant (respondent), the same was vehemently denied by the latter. Defendant-appellant presented the affidavit of their mother attesting that the subject lot was sold to him and that notice was given to the co-owner, however, proof of the said notice was never presented nor attached to the said affidavit. Defendant-appellant failed to prove that there was any notice, aside from the statement in the said affidavit. x x x We agree with the ruling of the lower court in not giving much weight to the affidavit of Eugenia Reyes Vda. de Rivera for the reason that plaintiff-appellee denied having been told of the sale in his testimony in open court. The infirmity of affidavits as a specie of evidence is a matter of judicial experience. As such, an affidavit taken ex-parte is generally considered to be inferior to testimonies in open court.22 Besides, even if petitioners claim were true, he would nonetheless still be guilty of laches.23 He failed to utilize, for an unreasonable and unexplained length of time, the available legal remedies24 for his claim over the property to be recognized not only by respondent but all other persons. Beginning from his alleged acquisition of the land in 1977, to his discovery of respondents registration in 1982, up to the filing of this case in 1991, more than 14 years had lapsed without any legal action on his part to secure his ownership over the property. His failure to display zealousness about his alleged ownership is fatal to his claim. WHEREFORE, the petition is hereby DENIED and the assailed decision and resolution of the Court of Appeals AFFIRMED. Costs against petitioner. SO ORDERED. G.R. No. L-27674 May 12, 1975 SOLEDAD T. CONSING, assisted by her husband, ANTONIO M. CONSING, plaintiffs-petitioners, vs. JOSE T. JAMANDRE, personally, and as Judicial Administrator of the Estate of Cirilo Jamandre, defendant-respondent. Agustin T. Locsin for plaintiffs-petitioners. Januario L. Sison, Sr. for defendant-respondent.

ESGUERRA, J.:+.wph!1 Petition for review on certiorari of the decision of the Court of Appeals in its CA-G.R. No. 36711-R reversing that of the Court of First Instance of Negros Occidental and dismissing the complaint of the plaintiffs-petitioners, besides ordering them to pay the defendant-respondent the amount of P19,000.00. The factual background of the case is as follows: Plaintiffs (now petitioners) filed in the Municipal Court of Sagay, Negros Occidental, a Complaint for Forcible Entry and Detainer against defendant (now respondent) for taking possession of Haciendas "Aida" and "Fe" through force, intimidation, stealth and strategy despite the contract of sublease (Annex "A" of the Complaint) executed on October 19, 1962, (the date plaintiffs-petitioners took possession and management of the leased premises) by and between the former, as sub-lessee, and the father of the latter, Cirilo Jamandre, as sub-lessor. Defendant-respondent filed his answer and averred that he took-over the haciendas in question on September 11, 1963, seven (7) months after the death of his father, Cirilo Jamandre, on February 11, 1963, because of the failure of plaintiffs-petitioners to comply with the terms and conditions of paragraphs 3 and 4 of the contract of sub-lease which read as follows: t.hqw
3. That the SUB-LESSEE Soledad T. Consing shall pay the SUB-LESSOR Cirilo Jamandre 1,000 piculs of "C" sugar every crop year and to effectuate said payment the Lopez Sugar Central is hereby authorized to register in the name of the SUB-LESSOR Cirilo Jamandre a proportion of 10% of the weekly sugar milled by the SUB-LESSEE properly quendaned until the full amount of 1,000 piculs of "C" sugar shall have been fully paid and satisfied not later than the month of February of every year. 4. That the SUB-LESSEE Soledad T. Consing shall pay the SUB-LESSOR the amount of TWENTY THOUSAND PESOS (P20,000.00) by way of advance payment every crop year until the duration of the lease. For the payment therefore, the amount of 1,000 piculs of "C" sugar referred in par. No. 3 shall be assigned and/or endorsed to the SUBLESSEE Soledad T. Consing and after proper liquidation of the same the surplus from the proceeds of 1,000 piculs of C sugar shall be paid to the SUB-LESSOR Cirilo Jamandre not later than the month of February of each crop year.

As justification for the take-over of the leased premises, defendant-respondent cited paragraph 9 of said contract of sublease as his authority, the text of which will be quoted hereafter. After the issues had been joined, the Municipal Court of Sagay, Negros Occidental, rendered judgment on June 5, 1964, in favor of plaintiffs-petitioners, the dispositive portion of which is as follows: t.hqw
WHEREFORE, in view of all the foregoing, the Court renders judgment for the plaintiff and against the defendant Jose T. Jamandre, personally and in his capacity as Judicial Administrator of the estate of the late Cirilo Jamandre, to vacate from and restore to

plaintiff, Soledad Tumbokon Consing, the possession of Hdas. "Aida" and "Fe" covered by Lots Nos. 1257, 1258, 806 and 694 all of Sagay Cadastre, and with costs against the defendant.

Defendant-respondent appealed to the Court of First Instance of Negros Occidental where the appeal was docketed as Civil Case No. 246 on July 25, 1964. On August 5, 1964, defendant-respondent filed his amended answer with the Court of First Instance of Negros Occidental. On August 18, 1964, plaintiffs-petitioners filed their Motion To Strike And For Summary Judgment, attaching thereto as Annex "A" the affidavit of Soledad Tumbokon Consing in support of the motion for summary judgment. Defendant-respondent objected to the motion to strike out the amended answer and for summary judgment. On August 29, 1964, the Court of First Instance of Negros Occidental admitted the amended answer of defendant-respondent and denied the motion to strike out and for judgment on the pleadings. The plaintiffs-petitioners moved for the reconsideration of the Order of August 29, 1964, and on September 15, 1964, they filed their Supplement To Motion For Reconsideration to which the defendant-respondent objected. On October 9, 1964, the Court of First Instance denied the motion for reconsideration, as follows:t.hqw
After considering the pleadings in the present case and the provisions of Rule 19 in connection with the Rule 34 of the Rules of Court, the Court is of the opinion and so holds that the plaintiff is not entitled to summary judgment.. IN VIEW OF THE FOREGOING, the Court denies the motion for reconsideration dated September 11, 1964. The Clerk of Court is directed to set the trial of this case on the merits in the November calendar at San Carlos City.

After the plaintiffs-petitioners had filed their Reply With Answer to Counterclaims, the case was set for pre-trial. On March 31, 1965, the Court of First Instance issued its PreTrial Order, to wit:t.hqw
After hearing the manifestations of both counsel, the Court finds that there is no possibility of an amicable settlement. According to the theory of the plaintiffs, considering that the prior possession of the plaintiffs is admitted by the defendant, the acts of the defendant in taking the possession of the property are illegal, and that the only question to be resolved in this case insofar as the plaintiffs are concerned is the determination of damages. The defendant, however, contends that according to the stipulations of the contract which is attached to the complaint and admitted by the defendant, the plaintiffs have violated the terms of the stipulations and conditions therein, and by virtue of the

stipulations of that contract the defendant is authorized to take possession of the property. The issue, therefore, to be resolved by this Court are: First: Whether the stipulations in the contract authorize the defendant in the taking of the possession of the property subject of the litigation; and Second: The damages that may be adjudicated to either of the parties in the event that a judgment is rendered. Therefore, the trial now will be confined to the interpretation of the contract and the determination of damages. There is no need of evidence with reference to the fact of prior possession because that is admitted in the pleadings and in the open manifestation of the parties.

On August 4, 1965, the Court of First Instance of Negros Occidental, in the exercise of its appellate jurisdiction over Forcible Entry and Detainer cases, rendered judgment, the dispositive portion of which reads as follows:t.hqw
IN VIEW OF the foregoing, judgment is hereby rendered as follows: 1. The defendant is ordered to vacate the premises of Lots Nos. 1257, 1258, 806 and 694 of the cadastral survey of Sagay, known as Hdas. "Aida" and "Fe" and to deliver the possession thereof to the plaintiffs; 2. The defendant is ordered to make an accounting of his expenses and income from the leased property from September 11, 1963 up to the date when the plaintiffs shall have been restored to the possession thereof and the profit or net income shall be paid the plaintiffs; 3. The defendant shall pay the costs; and 4. No award for attorney's fees as there is no evidence that the acts of the defendant were inspired by fraud, malice or evident bad faith.

The defendant-respondent appealed to the Court of Appeals which rendered judgment reversing that of the court a quo, the dispositive portion of which reads as follows:t.hqw
WHEREFORE, the judgment appealed from is reversed and another one entered dismissing the complaint of the plaintiffs, and ordering said plaintiffs to pay the defendant, on the counter-claim, the amount of P19,000.00, which however, should be deducted from the proceeds of the sugarcane harvested by the appellant, who is ordered to render an accounting of the sugar cane he harvested for the crop year 1962-63, the excess thereof, if any, after such accounting is made, is ordered to be delivered to the appellees. On equitable considerations, without special pronouncement as to costs.

The plaintiffs-petitioners' motion for reconsideration and Addendum to Motion For Reconsideration having been denied, the herein petition for review on certiorari was filed.

Plaintiffs-petitioners maintain that summary judgment should have been rendered by the court a quo in view of the failure of the defendant-respondent to file a counter affidavit or verified opposition. Besides, defendant-respondent admits having taken possession of the leased premises. Plaintiffs-petitioners likewise maintain that the original case being one of forcible entry, reception of evidence should have been limited only to that of possession de facto, and that the contractual stipulation no. 9 of the Contract of Sublease (Annex "A" of the Complaint and submitted as Exhibit "A") authorizing defendant-respondent to take possession of the leased premises without the need of a court action is illegal. Petitioners further contend that the only issue in forcible entry case is the physical possession of the property involved which is only possession de facto and not possession de jure; that what is needed to be proved only in forcible entry case is prior possession, and that if one could prove prior possession of the property under litigation, he is entitled to stay thereon until he is lawfully ejected by a person having a better right either by accion publiciana or accion reivindicatoria. Petitioners argue that the contractual stipulation in the contract of sub-lease with the herein respondent, authorizing the latter to take possession of the leased premises even without resorting to court action is illegal and violative of due process. They maintain that this is tantamount to a renunciation of one's day in Court and, therefore, null and void. Besides, this might open the floodgates to violence which our law seek to suppress. Respondent on the other hand maintains that he took possession of the leased property because he is authorized to do so under the contract (Annex "A" of the Complaint; Exh. "A"). Respondent further maintains that the appellate court did not err in proceeding with its interpretation of the contract of sub-lease of the parties and in determining the amount of damages because the parties so agreed during the pre-trial of the case. Respondent also claims that the stipulation "without necessity of resorting to any court action", in the contract of sub-lease (stipulation no. 9, Annex "A" of the Complaint; Exh. "A") is not tainted with illegality because it does not provide for the use of force in the taking of possession by the sub-lessor(respondent in the present case) and, therefore, the same is not offensive to the law against forcible entry or to public policy which, for the preservation of the public peace, does not allow taking the law into one's own hands. I The principal issue, therefore, to be resolved is whether or not the stipulation in the contract of sub-lease between the parties authorizing the herein respondent, as sublessor, to take possession of the leased premises including all its improvements thereon without compensation to the sub-lessee (herein petitioners) and without the need of judicial action is valid and binding.

For a better understanding of the controversy, the contractual stipulation is hereunder quoted:t.hqw
9. That in case of the failure on the part of the SUB-LESSEE to comply with any of the terms and conditions thereof, the SUB-LESSEE hereby gives an authority to the SUBLESSOR or to any of his authorized representative to take possession of the leased premises including all its improvements thereon without compensation to the SUBLESSEE and without necessity of resorting to any court action but in which case the SUB-LESSEE shall be duly advised in writing of her failure to comply with the terms and conditions of the contract by way of reminder before the take-over.

This stipulation is in the nature of a resolutely condition, for upon the exercise by the Sub-lessor of his right to take possession of the leased property, the contract is deemed terminated. This kind of contractual stipulation is not illegal, there being nothing in the law proscribing such kind of agreement. As held by this Court in Froilan vs. Pan Oriental Shipping Co., G.R. No. L-11897, October 31, 1964; 12 SCRA 276, 286:t.hqw
Under Article 1191 of the Civil Code, in case of reciprocal obligations, the power to rescind the contract where a party incurs in default, is impliedly given to the injured party. Appellee maintains, however, that the law contemplates of rescission of contract by judicial action and not a unilateral act by the injured party; consequently, the action of the Shipping Administration contravenes said provision of the law. This is not entirely correct, because there is also nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention.In other words, it is not always necessary for the injured party to resort to court for rescission of the contract. As already held, judicial action is needed where there is absence of special provision in the contract granting to a party the right of rescission.

Judicial permission to cancel the agreement was not, therefore, necessary because of the express stipulation in the contract of sub-lease that the sub-lessor, in case of failure of the sub-lessee to comply with the terms and conditions thereof, can take over the possession of the leased premises, thereby cancelling the contract of sub-lease. Resort to judicial action is necessary only in the absence of a special provision granting the power of cancellation. (De la Rama Steamship Co., vs. Tan, G.R. No. L-8784, May 21, 1956; 99 Phil. 1034). II On the question that the reception of evidence should have been limited to possession de facto only, We rule that the court a quo did not err in going further by interpreting the contract sub-lease. While it is true that the only issue in forcible entry or unlawful detainer action is the physical possession of the leased property, that is possession de facto not possession de jure, yet the court may go beyond that if only to prove the nature of the possession. (Pitargue vs. Sorilla, L-4302, September 17,1952; 48 O.G. 3849). The court may receive evidence upon the question of the title, or for that matter possession de jure, solely for the purpose of determining the character and extent of possession and damages for the detention. (Sec. 88, Judiciary Act of 1948, as amended by R.A. Nos. 2613 and 3828, approved June 22, 1963).

III As to the legal question that summary judgment should have been rendered by the court a quo, We rule that plaintiffs-petitioners are not entitled, as a matter of right, thereto. Summary judgment can only be granted where there are no questions of fact in issue or where the material allegations of the pleadings are not disputed. Such is not true in the case at bar. Firstly, defendant-respondent maintains that plaintiffs-petitioners failed to comply with the terms and conditions of their agreement. Secondly, in view of such failure on the part of plaintiffs-petitioners, the defendant-respondent maintains that under their contract of sub-lease he is authorized to take-over the possession of the leased premises. WHEREFORE, finding no error in the decision appealed from, the same is hereby affirmed. Costs against petitioners. SO ORDERED. [G.R. No. 177120, July 14, 2008] PAUL T. IRAO, PETITIONER, VS. BY THE BAY, INC., RESPONDENT. DECISION CARPIO MORALES, J.: By Resolution of February 20, 2008, this Court denied the Petition for Review on Certiorari filed by Paul T. Irao (petitioner) due to non-compliance with the September 17, 2007 Resolution directing him to file a reply to the comment of By the Bay, Inc. (respondent) on the petition. Petitioner, through counsel, promptly filed an Urgent Omnibus Motion[1] praying for the reconsideration of the above-said February 20, 2008 Resolution, the reinstatement of his petition, and the admission of his belated reply attached to the motion. Explaining the non-compliance, petitioner's counsel Atty. Tristram B. Zoleta of A., Tan, Zoleta and Associates alleges that "the previous lawyer (Atty. Wilfred F. Neis) assigned to this case inadvertently and unintentionally failed to file the required reply due to his resignation from the law firm, without properly turning over all the cases assigned to him;" that "the law firm and its associates had no slightest intention" to disobey the September 17, 2007 Resolution; and that they have "committed themselves under their oath as lawyers that they will be more circumspect in the supervision and handling of petitioner's case."[2] Atty. Zoleta further averred that "petitioner has a valid and meritorious case," warranting the grant of the petition.[3] The Court finds counsel's excuse to be flimsy and hackneyed. It is preposterous for his law firm to allow the handling lawyer to resign without requiring him to turn over all the cases

assigned to him. Given that the findings on the case by the Metropolitan Trial Court and the Regional Trial Court on one hand, and the Court of Appeals on the other, are conflicting, however, and the prima facie merit of the petition, the Court heeds petitioner's entreaty and thus reconsiders the February 20, 2008 Resolution, reinstates the petition, and admits petitioner's belated reply to respondent's comment on the petition. In June of 2002, the Estate of Doa Trinidad de Leon Roxas represented by Ruby Roxas as lessor, and herein respondent represented by Ronald M. Magbitang as lessee, forged a contract of lease[4] over a three-storey building with an area of 662 square meters, located at Roxas Boulevard corner Salud Street, Pasay City, for a term of five (5) years commencing on July 1, 2002 until June 30, 2007, for a monthly rental of P200,000.00, to be increased annually by P50,000.00.[5] It appears that in November 2003, respondent's restaurant business at the leased premises was "closed down by the City Government." Respondent defaulted in the payment of rentals which, as of January 2004, totaled P2,517,333.36[6] inclusive of interest and penalty charges. Despite demands to pay the amount and comply with the terms and conditions of the contract, respondent failed and refused to do so.[7] The lessor's counsel thereupon demanded, by letter[8] of January 16, 2004, the payment by respondent of P2,517,333.36 within five (5) days from notice "otherwise the Contract of Lease would be terminated without notice." It appears that the letter to respondent was received on January 23, 2004.[9] Respondent failed to heed the demand, however, drawing the lessor to terminate the contract without notice, in accordance with Section 31 of the contract which provides: 31. DEFAULT The LESSEE agrees that all the covenants and agreements herein contained shall be deemed conditions as well as covenants and that if default or breach be made of any of such covenants and conditions then this lease, at the discretion of the LESSOR, may be terminated and cancelled forthwith, and the LESSEE shall be liable for any and all damages, actual and consequential, resulting from such default and termination. If after due notice has been given to the LESSEE of the cancellation of the lease, the latter fails to comply with the LESSOR's demand for the return to it of the possession of the premises and the payment of the LESSEE's accrued obligations pursuant to the provisions of this Contract or in the event the LESSOR should exercise its Contract or in the event the LESSOR should exercise its right to enforce its preferred lien on the personal properties of the LESSEE existing on the Leased Premises, orin the event of default or breach by the LESSEE of any of the provisions herein contained, the LESSEE hereby empowers the LESSOR and/or her authorized representatives to open,

enter, occupy, padlock, secure, enclose, fence and/or discontinue public utilities and otherwise take full and complete physical possession and control of the Leased Premises without resorting to court action; x x x. For purposes of this provision and other pertinent provisions of this Contract, the LESSEE hereby constitutes the LESSOR and her authorized representatives as the LESSEE's attorney-in-fact, and all acts performed by them in the exercise of their authority are hereby confirmed. The LESSEE hereby expressly agrees that only or all acts performed by the LESSOR, her authorized agents, employees and/or representatives under the provisions of this Section may not be the subject of any Petition for a Writ of Preliminary Injunction or Mandatory Injunction in court.[10] (Emphasis and underscoring supplied) Subsequently or on February 4, 2004, the lessor executed a lease contract[11] over the same property with herein petitioner, Paul T. Irao, effective February 1, 2004 until January 30, 2009. Paragraph 6 of this contract empowers petitioner to enter and take over the possession of the leased premises, thus: 6. TURNOVER OF POSSESSION The Leased Premises is presently being unlawfully detained by the previous lessee and the LESSEE acknowledges and recognizes such fact. The LESSEE undertakes that it shall take the necessary legal measures to eject or evict the previous lessee and its employees and assigns and take over possession of the Leased Premises.[12] Consequently, on or about February 6, 2004, petitioner, accompanied by a Barangay Kagawad and some security guards from the Spy Master Security Agency, entered and took possession of the leased premises. Respondent thereupon filed with the Metropolitan Trial Court (MeTC) of Pasay City a complaint[13] for forcible entry with prayer for preliminary mandatory injunction and damages against petitioner and all persons claiming rights under him, docketed as Civil Case No. 89-04 CFM. In its complaint, respondent alleged that its lease contract had not been terminated[14] because the lessor's demand letter was merely a demand to pay the rental arrears, without a notice to terminate the contract, hence, it "has the right to occupy the leased premises until June 30, 2007,"[15] the expiry date of the lease; and that, therefore, petitioner's taking over the possession of the leased premises on February 6, 2004 was illegal. By Decision[16] of May 21, 2004, Branch 44 of the MeTC dismissed respondent's complaint, it holding that by respondent's failure to pay monthly rentals, it "violated its contractual obligations and therefore come to Court with unclean hands."[17] On appeal, the Regional Trial Court (RTC) of Pasay City, Branch 108, by Decision[18] dated August 16, 2004, dismissed respondent's appeal and affirmed the MeTC Decision. Respondent elevated the case via petition for review to the Court of Appeals which, by Decision[19] of February 22, 2006, granted the petition, disposing as follows:

WHEREFORE, the petition is GRANTED. Accordingly, the August 16, 2004 Decision of the Regional Trial Court of Pasay City, Branch 108, and May 21, 2004 Decision of the Metropolitan Trial Court of Pasay City, Branch 44, are REVERSED and SET ASIDE. A NEW JUDGMENT is rendered ordering respondent [herein petitioner] Paul Irao to turn over the possession of the subject premises to petitioner. SO ORDERED. (Emphasis in the original; underscoring supplied) In reversing the RTC decision, the appellate court held that "while the contract with respondent provided that [i]n case of default, the parties stipulated that the lessor (or its authorized representative) could take over the physical possession of the leased premises `without resorting to court action,' [t]his empowerment, however, comes into play only `after due notice has been given to the LESSEE of the cancellation of the lease,'"[20] citing the second paragraph of Section 31 of respondent's lease contract, quoted earlier. Finding that a termination notice and a demand to vacate the leased premises were not incorporated in the lessor's demand letter, the appellate court ruled that respondent's eviction was improper. Petitioner's motion for reconsideration was denied by Resolution[21] of March 26, 2007. Hence, the present petition for review on certiorari filed on May 15, 2007 hinged on the issue of whether the lessor's demand letter to respondent contains a notice of termination of the lease contract and a demand to vacate the leased premises to justify the taking over of possession thereof by the lessor and/or its representative-herein petitioner. The Court finds in the affirmative. The pertinent portions of the demand letter read: xxxx Our client [the lessor] has informed us that since June 2003, you failed to pay and refused to pay your monthly rentals including the interest due thereon, which to date amounts to Php1,450,000. In addition, you also owe our client the amount of Php567,333.36 by way of penalty and interest for late payment of your rentals from January 2003 to January 2004. A statement of account is attached herewith for your guidance and information. xxxx In view of the foregoing, formal demand is hereby made on you to pay our client the full amount of Php2,517,333.36 within five (5) days from receipt hereof, otherwise we shall be constrained, much to our regret, to terminate your Contract of Lease and take the necessary legal measures against you to protect our client's interest, without further notice. (Emphasis and underscoring supplied) The language and intent of the abovequoted portions of the demand letter are unambiguous. The lessor demanded from respondent the full payment of its unpaid rentals of P2,517,333.36 within five days from notice. The phrase "otherwise we shall be constrained, much to our regret" in the letter sends a clear warning that failure to settle the amount within the stated period would constrain the lessor to "terminate [the] Contract of Lease" and "take the necessary legal

measures against [respondent] to protect [its] interest without further notice." The letter made it clear to respondent that the therein stated adverse consequences would ensue "without further notice," an unmistakable warning to respondent that upon its default, the lease contract would be deemed terminated and that its continued possession of the leased premises would no longer be permitted. The notice of impending termination was not something strange to respondent since it merely implemented the stipulation in Section 31 of their contract that "if default or breach be made of any of such covenants and conditions, then this lease, at the discretion of the LESSOR, may be terminated and cancelled forthwith." To "warn" means "to give notice to somebody beforehand, especially of danger;" and a "warning" may be "a notice of termination of an agreement, employment, etc."[22] Its purpose is "to apprise a party of the existence of danger of which he is not aware to enable him to protect himself against it."[23] "[W]here," as here, "the party is aware of the danger, the warning will serve no useful purpose and is unnecessary, and there is no duty to warn against risks which are open and obvious."[24] The appellate court's ruling that the lessor's letter did not demand respondent to vacate is flawed. A notice or demand to vacate does not have to expressly use the word "vacate," as it suffices that the demand letter puts the lessee or occupant on notice that if he does not pay the rentals demanded or comply with the terms of the lease contract, it should move out of the leased premises.[25] It bears reiteration that the demand letter priorly warned respondent that upon its default the lease contract would not only be terminated, but the lessor would "take the necessary legal measures against [respondent] to protect [its] interest, without further notice" and "without resorting to court action" as stipulated in their lease contract. The "necessary legal measures" are those expressly stipulated in Section 31 of the lease contract among which are, for expediency, requoted below: "x x x in the event of default or breach by the LESSEE of any of the provisions herein contained, the LESSEE hereby empowers the LESSOR and/or her authorized representatives to open, enter, occupy, x x x and otherwise take full and complete physical possession and control of the Leased Premises without resorting to court action; x x x. For purposes of this provision and other pertinent provisions of this Contract, the LESSEE hereby constitutes the LESSOR and her authorized representatives as the LESSEE's attorney-in-fact, and all acts performed by them in the exercise of their authority are hereby confirmed. x x x." (Emphasis and underscoring supplied) Contractual stipulations empowering the lessor and/or his representative to repossess the leased property extrajudicially from a deforciant lessee, as in the present case, have been held to be valid.[26] Being the law between the parties, they must be respected. Respondent cannot thus feign ignorance that the repossession of the leased property by the lessor and/or its representative-herein petitioner was the appropriate legal measure it (respondent) itself authorized under their contract.

In Viray v. Intermediate Appellate Court[27] where the lessor and the lessee stipulated as follows: 7. Upon failure of the Lessee to comply with any of the terms and conditions of this lease, as well as such other terms and conditions which may be imposed by the Lessor prior to and/or upon renewal of this lease agreement as provided in par. 2 above, then the Lessor shall have the right, upon five (5) days written notice to the Lessee or in his absence, upon written notice posted at the entrance of the premises leased, to enter and take possession of the said premises holding in his trust and custody and such possessions and belongings of the Lessee found therein after an inventory of the same in the presence of a witness, all these acts being hereby agreed to by the Lessee as tantamount to his voluntary vacation of the leased premises without the necessity of suit in court." (Underscoring supplied; italics in the original), this Court, finding that the stipulation empowered the lessor to reposses the leased premises extrajudicially, and citing, inter alia, Consing v. Jamadre[28] wherein this Court sustained the validity of a lease agreement empowering the sub-lessor to take possession of the leased premises, in case the sub-lessee fails "to comply with any of the terms and conditions" of the contract "without necessity of resorting to court action," held that the stipulation was valid. In Subic Bay Metropolitan Authority v. Universal International Group of Taiwan,[29] this Court, in resolving in the affirmative the issue of whether a "stipulation authorizing [the therein petitioner-lessor] to extrajudicially rescind its contract [with the therein respondent-lessee] and to recover possession of the property in case of contractual breach is lawful," considered, among other things, the therein lessee's several violations of the Lease and Development Agreement including its failure to complete the "rehabilitation of the Golf Course in time for the APEC Leaders' Summit, and to pay accumulated lease rentals, and to post the required performance bond," which violations the lessee did not deny or controvert. The Court therein concluded that the lessee "effectively . . . offered no valid or sufficient objection to the lessor's exercise of its stipulated right to extrajudicially rescind the [agreement] and take over the property in case of material breach." As in Subic Bay,[30] herein respondent-lessee violated its agreement with the lessor and offered no valid or sufficient objection to the exercise by the lessor through petitioner of its stipulated right to extrajudicially take possession of the leased premises. Apropos with respect to herein respondent's having already been ousted of the leased premises is this Court's explanation in Viray that "the existence of . . . an affirmative right of action [of the lessor] constitutes a valid defense against, and is fatal to any action by the tenant who has been ousted otherwise than judicially to recover possession," citing Apundar v. Andrin[31]which held: . . . The existence of an affirmative right of action on the part of the landlord to oust the tenant is fatal to the maintenance of any action by the tenant. Otherwise, the absurd result would follow that a tenant ousted under the circumstances here revealed would be restored to possession only himself to be immediately put out in a possessory action instituted by the landlord. To prevent circuity of action, therefore, we must recognize the affirmative right of action on the part of the landlord as a complete and efficacious defense to the maintenance of an action by the tenant.

Circuitus est evitandus; et boni judices est lites dirimere, ne lis ex lite oriatur. Another consideration based upon an idea familiar to jurisprudence is equally decisive. This is found in one of the implications of the familiar maxim, Ubi jus ibi remedium, the converse of which is of course equally true, namely: Nullum jus nullum remedium. Applying this idea to the case before us, it is manifest that inasmuch as the plaintiffs right of possession has been destroyed, the remedy is also necessarily taken away.[32] (Underscoring supplied) To restore possession of the premises to herein respondent, who was ousted under the circumstances reflected above, would undoubtedly, certainly result to absurdity. WHEREFORE, the petition is GRANTED. The challenged Court of Appeals Decision dated February 22, 2006 and its Resolution dated March 26, 2007 are REVERSED and SET ASIDE. The August 16, 2004 Decision of the Regional Trial Court of Pasay City, Branch 108 affirming that of the Metropolitan Trial Court of Pasay City, Branch 44 is REINSTATED. Costs against respondent. SO ORDERED.

G.R. No. 150918

August 17, 2007

NEGROS MERCHANTS ENTERPRISES, INC., Petitioner, vs. CHINA BANKING CORPORATION, Respondent. DECISION YNARES-SANTIAGO, J.: This Petition for Review on Certiorari1 assails the September 7, 2001 Decision2 of the Court of Appeals in CA-G.R. SP No. 65127, which annulled and set aside the September 22, 2000 and March 19, 2001 Orders3 of the Regional Trial Court of Bacolod City, Branch 41 in Civil Case No. 99-10707, as well as the November 12, 2001 Resolution4 denying the Motion for Reconsideration. The facts of the case are as follows: On August 23, 1993, petitioner Negros Merchants Enterprises, Inc. (NMEI), through its President and General Manager, Jacinto Y. Tan, Jr., applied for an P8 million Credit Accommodation with respondent China Banking Corporation (CBC), with terms "ONE YEAR LOAN LINE, RENEWABLE AND RE-AVAILABLE ANNUALLY THEREAFTER."5 The loan was secured by a real estate mortgage6 over its properties covered by Transfer Certificate of Title (TCT) Nos. T-1390957 and T-139096.8 On December 21, 1994, petitioner, through Tan,

applied for an additional Case-to-Case Loan worth P1,500,000.00.9 Both loans were respectively paid on January 31 and March 27, 1996. Meanwhile, beginning March 19, 1996, petitioner allegedly re-availed the P8 million credit line under the original Credit Accommodation through promissory notes executed by Tan.10 Petitioner failed to settle the obligation, hence respondent sent a demand letter11 with warning to foreclose on the real estate mortgage. Petitioner, through its counsel Atty. Raphael A. Diaz, sent two letters12 to respondent requesting a detailed statement of account and to hold in abeyance any legal action. The latter replied that said statement could not be released without proper board resolution or authorization.13 Subsequently, petitioners properties were extrajudicially foreclosed and sold in public auction, with respondent as the highest bidder. On March 6, 1998, the Ex-Officio Provincial Sheriff of Negros Occidental issued the corresponding Certificate of Sale14 in favor of respondent. On March 16, 1999, petitioner filed a Complaint for Annulment of Foreclosure Sale with Damages and Preliminary Injunction.15 Respondent moved to dismiss16 the same on the ground that petitioner failed to show by clear and convincing evidence that it is entitled to the relief sought in the complaint. Petitioner later filed an Amended Complaint17 impleading Tan and his spouse, Corazon V. Tan, as well as respondents Bacolod Branch Manager Ainalea Lim-Cortez. Respondent again sought to dismiss18 the amended complaint for failure to state cause of action and for failure to comply with the rules on non-forum shopping.19 Meanwhile, title over TCT Nos. T-139095 and T-139096 were consolidated20 in favor of respondent. On September 15, 1999, the Regional Trial Court of Bacolod City, Branch 46, granted respondents Petition for Issuance of a Writ of Possession for the said properties.21 On September 22, 2000, the Regional Trial Court of Bacolod City, Branch 41, denied respondents Motion to Dismiss. Respondent moved for reconsideration22 but was likewise denied. Thereafter, respondent filed a petition for certiorari before the Court of Appeals assailing the Orders of the trial court denying the motion to dismiss and the motion for reconsideration. On September 7, 2001, the Court of Appeals rendered the assailed Decision, the dispositive portion of which provides: WHEREFORE, premises considered, the present petition is GIVEN DUE COURSE and the writs prayed for, accordingly GRANTED. The Orders dated September 22, 2000 and March 19, 2001 which were both issued by respondent Judge RAY ALAN T. DRILON of Branch 41 of the Regional Trial court of Bacolod City in Civil Case No. 99-10707, entitled "Negros Merchants Enterprises, Inc. v. China Banking Corporation, Spouses Jacinto Y. Tan, Jr. and Corazon V. Tan and Ex-Officio Provincial Sheriff of Negros Occidental" are hereby ANNULLED and SET ASIDE. Respondent Judge, who is hereby permanently ENJOINED from enforcing the said Orders dated September 22, 2000 and March 19, 2001, is hereby ORDERED to dismiss Civil Case No. 99-10707 insofar as petitioner China Banking Corporation is concerned. Costs against private respondent.

SO ORDERED.23 The Court of Appeals held that the Amended Complaint should have been dismissed because the accompanying certification against forum shopping which was signed by petitioners corporate secretary, Amelito Lizares, was defective, for lack of authorization from the board of directors; that the allegations in the amended complaint were insufficient to establish a cause of action; that petitioner defaulted in paying the loan, thus respondent rightfully foreclosed the mortgaged properties; that petitioner cannot validly claim ignorance of the foreclosure proceedings; that the alleged collusion between Tan and respondents Bacolod branch manager lacks basis because petitioner expressly authorized Tan to enter into loan transactions in its behalf with the latter; and that the trial judge acted with grave abuse of discretion in denying respondents Motion to Dismiss. The motion for reconsideration filed by petitioner was denied for lack of merit; hence, the present petition for review on certiorari. Petitioner insists that the Court of Appeals departed from jurisprudential and procedural law when it entertained respondents petition for certiorari questioning the two interlocutory orders issued by the trial court as the same shall be reviewed only when an appeal is taken from the judgment of the trial court; that since no actual hearing was yet conducted, there is no evidence which the appellate court could use as basis to resolve the case on the merits or to determine whether the trial judge acted with grave abuse of discretion amounting to lack or in excess of jurisdiction. Petitioner also argues that trial courts have the authority to determine whether the allegations in a complaint are sufficient to support a cause of action and that they have the discretion to resolve a motion to dismiss on the ground of failure to state a cause of action based only on the complaint or based on other pleadings submitted by the parties. Thus, petitioner concludes that the trial judge acted within his discretion and authority in denying the motion to dismiss. Petitioner likewise claims that the amended complaint cannot be considered an initiatory pleading which requires an accompanying certification against forum shopping. Since respondents first motion to dismiss did not raise in issue the alleged defective certification, it is deemed to have waived any objection thereto, in accordance with Section 8, Rule 15 of the Rules of Court.24 However, in the event the certification is found to be defective, petitioner maintains that it substantially complied with the rules and that the substance of the complaint should not be subordinated to procedural lapses. Finally, petitioner asserts that the full payment of the P8 million loan accommodation on January 31, 1996 rendered the mortgage contract and other documents connected thereto without force or effect. Accordingly, the mortgage contract should be deemed cancelled, and the properties subject thereto deemed released, instead of using them as security for the loans fraudulently obtained by Tan, and subsequently foreclosing them when the latter failed to pay. Petitioner, thus, prays for the reinstatement of the complaint against respondent for further proceedings. The petition lacks merit.

In Espao, Sr. v. Court of Appeals,25 the Court held that an order denying a motion to dismiss is merely interlocutory and therefore not appealable, nor can it be the subject of a petition for review on certiorari. Such order may only be reviewed in the ordinary course of law by an appeal from the judgment after trial. The ordinary procedure to be followed in that event is to file an answer, go to trial, and if the decision is adverse, reiterate the issue on appeal from the final judgment.26 Thus, when the trial court denied respondents motion to dismiss, its next course of action would have been to file an answer and proceed with the trial of the case. It therefore erred when it filed instead a petition for certiorari before the Court of Appeals. Nevertheless, while indeed respondent erred in filing a petition for certiorari before the appellate court, we agree with the Court of Appeals that petitioners Amended Complaint should have been dismissed due to its defective verification and certification against forum shopping. It is settled that the requirement to file a certificate of non-forum shopping is mandatory and that the failure to comply with this requirement cannot be excused. The certification is a peculiar and personal responsibility of the party, an assurance given to the court or other tribunal that there are no other pending cases involving basically the same parties, issues and causes of action.27 In a case where the plaintiff is a private corporation, the certification may be signed, for and on behalf of the said corporation, by a specifically authorized person, including its retained counsel, who has personal knowledge of the facts required to be established by the documents.28 In the present case, the Verification and Certification attached to the original and amended complaints of petitioner Negros Merchants Enterprises, Inc. reads as follows: I, AMELITO LIZARES, after being duly sworn, depose and state: 1. That I am the Corporate Secretary of Negros Merchants Enterprises, Inc. the plaintiff in the above-entitled case; 2. That I have caused the preparation of the foregoing complaint; and that all the allegations contained therein are true of my own personal knowledge; 3. That I hereby certify that I have not commenced any other actions or complaint involving the same issues in the Supreme Court, Court of Appeals, or different Division thereof or any court or tribunal or agency, and to the best of my knowledge, no such action or proceeding is pending in the Supreme Court, Court of Appeals, or different Division thereof or any court or tribunal or agency; that in the event that a similar action or preceding [sic] has been filed or is pending before the Supreme Court, Court of Appeals, or different Division thereof, I hereby bind myself to notify the Court, tribunal, or agency within five (5) days from such notice. IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of March, 1999/12th day of October 1999, at Bacolod City, Philippines.

(Sgd.) AMELITO LIZARES29 As can be gleaned from the foregoing, there was no allegation that petitioner Negros Merchants Enterprises, Inc., through a board resolution, authorized Lizares to execute the verification and certification of non-forum shopping. Moreover, no such board resolution was appended to the complaint or amended complaint. In Tamondong v. Court of Appeals,30 we held that if a complaint is filed for and in behalf of the plaintiff who is not authorized to do so, the complaint is not deemed filed. An unauthorized complaint does not produce any legal effect. Hence, the court should dismiss the complaint on the ground that it has no jurisdiction over the complaint and the plaintiff.31 In the instant case, Lizares was not authorized to file the complaint for and in behalf of petitioner corporation. Thus, the complaint is not deemed filed by the proper party in interest and should be dismissed. Indeed, there is jurisprudence where the Court allowed substantial compliance with the rule on certification of no-forum shopping; however, the exceptional circumstances and/or social justice considerations present in those cases are wanting in petitioners Complaint or Amended Complaint. The words used in petitioners verification and certification of no-forum shopping clearly state that Lizares solely caused the preparation of the present case, without even averring that he had done so in behalf of petitioner. There was no belated filing of a proper verification and certification, or even a copy of the board resolution or a secretarys certificate attesting that Lizares was authorized to file said complaint or the amendment thereto. Instead, petitioner merely declared without qualification or explanation in its Opposition to Motion to Dismiss that "there was sufficient compliance as could be gleaned from the complaint."32lawphi1 There is likewise no merit in petitioners assertion that the amended complaint was not an initiatory pleading. Section 8, Rule 10 of the Rules of Court clearly provides that an amended complaint supersedes the complaint that it amends. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated September 7, 2001 in CA-G.R. SP No. 65127, which annulled and set aside the Orders of the Regional Trial Court of Bacolod City, Branch 41 denying the motion to dismiss, and ordering the Regional Trial Court of Bacolod City, Branch 41, to dismiss Civil Case No. 99-10707, as well as the November 12, 2001 Resolution denying the motion for reconsideration, are AFFIRMED. SO ORDERED.

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