Sales 1 To 9 6-26-13

THIRD DIVISION [G.R. No. 166714. February 9, 2007.] AMELIA S. ROBERTS, petitioner, vs. MARTIN B. PAPIO, respondent.
Thereafter, the parties (Amelia Roberts as lessor and Martin Papio as lessee) executed a two-year contract of lease dated April 15, 1982, effective May 1, 1982. The contract was subject to renewal or extension for a like period at the option of the lessor, the lessee waiving thereby the benefits of an implied new lease. The lessee was obliged to pay monthly rentals of P800.00 to be deposited in the lessor's account at the Bank of America, Makati City branch. 6 On July 6, 1982, TCT No. S-44980 was cancelled, and TCT No. 114478 was issued in the name of Amelia Roberts as owner. 7 Martin Papio paid the rentals from May 1, 1982 to May 1, 1984, and thereafter, for another year. 8 He then failed to pay rentals, but he and his family nevertheless remained in possession of the property for a period of almost thirteen (13) years. In a letter dated June 3, 1998, Amelia Roberts, through counsel, reminded Papio that he failed to pay the monthly rental of P2,500.00 from January 1, 1986 to December 31, 1997, and P10,000.00 from January 1, 1998 to May 31, 1998; thus, his total liability was P410,000.00. She demanded that Papio vacate the property within 15 days from receipt of the letter in case he failed to settle the amount. 9 Because he refused to pay, Papio received another letter from Roberts on April 22, 1999, demanding, for the last time, that he and his family vacate the property. 10 Again, Papio refused to leave the premises. EAcIST On June 28, 1999, Amelia Roberts, through her attorney-in-fact, Matilde Aguilar, filed a Complaint 11 for unlawful detainer and damages against Martin Papio before the MeTC, Branch 64, Makati City. She alleged the following in her complaint: Sometime in 1982 she purchased from defendant a 274-sq-m residential house and lot situated at No. 1046 Teresa St., Brgy. Valenzuela, Makati City. 12Upon Papio's pleas to continue staying in the property, they executed a two-year lease contract 13 which commenced on May 1, 1982. The monthly rental was P800.00. Thereafter, TCT No. 114478 14 was issued in her favor and she paid all the realty taxes due on the property. When the term of the lease expired, she still allowed Papio and his family to continue leasing the property. However, he took advantage of her absence and stopped payment beginning January 1986, and refused to pay despite repeated demands. In June 1998, she sent a demand letter 15 through counsel requiring Papio to pay rentals from January 1986 up to May 1998 and to vacate the leased property. The accumulated arrears in rental are as follows: (a) P360,000.00 from January 1, 1986 to December 31, 1997 at P2,500.00 per month; and (b) P50,000.00, from January 1, 1998 to May 31, 1998 at P10,000.00 per month. 16 She came to the Philippines but all efforts at an amicable settlement proved futile. Thus, in April 1999, she sent the final demand letter to defendant directing him and his family to pay and immediately vacate the leased premises. 17
DECISION
CALLEJO, SR., J p: Assailed in this petition for review on certiorari is the Decision 1 of the Court of Appeals (CA), in CA-G.R. CV No. 69034 which reversed and set aside the Decision 2 of the Regional Trial Court (RTC), Branch 150, Makati City, in Civil Case No. 01-431. The RTC ruling had affirmed with modification the Decision 3of the Metropolitan Trial Court (MeTC), Branch 64, Makati City in Civil Case No. 66847. The petition likewise assails the Resolution of the CA denying the motion for reconsideration of its decision. The Antecedents The spouses Martin and Lucina Papio were the owners of a 274-square-meter residential lot located in Makati (now Makati City) and covered by Transfer Certificate of Title (TCT) No. S-44980. 4 In order to secure a P59,000.00 loan from the Amparo Investments Corporation, they executed a real estate mortgage on the property. Upon Papio's failure to pay the loan, the corporation filed a petition for the extrajudicial foreclosure of the mortgage. Since the couple needed money to redeem the property and to prevent the foreclosure of the real estate mortgage, they executed a Deed of Absolute Sale over the property on April 13, 1982 in favor of Martin Papio's cousin, Amelia Roberts. Of the P85,000.00 purchase price, P59,000.00 was paid to the Amparo Investments Corporation, while the P26,000.00 difference was retained by the spouses. 5 As soon as the spouses had settled their obligation, the corporation returned the owner's duplicate of TCT No. S-44980, which was then delivered to Amelia Roberts.
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Roberts appended to her complaint copies of the April 13, 1982 Deed of Absolute Sale, the April 15, 1982 Contract of Lease, and TCT No. 114478. In his Answer with counterclaim, Papio alleged the following: He executed the April 13, 1982 deed of absolute sale and the contract of lease. Roberts, his cousin who is a resident of California, United States of America (USA), arrived in the Philippines and offered to redeem the property. Believing that she had made the offer for the purpose of retaining his ownership over the property, he accepted. She then remitted P59,000.00 to the mortgagor for his account, after which the mortgagee cancelled the real estate mortgage. However, he was alarmed when the plaintiff had a deed of absolute sale over the property prepared (for P83,000.00 as consideration) and asked him to sign the same. She also demanded that the defendant turn over the owner's duplicate of TCT No. S-44980. The defendant was in a quandary. He then believed that if he signed the deed of absolute sale, Roberts would acquire ownership over the property. He asked her to allow him to redeem or reacquire the property at any time for a reasonable amount. 18 When Roberts agreed, Papio signed the deed of absolute sale. Pursuant to the right to redeem/repurchase given him by Roberts, Papio purchased the property for P250,000.00. In July 1985, since Roberts was by then already in the USA, he remitted to her authorized representative, Perlita Ventura, the amount of P150,000.00 as partial payment for the property. 19 On June 16, 1986, she again remitted P100,000.00, through Ventura. Both payments were evidenced by receipts signed by Ventura. 20 Roberts then declared that she would execute a deed of absolute sale and surrender the title to the property. However, Ventura had apparently misappropriated P39,000.00 out of the P250,000.00 that she had received; Roberts then demanded that she pay the amount misappropriated before executing the deed of absolute sale. Thus, the sole reason why Roberts refused to abide by her promise was the failure of her authorized representative to remit the full amount of P250,000.00. Despite Papio's demands, Roberts refused to execute a deed of absolute sale. Accordingly, defendant posited that plaintiff had no cause of action to demand payment of rental and eject him from the property. Papio appended to his Answer the following: (1) the letter dated July 18, 1986 of Perlita Ventura to the plaintiff wherein the former admitted having used the money of the plaintiff to defray the plane fares of Perlita's parents to the USA, and pleaded that she be allowed to repay the amount within one year; (b) the letter of Eugene Roberts (plaintiff's husband) to Perlita Ventura dated July 25, 1986 where he accused Ventura of stealing the money of plaintiff Amelia (thus preventing the latter from paying her loan on her house and effect the cancellation of the mortgage), and demanded that she deposit the balance; 21 and (c) plaintiff's letter to defendant Papio dated July 25, 1986 requesting the latter to convince Ventura to remit the balance of P39,000.00 so that the plaintiff could transfer the title of the property to the defendant. 22
Papio asserted that the letters of Roberts and her husband are in themselves admissions or declarations against interest, hence, admissible to prove that he had reacquired the property although the title was still in her possession. In her Affidavit and Position Paper, 23 Roberts averred that she had paid the real estate taxes on the property after she had purchased it; Papio's initial right to occupy the property was terminated when the original lease period expired; and his continued possession was only by mere tolerance. She further alleged that the Deed of Sale states on its face that the conveyance of the property was absolute and unconditional. She also claimed that any right to repurchase the property must appear in a public document pursuant to Article 1358, Paragraph 1, of the Civil Code of the Philippines. 24 Since no such document exists, defendant's supposed real interest over the property could not be enforced without violating the Statute of Frauds. 25 She stressed that her Torrens title to the property was an "absolute and indefeasible evidence of her ownership of the property which is binding and conclusive upon the whole world." Roberts admitted that she demanded P39,000.00 from the defendant in her letter dated July 25, 1986. However, she averred that the amount represented his back rentals on the property. 26 She declared that she neither authorized Ventura to sell the property nor to receive the purchase price therefor. She merely authorized her to receive the rentals from defendant and to deposit them in her account. She did not know that Ventura had received P250,000.00 from Papio in July 1985 and on June 16, 1986, and had signed receipts therefor. It was only on February 11, 1998 that she became aware of the receipts when she received defendant Papio's letter to which were appended the said receipts. She and her husband offered to sell the property to the defendant in 1984 for US$15,000.00 on a "take it or leave it" basis when they arrived in the Philippines in May 1984. 27 However, defendant refused to accept the offer. The spouses then offered to sell the property anew on December 20, 1997, for P670,000.00 inclusive of back rentals. 28 However, defendant offered to settle his account with the spouses. 29 Again, the offer came on January 11, 1998, but it was rejected. The defendant insisted that he had already purchased the property in July 1985 for P250,000.00.
Roberts insisted that Papio's claim of the right to repurchase the property, as well as his claim of payment therefor, is belied by his own letter in which he offered to settle plaintiff's claim for back rentals. Even assuming that the purchase price of the property had been paid through Ventura, Papio did not adduce any proof to show that Ventura had been authorized to sell the property or to accept any payment thereon. Any payment to Ventura could have no binding effect on her since she was not privy to the transaction; if at all, such agreement would be binding only on Papio and Ventura. DCASEc
She further alleged that defendant's own inaction belies his claim of ownership over the property: first, he failed to cause any notice or annotation to be made on the Register of Deed's copy of TCT No. 114478 in order to protect his supposed adverse claim; second, he did not institute any action against Roberts to compel the execution of the necessary deed of transfer of title in his favor; and third, the defense of ownership over the property was raised only after Roberts demanded him to vacate the property. Based solely on the parties' pleadings, the MeTC rendered its January 18, 2001 Decision 30 in favor of Roberts. The fallo of the decision reads: WHEREFORE, premises considered, finding this case for the plaintiff, the defendant is hereby ordered to: 1.Vacate the leased premises known as 1046 Teresa St., Valenzuela, Makati City; 2.Pay plaintiff the reasonable rentals accrual for the period January 1, 1996 to December 13, 1997 at the rate equivalent to Php2,500.00 per month and thereafter, Php10,000.00 from January 1998 until he actually vacates the premises; 3.Pay the plaintiff attorney's fees as Php20,000.00; and 4.Pay the costs. SO ORDERED. 31 The MeTC held that Roberts merely tolerated the stay of Papio in the property after the expiration of the contract of lease on May 1, 1984; hence, she had a cause of action against him since the only elements in an unlawful detainer action are the fact of lease and the expiration of its term. The defendant as tenant cannot controvert the title of the plaintiff or assert any right adverse thereto or set up any inconsistent right to change the existing relation between them. The plaintiff need not prove her ownership over the property inasmuch as evidence of ownership can be admitted only for the purpose of determining the character and extent of possession, and the amount of damages arising from the detention. The court further ruled that Papio made no denials as to the existence and authenticity of Roberts' title to the property. It declared that "the certificate of title is indefeasible in favor of the person whose name appears therein and incontrovertible upon the expiration of the one-year period from the date of issue," and that a Torrens title, "which enjoys a strong presumption of regularity and validity, is generally a conclusive evidence of ownership of the land referred to therein."
As to Papio's claim that the transfer of the property was one with right of repurchase, the MeTC held it to be bereft of merit since the Deed of Sale is termed as "absolute and unconditional." The court ruled that the right to repurchase is not a right granted to the seller by the buyer in a subsequent instrument but rather, a right reserved in the same contract of sale. Once the deed of absolute sale is executed, the seller can no longer reserve the right to repurchase; any right thereafter granted in a separate document cannot be a right of repurchase but some other right. As to the receipts of payment signed by Ventura, the court gave credence to Roberts's declaration in her Affidavit that she authorized Ventura only to collect rentals from Papio, and not to receive the repurchase price. Papio's letter of January 31, 1998, which called her attention to the fact that she had been sending people without written authority to collect money since 1985, bolstered the court's finding that the payment, if at all intended for the supposed repurchase, never redounded to the benefit of the spouses Roberts. Papio appealed the decision to the RTC, alleging the following: I. THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR EJECTMENT OUTRIGHT ON THE GROUND OF LACK OF CAUSE OF ACTION. II. THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THE DOCUMENTARY EVIDENCE ADDUCED BY DEFENDANT-APPELLANT WHICH ESTABLISHED THAT A REPURCHASE TRANSACTION EXISTED BETWEEN THE PARTIES ONLY THAT PLAINTIFFAPPELLEE WITHHELD THE EXECUTION OF THE ABSOLUTE DEED OF SALE AND THE TRANSFER OF TITLE OF THE SAME IN DEFENDANT-APPELLANT'S NAME. III. THE LOWER COURT GRAVELY ERRED IN NOT CONSIDERING THAT THE LETTERS OF PLAINTIFF-[APPELLEE] AND OF HER HUSBAND ADDRESSED TO DEFENDANTAPPELLANT AND HIS WIFE ARE IN THEMSELVES ADMISSION AND/OR DECLARATION OF THE FACT THAT DEFENDANT-APPELLANT HAD DULY PAID PLAINTIFF-APPELLEE OF THE PURCHASE AMOUNT COVERING THE SUBJECT PROPERTY.
IV. THE LOWER COURT GRAVELY ERRED IN NOT DISMISSING THE CASE FOR EJECTMENT OUTRIGHT CONSIDERING THAT PLAINTIFF-APPELLEE WHO IS [AN] AMERICAN CITIZEN AND RESIDENT THEREIN HAD NOT APPEARED IN COURT ONCE, NEITHER WAS HER ALLEGED ATTORNEY-IN-FACT, MATILDE AGUILAR NOR [DID] THE LATTER EVER [FURNISH] THE LOWER COURT A SPECIAL POWER OF ATTORNEY AUTHORIZING HER TO APPEAR IN COURT IN BEHALF OF HER PRINCIPAL. 32 Papio maintained that Roberts had no cause of action for eviction because she had already ceded her right thereto when she allowed him to redeem and reacquire the property upon payment of P250,000.00 to Ventura, her duly authorized representative. He also contended that Roberts's claim that the authority of Ventura is limited only to the collection of the rentals and not of the purchase price was a mere afterthought, since her appended Affidavit was executed sometime in October 1999 when the proceedings in the MeTC had already started. On March 26, 2001, Roberts filed a Motion for Issuance of Writ of Execution. 33 The court granted the motion in an Order 34 dated June 19, 2001. Subsequently, a Writ of Execution 35 pending appeal was issued on September 28, 2001. On October 29, 2001, Sheriff Melvin M. Alidon enforced the writ and placed Roberts in possession of the property. Meanwhile, Papio filed a complaint with the RTC of Makati City, for specific performance with damages against Roberts. Papio, as plaintiff, claimed that he entered into a contract of sale with pacto de retro with Roberts, and prayed that the latter be ordered to execute a Deed of Sale over the property in his favor and transfer the title over the property to and in his name. The case was docketed as Civil Case No. 01851. On October 24, 2001, the RTC rendered judgment affirming the appealed decision of the MeTC. Thefallo of the decision reads: 36 Being in accordance with law and the circumstances attendant to the instant case, the court finds merit in plaintiff-appellee's claim. Wherefore, the challenged decision dated January 18, 2001 is hereby affirmed in toto. SO ORDERED. 37
Both parties filed their respective motions for reconsideration. 38 In an Order 39 dated February 26, 2002, the court denied the motion of Papio but modified its decision declaring that the computation of the accrued rentals should commence from January 1986, not January 1996. The decretal portion of the decision reads: Wherefore, the challenged decision dated January 18, 2001 is hereby affirmed with modification that defendant pay plaintiff the reasonable rentals accrued for the period January 1, 1986 to December [31, 1997] per month and thereafter and P10,000.00 [per month] from January 1998 to October 28, 2001 when defendant-appellant actually vacated the subject leased premises. SO ORDERED. 40 On February 28, 2002, Papio filed a petition for review 41 in the CA, alleging that the RTC erred in not finding that he had reacquired the property from Roberts for P250,000.00, but the latter refused to execute a deed of absolute sale and transfer the title in his favor. He insisted that the MeTC and the RTC erred in giving credence to petitioner's claim that she did not authorize Ventura to receive his payments for the purchase price of the property, citing Roberts' letter dated July 25, 1986 and the letter of Eugene Roberts to Ventura of even date. He also averred that the MeTC and the RTC erred in not considering his documentary evidence in deciding the case. On August 31, 2004, the CA rendered judgment granting the petition. The appellate court set aside the decision of the RTC and ordered the RTC to dismiss the complaint. The decretal portion of the Decision 42 reads: WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered: (1) rendering an initial determination that the "Deed of Absolute Sale" dated April 13, 1982 is in fact an equitable mortgage under Article 1603 of the New Civil Code; and (2) resolving therefore that petitioner Martin B. Papio is entitled to possession of the property subject of this action; (3) But such determination of ownership and equitable mortgage are not clothed with finality and will not constitute a binding and conclusive adjudication on the merits with respect to the issue of ownership and such judgment shall not bar an action between the same parties respecting title to the land, nor shall it be held conclusive of the facts therein found in the case between the same parties upon a different cause of action not involving possession. All other counterclaims for damages are hereby dismissed. Cost against the respondent.
SO ORDERED. 43 According to the appellate court, although the MeTC and RTC were correct in holding that the MeTC had jurisdiction over the complaint for unlawful detainer, they erred in ignoring Papio's defense of equitable mortgage, and in not finding that the transaction covered by the deed of absolute sale by and between the parties was one of equitable mortgage under Article 1602 of the New Civil Code. The appellate court ruled that Papio retained the ownership of the property and its peaceful possession; hence, the MeTC should have dismissed the complaint without prejudice to the outcome of Civil Case No. 01-851 relative to his claim of ownership over the property.
representation, he had impliedly admitted the existence and validity of the deed of absolute sale whereby ownership of the property was transferred to petitioner but reverted to him upon the exercise of said right. The respondent even filed a complaint for specific performance with damages, which is now pending in the RTC of Makati City, docketed as Civil Case No. 01-851 entitled "Martin B. Papio vs. Amelia SalvadorRoberts." In that case, respondent claimed that his transaction with the petitioner was a sale with pacto de retro. Petitioner posits that Article 1602 of the Civil Code applies only when the defendant specifically alleges this defense. Consequently, the appellate court was proscribed from finding that petitioner and respondent had entered into an equitable mortgage under the deed of absolute sale. Petitioner further avers that respondent was ably represented by counsel and was aware of the difference between a pacto de retro sale and an equitable mortgage; thus, he could not have been mistaken in declaring that he repurchased the property from her. As to whether a sale is in fact an equitable mortgage, petitioner claims that the issue should be properly addressed and resolved by the RTC in an action to enforce ownership, not in an ejectment case before the MeTC where the main issue involved is possession de facto. According to her, the obvious import of the CA Decision is that, in resolving an ejectment case, the lower court must pass upon the issue of ownership (in this case, by applying the presumptions under Art. 1602) which, in effect, would use the same yardstick as though it is the main action. The procedure will not only promote multiplicity of suits but also place the new owner in the absurd position of having to first seek the declaration of ownership before filing an ejectment suit. Respondent counters that the defense of equitable mortgage need not be particularly stated to apprise petitioner of the nature and character of the repurchase agreement. He contends that he had amply discussed in his pleadings before the trial and appellate courts all the surrounding circumstances of the case, such as the relative situation of the parties at the time; their attitude, acts, conduct, and declarations; and the negotiations between them that led to the repurchase agreement. Thus, he argues that the CA correctly ruled that the contract was one of equitable mortgage. He insists that petitioner allowed him to redeem and reacquire the property, and accepted his full payment of the property through Ventura, the authorized representative, as shown by the signed receipts. The threshold issues are the following: (1) whether the MeTC had jurisdiction in an action for unlawful detainer to resolve the issue of who between petitioner and respondent is the owner of the property and entitled to the de facto possession thereof; (2) whether the transaction entered into between the parties under the Deed of Absolute Sale and the Contract of Lease is an equitable mortgage over the property; and (3) whether the petitioner is entitled to the material or de facto possession of the property.
Roberts filed a motion for reconsideration of the decision on the following grounds: I.Petitioner did not allege in his Answer the defense of equitable mortgage; hence, the lower courts [should] not have discussed the same; II.Even assuming that Petitioner alleged the defense of equitable mortgage, the MeTC could not have ruled upon the said defense, III.The M[e]TC and the RTC were not remiss in the exercise of their jurisdiction. 44 The CA denied the motion. In this petition for review, Amelia Salvador-Roberts, as petitioner, avers that: I.THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN DECLARING THAT THE M[e]TC AN(D) THE RTC WERE REMISS IN THE EXERCISE OF THAT JURISDICTION ACQUIRED BECAUSE IT DID NOT CONSIDER ALL PETITIONER'S DEFENSE OF EQUITABLE MORTGAGE. II.THE HONORABLE COURT OF APPEALS GRIEVEOUSLY (SIC) ERRED IN REQUIRING THE M[e]TC AND RTC TO RULE ON A DEFENSE WHICH WAS NEVER AVAILED OF BY RESPONDENT. 45 Petitioner argues that respondent is barred from raising the issue of equitable mortgage because his defense in the MeTC and RTC was that he had repurchased the property from the petitioner; by such
The Ruling of the Court On the first issue, the CA ruling (which upheld the jurisdiction of the MeTC to resolve the issue of who between petitioner or respondent is the lawful owner of the property, and is thus entitled to the material or de facto possession thereof) is correct. Section 18, Rule 70 of the Rules of Court provides that when the defendant raises the defense of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession. The judgment rendered in an action for unlawful detainer shall be conclusive with respect to the possession only and shall in no wise bind the title or affect the ownership of the land or building. Such judgment would not bar an action between the same parties respecting title to the land or building. 46 The summary nature of the action is not changed by the claim of ownership of the property of the defendant. 47 The MeTC is not divested of its jurisdiction over the unlawful detainer action simply because the defendant asserts ownership over the property. CcAESI The sole issue for resolution in an action for unlawful detainer is material or de facto possession of the property. Even if the defendant claims juridical possession or ownership over the property based on a claim that his transaction with the plaintiff relative to the property is merely an equitable mortgage, or that he had repurchased the property from the plaintiff, the MeTC may still delve into and take cognizance of the case and make an initial or provisional determination of who between the plaintiff and the defendant is the owner and, in the process, resolve the issue of who is entitled to the possession. The MeTC, in unlawful detainer case, decides the question of ownership only if it is intertwined with and necessary to resolve the issue of possession. 48 The resolution of the MeTC on the ownership of the property is merely provisional or interlocutory. Any question involving the issue of ownership should be raised and resolved in a separate action brought specifically to settle the question with finality, in this case, Civil Case No. 01-851 which respondent filed before the RTC. The ruling of the CA, that the contract between petitioner and respondent was an equitable mortgage, is incorrect. The fact of the matter is that the respondent intransigently alleged in his answer, and even in his affidavit and position paper, that petitioner had granted him the right to redeem or repurchase the property at any time and for a reasonable amount; and that, he had, in fact, repurchased the property in July 1985 for P250,000.00 which he remitted to petitioner through an authorized representative who signed receipts therefor; he had reacquired ownership and juridical possession of the property after his repurchase thereof in 1985; and consequently, petitioner was obliged to execute a deed of absolute sale over the property in his favor.
Notably, respondent alleged that, as stated in his letter to petitioner, he was given the right to reacquire the property in 1982 within two years upon the payment of P53,000.00, plus petitioner's airfare for her trip to the Philippines from the USA and back; petitioner promised to sign the deed of absolute sale. He even filed a complaint against the petitioner in the RTC, docketed as Civil Case No. 01-851, for specific performance with damages to compel petitioner to execute the said deed of absolute sale over the property presumably on the strength of Articles 1357 and 1358 of the New Civil Code. Certainly then, his claim that petitioner had given him the right to repurchase the property is antithetical to an equitable mortgage. An equitable mortgage is one that, although lacking in some formality, form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to change a real property as security for a debt and contain nothing impossible or contrary to law. 49 A contract between the parties is an equitable mortgage if the following requisites are present: (a) the parties entered into a contract denominated as a contract of sale; and (b) the intention was to secure an existing debt by way of mortgage. 50 The decisive factor is the intention of the parties. In an equitable mortgage, the mortgagor retains ownership over the property but subject to foreclosure and sale at public auction upon failure of the mortgagor to pay his obligation. 51 In contrast, in a pacto de retro sale, ownership of the property sold is immediately transferred to the vendee a retrosubject only to the right of the vendor a retro to repurchase the property upon compliance with legal requirements for the repurchase. The failure of the vendor a retro to exercise the right to repurchase within the agreed time vests upon the vendee a retro, by operation of law, absolute title over the property.52 One repurchases only what one has previously sold. The right to repurchase presupposes a valid contract of sale between the same parties. 53 By insisting that he had repurchased the property, respondent thereby admitted that the deed of absolute sale executed by him and petitioner on April 13, 1982 was, in fact and in law, a deed of absolute sale and not an equitable mortgage; hence, he had acquired ownership over the property based on said deed. Respondent is, thus, estopped from asserting that the contract under the deed of absolute sale is an equitable mortgage unless there is allegation and evidence of palpable mistake on the part of respondent; 54 or a fraud on the part of petitioner. Respondent made no such allegation in his pleadings and affidavit. On the contrary, he maintained that petitioner had sold the property to him in July 1985 and acknowledged receipt of the purchase price thereof except the amount of P39,000.00 retained by Perlita Ventura. Respondent is thus bound by his admission of petitioner's ownership of the property and is barred from claiming otherwise. 55
Respondent's admission that petitioner acquired ownership over the property under the April 13, 1982 deed of absolute sale is buttressed by his admission in the Contract of Lease dated April 15, 1982 that petitioner was the owner of the property, and that he had paid the rentals for the duration of the contract of lease and even until 1985 upon its extension. Respondent was obliged to prove his defense that petitioner had given him the right to repurchase, and that petitioner obliged herself to resell the property for P250,000.00 when they executed the April 13, 1982 deed of absolute sale. We have carefully reviewed the case and find that respondent failed to adduce competent and credible evidence to prove his claim. As gleaned from the April 13, 1982 deed, the right of respondent to repurchase the property is not incorporated therein. The contract is one of absolute sale and not one with right to repurchase. The law states that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. 56 When the language of the contract is explicit, leaving no doubt as to the intention of the drafters, the courts may not read into it any other intention that would contradict its plain import. 57 The clear terms of the contract should never be the subject matter of interpretation. Neither abstract justice nor the rule of liberal interpretation justifies the creation of a contract for the parties which they did not make themselves, or the imposition upon one party to a contract or obligation to assume simply or merely to avoid seeming hardships. 58 Their true meaning must be enforced, as it is to be presumed that the contracting parties know their scope and effects. 59 As the Court held in Villarica, et al. v. Court of Appeals: 60 The right of repurchase is not a right granted the vendor by the vendee in a subsequent instrument, but is a right reserved by the vendor in the same instrument of sale as one of the stipulations of the contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the vendor by the vendee in a separate instrument cannot be a right of repurchase but some other right like the option to buy in the instant case. 61 In Ramos v. Icasiano, 62 we also held that an agreement to repurchase becomes a promise to sell when made after the sale because when the sale is made without such agreement the purchaser acquires the thing sold absolutely; and, if he afterwards grants the vendor the right to repurchase, it is a new contract entered into by the purchaser as absolute owner. An option to buy or a promise to sell is different and distinct from the right of repurchase that must be reserved by means of stipulations to that effect in the contract of sale. 63
There is no evidence on record that, on or before July 1985, petitioner agreed to sell her property to the respondent for P250,000.00. Neither is there any documentary evidence showing that Ventura was authorized to offer for sale or sell the property for and in behalf of petitioner for P250,000.00, or to receive the said amount from respondent as purchase price of the property. The rule is that when a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void 64 and cannot produce any legal effect as to transfer the property from its lawful owner. 65 Being inexistent and void from the very beginning, said contract cannot be ratified. 66 Any contract entered into by Ventura for and in behalf of petitioner relative to the sale of the property is void and cannot be ratified by the latter. A void contract produces no effect either against or in favor of anyone. 67 Respondent also failed to prove that the negotiations between him and petitioner has culminated in his offer to buy the property for P250,000.00, and that they later on agreed to the sale of the property for the same amount. He likewise failed to prove that he purchased and reacquired the property in July 1985. The evidence on record shows that petitioner had offered to sell the property for US$15,000 on a "take it or leave it" basis in May 1984 upon the expiration of the Contract of Lease 68 an offer that was rejected by respondent which is why on December 30, 1997, petitioner and her husband offered again to sell the property to respondent for P670,000.00 inclusive of back rentals and the purchase price of the property under the April 13, 1982 Deed of absolute Sale. 69 The offer was again rejected by respondent. The final offer appears to have been made on January 11, 1998 70 but again, like the previous negotiations, no contract was perfected between the parties. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.71 Under Article 1318 of the New Civil Code, there is no contract unless the following requisites concur: (1)Consent of the contracting parties; (2)Object certain which is the subject matter of the contract; (3)Cause of the obligation which is established. Contracts are perfected by mere consent manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. 72 Once perfected, they bind the contracting parties and the obligations arising therefrom have the form of law between the parties which must be complied with in good faith. The parties are bound not only to the fulfillment of what has been expressly
stipulated but also to the consequences which, according to their nature, may be in keeping with good faith, usage and law. 73 There was no contract of sale entered into by the parties based on the Receipts dated July 1985 and June 16, 1986, signed by Perlita Ventura and the letter of petitioner to respondent dated July 25, 1986. TEHDIA By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing and the other, to pay therefor a price certain in money or its equivalent. 74 The absence of any of the essential elements will negate the existence of a perfected contract of sale. As the Court ruled in Boston Bank of the Philippines v. Manalo: 75 A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale. 76 A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer by one party without acceptance of the other, there is no contract. 77 When the contract of sale is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation between the parties. 78 Respondent's reliance on petitioner's letter to him dated July 25, 1986 is misplaced. The letter reads in full: 7-25-86 Dear Martin & Ising, Enclosed for your information is the letter written by my husband to Perlita. I hope that you will be able to convince your cousin that it's to her best interest to deposit the balance of your payment to me of P39,000.00 in my bank acct. per our agreement and send me my bank book right away so that we can transfer the title of the property. Regards, Amie 79
We have carefully considered the letter of Perlita Ventura, dated July 18, 1986, and the letter of Eugene Roberts, dated July 25, 1986, where Ventura admitted having used the money of petitioner amounting to P39,000.00 without the latter's knowledge for the plane fare of Ventura's parents. Ventura promised to refund the amount of P39,000.00, inclusive of interests, within one year. 80 Eugene Roberts berated Ventura and called her a thief for stealing his and petitioner's money and that of respondent's wife, Ising, who allegedly told petitioner that she, Ising, loaned the money to her parents for their plane fare to the USA. Neither Ventura nor Eugene Roberts declared in their letters that Ventura had used the P250,000.00 which respondent gave to her. Petitioner in her letter to respondent did not admit, either expressly or impliedly, having received P211,000.00 from Ventura. Moreover, in her letter to petitioner, only a week earlier, or on July 18, 1986, Ventura admitted having spent the P39,000.00 and pleaded that she be allowed to refund the amount within one (1) year, including interests. Naririto ang total ng pera mo sa bankbook mo, P55,000.00 pati na yong deposit na sarili mo at bale ang nagalaw ko diyan ay P39,000.00. Huwag kang mag-alala ibabalik ko rin sa iyo sa loob ng isang taon pati interest. Ate Per 81 It is incredible that Ventura was able to remit to petitioner P211,000.00 before July 25, 1986 when only a week earlier, she was pleading to petitioner for a period of one year within which to refund the P39,000.00 to petitioner. It would have bolstered his cause if respondent had submitted an affidavit of Ventura stating that she had remitted P211,000.00 out of the P250,000.00 she received from respondent in July 1985 and June 20, 1986. IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 69034 is REVERSED and SET ASIDE. The Decision of the Metropolitan Trial Court, affirmed with modification by the Regional Trial Court, is AFFIRMED.
SO ORDERED.
SECOND DIVISION [G.R. No. 145470. December 9, 2005.] SPS. LUIS V. CRUZ and AIDA CRUZ, petitioners, vs. SPS. ALEJANDRO FERNANDO, SR., and RITA FERNANDO, respondents.
the Kasunduan is a perfected contract of sale; (2) the agreement has already been "partially consummated" as they already relocated their house from the rear portion of the lot to the front portion that was sold to them; (3) Mrs. Glorioso prevented the complete consummation of the sale when she refused to have the exact boundaries of the lot bought by petitioners surveyed, and the existing survey was made without their knowledge and participation; and (4) respondents are buyers in bad faith having bought that portion of the lot occupied by them (petitioners) with full knowledge of the prior sale to them by the Gloriosos. 4 After due proceedings, the RTC rendered a Decision on April 3, 1998 in favor of respondents. The decretal portion of the decision provides: PREMISES CONSIDERED, the herein plaintiffs was able to prove by preponderance of evidence the case of accion publiciana, against the defendants and judgment is hereby rendered as follows: 1.Ordering defendants and all persons claiming under them to vacate placefully (sic) the premises in question and to remove their house therefore (sic); EIDTAa 2.Ordering defendants to pay plaintiff the sum of P500.00 as reasonable rental per month beginning October 21, 1994 when the case was filed before this Court and every month thereafter until they vacate the subject premises and to pay the costs of suit. The counter claim is hereby DISMISSED for lack of merit. SO ORDERED. 5 Petitioners appealed the RTC decision but it was affirmed by the CA per its Decision dated October 3, 2000. Hence, the present petition raising the following issues: 1.Whether the Honorable Court of Appeals committed an error of law in holding that the Agreement (Kasunduan) between the parties was a "mere offer to sell," and not a perfected "Contract of Purchase and Sale"? 2.Whether the Honorable Court of Appeals committed an error of law in not holding that where the parties clearly gave the petitioners a period of time within which to pay the
DECISION
AUSTRIA-MARTINEZ, J p: For resolution is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision 1 dated October 3, 2000 of the Court of Appeals (CA) in CA-G.R. CV No. 61247, dismissing petitioners' appeal and affirming the decision of the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 79, in Civil Case No. 877-M-94. The antecedent facts are as follows: Luis V. Cruz and Aida Cruz (petitioners) are occupants of the front portion of a 710-square meter property located in Sto. Cristo, Baliuag, Bulacan. On October 21, 1994, spouses Alejandro Fernando, Sr. and Rita Fernando (respondents) filed before the RTC a complaint for accion publiciana against petitioners, demanding the latter to vacate the premises and to pay the amount of P500.00 a month as reasonable rental for the use thereof. Respondents alleged in their complaint that: (1) they are owners of the property, having bought the same from the spouses Clodualdo and Teresita Glorioso (Gloriosos) per Deed of Sale dated March 9, 1987; (2) prior to their acquisition of the property, the Gloriosos offered to sell to petitioners the rear portion of the property but the transaction did not materialize due to petitioners' failure to exercise their option; (3) the offer to sell is embodied in a Kasunduan dated August 6, 1983 executed before the Barangay Captain; (4) due to petitioners' failure to buy the allotted portion, respondents bought the whole property from the Gloriosos; and (5) despite repeated demands, petitioners refused to vacate the property. 2 Petitioners filed a Motion to Dismiss but the RTC dismissed it for lack of merit in its Order dated March 6, 1995. 3 Petitioners then filed their Answer setting forth the affirmative defenses that: (1)
price, but did not fix said period, the remedy of the vendors is to ask the Court to fix the period for the payment of the price, and not an "accion publiciana"? 3.Whether the Honorable Court of Appeals committed an error of law in not ordering respondents to at least deliver the "back portion" of the lot in question upon payment of the agreed price thereof by petitioners, assuming that the Regional Trial Court was correct in finding that the subject matter of the sale was said "back portion", and not the "front" portion of the property? 4.Whether the Honorable Court of Appeals committed an error of law in affirming the decision of the trial court ordering the petitioners, who are possessors in good faith, to pay rentals for the portion of the lot possessed by them? 6 The RTC dwelt on the issue of which portion was being sold by the Gloriosos to petitioners, finding that it was the rear portion and not the front portion that was being sold; while the CA construed the Kasunduan as a mere contract to sell and due to petitioners' failure to pay the purchase price, the Gloriosos were not obliged to deliver to them (petitioners) the portion being sold. Petitioners, however, insist that the agreement was a perfected contract of sale, and their failure to pay the purchase price is immaterial. They also contend that respondents have no cause of action against them, as the obligation set in the Kasunduan did not set a period, consequently, there is no breach of any obligation by petitioners. The resolution of the issues in this case principally is dependent on the interpretation of the Kasunduan dated August 6, 1983 executed by petitioners and the Gloriosos. The Kasunduan provided the following pertinent stipulations: a.Na pumayag ang mga maysumbong (referring to the Gloriosos) na pagbilhan ang mga ipinagsumbong (referring to petitioners) na bahagi ng lupa at ang ipagbibili ay may sukat na 213 metrong parisukat humigit kumulang sa halagang P40.00 bawat metrong parisukat; b.Na sa titulong papapanaugin ang magiging kabuuang sukat na mauukol sa mga ipinagsusumbong ay 223 metrong parisukat at ang 10 metro nito ay bilang kaloob ng mga maysumbong sa mga Ipinagsusumbong na bahagi ng right of way;
c.Na ang right of way ay may luwang na 1.75 meters magmula sa daang Lopez Jaena patungo sa likuran ng lote na pagtatayuan ng bahay ng mga Ipinagsusumbong na kanyang bibilhin; d.Na ang gugol sa pagpapasukat at pagpapanaog ng titulo ay paghahatian ng magkabilang panig na ang panig ay magbibigay ng halagang hindi kukulanging sa halagang tig-AAPAT NA DAANG PISO (P400.00); e.Na ang ipinagsusumbong ay tiyakang ililipat ang bahay sa bahaging kanilang nabili o mabibili sa buwan ng Enero 31, 1984; 7 (Emphasis supplied) AHDTIE Under Article 1458 of the Civil Code, a contract of sale is a contract by which one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Article 1475 of the Code further provides that the contract of sale is perfected at the moment there is meeting of the minds upon the thing which is the object of the contract and upon the price. From that moment the parties may reciprocally demand performance subject to the provisions of the law governing the form of contracts. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold, as distinguished from a contract to sell where ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. 8 Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. The Kasunduan provides for the following terms and conditions: (a) that the Gloriosos agreed to sell to petitioners a portion of the property with an area of 213 meters at the price of P40.00 per square meter; (b) that in the title that will be caused to be issued, the aggregate area is 223 square meters with 10 meters thereof serving as right of way; (c) that the right of way shall have a width of 1.75 meters from Lopez Jaena road going towards the back of the lot where petitioners will build their house on the portion of the lot that they will buy; (d) that the expenses for the survey and for the issuance of the title will be divided between the parties with each party giving an amount of no less than P400.00; and (e) that petitioners will definitely relocate their house to the portion they bought or will buy by January 31, 1984.
The foregoing terms and conditions show that it is a contract to sell and not a contract of sale. For one, the conspicuous absence of a definite manner of payment of the purchase price in the agreement confirms the conclusion that it is a contract to sell. This is because the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist . 9 Although the Civil Code does not expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. 10 As held inToyota Shaw, Inc. vs. Court of Appeals, 11 a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. The Kasunduan does not establish any definite agreement between the parties concerning the terms of payment. What it merely provides is the purchase price for the 213-square meter property at P40.00 per square meter.
In the present case, aside from the payment of the purchase price, there existed another suspensive condition, i.e.: that petitioners will relocate their house to the portion they bought or will buy by January 31, 1984. ETIHCa Petitioners failed to abide by the express condition that they should relocate to the rear portion of the property being bought by January 31, 1984. Indeed, the Kasunduan discloses that it is the rear portion that was being sold by the Gloriosos, and not the front portion as petitioners stubbornly claim. This is evident from the provisions establishing a right of way from Lopez Jaena road going towards the back of the lot, and requiring them to relocate their house to the portion being sold by January 31, 1984. Petitioners are presently occupying the front portion of the property. Why the need for a right of way and for petitioners to relocate if the front portion on which their house stands is the portion being sold? This condition is a suspensive condition noncompliance of which prevented the Gloriosos from proceeding with the sale and ultimately transferring title to petitioners; and the Kasunduan from having obligatory force. 15 It is established by evidence that the petitioners did not transfer their house located in the front portion of the subject property to the rear portion which, under the Kasunduan, they intended to buy. Thus, no obligation arose on the part of the Gloriosos to consider the subject property as having been sold to petitioners because the latter's non-fulfillment of the suspensive condition rendered the contract to sell ineffective and unperfected. Petitioners admit that they have not paid a single centavo to the Gloriosos. However, petitioners argue that their nonpayment of the purchase price was due to the fact that there is yet to be a survey made of the property. But evidence shows, and petitioners do not dispute, that as early as August 12, 1983, or six days after the execution of the Kasunduan, a survey has already been made and the property was subdivided into Lot Nos. 565-B-1 (front portion) and 565-B-2 (rear portion), with Lot No. 565-B-2 measuring 223 square meters as the portion to be bought by petitioners. Petitioners question the survey made, asserting that it is a "table survey" made without their knowledge and participation. It should be pointed out that theKasunduan merely provides that the expenses for the survey will be divided between them and that each party should give an amount of no less than P400.00. Nowhere is it stated that the survey is a condition precedent for the payment of the purchase price. Petitioners further claim that respondents have no cause of action against them because their obligation to pay the purchase price did not yet arise, as the agreement did not provide for a period within which to pay the purchase price. They argue that respondents should have filed an action for specific performance or judicial rescission before they can avail of accion publiciana.
For another, the telltale provision in the Kasunduan that: "Na pumayag ang mga maysumbong
na pagbilhan ang mga ipinagsumbong na bahagi ng lupa at ang ipagbibili ay may sukat na 213 metrong parisukat humigit kumulang sa halagang P40.00 bawat metrong parisukat ," simply means that the
Gloriosos onlyagreed to sell a portion of the property and that the portion to be sold measures 213 square meters. Another significant provision is that which reads: "Na ang ipinagsusumbong ay tiyakang ililipat ang bahay sa bahaging kanilang nabili o mabibili sa buwan ng Enero 31, 1984." The foregoing indicates that a contract of sale is yet to be consummated and ownership of the property remained in the Gloriosos. Otherwise, why would the alternative term "mabibili" be used if indeed the property had already been sold to petitioners. In addition, the absence of any formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership. 12 Normally, in a contract to sell, the payment of the purchase price is the positive suspensive condition upon which the transfer of ownership depends. 13 The parties, however, are not prohibited from stipulating other lawful conditions that must be fulfilled in order for the contract to be converted from a contract to sell or at the most an executory sale into an executed one. 14
Notably, petitioners never raised these arguments during the proceedings before the RTC. Suffice it to say that issues raised for the first time on appeal and not raised timely in the proceedings in the lower court are barred by estoppel. 16 Matters, theories or arguments not brought out in the original proceedings cannot be considered on review or appeal where they are raised for the first time. To consider the alleged facts and arguments raised belatedly would amount to trampling on the basic principles of fair play, justice and due process. 17 Moreover, it would be inutile for respondents to first petition the court to fix a period for the performance of the contract. In the first place, respondents are not parties to the Kasunduan between petitioners and the Gloriosos, and they have no standing whatsoever to seek such recourse. In the second place, such recourse properly pertains to petitioners. It was they who should have sought the court's intercession. If petitioners believed that they have an actionable contract for the sale of the property, prudence and common sense dictate that they should have sought its enforcement forthwith. Instead, petitioners whiled away their time. HEDSCc Furthermore, there is no need for a judicial rescission of the Kasunduan for the simple reason that the obligation of the Gloriosos to transfer the property to petitioners has not yet arisen. There can be no rescission of an obligation that is nonexistent, considering that the suspensive conditions therefor have not yet happened. 18 Hence, petitioners have no superior right of ownership or possession to speak of. Their occupation of the property was merely through the tolerance of the owners. Evidence on record shows that petitioners and their predecessors were able to live and build their house on the property through the permission and kindness of the previous owner, Pedro Hipolito, who was their relative, 19 and subsequently, Teresita Glorioso, who is also their relative. They have no title or, at the very least, a contract of lease over the property. Based as it was on mere tolerance, petitioners' possession could neither ripen into ownership nor operate to bar any action by respondents to recover absolute possession thereof. 20 There is also no merit to petitioners' contention that respondents are buyers in bad faith. As explained in Coronel vs. Court of Appeals: In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller's
title per se, but the latter, of course, may be sued for damages by the intending buyer. 21 (Emphasis supplied) A person who occupies the land of another at the latter's forbearance or permission without any contract between them is necessarily bound by an implied promise that he will vacate upon demand. 22 Considering that petitioners' continued possession of the property has already been rendered unlawful, they are bound to pay reasonable rental for the use and occupation thereof, which in this case was appropriately pegged by the RTC at P500.00 per month beginning October 21, 1994 when respondents filed the case against them until they vacate the premises. Finally, petitioners seek compensation for the value of the improvements introduced on the property. Again, this is the first time that they are raising this point. As such, petitioners are now barred from seeking such relief. 23 WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated October 3, 2000 in CAG.R. CV No. 61247 is AFFIRMED. IDSETA SO ORDERED.
FIRST DIVISION [G.R. No. 144225. June 17, 2003.] SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES ARNULFO SAVELLANO and EDITHA B. SAVELLANO, DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU and ELIZABETH TUAZON, petitioners, vs. SPOUSES ARMANDO BORRAS and ADELIA LOBATON BORRAS, respondents.
1.REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF THE TRIAL COURT AFFIRMED BY THE APPELLATE COURT, RESPECTED. In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and not errors of facts. The factual findings of the appellate court are generally binding on this Court. This applies with greater force when both the trial court and the Court of Appeals are in complete agreement on their factual findings. 2.CIVIL LAW; CONTRACTS; SALES; PERFECTED CONTRACT OF SALE, PRESENT IN CASE AT BAR. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of the obligation. In the instant case, the object of the sale is the Subject Land, and the price certain is P15,000.00. The trial and appellate courts found that there was a meeting of the minds on the sale of the Subject Land and on the purchase price of P15,000.00. 3.ID.; ID.; ID.; CONSUMMATED AS CONTRACTING PARTIES COMPLIED WITH THEIR RESPECTIVE OBLIGATIONS. The contract of sale of the Subject Land has also been consummated because the sellers and buyers have performed their respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same, to the buyer who obligates himself to pay a price certain to the seller. In the instant case, Godofredo and Carmen delivered the Subject Land to Armando and Adelia, placing the latter in actual physical possession of the Subject Land. This physical delivery of the Subject Land also constituted a transfer of ownership of the Subject Land to Armando and Adelia. Ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery. Godofredo and Carmen also turned over to Armando and Adelia the documents of ownership to the Subject Land, namely the owner's duplicate copy of OCT No. 284, the tax declaration and the receipts of realty tax payments. It is not necessary that the seller himself deliver the title of the property to the buyer because the thing sold is understood as delivered when it is placed in the control and possession of the vendee. 4.ID.; ID.; UNENFORCEABLE CONTRACTS; STATUTE OF FRAUDS; NOT APPLICABLE WHERE THERE WAS MEMORANDUM OF SALE AND ALSO PERFORMANCE OF OBLIGATION. The Statute of Frauds provides that a contract for the sale of real property shall be unenforceable unless the contract or some note or memorandum of the sale is in writing and subscribed by the party charged or his agent. The existence of the receipt dated 11 March 1970, which is a memorandum of the sale, removes the transaction from the provisions of the Statute of Frauds. The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally performed. Thus, where one party has performed one's obligation, oral evidence will be admitted to prove the agreement. In the instant case, the parties have consummated the sale of the Subject Land, with both sellers and buyers performing their respective obligations under the contract of sale. In addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the contract. Godofredo and Carmen benefited from the contract because they paid their DBP loan and secured the cancellation of their mortgage using the money given by Armando and Adelia.
Ortiguera, Zuniga, Pomer, Salaria, Sison Law Offices for petitioners. David G. Paguio for private respondents.
SYNOPSIS The spouses Alfredo were the registered owners of the land in issue. They sold the same to the spouses Borras where some of the money was used to pay the mortgage loan. Thereafter, the spouses Borras took possession of the land but discovered that the spouses Alfredo re-sold the land to other persons. When the spouses Borras filed an adverse claim, the spouses Alfredo argued that the action was unenforceable under the Statute of Frauds as there was no written instrument evidencing the sale. Further, the alleged subsequent land buyers from the spouses Alfredo were buyers in good faith. The Court ruled in favor of the spouses Borras. The contract of sale between the spouses Alfredo and the spouses Borras on the land was not only a perfected contract but also a consummated contract. Thus, the Statute of Frauds does not apply. On the alleged good faith of the subsequent buyers, the same was belied by the fact that the spouses Borras registered their adverse claim earlier than subsequent buyers' date of purchase and registration. Thus, they have constructive notice of the defect in the titles of the sellers. SYLLABUS
Godofredo and Carmen also accepted payment of the balance of the purchase price. Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal contract of sale because they have performed their obligations, and have accepted benefits, under the verbal contract. Armando and Adelia have also performed their obligations under the verbal contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of the Subject Land. The Statute of Frauds was enacted to prevent fraud. This law cannot be used to advance the very evil the law seeks to prevent. 5.ID.; FAMILY RELATIONS; PROPERTY RELATIONS BETWEEN HUSBAND AND WIFE; CONJUGAL PARTNERSHIP OF GAINS; ADMINISTRATION; DISPOSITION OF CONJUGAL PROPERTY WITHOUT WIFE'S CONSENT IS VOIDABLE. The Family Code, which took effect on 3 August 1988, provides that any alienation or encumbrance made by the husband of the conjugal partnership property without the consent of the wife is void. However, when the sale is made before the effectivity of the Family Code. the applicable law is the Civil Code. Article 173 of the Civil Code provides that the disposition of conjugal property without the wife's consent is not void but merely voidable. 6.ID.; ID.; ID.; ID.; ID.; ID.; SUSCEPTIBLE TO RATIFICATION BY ACTION OF NON-CONSENTING SPOUSE. That Carmen sold the land to Armando and Adelia without the consent of Carmen's husband, the sale would only be voidable and not void. However, Godofredo can no longer question the sale. Voidable contracts are susceptible of ratification. Godofredo ratified the sale when he introduced Armando and Adelia to his tenants as the new owners of the Subject Land. That Godofredo and Carmen allowed Armando and Adelia to enjoy possession of the Subject Land for 24 years is formidable proof of Godofredo's acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should have filed an action to annul the sale. He did not. The prescriptive period to annul the sale has long lapsed. Godofredo's conduct belies his claim that his wife sold the Subject Land without his consent. 7.ID.; ID.; ID.; ID.; CHARGES UPON AND OBLIGATIONS OF THE CONJUGAL PARTNERSHIP; CONJUGAL PROPERTY LIABLE FOR DEBTS CONTRACTED BY WIFE FOR THE BENEFIT OF CONJUGAL PARTNERSHIP. Godofredo and Carmen used most of the proceeds of the sale to pay their debt with the DBP. The sale redounded to the benefit of the conjugal partnership. Article 161 of the Civil Code provides that the conjugal partnership shall be liable for debts and obligations contracted by the wife for the benefit of the conjugal partnership. Hence, even if Carmen sold the land without the consent of her husband, the sale still binds the conjugal partnership. 8.REMEDIAL LAW; APPEAL; ISSUE RAISED FOR THE FIRST TIME ON APPEAL, NOT PROPER; RULE LIBERALLY CONSTRUED TO PUT END TO CASE. Petitioners invoke the absence of approval of the sale by the Secretary of Agriculture and Natural Resources to nullify the sale. Petitioners never raised this issue before the trial court or the Court of Appeals. Litigants cannot raise an issue for the first time on appeal,
as this would contravene the basic rules of fair play, justice and due process. However, we will address this new issue to finally put an end to this case. HAICET 9.CIVIL LAW; PUBLIC LAND ACT; SALE OF LAND ACQUIRED UNDER FREE PATENT; REQUIRED APPROVAL OF AGRICULTURE SECRETARY IN THE ABSENCE OF GROUND TO DENY THE SAME MAY BE SECURED LATER. The sale of the Subject Land cannot be annulled on the ground that the Secretary did not approve the sale, which was made within 25 years from the issuance of the homestead title. Section 118 of the Public Land Act (Commonwealth Act No. 141) reads as follows: SEC. 118. Except in favor of the Government or any of its branches, units, or institutions or legally constituted banking corporation, lands acquired under free. patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of the issuance of the patent or grant. . . . No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five years after the issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal grounds. A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the time that the patent or grant is issued. A violation of this prohibition renders a sale void. This prohibition, however, expires on the fifth year. From then on until the next 20 years the land grant may be alienated provided the Secretary of Agriculture and Natural Resources approves the alienation. The Secretary is required to approve the alienation unless there are "constitutional and legal grounds" to deny the approval. In this case, there are no apparent constitutional or legal grounds for the Secretary to disapprove the sale of the Subject Land. The failure to secure the approval of the Secretary does not ipso facto make a sale void. The absence of approval by the Secretary does not nullify a sale made after the expiration of the 5-year period, for in such event the requirement of Section 118 of the Public Land Act becomes merely directory or a formality. The approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale had been previously authorized.
10.REMEDIAL LAW; CIVIL PROCEDURE; PLEADINGS; NATURE OF ACTION DETERMINED BY THE BODY OF THE COMPLAINT. The Amended Complaint filed by Armando and Adelia with the trial court is captioned as one for Specific Performance. In reality, the ultimate relief sought by Armando and Adelia is the reconveyance to them of the Subject Land. An action for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its rightful and legal owner. The body of the pleading or complaint determines the nature of an action, not its title or heading. Thus, the present action should be treated as one for reconveyance. 11.CIVIL LAW; CONTRACTS; IMPLIED TRUSTS; ONE WHO ACQUIRED PROPERTY THROUGH FRAUD BECOMES TRUSTEE FOR THE BENEFIT OF REAL PROPERTY OWNER WHO HAS RIGHT TO SEEK
RECONVEYANCE OF PROPERTY. Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes by operation of law a trustee of an implied trust for the benefit of the real owner of the property. The presence of fraud in this case created an implied trust in favor of Armando and Adelia. This gives Armando and Adelia the right to seek reconveyance of the property from the Subsequent Buyers. 12.ID.; MODES OF ACQUIRING OWNERSHIP; PRESCRIPTION OF ACTIONS; ACTION FOR RECONVEYANCE; PRESCRIPTION DOES NOT RUN WHERE OWNER IS IN POSSESSION OF THE PROPERTY AS ACTION IS IN THE NATURE OF QUIETING OF TITLE WHICH IS IMPRESCRIPTIBLE. To determine when the prescriptive period commenced in an action for reconveyance, plaintiff's possession of the disputed property is material. An action for reconveyance based on an implied trust prescribes in ten years. The ten-year prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession of the property. However, if the plaintiff, as the real owner of the property also remains in possession of the property, the prescriptive period to recover title and possession of the property does not run against him. In such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible. Prescription does not run against the plaintiff in actual possession of the disputed land because such plaintiff has a right to wait until his possession is disturbed or his title is questioned before initiating an action to vindicate his right. His undisturbed possession gives him the continuing right to seek the aid of a court of equity to determine the nature of the adverse claim of a third party and its effect on his title. 13.ID.; ID.; ID.; ACTION FOR RECONVEYANCE BASED ON IMPLIED TRUST PRESCRIBES IN TEN YEARS; PERIOD STARTED TO RUN FROM DATE OF REGISTRATION OF SUBSEQUENT BUYERS. Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly drove away from the Subject Land the Natanawans, the tenants of Armando and Adelia. This created an actual need for Armando and Adelia to seek reconveyance of the Subject Land. The statute of limitation becomes relevant in this case. The ten-year prescriptive period started to run from the date the Subsequent Buyers registered their deeds of sale with the Register of Deeds. 14.REMEDIAL LAW; CIVIL PROCEDURE; ACTIONS; LACHES; NOT PRESENT IN CASE AT BAR. Neither is the action barred by laches. We have defined laches as the failure or neglect, for an unreasonable time, to do that which, by the exercise of due diligence, could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. Armando and Adelia discovered in January 1994 the subsequent sale of the Subject Land and they filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights.
15.CIVIL LAW; CONTRACTS; SALES; DOUBLE SALE; WHERE SECOND BUYER HAS KNOWLEDGE OF PRIOR SALE, GOOD FAITH, NOT PRESENT. The settled rule is when ownership or title passes to the buyer, the seller ceases to have any title to transfer to any third person. If the seller sells the same land to another, the second buyer who has actual or constructive knowledge of the prior sale cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. Thus, to merit protection under the second paragraph of Article 1544 of the Civil Code, the second buyer must act in good faith in registering the deed. In this case, the Subsequent Buyers' good faith hinges on whether they had knowledge of the previous sale. Petitioners do not dispute that Armando and Adelia registered their adverse claim with the Registry of Deeds of Bataan on 8 February 1994. The Subsequent Buyers purchased their respective lots only on 22 February 1994 as shown by the date of their deeds of sale. Consequently, the adverse claim registered prior to the second sale charged the Subsequent Buyers with constructive notice of the defect in the title of the sellers, Godofredo and Carmen. The registration of the adverse claim on 8 February 1994 constituted, by operation of law, notice to the whole world. Thus, the Subsequent Buyers were not buyers in good faith when they purchased their lots on 22 February 1994. They were also not registrants in good faith when they registered their deeds of sale with the Registry of Deeds on 24 February 1994. 16.ID.; LAND TITLES; INDEFEASIBILITY DOES NOT APPLY WHERE FRAUD ATTENDED ISSUANCE THEREOF. The Subsequent Buyers' individual titles to their respective lots are not absolutely indefeasible. The defense of indefeasibility of the Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw in his title. The principle of indefeasibility of title does not apply where fraud attended the issuance of the titles as in this case. cDTACE 17.ID.; DAMAGES; ATTORNEY'S FEES; PROPER WHERE PARTY COMPELLED TO FILE AN ACTION. We sustain the award of attorney's fees. The decision of the court must state the grounds for the award of attorney's fees. The trial court complied with this requirement. We agree with the trial court that if it were not for petitioners' unjustified refusal to heed the just and valid demands of Armando and Adelia, the latter would not have been compelled to file this action.
DECISION
CARPIO, J p: The Case
Before us is a petition for review assailing the Decision 1 of the Court of Appeals dated 26 November 1999 affirming the decision 2 of the Regional Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also question the Resolution of the Court of Appeals dated 26 July 2000 denying petitioners' motion for reconsideration. The Antecedent Facts A parcel of land measuring 81,524 square meters ("Subject Land") in Barrio Culis, Mabiga, Hermosa, Bataan is the subject of controversy in this case. The registered owners of the Subject Land were petitioner spouses, Godofredo Alfredo ("Godofredo") and Carmen Limon Alfredo ("Carmen"). The Subject Land is covered by Original Certificate of Title No. 284 ("OCT No. 284") issued to Godofredo and Carmen under Homestead Patent No. V-69196. On 7 March 1994, the private respondents, spouses Armando Borras ("Armando") and Adelia Lobaton Borras ("Adelia"), filed a complaint for specific performance against Godofredo and Carmen before the Regional Trial Court of Bataan, Branch 4. The case was docketed as Civil Case No. DH-256-94. Armando and Adelia alleged in their complaint that Godofredo and Carmen mortgaged the Subject Land for P7,000.00 with the Development Bank of the Philippines ("DBP"). To pay the debt, Carmen and Godofredo sold the Subject Land to Armando and Adelia for P15,000.00, the buyers to pay the DBP loan and its accumulated interest, and the balance to be paid in cash to the sellers. Armando and Adelia gave Godofredo and Carmen the money to pay the loan to DBP which signed the release of mortgage and returned the owner's duplicate copy of OCT No. 284 to Godofredo and Carmen. Armando and Adelia subsequently paid the balance of the purchase price of the Subject Land for which Carmen issued a receipt dated 11 March 1970. Godofredo and Carmen then delivered to Adelia the owner's duplicate copy of OCT No. 284, with the document of cancellation of mortgage, official receipts of realty tax payments, and tax declaration in the name of Godofredo. Godofredo and Carmen introduced Armando and Adelia, as the new owners of the Subject Land, to the Natanawans, the old tenants of the Subject Land. Armando and Adelia then took possession of the Subject Land. In January 1994, Armando and Adelia learned that hired persons had entered the Subject Land and were cutting trees under instructions of allegedly new owners of the Subject Land. Subsequently, Armando and Adelia discovered that Godofredo and Carmen had re-sold portions of the Subject Land to several persons. DcSACE
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register of Deeds of Bataan. Armando and Adelia discovered that Godofredo and Carmen had secured an owner's duplicate copy of OCT No. 284 after filing a petition in court for the issuance of a new copy. Godofredo and Carmen claimed in their petition that they lost their owner's duplicate copy. Armando and Adelia wrote Godofredo and Carmen complaining about their acts, but the latter did not reply. Thus, Armando and Adelia filed a complaint for specific performance. On 28 March 1994, Armando and Adelia amended their complaint to include the following persons as additional defendants: the spouses Arnulfo Savellano and Editha B. Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, and Elizabeth Tuazon ("Subsequent Buyers"). The Subsequent Buyers, who are also petitioners in this case, purchased from Godofredo and Carmen the subdivided portions of the Subject Land. The Register of Deeds of Bataan issued to the Subsequent Buyers transfer certificates of title to the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively "petitioners") argued that the action is unenforceable under the Statute of Frauds. Petitioners pointed out that there is no written instrument evidencing the alleged contract of sale over the Subject Land in favor of Armando and Adelia. Petitioners objected to whatever parole evidence Armando and Adelia introduced or offered on the alleged sale unless the same was in writing and subscribed by Godofredo. Petitioners asserted that the Subsequent Buyers were buyers in good faith and for value. As counterclaim, petitioners sought payment of attorney's fees and incidental expenses. Trial then followed. Armando and Adelia presented the following witnesses: Adelia, Jesus Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando Natanawan, Tomas Natanawan, and Mildred Lobaton. Petitioners presented two witnesses, Godofredo and Constancia Calonso. On 7 June 1996, the trial court rendered its decision in favor of Armando and Adelia. The dispositive portion of the decision reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs, the spouses Adelia Lobaton Borras and Armando F. Borras, and against the defendantspouses Godofredo Alfredo and Carmen Limon Alfredo, spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as follows:
1.Declaring the Deeds of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) executed by the spouses Godofredo Alfredo and Carmen Limon Alfredo in favor of spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as null and void; 2.Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in the names of spouses Arnulfo Sabellano and Editha B. Sabellano; Transfer Certificates of Title Nos. T-163268 and 163272 in the names of spouses Delfin F. Espiritu, Jr., and Estela S. Espiritu; Transfer Certificates of Title Nos. T-163269 and T-163271 in the name of Danton D. Matawaran; and Transfer Certificate of Title No. T-163270 in the name of Elizabeth Tuazon, as null and void and that the Register of Deeds of Bataan is hereby ordered to cancel said titles; 3.Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to execute and deliver a good and valid Deed of Absolute Sale of the disputed parcel of land (covered by OCT No. 284) in favor of the spouses Adelia Lobaton Borras and Armando F. Borras within a period of ten (10) days from the finality of this decision; 4.Ordering defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to surrender their owner's duplicate copy of OCT No. 284 issued to them by virtue of the Order dated May 20, 1992 of the Regional Trial Court of Bataan, Dinalupihan Branch, to the Registry of Deeds of Bataan within ten (10) days from the finality of this decision, who, in turn, is directed to cancel the same as there exists in the possession of herein plaintiffs of the owner's duplicate copy of said OCT No. 284 and, to restore and/or reinstate OCT No. 284 of the Register of Deeds of Bataan to its full force and effect; 5.Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to restitute and/or return the amount of the respective purchase prices and/or consideration of sale of the disputed parcels of land they sold to their co-defendants within ten (10) days from the finality of this decision with legal interest thereon from date of the sale;
6.Ordering the defendants, jointly and severally, to pay plaintiff-spouses the sum of P20,000.00 as and for attorney's fees and litigation expenses; and 7.Ordering defendants to pay the costs of suit. Defendants' counterclaims are hereby dismissed for lack of merit. SO ORDERED. 3 Petitioners appealed to the Court of Appeals. On 26 November 1999, the Court of Appeals issued its Decision affirming the decision of the trial court, thus: WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-256-94 is hereby AFFIRMED in its entirety. Treble costs against the defendants-appellants. SO ORDERED. 4 On 26 July 2000, the Court of Appeals denied petitioners' motion for reconsideration. The Ruling of the Trial Court The trial court ruled that there was a perfected contract of sale between the spouses Godofredo and Carmen and the spouses Armando and Adelia. The trial court found that all the elements of a contract of sale were present in this case. The object of the sale was specifically identified as the 81,524-square meter lot in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT No. 284 issued by the Registry of Deeds of Bataan. The purchase price was fixed at P15,000.00, with the buyers assuming to pay the sellers' P7,000.00 DBP mortgage loan including its accumulated interest. The balance of the purchase price was to be paid in cash to the sellers. The last payment of P2,524.00 constituted the full settlement of the purchase price and this was paid on 11 March 1970 as evidenced by the receipt issued by Carmen. The trial court found the following facts as proof of a perfected contract of sale: (1) Godofredo and Carmen delivered to Armando and Adelia the Subject Land; (2) Armando and Adelia treated as their own tenants the tenants of Godofredo and Carmen; (3) Godofredo and Carmen turned over to Armando and Adelia documents such as the owner's duplicate copy of the title of the Subject Land, tax declaration, and
the receipts of realty tax payments in the name of Godofredo; and (4) the DBP cancelled the mortgage on the Subject Property upon payment of the loan of Godofredo and Carmen. Moreover, the receipt of payment issued by Carmen served as an acknowledgment, if not a ratification, of the verbal sale between the sellers and the buyers. The trial court ruled that the Statute of Frauds is not applicable because in this case the sale was perfected. The trial court concluded that the Subsequent Buyers were not innocent purchasers. Not one of the Subsequent Buyers testified in court on how they purchased their respective lots. The Subsequent Buyers totally depended on the testimony of Constancia Calonso ("Calonso") to explain the subsequent sale. Calonso, a broker, negotiated with Godofredo and Carmen the sale of the Subject Land which Godofredo and Carmen subdivided so they could sell anew portions to the Subsequent Buyers. Calonso admitted that the Subject Land was adjacent to her own lot. The trial court pointed out that Calonso did not inquire on the nature of the tenancy of the Natanawans and on who owned the Subject Land. Instead, she bought out the tenants for P150,000.00. The buy out was embodied in a Kasunduan. Apolinario Natanawan ("Apolinario") testified that he and his wife accepted the money and signed the Kasunduan because Calonso and the Subsequent Buyers threatened them with forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he was asked to produce the documents showing that Adelia is the owner of the Subject Land. Since Apolinario could not produce the documents, the agrarian officer told him that he would lose the case. Thus, Apolinario was constrained to sign the Kasunduan and accept the P150,000.00. Another indication of Calonso's bad faith was her own admission that she saw an adverse claim on the title of the Subject Land when she registered the deeds of sale in the names of the Subsequent Buyers. Calonso ignored the adverse claim and proceeded with the registration of the deeds of sale. The trial court awarded P20,000.00 as attorney's fees to Armando and Adelia. In justifying the award of attorney's fees, the trial court invoked Article 2208 (2) of the Civil Code which allows a court to award attorney's fees, including litigation expenses, when it is just and equitable to award the same. The trial court ruled that Armando and Adelia are entitled to attorney's fees since they were compelled to file this case due to petitioners' refusal to heed their just and valid demand. The Ruling of the Court of Appeals The Court of Appeals found the factual findings of the trial court well supported by the evidence. Based on these findings, the Court of Appeals also concluded that there was a perfected contract of sale and the Subsequent Buyers were not innocent purchasers. ATICcS
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is sufficient proof that Godofredo and Carmen sold the Subject Land to Armando and Adelia upon payment of the balance of the purchase price. The Court of Appeals found the recitals in the receipt as "sufficient to serve as the memorandum or note as a writing under the Statute of Frauds." 5 The Court of Appeals then reiterated the ruling of the trial court that the Statute of Frauds does not apply in this case. The Court of Appeals gave credence to the testimony of a witness of Armando and Adelia, Mildred Lobaton, who explained why the title to the Subject Land was not in the name of Armando and Adelia. Lobaton testified that Godofredo was then busy preparing to leave for Davao. Godofredo promised that he would sign all the papers once they were ready. Since Armando and Adelia were close to the family of Carmen, they trusted Godofredo and Carmen to honor their commitment. Armando and Adelia had no reason to believe that their contract of sale was not perfected or validly executed considering that they had received the duplicate copy of OCT No. 284 and other relevant documents. Moreover, they had taken physical possession of the Subject Land. The Court of Appeals held that the contract of sale is not void even if only Carmen signed the receipt dated 11 March 1970. Citing Felipe v. Heirs of Maximo Aldon, 6 the appellate court ruled that a contract of sale made by the wife without the husband's consent is not void but merely voidable. The Court of Appeals further declared that the sale in this case binds the conjugal partnership even if only the wife signed the receipt because the proceeds of the sale were used for the benefit of the conjugal partnership. The appellate court based this conclusion on Article 161 7 of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in good faith because they had constructive notice of the adverse claim of Armando and Adelia. Calonso, who brokered the subsequent sale, testified that when she registered the subsequent deeds of sale, the adverse claim of Armando and Adelia was already annotated on the title of the Subject Land. The Court of Appeals believed that the act of Calonso and the Subsequent Buyers in forcibly ejecting the Natanawans from the Subject Land buttresses the conclusion that the second sale was tainted with bad faith from the very beginning. Finally, the Court of Appeals noted that the issue of prescription was not raised in the Answer. Nonetheless, the appellate court explained that since this action is actually based on fraud, the prescriptive period is four years, with the period starting to run only from the date of the discovery of the fraud. Armando and Adelia discovered the fraudulent sale of the Subject Land only in January 1994. Armando and Adelia lost no time in writing a letter to Godofredo and Carmen on 2 February 1994 and filed
this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights or lose their rights by prescription. The Court of Appeals sustained the award of attorney's fees and imposed treble costs on petitioners. The Issues
V Whether petitioners are entitled to the counterclaim for attorney's fees and litigation expenses, where they have sustained such expenses by reason of institution of a clearly malicious and unfounded action by Armando and Adelia. 8 The Court's Ruling
Petitioners raise the following issues: The petition is without merit. I Whether the alleged sale of the Subject Land in favor of Armando and Adelia is valid and enforceable, where (1) it was orally entered into and not in writing; (2) Carmen did not obtain the consent and authority of her husband, Godofredo, who was the sole owner of the Subject Land in whose name the title thereto (OCT No. 284) was issued; and (3) it was entered into during the 25-year prohibitive period for alienating the Subject Land without the approval of the Secretary of Agriculture and Natural Resources. II Whether the action to enforce the alleged oral contract of sale brought after 24 years from its alleged perfection had been barred by prescription and by laches. III Whether the deeds of absolute sale and the transfer certificates of title over the portions of the Subject Land issued to the Subsequent Buyers, innocent purchasers in good faith and for value whose individual titles to their respective lots are absolute and indefeasible, are valid. IV Whether petitioners are liable to pay Armando and Adelia P20,000.00 as attorney's fees and litigation expenses and the treble costs, where the claim of Armando and Adelia is clearly unfounded and baseless. In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and not errors of facts. 9 The factual findings of the appellate court are generally binding on this Court. 10 This applies with greater force when both the trial court and the Court of Appeals are in complete agreement on their factual findings. 11 In this case, there is no reason to deviate from the findings of the lower courts. The facts relied upon by the trial and appellate courts are borne out by the record. We agree with the conclusions drawn by the lower courts from these facts.
Validity and Enforceability of the Sale

The contract of sale between the spouses Godofredo and Carmen and the spouses Armando and Adelia was a perfected contract. A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of the obligation. 12 In the instant case, the object of the sale is the Subject Land, and the price certain is P15,000.00. The trial and appellate courts found that there was a meeting of the minds on the sale of the Subject Land and on the purchase price of P15,000.00. This is a finding of fact that is binding on this Court. We find no reason to disturb this finding since it is supported by substantial evidence. The contract of sale of the Subject Land has also been consummated because the sellers and buyers have performed their respective obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same, to the buyer who obligates himself to pay a price certain to the seller. 13 In the instant case, Godofredo and Carmen delivered the Subject Land to Armando and Adelia, placing the latter in actual physical possession of the Subject Land. This physical delivery of the Subject Land also constituted a transfer of ownership of the Subject Land to Armando and Adelia. 14 Ownership of the thing sold is transferred to the vendee upon its actual or constructive delivery. 15 Godofredo and Carmen also turned over to Armando and Adelia the documents of ownership to the Subject Land, namely the owner's duplicate copy of OCT No. 284, the tax declaration and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as evidenced by the receipt dated 11 March 1970 issued by Carmen. Armando and Adelia fulfilled their obligation to provide the P7,000.00 to pay the DBP loan of Godofredo and Carmen, and to pay the latter the balance of P8,000.00 in cash. The P2,524.00 paid under the receipt dated 11 March 1970 was the last installment to settle fully the purchase price. Indeed, upon payment to DBP of the P7,000.00 and the accumulated interests, the DBP cancelled the mortgage on the Subject Land and returned the owner's duplicate copy of OCT No. 284 to Godofredo and Carmen. The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The Statute of Frauds 16 provides that a contract for the sale of real property shall be unenforceable unless the contract or some note or memorandum of the sale is in writing and subscribed by the party charged or his agent. The existence of the receipt, dated 11 March 1970, which is a memorandum of the sale, removes the transaction from the provisions of the Statute of Frauds. The Statute of Frauds applies only to executory contracts and not to contracts either partially or totally performed. 17 Thus, where one party has performed one's obligation, oral evidence will be admitted to prove the agreement. 18 In the instant case, the parties have consummated the sale of the Subject Land, with both sellers and buyers performing their respective obligations under the contract of sale. In addition, a contract that violates the Statute of Frauds is ratified by the acceptance of benefits under the contract. 19 Godofredo and Carmen benefited from the contract because they paid their DBP loan and secured the cancellation of their mortgage using the money given by Armando and Adelia. Godofredo and Carmen also accepted payment of the balance of the purchase price. Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal contract of sale because they have performed their obligations, and have accepted benefits, under the verbal contract. 20 Armando and Adelia have also performed their obligations under the verbal contract. Clearly, both the sellers and the buyers have consummated the verbal contract of sale of the Subject Land. The Statute of Frauds was enacted to prevent fraud. 21 This law cannot be used to advance the very evil the law seeks to prevent. Godofredo and Carmen also claim that the sale of the Subject Land to Armando and Adelia is void on two grounds. First, Carmen sold the Subject Land without the marital consent of Godofredo. Second, the sale was made during the 25-year period that the law prohibits the alienation of land grants without the approval of the Secretary of Agriculture and Natural Resources. These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any alienation or encumbrance made by the husband of the conjugal partnership property without the consent of the wife is void. However, when the sale is made before the effectivity of the Family Code, the applicable law is the Civil Code. 22 Article 173 of the Civil Code provides that the disposition of conjugal property without the wife's consent is not void but merely voidable. Article 173 reads: The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required; or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband. In Felipe v. Aldon, 23 we applied Article 173 in a case where the wife sold some parcels of land belonging to the conjugal partnership without the consent of the husband. We ruled that the contract of sale was voidable subject to annulment by the husband. Following petitioners' argument that Carmen sold the land to Armando and Adelia without the consent of Carmen's husband, the sale would only be voidable and not void. HcISTE However, Godofredo can no longer question the sale. Voidable contracts are susceptible of ratification. 24 Godofredo ratified the sale when he introduced Armando and Adelia to his tenants as the new owners of the Subject Land. The trial court noted that Godofredo failed to deny categorically on the witness stand the claim of the complainants' witnesses that Godofredo introduced Armando and Adelia as the new landlords of the tenants. 25 That Godofredo and Carmen allowed Armando and Adelia to enjoy possession of the Subject Land for 24 years is formidable proof of Godofredo's acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should have filed an action to annul the sale. He did not. The prescriptive period to annul the sale has long lapsed. Godofredo's conduct belies his claim that his wife sold the Subject Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay their debt with the DBP. We agree with the Court of Appeals that the sale redounded to the benefit of the conjugal partnership. Article 161 of the Civil Code provides that the conjugal partnership shall be liable for debts and obligations
contracted by the wife for the benefit of the conjugal partnership. Hence, even if Carmen sold the land without the consent of her husband, the sale still binds the conjugal partnership. Petitioners contend that Godofredo and Carmen did not deliver the title of the Subject Land to Armando and Adelia as shown by this portion of Adelia's testimony on cross-examination: QNo title was delivered to you by Godofredo Alfredo? AI got the title from Julie Limon because my sister told me. 26 Petitioners raise this factual issue for the first time. The Court of Appeals could have passed upon this issue had petitioners raised this earlier. At any rate, the cited testimony of Adelia does not convincingly prove that Godofredo and Carmen did not deliver the Subject Land to Armando and Adelia. Adelia's cited testimony must be examined in context not only with her entire testimony but also with the other circumstances. Adelia stated during cross-examination that she obtained the title of the Subject Land from Julie Limon ("Julie"), her classmate in college and the sister of Carmen. Earlier, Adelia's own sister had secured the title from the father of Carmen. However, Adelia's sister, who was about to leave for the United States, gave the title to Julie because of the absence of the other documents. Adelia's sister told Adelia to secure the title from Julie, and this was how Adelia obtained the title from Julie. It is not necessary that the seller himself deliver the title of the property to the buyer because the thing sold is understood as delivered when it is placed in the control and possession of the vendee. 27 To repeat, Godofredo and Carmen themselves introduced the Natanawans, their tenants, to Armando and Adelia as the new owners of the Subject Land. From then on, Armando and Adelia acted as the landlords of the Natanawans. Obviously, Godofredo and Carmen themselves placed control and possession of the Subject Land in the hands of Armando and Adelia. Petitioners involve the absence of approval of the sale by the Secretary of Agriculture and Natural Resources to nullify the sale. Petitioners never raised this issue before the trial court or the Court of Appeals. Litigants cannot raise an issue for the first time on appeal, as this would contravene the basic rules of fair play, justice and due process. 28 However, we will address this new issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary did not approve the sale, which was made within 25 years from the issuance of the homestead title. Section 118 of the Public Land Act (Commonwealth Act No. 141) reads as follows: SEC. 118.Except in favor of the Government or any of its branches, units, institutions or legally constituted banking corporation, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of the issuance of the patent or grant. xxx xxx xxx No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five years after the issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal grounds. A grantee or homesteader is prohibited from alienating to a private individual a land grant within five years from the time that the patent or grant is issued. 29 A violation of this prohibition renders a sale void. 30 This prohibition, however, expires on the fifth year. From then on until the next 20 years 31 the land grant may be alienated provided the Secretary of Agriculture and Natural Resources approves the alienation. The Secretary is required to approve the alienation unless there are "constitutional and legal grounds" to deny the approval. In this case, there are no apparent constitutional or legal grounds for the Secretary to disapprove the sale of the Subject Land. The failure to secure the approval of the Secretary does not ipso facto make a sale void. 32 The absence of approval by the Secretary does not nullify a sale made after the expiration of the 5-year period, for in such event the requirement of Section 118 of the Public Land Act becomes merely directory 33 or a formality. 34 The approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale had been previously authorized.35 As held in Evangelista v. Montano: 36 Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the approval by the Department Secretary "shall not be denied except on constitutional and legal grounds." There being no allegation that there were constitutional or legal impediments to the sales, and no pretense that if the sales had been submitted to the Secretary concerned they would have been disapproved, approval was a ministerial duty, to be had as a matter of course and demandable if refused. For this reason, and
if necessary, approval may now be applied for and its effect will be to ratify and adopt the transactions as if they had been previously authorized. (Emphasis supplied) aIcETS
. . . It must be remembered that before August 30, 1950, the date of the effectivity of the new Civil Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It provided: SEC. 43.Other civil actions; how limited. Civil actions other than for the recovery of real property can only be brought within the following periods after the right of action accrues: xxx xxx xxx 3.Within four years: . . . An action for relief on the ground of fraud, but the right of action in such case shall not be deemed to have accrued until the discovery of the fraud; xxx xxx xxx In contrast, under the present Civil Code, we find that just as an implied or constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey the property and the title thereto in favor of the true owner. In this context, and vis-a-vis prescription, Article 1144 of the Civil Code is applicable. Article 1144. The following actions must be brought within ten years from the time the right of action accrues: (1)Upon a written contract; (2)Upon an obligation created by law; (3)Upon a judgment. xxx xxx xxx (Italics supplied).
Action Not Barred by Prescription and Laches

Petitioners insist that prescription and laches have set in. We disagree. The Amended Complaint filed by Armando and Adelia with the trial court is captioned as one for Specific Performance. In reality, the ultimate relief sought by Armando and Adelia is the reconveyance to them of the Subject Land. An action for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its rightful and legal owner. 37 The body of the pleading or complaint determines the nature of an action, not its title or heading. 38Thus, the present action should be treated as one for reconveyance. 39 Article 1456 of the Civil Code provides that a person acquiring property through fraud becomes by operation of law a trustee of an implied trust for the benefit of the real owner of the property. The presence of fraud in this case created an implied trust in favor of Armando and Adelia. This gives Armando and Adelia the right to seek reconveyance of the property from the Subsequent Buyers. 40 To determine when the prescriptive period commenced in an action for reconveyance, plaintiff's possession of the disputed property is material. An action for reconveyance based on an implied trust prescribes in ten years. 41 The ten-year prescriptive period applies only if there is an actual need to reconvey the property as when the plaintiff is not in possession of the property. 42 However, if the plaintiff, as the real owner of the property also remains in possession of the property, the prescriptive period to recover title and possession of the property does not run against him. 43 In such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit for quieting of title, an action that is imprescriptible. 44 In this case, the appellate court resolved the issue of prescription by ruling that the action should prescribe four years from discovery of the fraud. We must correct this erroneous application of the fouryear prescriptive period. In Caro v. Court of Appeals, 45 we explained why an action for reconveyance based on an implied trust should prescribe in ten years. In that case, the appellate court also erroneously applied the four-year prescriptive period. We declared inCaro: We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261, September 30, 1987, 154 SCRA 396 illuminated what used to be a gray area on the prescriptive period for an action to reconvey the title to real property and, corollarily, its point of reference:
An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this
Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now
well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin vs. Medalla which states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence Section
43(3) of Act No. 190, was applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned earlier. It must be stressed, at this juncture, that Article 1144 and Article 1456, are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real property acquired under false pretenses.
Following Caro, we have consistently held that an action for reconveyance based on an implied trust prescribes in ten years. 47 We went further by specifying the reference point of the ten-year prescriptive period as the date of the registration of the deed or the issuance of the title. 48 Had Armando and Adelia remained in possession of the Subject Land, their action for reconveyance, in effect an action to quiet title to property, would not be subject to prescription. Prescription does not run against the plaintiff in actual possession of the disputed land because such plaintiff has a right to wait until his possession is disturbed or his title is questioned before initiating an action to vindicate his right. 49 His undisturbed possession gives him the continuing right to seek the aid of a court of equity to determine the nature of the adverse claim of a third party and its effect on his title. 50 Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly drove away from the Subject Land the Natanawans, the tenants of Armando and Adelia. 51 This created an actual need for Armando and Adelia to seek reconveyance of the Subject Land. The statute of limitation becomes relevant in this case. The ten-year prescriptive period started to run from the date the Subsequent Buyers registered their deeds of sale with the Register of Deeds. The Subsequent Buyers bought the subdivided portions of the Subject Land on 22 February 1994, the date of execution of their deeds of sale. The Register of Deeds issued the transfer certificates of title to the Subsequent Buyers on 24 February 1994. Armando and Adelia filed the Complaint on 7 March 1994. Clearly, prescription could not have set in since the case was filed at the early stage of the ten-year prescriptive period. Neither is the action barred by laches. We have defined laches as the failure or neglect, for an unreasonable time, to do that which, by the exercise of due diligence, could or should have been done earlier. 52 It is negligence or omission, to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it. 53 Armando and Adelia discovered in January 1994 the subsequent sale of the Subject Land and they filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No. 1529, which provides: In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on the original petition or application, . . . This provision should be read in conjunction with Article 1456 of the Civil Code, which provides: CIDTcH Article 1456.If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. The law thereby creates the obligation of the trustee to reconvey the property and the title thereto in favor of the true owner. Correlating Section 53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently registered real property is ten (10) years reckoned from the date of the issuance of the certificate of title . . . (Emphasis supplied) 46
Validity of Subsequent Sale of Portions of the Subject Land

Petitioners maintain that the subsequent sale must be upheld because the Subsequent Buyers, the copetitioners of Godofredo and Carmen, purchased and registered the Subject Land in good faith. Petitioners argue that the testimony of Calonso, the person who brokered the second sale, should not prejudice the Subsequent Buyers. There is no evidence that Calonso was the agent of the Subsequent Buyers and that she communicated to them what she knew about the adverse claim and the prior sale. Petitioners assert
that the adverse claim registered by Armando and Adelia has no legal basis to render defective the transfer of title to the Subsequent Buyers. We are not persuaded. Godofredo and Carmen had already sold the Subject Land to Armando and Adelia. The settled rule is when ownership or title passes to the buyer, the seller ceases to have any title to transfer to any third person. 54 If the seller sells the same land to another, the second buyer who has actual or constructive knowledge of the prior sale cannot be a registrant in good faith. 55 Such second buyer cannot defeat the first buyer's title. 56 In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. 57 Thus, to merit protection under the second paragraph of Article 1544 58 of the Civil Code, the second buyer must act in good faith in registering the deed. 59In this case, the Subsequent Buyers' good faith hinges on whether they had knowledge of the previous sale. Petitioners do not dispute that Armando and Adelia registered their adverse claim with the Registry of Deeds of Bataan on 8 February 1994. The Subsequent Buyers purchased their respective lots only on 22 February 1994 as shown by the date of their deeds of sale. Consequently, the adverse claim registered prior to the second sale charged the Subsequent Buyers with constructive notice of the defect in the title of the sellers, 60 Godofredo and Carmen. It is immaterial whether Calonso, the broker of the second sale, communicated to the Subsequent Buyers the existence of the adverse claim. The registration of the adverse claim on 8 February 1994 constituted, by operation of law, notice to the whole world. 61 From that date onwards, the Subsequent Buyers were deemed to have constructive notice of the adverse claim of Armando and Adelia. When the Subsequent Buyers purchased portions of the Subject Land on 22 February 1994, they already had constructive notice of the adverse claim registered earlier. 62 Thus, the Subsequent Buyers were not buyers in good faith when they purchased their lots on 22 February 1994. They were also not registrants in good faith when they registered their deeds of sale with the Registry of Deeds on 24 February 1994. The Subsequent Buyers' individual titles to their respective lots are not absolutely indefeasible. The defense of indefeasibility of the Torrens Title does not extend to a transferee who takes the certificate of title with notice of a flaw in his title. 63 The principle of indefeasibility of title does not apply where fraud attended the issuance of the titles as in this case. 64
were not for petitioners' unjustified refusal to heed the just and valid demands of Armando and Adelia, the latter would not have been compelled to file this action. The Court of Appeals echoed the trial court's condemnation of petitioners' fraudulent maneuverings in securing the second sale of the Subject Land to the Subsequent Buyers. We will also not turn a blind eye on petitioners' brazen tactics. Thus, we uphold the treble costs imposed by the Court of Appeals on petitioners. WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. Treble costs against petitioners. SO ORDERED.
Attorney's Fees and Costs

We sustain the award of attorney's fees. The decision of the court must state the grounds for the award of attorney's fees. The trial court complied with this requirement. 65 We agree with the trial court that if it
THIRD DIVISION [G.R. No. 103577. October 7, 1996.] ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents.
the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. 3.ID.; ID.; ID.; SALE OF SUBJECT PROPERTY TO A THIRD PERSON; EFFECTS THEREOF. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. 4.ID.; ID.; CONTRACT OF SALE; INTERPRETATION OF WORDS USED THEREIN SHOULD BE GIVEN ORDINARY MEANING; CASE AT BENCH. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, . . . When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have been a contract to sell because the sellers
Leven S. Puno for petitioners. Perpetuo G. Paner for private respondents.

SYLLABUS 1.CIVIL LAW; SALES; ESSENTIAL ELEMENTS THEREOF. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following: a) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) determinate subject matter; and c) price certain in money or its equivalent. DCScaT 2.ID.; ID.; CONTRACT TO SELL DISTINGUISHED FROM CONDITIONAL CONTRACT OF SALE. Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. . . . In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale,
herein made no express reservation of ownership or title to the subject parcel of land . Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. 5.ID.; ID.; ID.; WHEN RECIPROCAL OBLIGATIONS OF SELLER AND BUYER AROSE IN CASE AT BENCH. On January 19, 1985, as evidenced by the document denominated as "Receipt of Down Payment" (Exh. "A", Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the sellers shall effect the issuance of new certificate of title from that of their father's name to their names. . . . On February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4"). We therefore, hold that, in accordance with Article 1187 . . . the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose, that is, . . . petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. 6.ID.; WILLS AND SUCCESSION; RIGHTS THERETO TRANSMITTED FROM MOMENT OF DECEDENT'S DEATH; CASE AT BENCH. Petitioners also argue there could be no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property. We cannot sustain this argument. Article 774 of the Civil Code defines succession as a mode of transferring ownership as follows: Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law. Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]). 7.ID.; SALES; CONTRACT OF SALE; ESTOPPEL; PETITIONERS PRECLUDED FROM DENYING OWNERSHIP OF SUBJECT PROPERTY AT TIME OF SALE; CASE AT BENCH. Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be
allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. . . . Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time. 8.ID.; ID.; ID.; RESCISSION; PHYSICAL ABSENCE OF BUYER NOT A GROUND THEREFOR IN CASE AT BENCH. Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs ( Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We had stressed time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioners-sellers' act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984]). Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale.
9.ID.; ID.; ID.; ID.; ID.; BUYER NOT CONSIDERED IN DEFAULT IN CASE AT BENCH. Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical
absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, . . . There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. 10.ID.; ID.; DOUBLE SALE; WHEN SECOND BUYER IS ENTITLED TO TITLE OR OWNERSHIP OF PROPERTY. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply. . . . The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer. 11.ID.; ID.; ID.; ID.; CASE AT BENCH. Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner. Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith. We are not persuaded by such argument. In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the property. CAScIH
DECISION
MELO, J p: The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00 The undisputed facts of the case were summarized by respondent court in this wise: On January 19, 1985, defendants-appellants Romulo Coronel, et al. (hereinafter referred to as Coronels) executed a document entitled "Receipt of Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder: RECEIPT OF DOWN PAYMENT P1,240,000.00 Total amount 50,000.00 Down payment P1,190,000.00 Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00. We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in our name, We will immediately execute the deed of absolute sale of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of the P1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following: 1.Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos upon execution of the document aforestated; 2.The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment; 3.Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00) Pesos. On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2"). On February 6, 1985, the property originally registered in the name of the Coronels' father was transferred in their names under TCT No. 327043 (Exh. "D"; Exh. "4") On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. "F-3"; Exh. "6-C") For this reason, Coronels canceled and rescinded the contract (Exh. "A") with Ramona by depositing the down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz. On February 22, 1985, Concepcion, et al., filed a complaint for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5").
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of Deeds of Quezon City (Exh. "F"; Exh. "6"). On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. "G"; Exh. "7"). On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. "H"; Exh. "8"). (Rollo, pp. 134-136) In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary evidence accordingly marked as Exhibits "A" through "J", inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits "1" through "10", likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty (30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit their corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution. On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows: WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are hereby ordered to vacate the subject property and
deliver possession thereof to plaintiffs. Plaintiffs' claim for damages and attorney's fees, as well as the counterclaims of defendants and intervenors are hereby dismissed. No pronouncement as to costs. So Ordered. Macabebe, Pampanga for Quezon City, March 1, 1989. (Rollo, p. 106) A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
the authority to decide the case notwithstanding his transfer to another branch or region of the same court (Sec. 9, Rule 135, Rule of Court). Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not be disturbed. IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the Incumbent Presiding Judge" dated March 20, 1989 is hereby DENIED. SO ORDERED. Quezon City, Philippines, July 12, 1989.
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve such cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is submitted for decision has
(Rollo, pp. 108-109) Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully agreeing with the trial court. Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents' Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the case was last assigned. While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the trial court's decision, we definitely find the instant petition bereft of merit. The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise determination of the legal significance of the document entitled "Receipt of Down Payment" which was offered in evidence by both parties. There is no dispute as to the fact that said document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305.A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. While, it is the position of private respondents that the "Receipt of Down Payment" embodied a perfected contract of sale, which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute sale. Plainly, such variance in the contending parties' contentions is brought about by the way each interprets the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the said document was executed. The Civil Code defines a contract of sale, thus: Art. 1458.By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following: a)Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b)Determinate subject matter; and c)Price certain in money or its equivalent. Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition,
the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective seller's obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: Art. 1479.A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-seller's title per se, but the latter, of course, may be sued for damages by the intending buyer.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they sold their property. When the "Receipt of Down Payment" is considered in its entirety, it becomes more manifest that there was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioner's father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the purchase price. The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale could not have been executed and consummated right there and then. Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property, they undertook to have the certificate of title changed to their names and immediately thereafter, to execute the written deed of absolute sale. Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father, completely willing to transfer full ownership of the subject house and lot to the buyer if the documents were then in order. It just so happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the seller's title thereto. In fact, if there had been previous delivery of the subject property, the seller's ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the seller's title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale. With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered into by petitioners and private respondents. It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended ( Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said "Receipt of Down Payment" that they Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount of P1,240,000.00.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of a contract of absolute sale. What is clearly established by the plain language of the subject document is that when the said "Receipt of Down Payment" was prepared and signed by petitioners Romulo A. Coronel, et al., the parties had agreed to a conditional contract of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners' father, Constancio P. Coronel to their names. The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by the "Receipt of Down Payment." Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus, Art. 1475.The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. Art. 1181.In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners' names was fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that: 3.The petitioners-sellers Coronel bound themselves "to effect the transfer in our names from our deceased father Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-stated." The sale was still subject to this suspensive condition. (Emphasis supplied.) (Rollo, p. 16) Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they contend, continuing in the same paragraph, that: . . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there could be no perfected contract of sale. (Emphasis supplied.) (Ibid.) not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that: Art. 1186.The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. Besides, it should be stressed and emphasized that what is more controlling these mere hypothetical arguments is the fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4"). The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered into a contract of sale subject only to the suspensive condition that the sellers shall effect the issuance of new certificate of title from that of
their father's name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh "4"). We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187.The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation . . . In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been complied with. the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal obligations of both seller and buyer arose.
Be it also noted that petitioners' claim that succession may not be declared unless the creditors have been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property from the decedent's name to their names on February 6, 1985. Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code expressly states that: Art. 1431.Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that they were not yet the absolute owners thereof at that time. Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz, the latter breached her reciprocal obligation when she rendered impossible the consummation thereof by going to the United States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in unilaterally rescinding the contract of sale. We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that these supposed grounds for petitioners' rescission, are mere allegations found only in their responsive pleadings, which by express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners' allegations. We have stressed time and again that allegations must be proven by sufficient evidence ( Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify petitioners-sellers' act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984]).
Petitioners also argue there could be no perfected contract on January 19, 1985 because they were then not yet the absolute owners of the inherited property. We cannot sustain this argument. Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows: Art. 774.Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of the inheritance of a person are transmitted through his death to another or others by his will or by operation of law. Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitioners ever questioned Concepcion's authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind the contract of sale. Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramona's corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in default, to wit: Art. 1169.Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. xxx xxx xxx In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. (Emphasis supplied.) There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents. With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544.If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. 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. 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 record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply. The above-cited provision on double sale presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer. In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court, Justice Jose C. Vitug, explains: The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second sale cannot defeat the first buyer's rights except when the second buyer first registers in good faith the second sale ( Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604). Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith. We are not persuaded by such argument. In a case of double sale, what finds relevance and materiality is not whether or not the second buyer was a buyer in good faith but whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of the property sold. As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same property. Petitioner Mabanag cannot close her eyes to the defect in petitioners' title to the property at the time of the registration of the property.
Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not touch this issue and no longer disturb the lower courts' ruling on this point. WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED. SO ORDERED.
This Court had occasions to rule that: If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same property to a third party or that another person claims said property in a previous sale, the registration will constitute a registration in bad faith and will not confer upon him any right. ( Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.
THIRD DIVISION [G.R. No. 108346. July 11, 2001.]
and forfeiture of payment clauses in the mortgage contract does not apply. Considering that the rescission of the contract was based on Article 1191 of the Civil Code, mutual restitution by the parties is required. SYLLABUS
Spouses MARIANO Z. VELARDE and AVELINA D. VELARDE, petitioners, vs. COURT OF APPEALS, DAVID A. RAYMUNDO and GEORGE RAYMUNDO, respondents.
Marciano J. Cagatan and Mariano R. Logarta for petitioners. M.B. Tomacruz for private respondents.
SYNOPSIS Petitioners entered into a deed of sale with assumption of mortgage with private respondents paying a downpayment of P800,000 and assuming the mortgage amount of P1.8M in favor of BPI. Petitioners further agreed "to strictly and faithfully comply with all the terms and conditions appearing in the real estate mortgage signed and executed by the vendor in favor of BPI . . . as if the same were originally signed and executed by the vendee." As part of the deed, petitioner Avelina with her husband's consent executed an undertaking that during the pendency of the application for the assumption of mortgage she agreed to continue paying said loan in accordance with the mortgage deed and that in the event of violation of any of the terms and conditions of the deed of real estate mortgage, she agreed that the P800,000 downpayment shall be forfeited as liquidated damages and the deed of sale with assumption of mortgage shall be deemed automatically cancelled. When the bank denied the application for assumption of mortgage, petitioners stopped making payments. Thus, notice of cancellation/rescission was sent to petitioners for non-performance of their obligation. Aggrieved, petitioners filed a complaint against private respondent for specific performance, nullity of cancellation, writ of possession and damages. Both parties admitted that their agreement mandated that petitioners should pay the purchase price balance of P1.8M to private respondents in case the request to assume the mortgage would be disapproved. The trial court dismissed the complaint, but on reconsideration, directed the parties to proceed with the sale. On appeal, the Court of Appeals upheld the validity of the rescission. Hence, this recourse. ADCIca The failure of the vendee to pay the balance of the purchase price constitutes a breach on the performance of a reciprocal obligation, and not a violation of the terms and conditions of the mortgage contract. This gave rise to the vendor's right to rescind the contract. However, the automatic rescission
1.CIVIL LAW; SPECIAL CONTRACTS; SALES; CONSTRUED; CASE AT BAR. In a contract of sale, the seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer to pay therefor a price certain in money or its equivalent. Private respondents had already performed their obligation through the execution of the Deed of Sale, which effectively transferred ownership of the property to petitioner through constructive delivery. Prior physical delivery or possession is not legally required, and the execution of the Deed of Sale is deemed equivalent to delivery. 2.ID.; ID.; RESCISSION; OBLIGOR'S FAILURE TO COMPLY WITH EXISTING OBLIGATION. The right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them. The breach contemplated in the said provision is the obligor's failure to comply with an existing obligation. When the obligor cannot comply with what is incumbent upon it, the obligee may seek rescission and, in the absence of any just cause for the court to determine the period of compliance, the court shall decree the rescission. IEHScT 3.ID.; ID.; ID.; ID.; CASE AT BAR. In the present case, private respondents validly exercised their right to rescind the contract, because of the failure of petitioners to comply with their obligation to pay the balance of the purchase price. Indubitably, the latter violated the very essence of reciprocity in the contract of sale, a violation that consequently gave rise to private respondents' right to rescind the same in accordance with law. 4.ID.; ID.; ID.; FORFEITURE OF PAYMENT DOES NOT APPLY WHERE BREACH WAS NON-PERFORMANCE; MUTUAL RESTITUTION, REQUIRED. As discussed earlier, the breach committed by petitioners was the nonperformance of a reciprocal obligation, not a violation of the terms and conditions of the mortgage contract. Therefore, the automatic rescission and forfeiture of payment clauses stipulated in the contract does not apply. Instead, Civil Code provisions shall govern and regulate the resolution of this controversy. Considering that the rescission of the contract is based on Article 1191 of the Civil Code, mutual restitution is required to bring back the parties to their original situation prior to the inception of the contract. Accordingly, the initial payment of P800,000 and the corresponding mortgage payments in the amounts of P27,225, P23,000 and P23,925 (totaling P874,150.00) advanced by petitioners should be returned by private respondents, lest the latter unjustly enrich themselves at the expense of the former.
5.ID.; ID.; ID.; OBLIGATION CREATED. Rescission creates the obligation to return the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. To rescind is to declare a contract void at its inception and to put an end to it as though it never was. It is not merely to terminate it and release the parties from further obligations to each other, but to abrogate it from the beginning and restore the parties to their relative positions as if no contract has been made. IDAEHT
located at 1918 Kamias St., Dasmarias Village, Makati and covered by TCT No. 142177. Defendant George Raymundo [herein private respondent] is David's father who negotiated with plaintiffs Avelina and Mariano Velarde [herein petitioners] for the sale of said property, which was, however, under lease (Exh. '6', p. 232, Record of Civil Case No. 15952). "On August 8, 1986, a Deed of Sale with Assumption of Mortgage (Exh. 'A'; Exh. '1', pp. 11-12, Record) was executed by defendant David Raymundo, as vendor, in favor of plaintiff Avelina Velarde, as vendee, with the following terms and conditions: 'xxx xxx xxx
DECISION
PANGANIBAN, J p: A substantial breach of a reciprocal obligation, like failure to pay the price in the manner prescribed by the contract, entitles the injured party to rescind the obligation. Rescission abrogates the contract from its inception and requires a mutual restitution of benefits received.
The Case
Before us is a Petition for Review on Certiorari 1 questioning the Decision 2 of the Court of Appeals (CA) in CA-GR CV No. 32991 dated October 9, 1992, as well as its Resolution 3 dated December 29, 1992 denying petitioner's motion for reconsideration. 4 The dispositive portion of the assailed Decision reads: "WHEREFORE, the Order dated May 15, 1991 is hereby ANNULLED and SET ASIDE and the Decision dated November 14, 1990 dismissing the [C]omplaint is REINSTATED. The bonds posted by plaintiffs-appellees and defendants-appellants are hereby RELEASED." 5
'That for and in consideration of the amount of EIGHT HUNDRED THOUSAND PESOS (P800,000.00), Philippine currency, receipt of which in full is hereby acknowledged by the VENDOR from the VENDEE, to his entire and complete satisfaction, by these presents the VENDOR hereby SELLS, CEDES, TRANSFERS, CONVEYS AND DELIVERS, freely and voluntarily, with full warranty of a legal and valid title as provided by law, unto the VENDEE, her heirs, successors and assigns, the parcel of land mentioned and described above, together with the house and other improvements thereon. 'That the aforesaid parcel of land, together with the house and other improvements thereon, were mortgaged by the VENDOR to the BANK OF THE PHILIPPINE ISLANDS, Makati, Metro Manila, to secure the payment of a loan of ONE MILLION EIGHT HUNDRED THOUSAND PESOS (P1,800,000.00), Philippine currency, as evidenced by a Real Estate Mortgage signed and executed by the VENDOR in favor of the said Bank of the Philippine Islands, on _________ and which Real Estate Mortgage was ratified before Notary Public for Makati, _________, as Doc. No. _____, Page No. ____, Book No. ____, Series of 1986 of his Notarial Register. 'That as part of the consideration of this sale, the VENDEE hereby assumes to pay the mortgage obligations on the property herein sold in the amount of ONE MILLION EIGHT HUNDRED THOUSAND PESOS (P1,800,000.00), Philippine currency, in favor of Bank of the Philippine Islands, in the name of the VENDOR, and further agrees to strictly and faithfully comply with all the terms and conditions appearing in the Real Estate Mortgage signed and executed by the
The Facts
The factual antecedents of the case, as found by the CA, are as follows: " . . .. David Raymundo [herein private respondent] is the absolute and registered owner of a parcel of land, together with the house and other improvements thereon,
VENDOR in favor of BPI, including interests and other charges for late payment levied by the Bank, as if the same were originally signed and executed by the VENDEE. 'It is further agreed and understood by the parties herein that the capital gains tax and documentary stamps on the sale shall be for the account of the VENDOR; whereas, the registration fees and transfer tax thereon shall be for the account of the VENDEE.' (Exh. 'A', pp. 11-12, Record).' "On the same date, and as part of the above-document, plaintiff Avelina Velarde, with the consent of her husband, Mariano, executed an Undertaking (Exh. 'C', pp. 13-14, Record). the pertinent Portions of which read, as follows: 'xxx xxx xxx 'Whereas, as per Deed of Sale with Assumption of Mortgage, I paid Mr. David A. Raymundo the sum of EIGHT HUNDRED THOUSAND PESOS (P800,000.00), Philippine currency, and assume the mortgage obligations on the property with the Bank of the Philippine Islands in the amount of ONE MILLION EIGHT HUNDRED THOUSAND PESOS (P1,800,000.00), Philippine currency, in accordance with the terms and conditions of the Deed of Real Estate Mortgage dated _________, signed and executed by Mr. David A. Raymundo with the said Bank, acknowledged before Notary Public for Makati, ______, as Doc. No. ___, Page No. ____, Book No. _____, Series of 1986 of his Notarial Register.
'NOW, THEREFORE, for and in consideration of the foregoing premises, and the assumption of the mortgage obligations of ONE MILLION EIGHT HUNDRED THOUSAND PESOS (P1,800,000.00), Philippine currency, with the Bank of the Philippine islands, I, Mrs. Avelina D. Velarde, with the consent of my husband, Mariano Z. Velarde, do hereby bind and obligate myself, my heirs, successors and assigns, to strictly and faithfully comply with the following terms and conditions: '1.That until such time as my assumption of the mortgage obligations on the property purchased is approved by the mortgagee bank, the Bank of the Philippine Islands, I shall continue to pay the said loan in accordance with the terms and conditions of the Deed of Real Estate Mortgage in the name of Mr. David A. Raymundo, the original Mortgagor. '2.That, in the event I violate any of the terms and conditions of the said Deed of Real Estate Mortgage, I hereby agree that my downpayment of P800,000.00, plus all payments made with the Bank of the Philippine Islands on the mortgage loan, shall be forfeited in favor of Mr. David A. Raymundo, as and by way of liquidated damages, without necessity of notice or any judicial declaration to that effect, and Mr. David A. Raymundo shall resume total and complete ownership and possession of the property sold by way of Deed of Sale with Assumption of Mortgage, and the same shall be deemed automatically cancelled and be of no further force or effect, in the same manner as if (the) same had never been executed or entered into. '3.That I am executing this Undertaking for purposes of binding myself, my heirs, successors and assigns, to strictly and faithfully comply with the terms and conditions of the mortgage obligations with the Bank of the Philippine Islands, and the covenants, stipulations and provisions of this Undertaking. 'That, David A. Raymundo, the vendor of the property mentioned and identified above, [does] hereby confirm and agree to the undertakings of the Vendee pertinent to the assumption of the mortgage obligations by the Vendee with the Bank of the Philippine Islands. (Exh. 'C', pp. 13-14, Record).' "This undertaking was signed by Avelina and Mariano Velarde and David Raymundo.
'WHEREAS, while my application for the assumption of the mortgage obligations on the property is not yet approved by the mortgagee Bank, I have agreed to pay the mortgage obligations on the property with the Bank in the name of Mr. David A. Raymundo, in accordance with the terms and conditions of the said Deed of Real Estate Mortgage, including all interests and other charges for late payment. 'WHEREAS, this undertaking is being executed in favor of Mr. David A. Raymundo, for purposes of attesting and confirming our private understanding concerning the said mortgage obligations to be assumed. cCEAHT
"It appears that the negotiated terms for the payment of the balance of P1.8 million was from the proceeds of a loan that plaintiffs were to secure from a bank with defendant's help. Defendants had a standing approved credit line with the Bank of the Philippine Islands (BPI). The parties agreed to avail of this, subject to BPI's approval of an application for assumption of mortgage by plaintiffs. Pending BPI's approval o[f] the application, plaintiffs were to continue paying the monthly interests of the loan secured by a real estate mortgage. "Pursuant to said agreements, plaintiffs paid BPI the monthly interest on the loan secured by the aforementioned mortgage for three (3) months as follows: September 19, 1986 at P27,225.00; October 20, 1986 at P23,000.00; and November 19, 1986 at P23,925.00 (Exh. 'E', 'H' & 'J', pp. 15, 17 and 18, Record). "On December 15, 1986, plaintiffs were advised that the Application for Assumption of Mortgage with BPI was not approved (Exh. 'J', p. 133, Record). This prompted plaintiffs not to make any further payment. "On January 5, 1987, defendants, thru counsel, wrote plaintiffs informing the latter that their non-payment to the mortgage bank constitute[d] non-performance of their obligation (Exh. '3', p. 220, Record). "In a Letter dated January 7, 1987, plaintiffs, thru counsel, responded, as follows: 'This is to advise you, therefore, that our client is willing to pay the balance in cash not later than January 21, 1987 provided: (a) you deliver actual possession of the property to her not later than January 15, 1987 for her immediate occupancy; (b) you cause the release of title and mortgage from the Bank of P.I. and make the title available and free from any liens and encumbrances; and (c) you execute an absolute deed of sale in her favor free from any liens or encumbrances not later than January 21, 1987.' (Exhs. 'K', '4', p. 223, Record). "On January 8, 1987, defendants sent plaintiffs a notarial notice of cancellation/rescission of the intended sale of the subject property allegedly due to the latter's failure to comply with the terms and conditions of the Deed of Sale with Assumption of Mortgage and the Undertaking (Exh. '5', pp. 225-226, Record)." ' 6
Consequently, petitioners filed on February 9, 1987 a Complaint against private respondents for specific performance, nullity of cancellation, writ of possession and damages. This was docketed as Civil Case No. 15952 at the Regional Trial Court of Makati, Branch 149. The case was tried and heard by then Judge Consuelo Ynares-Santiago (now an associate justice of this Court), who dismissed the Complaint in a Decision dated November 14, 1990. 7Thereafter, petitioners filed a Motion for Reconsideration. 8 Meanwhile, then Judge Ynares-Santiago was promoted to the Court of Appeals and Judge Salvador S. A. Abad Santos was assigned to the sala she vacated. In an Order dated May 15, 1991, 9 Judge Abad Santos granted petitioners' Motion for Reconsideration and directed the parties to proceed with the sale. He instructed petitioners to pay the balance of P1.8 million to private respondents who, in turn, were ordered to execute a deed of absolute sale and to surrender possession of the disputed property to petitioners. Private respondents appealed to the CA.
Ruling of the Court of Appeals

The CA set aside the Order of Judge Abad Santos and reinstated then Judge Ynares-Santiago's earlier Decision dismissing petitioners' Complaint. Upholding the validity of the rescission made by private respondents, the CA explained its ruling in this wise: "In the Deed of Sale with Assumption of Mortgage, it was stipulated that 'as part of the consideration of this sale, the VENDEE (Velarde)' would assume to pay the mortgage obligation on the subject property in the amount of P1.8 million in favor of BPI in the name of the Vendor (Raymundo). Since the price to be paid by the Vendee Velarde includes the downpayment of P800,000.00 and the balance of P1.8 million, and the balance of P1.8 million cannot be paid in cash, Vendee Velarde, as part of the consideration of the sale, had to assume the mortgage obligation on the subject property. In other words, the assumption of the mortgage obligation is part of the obligation of Velarde, as vendee, under the contract. Velarde further agreed 'to strictly and faithfully comply with all the terms and conditions appearing in the Real Estate Mortgage signed and executed by the VENDOR in favor of BPI . . . as if the same were originally signed and executed by the Vendee.' (p. 2, thereof, p. 12, Record). This was reiterated by Velarde in the document entitled 'Undertaking' wherein the latter agreed to continue paying said loan in accordance with the terms and conditions of the Deed of Real Estate Mortgage in the name of Raymundo. Moreover, it was stipulated that in the event of violation by Velarde of any terms and conditions of said deed of real estate mortgage, the downpayment of P800,000.00 plus all payments made with BPI or the
mortgage loan would be forfeited and the [D]eed of [S]ale with [A]ssumption of [M]ortgage would thereby be cancelled automatically and of no force and effect (pars. 2 & 3, thereof, pp. 13-14, Record). "From these 2 documents, it is therefore clear that part of the consideration of the sale was the assumption by Velarde of the mortgage obligation of Raymundo in the amount of P1.8 million. This would mean that Velarde had to make payments to BPI under the [D]eed of [R]eal [E]state [M]ortgage in the name of Raymundo. The application with BPI for the approval of the assumption of mortgage would mean that, in case of approval, payment of the mortgage obligation will now be in the name of Velarde. And in the event said application is disapproved, Velarde had to pay in full. This is alleged and admitted in Paragraph 5 of the Complaint. Mariano Velarde likewise admitted this fact during the hearing on September 15, 1997 (p. 47, t.s.n., September 15, 1987; see also pp. 16-26, t.s.n., October 8, 1989). This being the case, the non-payment of the mortgage obligation would result in a violation of the contract. And, upon Velarde's failure to pay the agreed price, the[n] Raymundo may choose either of two (2) actions (1) demand fulfillment of the contract, or (2) demand its rescission (Article 1191, Civil Code). "The disapproval by BPI of the application for assumption of mortgage cannot be used as an excuse for Velarde's non-payment of the balance of the purchase price. As borne out by the evidence, Velarde had to pay in full in case of BPI's disapproval of the application for assumption of mortgage. What Velarde should have done was to pay the balance of P1.8 million. Instead, Velarde sent Raymundo a letter dated January 7, 1987 (Exh. 'K', '4') which was strongly given weight by the lower court in reversing the decision rendered by then Judge Ynares-Santiago. In said letter, Velarde registered their willingness to pay the balance in cash but enumerated 3 new conditions which, to the mind of this Court, would constitute a new undertaking or new agreement which is subject to the consent or approval of Raymundo. These 3 conditions were not among those previously agreed upon by Velarde and Raymundo. These are mere offers or, at most, an attempt to novate. But then again, there can be no novation because there was no agreement of all the parties to the new contract (Garcia, Jr. vs. Court of Appeals, 191 SCRA 493).
further force and effect, as if the same had never been executed or entered into.' While it is true that even if the contract expressly provided for automatic rescission upon failure to pay the price, the vendee may still pay, he may do so only for as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act (Article 1592, Civil Code). In the case at bar, Raymundo sent Velarde a notarial notice dated January 8, 1987 of cancellation/rescission of the contract due to the latter's failure to comply with their obligation. The rescission was justified in view of Velarde's failure to pay the price (balance) which is substantial and fundamental as to defeat the object of the parties in making the agreement. As adverted to above, the agreement of the parties involved a reciprocal obligation wherein the obligation of one is a resolutory condition of the obligation of the other, the non-fulfillment of which entitles the other party to rescind the contract (Songcuan vs. IAC, 191 SCRA 28). Thus, the non-payment of the mortgage obligation by appellees Velarde would create a right to demand payment or to rescind the contract, or to criminal prosecution (Edca Publishing & Distribution Corporation vs. Santos, 184 SCRA 614). Upon appellees' failure, therefore, to pay the balance, the contract was properly rescinded (Ruiz vs. IAC, 184 SCRA 720). Consequently, appellees Velarde having violated the contract, they have lost their right to its enforcement and hence, cannot avail of the action for specific performance (Voysaw vs. Interphil Promotions, Inc., 148 SCRA 635)." 10 Hence, this appeal. 11
The Issues
Petitioners, in their Memorandum, 12 interpose the following assignment of errors: "I The Court of Appeals erred in holding that the non-payment of the mortgage obligation resulted in a breach of the contract. "II The Court of Appeals erred in holding that the rescission (resolution) of the contract by private respondents was justified.
"It was likewise agreed that in case of violation of the mortgage obligation, the Deed of Sale with Assumption of Mortgage would be deemed 'automatically cancelled and of no
"III
The Court of Appeals erred in holding that petitioners' January 7, 1987 letter gave three 'new conditions' constituting mere offers or an attempt to novate necessitating a new agreement between the parties."
Petitioners, on the other hand, did not perform their correlative obligation of paying the contract price in the manner agreed upon. Worse, they wanted private respondents to perform obligations beyond those stipulated in the contract before fulfilling their own obligation to pay the full purchase price. IHcTDA
The Court's Ruling

The Petition is partially meritorious.
Second Issue Validity of the Rescission
First Issue: Breach of Contract

Petitioners aver that their nonpayment of private respondents' mortgage obligation did not constitute a breach of contract, considering that their request to assume the obligation had been disapproved by the mortgagee bank. Accordingly, payment of the monthly amortizations ceased to be their obligation and, instead, it devolved upon private respondents again. However, petitioners did not merely stop paying the mortgage obligations; they also failed to pay the balance of the purchase price. As admitted by both parties, their agreement mandated that petitioners should pay the purchase price balance of P1.8 million to private respondents in case the request to assume the mortgage would be disapproved. Thus, on December 15, 1986, when petitioners received notice of the bank's disapproval of their application to assume respondents' mortgage, they should have paid the balance of the P1.8 million loan. Instead of doing so, petitioners sent a letter to private respondents offering to make such payment only upon the fulfillment of certain conditions not originally agreed upon in the contract of sale. Such conditional offer to pay cannot take the place of actual payment as would discharge the obligation of a buyer under a contract of sale. In a contract of sale, the seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer to pay therefor a price certain in money or its equivalent. 13 Private respondents had already performed their obligation through the execution of the Deed of Sale, which effectively transferred ownership of the property to petitioner through constructive delivery. Prior physical delivery or possession is not legally required, and the execution of the Deed of Sale is deemed equivalent to delivery. 14
Petitioners likewise claim that the rescission of the contract by private respondents was not justified, inasmuch as the former had signified their willingness to pay the balance of the purchase price only a little over a month from the time they were notified of the disapproval of their application for assumption of mortgage. Petitioners also aver that the breach of the contract was not substantial as would warrant a rescission. They cite several cases 15 in which this Court declared that rescission of a contract would not be permitted for a slight or casual breach. Finally, they argue that they have substantially performed their obligation in good faith, considering that they have already made the initial payment of P800,000 and three (3) monthly mortgage payments. As pointed out earlier, the breach committed by petitioners was not so much their nonpayment of the mortgage obligations, as their nonperformance of their reciprocal obligation to pay the purchase price under the contract of sale. Private respondents' right to rescind the contract finds basis in Article 1191 of the Civil Code, which explicitly provides as follows: "ARTICLE 1191.The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission even after he has chosen fulfillment, if the latter should become impossible." The right of rescission of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party who violates the reciprocity between them. 16 The breach contemplated in the said provision is the obligor's failure to comply with an existing obligation. 17 When the obligor cannot comply with what is incumbent upon it, the obligee may seek rescission and, in the absence of any just cause for the court to determine the period of compliance, the court shall decree the rescission. 18 In the present case, private respondents validly exercised their right to rescind the contract, because of the failure of petitioners to comply with their obligation to pay the balance of the purchase price.
Indubitably, the latter violated the very essence of reciprocity in the contract of sale, a violation that consequently gave rise to private respondents' right to rescind the same in accordance with law. True, petitioners expressed their willingness to pay the balance of the purchase price one month after it became due; however, this was not equivalent to actual payment as would constitute a faithful compliance of their reciprocal obligation. Moreover, the offer to pay was conditioned on the performance by private respondents of additional burdens that had not been agreed upon in the original contract. Thus, it cannot be said that the breach committed by petitioners was merely slight or casual as would preclude the exercise of the right to rescind. Misplaced is petitioners' reliance on the cases 19 they cited, because the factual circumstances in those cases are not analogous to those in the present one. In Song Fo there was, on the part of the buyer, only a delay of twenty (20) days to pay for the goods delivered. Moreover, the buyer's offer to pay was unconditional and was accepted by the seller. In Zepeda, the breach involved a mere one-week delay in paying the balance of P1,000, which was actually paid. In Tan, the alleged breach was private respondent's delay of only a few days, which was for the purpose of clearing the title to the property; there was no reference whatsoever to the nonpayment of the contract price. In the instant case, the breach committed did not merely consist of a slight delay in payment or an irregularity; such breach would not normally defeat the intention of the parties to the contract. Here, petitioners not only failed to pay the P1.8 million balance, but they also imposed upon private respondents new obligations as preconditions to the performance of their own obligation. In effect, the qualified offer to pay was a repudiation of an existing obligation, which was legally due and demandable under the contract of sale. Hence, private respondents were left with the legal option of seeking rescission to protect their own interest.
P27,225, P23,000 and P23,925 (totaling P874,150.00) advanced by petitioners should be returned by private respondents, lest the latter unjustly enrich themselves at the expense of the former.
Rescission creates the obligation to return the object of the contract. It can be carried out only when the one who demands rescission can return whatever he may be obliged to restore. 20 To rescind is to declare a contract void at its inception and to put an end to it as though it never was. It is not merely to terminate it and release the parties from further obligations to each other, but to abrogate it. from the beginning and restore the parties to their relative positions as if no contract has been made. 21
Third Issue Attempt to Novate

In view of the foregoing discussion, the Court finds it no longer necessary to discuss the third issue raised by petitioners. Suffice it to say that the three conditions appearing on the January 7, 1987 letter of petitioners to private respondents were not part of the original contract. By that time, it was already incumbent upon the former to pay the balance of the sale price. They had no right to demand preconditions to the fulfillment of their obligation, which had become due. WHEREFORE, the assailed Decision is hereby AFFIRMED with the MODIFICATION that private respondents are ordered to return to petitioners the amount of P874,150, which the latter paid as a consequence of the rescinded contract, with legal interest thereon from January 8, 1987, the date of rescission. No pronouncement as to costs. SO ORDERED.
Mutual Restitution Required in Rescission

As discussed earlier, the breach committed by petitioners was the nonperformance of a reciprocal obligation, not a violation of the terms and conditions of the mortgage contract. Therefore, the automatic rescission and forfeiture of payment clauses stipulated in the contract does not apply. Instead, Civil Code provisions shall govern and regulate the resolution of this controversy. Considering that the rescission of the contract is based on Article 1191 of the Civil Code, mutual restitution is required to bring back the parties to their original situation prior to the inception of the contract. Accordingly, the initial payment of P800,000 and the corresponding mortgage payments in the amounts of
SECOND DIVISION [G.R. No. 120820. August 1, 2000.] SPS. FORTUNATO SANTOS and ROSALINDA R. SANTOS, petitioners, vs. COURT OF APPEALS, SPS. MARIANO R. CASEDA and CARMEN CASEDA, respondents.
P.C. Jose & Associates for petitioners. Felix D. Gragasin for private respondents.
SYNOPSIS Spouses Fortunato and Rosalinda Santos owned a house and lot located at the Better Living Subdivision, Paraaque, Metro Manila. The said house and lot was mortgaged with the Rural Bank of Salinas, Inc. to mature on June 16, 1987. On June 16, 1984, the bank sent to Rosalinda Santos a letter demanding payment of P16,915.84 as an unpaid interest and other charges. Rosalinda then offered to sell the said house and lot to Carmen Caseda. Carmen and her husband agreed to buy the said property. In that same month, Carmen gave a partial payment of P54,100.00 out of the total purchase price of P350,000.00. The parties also agreed that the Caseda spouses must have to pay the balance of the mortgage loan, the real estate taxes, the electric and water bills and the balance of the cash price must have to be paid not later than June 16, 1987. Immediately, the Casedas took possession of the property and rented it to third persons. They also paid in installments P81,696.84 of the mortgage loan. However, they suffered bankruptcy in 1987. Nonetheless, Carmen paid in March 1990 the real estate taxes on the property for 1981-1984 and the electric bills from December 12, 1988 to July 12, 1989. All the payments were still in the name of Rosalinda. In January 1989, seeing that the Casedas lacked the means to pay the amortization of the loan, the Santoses repossessed the property and collected rentals from the tenants. In February 1989, Carmen sold her fishpond in Batangas. She approached the Santoses and offered to pay the balance of the purchase price, but the Santoses wanted a higher price. Hence, the Casedas instituted an action for specific performance and damages. After trial, the trial court dismissed the complaint. On appeal, the Court of Appeals reversed the lower court. The Court ruled that notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property, TCT No. 28005 (S-11029) issued by the Register of Deeds of Paraaque, has remained always in the name of Rosalinda Santos. The bank's cancellation and
discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda Santos. The foregoing circumstances categorically and clearly showed that no valid transfer of ownership was made by the Santoses to the Casedas. Absent this essential element, their agreement cannot be deemed a contract of sale. The Court agreed with petitioners' averment that the agreement between Rosalinda Santos and Carmen Caseda is a contract to sell. In a contract to sell, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase price in a full, they were merely enforcing the contract and not rescinding it. As petitioners correctly pointed out, the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. Petition was GRANTED. SYLLABUS 1.REMEDIAL LAW; APPEAL; QUESTION OF LAW AND QUESTION OF FACT; DIFFERENTIATED. There is a question of law in a given case when the doubt or difference arises as to what the law is on a certain set of facts, and there is a question of fact when the doubt or difference arises as to the truth or falsehood of the alleged facts. 2.ID.; COURT OF APPEALS; JURISDICTION; WHEN QUESTION OF FACT IS INVOLVED, COURT OF APPEALS HAS JURISDICTION. But we note that the first assignment of error submitted by respondents for consideration by the appellate court dealt with the trial court's finding that herein petitioners got back the property in question because respondents did not have the means to pay the installments and/or amortization of the loan. The resolution of this question involved an evaluation of proof, and not only a consideration of the applicable statutory and case laws. Clearly, CA-G.R. CV No. 30955 did not involve pure questions of law, hence the Court of Appeals had jurisdiction and there was no violation of our Circular No. 2-90. CAaDSI 3.ID.; APPEAL; ISSUE OF JURISDICTION MUST BE RAISED AT THE EARLIEST OPPORTUNITY. [W]e find that petitioners took an active part in the proceedings before the Court of Appeals, yet they did not raise there the issue of jurisdiction. They should have raised this issue at the earliest opportunity before the Court of Appeals. A party taking part in the proceedings before the appellate court and submitting his
case for its decision ought not to later on attack the court's decision for want of jurisdiction because the decision turns out to be adverse to him. 4.CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT OF SALE; OBLIGES THE VENDOR TO TRANSFER OWNERSHIP OF THE THING SOLD. It must be emphasized from the outset that a contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. Article 1458 of the Civil Code defines a contract of sale. Note that the said article expressly obliges the vendor to transfer ownership of the thing sold as an essential element of a contract of sale. This is because the transfer of ownership in exchange for a price paid or promised is the very essence of a contract sale. 5.ID.; ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR. We have carefully examined the contents of the unofficial receipt, Exh. D, with the terms and conditions informally agreed upon by the parties, as well as the proofs submitted to support their respective contentions. We are far from persuaded that there was a transfer of ownership simultaneously with the delivery of the property purportedly sold. The records clearly show that, notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property, TCT No. 28005 (S-11029) issued by the Register of Deeds of Paraaque, has remained always in the name of Rosalinda Santos. Note further that although the parties had agreed that the Casedas would assume the mortgage, all amortization payments made by Carmen Caseda to the bank were in the name of Rosalinda Santos. We likewise find that the bank's cancellation and discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda Santos. The foregoing circumstances categorically and clearly show that no valid transfer of ownership was made by the Santoses to Casedas. Absent this essential element, their agreement cannot be deemed a contract of sale. We agree with petitioners' averment that the agreement between Rosalinda Santos and Carmen Caseda is a contract to sell. 6.ID.; ID.; CONTRACT TO SELL; JUDICIAL RESCISSION IS NOT APPLICABLE. In contracts to sell, ownership is reserved by the vendor and is not to pass until full payment of the purchase price. This we find fully applicable and understandable in this case, given that the property involved is a titled realty under mortgage to a bank and would require notarial and other formalities of law before transfer thereof could be validly effected. In view of our findings in the present case that the agreement between the parties is a contract to sell, it follows that the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there was no rescission to speak of in the first place. . . . When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase price in full, they were merely enforcing the contract and not rescinding it. As petitioners correctly point out, the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a
contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property. Neither provision is applicable in the present case. 7.ID.; ID.; CONTRACT TO SELL AND CONTRACT OF SALE; DIFFERENTIATED. [I]n a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. This is entirely different from the situation in a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it.
DECISION
QUISUMBING, J p: For review on certiorari is the decision of the Court of Appeals, dated March 28, 1995, in CA-G.R. CV No. 30955, which reversed and set aside the judgment of the Regional Trial Court of Makati, Branch 133, in Civil Case No. 89-4759. Petitioners (the Santoses) were the owners of a house and lot informally sold, with conditions, to herein private respondents (the Casedas). In the trial court, the Casedas had complained that the Santoses refused to deliver said house and lot despite repeated demands. The trial court dismissed the complaint for specific performance and damages, but in the Court of Appeals, the dismissal was reversed, as follows:
"WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and SET ASIDE and a new one entered:
"1.GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the finality of judgment within which to pay the balance of the obligation in accordance with their agreement; "2.Ordering appellees to restore possession of the subject house and lot to the appellants upon receipt of the full amount of the balance due on the purchase price; and "3.No pronouncement as to costs. "SO ORDERED." 1 The undisputed facts of this case are as follows: The spouses Fortunato and Rosalinda Santos owned the house and lot consisting of 350 square meters located at Lot 7, Block 8, Better Living Subdivision, Paraaque, Metro Manila, as evidenced by TCT (S11029) 28005 of the Register of Deeds of Paraaque. The land together with the house, was mortgaged with the Rural Bank of Salinas, Inc., to secure a loan of P150,000.00 maturing on June 16, 1987. Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of hers in Pasay City and soon became very good friends with her. The duo even became kumadres when Carmen stood as a wedding sponsor of Rosalinda's nephew. On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of P16,915.84 in unpaid interest and other charges. Since the Santos couple had no funds, Rosalinda offered to sell the house and lot to Carmen. After inspecting the real property, Carmen and her husband agreed. Sometime that month of June, Carmen and Rosalinda signed a document, which reads: "Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to the (total) amount of P350,000.00 (house and lot) that is own (sic) by Mrs. Rosalinda R. Santos. (Mrs.) (Sgd.) Carmen H. Caseda direct buyer
Mrs. Carmen Caseda "(Sgd.) Rosalinda Del R. Santos Owner Mrs. Rosalinda R. Santos House and Lot Better Living Subd. Paraaque, Metro Manila Section V Don Bosco St." 2 The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay: (1) the balance of the mortgage loan with the Rural bank amounting to P135,385.18; (2) the real estate taxes; (3) the electric and water bills; and (4) the balance of the cash price to be paid not later than June 16, 1987, which was the maturity date of the loan. 3 The Casedas gave an initial payment of P54,100.00 and immediately took possession of the property, which they then leased out. They also paid in installments, P81,696.84 of the mortgage loan. The Casedas, however, failed to pay the remaining balance of the loan because they suffered bankruptcy in 1987. Notwithstanding the state of their finances, Carmen nonetheless paid in March 1990, the real estate taxes on the property for 1981-1984. She also settled the electric bills from December 12, 1988 to July 12, 1989. All these payments were made in the name of Rosalinda Santos. In January 1989, the Santoses, seeing that the Casedas lacked the means to pay the remaining installments and/or amortization of the loan, repossessed the property. The Santoses then collected the rentals from the tenants. In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approached petitioners and offered to pay the balance of the purchase price for the house and lot. The parties, however, could not agree, and the deal could not push through because the Santoses wanted a higher price. For understandably, the real estate boom in Metro Manila at this time, had considerably jacked up realty values.
On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of Makati, to have the Santoses execute the final deed of conveyance over the property, or in default thereof, to reimburse the amount of P180,000.00 paid in cash and P249,900.00 paid to the rural bank, plus interest, as well as rentals for eight months amounting to P32,000.00, plus damages and costs of suit. After trial on the merits, the lower court disposed of the case as follows: "WHEREFORE, judgment is hereby ordered: (a)dismissing plaintiff's (Casedas') complaint; and (b)declaring the agreement marked as Annex "C" of the complaint rescinded. Costs against plaintiffs. "SO ORDERED." 4 Said judgment of dismissal is mainly based on the trial court's finding that: "Admittedly, the purchase price of the house and lot was P485,385.18, i.e. P350,000.00 as cash payment and P135,385.18, assumption of mortgage. Of it plaintiffs [Casedas] paid the following: (1) P54,100.00 down payment; and (2) P81,694.64 installment payments to the bank on the loan (Exhs. E to E-19) or a total of P135,794.64. Thus, plaintiffs were short of the purchase price. They cannot, therefore, demand specific performance." 5 The trial court further held that the Casedas were not entitled to reimbursement of payments already made, reasoning that: "As earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the purchase price of P485,385.18. The property was in plaintiffs' possession from June 1984 to January 1989 or a period of fifty-five months. During that time, plaintiffs leased the property. Carmen said the property was rented for P25.00 a day or P750.00 a month at the start and in 1987 it was increased to P2,000.00 and P4,000.00 a month. But the evidence is not precise when the different amounts of rental took place. Be that as it may, fairness demands that plaintiffs must pay defendants for the exercise of dominical rights over the property by renting it to others. The amount of P2,000.00 a month would be reasonable based on the average of P750.00, P2,000.00, P4,000.00
lease-rentals charged. Multiply P2,000 by 55 months, the plaintiffs must pay defendants P110,000.00 for the use of the property. Deducting this amount from the P135,794.64 payment of the plaintiffs on the property, the difference is P25,794.64. Should the plaintiffs be entitled to a reimbursement of this amount? The answer is in the negative. Because of failure of plaintiffs to liquidated the mortgage loan on time, it had ballooned from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of December 31, 1988. Defendants [Santoses] had to pay the last amount to the bank to save the property from foreclosure. Logically, plaintiffs must share in the burden arising from their failure to liquidate the loan per their contractual commitment. Hence, the amount of P25,794.64 as their share in the defendants' damages in the form of increased loanamount, is reasonable." 6 On appeal, the appellate court, as earlier noted, reversed the lower court. The appellate court held that rescission was not justified under the circumstances and allowed the Caseda spouses a period of ninety days within which to pay the balance of the agreed purchase price. Hence, this instant petition for review on certiorari filed by the Santoses. Petitioners now submit the following issues for our consideration: WHETHER OR NOT THE COURT OF APPEALS HAS JURISDICTION TO DECIDE PRIVATE RESPONDENT'S APPEAL INTERPOSING PURELY QUESTIONS OF LAW. WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE BUT A MERE ORAL CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND FOR RESCISSION (ART. 1592, 7 CIVIL CODE) IS NOT APPLICABLE. ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED, WHETHER PETITIONERS' DEMAND AND PRAYER FOR RESCISSION CONTAINED IN THEIR ANSWER FILED BEFORE THE TRIAL SATISFIED THE SAID REQUIREMENT. WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE PURCHASE PRICE INCLUDING THE NON-COMPLIANCE WITH THE STIPULATION TO LIQUIDATE THE MORTGAGE LOAN ON TIME WHICH CAUSED GRAVE DAMAGE AND PREJUDICE TO PETITIONERS, CONSTITUTE SUBSTANTIAL BREACH TO JUSTIFY RESCISSION OF A CONTRACT TO SELL UNDER ARTICLE 1191 8 (CIVIL CODE).
On the first issue, petitioners argue that, since both the parties and the appellate court adopted the findings of trial court, 9 no questions of fact were raised before the Court of Appeals. According to petitioners, CA-G.R. CV No. 30955, involved only pure questions of law. They aver that the court a quo had no jurisdiction to hear, much less decide, CA-G.R. CV No. 30955, without running afoul of Supreme Court Circular No. 290 (4) [c]. 10 There is a question of law in a given case when the doubt or difference arises as to how the law is on a certain set of facts, and there is a question of fact when the doubt or difference arises as to the truth or falsehood of the alleged facts. 11 But we note that the first assignment of error submitted by respondents for consideration by the appellate court dealt with the trial court's finding that herein petitioners got back the property in question because respondents did not have the means to pay the installments and/or amortization of the loan. 12 The resolution of this question involved an evaluation of proof, and not only a consideration of the applicable statutory and case laws. Clearly, C.A.-G.R. CV No. 30955 did not involve pure questions of law, hence the Court of Appeals had jurisdiction and there was no violation of our Circular No. 2-90. Moreover, we find that petitioners took an active part in the proceedings before the Court of Appeals, yet they did not raise there the issue of jurisdiction. They should have raised this issue at the earliest opportunity before the Court of Appeals. A party taking part in the proceedings before the appellate court and submitting his case for its decision ought not to later on attack the court's decision for want of jurisdiction because the decision turns out to be adverse to him. 13 The second and third issues deal with the question: Did the Court of Appeals err in holding that a judicial rescission of the agreement was necessary? In resolving both issues, we must first make a preliminary determination of the nature of the contract in question: Was it a contract of sale, as insisted by respondents or a mere contract to sell, as contended by petitioners?
the court a quo with reversible error in holding that petitioners should have judicially rescinded the agreement with respondents when the latter failed to pay the amortizations on the bank loan. Respondents insist that there was a perfected contract of sale, since upon their partial payment of the purchase price, they immediately took possession of the property as vendees, and subsequently leased it, thus exercising all the rights of ownership over the property. This showed that transfer of ownership was simultaneous with the delivery of the realty sold, according to respondents. It must be emphasized from the outset that a contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it. 14 Article 1458 15 of the Civil Code defines a contract of sale. Note that the said article expressly obliges the vendor to transfer ownership of the thing sold as an essential element of a contract of sale. This is because the transfer of ownership in exchange for a price paid or promised is the very essence of a contract of sale. 16 We have carefully examined the contents of the unofficial receipt, Exh. D, with the terms and conditions informally agreed upon by the parties, as well as the proofs submitted to support their respective contentions. We are far from persuaded that there was a transfer of ownership simultaneously with the delivery of the property purportedly sold. The records clearly show that, notwithstanding the fact that the Casedas first took then lost possession of the disputed house and lot, the title to the property, TCT No. 28005 (S11029) issued by the Register of Deeds of Paraaque, has remained always in the name of Rosalinda Santos. 17 Note further that although the parties agreed that the Casedas would assume the mortgage, all amortization payments made by Carmen Caseda to the bank were in the name of Rosalinda Santos. 18 We likewise find that the bank's cancellation and discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda Santos. 19 The foregoing circumstances categorically and clearly show that no valid transfer of ownership was made by the Santoses to the Casedas. Absent this essential element, their agreement cannot be deemed a contract of sale. We agree with petitioner's averment that the agreement between Rosalinda Santos and Carmen Caseda is a contract to sell. In contracts to sell, ownership is reserved the by the vendor and is not to pass until full payment of the purchase price. This we find fully applicable and understandable in this case, given that the property involved is a titled realty under mortgage to a bank and would require notarial and other formalities of law before transfer thereof could be validly effected. In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that the appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there was no rescission to speak of in the first place. As we earlier pointed out, in a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. 20 This is entirely
Petitioners argue that the transaction between them and respondents was a mere contract to sell, and not a contract of sale, since the sole documentary evidence (Exh. D, receipt) referring to their agreement clearly showed that they did not transfer ownership of the property in question simultaneous with its delivery and hence remained its owners, pending fulfillment of the other suspensive conditions, i.e. full payment of the balance of the purchase price and the loan amortizations. Petitioners point to Manuel v. Rodriguez, 109 Phil. 1 (1960) and Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972), where we held that Article 1592 of the Civil Code is inapplicable to a contract to sell. They charge
different from the situation in a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. 21 In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay the purchase price in full, they were merely enforcing the contract and not rescinding it. As petitioners correctly point out, the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. 22 As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property. 23 Neither provision is applicable in the present case. As to the last issue, we need not tarry to make a determination of whether the breach of contract by private respondents is so substantial as to defeat the purpose of the parties in entering into the agreement and thus entitle petitioners to rescission. Having ruled that there is no rescission to speak of in this case, the question is moot. WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court of Appeals in CA-G.R. CV No. 30955 is REVERSED and SET ASIDE. The judgment of the Regional Trial Court of Makati, Branch 133, with respect to the DISMISSAL of the complaint in Civil Case No. 89-4759, is hereby REINSTATED. No pronouncement as to costs. SO ORDERED.
SECOND DIVISION [G.R. No. 95771. March 19, 1993.] LAWRENCE BOWE and CIRILO ARBOLARIO, petitioners, vs. HONORABLE COURT OF APPEALS, and TEODORO R. GARCIA, represented by his son, SERAFIN M. GARCIA, respondents. SYLLABUS 1.CIVIL LAW; SPECIAL CONTRACTS; SALE; CONTRACT TO SELL; DISTINGUISHED FROM CONTRACT OF SALE; CASE AT BAR. Indeed a contract of sale is perfected by mere consent. It is not enough to state, however, that the contract of sale, being consensual, became effective between petitioners and private respondent as of 1982. Such fact is beyond dispute. What is crucial at this point is to ascertain those undertakings which the parties have consented in order to determine the nature of their agreement. According to Lim vs. Court of Appeals, (182 SCRA 564, 570 [1990], citing Sing Yee v. Santos, 47 O.G. 6372 [December, 1951]): ". . . A distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing sold and a contract to sell . . . where by agreement the ownership is reserved in the seller and is not to pass until the full payment of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract." Inevitably, the foregoing distinctions lead to a finding that the verbal agreement between petitioners and private respondent was only a contract to sell, not a contract of sale. A careful examination of the receipts presented by the petitioners shows that only Exhibits "2," "4" and "5" have direct bearing on the agreement of the petitioners and private respondent regarding the disputed properties. Those exhibits reveal that the amounts contained therein are either "downpayments," "deductible from apartment sale" or "an advanced payment of unconsummated sale." Those are the only terms contained in the said exhibits. Nothing more. Prescinding therefrom, there was no immediate transfer of title to petitioners to speak of as would have happened if there had been a sale at the outset. Clearly the absence of formal deed of conveyance strongly indicates that the parties did not intend immediate transfer of title, but only a transfer after full payment of the price. It is unlikely that if the contract were an absolute sale, the petitioners would not have insisted that the same be reduced to writing despite several opportunities to do so. Another thing is that at the time petitioners were delivering the unpaid balance which was allegedly
rejected by private respondent, they simply asked private respondent (Teodoro Garcia) to give back the amounts that had been given as advance payment. This simply goes against the grain of their argument that they are already the owners of the disputed properties. Hence, as payment of the consideration was a positive suspensive condition, title to the subject property never passed to the petitioners. 2.ID.; ID.; ID.; IMPOSES RECIPROCAL OBLIGATION AND SO CANNOT BE TERMINATED UNILATERALLY BY EITHER PARTY. This Court's ruling in Lim v. Court of Appeals, is worth quoting: "It is true that the contract to sell imposes reciprocal obligations and so cannot be terminated unilaterally by either party. Judicial rescission is required under Article 1191 of the Civil Code. However, this rule is not absolute. We have held that in proper cases, a party may take it upon itself to consider the contract rescinded and act accordingly albeit subject to judicial confirmation, which may or may not be given. It is true that the rescinding party takes a risk that its action may not be approved by the court. But as we said in University of the Philippines v. De los Angeles (35 SCRA 102 [1970]): . . . But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages." 3.ID.; ID.; LEASE; IMPLIED NEW LEASE OR TACITA RECONDUCCION; WHEN AVAILABLE; RULE; CASE AT BAR. It is also contended by petitioners that the suit initiated by herein private respondent denominated, as termination of lease with damages and reimbursement of rents, was actually a suit for unlawful detainer. Hence, the Regional Trial Court has no jurisdiction to entertain the same. This contention is also bereft of merit. There is no question that the original lease contract between the parties was only for five (5) years nonetheless petitioners continued occupying the leased premises beyond that date and it was only sometime in October 1984, that Serafin Garcia went to see petitioners for accounting purposes regarding the advance payment made by the latter and informing them at the same that a case will be filed against them. There is no evidence on record that petitioners were served with notice to vacate. This Court will have to determine whether such continued occupancy was with or without the implied acquiescence of private respondent. An implied new lease or tacita reconduccion will set in if it is shown that: (a) the term of the original contract of lease has expired; (b) the lessor has not given the lessee a notice to vacate; and (c) the lessee continued enjoying the thing leased for fifteen days with the acquiescence of the lessor. This acquiescence may be inferred from this failure to serve a notice to quit. In the instant case, there is an implied renewal of the lease contract. As aforementioned, no talks have been held between the lessor and the lessees concerning the renewal of the lease. By the inaction of the lessor, there can be no inference that he intends to discontinue it. In such a case, no less than an express notice to vacate must be made within the statutory 15-day period. Not only was there an absence of notice to vacate but there were also no communications that transpired between the parties regarding the lease.
The earliest communication that has been shown was in October, 1984, definitely way beyond the 15-day statutory period required by law. Considering that there was an implied renewal of lease, there is no unlawful detainer to speak of. The filing of the termination of contract was, therefore, appropriate and clearly the Regional Trial Court has jurisdiction over the case since it is an action involving the title to or possession of real property or any interest therein.
DECISION
payments were also made in installment and private respondents admittedly received the total amount of P66,000.00 8 and it was agreed that the balance will be paid by the petitioners to private respondent upon the latter's (Teodoro Garcia) return to the Philippines when he could execute the deed of absolute sale. 9 After the petitioners' last payment on December 22, 1983 private respondent wrote them a letter informing them that the deal is off 10 and after the expiration of the lease contract on September 1, 1984, private respondent's son Serafin went to petitioners and offered an accounting of the amounts of money they have paid (to compute them as rentals) but the petitioners refused, claiming the they already own the property. 11 Hence, Teodoro Garcia, represented by his son, Serafin Garcia filed a complaint against Laura Arbolario, joined by her husband Cirilo (Carlos) Arbolario before the RTC of Olongapo docketed as Civil Case No. 451-0-84, alleging that the conditions on said contract of lease have been fully satisfied; that petitioner's unjust refusal to vacate the premises after September 1, 1984 has caused actual damages by way of rental from September 2, 1984 up to the time petitioners shall have relinquished the premises; and that defendant's violation of their contractual obligation caused exemplary and moral damages, attorney's fees plus incidental expenses for litigation; and thus prayed for: the termination of the contract of lease as of September 1, 1984; petitioners to reimburse private respondent of all rents received from said 6-door apartment from September 2, 1984 up to the time she shall vacate the premises by virtue of judgment; and petitioners to pay attorney's fee of P10,000.00, miscellaneous expenses of P2,000.00 and moral and exemplary damages. 12
CAMPOS, JR., J p: This is a petition for review on certiorari seeking the reversal of the Decision ** of December 18, 1989 and the Resolution *** of October 23, 1990 of the respondent Court of Appeals in CA-G.R. CV No 17201, entitled "TEODORO R. GARCIA, represented by his son, SERAFIN GARCIA v. LAWRENCE BOWE, ET AL." affirming the decision" of the Regional Trial Court of Olongapo City dated December 17, 1987 in Civil Case No. 451-0-84 for termination of a lease contract with damages and reimbursement of rents. As gathered from the records, the facts of the case are as follows: On June 27, 1979, private respondent (plaintiff below) Teodoro Garcia's wife Luz Garcia, now deceased, as owner and lessor of a two (2)-storey, 6-door apartment building located at No. 2-B Leo St., Lower Kalaklan, Olongapo City entered into a contract of lease 1 covering the same property with Laura Arbolario (now deceased, substituted by her son by previous marriage Lawrence Bowe), 2 for a period of five (5) years starting September 1, 1979 to terminate on September 1, 1984. 3 It was stipulated, among others, that herein petitioners can sublease the premises and collect rentals therefrom and shall start to pay private respondent the amount of P30,000.00 as yearly rental after the indebtedness of private respondent to petitioners in the amount of P75,000.00 is fully and completely paid by private respondent to the petitioners out of the rental received by the latter on said property. 4 Sometime in October of 1982, during the efficacy of the contract of lease, Teodoro Garcia and his son, Serafin Garcia, verbally agreed to sell the disputed house and lot to the spouses Cirilo and Laura Arbolario for a consideration of P220,000.00. 5 Pursuant to said agreement, the first of the downpayments was made on August 18, 1982 6 for P2,600.00. Said receipt was signed by Serafin Garcia in the presence of the petitioners. 7 Succeeding
Petitioners' admit the existence of the contract of lease and assert in defense that in 1982 private respondent agreed to sell to them the house and lot subject of the contract of lease for P220,000.00; that pursuant to said agreement, private respondent or through his children received from petitioners down payments in the total amount of P66,600.00 and it was agreed that the balance will be paid by petitioners to private respondent as soon as the latter returned to the Philippines when he could execute the deed of absolute sale; that petitioners collected rental from tenants thereon and made considerable improvements and repairs on the apartment; that they have a perfect right not to vacate the premises being owners thereof by virtue of the sale; and as counterclaim, petitioners allege that despite the agreement to sell, private respondent refused to accept petitioners' offer and tender of the payment of the additional amount of P153,400.00 which petitioners are willing and able to pay at any time or upon order of the court; and thus praying that the case be dismissed. After hearing the lower court rendered its decision dated December 17, 1987, the dispositive portion of which reads:
"WHEREFORE, from the FOREGOING considerations, this Court hereby renders judgment as follows: 1)Pronouncing the termination of the written and implied Contract of Lease between plaintiff and the defendants; 2)Directing the defendants to vacate the apartment building and land located at No. 2-B Leo Street, (formerly Indiana Street) Lower Kalaklan, Olongapo City, and surrender the same to the plaintiff-owner; 3)Directing the defendants to pay the amount of P6,900.00 representing the balance of the unpaid rentals from September 1979 to September 1984; 4)Directing the defendants to pay plaintiff annual rentals from September 1, 1984 to September 1, 1987, which this Court holds as an implied renewal of their written Contract of Lease at the same yearly rental of P30,000.00 or a total of P90,000.00 and thereafter to pay the amount of P2,500.00 every month from October 1, 1987 up to the time that defendants shall vacate the premises; 5)Directing the defendants to pay the plaintiff the amount of P8,000.00 by way of attorney's fees and costs; and 6)All other contending claims of the parties are hereby DISMISSED." 13 Petitioners appealed the decision of the lower court to the respondent Court of Appeals which affirmed in full 14 the said decision. Hence, this petition. Petitioners assign the following errors:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING AND IN FINDING NO REVERSIBLE ERROR IN THE APPEALED DECISION OF THE TRIAL COURT A QUO BECAUSE: A.IT ERRED IN FINDING THAT THE CONTRACT OF SALE WAS NEVER CONSUMMATED. B.IT ERRED IN FINDING THAT THE CONTRACT OF SALE WAS RESCINDED. C.IT ERRED IN PLACING UNDUE EMPHASIS ON NOVATION OF THE CONTRACT OF LEASE WHEN THE SAME HAS BEEN SUPPLANTED AND/OR ABANDONED. D.IT ERRED IN NOT DISMISSING THE CASE AS AN EJECTMENT CASE EXCLUSIVELY COGNIZABLE BY THE INFERIOR COURT, HENCE, THIS HONORABLE COURT OF APPEALS HAS NO APPELLATE JURISDICTION OVER THE PRESENT CASE. The main issue to be resolved is whether or not the contract of lease has been supplanted and/or abandoned. Petitioners contend that the contract of lease between them and private respondent was already supplanted and/or abandoned in 1982 when their contract of sale, although admittedly verbal, was perfected and partially performed. Consequently, their relationship as lessor and lessee was terminated effectively and ipso facto upon such perfection of their contract of sale. To bolster their contention, petitioners introduced several receipts, Exhibits 1-6, as evidence of their payment in installments. Private respondent, on the other hand, counters that the contract was not one "of sale" but a mere "contract to sell", or at most, a conditional contract of sale. The petition is devoid of merit. Indeed a contract of sale is perfected by mere consent. 15 It is not enough to state, however, that the contract of sale, being consensual, became effective between petitioners and private respondent as of 1982. Such fact is beyond dispute. What is crucial at this point is to ascertain those undertakings which the parties have consented in order to determine the nature of their agreement.
According to Lim vs. Court of Appeals: 16 ". . . A distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing sold and a contract to sell . . . where by agreement the ownership is reserved in the seller and is not to pass until the full payment of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract." Inevitably, the foregoing distinctions lead to a finding that the verbal agreement between petitioners and private respondent was only a contract to sell, not a contract of sale. A careful examination of the receipts 17 presented by the petitioners shows that only Exhibits "2", "4" and "5" have direct bearing on the agreement of the petitioners and private respondent regarding the disputed properties. Those exhibits reveal that the amounts contained therein are either "downpayments", "deductible from apartment sale" or "an advanced payment of unconsummated sale". Those are the only terms contained in the said exhibits. Nothing more. Prescinding therefrom, there was no immediate transfer of title to petitioners to speak of as would have happened if there had been a sale at the outset. 18Clearly the absence of formal deed of conveyance strongly indicates that the parties did not intend immediate transfer of title, but only a transfer after full payment of the price. 19 It is unlikely that if the contract were an absolute sale, the petitioners would not have insisted that the same be reduced to writing despite several opportunities to do so. Another thing is that at the time petitioners were delivering the unpaid balance which was allegedly rejected by private respondent, they simply asked private respondent (Teodoro Garcia) to give back the amounts that had been given as advance payment. 20 This simply goes against the grain of their argument that they are already the owners of the disputed properties. Hence, as payment of the consideration was a positive suspensive condition, title to the subject property never passed to the petitioners. This Court's ruling in Lim v. Court of Appeals, 21 is worth quoting:
"It is true that the contract to sell imposes reciprocal obligations and so cannot be terminated unilaterally by either party. Judicial rescission is required under Article 1191 of the Civil Code. However, this rule is not absolute. We have held that in proper cases, a party may take it upon itself to consider the contract rescinded and act accordingly albeit subject to judicial confirmation, which may or may not be given. It is true that the rescinding party takes a risk that its action may not be approved by the court. But as we said in University of the Philippines v. De los Angeles [35 SCRA 102 (1970)]: xxx xxx xxx . . . But the law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages." It is also contended by petitioners that the suit initiated by herein private respondent denominated, as termination of lease with damages and reimbursement of rents, was actually a suit for unlawful detainer. Hence, the Regional Trial Court has no jurisdiction to entertain the same. This contention is also bereft of merit. There is no question that the original lease contract between the parties was only for five (5) years nonetheless petitioners continued occupying the leased premises beyond that date and it was only sometime in October 1984, that Serafin Garcia went to see petitioners for accounting purposes regarding the advance payment made by the latter and informing them at the same that a case will be filed against them. 22 There is no evidence on record that petitioners were served with notice to vacate. This Court will have to determine whether such continued occupancy was with or without the implied acquiescence of private respondent. An implied new lease or tacita reconduccion will set in if it is shown that: (a) the term of the original contract of lease has expired; (b) the lessor has not given the lessee a notice to vacate; and (c) the lessee continued enjoying the thing leased for fifteen days with the acquiescence of the lessor. This acquiescence may be inferred from this failure to serve a notice to quit. 23
In the instant case, there is an implied renewal of the lease contract. As aforementioned, no talks have been held between the lessor and the lessees concerning the renewal of the lease. By the inaction of the lessor, there can be no inference that he intends to discontinue it. In such a case, no less than an express notice to vacate must be made within the statutory 15-day period. Not only was there an absence of notice to vacate but there were also no communications that transpired between the parties regarding the lease. The earliest communication that has been shown was in October, 1984, definitely way beyond the 15-day statutory period required by law.
Considering that there was an implied renewal of lease, there is no unlawful detainer to speak of. The filing of the termination of contract was, therefore, appropriate and clearly the Regional Trial Court has jurisdiction over the case since it is an action involving the title to or possession of real property or any interest therein. 24 WHEREFORE, the petition is DENIED. The decision and resolution of the respondent Court of Appeals dated December 18, 1989 and October 23, 1990 respectively, are AFFIRMED. Costs against petitioners. SO ORDERED.
FIRST DIVISION [G.R. No. 126376. November 20, 2003.] SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.
petitioners are free to dispose of their properties and the sale of the lots to their siblings does not affect the value of their parents' estate because while the sale of the lots reduced the estate, the cash of equivalent value replaced the lots taken from the estate. The Court also ruled that payment of the price has nothing to do with the perfection of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract, while the latter prevents the existence of a valid contract. In the case at bar, petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. On the issue of inadequacy of the price or consideration, the Court did not disturb the ruling of the trial court that the lots were sold for a valid consideration, and that the respondents-children actually paid the purchase price stipulated in their respective Deeds of Sale. Said factual finding by the trial court is binding on the Court. SYLLABUS 1.REMEDIAL LAW; CIVIL PROCEDURE; PARTIES TO CIVIL ACTIONS; PARTIES IN INTEREST; PETITIONERS DO NOT HAVE LEGAL INTEREST OVER THE PROPERTIES SUBJECT OF THE DEEDS OF SALE; RIGHT TO THEIR PARENTS' PROPERTIES IS MERELY INCHOATE AND VESTS ONLY UPON THEIR PARENTS' DEATH. It is evident from the records that petitioners are interested in the properties subject of the Deeds of Sale, but they have failed to show any legal right to the properties: The trial and appellate courts should have dismissed the action for this reason alone. An action must be prosecuted in the name of the real party-in-interest. Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the appellate court stated, petitioners' right to their parents' properties is merely inchoate and vests only upon their parents' death. While still living, the parents of petitioners are free to dispose of their properties. In their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value of their parents' estate. While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate. 2.CIVIL LAW; SPECIAL CONTRACTS; SALE; A CONSENSUAL CONTRACT; PAYMENT OF THE PRICE HAS NOTHING TO DO WITH THE PERFECTION OF CONTRACT. A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void. Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void. It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract.
Zosimo G. Linato for petitioners. Gregorio M Velasquez for private respondents.

SYNOPSIS Petitioners sought to declare as null and void ab initio certain deeds of sale of real property executed by their parents, respondents Leonardo Joaquin and Feliciana Landrito, in favor of their co-respondentschildren and the corresponding certificates of title issued in their names. They alleged that the sale of the subject properties impaired their legitime and that there was no actual valid consideration for the deeds of sale, and even assuming that there was indeed consideration, the price was grossly inadequate. The trial court ruled in favor of the respondents and dismissed the complaint. The trial court ruled that petitioners had no valid cause of action against respondents since there can be no legitime to speak of prior to the death of their parents. On appeal, the Court of Appeals affirmed the decision of the trial court. The appellate court ruled that petitioners have no legal capacity to challenge the validity of the subject deeds since they are not parties thereto and are not principally or subsidiarily bound thereby. The Supreme Court affirmed the ruling of the Court of Appeals. According to the Court, petitioners do not have any legal interest over the properties subject of the Deeds of Sale. Petitioners' right to their parents' properties is merely inchoate and vests only upon their parents' death. While still living, the parents of
Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. AcDHCS 3.ID.; ID.; ID.; PETITIONERS FAILED TO SHOW THAT THE PRICES IN THE DEEDS OF SALE WERE ABSOLUTELY SIMULATED. Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation, petitioners presented Emma Joaquin Valdoz's testimony stating that their father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price. The trial court did not find the allegation of absolute simulation of price credible. Petitioners' failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings' financial capacity to buy the questioned lots. On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents' minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father. 4.ID.; ID.; ID.; NO REQUIREMENT THAT THE PRICE BE EQUAL TO THE EXACT VALUE OF THE SUBJECT MATTER OF THE SALE. Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave. Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater weight when they coincide with the factual findings of the trial court. This Court will not weigh the evidence all over again unless there has been a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion. In the instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive upon us.
This is a petition for review on certiorari 1 to annul the Decision 2 dated 26 June 1996 of the Court of Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision 3 dated 18 February 1993 rendered by Branch 65 of the Regional Trial Court of Makati ("trial court") in Civil Case No. 89-5174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid consideration and that the plaintiffs did not have a cause of action against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows: Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective spouses. Sought to be declared null and void ab initio, are certain deeds of sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title issued in their names, to wit: 1.Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd256395 executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. "C"), pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. "C-1"); 2.Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd256394 executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. "D"), pursuant to which TCT No. S-109772 was issued in her name (Exh. "D-1"); 3.Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd256394 executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh. "E"), pursuant to which TCT No. 155329 was issued to them (Exh. "E-1");
DECISION
CARPIO, J p:
The Case
4.Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd256394 executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a consideration of P[54,3]00.00 (Exh. "F"), pursuant to which TCT No. 155330 was issued to them (Exh. "F-1"); and 5.Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00 (Exh. "G"), pursuant to which TCT No. 157203 was issued in her name (Exh. "G-1"). [6.Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd256395 executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. "K"), pursuant to which TCT No. 157779 was issued in his name (Exh. "K-1").] In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their complaint, aver: xxx xxx xxx The deeds of sale, Annexes "C," "D," "E," "F," and "G," [and "K"] are simulated as they are, are NULL AND VOID AB INITIO because a)Firstly, there was no actual valid consideration for the deeds of sale . . . over the properties in litis; b)Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the properties are more than three-fold times more valuable than the measly sums appearing therein; c)Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and vendees); and d)Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime.
xxx xxx xxx Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties in litis . . . are NULL AND VOID AB INITIO. Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale; and (3) that the certificates of title were issued with sufficient factual and legal basis. 4 (Emphasis in the original)
The Ruling of the Trial Court

Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino Joaquin and Lea Asis. 5 Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss. 6 In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted that "compulsory heirs have the right to a legitime but such right is contingent since said right commences only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines." 7 After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court stated: In the first place, the testimony of the defendants, particularly that of the . . . father will show that the Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the negative allegation of plaintiffs. And then there is the argument that plaintiffs do not have a valid cause of action against defendants since there can be no legitime to speak of prior to the death of their parents. The court finds this contention tenable. In determining the legitime, the value of the property left at the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.
All the foregoing considered, this case is DISMISSED. In order to preserve whatever is left of the ties that should bind families together, the counterclaim is likewise DISMISSED. No costs. SO ORDERED. 8
is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live." With this posture taken by the Court, consideration of the errors assigned by plaintiffsappellants is inconsequential. WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.
The Ruling of the Court of Appeals

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled: To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether . . . they have a cause of action against appellees. Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely inchoate and vests only upon the latter's death. While still alive, defendant parents are free to dispose of their properties, provided that such dispositions are not made in fraud of creditors. Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be creditors of their defendant parents. Consequently, they cannot be considered as real parties in interest to assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus: The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound thereby; hence, they have no legal capacity to challenge their validity. Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions made by their defendant parents in favor of their defendant brothers and sisters. But, as correctly held by the court a quo, "the legitime of a compulsory heir
SO ORDERED. 9 Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals: 1.THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION HAD NO VALID CONSIDERATION. 2.THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE. 3.THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS THE TRUE INTENT OF THE PARTIES. 4.THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES. 5.THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS. 10
The Ruling of the Court
We find the petition without merit. We will discuss petitioners' legal interest over the properties subject of the Deeds of Sale before discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the Deeds of Sale.
Whether Petitioners have a legal interest over the properties subject of the Deeds of Sale
Petitioners' Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted that the "purported sale of the properties in litis, was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime." Petitioners' strategy was to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to their respondent parents. If their parents die still owning the lots, petitioners and their respondent siblings will then co-own their parents' estate by hereditary succession. 11 It is evident from the records that petitioners are interested in the properties subject of the Deeds of Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should have dismissed the action for this reason alone. An action must be prosecuted in the name of the real party-ininterest. 12 [T]he question as to "real party-in-interest" is whether he is "the party who would be benefited or injured by the judgment, or the 'party entitled to the avails of the suit.'" xxx xxx xxx In actions for the annulment of contracts, such as this action, the real parties are those who are parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to one of the contracting parties and can show the detriment which would positively result to them from the contract even though they did not intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) . . . . These are parties with "a present substantial interest, as distinguished from a mere expectancy or future, contingent, subordinate, or consequential interest. . . . The phrase 'present substantial interest' more concretely is meant such interest of a party in the subject matter of the action as will entitle him, under the substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand and the defendant will be protected in a payment to or recovery by him." 13
Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the appellate court stated, petitioners' right to their parents' properties is merely inchoate and vests only upon their parents' death. While still living, the parents of petitioners are free to dispose of their properties. In their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value of their parents' estate. While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate.
Whether the Deeds of Sale are void for lack of consideration

Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void. A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void. 14 Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void. It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. 15 Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation, petitioners presented Emma Joaquin Valdoz's testimony stating that their father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price. 16 The trial court did not find the allegation of absolute simulation of price credible. Petitioners' failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings' financial capacity to buy the questioned lots. 17 On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents' minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale.
As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father. 18
Whether the Deeds of Sale are void for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to invalidate the Deeds of Sale. Article 1355 of the Civil Code states: Art. 1355.Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied) Article 1470 of the Civil Code further provides: Art. 1470.Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (Emphasis supplied) Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave. As we stated in Vales v. Villa: 19 Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be, in addition, a violation of the law, the commission of what the law knows as anactionable wrong, before the courts are authorized to lay hold of the situation and remedy it. (Emphasis in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater weight when they coincide with the factual findings of the trial court. This Court will not weigh the evidence all over again unless there has been a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion. 20 In the instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive upon us. AcSEHT WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto. SO ORDERED.

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THIRD DIVISION [G.R. No. 166714. February 9, 2007.] AMELIA S. ROBERTS, petitioner, vs. MARTIN B. PAPIO, respondent.

CARPIO, J p: The Case

Validity and Enforceability of the Sale

Action Not Barred by Prescription and Laches

Validity of Subsequent Sale of Portions of the Subject Land

Attorney's Fees and Costs

Leven S. Puno for petitioners. Perpetuo G. Paner for private respondents.

THIRD DIVISION [G.R. No. 108346. July 11, 2001.]

Ruling of the Court of Appeals

The Court's Ruling

Second Issue Validity of the Rescission

First Issue: Breach of Contract

Third Issue Attempt to Novate

Mutual Restitution Required in Rescission

Zosimo G. Linato for petitioners. Gregorio M Velasquez for private respondents.

The Ruling of the Trial Court

The Ruling of the Court of Appeals

SO ORDERED. 9 Hence, the instant petition.

The Ruling of the Court

Whether the Deeds of Sale are void for lack of consideration

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