Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

80058 February 13, 1989 ERNESTO R. ANG and ROSALINDA ANG, petitioners, vs. THE COURT OF APPEALS and LEE CHUY REALTY CORP., respondents. Quisumbing, Torres & Evangelista for petitioners. Victor J. Lee for respondents. GANCAYCO, J.: This is a petition for review on certiorari of the decision of the Court of Appeals dated June 22, 1987 1 reversing the decision of the Regional Trial Court dated June 23, 1983 which dismissed the complaint of private respondent and awarded damages to petitioner. 2 The focus is on the issue of when a breach of contract may warrant its resolution. The antecedents of this case are as follows: Petitioners Ernesto Ang and Rosalinda Ang, brother and sister, are the owners of three (3) parcels of land located at A. Bonifacio St., Balintawak, Quezon City with an aggregate area of 2,096 square meters covered by Transfer Certificates of Title Nos. 258870, 258871 and 258872 which they acquired by purchase from the Cruz family on July 3, 1979 at a price of P680,000.00. 3 Sometime in November 1979, negotiations were undertaken for the sale of the aforementioned properties between the petitioners as sellers and private respondent Lee Chuy Realty Corporation, through its president Henry Lee Chuy as buyer. On December 4, 1979, private respondent issued in favor of petitioners Manila Banking Corporation Check No. 30022695 in the amount of P50,000.00 4 which it transmitted to petitioners together with a receipt supposedly embodying the terms and conditions of their agreement as follows: RECEIVED from LEE CHUY REALTY CORPORATION the sum of FIFTY THOUSAND PESOS (P50,000.00) ONLY, Philippine Currency, per MBTC (sic) Check No. 30022695, as down payment for the sale to it of three (3) parcels of land located at A. Bonifacio, Balintawak, Quezon City, covered by TCT Nos. 258870, 258871, and 258872 of the Registry of Deeds for Metro Manila District II, at the agreed total price of One Million Six Hundred Thousand Pesos (P1,600,000.00), under the following agreement: 1. The sellers hereby undertake to remove and clear the subject property of all occupants and obstruction within this month of December 1979 at their own expenses (sic); 2. Upon the subject property being cleared of occupants and obstruction and ready for turn over to the buyer, the sellers shall forthwith execute and deliver a deed of absolute sale in favor of the buyer together with a tax clearance as to payment of capital gain (sic) tax and such other papers as are necessary for the buyer to register the sale and (the) issuance of the corresponding transfer certificate of title in its name, free from any lien and encumbrance; and simultaneously therewith, the buyer shall pay the sellers the additional sum of Seven Hundred Fifty Thousand 1

Pesos (P750,000.00) to complete payment of fifty per centum (50%) of the price in the amount of Eight hundred Thousand Pesos (P800,000.00) shall be payable by the buyer to the sellers within a period of forty-five (45) days thereafter; 3. The sale carries the usual seller's warranty of peaceful possession and valid title by the buyer. 4. All expenses for the execution and registration of the sale, including lawyer's fees, notarial fees, documentary stamp tax, transfer tax, registration fees, and agent's commission are for the accounts (sic) of the sellers. 5 The check for P50,000.00 was received and thereafter encashed by petitioners. However, the accompanying receipt was not returned by petitioners and instead another receipt prepared and signed by petitioners was forwarded to private respondent. This receipt thus reads: RECEIVED from LEE CHUY REALTY CORPORATION the sum of FIFTY THOUSAND PESOS (P50,000.00), Philippine Currency, per MBTC (Sic) Check No. 30022695 as deposit to sale of three (3) parcels of land located at A. Bonifacio, Balintawak, Quezon City, covered by TCT Nos. 258870, 258871, and 258872 of the Registry of Deeds for Metro Manila District II, in lieu of the agreed price, under the following agreement: 1. The sellers hereby undertake to remove and clear the subject property of all occupants and obstruction within this month of December 1979 at their own expenses (sic); 2. Upon the subject property being cleared of occupants and obstruction and ready for turn over to the buver, the sellers shall forthwith execute and deliver a deed of absolute sale in favor of the buyer together with all pertinent papers necessary for the transfer of the certificate of title in its name, free from any lien and encumbrance and simultaneously therewith, the buyer shall pay the seller 50% of the agreed price minus the deposit of FIFTY THOUSAND PESOS (P 50,000.00) in Philippine Currency and the balance of 50% of the agreed price shall be paid within a period of forty five (45) days with a post dated check; 3. The sale carries the usual seller's warranty of peaceful possession and valid title by the buyer; 4. The agent's commission will be for the account of the sellers; 5. All expenses for the execution and registration of the sale, including lawyer's fees, notarial fees, documentary stamp tax, transfer tax and registration fees will be deducted from the agent's commission. 6 On January 12, 1980, petitioner Rosalinda R. Ang sent private respondent a letter giving the latter up to January 24, 1980 to pay the balance of the purchase price, and informing it that failure to do so will result in the cancellation of their agreement. 7 In reply thereto, private respondent wrote petitioners on January 25, 1980 expressing surprise over the demand for payment made by petitioners since private respondent had been ready since December 1979 to perform its part of the agreement while petitioners had not yet complied with their undertaking to clear the subject properties of the obstructions thereon. 8 On March 3, 1980, private respondent, through its counsel, wrote petitioners demanding the refund of the P 50,000.00 down payment made by private respondent on account of the failure of the petitioners to comply with their undertaking and their subsequent withdrawal from the sale. 9

Upon the failure of the petitioners to return the P50,000.00 down payment, private respondent filed a complaint for the collection of a sum of money with damages before the Court of First Instance (now Regional Trial Court) of Rizal on May 9, 1980. The petitioners sought the dismissal of the complaint. They also filed a counterclaim, praying for actual damages of P20,000.00 a month counted from November 1979 to continue while their deprivation of rental income persists, as well as moral and exemplary damages, plus attorney's fees. After trial where the parties presented only one (1) witness each, the trial court rendered its decision dated June 23, 1983 10 in favor of petitioners and ordered private respondent to pay to petitioners the amounts of P170,000.00 with interest of 12% per annum to commence from the date of the filing of the complaint, P 25,000.00 as exemplary damages and P 20,000.00 as attorney's fees. Both petitioners and private respondent appealed the decision of the trial court. The Court of Appeals held that petitioners were the ones who breached the agreement. In a decision dated June 22, 1987, 11 the appellate court reversed the decision of the trial court and ordered petitioners to pay private respondent the amount of P50,000.00 with legal interest computed from March 3, 1980 plus P 10,000.00 attorney's fees. The motion for reconsideration filed by petitioners was denied by the Court of Appeals in its resolution dated September 18,1987. 12 Hence, this petition for review on certiorari wherein petitioners raise several errors which all boil down to the issue of which party, the petitioners or the private respondent, breached the agreement. Outside of the documentary evidence submitted by the parties, the only evidence available are the testimonies of the two witnesses presented during the trial Henry Lee Chuy, president of respondent corporation, for the plaintiff (herein private respondent) and Ang Kilin alias Tan Tian, father of the petitioner, for the defense which testimonies are diametrically opposed to one another. After a careful examination of the records of the case, this Court rules in favor of the private respondent. There is no doubt that there was a perfected contract for the sale of subject properties between petitioners and private respondent as evidenced by the down payment of P50,000.00. 13 What needs to be resolved is the agreed price for the sale of subject properties. In the receipt prepared by private respondent which was not signed by petitioners, the stated purchase price is P1,600,000.00. However, the receipt signed by petitioners, which substantially reproduced the terms and conditions embodied in the original receipt, did not state the agreed price. Henry Lee Chuy testified that the second receipt did not indicate the agreed price because petitioners wanted to undervalue the price of P1,600,000.00 so that they will not pay a large amount of capital gains tax considering that the prior acquisition price for the property was only P680,000.00. 14 Initially, he refused to agree but upon the assurance of petitioners' father Ang Kilin that the clearing work in the property will be completed in a week or two, he agreed to keep the receipt. On the other hand, Ang Kilin testified that the real price for the sale is P2,340,000.00 and not P1,600,000.00 as claimed by private respondent so that they (the petitioners) did not sign the receipt prepared by the latter. He claimed that it was Mrs. Lee, the mother of Henry Lee Chuy, who did not want to state the correct price since she wanted to undervalue the property. He adds that they have received offers for the properties in the amount of P2,160,000.00 from Dolora Chua, 15 and Pl,300.00 per square meter from Eusebio Chang of the Ching Chua Printing Press. 16 He also testified that inasmuch as the offer of private respondent was made earlier, petitioners were not in a position to negotiate with the other buyers. The respondent Court of Appeals arrived at the conclusion that the petitioner committed a breach of their contract and acted in bad faith in dealing with private respondent. 2

We agree. Petitioners did not offer any plausible explanation as to why Mrs. Lee did not want to state the correct price except that the latter wanted to undervalue the property. The reason why Mrs. Lee wanted to undervalue the property was not clear. On the other hand, Henry Lee Chuy categorically stated that petitioners did not want to state the correct price for purposes of reducing their capital gains tax liability. The Court finds that the latter explanation appears to be the more logical reason why petitioners did not state any specified amount for the agreed price in the receipt they signed. Since petitioners acquired the property for only P680,000.00 and the purchase price of the same was set at P1,600,000.00, they would have been liable to pay quite a large amount of capital gains tax for the profits to be realized from the sale, and even more had the price been set at P2,340,000.00. Moreover, the original receipt prepared by private respondent recites in detail the manner of payment of the balance of the purchase price, to wit: P750,000.00 to be paid after the property is cleared of occupants and obstructions and upon delivery of the deed of absolute sale; and the balance of P800,000.00 to be paid within 45 days thereafter. On the other hand, the receipt prepared and signed by petitioners merely indicates that 50% of the price minus the deposit shall be paid upon delivery of the deed of absolute sale and the other 50% would be paid within 45 days thereafter without stating the price. If the price was really P2,340,000.00 as claimed by petitioners, they could have easily written the amount in the receipt. With or without a lawyer to assist them, petitioners must have been aware of the importance of indicating the correct amount in the receipt since they claim that they did not sign the receipt prepared by private respondent because the price indicated thereon was wrong. Petitioners were the ones who clearly caused the obscurity when they omitted the purchase price in the receipt they prepared and signed. Hence, such obscurity must be construed against them. 17 The claim of the petitioners, which the trial court believed, is that they could no longer accept the offers they have received from Dolora Chua and the Ching Hua Printing Press because of their previous commitment with private respondent. This pretension is not supported by the evidence. The records show that petitioners had entered into an "Agreement of Purchase or Sale" with Dolora Chua on December 3, 1979, 18 or one day before the date of the receipt they signed for the P50,000.00 down payment made by private respondent. Petitioners also argue that the appellate court e"ed when it considered the said document as an agreement and not a mere offer. We have carefully examined the said document and We find no cogent basis to view the same as a mere offer. It is clearly stated in the agreement that petitioners received P20,000.00 from Dolora Chua as down payment for the subject properties with the balance of the purchase price of P2,160,000.00 to be paid in full at the time the land shall have been cleared and that petitioners bind themselves to deliver to the buyer a deed of sale and conveyance upon full payment. The terms of the agreement are so. clear as not to leave room for any other interpretation. 19 The aforementioned agreement further bolsters the conclusion that the price agreed upon by petitioners and private respondent was P1,600,000.00. If the true price was P2,340,000.00, it would be unusual for petitioners to enter into such an agreement with Chua at a lesser purchase price. The only logical conclusion is that petitioners had intentionally omitted the price of P1,600,000.00 in the receipt they signed either to compel private respondent to agree to a price increase or to enable them to back out of their agreement notwithstanding their plan to reduce their capital gains tax liability. Having settled the issue as to the agreed purchase price, We are now faced with the question of who breached the agreement and, as a corollary to this, who has the right to withdraw from the sale. The Court of Appeals found that the petitioners breached the agreement when they failed to undertake fulfillment of the two conditions embodied in the same; (1) that petitioners will undertake to remove and clear the subject property of all occupants and obstructions within the month of December 1979 and (2) that when the subject property is cleared of all occupants and obstructions, the petitioners shall deliver a

deed of absolute sale in favor of private respondent with all pertinent papers necessary for the registration and issuance of a certificate of title in the name of private respondent. Said conclusion of the Court of Appeals that petitioners failed to comply with their part of the agreement is conclusive upon this Court. 20 The appellate court discussed in detail its findings on the matter. We have gone through the records of this case and find no cogent reason to disturb such findings. However, such breach of the agreement by petitioner does not warrant a resolution of the contract. 21 While it is true that in reciprocal obligations, such as the contract of purchase and sale in this case, the power to rescind is implied and any of the contracting parties may, upon non-fulfillment by the other party of his part of the obligation, resolve the contract, 22 rescission wig not be permitted for a slight or casual breach of the contract. Rescission may be had only for such breaches that are so substantial and fundamental as to defeat the object of the parties in making the agreement. 23 The two aforementioned conditions that were breached by petitioners are not essential for the fulfillment of the obligations to sen on their part but merely an incidental undertaking. The rescission of the contract may not be allowed on this ground alone. At any rate, private respondent at first did not seek to rescind the contract on the basis of the nonfulfillment of these conditions. Private respondent in fact sought definite advice from petitioners as to when they can comply with the conditions since it was ready to perform its part of the agreement since December 1979. This was after it received the letter of petitioners demanding payment of the balance of the purchase price on or before January 24, 1980 with the threat that failure to do so will lead to the repudiation of the agreement. Of course, petitioners cannot unilaterally repudiate the contract for the slight delay in payment incurred by private respondent which, even if true, cannot also be a ground for rescission since the same amounts to a slight breach. 24 Indeed, it was the failure of the petitioners to comply with the aforementioned conditions of the agreement that caused the delay in the payment by private respondent. However, when petitioners still failed to comply with their obligation and refused to proceed with the sale unless the purchase price is increased, that was the time private respondent demanded the resolution of the sale by asking for the refund of the downpayment. The Court holds that when petitioners refused to proceed with the sale unless private respondent agreed to pay the higher price of P2,340,000.00, the petitioners thereby committed a serious breach of the agreement. There was a perfected contract of sale between the parties and the purchase price was set at P1,600,000.00. Petitioners cannot increase the purchase price agreed upon without the consent of private respondent. As private respondent was willing to buy the subject property at the price of P1,600,000.00 as agreed upon and petitioners were not willing to sell unless the price is increased to P2,340,000.00, 25 private respondent had the right to rescind the agreement as petitioners committed a serious breach of the terms of the same. Moreover, as the Court of Appeals correctly observed, since petitioners had already sold the subject properties to Dolora Chua, they can no longer perform what was incumbent upon them under the terms of the agreement, that is, to deliver the subject property to private respondent. This is another breach of their agreement. The appellate court aptly characterized the actuations of petitioners to be "doubledealing." As a consequence of the resolution of the contract of sale, the parties should be restored to their original situation. 26 Petitioners should, therefore, be liable to refund the P50,000.00 down payment they have received from private respondent with legal interest computed from the date of the extrajudicial demand made on March 3, 1980. 27 WHEREFORE, the decision of the Court of Appeals dated June 22, 1987 in Case No. CA-GR CV No. 07139 is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. G.R. No. L-116650 May 23, 1995

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

TOYOTA SHAW, INC., petitioner, vs. COURT OF APPEALS and LUNA L. SOSA, respondents. DAVIDE, JR., J.: At the heart of the present controversy is the document marked Exhibit "A" 1 for the private respondent, which was signed by a sales representative of Toyota Shaw, Inc. named Popong Bernardo. The document reads as follows: AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC. 1. all necessary documents will be submitted to TOYOTA SHAW, INC. (POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from the Province (Marinduque) where the unit will be used on the 19th of June. 2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June 15, 1989. 3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m. Was this document, executed and signed by the petitioner's sales representative, a perfected contract of sale, binding upon the petitioner, breach of which would entitle the private respondent to damages and attorney's fees? The trial court and the Court of Appeals took the affirmative view. The petitioner disagrees. Hence, this petition for review oncertiorari. The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are as follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's market and Sosa had difficulty finding a dealer with an available unit for sale. But upon contacting Toyota Shaw, Inc., he was told that there was an available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig, Metro Manila. There they met Popong Bernardo, a sales representative of Toyota. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he, his family, and abalikbayan guest would use it on 18 June 1989 to go to Marinduque, his home province, where he would celebrate his birthday on the 19th of June. He added that if he does not arrive in his hometown with the new car, he would become a "laughing stock." Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo then signed the aforequoted "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by the parties that the balance of the purchase price would be paid by credit financing through B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents of Toyota and B.A. Finance pertaining to the application for financing. 3

The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the downpayment of P100,000.00. They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No. 928, 2 on which Gilbert signed under the subheading CONFORME. This document shows that the customer's name is "MR. LUNA SOSA" with home address at No. 2316 Guijo Street, United Paraaque II; that the model series of the vehicle is a "Lite Ace 1500" described as "4 Dr minibus"; that payment is by "installment," to be financed by "B.A.," 3 with the initial cash outlay of P100,000.00 broken down as follows: a) b) c) downpayment insurance BLT registration fee CHMO fee service fee accessories P 53,148.00 P 13,970.00 P 1,067.00 P 2,715.00 P 500.00 P 29,000.00

Sosa. But even before this answer was made and received by Sosa, the latter filed on 20 November 1989 with Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00. 9 He alleges, inter alia, that: 9. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff, plaintiff suffered embarrassment, humiliation, ridicule, mental anguish and sleepless nights because: (i) he and his family were constrained to take the public transportation from Manila to Lucena City on their way to Marinduque; (ii) his balikbayan-guest canceled his scheduled first visit to Marinduque in order to avoid the inconvenience of taking public transportation; and (iii) his relatives, friends, neighbors and other provincemates, continuously irked him about "his Brand-New Toyota Lite Ace that never was." Under the circumstances, defendant should be made liable to the plaintiff for moral damages in the amount of One Million Pesos (P1,000,000.00). 10 In its answer to the complaint, Toyota alleged that no sale was entered into between it and Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its behalf, and that Bernardo signed Exhibit "A" in his personal capacity. As special and affirmative defenses, it alleged that: the VSP did not state date of delivery; Sosa had not completed the documents required by the financing company, and as a matter of policy, the vehicle could not and would not be released prior to full compliance with financing requirements, submission of all documents, and execution of the sales agreement/invoice; the P100,000.00 was returned to and received by Sosa; the venue was improperly laid; and Sosa did not have a sufficient cause of action against it. It also interposed compulsory counterclaims. After trial on the issues agreed upon during the pre-trial session, 11 the trial court rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid perfected contract of sale between Sosa and Toyota which bound Toyota to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to another the unit already reserved for him. As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A," the trial court held that the extent of Bernardo's authority "was not made known to plaintiff," for as testified to by Quirante, "they do not volunteer any information as to the company's sales policy and guidelines because they are internal matters." 13 Moreover, "[f]rom the beginning of the transaction up to its consummation when the downpayment was made by the plaintiff, the defendants had made known to the plaintiff the impression that Popong Bernardo is an authorized sales executive as it permitted the latter to do acts within the scope of an apparent authority holding him out to the public as possessing power to do these acts." 14 Bernardo then "was an agent of the defendant Toyota Shaw, Inc. and hence bound the defendants." 15 The court further declared that "Luna Sosa proved his social standing in the community and suffered besmirched reputation, wounded feelings and sleepless nights for which he ought to be compensated." 16 Accordingly, it disposed as follows: WHEREFORE, viewed from the above findings, judgment is hereby rendered in favor of the plaintiff and against the defendant: 1. ordering the defendant to pay to the plaintiff the sum of P75,000.00 for moral damages; 2. ordering the defendant to pay the plaintiff the sum of P10,000.00 for exemplary damages;

and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for "Delivery Terms" were not filled-up. It also contains the following pertinent provisions: CONDITIONS OF SALES 1. This sale is subject to availability of unit. 2. Stated Price is subject to change without prior notice, Price prevailing and in effect at time of selling will apply. . . . Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP. On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the vehicle would not be ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latter's office. According to Sosa, Bernardo informed them that the Lite Ace was being readied for delivery. After waiting for about an hour, Bernardo told them that the car could not be delivered because "nasulot ang unit ng ibang malakas." Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit financing application of Sosa. It further alleged that a particular unit had already been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused. After it became clear that the Lite Ace would not be delivered to him, Sosa asked that his downpayment be refunded. Toyota did so on the very same day by issuing a Far East Bank check for the full amount of P100,000.00, 4 the receipt of which was shown by a check voucher of Toyota, 5 which Sosa signed with the reservation, "without prejudice to our future claims for damages." Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and signed by him, he demanded the refund, within five days from receipt, of the downpayment of P100,000.00 plus interest from the time he paid it and the payment of damages with a warning that in case of Toyota's failure to do so he would be constrained to take legal action. 6 The second, dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel, demanded one million pesos representing interest and damages, again, with a warning that legal action would be taken if payment was not made within three days. 7 Toyota's counsel answered through a letter dated 27 November 1989 8 refusing to accede to the demands of 4

3. ordering the defendant to pay the sum of P30,000.00 attorney's fees plus P2,000.00 lawyer's transportation fare per trip in attending to the hearing of this case; 4. ordering the defendant to pay the plaintiff the sum of P2,000.00 transportation fare per trip of the plaintiff in attending the hearing of this case; and 5. ordering the defendant to pay the cost of suit. SO ORDERED. Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. The case was docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July 1994, 17 the Court of Appeals affirmed in toto the appealed decision. Toyota now comes before this Court via this petition and raises the core issue stated at the beginning of the ponenciaand also the following related issues: (a) whether or not the standard VSP was the true and documented understanding of the parties which would have led to the ultimate contract of sale, (b) whether or not Sosa has any legal and demandable right to the delivery of the vehicle despite the nonpayment of the consideration and the non-approval of his credit application by B.A. Finance, (c) whether or not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d) whether or not Toyota may be held liable for damages. We find merit in the petition. Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected contract of sale. Article 1458 of the Civil Code defines a contract of sale as follows: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. and Article 1475 specifically provides when it is deemed perfected: 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. What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. It is not a contract of sale. No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein. The provision on the downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed. But nothing was mentioned about the full purchase price and the manner the installments were to be paid. This Court had already ruled that 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. 18 This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. Definiteness as to the price is an essential element of a binding agreement to sell personal property. 19 5

Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from its title, written in bold letters, viz., AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA SHAW, INC. that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any Toyota vehicle. He knew that Bernardo was only a sales representative of Toyota and hence a mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as an agent 20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. 21 At the most, Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. There are three stages in the contract of sale, namely: (a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties; (b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract. 22 The second phase of the generation or negotiation stage in this case was the execution of the VSP. It must be emphasized that thereunder, the downpayment of the purchase price was P53,148.00 while the balance to be paid on installment should be financed by B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp. was acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP. Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or partnerships, except those regulated by the Central Bank of the Philippines, the Insurance Commission and the Cooperatives Administration Office, which are primarily organized for the purpose of extending credit facilities to consumers and to industrial, commercial, or agricultural enterprises, either by discounting or factoring commercial papers or accounts receivables, or by buying and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of motor vehicles, heavy equipment and industrial machinery, business and office machines and equipment, appliances and other movable property." 23 Accordingly, in a sale on installment basis which is financed by a financing company, three parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on installment, the seller who assigns the notes or discounts them with a financing company, and the financing company which is subrogated in the place of the seller, as the creditor of the installment buyer. 24 Since B.A. Finance did not approve Sosa's application, there was then no meeting of minds on the sale on installment basis. We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's application for which reason it suggested to Sosa that he pay the full purchase price. When the latter refused, Toyota cancelled the VSP and returned to him his P100,000.00. Sosa's version that the VSP was cancelled because, according to Bernardo, the vehicle was delivered to another who was " mas malakas" does not inspire belief and was obviously a delayed afterthought. It is claimed that Bernardo said, " Pasensiya kayo, nasulot ang unit ng ibang malakas," while the Sosas had already been waiting for an hour for the delivery of the vehicle in the afternoon of 17 June 1989. However, in paragraph 7 of his complaint, Sosa solemnly states:

On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales representative, Mr. Popong Bernardo, called plaintiff's house and informed the plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his son went to defendant's office on June 17 1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant for reasons known only to its representatives, refused and/or failed to release the vehicle to the plaintiff. Plaintiff demanded for an explanation, but nothing was given; . . . (Emphasis supplied). 25 The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to him, and its non-delivery did not cause any legally indemnifiable injury. The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal basis. Besides, the only ground upon which Sosa claimed moral damages is that since it was known to his friends, townmates, and relatives that he was buying a Toyota Lite Ace which they expected to see on his birthday, he suffered humiliation, shame, and sleepless nights when the van was not delivered. The van became the subject matter of talks during his celebration that he may not have paid for it, and this created an impression against his business standing and reputation. At the bottom of this claim is nothing but misplaced pride and ego. He should not have announced his plan to buy a Toyota Lite Ace knowing that he might not be able to pay the full purchase price. It was he who brought embarrassment upon himself by bragging about a thing which he did not own yet. Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated, or compensatory damages, he is likewise not entitled to exemplary damages. Under Article 2229 of the Civil Code, exemplary or corrective damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated, or compensatory damages. Also, it is settled that for attorney's fees to be granted, the court must explicitly state in the body of the decision, and not only in the dispositive portion thereof, the legal reason for the award of attorney's fees. 26 No such explicit determination thereon was made in the body of the decision of the trial court. No reason thus exists for such an award. WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CAG.R. CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is DISMISSED. The counterclaim therein is likewise DISMISSED. No pronouncement as to costs. SO ORDERED

.[G.R. No. 126444. December 4, 1998] ALFONSO QUIJADA, CRESENTE QUIJADA, REYNELDA QUIJADA, DEMETRIO QUIJADA, ELIUTERIA QUIJADA, EULALIO QUIJADA, and WARLITO QUIJADA, petitioners, vs. COURT OF APPEALS, REGALADO MONDEJAR, RODULFO GOLORAN, ALBERTO ASIS, SEGUNDINO RAS, ERNESTO GOLORAN, CELSO ABISO, FERNANDO BAUTISTA, ANTONIO MACASERO, and NESTOR MAGUINSAY, respondents. DECISION MARTINEZ, J.: Petitioners, as heirs of the late Trinidad Quijada, filed a complaint against private respondents for quieting of title, recovery of possession and ownership of parcels of land with claim for attorney's fees and damages. The suit was premised on the following facts found by the Court of Appeals, which is materially the same as that found by the trial court: "Plaintiffs-appellees (petitioners) are the children of the late Trinidad Corvera Vda. de Quijada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from the latter the two-hectare parcel of land subject of the case, situated in the barrio of San Agustin, Talacogon, Agusan del Sur. On April 5, 1956, Trinidad Quijada together with her sisters Leonila Corvera Vda. de Sequea and Paz Corvera Cabiltes and brother Epapiadito Corvera executed a conditional deed of donation (Exh. C) of the two-hectare parcel of land subject of the case in favor of the Municipality of Talacogon, the condition being that the parcel of land shall be used solely and exclusively as part of the campus of the proposed provincial high school in Talacogon. Apparently, Trinidad remained in possession of the parcel of land despite the donation. On July 29, 1962, Trinidad sold one (1) hectare of the subject parcel of land to defendantappellant Regalado Mondejar (Exh. 1). Subsequently, Trinidad verbally sold the remaining one (1) hectare to defendant-appellant (respondent) Regalado Mondejar without the benefit of a written deed of sale and evidenced solely by receipts of payment. In 1980, the heirs of Trinidad, who at that time was already dead, filed a complaint for forcible entry (Exh. E) against defendant-appellant (respondent) Regalado Mondejar, which complaint was, however, dismissed for failure to prosecute (Exh. F). In 1987, the proposed provincial high school having failed to materialize, the Sangguniang Bayan of the municipality of Talacogon enacted a resolution reverting the two (2) hectares of land donated back to the donors (Exh. D). In the meantime, defendant-appellant (respondent) Regalado Mondejar sold portions of the land to defendants-appellants (respondents) Fernando Bautista (Exh. 5), Rodolfo Goloran (Exh. 6), Efren Guden (Exh. 7) and Ernesto Goloran (Exh. 8). "On July 5, 1988, plaintiffs-appellees (petitioners) filed this action against defendants-appellants (respondents). In the complaint, plaintiffs-appellees (petitioners) alleged that their deceased mother never sold, conveyed, transferred or disposed of the property in question to any person or entity much less to Regalado Mondejar save the donation made to the Municipality of Talacogon in 1956; that at the time of the alleged sale to Regalado Mondejar by Trinidad Quijada, the land still belongs to the Municipality of Talacogon, hence, the supposed sale is null and void. "Defendants-appellants (respondents), on the other hand, in their answer claimed that the land in dispute was sold to Regalado Mondejar, the one (1) hectare on July 29, 1962, and the remaining one (1) hectare on installment basis until fully paid. As affirmative and/or special defense, defendants-appellants (respondents) alleged that plaintiffs' action is barred by laches or has prescribed. "The court a quo rendered judgment in favor of plaintiffs-appellees (petitioners): firstly because 'Trinidad Quijada had no legal title or right to sell the land to defendant Mondejar in 1962, 1966, 1967 and 1968, the same not being hers to dispose of because ownership belongs to the Municipality of Talacogon' (Decision, p. 4; Rollo, p. 39) and, secondly, that the deed of sale executed by Trinidad Quijada in favor of Mondejar did not carry with it the conformity and acquiescence of her children, more so that she was already 63 years old at the time, and a widow (Decision, p. 6; Rollo, p. 41)."[1] 6

The dispositive portion of the trial court's decision reads: "WHEREFORE, viewed from the above perceptions, the scale of justice having tilted in favor of the plaintiffs, judgment is, as it is hereby rendered: 1) ordering the Defendants to return and vacate the two (2) hectares of land to Plaintiffs as described in Tax Declaration No. 1209 in the name of Trinidad Quijada; 2) ordering any person acting in Defendants' behalf to vacate and restore the peaceful possession of the land in question to Plaintiffs; 3) ordering the cancellation of the Deed of Sale executed by the late Trinidad Quijada in favor of Defendant Regalado Mondejar as well as the Deeds of Sale/Relinquishments executed by Mondejar in favor of the other Defendants; 4) ordering Defendants to remove their improvements constructed on the questioned lot; 5) ordering the Defendants to pay Plaintiffs, jointly and severally, the amount of P10,000.00 representing attorney's fees; 6) ordering Defendants to pays the amount of P8,000.00 as expenses of litigation; and 7) ordering Defendants to pay the sum of P30,000.00 representing moral damages. SO ORDERED."[2] On appeal, the Court of Appeals reversed and set aside the judgment a quo[3] ruling that the sale made by Trinidad Quijada to respondent Mondejar was valid as the4 former retained an inchoate interest on the lots by virtue of the automatic reversion clause in the deed of donation. [4] Thereafter, petitioners filed a motion for reconsideration. When the CA denied their motion,[5] petitioners instituted a petition for review to this Court arguing principally that the sale of the subject property made by Trinidad Quijada to respondent Mondejar is void, considering that at that time, ownership was already transferred to the Municipality of Talacogon. On the contrary, private respondents contend that the sale was valid, that they are buyers in good faith, and that petitioners' case is barred by laches.[6] We affirm the decision of the respondent court. The donation made on April 5, 1956 by Trinidad Quijada and her brother and sisters [7] was subject to the condition that the donated property shall be "used solely and exclusively as a part of the campus of the proposed Provincial High School in Talacogon."[8] The donation further provides that should "the proposed Provincial High School be discontinued or if the same shall be opened but for some reason or another, the same may in the future be closed" the donated property shall automatically revert to the donor.[9] Such condition, not being contrary to law, morals, good customs, public order or public policy was validly imposed in the donation.[10] When the Municipality's acceptance of the donation was made known to the donor, the former became the new owner of the donated property -- donation being a mode of acquiring and transmitting ownership[11] - notwithstanding the condition imposed by the donee. The donation is perfected once the acceptance by the donee is made known to the donor.[12] Accordingly, ownership is immediately transferred to the latter and that ownership will only revert to the donor if the resolutory condition is not fulfilled. In this case, that resolutory condition is the construction of the school. It has been ruled that when a person donates land to another on the condition that the latter would build upon the land a school, the condition imposed is not a condition precedent or a suspensive condition but a resolutory one. [13] Thus, at the time of the sales made in 1962 towards 1968, the alleged seller (Trinidad) could not have sold the lots since she had earlier transferred ownership thereof by virtue of the deed of donation. So long as the resolutory condition subsists and is capable of fulfillment, the donation remains effective and the donee 7

continues to be the owner subject only to the rights of the donor or his successors-in-interest under the deed of donation. Since no period was imposed by the donor on when must the donee comply with the condition, the latter remains the owner so long as he has tried to comply with the condition within a reasonable period. Such period, however, became irrelevant herein when the donee-Municipality manifested through a resolution that it cannot comply with the condition of building a school and the same was made known to the donor. Only then - when the non-fulfillment of the resolutory condition was brought to the donor's knowledge - that ownership of the donated property reverted to the donor as provided in the automatic reversion clause of the deed of donation. The donor may have an inchoate interest in the donated property during the time that ownership of the land has not reverted to her. Such inchoate interest may be the subject of contracts including a contract of sale. In this case, however, what the donor sold was the land itself which she no longer owns. It would have been different if the donor-seller sold her interests over the property under the deed of donation which is subject to the possibility of reversion of ownership arising from the non-fulfillment of the resolutory condition. As to laches, petitioners' action is not yet barred thereby. Laches presupposes failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier;[14] "it is negligence or omission to assert a right within a reasonable time, thus, giving rise to a presumption that the party entitled to assert it either has abandoned or declined to assert it."[15] Its essential elements of: a) Conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of; b) Delay in asserting complainant's right after he had knowledge of the defendant's conduct and after he has an opportunity to sue; c) Lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and, d) Injury or prejudice to the defendant in the event relief is accorded to the complainant."[16] are absent in this case. Petitioners' cause of action to quiet title commenced only when the property reverted to the donor and/or his successors-in-interest in 1987. Certainly, when the suit was initiated the following year, it cannot be said that petitioners had slept on their rights for a long time. The 1960's sales made by Trinidad Quijada cannot be the reckoning point as to when petitioners' cause of action arose. They had no interest over the property at that time except under the deed of donation to which private respondents were not privy. Moreover, petitioners had previously filed an ejectment suit against private respondents only that it did not prosper on a technicality. Be that at it may, there is one thing which militates against the claim of petitioners. Sale, being a consensual contract, is perfected by mere consent, which is manifested the moment there is a meeting of the minds[17] as to the offer and acceptance thereof on three (3) elements: subject matter, price and terms of payment of the price.[18] ownership by the seller on the thing sold at the time of the perfection of the contract of sale is not an element for its perfection. What the law requires is that the seller has the right to transfer ownership at the time the thing sold is delivered.[19] Perfection per se does not transfer ownership which occurs upon the actual or constructive delivery of the thing sold. [20] A perfected contract of sale cannot be challenged on the ground of non-ownership on the part of the seller at the time of its perfection; hence, the sale is still valid. The consummation, however, of the perfected contract is another matter. It occurs upon the constructive or actual delivery of the subject matter to the buyer when the seller or her successors-ininterest subsequently acquires ownership thereof. Such circumstance happened in this case when petitioners -- who are Trinidad Quijada's heirs and successors-in-interest -- became the owners of the subject property upon the reversion of the ownership of the land to them. Consequently, ownership is

transferred to respondent Mondejar ands those who claim their right from him. Article 1434 of the New Civil Code supports the ruling that the seller's "title passes by operation of law to the buyer."[21] This rule applies not only when the subject matter of the contract of sale is goods,[22] but also to other kinds of property, including real property.[23] There is also no merit in petitioners' contention that since the lots were owned by the municipality at the time of the sale, they were outside the commerce of men under Article 1409 (4) of the NCC; [24] thus, the contract involving the same is inexistent and void from the beginning. However, nowhere in Article 1409 (4) is it provided that the properties of a municipality, whether it be those for public use or its patrimonial property[25] are outside the commerce of men. Besides, the lots in this case were conditionally owned by the municipality. To rule that the donated properties are outside the commerce of men would render nugatory the unchallenged reasonableness and justness of the condition which the donor has the right to impose as owner thereof. Moreover, the objects referred to as outsides the commerce of man are those which cannot be appropriated, such as the open seas and the heavenly bodies. With respect to the trial courts award of attorneys fees, litigation expenses and moral damages, there is neither factual nor legal basis thereof. Attorneys fees and expenses of litigation cannot, following the general rule in Article 2208 of the New Civil Code, be recovered in this case, there being no stipulation to that effect and the case does not fall under any of the exceptions. [26] It cannot be said that private respondents had compelled petitioners to litigate with third persons. Neither can it be ruled that the former acted in gross and evident bad faith in refusing to satisfy the latters claims considering that private respondents were under an honest belief that they have a legal right over the property by virtue of the deed of sale. Moral damages cannot likewise be justified as none of the circumstances enumerated under Articles 2219[27] and 2220[28] of the New Civil Code concur in this case. WHEREFORE, by virtue of the foregoing, the assailed decision of the Court of Appeals is AFFIRMED. SO ORDERED.

SECOND DIVISION [G.R. No. 134718. August 20, 2001] HEIRS OF ROMANA INGJUG-TIRO: BEDESA, PEDRO, RITA all surnamed TIRO, and BARBARA TIRO (deceased) represented by NORMA SARAMOSING; HEIRS OF FRANCISCO INGJUG: LEONARDO, LILIA, FERNANDA, ZENAIDA, PACITA and ANTONIO, all surnamed INGJUG; and HEIRS OF FRANCISCA INGJUG-FUENTES: ULDARICO and GUILLERMA, all surnamed FUENTES, and PAULINA INGJUG-FUENTES (deceased) represented by VICTOR, ELENA, SERGIA and DESIDERIO, all surnamed MUEZ, petitioners, vs. SPOUSES LEON V. CASALS and LILIA C. CASALS, SPOUSES CARLOS L. CLIMACO and LYDIA R. CLIMACO, SPOUSES JOSE L. CLIMACO, JR. and BLANQUITA C. CLIMACO, and CONSUELO L. CLIMACO, respondents. DECISION BELLOSILLO, J.: A 5,354-square meter parcel of land is at the epicentrum of the controversy. Originally titled in the name of Mamerto Ingjug, the property is located in the former Municipality of Opon, Province of Cebu (now Marigondon, Lapu-Lapu City). The claimants are the descendants of Mamerto Ingjug on one hand who allege that they have been deprived of their successional rights through fraud and misrepresentation, and a group of vendees on the other hand claiming to have acquired the property for value and in good faith. The case filed by the descendants of Mamerto Ingjug was dismissed by the trial court on the ground of prescription and laches. The dismissal was affirmed by the Court of Appeals. The affirmance by the appellate court is now assailed in this petition for review. During the Second World War, or some sixty (60) years ago, Mamerto Ingjug died leaving behind the subject parcel of land covered by Original Certificate of Title No. RO-0376 in his name as owner in fee simple. Upon his death title thereto devolved upon his five (5) children, namely, Romana, Francisco, Francisca, Luisa and Maria, all surnamed Ingjug. On 9 July 1965, or more than two (2) decades later, Luisa, Maria, one Eufemio Ingjug, and Guillerma Ingjug Fuentes-Pagubo, daughter of Francisca, sold the disputed land to herein respondents, the spouses Leon V. Casals and Lilia C. Casals, the spouses Carlos L. Climaco and Lydia R. Climaco, the spouses Jose L. Climaco, Jr. and Blanquita C. Climaco, and Consuelo L. Climaco. The vendors allegedly represented to the vendees that the property was inherited by them from the late Mamerto Ingjug, and that they were his only surviving heirs. The sale was evidenced by a Deed of Sale of Unregistered Land[1] and an Extrajudicial Settlement and Confirmation of Sale[2] executed by the vendors in favor of the vendees. On 10 August 1992, herein petitioners as heirs of Romana Ingjug, namely, Bedesa, Pedro, Rita and Barbara; heirs of Francisco Ingjug, namely, Leonardo, Lilia, Fernanda, Zenaida, Pacita and Antonio; and, heirs of Francisca, namely, Uldarico, and Paulina, challenged respondents' ownership of the property by filing a complaint for Partition, Recovery of Ownership and Possession, Declaration of Nullity: Deed of Sale of Unregistered Land; Extrajudicial Settlement and Confirmation of Sale,[3] against herein respondents. Petitioners alleged that they only discovered in 1990 that the property had already been sold and titled to respondents, and that respondents refused, despite repeated demands, to deliver and return to them their shares in the property. Petitioners also prayed that the Deed of Sale of Unregistered Land as well as theExtrajudicial Settlement and Confirmation of Sale executed by Luisa, Maria, Eufemio and Guillerma be nullified to the extent of petitioners' shares in the property. Respondents - the spouses Leon Casals and Lilia Casals, and Consuelo L. Climaco - failed to answer within the reglementary period, hence, on motion of petitioners' counsel, they were declared in default.[4] On the other hand, respondents - the spouses Carlos L. Climaco and Lydia R. Climaco, and the spouses Jose L. Climaco, Jr. and Blanquita C. Climaco - filed a motion to dismiss, instead of an answer, arguing that the complaint failed to state a cause of action and was barred by prescription and laches. They further averred that the original certificate of title in the name of Mamerto Ingjug was 8

lost during the war, and that they bought the property from the heirs of Mamerto Ingjug pending the reconstitution of the title; that they acquired the property in good faith believing that the vendors were indeed the only surviving heirs of Mamerto Ingjug; that upon the issuance of the reconstituted title the vendors executed the questioned Deed of Extrajudicial Settlement and Confirmation of Sale in their favor; and that, on the basis of the deed, the original certificate of title in the name of Mamerto Ingjug was cancelled and Transfer Certificate of Title No. T-1150 was issued in their names.[5] On 24 February 1993 the trial court in dismissing the complaint held[6] From February 9, 1965 to October 10, 1992 when the instant action was filed in court is 27 years and from February 2, 1967, the time the title was transferred to defendants to October 10, 1992 when plaintiffs initiated the instant case is 25 years. The possession of the property is admitted by the plaintiffs to be with the defendants. If this is so, then the conclusion is inevitable that the property has already been acquired by the defendants by prescription, and the action to recover the same has already been lost x x x x Coownership of the lot in question was already repudiated as early as 1965 when Luisa, Maria and Guillerma sold the land claiming they are the only heirs of Mamerto Ingjug, and when the other compulsory heir, Francisco Ingjug confirmed said sale in 1967. From that date, plaintiffs had only 10 years to initiate an action for reconveyance which they failed to do. Accordingly, an action for reconveyance based on implied or constructive trust prescribes in ten years counted from the date when an adverse title is asserted by the possessor of the property x x x moreover, "the rule in this jurisdiction is that an action to enforce an implied trust may be barred not only by prescription but also by laches in which case repudiation is not even required." On 26 February 1998 the Court of Appeals, as stated earlier, affirmed the Decision of the trial court.[7] Petitioners now seek a review of the appellate court's Decision contending that: (a) the litigated property was originally registered under the Torrens system and, as such, it cannot be acquired by prescription or adverse possession; (b) prescription is unavailing not only against the registered owner but also against his hereditary successors because the latter merely step into the shoes of the former by operation of law and are merely the continuation of the personality of their predecessors in interest; (c) the right to recover possession of a registered property is equally imprescriptible; (d) laches too may not be considered a valid defense for claiming ownership of land registered under the Torrens system. When prescription would not lie, neither would laches be available; (e) respondents are not in possession of the land in the concept of owners, but are merely holding the same in trust for petitioners; (f) neither could possession of respondents be characterized as adverse possession in good faith; (g) Francisco Ingjug could not have been a party to the Deed of Extrajudicial Settlement and Confirmation of Sale in 1967 because he died on 17 August 1963; and, (h) Eufemio Ingjug, one of the signatories to the Deed of Sale, was not the son of Mamerto Ingjug but only a son-in-law, he being a Tiro and husband of Ramona Ingjug-Tiro.[8] The pivotal issue is whether petitioners' right to institute a complaint for partition and reconveyance is effectively barred by prescription and laches. We grant the petition. It should be noted that the trial court dismissed the complaint based on prescription and laches alone without taking into consideration the other issues raised by petitioners concerning the validity of the contract and its bearing on the matter of prescription. The Court of Appeals likewise skirted the other issues and sustained the trial court's theory that herein petitioners' cause of action - which is essentially one for reconveyance based upon a constructive or implied trust resulting from fraud - had been effectively lost through prescription and laches. A cursory reading of the complaint, however, reveals that the action filed by petitioners was for partition, recovery of ownership and possession, declaration of nullity of a deed of sale of unregistered land and extrajudicial settlement and confirmation of sale . Petitioners' causes of action are premised on their claim that: (a) the Deed of Sale of Unregistered Land is void and of no effect 9

since their respective shares in the inheritance were included in the sale without their knowledge and consent, and one of the vendor-signatories therein, Eufemio Ingjug (Eufemio Tiro,[9] husband of Romana Ingjug[10]), was not even a direct and compulsory heir of the decedent; and (b) the Extrajudicial Settlement and Confirmation of Sale is simulated and therefore null and void ab initio, as it was purportedly executed in 1967 by, among others, Eufemio Tiro who was not an heir, and by Francisco Ingjug who died in 1963. Also, the prayer in the same complaint expressly asks that all those transactions be declared null and void. In other words, it is the nullity of the deeds of sale and the extrajudicial settlement and confirmation of the sale which is the basic hypothesis upon which the instant civil action rests. Thus, it appears that we are dealing here not with simple voidable contracts tainted with fraud, but with contracts that are altogether null and void ab initio. Assuming petitioners' allegations to be true, without however prejudging the validity or invalidity of the contract of sale and the extrajudicial settlement which will ultimately be determined by the trial court, Romana, Francisco, Francisca, Luisa and Maria, succeeded to the possession and ownership of the land from the time of the death of their father Mamerto Ingjug. The property should have been divided equally among them, but prior to its partition these heirs of Mamerto Ingjug owned the property in common. It follows then that Luisa, Maria and Guillerma (daughter of Francisca) and Eufemio Ingjug could not, by themselves, validly dispose of the entire litigated property to the exclusion of and without the knowledge and consent of the other heirs since Luisa, Maria, Guillerma and Eufemio are not the exclusive owners thereof. More so in the case of Eufemio, who is claimed to be a total stranger to and therefore has no legal interest whatsoever in the inherited property not being a direct heir. Article 1458 of the New Civil Code provides: "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." It is essential that the vendors be the owners of the property sold otherwise they cannot dispose that which does not belong to them. As the Romans put it: "Nemo dat quod non habet." No one can give more than what he has. The sale of the realty to respondents is null and void insofar as it prejudiced petitioners' interests and participation therein. At best, only the ownership of the shares of Luisa, Maria and Guillerma in the disputed property could have been transferred to respondents. Consequently, respondents could not have acquired ownership over the land to the extent of the shares of petitioners. The issuance of a certificate of title in their favor could not vest upon them ownership of the entire property; neither could it validate the purchase thereof which is null and void. Registration does not vest title; it is merely the evidence of such title. Our land registration laws do not give the holder any better title than what he actually has.[11] Being null and void, the sale to respondents of petitioners' shares produced no legal effects whatsoever. Similarly, the claim that Francisco Ingjug died in 1963 but appeared to be a party to the Extrajudicial Settlement and Confirmation of Sale executed in 1967 would be fatal to the validity of the contract, if proved by clear and convincing evidence. Contracting parties must be juristic entities at the time of the consummation of the contract. Stated otherwise, to form a valid and legal agreement it is necessary that there be a party capable of contracting and a party capable of being contracted with. Hence, if any one party to a supposed contract was already dead at the time of its execution, such contract is undoubtedly simulated and false and therefore null and void by reason of its having been made after the death of the party who appears as one of the contracting parties therein.[12] The death of a person terminates contractual capacity. In actions for reconveyance of property predicated on the fact that the conveyance complained of was null and void ab initio, a claim of prescription of action would be unavailing.[13] The action or defense for the declaration of the inexistence of a contract does not prescribe."[14] Neither could laches be invoked in the case at bar. Laches is a doctrine in equity and our courts are basically courts of law and not courts of equity. Equity, which has been aptly described as "justice outside legality," should be applied only in the absence of, and never against, statutory law. Aequetas nunguam contravenit legis. The positive

mandate of Art. 1410 of the New Civil Code conferring imprescriptibility to actions for declaration of the inexistence of a contract should pre-empt and prevail over all abstract arguments based only on equity. Certainly, laches cannot be set up to resist the enforcement of an imprescriptible legal right, and petitioners can validly vindicate their inheritance despite the lapse of time. Considering the foregoing, the trial court judge should not have summarily dismissed petitioners' complaint; instead, he should have required the defendants to answer the complaint, deferred action on the special defenses of prescription and laches, and ordered the parties to proceed with the trial on the merits. Verily, the dismissal of the case on the ground of prescription and laches was premature. The summary or outright dismissal of an action is not proper where there are factual matters in dispute which need presentation and appreciation of evidence. Here, petitioners still had to prove the following: first, that they were the coheirs and co-owners of the inherited property; second, that their coheirs-co-owners sold their hereditary rights thereto without their knowledge and consent; third, that forgery, fraud and deceit were committed in the execution of theDeed of Extrajudicial Settlement and Confirmation of Sale since Francisco Ingjug who allegedly executed the deed in 1967 actually died in 1963, hence, the thumbprint found in the document could not be his; fourth, that Eufemio Ingjug who signed the deed of sale is not the son of Mamerto Ingjug, and therefore not an heir entitled to participate in the disposition of the inheritance; fifth, that respondents have not paid the taxes since the execution of the sale in 1965 until the present date and the land in question is still declared for taxation purposes in the name of Mamerto Ingjug, the original registered owner, as of 1998; sixth, that respondents had not taken possession of the land subject of the complaint nor introduced any improvement thereon; and seventh, that respondents are not innocent purchasers for value. Without any evidence on record relating to these points, this Court cannot affix its imprimatur to the peremptory dismissal of the complaint in light of the pleas of petitioners for their just share in the inheritance and for the partition of their common predecessor's estate. Indeed, it is but fair and just that, without prejudging the issues, the parties be allowed to substantiate their respective claims and defenses in a full-blown trial, and secure a ruling on all the issues presented in their respective pleadings. WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is REVERSED and SET ASIDE, and the case is REMANDED to the RTC-Br. 27, Lapu-Lapu City, for trial and judgment on the merits. No costs. SO ORDERED.

FIRST DIVISION [G.R. No. 136054. September 5, 2001] HEIRS OF SEVERINA SAN MIGUEL, namely: MAGNO LAPINA, PACENCIA LAPINA, MARCELO LAPINA, SEVERINO LAPINA, ROSARIO LAPINA, FRANCISCO LAPINA, CELIA LAPINA assisted by husband RODOLFO TOLEDO, petitioners, vs. THE HONORABLE COURT OF APPEALS, DOMINADOR SAN MIGUEL, GUILLERMO F. SAN MIGUEL, PACIENCIA F. SAN MIGUEL, CELESTINO, assisted by husband, ANTERO CELESTINO, represented by their Attorney-in-Fact ENRICO CELESTINO, AUGUSTO SAN MIGUEL, ANTONIO SAN MIGUEL, RODOLFO SAN MIGUEL, CONRADO SAN MIGUEL and LUCITA SAN MIGUEL, respondents. DECISION PARDO, J.: The Case The case is a petition for review on certiorari[1] of the decision of the Court of Appeals,[2] affirming that of the Regional Trial Court, Cavite, Branch 19, Bacoor[3] ordering petitioners, Heirs of Severina San Miguel (hereafter, Severinas heirs) to surrender to respondents Domina dor San Miguel, et al. (hereafter, Dominador, et al.), Transfer Certificate of Title No. 223511 and further directing Severinas heirs to pay for the capital gains and related expenses for the transfer of the two (2) lots to Dominador, et al. The Facts This case involves a parcel of land originally claimed by Severina San Miguel (petitioners predecessor-in-interest, hereafter, Severina). The land is situated in Panapan, Bacoor, Cavite with an area of six hundred thirty two square meters (632 sq. m.), more or less. Without Severinas knowledge, Dominador managed to cause the subdivision of the land into three (3) lots, to wit:[4] LRC Psu 1312 - with an area of 108 square meters; LRC Psu -1313 - Lot 1, with an area of 299 square meters; LRC Psu -1313 - Lot 2, with an area of 225 square meters. On September 25, 1974, Dominador, et al. filed a petition with the Court of First Instance, Cavite, as a land registration court, to issue title over Lots 1 and 2 of LRC Psu-1313, in their names.[5] On July 19, 1977, the Land Registration Commission (hereafter LRC) rendered a decision directing the issuance of Original Certificate of Title No. 0-1816 in the names of Dominador, et al. On or about August 22, 1978, Severina filed with the Court of First Instance of Cavite a petition for review of the decision alleging that the land registration proceedings were fraudulently concealed by Dominador from her.[6] On December 27, 1982, the court resolved to set aside the decision of July 19, 1977, and declared Original Certificate of Title No. 0-1816 as null and void. On July 13, 1987, the Register of Deeds of Cavite issued Transfer Certificate of Title No. T-223511 in the names of Severina and her heirs.[7] On February 15, 1990, the trial court issued an order in favor of Severinas heirs, to wit:[8] WHEREFORE, as prayed for, let the writ of possession previously issued in favor of petitioner Severina San Miguel be implemented. 10

However, the writ was returned unsatisfied. On November 28, 1991, the trial court ordered:[9] WHEREFORE, as prayed for, let an alias writ of demolition be issued in favor of petitioners, Severina San Miguel. Again, the writ was not satisfied. On August 6, 1993, Severinas heirs, decided not to pursue the writs of possession and demolition and entered into a compromise with Dominador, et al. According to the compromise, Severinas heirs were to sell the subject lots[10] to Dominador, et al. for one and a half million pesos (P1.5 M) with the delivery of Transfer Certificate of Title No. T-223511 (hereafter, the certificate of title) conditioned upon the purchase of another lot[11] which was not yet titled at an additional sum of three hundred thousand pesos (P300,000.00). The salient features of the compromise (hereafter kasunduan) are:[12] 5. Na ang Lot 1 at Lot 2, plano LRCPsu-1313 na binabanggit sa itaas na ipinagkasundo ng mga tagapagmana ni Severina San Miguel na kilala sa kasulatang ito sa taguringLAPINA (representing Severinas heirs), na ilipat sa pangalan nina SAN MIGUEL (representing Dominadors heirs) alang alang sa halagang ISANG MILYON AT LIMANG DAANG LIBONG PISO (P1,500,000.00) na babayaran nina SAN MIGUEL kina LAPINA; 6. Na si LAPINA at SAN MIGUEL ay nagkakasundo na ang lote na sakop ng plano LRC- Psu1312, may sukat na 108 metro cuadrado ay ipagbibili na rin kina SAN MIGUEL sa halagang TATLONG DAANG LIBONG PISO (P300,000.00); 7. Na kinikilala ni SAN MIGUEL na ang tunay na may-ari ng nasabing lote na sakop ng plano LRC Psu-1312 ay sina LAPINA at sila na ang magpapatitulo nito at sina LAPINA ay walang pananagutan sa pagpapatitulo nito at sa paghahabol ng sino mang tao; 8. Na ang nasabing halaga na TATLONG DAANG LIBONG PISO (P300,000.00) ay babayaran nina SAN MIGUEL kina LAPINA sa loob ng dalawang (2) buwan mula sa petsa ng kasulatang ito at kung hindi mabayaran nina SAN MIGUEL ang nasabing halaga sa takdang panahon ay mawawalan ng kabuluhan ang kasulatang ito; 9. Na sina LAPINA at SAN MIGUEL ay nagkakadunso (sic) rin na ang owners copy ng Transfer Certificate of Title No. T-223511 na sumasakop sa Lots 1 at 2, plano LRC Psu-1313 ay ilalagay lamang nina LAPINA kina SAN MIGUEL pagkatapos mabayaran ang nabanggit na P300,000.00 On the same day, on August 6, 1993, pursuant to the kasunduan, Severinas heirs and Dominador, et al. executed a deed of sale designated as kasulatan sa bilihan ng lupa.[13] On November 16, 1993, Dominador, et al. filed with the trial court,[14] Branch 19, Bacoor, Cavite, a motion praying that Severinas heirs deliver the owners copy of the certificate of title to them. [15] In time, Severinas heirs opposed the motion stressing that under the kasunduan, the certificate of title would only be surrendered upon Dominador, et al.s payment of the amount of three hundred thousand pesos (P300,000.00) within two months from August 6, 1993, which was not complied with.[16] Dominador, et al. admitted non-payment of three hundred thousand pesos (P300,000.00) for the reason that Severinas heirs have not presented any proof of ownership over the untitled parcel of land covered by LRC- Psu-1312. Apparently, the parcel of land is declared in the name of a third party, a certain Emiliano Eugenio.[17] Dominador, et al. prayed that compliance with the kasunduan be deferred until such time that Severinas heirs could produce proof of ownership over the parcel of land.[18] Severinas heirs countered that the arguments of Dominador, et al. were untenable in light of the provision in the kasunduan where Dominador, et al. admitted their ownership over the parcel of land, 11

hence dispensing with the requirement that they produce actual proof of title over it.[19] Specifically, they called the trial courts attention to the following statement in the kasunduan:[20] 7. Na kinikilala ni SAN MIGUEL na ang tunay na may-ari ng nasabing lote na sakop ng plano LRC Psu-1312 ay sina LAPINA at sila na ang magpapatitulo nito at sina LAPINA ay walang pananagutan sa pagpapatitulo nito at sa paghahabol ng sino mang tao; According to Severinas heirs, since Dominador, et al. have not paid the amount of three hundred thousand pesos (P300,000.00), then they were justified in withholding release of the certificate of title.[21] The trial court conducted no hearing and then rendered judgment based on the pleadings and memoranda submitted by the parties. The Trial Courts Ruling On June 27, 1994, the trial court issued an order to wit:[22] WHEREFORE, finding the Motion to Order to be impressed with merit, the defendants-oppositorsvendors Heirs of Severina San Miguel are hereby ordered to surrender to the movant-plaintiffs-vendeesHeirs of Dominador San Miguel the Transfer Certificates of Title No. 223511 and for herein defendantsoppositors-vendors to pay for the capital gains and related expenses for the transfer of the two lots subject of the sale to herein movants-plaintiffs-vendees-Heirs of Dominador San Miguel. SO ORDERED. On July 25, 1994, Severinas heirs filed with the trial court a motion for reconsideration of the aforequoted order.[23] On January 23, 1995, the trial court denied the motion for reconsideration for lack of merit and further ordered:[24] xxx...Considering that the Lots 1 and 2 covered by TCT No. T-223511 had already been paid since August 6, 1993 by the plaintiffs-vendees Dominador San Miguel, et al. (Vide, Kasulatan sa Bilihan ng Lupa, Rollo, pp. 174-176), herein defendants-vendors-Heirs of Severina San Miguel is hereby ordered (sic) to deliver the aforesaid title to the former (Dominador San Miguel, et al.) within thirty (30) days from receipt of this order. In case the defendants-vendors-Heirs of Severina San Miguel fail and refuse to do the same, then the Register of Deeds of Cavite is ordered to immediately cancel TCT No. T-223511 in the name of Severina San Miguel and issue another one in the name of plaintiffs Dominador San Miguel, et al. Also send a copy of this Order to the Register of Deeds of the Province of Cavite, Trece Martires City, for her information and guidance. SO ORDERED. On February 7, 1995, Severinas heirs appealed the orders to the Court of Appeals.[25] The Court of Appeals Ruling On June 29, 1998, the Court of Appeals promulgated a decision denying the appeal, and affirming the decision of the trial court. The Court of Appeals added that the other matters raised in the petition were extraneous to the kasunduan.[26] The Court of Appeals upheld the validity of the contract of sale and sustained the parties freedom to contract. The Court of Appeals decided, thus:[27] WHEREFORE, the decision appealed from is hereby AFFIRMED. SO ORDERED. On August 4, 1998, Severinas heirs filed with the Court of Appeals a motion for reconsideration of the above decision.[28]

merit.[29]

On October 14, 1998, the Court of Appeals denied the motion for reconsideration for lack of Hence, this appeal.[30] The Issues

accompanied by possession for a period sufficient for prescription. [39] Severinas heirs have nothing to counter this document. Therefore, to insist that Dominador, et al. pay the price under such circumstances would result in Severinas heirs unjust enrichment.[40] Basic is the principle in law, Niguno non deue enriquecerse tortizamente condano de otro.[41] The essence of a sale is the transfer of title or an agreement to transfer it for a price actually paid or promised.[42] In Nool v. Court of Appeals,[43] we held that if the sellers cannot deliver the object of the sale to the buyers, such contract may be deemed to be inoperative. By analogy, such a contract may fall under Article 1405, No. 5 of the Civil Code, to wit: Article 1405. The following contracts are inexistent and void from the beginning: xxx (5) Those which contemplate an impossible service. Severinas heirs insist that delivery of the certificate of title is predicated on a condition - payment of three hundred thousand pesos (P300,000.00) to cover the sale of Lot 3 of LRO Psu 1312. We find this argument not meritorious. The condition cannot be honored for reasons afore-discussed. Article 1183 of the Civil Code provides that, Impossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. If the obligation is divisible, that part thereof which is not affected by the impossible or unlawful condition shall be valid. xxx Hence, the non-payment of the three hundred thousand pesos (P300,000.00) is not a valid justification for refusal to deliver the certificate of title. Besides, we note that the certificate of title covers Lots 1 and 2 of LRC Psu-1313, which were fully paid for by Dominador, et al. Therefore, Severinas heirs are bound to deliver the certificate of title covering the lots. The Fallo WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in CA-G. R. CV No. 48430 is AFFIRMED in toto. No costs. SO ORDERED.

Severinas heirs submit that the Court of Appeals erred and committed grave abuse of discretion: First, when it held that the kasunduan had no effect on the kasulatan sa bilihan ng lupa. Second, when it ordered them to surrender the certificate of title to Dominador, et al., despite noncompliance with their prior obligations stipulated under the kasunduan. Third, when it did not find that the kasunduan was null and void for having been entered into by Dominador, et al. fraudulently and in bad faith.[31] We find the above issues raised by Severinas heirs to be factual. The question whether the prerequisites to justify release of the certificate of title to Dominador, et al. have been complied with is a question of fact.[32] However, we sift through the arguments and identify the main legal issue, which is whether Dominador, et al. may be compelled to pay the three hundred thousand pesos (P300,000.00) as agreed upon in the kasunduan (as a pre-requisite for the release of the certificate of title), despite Severinas heirs lack of evidence of ownership over the parcel of land covered by LRC Psu-1312. The Courts Ruling We resolve the issue in the negative, and find the petition without merit. Severinas heirs anchor their claim on the kasunduan, stressing on their freedom to stipulate and the binding effect of contracts. This argument is misplaced.[33] The Civil Code provides: Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient provided they are not contrary to law, morals, good customs, public order or public policy (underscoring ours). It is basic that the law is deemed written into every contract. [34] Although a contract is the law between the parties, the provisions of positive law which regulate contracts are deemed written therein and shall limit and govern the relations between the parties.[35] The Civil Code provisions on sales state: Article 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 a price certain in money or its equivalent. xxx Article 1459. The thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. Article 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of sale (underscoring ours). True, in contracts of sale, the vendor need not possess title to the thing sold at the perfection of the contract.[36] However, the vendor must possess title and must be able to transfer title at the time of delivery. In a contract of sale, title only passes to the vendee upon full payment of the stipulated consideration, or upon delivery of the thing sold.[37] Under the facts of the case, Severinas heirs are not in a position to transfer title . Without passing on the question of who actually owned the land covered by LRC Psu -1312, we note that there is no proof of ownership in favor of Severinas heirs. In fact, it is a certain Emiliano Eugenio, who holds a tax declaration over the said land in his name.[38] Though tax declarations do not prove ownership of the property of the declarant, tax declarations and receipts can be strong evidence of ownership of land when 12

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-17527 April 30, 1963 SUN BROTHERS APPLIANCES, INC., plaintiff-appellee, vs. DAMASO P. PEREZ, defendant-appellant. Dominador A. Alafriz for plaintiff-appellee. Robert P. Halili & Associates for defendant-appellant. LABRADOR, J.: This is an action brought by the plaintiff to recover from defendant the sum of P1,404.00, the price of one Admiral Air Conditioner, Slim Style, Model 100-23-1 H.P., Serial No. 2978828, delivered to the defendant by the plaintiff under a conditional sale agreement entered into by and between them on December 6, 1958, in the City of Manila, plus stipulated interest of 12% from January 6, 1959 until the same is fully paid, together with P200 as attorney's fees, and costs. Defendant answered that the air-conditioner in question was delivered to him installed in the office of the defendant located at Gardiner street, Lucena, Quezon on December 14, 1959 but that said air-conditioner was totally destroyed by fire which occured in the morning of December 28, 1958 at 2 o'clock. Defendant further claimed that the machine was destroyed by force majeure, not by the defendant's fault and/or negligence and, therefore, he is not liable under the conditional sale, Annex "A", which the parties, plaintiff and defendant, had executed. At the trial of the case the parties entered into a stipulation of facts, the most important provision of which are as follows: 1. That defendant admits that on December 6, 1958, he entered into a Conditional Sale Agreement with the plaintiff, copy of which contract is attached to the complaint as Annex "A"; 2. That pursuant to the terms and conditions provided in the said Conditional Sale Agreement the plaintiff delivered to the defendant (1) Admiral Air Conditioner Slim Style Model 100-23-1 HP, Serial No. 2978828 with the contract price of P1,678.00 and that said Air Conditioner was received by the defendant; 3. That defendant made a down payment of P274.00 on December 6, 1958, pursuant to the terms and conditions of the Conditional Sales Agreement; and Air Conditioner was installed by the plaintiff, thru its representative, at Lucena, Quezon; 4. That said Air Conditioner was burned on December 27,1958, on or about 2:00 o'clock in the morning, however, defendant will present evidence to show that the Air Conditioner subject of the complaint herein was burned where it was installed by the plaintiff; 5. That defendant, after making down payment of P274.00 to the plaintiff, did not pay any of the monthly installments of P78.00 thereafter, leaving a balance of P1,404.00 in favor of the plaintiff; 6. That after defendant presents evidence to prove that the Air Conditioner was burned where it was installed by the plaintiff to the satisfaction of this Honorable Court, the parties agree to leave to this Honorable Court the resolution of the issue whether loss by fire extinguishes the obligation of the defendant to pay to the plaintiff the subsequent installments of the initial payment;" The Court of First Instance before which the action was brought rendered judgment condemning the defendant to pay the plaintiff the amount demanded in the complaint, including interest and attorney's fees. The defendant has appealed the case directly to us as involving only a question of law. The conditional sale executed by the plaintiff and defendant contained the following stipulation: 13

"2. Title to said property shall vest in the Buyer only upon full payment of the entire account as herein provided, and only upon complete performance of all the other conditions herein specified: "3. The Buyer shall keep said property in good condition and properly protected against the elements, at his/its address above-stated, and undertakes that if said property or any part thereof be lost, damaged, or destroyed for any causes, he shall suffer such loss, or repair such damage, it being distinctly understood and agreed that said property remains at Buyer's risk after delivery;" The Court below declared that as the buyer would be liable in case of loss for any cause, such buyer assumed liability even in case of loss by fortuitous event; so it rendered judgment declaring defendant liable for the sun demanded together with interest and attorney's fees. Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1wph1.t In this Court on appeal defendant-appellant argues that inasmuch as the title to the property sold shall vest in the buyer only upon full payment of the price, the loss of the vendor; that the phrase "for any cause" used in paragraph 2 of the agreement may not be interpreted to include a fortuitous event absolutely beyond the control of the appellant; and that although Article 1174 of the new Civil Code recognizes the exception on fortuitous event when the parties to a contract expressly so stipulate, the phrase "for any cause" used in the contract did not indicate any intention of the parties that the loss of the unit due to fortuitous event is to be included within the responsibility of the vendor. In answer to the arguments above set forth the appellee argues that the stipulation in the contract of sale whereby the buyer shall be liable for any loss, damage or destruction for any cause, is not contrary to law, morals or public policy and is specifically authorized to be stipulated upon between the parties by Article 1174 of the Civil Code; that the risk of loss was expressly stipulated to be undertaken by the buyer, even if the title to the property sold remained, also by stipulation, in the vendor; that the terms "any cause" used in the agreement includes a fortuitous event, and an express stipulation making the vendee responsible in such case is valid. We believe that the agreement making the buyer responsible for any loss whatsoever, fortuitous or otherwise, even if the title to the property remains in the vendor, is neither contrary to law, nor to morals or public policy. We have held such stipulation to be legal in the case of Government vs. Amechazurra, 10 Phil. 637 (Tolentino, Commentaries on the Civil Code, Vol. IV, p. 120)and declare it to be based on a sound public policy in conditional sales according to American decisions. "The weight of authority support the rule that where goods are sold and delivered to the vendor under an agreement that the title is to remain in the vendor until payment, the loss or destruction of the property while in the possession of the vendor before payment, without his fault, does not relieve him from the obligation to pay the price, and he, therefore, suffers the loss. In accord with this rule are the provisions of the Uniform Sales Act and the Uniform Conditional Sales Act. There are several basis for this rule. First is the absolute and unconditional nature of the vendee's promise to pay for the goods. The promise is nowise dependent upon the transfer of the absolute title. Second is the fact that the vendor has fully performed his contract and has nothing further to do except receive payment, and the vendee received what he bargained for when he obtained the right of possession and use of the goods and the right to acquire title upon making full payment of the price. A third basis advanced for the rule is the policy of providing an incentive to care properly for the goods, they being exclusively under the control and dominion of the vendee." (47 Am. Jur., pp. 81-82). We, therefore, agree with the trial court that the loss by fire or fortuitous event was expressly agreed in the contract to be borne by the buyer and this express agreement is not contrary to law but sanctioned by it as well as by the demands of sound, public policy. The judgment of the court below is affirmed, with costs against defendant-appellant.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-25885 January 31, 1972 LUZON BROKERAGE CO., INC., plaintiff-appellee, vs. MARITIME BUILDING CO., INC., and MYERS BUILDING CO., INC., defendants, MARITIME BUILDING CO., INC., defendant-appellant. REYES, J.B.L., J.:p Direct appeal (prior to the effectivity of Republic Act 5440) by Maritime Building Co., Inc. from a decision of the Court of First Instance of Manila (in its Civil Case No. 47319), the dispositive part of which provides as follows: FOR ALL THE FOREGOING CONSIDERATIONS, judgment is hereby rendered declaring that the Myers Building Co., Inc. is entitled to receive the rentals which the plaintiff has been paying, including those already deposited in Court, thereby relieving the plaintiff of any obligation to pay the same to any other party, and ordering the Maritime Building Co., Inc. to pay the commission fees paid by the Myers Building Co., Inc. to the Clerk of this Court, plus the sum of P3,000.00 as and for attorney's fees. On the cross-claim by the Myers Building Co., Inc., the Maritima Building Co., Inc. is hereby ordered to pay the Myers Building Co., Inc. the sum of P10,000.00 damages, plus the sum of P30,000.00, representing rentals wrongfully collected by it from the plaintiff corresponding to the months of March, April and May, 1961 and the costs hereof. The antecedents of the litigation are summarized in the appealed judgment thus: This is an action for interpleading. It appears that on April 30, 1949, in the City of Manila, the defendant Myers Building Co., Inc., owner of three parcels of land in the City of Manila, together with the improvements thereon, entered into a contract entitled "Deed of Conditional Sale" in favor of Bary Building Co., Inc., later known as Maritime Building Co., Inc., whereby the former sold the same to the latter for P1,000,000.00, Philippine currency. P50,000.00 of this price was paid upon the execution of the said contract and the parties agreed that the balance of P950,000.00 was to be paid in monthly installments at the rate of P10,000.00 with interest of 5% per annum until the same was fully paid. In Par. (O), they agreed that in case of failure on the part of the vendee to pay any of the installments due and payable, the contract shall be annulled at the option of the vendor and all payments already made by vendee shall be forfeited and the vendor shall have right to re-enter the property and take possession thereof. Later, the monthly installment of P10,000.00 above-stipulated with 5% interest per annum was amended or decreased to P5,000.00 per month and the interest was raised to 5-1/2% per annum. The monthly installments under the contract was regularly paid by the Bary Building Co., Inc. and/or the Maritime Co., Inc. until the end of February, 1961. It failed to pay the monthly installment corresponding to the month of March 1961, for which the Vice-President, George Schedler, of the 14

Maritime Building Co., Inc., wrote a letter to the President of Myers, Mr. C. Parsons, requesting for a moratorium on the monthly payment of the installments until the end of the year 1961, for the reason that the said company was encountering difficulties in connection with the operation of the warehouse business. However, Mr. C. Parsons, in behalf of the Myers Estate, answered that the monthly payments due were not payable to the Myers Estate but to the Myers Building Co., Inc., and that the Board of Directors of the Myers Co., Inc. refused to grant the request for moratorium for suspension of payments under any condition. Notwithstanding the denial of this request for moratorium by the Myers Board of Directors the Maritime Building Co., Inc. failed to pay the monthly installments corresponding to the months of March, April and May, 1961. Whereupon, on May 16, 1961, the Myers Building Co., Inc. made a demand upon the Maritime Building Co., Inc., for the payment of the installments that had become due and payable, which letter, however, was returned unclaimed. Then, on June 5, 1961, the Myers Building Co., Inc. wrote the Maritime Building Co., Inc. another letter advising it of the cancellation of the Deed of Conditional Sale entered into between them and demanding the return of the possession of the properties and holding the Maritime Building Co., Inc. liable for use and occupation of the said properties at P10,000.00 monthly. In the meantime, the Myers Building Co., Inc. demanded upon the Luzon Brokerage Co., Inc. to whom the Maritime Building Co., Inc. leased the properties, the payment of monthly rentals of P10,000.00 and the surrender of the same to it. As a consequence, the Luzon Brokerage Co., Inc. found itself in a payment to the wrong party, filed this action for interpleader against the Maritime Building Co., Inc. After the filing of this action, the Myers Building Co., Inc. in its answer filed a crossclaim against the Maritime Building Co., Inc. praying for the confirmation of its right to cancel the said contract. In the meantime, the contract between the Maritime Building Co., Inc. and the Luzon Brokerage Co., Inc. was extended by mutual agreement for a period of four (4) more years, from April, 1964 to March 31, 1968. The Maritime Building Co., Inc. now contends (1) that the Myers Building Co., Inc. cannot cancel the contract entered into by them for the conditional sale of the properties in question extrajudicially and (2) that it had not failed to pay the monthly installments due under the contract and, therefore, is not guilty of having violated the same. It should be further elucidated that the suspension by the appellant Maritime Building Co., Inc. (hereinafter called Maritime) of the payment of installments due from it to appellee Myers Building Co., Inc. (hereinafter designated as Myers Corporation) arose from an award of backwages made by the Court of Industrial Relations in favor of members of Luzon Labor Union who served the Fil-American forces in Bataan in early 1942 at the instance of the employer Luzon Brokerage Co. and for which F. H. Myers, former majority stockholder of the Luzon Brokerage Co., had allegedly promised to indemnify E. M. Schedler (who controlled Maritime) when the latter purchased Myers' stock in the Brokerage Company. Schedler contended that he was being sued for the backpay award of some P325,000, when it was a liability of Myers, or of the latter's estate upon his death. In his letter to Myers Corporation (Exhibit "11", Maritime) dated 7 April 1961 (two months and ten days before the initial complaint in the case at bar), Schedler claimed the following: At all times when the F. H. Myers Estate was open in the Philippine Islands and open in San Francisco, the Myers Estate or heirs assumed the defense of the Labor Union claims and led us to believe that they would indemnify us therefrom.

Recently, however, for the first time, and after both the Philippine and San Francisco F. H. Myers Estates were closed, we have been notified that the F. H. Myers indemnity on the Labor Union case will not be honored, and in fact Mrs. Schedler and I have been sued in the Philippines by my successor in interest, Mr. Wentholt, and have been put to considerable expense. You are advised that my wife and I, as the owners of the Maritime Building Company, intend to withhold any further payments to Myers Building Company or Estate, in order that we can preserve those funds and assets to set off against the potential liability to which I am now exposed by the failure of the Myers heirs to honor the indemnity agreement pertaining to the Labor claims. The trial court found the position of Schedler indefensible, and that Maritime, by its failure to pay, committed a breach of the sale contract; that Myers Company, from and after the breach, became entitled to terminate the contract, to forfeit the installments paid, as well as to repossess, and collect the rentals of, the building from its lessee, Luzon Brokerage Co., in view of the terms of the conditional contract of sale stipulating that: (d) It is hereby agreed, covenanted and stipulated by and between the parties hereto that the Vendor will execute and deliver to the Vendee a definite or absolute deed of sale upon the full payment by the vendee of the unpaid balance of the purchase price hereinabove stipulated; that should the Vendee fail to pay any of the monthly installments, when due, or otherwise fail to comply with any of the terms and conditions herein stipulated, then this Deed of Conditional Sale shall automatically and without any further formality, become null and void, and all sums so paid by the Vendee by reason thereof, shall be considered as rentals and the Vendor shall then and there be free to enter into the premises, take possession thereof or sell the properties to any other party. xxx xxx xxx (o) In case the Vendee fails to make payment or payments, or any part thereof, as herein provided, or fails to perform any of the covenants or agreements hereof, this contract shall, at the option of the Vendor, be annulled and, in such event, all payments made by the Vendee to the Vendor by virtue of this contract shall be forfeited and retained by the Vendor in full satisfaction of the liquidated damages by said Vendor sustained; and the said Vendor shall have the right to forthwith re-enter, and take possession of, the premises subject-matter of this contract. "The remedy of forfeiture stated in the next-preceding paragraph shall not be exclusive of any other remedy, but the Vendor shall have every other remedy granted it by virtue of this contract, by law, and by equity." From the judgment of the court below, the dispositive portion whereof has been transcribed at the start of this opinion, Myers duly appealed to this Court. The main issue posed by appellant is that there has been no breach of contract by Maritime; and assuming that there was one, that the appellee Myers was not entitled to rescind or resolve the contract without recoursing to judicial process. It is difficult to understand how appellant Maritime can seriously contend that its failure or refusal to pay the P5,000 monthly installments corresponding to the months of March, April and May, 1961 did not constitute a breach of contract with Myers, when said agreement (transcribed in the Record on Appeal, pages 59-71) expressly stipulated that the balance of the purchase price (P950,000) shall be paid at the rate of Ten Thousand Pesos (P10,000) monthly on or before the 10th day of each month with interest at 5% per annum, this amount to be first 15

applied on the interest, and the balance paid to the principal thereof; and the failure to pay any installment or interest when due shallipso facto cause the whole unpaid balance of the principal and interest to be and become immediately due and payable. (Contract, paragraph b; Record on Appeal, page 63) Contrary to appellant Maritime's averments, the default was not made in good faith. The text of the letter to Myers (Exhibit "11", Maritime), heretofore quoted, leaves no doubt that the non-payment of the installments was the result of a deliberate course of action on the part of appellant, designed to coerce the appellee Myers Corporation into answering for an alleged promise of the late F. H. MYERS to indemnify E. W. Schedler, the controlling stock-holder of appellant, for any payments to be made to the members of the Luzon Labor Union. This is apparent also from appellant's letter to his counsel (Exhibit "12", Maritime): ... I do not wish to deposit pesos representing the months of March, April and May, since the Myers refusal to honor the indemnity concerning the labor claims has caused me to disburse (sic) roughly $10,000.00 to date in fees, cost and travel expenses. However, if the Myers people will deposit in trust with Mr. C. Parsons 25,000 pesos to cover my costs to date, I will then deposit with Mr. Parsons, in trust, 15,000 pesos for March, April and May and will also post a monthly deposit of 5,000 pesos until the dispute is settled. The dispute won't be settled in my mind, unless and until: a) The Myers people indemnify me fully the labor cases; b) The labor cases are terminated favorably to Luzon Brokerage and no liability exists; c) The Myers people pay any judgment entered on the labor cases thereby releasing me; or d) It is finally determined either in San Francisco or in the Philippines by a court that the Myers heirs must honor the indemnity which Mr. F. H. Myers promised when I purchased Luzon Brokerage Company. Yet appellant Maritime (assuming that it had validly acquired the claims of its president and controlling stockholder, E. M. Schedler) could not ignore the fact that whatever obligation F. H. Myers or his estate had assumed in favor of Schedler with respect to the Luzon Brokerage labor case was not, and could not have been, an obligation of appellee corporation (Myers Building Company). No proof exists that the board of directors of the Myers Corporation had agreed to assume responsibility for the debts (if any) that the late Myers or his heirs had incurred in favor of Schedler. Not only this, but it is apparent from the letters quoted heretofore that Schedler had allowed the estate proceedings of the late F. M. Myers to close without providing for any contingent liability in Schedler's favor; so that by offsetting the alleged debt of Myers to him, against the balance of the price due under the "Deed of Conditional Sale", appellant Maritime was in fact attempting to burden the Myers Building Company with an uncollectible debt, since enforcement thereof against the estate of F. H. Myers was already barred. Under the circumstances, the action of Maritime in suspending payments to Myers Corporation was a breach of contract tainted with fraud or malice (dolo), as distinguished from mere negligence (culpa), "dolo" being succinctly defined as a "conscious and intentional design to evade the normal fulfillment of existing obligations" (Capistrano, Civil Code of the Philippines, Vol. 3, page 38), and therefore incompatible with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo, Teoria de Obligaciones, Vol. 1, page 116). Maritime having acted in bad faith, it was not entitled to ask the court to give it further time to make payment and thereby erase the default or breach that it had deliberately incurred. Thus the lower court committed no error in refusing to extend the periods for payment. To do otherwise would be to sanction a

deliberate and reiterated infringement of the contractual obligations incurred by Maritime, an attitude repugnant to the stability and obligatory force of contracts. From another point of view, it is irrelevant whether appellant Maritime's infringement of its contract was casual or serious, for as pointed out by this Court in Manuel vs. Rodriguez, 109 Phil. 1, at page 10 The contention of plaintiff-appellant that Payatas Subdivision Inc. had no right to cancel the contract as there was only a "casual breach" is likewise untenable. In contracts to sell, where ownership is retained by the seller and is not to pass until the full payment of the price, such payment, as we said, is a positive suspensive condition, the 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, in accordance with Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case. But it is argued for Maritime that even if it had really violated the Contract of Conditional Sale with Myers, the latter could not extrajudicially rescind or resolve the contract, but must first recourse to the courts. While recognizing that paragraph (d) of the deed of conditional sale expressly provides inter alia that should the Vendee fail to pay any of the monthly installments when due, or otherwise fail to comply with any of the terms and conditions herein stipulated, then this Deed of Conditional Sale shallautomatically and without any further formality, become null and void, and all sums so paid by the Vendee by reason thereof shall be considered as rentals.. (Emphasis supplied) herein appellant Maritime avers that paragraph (e) of the deed contemplates that a suit should be brought in court for a judicial declaration of rescission. The paragraph relied upon by Maritime is couched in the following, terms: (e) It is also hereby agreed, covenanted and stipulated by and between the parties hereto that should the Vendor rescind this Deed of Conditional Sale, for any of the reasons stipulated in the preceding paragraph, the Vendee by these presents obligates itself to peacefully deliver the properties subject of this contract to the Vendor, and in the event that the Vendee refuses to peacefully deliver the possession of the properties subject of this contract to the Vendor in case of rescission, and a suit should be brought in court by the Vendor to seek judicial declaration of rescission and take possession of the properties subject of this contract, the Vendee hereby obligates itself to pay all the expenses to be incurred by reason of such suit and in addition obligates itself to pay the sum of P10,000.00, in concept of damages, penalty and attorney's fees. Correlation of this paragraph (e) with the preceding paragraph (d) of the Deed of Conditional Sale (quoted in page 5 of this opinion) reveals no incompatibility between the two; and the suit to "be brought in Court by the Vendor to seek judicial declaration of rescission" is provided for by paragraph(e) only in the eventuality that, notwithstanding the automatic annulment of the deed under paragraph (d), the Vendee "refuses to peacefully deliver the possession of the properties subject of this contract". The step contemplated is logical since the Vendor can not, by himself, dispossess the Vendee manu militari, if the latter should refuse to vacate despite the violation of the contract, since no party can take the law in his own hands. But the bringing of such an action in no way contradicts or restricts the automatic termination of the contract in case the Vendee (i.e., appellant Maritime) should not comply with the agreement. Anyway, this Court has repeatedly held that Well settled is, however, the rule that a judicial action for the rescission of a contract is not necessary where the contract provides that it may be revoked and cancelled 16

for violation of any of its terms and conditions" (Lopez vs. Commissioner of Customs, L-28235, 30 January 1971, 37 SCRA 327, 334,, and cases cited therein). 1 (Emphasis supplied.) Resort to judicial action for rescission is obviously not contemplated.... The validity of the stipulation can not be seriously disputed. It is in the nature of a facultative resolutory condition which in many cases has been upheld by this Court. (Ponce Enrile vs. Court of Appeals, L-27549, 30 Sept. 1969; 29 SCRA 504). The obvious remedy of the party opposing the rescission for any reason being to file the corresponding action to question the rescission and enforce the agreement, as indicated in our decision in University of the Philippines vs. Walfrido de los Angeles, L-28602, 29 September 1970, 35 SCRA 107. Of course, it must be understood that the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court. Then, should the court, after due hearing, decide that the resolution of the contract was not warranted, the responsible party will be sentenced to damages; in the contrary case, the resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced. In other words, the party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. 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 the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages (Civil Code, Article 2203). Maritime likewise invokes Article 1592 of the Civil Code of the Philippines as entitling it to pay despite its default: ART. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. Assuming arguendo that Article 1592 is applicable, the cross-claim filed by Myers against Maritime in the court below constituted a judicial demand for rescission that satisfies the requirements of said article. But even if it were not so, appellant overlooks that its contract with appellee Myers is not the ordinary sale envisaged by Article 1592, transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor retained ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer strictly complied with the terms of the contract (see paragraph [d], ante, page 5). In suing to recover possession of the building from Maritime, appellee Myers is not after the resolution or setting aside of the contract and the restoration of the parties to the status quo ante, as contemplated by Article 1592, but precisely enforcing the provisions of the agreement that it is no

longer obligated to part with the ownership or possession of the property because Maritime failed to comply with the specified condition precedent, which is to pay the installments as they fell due. The distinction between contracts of sale and contract to sell with reserved title has been recognized by this Court in repeated decisions 2 upholding the power of promisors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums or installments already received, where such rights are expressly provided for, as in the case at bar. Maritime's appeal that it would be iniquituous that it should be compelled to forfeit the P973,000 already paid to Myers, as a result of its failure to make good a balance of only P319,300.65, payable at P5,000 monthly, becomes unimpressive when it is considered that while obligated to pay the price of one million pesos at P5,000 monthly, plus interest, Maritime, on the other hand, had leased the building to Luzon Brokerage, Inc. since 1949; and Luzon paid P13,000 a month rent, from September, 1951 to August 1956, and thereafter until 1961, at P10,000 a month, thus paying a total of around one and a half million pesos in rentals to Maritime. Even adding to Maritime's losses of P973,000 the P10,000 damages and P3,000 attorneys' fees awarded by the trial court, it is undeniable that appellant Maritime has come out of the entire transaction still at a profit to itself. There remains the procedural objection raised by appellant Maritime to this interpleader action filed by the Luzon Brokerage Co., the lessee of the building conditionally sold by Myers to Maritime. It should be recalled that when Maritime defaulted in its payments to Myers, and the latter notified the former that it was cancelling the contract of conditional sale, Myers also notified Luzon Brokerage, Maritime's lessee of the building, of the cancellation of the sale, and demanded that Luzon should pay to Myers the rentals of the building beginning from June, 1961, under penalty of ejectment (Record on Appeal, pages 14-15). In doubt as to who was entitled to the rentals, Luzon filed this action for interpleader against Myers and Maritime, and deposited the rentals in court as they fell due. The appellant Maritime moved to dismiss on the ground that (a) Luzon could not entertain doubts as to whom the rentals should be paid since Luzon had leased the building from Maritime since 1949, renewing the contract from time to time, and Myers had no right to cancel the lease; and (b) that Luzon was not a disinterested party, since it tended to favor appellee Myers. The court below overruled Maritime's objections and We see no plausible reason to overturn the order. While Myers was not a party to the lease, its cancellation of the conditional sale of the premises to Maritime, Luzon's lessor, could not but raise reasonable doubts as to the continuation of the lease, for the termination of the lessor's right of possession of the premises necessarily ended its right to the rentals falling due thereafter. The preceding portion of our opinion is conclusive that Luzon's doubts were grounded under the law and the jurisprudence of this Court. No adequate proof exists that Luzon was favoring any one of the contending parties. It was interested in being protected against prejudice deriving from the result of the controversy, regardless of who should win. For the purpose it was simpler for Luzon to compel the disputants to litigate between themselves, rather than chance being sued by Myers, and later being compelled to proceed against Maritime to recoup its losses. In any event, Maritime ultimately confirmed the act of Luzon in suing for interpleader, by agreeing to renew Luzon's lease in 1963 during the pendency of the present action, and authorizing Luzon to continue depositing the rentals in court "until otherwise directed by a court of competent jurisdiction" (Exhibit "18-Maritime"). The procedural objection has thus become moot. PREMISES CONSIDERED, the appealed decision should be, and hereby is, affirmed, and appellant Maritime Building Co., as well as appellee Luzon Brokerage Co., are further ordered to surrender the premises to the appellee Myers Building Co. Costs against appellant.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-11668 April 1, 1918 ANTONIO ENRIQUEZ DE LA CAVADA, plaintiff-appellee, vs. ANTONIO DIAZ, defendant-appellant. Ramon Diokno for appellant. Alfredo Chicote and Jose Arnaiz for appellee. JOHNSON, J.: This action was instituted by the plaintiff for the purpose of requiring the defendant to comply with a certain "contract of option" to purchase a certain piece or parcel of land described in said contract and for damages for a noncompliance with said contract. After the close of the trial the Honorable James A. Ostrand, judge, rendered a judgment the dispositive part of which is as follows: Wherefore, it is hereby ordered and adjudged that the defendant, within the period of thirty days from the date upon which this decision becomes final, convey to the plaintiff a good and sufficient title in fee simple to the land described in decrees Nos. 13909 and 13919 of the Court of Land Registration, upon payment or legal tender of payment by said plaintiff of the sum of thirty thousand pesos (P30,000) in cash, and upon said plaintiff giving security approved by this court for the payment within the term of 6 years from the date of the conveyance for the additional sum of forty thousand pesos (P40,000) with interest at the rate of 6 per cent per annum. It is further ordered and adjudged that in the event of the failure of the defendant to execute the conveyance as aforesaid, the plaintiff have and recover judgment against him, the said defendant, for the sum of twenty thousand pesos (P20,000), with interest at the rate of six per cent (6 per cent per annum from the date upon which the conveyance should have been made). It is so ordered. From that judgment the defendant appealed and made several assignment of error. It appears from the record that on the 15th day of November, 1912, the defendant and the plaintiff entered into the following "contract of option:" (EXHIBIT A.) CONTRACT OF OPTION. I, the undersigned, Antonio Diaz, of legal age, with personal registration certificate Number F855949, issued at Pitogo, Tayabas, January 16, 1912, and temporarily residing in Manila, P. I., do hereby grant an option to Antonio Enriquez to purchase my hacienda at Pitogo consisting of 100 and odd hectares, within the period necessary for the approval and issuance of a Torrens title thereto by the Government for which he may pay me either the sum of thirty thousand pesos (P30,000), Philippine currency, in cash, or within the period of six (6) years, beginning with the date of the purchase, the sum of forty thousand pesos (P40,000), Philippine currency, at six per cent interest per annum, with due security for the payment of the said P40,000 in consideration of the sale to him of my property described as follows, to wit:

17

About one hundred hectares of land in Pitogo, Tayabas, containing about 20,000 coconut trees and 10,000 nipa-palm trees, all belonging to me, which I hereby sell to Antonio Enriquez de la Cavada for seventy thousand pesos, under the conditions herein specified. I declare that Antonio Enriquez is the sole person who has, and shall have, during the period of this option, the right to purchase the property above-mentioned. I likewise declare that Antonio Enriquez shall be free to resell the said property at whatever price he may desire, provided that he should comply with the stipulations covenanted with me. In witness of my entire conformity with the foregoing, I hereunto affix my signature, in Manila, P. I., this 15th day of November, 1912. (Sgd.) Antonio Diaz. Signed in the presence of: (Sgd.) J. VALDS DIAZ. (EXHIBIT B.) P. I., November 15, 1912. Sr. Don ANTONIO DIAZ, Calle Victoria, No. 125, W. C., Manila, P. I. DEAR SIR: I have the honor to inform you that, in conformity with the letter of option in my favor of even date, I will buy your coconut plantation in Pitogo, containing one hundred hectares, together with all the coconut and nipa-palm trees planted thereon, under the following conditions: 1. I shall send a surveyor to survey the said property, and to apply to the Government for a Torrens title therefore, and, if the expenses incurred for the same should not exceed P1,000, I shall pay the P500 and you the other P500; Provided, however, that you shall give the surveyor all necessary assistance during his stay at the hacienda. 2. I shall pay the purchase price to you in conformity with our letter of option of this date, and after the Torrens title shall have been officially approved. Yours respectfully, (Sgd.) A. ENRIQUEZ I acknowledge receipt of, and conform with, the foregoing. (Sgd.) ANTONIO DIAZ It appears from the record that soon after the execution of said contract, and in part compliance with the terms thereof, the defendant presented two petitions in the Court of Land Registration (Nos. 13909 and 13919), each for the purpose of obtaining the registration of a part of the "Hacienda de Pitogo." Said petitions were granted, and each parcel as registered and a certificate of title was issued for each part under the Torrens system to the defendant herein. Later, and pretending to comply with the terms of said contract, the defendant offered to transfer to the plaintiff one of said parcels only, which was a part of said "hacienda." The plaintiff refused to accept said certificate for a part only of said "hacienda" upon the ground (a) that it was only a part of the "Hacienda de Pitogo," and (b) under the contract (Exhibits A and B) he was entitled to a transfer to him all said "hacienda." The theory of the defendant is that the contract of sale of said "Hacienda de Pitogo" included only 100 hectares, more or less, of said "hacienda," and that by offering to convey to the plaintiff a portion of said 18

"hacienda" composed of "100 hectares, more or less," he thereby complied with the terms of the contract. The theory of the plaintiff is that he had purchased all of said "hacienda," and that the same contained, at least, 100 hectares, more or less. The lower court sustained the contention of the plaintiff, to wit, that the sale was a sale of the "Hacienda de Pitogo" and not a sale of a part of it, and rendered a judgment requiring the defendant to comply with the terms of the contract by transferring to the plaintiff, by proper deeds of conveyance, all said "hacienda," or to pay in lieu thereof the sum of P20,000 damages, together with 6 per cent interest from the date upon which said conveyance should have been made. After issue had been joined between the plaintiff and defendant upon their pleadings, they entered into the following agreement with reference to the method of presenting their proof: The attorneys for the parties in this case make the following stipulations: 1. Each of the litigating parties shall present his evidence before Don Felipe Canillas, assistant clerk of the Court of First Instance of Manila, who, for such purpose, should be appointed commissioner. 2. Said commissioner shall set a day and hour for the presentation of the evidence abovementioned, both oral and documentary, and in the stenographic notes shall have record entered of all objections made to the evidence by either party, in order that they may afterwards be decided by the court. 3. The transcription of the stenographic notes, containing the record of the evidence taken, shall be paid for in equal shares by both parties. 4. At the close of the taking of the evidence, each of the parties shall file his brief in respect to such evidence, whereupon the case as it then stands shall be submitted to the decision of the court. The parties request the court to approve this agreement in the part thereof which refers to the proceedings in this case. Manila, P. I., December 21, 1914. (Sgd.) ANTONIO V. HERRERO. Approved: (Sgd.) GEO. R. HARVEY, Judge. Said agreement was approved by the lower court, and proof was taken in accordance therewith. The defendant-appellant now alleges, giving several reasons therefor, that the proof was improperly practiced, and that the judge was without authority o decide the cause upon proof taken in the manner agreed upon by the respective parties. The defendant-appellant makes no contention that he was not permitted to present all the proof he desired to present. He makes no contention that he has been prejudiced in any manner whatsoever by virtue of the method agreed upon for taking the testimony. There is nothing in the law nor in public policy which prohibits the parties in a civil litigation from making the agreement above quoted. While the law concedes to parties litigant, generally, the right to have their proof taken in the presence of the judge, such right is a renounceable one. In a civil action the parties litigant have a right to agree, outside of the court, upon the facts in litigation. Under certain conditions the parties litigant have a right to take the depositions of witnesses and submit the sworn statements in that form to the court. The proof, as it was submitted to the court in the present case, by virtue of said agreement, was, in effect, in the form of a deposition of the various witnesses presented. Having agreed to the method of taking the proof, and the same having been taking in compliance with said agreement, it (Sgd.) ALFREDO CHICOTE.

is now too late, there being no law to the contrary, for them to deny and repudiate the effect of their agreement. (Biunas vs. Mora, R. G. No. 11464, March 11, 1918; Behr vs. Levy Hermanos, R. G. No 12211, March 19, 1918.1) Not only is there no law prohibiting the parties from entering into an agreement to submit their proof to the court in civil actions as was done in the present case, but it may be a method highly convenient, not only to the parties, but to busy courts. The judgment of the lower court, therefore, should not be modified or reversed on account of the first assignment of error. In the second assignment of error, the appellant alleges (a) that the lower court committed an error in declaring the contract (Exhibits A and B) a valid obligation, for the reason that it not been admitted in evidence, and (b) that the same was null for a failure of consideration. Upon the first question, an examination of the proof shows that said contract (Exhibits A and B) was offered in evidence and admitted as proof without objection. Said contract was, therefore, properly presented to the court as proof. Not only was the contract before the court by reason of its having been presented in evidence, but the defendant himself made said contract an integral part of his pleadings. The defendant admitted the execution and delivery of the contract, and alleged that he made an effort to comply with its terms. His only defense is that he sold to the plaintiff a part of the "hacienda" only and that he offered, in compliance with the terms of the contract, to convey to the plaintiff all of the land which he had promised to sell. With reference to the second objection, to wit, that there was no consideration for said contract it may be said (a) that the contract was for the sale of a definite parcel of land; (b) that it was reduced to writing; (c) that the defendant promised to convey to the plaintiff said parcel of land; (d) that the plaintiff promised to pay therefor the sum of P70,000 in the manner prescribed in said contract; (e) that the defendant admitted the execution and delivery of the contract and alleged that he made an effort to comply with the same (par. 3 of defendant's answer) and requested the plaintiff to comply with his part of the contract; and (f) that no defense or pretension was made in the lower court that there was no consideration for his contract. Having admitted the execution and delivery of the contract, having admitted an attempt to comply with its terms, and having failed in the court below to raise any question whatsoever concerning the inadequacy of consideration, it is rather late, in the face of said admissions, to raise that question for the first time in this court. The only dispute between the parties in the lower court was whether or not the defendant was obliged to convey to the plaintiff all of said "hacienda." The plaintiff insisted that his contract entitled him to a conveyance of all of said "hacienda." The defendant contended that he had complied with the terms of his contract by offering to convey to the plaintiff a part of the said "hacienda" only. That was the only question presented to the lower court and that was the only question decided. A promise made by one party, if made in accordance with the forms required by the law, may be a good consideration (causa) for a promise made by another party. (Art. 1274, Civil Code.) In other words, the consideration (causa) need not pass from one to the other at the time the contract is entered into. For example, A promises to sell a certain parcel of land to B for the sum of P70,000. A, by virtue of the promise of B to pay P70,000, promises to sell said parcel of land to B for said sum, then the contract is complete, provided they have complied with the forms required by the law. The consideration need not be paid at the time of the promise. The one promise is a consideration for the other. Of course, A cannot enforce a compliance with the contract and require B to pay said sum until he has complied with his part of the contract. In the present case, the defendant promised to convey the land in question to the plaintiff as soon as the same could be registered. The plaintiff promised to pay to the defendant P70,000 therefor in accordance with the terms of their contract. The plaintiff stood ready to comply with his part of the contract. The defendant, even though he had obtained a registered title to said parcel of land, refused to comply with his promise. All of the conditions of the contract on the part of the defendant had been concluded, except delivering the deeds of transfer. Of course, if the defendant had been unable to obtain a registration of his title, or if he had violated the terms of the alleged optional contract by selling the same to some other person than the plaintiff, then he might have raised the objection that he had received nothing from the plaintiff for the option which he had conceded. That condition, of course, would have presented a different question from the one which we have before us. The said contract (Exhibits A and 19

B) was not, in fact, an "optional contract" as that phrase is generally used. Reading the said contract from its four corners it is clearly as absolute promise to sell a definite parcel of land for a fixed price upon definite conditions. The defendant promised to convey to the plaintiff the land in question as soon as the same was registered under the Torrens system, and the plaintiff promised to pay to the defendant the sum of P70,000, under the conditions named, upon the happening of that event. The contract was not, in fact, what is generally known as a "contract of option." It differs very essentially from a contract of option. An optional contract is a privilege existing in one person, for which he had paid a consideration, which gives him the right to buy, for example, certain merchandise of certain specified property, from another person, if he chooses, at any time within the agreed period, at a fixed price. The contract of option is a separate and distinct contract from the contract which the parties may enter into upon the consummation of the option. A consideration for an optional contract is just as important as the consideration for any other kind of contract. If there was no consideration for the contract of option, then it cannot be entered any more than any other contract where no consideration exists. To illustrate, A offers B the sum of P100,000 for the option of buying his property within the period of 30 days. While it is true that the conditions upon which A promises to buy the property at the end of the period mentioned are usually fixed in the option, the consideration for the option is an entirely different consideration from the consideration of the contract with reference to which the option exists. A contract of option is a contract by virtue of the terms of which the parties thereto promise and obligate themselves to enter into contract at a future time, upon the happening of certain events, or the fulfillment of certain conditions. Upon the other hand, suppose that the defendant had complied with his part of the contract and had tendered the deeds of transfer of the "Hacienda de Pitogo" in accordance with its terms and had demanded the payments specified in the contract, and the plaintiff refused to comply what then would have been the rights of the defendant? Might he not have successfully maintained an action for the specific performance of the contract, or for the damages resulting from the breach of said contract? When the defendant alleged that he had complied with his part of the contract (par. 3 of defendant's answer) and demanded that the plaintiff should immediately comply with his part of the same, he evidently was laying the foundation for an action for damages, the nullification or a specific compliance with the contract. The appellant contends that the contract which he made was not with the plaintiff but with Rosenstock, Elser and Co. That question was not presented in the court below. The contract in question shows, upon its face, that the defendant made the same with the plaintiff, Not having raised the question in the court below, and having admitted the execution and delivery of the contract in question with the plaintiff, we are of the opinion that his admission is conclusive upon that question (par. 1 of special defense of defendant's answer) and need not be further discussed. The appellant further contends that the action was premature, for the reason that the plaintiff had not paid nor offered to pay the price agreed upon, under the conditions named, for the land in question. That question was not raised in the court below, which fact, ordinarily, would be a sufficient answer to the contention of the appellant. It may be added, however, that the defendant could not demand the payment until he had offered the deeds of conveyance, in accordance with the terms of his contract. He did not offer to comply with the terms of his contract. True it is that he offered to comply partially with the terms of the contract, but not fully. While the payment must be simultaneous with the delivery of the deeds of conveyance, the payment need not be made until the deed of conveyance is offered. The plaintiff stood ready and willing to perform his part of the contract immediately upon the performance on the part of the defendant. (Arts. 1258 and 1451 of Civil Code.) In the fifth assignment of error the appellant contends that the lower court committed an error in not declaring that the defendant was not obligated to sell the "Hacienda de Pitogo" to the plaintiff "por incumplimiento, renuncia abandono y negligencia del mismo demandante, etc." (For nonfulfillment, renunciation, abandonment and negligence of plaintiff himself, etc.) That question was not presented to the court below. But even though it had been the record shows that the plaintiff, at all times, insisted upon

a compliance with the terms of the contract on the part of the defendant, standing ready to comply with his part of the same. The appellant contends in his sixth assignment of error that the plaintiff had not suffered the damages complained of, to wit, in the sum of P20,000. The only proof upon the question of damages suffered by the plaintiff for the noncompliance with the terms of the contract in question on the part of the defendant is that the plaintiff, in contemplation of the compliance with the terms of the contract on the part of the defendant, entered into a contract with a third party to sell the said "hacienda" at a profit of P30,000. That proof is not disputed. No attempt was made in the lower court to deny that fact. The proof shows that the person with whom the plaintiff had entered into a conditional sale of the land in question had made a deposit for the purpose of guaranteeing the final consummation of that contract. By reason of the failure of the defendant to comply with the contract here in question, the plaintiff was obliged to return the sum deposited by said third party with a promise to pay damages. The record does not show why the plaintiff did not ask for damages in the sum of P30,000. He asked for a judgment only in the sum of P20,000. He now asks that the judgment of the lower court be modified and that he be given a judgment for P30,000. Considering the fact that he neither asked for a judgment for more than P20,000 nor appealed from the judgment of the lower court, his request now cannot be granted. We find no reason for modifying the judgment of the lower court by virtue of the sixth assignment of error. In the seventh assignment of error the appellant contends that the contract of sale was not in effect a contract of sale. He alleges that the contract was, in fact, a contract by virtue of which the plaintiff promised to find a buyer for the parcel of land in question; that the plaintiff was not in fact the purchaser; that the only obligation that the plaintiff assumed was to find some third person who would purchase the land from the defendant. Again, it would be sufficient to say, in answer to that assignment of error, that no contention of that nature was presented in the court below, and for that reason it is improperly presented now for the first time. In addition, however, it may be added that the defendant, in his answer, admitted that he not only sold the land in question, but offered to transfer the same to the plaintiff, in compliance with the contract. (See answer of defendant.) In the eighth assignment of error the appellant contends that the lower court committed an error in its order requiring him to convey to the plaintiff the "Hacienda de Pitogo," for the reason that the plaintiff had not demanded a transfer of said property, and for the additional reason that a portion of said "hacienda" had already been sold to a third person. With reference to the first contention, the record clearly shows that the plaintiff was constantly insisting upon a compliance with the terms of the contract, to wit, a conveyance to him of the "Hacienda de Pitogo" by the defendant. Naturally, he refused, under the contract, to accept a conveyance of a part only of said "hacienda." With reference to the second contention, it may be said that the mere fact that the defendant had sold a part of the "hacienda" to other persons, is no sufficient reason for not requiring a strict compliance with the terms of his contract with the plaintiff, or to answer in damages for his failure. (Arts. 1101 and 1252 of the Civil Code.) In view of the foregoing, and after a consideration of the facts and the law applicable thereto, we are persuaded that there is no reason given in the record justifying a modification or reversal of the judgment of the lower court. The same is, however, hereby affirmed, with costs. So ordered.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 141851 January 16, 2002 DIRECT FUNDERS HOLDINGS CORPORATION, petitioner, vs. JUDGE CELSO D. LAVIA, PRESIDING JUDGE OF RTC-Pasig City, Branch 71 and KAMBIAK Y. CHAN, JR.,respondents. PARDO, J.: The petition at bar1 seeks to review the decision2 of the Court of Appeals3 dismissing the petition assailing the ruling of the trial court issuing a writ of preliminary injunction that restrained a writ of possession issued by a coordinate court.4 The Facts The facts, as found by the Court of Appeals, are as follows: "It is alleged by the petitioner that the respondent Judge issued the writ of preliminary injunction, despite clear and express prayer in the Amended Complaint (Rollo, p. 23) that private respondent Kambiak Y. Chan, Jr. sought the issuance of a writ of preliminary mandatory injunction. This is again despite the fact this error was brought to respondent Judge's attention denied the Motion for Reconsideration on May 29, 1998 justifying the issuance thereof due to petitioner's alleged misappreciation of facts and reliefs sought for. "Culled from the records of the case, the action a quo is for annulment of documents, reconveyance, recovery of possession, damages with application for the issuance of a writ of preliminary mandatory injunction and temporary restraining order.1wphi1.nt "During the hearing for the issuance of temporary restraining order, it was made clear to the respondent Judge that the property in question was occupied by the petitioner by virtue of a writ of possession issued by the Regional Trial Court of Pasig, Branch 157 in LRC Case No. R5475 in a petition for the issuance of writ of possession thereof way back on October 23, 1997 (Rollo, p. 22). Despite the lawful order of a coordinate and co-equal court, the respondent Judge, presiding Regional Trial Court of Pasig, Branch 71, issued the questioned orders to restore possession to private respondent Chan, alleging an obviously grave abuse of discretion, tantamount to lack of jurisdiction (Rollo, p. 38). "On the same date on December 8, 1997, the temporary restraining order (TRO) was issued, the Court Sheriff IV Cresencio Rabello, Jr. implemented the TRO and submitted the Return on December 9, 1997 (Rollo, p. 39). "Then, on January 21, 1998, the respondent Judge issued the questioned order granting the issuance of a writ of preliminary injunction (Rollo, p. 14) who subsequently denied the petitioner's motion to dismiss and supplemental motion to dismiss and the very urgent motion for reconsideration on February 16, 1998. "On May 29, 1998, the motion for inhibition and the motion to dissolve the writ of preliminary injunction were also denied (Rollo, p. 18)."15 On August 5, 1998, petitioner filed with the Court of Appeals a petition for certiorari and prohibition assailing the trial court's issuance of a writ of preliminary injunction.6 20

On September 28, 1999, the Court of Appeals promulgated a decision dismissing the petition ruling that the trial court jurisdiction to issue the injunction that did not interfere with the writ of possession of a coordinate court.7 On October 19, 1999, petitioner filed with the Court of Appeals a motion for reconsideration of the decision.8 On February 2, 2000, the Court of Appeals denied petitioner's motion stating that the arguments advanced were "mere reiteration and restatements of those contained in their pleadings x x x."9 Hence, this appeal.10 The Issue The issue raised is whether the Court of Appeals erred in affirming the trial court's ruling issuing a writ of injunction restraining a writ of possession in another case to place respondent back in possession of the subject property. In other words, the issue is who between petitioner and respondent Kambiak Y. Chan, Jr. has a better right to the possession of the subject property? The Court's Ruling We resolve the issue in favor of petitioner. The conditional sale agreement was the only document that the respondent presented during the summary hearing of the application for a temporary restraining order before the Regional Trial Court, Branch 71, Pasig City.11 We find that the conditional sale agreement is officious and ineffectual. First, it was not consummated. Second, it was not registered and duly annotated on the Transfer Certificate of Title (No. 12357) covering the subject property. Third, it was executed about eight (8) years after the execution of the real estate mortgage over the subject property.1wphi1.nt To emphasize, the mortgagee (United Savings Bank) did not give its consent to the change of debtor. It is a fundamental axiom in the law on contracts that a person not a party to an agreement cannot be affected thereby. Worse, not only was the conditional sale agreement executed without the consent of the mortgagee-creditor, United Savings Bank, the same was also a material breach of the stipulations of the real estate mortgage over the subject property. The real estate mortgage, in part, provides: "(j) The MORTGAGOR shall neither lease the mortgaged property/ies, nor sell or dispose of the same in any manner, without the written consent of the MORTGAGEE. However, if notwithstanding this stipulation and during the existence of this mortgage, the property/ies herein mortgaged, or any portion thereof, is/are leased or sold, x x x. It shall also be incumbent upon the MORTGAGOR to make it a condition of the sale or alienation that the vendee, or any other party in whose favor the alienation is made, shall recognize as first lien the existing mortgage or encumbrance in favor of the MORTGAGEE, as well as any new modified mortgage covering the same properties to be executed by said MORTGAGOR in favor of the MORTGAGEE, and shall thereafter agree, promise and bind himself to recognize and respect any extension of the terms of the original mortgage granted by the MORTGAGEE in favor of the MORTGAGOR and such extended mortgage shall be considered as prior to such encumbrance as the original mortgage. It is also further understood that should the MORTGAGOR sell, transfer or in any manner alienate or encumber the mortgaged property/ies in violation of this agreement, he/she shall be liable for damages to the MORTGAGEE."12 The conditions of the conditional sale agreement were not fulfilled, hence, respondent's claim to the subject property was as heretofore stated ineffectual. Article 1181 of the Civil Code reads: 21

"Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishments or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition." On the other hand, petitioner's right to the subject property is based on the following: 1. The real estate mortgage constituted by the Sps. Espino duly registered and annotated on TCT No. 12357 covering the subject property. 2. The Deed of Assignment dated 15 January 1997 executed by UCPB Savings Bank (formerly United Savings Bank) whereby it conveyed its rights as mortgagee in favor of the petitioner. 3. The Deed of Assignment of Right of Redemption dated 15 January 1997, executed by the Sps. Espino wherein they assigned their right of redemption over the subject property to UCPB Savings Bank and the latter's successors-in-interest. 4. The Certificate of Sale dated 29 May 1997 executed by the sheriff, the affidavit of consolidation of ownership dated July 1997 (denominated as Doc. No. 490; Page No. 99. Book No. CLVII, Series of 1997 in the Notarial Books of Erlinda B. Espejo, Notary Public for Quezon City) and TCT No. 8559-R subsequently issued to Petitioner. 5. The Order dated 23 October 1997 of Branch 157, RTC, Pasig City (LRC No. R-5475) and the Turn-over/Delivery of Possession of the sheriff in the said LRC case. In Soriano v. Bautista,13 the Deed of Real Estate Mortgage dated May 30, 1956 executed by the mortgagors contained a stipulation giving the mortgagee the option to purchase the land subject of the mortgage on any date within the 2-year period of the mortgage. The mortgagee subsequently decided to buy the land pursuant to this stipulation. We ruled: "Appellants contend that, being mortgagors, they cannot be deprived of the right to redeem the mortgaged property, because such right is inherent in and inseparable from this kind of contract. The premise of the contention is not entirely accurate. While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning redemption, it carries the added special provision aforequoted, which renders the mortgagors' right to redeem defeasible at the election of the mortgages. There is nothing illegal or immoral in this. It is simply an option to buy, sanctioned by Article 1479 of the Civil Code, which states: "A promise to buy and sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price."14 In view of all of the foregoing, it is inexorable to conclude that petitioner, not the respondent, has a better right to the possession of subject property. The Judgment WHEREFORE, the Court hereby REVERSES the decision of the Court of Appeals15 and the order denying reconsideration. In lieu thereof, the Court renders judgment dismissing the case below, Civil Case No. 66554 of the Regional Trial Court, Branch 71, Pasig City, including the counterclaims. No costs. SO ORDERED.

THIRD DIVISION [G.R. No. 112330. August 17, 1999] SPS. HENRY CO AND ELIZABETH CO AND MELODY CO, petitioners, vs. COURT OF APPEALS AND MRS. ADORACION CUSTODIO, represented by her Attorney-in-fact, TRINIDAD KALAGAYAN, respondents. DECISION GONZAGA-REYES, J.: Before us is a Petition for Review on Certiorari of the decision of the Court of Appeals[1] in CA-G.R. CV No. 32972 entitled MRS. ADORACION CUSTODIO, represented by her Attorney-in-fact, TRINIDAD KALAGAYAN vs. SPS. HENRY CO AND ELIZABETH CO AND MELODY CO. The following facts as found by the lower court and adopted by the Court of Appeals are undisputed: xxx sometime on October 9, 1984, plaintiff entered into a verbal contract with defendant for her purchase of the latters house and lot located at 316 Beata St., New Alabang Village, Muntinlupa, Metro Manila, for and in consideration of the sum of $100,000.00. One week thereafter, and shortly before she left for the United States, plaintiff paid to the defendants the amounts of $1,000.00 and P40,000.00 as earnest money, in order that the same may be reserved for her purchase, said earnest money to be deducted from the total purchase price. The purchase price of $100,000.00 is payable in two payments $40,000.00 on December 4, 1984 and the balance of $60,000.00 on January 5, 1985. On January 25, 1985, although the period of payment had already expired, plaintiff paid to the defendant Melody Co in the United States, the sum of $30,000.00, as partial payment of the purchase price. Defendants counsel, Atty. Leopoldo Cotaco, wrote a letter to the plaintiff dated March 15, 1985, demanding that she pay the balance of $70,000.00 and not receiving any response thereto, said lawyer wrote another letter to plaintiff dated August 8, 1986, informing her that she has lost her option to purchase the property subject of this case and offered to sell her another property. Under date of September 5 (1986), Atty. Estrella O. Laysa, counsel for plaintiff, wrote a letter to Atty. Leopoldo Cotaco informing him that plaintiff is now ready to pay the remaining balance to complete the sum of $100,000.00, the agreed amount as selling price and on October 24, 1986, plaintiff filed the instant complaint.[2] The Regional Trial Court (RTC) ruled in favor of private respondent Adoracion Custodio (CUSTODIO) and ordered the petitioner spouses Henry and Elizabeth Co (COS) to refund the amount of $30,000.00 in CUSTODIOs favor. The dispositive portion of the RTCs decision reads: WHEREFORE, the Court hereby orders: 1. that the earnest money of $1,000.00 and P40,000.00 is hereby forfeited in favor of the defendants, and 2. the defendants are ordered to remit to plaintiff the peso equivalent of THIRTY THOUSAND ($30,000.00) U.S. DOLLARS, at the prevailing rate of exchange at the time of payment. Costs against plaintiff. SO ORDERED.[3] Not satisfied with the decision, the COS appealed to the Court of Appeals which affirmed the decision of the RTC. Hence, this appeal where the COS assign as sole error the following:

PETITIONER RESPECTFULLY SUBMITS THAT RESPONDENT COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW AND THE APPLICABLE DECISIONS OF THE SUPREME COURT.[4] The COS argue that the Court of Appeals erred in ruling that CUSTODIO could still exercise her option to pay the balance of the purchase price of the property. The COS claim that CUSTODIO was in default since she failed to pay after a demand was made by the petitioners in their March 15, 1985 letter[5]. The COS claim that they never granted CUSTODIO an extension of time to exercise the option contrary to the finding of the Court of Appeals that a thirty (30) day period of time was granted to her in their August 8, 1986 letter[6]. Said period refers to another option which the COS gave CUSTODIO to buy another piece of property and not the Beata property as they could no longer hold the Beata property for CUSTODIO. In fact, said letter specifically states that CUSTODIO lost her option to purchase the subject property; that the COS were willing to apply the payments already made to the payment of the second property; and that if CUSTODIO failed to purchase the second property within thirty (30) days, she would forfeit her previous payments. Since CUSTODIO manifested her readiness to exercise her option to pay the balance of the purchase price of the Beata property and not the second property, her manifestation was no longer of any legal effect as this option was no longer available to her. This being the case, the Court of Appeals should have ruled that the COS properly rescinded their contract with CUSTODIO over the Beata property pursuant to Article 1191[7] of the Civil Code and should have further ordered her to pay them damages consequent to the rescission. Moreover, even assuming that they waived the deadline by accepting the payment of $30,000.00 on January 26, 1986, CUSTODIO still failed to pay the remaining balance of $70,000.00. Her offer to pay the remaining balance came too late as the option given to her had already been lost. In addition, the Court of Appeals also erred in ordering the COS to return the $30,000.00 dollars since the August 8, 1986 letter warned CUSTODIO that if the she did not exercise her option within thirty days, she would lose her option and other rights and any payments made shall be forfeited. Finally, the COS claim that the Court of Appeals erred in not granting them attorneys fees when the law allows recovery therefor considering that by the defendants act or omission, the plaintiff is compelled to litigate with third persons or to incur expenses to protect his rights.[8] The core issue is whether or not the Court of Appeals erred in ordering the COS to return the $30,000.00 paid by CUSTODIO pursuant to the option granted to her over the Beata property? We rule in the negative. The COS main argument is that CUSTODIO lost her option over the Beata property and her failure to exercise said option resulted in the forfeiture of any amounts paid by her pursuant to the August letter. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration.[9] An option contract conforms with the second paragraph of Article 1479 of the Civil Code[10] which reads: Article 1479. xxx 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. However, the March 15, 1985 letter[11] sent by the COS through their lawyer to the CUSTODIO reveals that the parties entered into a perfected contract of sale and not an option contract. A contract of sale is a consensual contract and is perfected at the moment there is a 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.[12] The elements of a valid contract of sale under Article 1458 of the Civil Code are (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its 22

equivalent.[13] As evidenced by the March 15, 1985 letter, all three elements of a contract of sale are present in the transaction between the petitioners and respondent. CUSTODIOs offer to purchase the Beata property, subject of the sale at a price of $100,000.00 was accepted by the COS. Even the manner of payment of the price was set forth in the letter. Earnest money in the amounts of US$1,000.00 and P40,000.00 was already received by the COS. Under Article 1482[14] of the Civil Code, earnest money given in a sale transaction is considered part of the purchase price and proof of the perfection of the sale.[15] Despite the fact that CUSTODIOs failure to pay the amounts of US$ 40,000.00 and US$ 60,000.00 on or before December 4, 1984 and January 5, 1985 respectively was a breach of her obligation under Article 1191[16] of the Civil Code, the COS did not sue for either specific performance or rescission of the contract. The COS were of the mistaken belief that CUSTODIO had lost her option over the Beata property when she failed to pay the remaining balance of $70,000.00 pursuant to their August 8, 1986 letter. In the absence of an express stipulation authorizing the sellers to extrajudicially rescind the contract of sale, the COS cannot unilaterally and extrajudicially rescind the contract of sale.[17] Accordingly, CUSTODIO acted well within her rights when she attempted to pay the remaining balance of $70,000.00 to complete the sum owed of $100,000.00 as the contract was still subsisting at that time. When the COS refused to accept said payment and to deliver the Beata property, CUSTODIO immediately sued for the rescission of the contract of sale and prayed for the return of the $30,000.00 she had initially paid. Under Article 1385[18] of the Civil Code, rescission creates the obligation to return the things which were the object of the contract but such rescission can only be carried out when the one who demands rescission can return whatever he may be obliged to restore. This principle has been applied to rescission of reciprocal obligations under Article 1191 of the Civil Code.[19] The Court of Appeals therefore did not err in ordering the COS to return the amount of $30,000.00 to CUSTODIO after ordering the rescission of the contract of sale over the Beata property. We quote with approval the Court of Appeals decision to wit: Since it has been shown that the appellee who was not in default, was willing to perform part of the contract while the appellants were not, rescission of the contract is in order. 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, (Article 1191, same Code). Rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest x x x x (Article 1385, same Code). In the case at bar, the property involved has not been delivered to the appellee. She has therefore nothing to return to the appellants. The price received by the appellants has to be returned to the appellee as aptly ruled by the lower court, for such is a consequence of rescission, which is to restore the parties in their former situations. No error was committed by the lower court when it did not award attorneys fees to the appellants for as has been shown, the appellees complaint is not unfounded.[20] We cannot uphold the forfeiture clause contained in the petitioners August 8, 1986 letter. It appears that such condition was unilaterally imposed by the COS and was not agreed to by CUSTODIO. It cannot therefore be considered as part of the contract of sale as it lacks the consent of CUSTODIO.[21] Finally, the Court of Appeals did not err in not awarding the COS attorneys fees. Although attorneys fees may be awarded if the claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party from whom it is sought[22], we find that CUSTODIOs act clearly was not unjustified. WHEREFORE, the instant petition is hereby DENIED, and the appealed decision of the Court of Appeals is AFFIRMED. SO ORDERED. 23

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 111238 January 25, 1995 ADELFA PROPERTIES, INC., petitioner, vs .COURT OF APPEALS, ROSARIO JIMENEZCASTAEDA and SALUD JIMENEZ, respondents. REGALADO, J.: The main issues presented for resolution in this petition for review on certiorari of the judgment of respondent Court of appeals, dated April 6, 1993, in CA-G.R. CV No. 34767 1 are (1) whether of not the "Exclusive Option to Purchase" executed between petitioner Adelfa Properties, Inc. and private respondents Rosario Jimenez-Castaeda and Salud Jimenez is an option contract; and (2) whether or not there was a valid suspension of payment of the purchase price by said petitioner, and the legal effects thereof on the contractual relations of the parties. The records disclose the following antecedent facts which culminated in the present appellate review, to wit: 1. Herein private respondents and their brothers, Jose and Dominador Jimenez, were the registered coowners of a parcel of land consisting of 17,710 square meters, covered by Transfer Certificate of Title (TCT) No. 309773, 2situated in Barrio Culasi, Las Pias, Metro Manila. 2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting of one-half of said parcel of land, specifically the eastern portion thereof, to herein petitioner pursuant to a "Kasulatan sa Bilihan ng Lupa." 3Subsequently, a "Confirmatory Extrajudicial Partition Agreement" 4 was executed by the Jimenezes, wherein the eastern portion of the subject lot, with an area of 8,855 square meters was adjudicated to Jose and Dominador Jimenez, while the western portion was allocated to herein private respondents. 3. Thereafter, herein petitioner expressed interest in buying the western portion of the property from private respondents. Accordingly, on November 25, 1989, an "Exclusive Option to Purchase" 5 was executed between petitioner and private respondents, under the following terms and conditions: 1. The selling price of said 8,655 square meters of the subject property is TWO MILLION EIGHT HUNDRED FIFTY SIX THOUSAND ONE HUNDRED FIFTY PESOS ONLY (P2,856,150.00) 2. The sum of P50,000.00 which we received from ADELFA PROPERTIES, INC. as an option money shall be credited as partial payment upon the consummation of the sale and the balance in the sum of TWO MILLION EIGHT HUNDRED SIX THOUSAND ONE HUNDRED FIFTY PESOS (P2,806,150.00) to be paid on or before November 30, 1989; 3. In case of default on the part of ADELFA PROPERTIES, INC. to pay said balance in accordance with paragraph 2 hereof, this option shall be cancelled and 50% of the option money to be forfeited in our favor and we will refund the remaining 50% of said money upon the sale of said property to a third party; 4. All expenses including the corresponding capital gains tax, cost of documentary stamps are for the account of the VENDORS, and expenses for the registration of the deed of sale in the Registry of Deeds are for the account of ADELFA PROPERTIES, INC. Considering, however, that the owner's copy of the certificate of title issued to respondent Salud Jimenez had been lost, a petition for the re-issuance of a new owner's copy of said certificate of title was filed in court through Atty. Bayani L. Bernardo, who acted as private respondents' counsel. Eventually, a new owner's copy of the certificate of title was issued but it remained in the possession of Atty. Bernardo until he turned it over to petitioner Adelfa Properties, Inc.

4. Before petitioner could make payment, it received summons 6 on November 29, 1989, together with a copy of a complaint filed by the nephews and nieces of private respondents against the latter, Jose and Dominador Jimenez, and herein petitioner in the Regional Trial Court of Makati, docketed as Civil Case No. 89-5541, for annulment of the deed of sale in favor of Household Corporation and recovery of ownership of the property covered by TCT No. 309773. 7 5. As a consequence, in a letter dated November 29, 1989, petitioner informed private respondents that it would hold payment of the full purchase price and suggested that private respondents settle the case with their nephews and nieces, adding that ". . . if possible, although November 30, 1989 is a holiday, we will be waiting for you and said plaintiffs at our office up to 7:00 p.m." 8 Another letter of the same tenor and of even date was sent by petitioner to Jose and Dominador Jimenez. 9 Respondent Salud Jimenez refused to heed the suggestion of petitioner and attributed the suspension of payment of the purchase price to "lack of word of honor." 6. On December 7, 1989, petitioner caused to be annotated on the title of the lot its option contract with private respondents, and its contract of sale with Jose and Dominador Jimenez, as Entry No. 1437-4 and entry No. 1438-4, respectively. 7. On December 14, 1989, private respondents sent Francisca Jimenez to see Atty. Bernardo, in his capacity as petitioner's counsel, and to inform the latter that they were cancelling the transaction. In turn, Atty. Bernardo offered to pay the purchase price provided that P500,000.00 be deducted therefrom for the settlement of the civil case. This was rejected by private respondents. On December 22, 1989, Atty. Bernardo wrote private respondents on the same matter but this time reducing the amount from P500,000.00 to P300,000.00, and this was also rejected by the latter. 8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil Case No. 89-5541. Thus, on February 28, 1990, petitioner caused to be annotated anew on TCT No. 309773 the exclusive option to purchase as Entry No. 4442-4. 9. On the same day, February 28, 1990, private respondents executed a Deed of Conditional Sale 10 in favor of Emylene Chua over the same parcel of land for P3,029,250, of which P1,500,000.00 was paid to private respondents on said date, with the balance to be paid upon the transfer of title to the specified one-half portion. 10. On April 16, 1990, Atty. Bernardo wrote private respondents informing the latter that in view of the dismissal of the case against them, petitioner was willing to pay the purchase price, and he requested that the corresponding deed of absolute sale be executed. 11 This was ignored by private respondents. 11. On July 27, 1990, private respondents' counsel sent a letter to petitioner enclosing therein a check for P25,000.00 representing the refund of fifty percent of the option money paid under the exclusive option to purchase. Private respondents then requested petitioner to return the owner's duplicate copy of the certificate of title of respondent Salud Jimenez. 12 Petitioner failed to surrender the certificate of title, hence private respondents filed Civil Case No. 7532 in the Regional Trial Court of Pasay City, Branch 113, for annulment of contract with damages, praying, among others, that the exclusive option to purchase be declared null and void; that defendant, herein petitioner, be ordered to return the owner's duplicate certificate of title; and that the annotation of the option contract on TCT No. 309773 be cancelled. Emylene Chua, the subsequent purchaser of the lot, filed a complaint in intervention. 12. The trial court rendered judgment 13 therein on September 5, 1991 holding that the agreement entered into by the parties was merely an option contract, and declaring that the suspension of payment by herein petitioner constituted a counter-offer which, therefore, was tantamount to a rejection of the option. It likewise ruled that herein petitioner could not validly suspend payment in favor of private respondents on the ground that the vindicatory action filed by the latter's kin did not involve the western portion of the land covered by the contract between petitioner and private respondents, but the eastern portion thereof which was the subject of the sale between petitioner and the brothers Jose and Dominador Jimenez. The trial court then directed the cancellation of the exclusive option to purchase, 24

declared the sale to intervenor Emylene Chua as valid and binding, and ordered petitioner to pay damages and attorney's fees to private respondents, with costs. 13. On appeal, respondent Court of appeals affirmed in toto the decision of the court a quo and held that the failure of petitioner to pay the purchase price within the period agreed upon was tantamount to an election by petitioner not to buy the property; that the suspension of payment constituted an imposition of a condition which was actually a counter-offer amounting to a rejection of the option; and that Article 1590 of the Civil Code on suspension of payments applies only to a contract of sale or a contract to sell, but not to an option contract which it opined was the nature of the document subject of the case at bar. Said appellate court similarly upheld the validity of the deed of conditional sale executed by private respondents in favor of intervenor Emylene Chua. In the present petition, the following assignment of errors are raised: 1. Respondent court of appeals acted with grave abuse of discretion in making its finding that the agreement entered into by petitioner and private respondents was strictly an option contract; 2. Granting arguendo that the agreement was an option contract, respondent court of Appeals acted with grave abuse of discretion in grievously failing to consider that while the option period had not lapsed, private respondents could not unilaterally and prematurely terminate the option period; 3. Respondent Court of Appeals acted with grave abuse of discretion in failing to appreciate fully the attendant facts and circumstances when it made the conclusion of law that Article 1590 does not apply; and 4. Respondent Court of Appeals acted with grave abuse of discretion in conforming with the sale in favor of appellee Ma. Emylene Chua and the award of damages and attorney's fees which are not only excessive, but also without in fact and in law. 14 An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the conclusion that the agreement between the parties is a contract to sell, and not an option contract or a contract of sale. I 1. In view of the extended disquisition thereon by respondent court, it would be worthwhile at this juncture to briefly discourse on the rationale behind our treatment of the alleged option contract as a contract to sell, rather than a contract of sale. The distinction between the two is important for in contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. 15 There are two features which convince us that the parties never intended to transfer ownership to petitioner except upon the full payment of the purchase price. Firstly, the exclusive option to purchase, although it provided for automatic rescission of the contract and partial forfeiture of the amount already paid in case of default, does not mention that petitioner is obliged to return possession or ownership of the property as a consequence of non-payment. There is no stipulation anent reversion or reconveyance of the property to herein private respondents in the event that petitioner does not comply with its obligation. With the absence of such a stipulation, although there is a provision on the remedies available to the parties in case of breach, it may legally be inferred that the parties never intended to transfer ownership to the petitioner to completion of payment of the purchase price. In effect, there was an implied agreement that ownership shall not pass to the purchaser until he had fully paid the price. Article 1478 of the civil code does not require that such a stipulation be expressly made.

Consequently, an implied stipulation to that effect is considered valid and, therefore, binding and enforceable between the parties. It should be noted that under the law and jurisprudence, a contract which contains this kind of stipulation is considered a contract to sell. Moreover, that the parties really intended to execute a contract to sell, and not a contract of sale, is bolstered by the fact that the deed of absolute sale would have been issued only upon the payment of the balance of the purchase price, as may be gleaned from petitioner's letter dated April 16, 1990 16 wherein it informed private respondents that it "is now ready and willing to pay you simultaneously with the execution of the corresponding deed of absolute sale." Secondly, it has not been shown there was delivery of the property, actual or constructive, made to herein petitioner. The exclusive option to purchase is not contained in a public instrument the execution of which would have been considered equivalent to delivery. 17 Neither did petitioner take actual, physical possession of the property at any given time. It is true that after the reconstitution of private respondents' certificate of title, it remained in the possession of petitioner's counsel, Atty. Bayani L. Bernardo, who thereafter delivered the same to herein petitioner. Normally, under the law, such possession by the vendee is to be understood as a delivery. 18However, private respondents explained that there was really no intention on their part to deliver the title to herein petitioner with the purpose of transferring ownership to it. They claim that Atty. Bernardo had possession of the title only because he was their counsel in the petition for reconstitution. We have no reason not to believe this explanation of private respondents, aside from the fact that such contention was never refuted or contradicted by petitioner. 2. Irrefragably, the controverted document should legally be considered as a perfected contract to sell. On this particular point, therefore, we reject the position and ratiocination of respondent Court of Appeals which, while awarding the correct relief to private respondents, categorized the instrument as "strictly an option contract." The important task in contract interpretation is always the ascertainment of the intention of the contracting parties and that task is, of course, to be discharged by looking to the words they used to project that intention in their contract, all the words not just a particular word or two, and words in context not words standing alone. 19Moreover, judging from the subsequent acts of the parties which will hereinafter be discussed, it is undeniable that the intention of the parties was to enter into a contract to sell. 20 In addition, the title of a contract does not necessarily determine its true nature. 21 Hence, the fact that the document under discussion is entitled "Exclusive Option to Purchase" is not controlling where the text thereof shows that it is a contract to sell. An option, as used in the law on sales, is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It is also sometimes called an "unaccepted offer." An option is not of itself a purchase, but merely secures the privilege to buy. 22 It is not a sale of property but a sale of property but a sale of the right to purchase.23 It is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something, that it is, the right or privilege to buy at the election or option of the other party. 24 Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer. Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject matter, but is merely a contract by which the owner of property gives the optionee the right or privilege of accepting the offer and buying the property on certain terms. 25 On the other hand, a contract, like a contract to sell, involves a meeting of minds two persons whereby one binds himself, with respect to the other, to give something or to render some service. 26 Contracts, in general, are perfected by mere consent, 27 which is manifested by the meeting of the offer and the 25

acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. 28 The distinction between an "option" and a contract of sale is that an option is an unaccepted offer. It states the terms and conditions on which the owner is willing to sell the land, if the holder elects to accept them within the time limited. If the holder does so elect, he must give notice to the other party, and the accepted offer thereupon becomes a valid and binding contract. If an acceptance is not made within the time fixed, the owner is no longer bound by his offer, and the option is at an end. A contract of sale, on the other hand, fixes definitely the relative rights and obligations of both parties at the time of its execution. The offer and the acceptance are concurrent, since the minds of the contracting parties meet in the terms of the agreement. 29 A perusal of the contract in this case, as well as the oral and documentary evidence presented by the parties, readily shows that there is indeed a concurrence of petitioner's offer to buy and private respondents' acceptance thereof. The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale. 30 The records also show that private respondents accepted the offer of petitioner to buy their property under the terms of their contract. At the time petitioner made its offer, private respondents suggested that their transfer certificate of title be first reconstituted, to which petitioner agreed. As a matter of fact, it was petitioner's counsel, Atty. Bayani L. Bernardo, who assisted private respondents in filing a petition for reconstitution. After the title was reconstituted, the parties agreed that petitioner would pay either in cash or manager's check the amount of P2,856,150.00 for the lot. Petitioner was supposed to pay the same on November 25, 1989, but it later offered to make a down payment of P50,000.00, with the balance of P2,806,150.00 to be paid on or before November 30, 1989. Private respondents agreed to the counteroffer made by petitioner. 31 As a result, the so-called exclusive option to purchase was prepared by petitioner and was subsequently signed by private respondents, thereby creating a perfected contract to sell between them. It cannot be gainsaid that the offer to buy a specific piece of land was definite and certain, while the acceptance thereof was absolute and without any condition or qualification. The agreement as to the object, the price of the property, and the terms of payment was clear and well-defined. No other significance could be given to such acts that than they were meant to finalize and perfect the transaction. The parties even went beyond the basic requirements of the law by stipulating that "all expenses including the corresponding capital gains tax, cost of documentary stamps are for the account of the vendors, and expenses for the registration of the deed of sale in the Registry of Deeds are for the account of Adelfa properties, Inc." Hence, there was nothing left to be done except the performance of the respective obligations of the parties. We do not subscribe to private respondents' submission, which was upheld by both the trial court and respondent court of appeals, that the offer of petitioner to deduct P500,000.00, (later reduced to P300,000.00) from the purchase price for the settlement of the civil case was tantamount to a counteroffer. It must be stressed that there already existed a perfected contract between the parties at the time the alleged counter-offer was made. Thus, any new offer by a party becomes binding only when it is accepted by the other. In the case of private respondents, they actually refused to concur in said offer of petitioner, by reason of which the original terms of the contract continued to be enforceable. At any rate, the same cannot be considered a counter-offer for the simple reason that petitioner's sole purpose was to settle the civil case in order that it could already comply with its obligation. In fact, it was even indicative of a desire by petitioner to immediately comply therewith, except that it was being prevented from doing so because of the filing of the civil case which, it believed in good faith, rendered

compliance improbable at that time. In addition, no inference can be drawn from that suggestion given by petitioner that it was totally abandoning the original contract. More importantly, it will be noted that the failure of petitioner to pay the balance of the purchase price within the agreed period was attributed by private respondents to "lack of word of honor" on the part of the former. The reason of "lack of word of honor" is to us a clear indication that private respondents considered petitioner already bound by its obligation to pay the balance of the consideration. In effect, private respondents were demanding or exacting fulfillment of the obligation from herein petitioner. with the arrival of the period agreed upon by the parties, petitioner was supposed to comply with the obligation incumbent upon it to perform, not merely to exercise an option or a right to buy the property. The obligation of petitioner on November 30, 1993 consisted of an obligation to give something, that is, the payment of the purchase price. The contract did not simply give petitioner the discretion to pay for the property. 32It will be noted that there is nothing in the said contract to show that petitioner was merely given a certain period within which to exercise its privilege to buy. The agreed period was intended to give time to herein petitioner within which to fulfill and comply with its obligation, that is, to pay the balance of the purchase price. No evidence was presented by private respondents to prove otherwise. The test in determining whether a contract is a "contract of sale or purchase" or a mere "option" is whether or not the agreement could be specifically enforced. 33 There is no doubt that the obligation of petitioner to pay the purchase price is specific, definite and certain, and consequently binding and enforceable. Had private respondents chosen to enforce the contract, they could have specifically compelled petitioner to pay the balance of P2,806,150.00. This is distinctly made manifest in the contract itself as an integral stipulation, compliance with which could legally and definitely be demanded from petitioner as a consequence. This is not a case where no right is as yet created nor an obligation declared, as where something further remains to be done before the buyer and seller obligate themselves. 34 An agreement is only an "option" when no obligation rests on the party to make any payment except such as may be agreed on between the parties as consideration to support the option until he has made up his mind within the time specified. 35 An option, and not a contract to purchase, is effected by an agreement to sell real estate for payments to be made within specified time and providing forfeiture of money paid upon failure to make payment, where the purchaser does not agree to purchase, to make payment, or to bind himself in any way other than the forfeiture of the payments made. 36 As hereinbefore discussed, this is not the situation obtaining in the case at bar. While there is jurisprudence to the effect that a contract which provides that the initial payment shall be totally forfeited in case of default in payment is to be considered as an option contract, 37 still we are not inclined to conform with the findings of respondent court and the court a quo that the contract executed between the parties is an option contract, for the reason that the parties were already contemplating the payment of the balance of the purchase price, and were not merely quoting an agreed value for the property. The term "balance," connotes a remainder or something remaining from the original total sum already agreed upon. In other words, the alleged option money of P50,000.00 was actually earnest money which was intended to form part of the purchase price. The amount of P50,000.00 was not distinct from the cause or consideration for the sale of the property, but was itself a part thereof. It is a statutory rule that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. 38 It constitutes an advance payment and must, therefore, be deducted from the total price. Also, earnest money is given by the buyer to the seller to bind the bargain. There are clear distinctions between earnest money and option money, viz.: (a) earnest money is part of the purchase price, while option money ids the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a 26

sale not yet perfected; and (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy. 39 The aforequoted characteristics of earnest money are apparent in the so-called option contract under review, even though it was called "option money" by the parties. In addition, private respondents failed to show that the payment of the balance of the purchase price was only a condition precedent to the acceptance of the offer or to the exercise of the right to buy. On the contrary, it has been sufficiently established that such payment was but an element of the performance of petitioner's obligation under the contract to sell. 40 II 1. This brings us to the second issue as to whether or not there was valid suspension of payment of the purchase price by petitioner and the legal consequences thereof. To justify its failure to pay the purchase price within the agreed period, petitioner invokes Article 1590 of the civil Code which provides: Art. 1590. Should the vendee be disturbed in the possession or ownership of the thing acquired, or should he have reasonable grounds to fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may suspend the payment of the price until the vendor has caused the disturbance or danger to cease, unless the latter gives security for the return of the price in a proper case, or it has been stipulated that, notwithstanding any such contingency, the vendee shall be bound to make the payment. A mere act of trespass shall not authorize the suspension of the payment of the price. Respondent court refused to apply the aforequoted provision of law on the erroneous assumption that the true agreement between the parties was a contract of option. As we have hereinbefore discussed, it was not an option contract but a perfected contract to sell. Verily, therefore, Article 1590 would properly apply. Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed against the parties herein involved only the eastern half of the land subject of the deed of sale between petitioner and the Jimenez brothers, it did not, therefore, have any adverse effect on private respondents' title and ownership over the western half of the land which is covered by the contract subject of the present case. We have gone over the complaint for recovery of ownership filed in said case 41 and we are not persuaded by the factual findings made by said courts. At a glance, it is easily discernible that, although the complaint prayed for the annulment only of the contract of sale executed between petitioner and the Jimenez brothers, the same likewise prayed for the recovery of therein plaintiffs' share in that parcel of land specifically covered by TCT No. 309773. In other words, the plaintiffs therein were claiming to be coowners of the entire parcel of land described in TCT No. 309773, and not only of a portion thereof nor, as incorrectly interpreted by the lower courts, did their claim pertain exclusively to the eastern half adjudicated to the Jimenez brothers. Such being the case, petitioner was justified in suspending payment of the balance of the purchase price by reason of the aforesaid vindicatory action filed against it. The assurance made by private respondents that petitioner did not have to worry about the case because it was pure and simple harassment 42 is not the kind of guaranty contemplated under the exceptive clause in Article 1590 wherein the vendor is bound to make payment even with the existence of a vindicatory action if the vendee should give a security for the return of the price. 2. Be that as it may, and the validity of the suspension of payment notwithstanding, we find and hold that private respondents may no longer be compelled to sell and deliver the subject property to petitioner for two reasons, that is, petitioner's failure to duly effect the consignation of the purchase price after the disturbance had ceased; and, secondarily, the fact that the contract to sell had been validly rescinded by private respondents. The records of this case reveal that as early as February 28, 1990 when petitioner caused its exclusive option to be annotated anew on the certificate of title, it already knew of the dismissal of civil Case No. 89-5541. However, it was only on April 16, 1990 that petitioner, through its counsel, wrote private

respondents expressing its willingness to pay the balance of the purchase price upon the execution of the corresponding deed of absolute sale. At most, that was merely a notice to pay. There was no proper tender of payment nor consignation in this case as required by law. The mere sending of a letter by the vendee expressing the intention to pay, without the accompanying payment, is not considered a valid tender of payment. 43 Besides, a mere tender of payment is not sufficient to compel private respondents to deliver the property and execute the deed of absolute sale. It is consignation which is essential in order to extinguish petitioner's obligation to pay the balance of the purchase price. 44 The rule is different in case of an option contract 45 or in legal redemption or in a sale with right to repurchase, 46 wherein consignation is not necessary because these cases involve an exercise of a right or privilege (to buy, redeem or repurchase) rather than the discharge of an obligation, hence tender of payment would be sufficient to preserve the right or privilege. This is because the provisions on consignation are not applicable when there is no obligation to pay. 47 A contract to sell, as in the case before us, involves the performance of an obligation, not merely the exercise of a privilege of a right. consequently, performance or payment may be effected not by tender of payment alone but by both tender and consignation. Furthermore, petitioner no longer had the right to suspend payment after the disturbance ceased with the dismissal of the civil case filed against it. Necessarily, therefore, its obligation to pay the balance again arose and resumed after it received notice of such dismissal. Unfortunately, petitioner failed to seasonably make payment, as in fact it has deposit the money with the trial court when this case was originally filed therein. By reason of petitioner's failure to comply with its obligation, private respondents elected to resort to and did announce the rescission of the contract through its letter to petitioner dated July 27, 1990. That written notice of rescission is deemed sufficient under the circumstances. Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is not applicable to a contract to sell. 48 Furthermore, judicial action for rescission of a contract is not necessary where the contract provides for automatic rescission in case of breach, 49as in the contract involved in the present controversy. We are not unaware of the ruling in University of the Philippines vs. De los Angeles, etc. 50 that the right to rescind is not absolute, being ever subject to scrutiny and review by the proper court. It is our considered view, however, that this rule applies to a situation where the extrajudicial rescission is contested by the defaulting party. In other words, resolution of reciprocal contracts may be made extrajudicially unless successfully impugned in court. If the debtor impugns the declaration, it shall be subject to judicial determination 51 otherwise, if said party does not oppose it, the extrajudicial rescission shall have legal effect. 52 In the case at bar, it has been shown that although petitioner was duly furnished and did receive a written notice of rescission which specified the grounds therefore, it failed to reply thereto or protest against it. Its silence thereon suggests an admission of the veracity and validity of private respondents' claim. 53 Furthermore, the initiative of instituting suit was transferred from the rescinder to the defaulter by virtue of the automatic rescission clause in the contract. 54 But then, the records bear out the fact that aside from the lackadaisical manner with which petitioner treated private respondents' latter of cancellation, it utterly failed to seriously seek redress from the court for the enforcement of its alleged rights under the contract. If private respondents had not taken the initiative of filing Civil Case No. 7532, evidently petitioner had no intention to take any legal action to compel specific performance from the former. By such cavalier disregard, it has been effectively estopped from seeking the affirmative relief it now desires but which it had theretofore disdained. WHEREFORE, on the foregoing modificatory premises, and considering that the same result has been reached by respondent Court of Appeals with respect to the relief awarded to private respondents by the court a quo which we find to be correct, its assailed judgment in CA-G.R. CV No. 34767 is hereby AFFIRMED. SO ORDERED. 27

SECOND DIVISION [G.R. No. 155043. September 30, 2004] ARTURO R. ABALOS, petitioner, vs. DR. GALICANO S. MACATANGAY, JR., respondent. DECISION TINGA, J.: The instant petition seeks a reversal of the Decision of the Court of Appeals in CA-G.R. CV No. 48355 entitled Dr. Galicano S. Macatangay, Jr. v. Arturo R. Abalos and Esther Palisoc-Abalos, promulgated on March 14, 2002. The appellate court reversed the trial courts decision which dismissed the action for specific performance filed by respondent, and ordered petitioner and his wife to execute in favor of herein respondent a deed of sale over the subject property. Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with improvements located at Azucena St., Makati City consisting of about three hundred twenty-seven (327) square meters, covered by Transfer Certificate of Title (TCT) No. 145316 of the Registry of Deeds of Makati. Armed with a Special Power of Attorney dated June 2, 1988, purportedly issued by his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA) dated October 17, 1989, in favor of respondent, binding himself to sell to respondent the subject property and not to offer the same to any other party within thirty (30) days from date. Arturo acknowledged receipt of a check from respondent in the amount of Five Thousand Pesos (P5,000.00), representing earnest money for the subject property, the amount of which would be deducted from the purchase price of One Million Three Hundred Three Hundred Thousand Pesos (P1,300,000.00). Further, the RMOA stated that full payment would be effected as soon as possession of the property shall have been turned over to respondent. Subsequently, Arturos wife, Esther, executed a Special Power of Attorney dated October 25, 1989, appointing her sister, Bernadette Ramos, to act for and in her behalf relative to the transfer of the property to respondent. Ostensibly, a marital squabble was brewing between Arturo and Esther at the time and to protect his interest, respondent caused the annotation of his adverse claim on the title of the spouses to the property on November 14, 1989. On November 16, 1989, respondent sent a letter to Arturo and Esther informing them of his readiness and willingness to pay the full amount of the purchase price. The letter contained a demand upon the spouses to comply with their obligation to turn over possession of the property to him. On the same date, Esther, through her attorney-in-fact, executed in favor of respondent, a Contract to Sell the property to the extent of her conjugal interest therein for the sum of six hundred fifty thousand pesos (P650,000.00) less the sum already received by her and Arturo. Esther agreed to surrender possession of the property to respondent within twenty (20) days from November 16, 1989, while the latter promised to pay the balance of the purchase price in the amount of one million two hundred ninety thousand pesos (P1,290,000.00) after being placed in possession of the property. Esther also obligated herself to execute and deliver to respondent a deed of absolute sale upon full payment. In a letter dated December 7, 1989, respondent informed the spouses that he had set aside the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) as evidenced by Citibank Check No. 278107 as full payment of the purchase price. He reiterated his demand upon them to comply with their obligation to turn over possession of the property. Arturo and Esther failed to deliver the property which prompted respondent to cause the annotation of another adverse claim on TCT No. 145316. On January 12, 1990, respondent filed a complaint for specific performance with damages against petitioners. Arturo filed his answer to the complaint while his wife was declared in default. The Regional Trial Court (RTC) dismissed the complaint for specific performance. It ruled that the Special Power of Attorney (SPA) ostensibly issued by Esther in favor of Arturo was void as it was falsified. Hence, the court concluded that the SPA could not have authorized Arturo to sell the property to

respondent. The trial court also noted that the check issued by respondent to cover the earnest money was dishonored due to insufficiency of funds and while it was replaced with another check by respondent, there is no showing that the second check was issued as payment for the earnest money on the property. On appeal taken by respondent, the Court of Appeals reversed the decision of the trial court. It ruled that the SPA in favor of Arturo, assuming that it was void, cannot affect the transaction between Esther and respondent. The appellate court ratiocinated that it was by virtue of the SPA executed by Esther, in favor of her sister, that the sale of the property to respondent was effected. On the other hand, the appellate court considered the RMOA executed by Arturo in favor of respondent valid to effect the sale of Arturos conjugal share in the property. Dissatisfied with the appellate courts disposition of the case, petitioner seeks a reversal of its decision alleging that: I. The Court of Appeals committed serious and manifest error when it decided on the appeal without affording petitioner his right to due process. II. The Court of Appeals committed serious and manifest error in reversing and setting aside the findings of fact by the trial court. III. The Court of Appeals erred in ruling that a contract to sell is a contract of sale, and in ordering petitioner to execute a registrable form of deed of sale over the property in favor of respondent.[1] Petitioner contends that he was not personally served with copies of summons, pleadings, and processes in the appeal proceedings nor was he given an opportunity to submit an appellees brief. He alleges that his counsel was in the United States from 1994 to June 2000, and he never received any news or communication from him after the proceedings in the trial court were terminated. Petitioner submits that he was denied due process because he was not informed of the appeal proceedings, nor given the chance to have legal representation before the appellate court. We are not convinced. The essence of due process is an opportunity to be heard. Petitioners failure to participate in the appeal proceedings is not due to a cause imputable to the appellate court but because of petitioners own neglect in ascertaining the status of his case. Petitioners counsel is equally negligent in failing to inform his client about the recent developments in the appeal proceedings. Settled is the rule that a party is bound by the conduct, negligence and mistakes of his counsel. [2] Thus, petitioners plea of denial of due process is downright baseless. Petitioner also blames the appellate court for setting aside the factual findings of the trial court and argues that factual findings of the trial court are given much weight and respect when supported by substantial evidence. He asserts that the sale between him and respondent is void for lack of consent because the SPA purportedly executed by his wife Esther is a forgery and therefore, he could not have validly sold the subject property to respondent. Next, petitioner theorizes that the RMOA he executed in favor of respondent was not perfected because the check representing the earnest money was dishonored. He adds that there is no evidence on record that the second check issued by respondent was intended to replace the first check representing payment of earnest money. Respondent admits that the subject property is co-owned by petitioner and his wife, but he objects to the allegations in the petition bearing a relation to the supposed date of the marriage of the vendors. He contends that the alleged date of marriage between petitioner and his wife is a new factual issue which was not raised nor established in the court a quo. Respondent claims that there is no basis to annul the sale freely and voluntarily entered into by the husband and the wife. The focal issue in the instant petition is whether petitioner may be compelled to convey the property to respondent under the terms of the RMOA and the Contract to Sell. At bottom, the resolution of the 28

issue entails the ascertainment of the contractual nature of the two documents and the status of the contracts contained therein. Contracts, in general, require the presence of three essential elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established.[3] Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation.[4] In a contract of sale, the seller must consent to transfer ownership in exchange for the price, the subject matter must be determinate, and the price must be certain in money or its equivalent.[5] Being essentially consensual, a contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price. [6] However, ownership of the thing sold shall not be transferred to the vendee until actual or constructive delivery of the property.[7] On the other hand, an accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option.[8] An option merely grants a privilege to buy or sell within an agreed time and at a determined price. It is separate and distinct from that which the parties may enter into upon the consummation of the option. [9] A perfected contract of option does not result in the perfection or consummation of the sale; only when the option is exercised may a sale be perfected.[10] The option must, however, be supported by a consideration distinct from the price.[11] Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the property to respondent for a price certain within a period of thirty days. The RMOA does not impose upon respondent an obligation to buy petitioners property, as in fact it does not even bear his signature thereon. It is quite clear that after the lapse of the thirty-day period, without respondent having exercised his option, Arturo is free to sell the property to another. This shows that the intent of Arturo is merely to grant respondent the privilege to buy the property within the period therein stated. There is nothing in the RMOA which indicates that Arturo agreed therein to transfer ownership of the land which is an essential element in a contract of sale. Unfortunately, the option is not binding upon the promissory since it is not supported by a consideration distinct from the price.[12] As a rule, the holder of the option, after accepting the promise and before he exercises his option, is not bound to buy. He is free either to buy or not to buy later. In Sanchez v. Rigos[13] we ruled that in an accepted unilateral promise to sell, the promissor is not bound by his promise and may, accordingly, withdraw it, since there may be no valid contract without a cause or consideration. Pending notice of its withdrawal, his accepted promise partakes of the nature of an offer to sell which, if acceded or consented to, results in a perfected contract of sale. Even conceding for the nonce that respondent had accepted the offer within the period stated and, as a consequence, a bilateral contract of purchase and sale was perfected, the outcome would be the same. To benefit from such situation, respondent would have to pay or at least make a valid tender of payment of the price for only then could he exact compliance with the undertaking of the other party.[14] This respondent failed to do. By his own admission, he merely informed respondent spouses of his readiness and willingness to pay. The fact that he had set aside a check in the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) representing the balance of the purchase price could not help his cause. Settled is the rule that tender of payment must be made in legal tender. A check is not legal tender, and therefore cannot constitute a valid tender of payment. [15] Not having made a valid tender of payment, respondents action for specific performance must fail. With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the view that the amount is not earnest money as the term is understood in Article 1482 which signifies proof of the perfection of the contract of sale, but merely a guarantee that respondent is really interested to buy the

property. It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.[16] No reservation of ownership on the part of Arturo is necessary since, as previously stated, he has never agreed to transfer ownership of the property to respondent. Granting for the sake of argument that the RMOA is a contract of sale, the same would still be void not only for want of consideration and absence of respondents signature thereon, but also for lack of Esthers conformity thereto. Quite glaring is the absence of the signature of Esther in the RMOA, which proves that she did not give her consent to the transaction initiated by Arturo. The husband cannot alienate any real property of the conjugal partnership without the wifes consent.[17] However, it was the Contract to Sell executed by Esther through her attorney-in-fact which the Court of Appeals made full use of. Holding that the contract is valid, the appellate court explained that while Esther did not authorize Arturo to sell the property, her execution of the SPA authorizing her sister to sell the land to respondent clearly shows her intention to convey her interest in favor of respondent. In effect, the court declared that the lack of Esthers consent to the sale made by Arturo was cured by her subsequent conveyance of her interest in the property through her attorney-in-fact. We do not share the ruling. The nullity of the RMOA as a contract of sale emanates not only from lack of Esthers consent thereto but also from want of consideration and absence of respondents signature thereon. Such nullity cannot be obliterated by Esthers subsequent confirmation of the putative transaction as expressed in the Contract to Sell. Under the law, a void contract cannot be ratified[18] and the action or defense for the declaration of the inexistence of a contract does not prescribe.[19] A void contract produces no effect either against or in favor of anyoneit cannot create, modify or extinguish the juridical relation to which it refers.[20] True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by Arturo in favor of respondent. However, the RMOA which Arturo signed is different from the deed which Esther executed through her attorney-in-fact. For one, the first is sought to be enforced as a contract of sale while the second is purportedly a contract to sell only. For another, the terms and conditions as to the issuance of title and delivery of possession are divergent. The congruence of the wills of the spouses is essential for the valid disposition of conjugal property. Where the conveyance is contained in the same document which bears the conformity of both husband and wife, there could be no question on the validity of the transaction. But when there are two documents on which the signatures of the spouses separately appear, textual concordance of the documents is indispensable. Hence, in this case where the wifes putative consent to the sale of conjugal property appears in a separate document which does not, however, contain the same terms and conditions as in the first document signed by the husband, a valid transaction could not have arisen. Quite a bit of elucidation on the conjugal partnership of gains is in order. Arturo and Esther appear to have been married before the effectivity of the Family Code. There being no indication that they have adopted a different property regime, their property relations would automatically be governed by the regime of conjugal partnership of gains.[21] The subject land which had been admittedly acquired during the marriage of the spouses forms part of their conjugal partnership.[22] Under the Civil Code, the husband is the administrator of the conjugal partnership. This right is clearly granted to him by law. [23] More, the husband is the sole administrator. The wife is not entitled as of right to joint administration.[24] The husband, even if he is statutorily designated as administrator of the conjugal partnership, cannot validly alienate or encumber any real property of the conjugal partnership without the wifes consent.[25] Similarly, the wife cannot dispose of any property belonging to the conjugal partnership 29

without the conformity of the husband. The law is explicit that the wife cannot bind the conjugal partnership without the husbands consent, except in cases provided by law.[26] More significantly, it has been held that prior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until it appears that there are assets in the community as a result of the liquidation and settlement. The interest of each spouse is limited to the net remainder or remanente liquido (haber ganancial) resulting from the liquidation of the affairs of the partnership after its dissolution.[27] Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.[28] In not a few cases, we ruled that the sale by the husband of property belonging to the conjugal partnership without the consent of the wife when there is no showing that the latter is incapacitated is void ab initio because it is in contravention of the mandatory requirements of Article 166 of the Civil Code.[29] Since Article 166 of the Civil Code requires the consent of the wife before the husband may alienate or encumber any real property of the conjugal partnership, it follows that acts or transactions executed against this mandatory provision are void except when the law itself authorizes their validity.[30] Quite recently, in San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,[31] we ruled that neither spouse could alienate in favor of another, his or her interest in the partnership or in any property belonging to it, or ask for partition of the properties before the partnership itself had been legally dissolved. Nonetheless, alienation of the share of each spouse in the conjugal partnership could be had after separation of property of the spouses during the marriage had been judicially decreed, upon their petition for any of the causes specified in Article 191[32] of the Civil Code in relation to Article 214[33] thereof. As an exception, the husband may dispose of conjugal property without the wifes consent if such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162 of the Civil Code.[34] In Tinitigan v. Tinitigan, Sr.,[35] the Court ruled that the husband may sell property belonging to the conjugal partnership even without the consent of the wife if the sale is necessary to answer for a big conjugal liability which might endanger the familys economic standing. This is one instance where the wifes consent is not required and, impliedly, no judicial intervention is necessary. Significantly, the Family Code has introduced some changes particularly on the aspect of the administration of the conjugal partnership. The new law provides that the administration of the conjugal partnership is now a joint undertaking of the husband and the wife. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal partnership, the other spouse may assume sole powers of administration. However, the power of administration does not include the power to dispose or encumber property belonging to the conjugal partnership. [36] In all instances, the present law specifically requires the written consent of the other spouse, or authority of the court for the disposition or encumbrance of conjugal partnership property without which, the disposition or encumbrance shall be void.[37] Inescapably, herein petitioners action for specific performance must fail. Even on the supposition that the parties only disposed of their respective shares in the property, the sale, assuming that it exists, is still void for as previously stated, the right of the husband or the wife to one-half of the conjugal assets does not vest until the liquidation of the conjugal partnership. Nemo dat qui non habet. No one can give what he has not. WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. The complaint in Civil Case No. 90-106 of the Regional Trial Court of Makati is ordered DISMISSED. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 111495 August 18, 2006 AGRIPINO VILLEGAS, ATANACIO VILLEGAS (deceased), substituted by his wife SOLEDAD OCAMPO VILLEGAS, ROSA N. SANCHEZ, and CORAZON SANCHEZ, Petitioners, vs. THE COURT OF APPEALS, VICENTE M. REYES, JULITA R. MAYLAD, LORENZO M. REYES, LYDIA R. FELICIANO represented by Attorney-in-Fact VICTORIA F. HARPST, RUPERTA A. REYES, ESTRELLITA CRISOSTOMO, YOLANDA R. CHIU, VIRGILIO A. REYES, CARLITO A. REYES, PACITA R. BAUTISTA, and SPOUSES LITA SY and SY BON SU, Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 122404 August 18, 2006 THE HEIRS OF ATANACIO VILLEGAS as represented by SOLEDAD DE OCAMPO, AGRIPINO VILLEGAS, and OFELIA R. TUNGOL, Petitioners, vs. THE COURT OF APPEALS and SPOUSES LITA SY and SY BON SU, Respondents. DECISION CARPIO, J.: The Case Before the Court are the consolidated cases docketed as G.R. No. 111495 and G.R. No. 122404. The consolidated cases involve a parcel of land ("property") located at Evangelista Street, Quiapo, Manila. The first case, G.R. No. 111495, is a petition for review of the Decision 1 dated 6 January 1993 and Resolution dated 17 August 1993 of the Court of Appeals in CA-G.R. CV No. 25974. The Court of Appeals affirmed the Decision of the Regional Trial Court of Manila, Branch 2 ("RTC Branch 2"), declaring valid the sale of 75% undivided interest in the property to Spouses Lita Sy and Sy Bon Su ("Spouses Sy"). 2 The second case, G.R. No. 122404, is a petition for review of the Decision 3 dated 25 April 1995 and Resolution dated 27 October 1995 of the Court of Appeals in CA-G.R. CV No. 41931. The Court of Appeals affirmed the Decision of the Regional Trial Court of Manila, Branch 45 ("RTC Branch 45"), ordering the heirs of Atanacio Villegas to accept from Spouses Sy the redemption price for the 25% portion of the property. The Facts Vicente M. Reyes, Julita R. Maylad, Lorenzo M. Reyes, Lydia R. Feliciano, Ruperta A. Reyes, Estrellita Crisostomo, Yolanda R. Chiu, Virgilio A. Reyes, Carlito A. Reyes and Pacita R. Bautista ("respondentheirs"), together with Lorenza R. Martinez, Ambrosio M. Reyes, Concepcion Reyes-Ancheta and the heirs of Mario M. Reyes ("other heirs"), were the owners of the property located at Evangelista Street, Quiapo, Manila. They inherited the property from their father, Dr. Lorenzo C. Reyes, who died on 29 December 1985. The property, which has an area of 406.5 square meters, was covered by Transfer Certificate of Title No. 182782.

Agripino Villegas, Atanacio Villegas, Rosa N. Sanchez and Corazon Sanchez ("petitioner-lessees") were the lessees of the property since 1959. Petitioner-lessees owned the building and improvements constructed on the property. In a letter 4 dated 19 May 1988, the Administrative Committee of the heirs of Dr. Lorenzo C. Reyes ("Administrative Committee"), composed of Dr. Vicente Reyes, Julita R. Maylad and Carlito A. Reyes, informed petitioner-lessees that the heirs have decided to sell the property. The content of the letter reads: This is to inform you that by virtue of the Partial Compromise Agreement of the Estate belonging to the late Lorenzo C. Reyes, as approved by Judge Perlita Tria-Tirona, Regional Trial Judge, National Capital Judicial Regions, Quezon City Branch No. 102, April 18, 1988, respectively, hereunder are the exclusive owners of the lot which you are presently occupying under lease: Heirs of the First Marriage Heirs of the Second Marriage 1. Vicente M. Reyes 1. Ruperta A. Reyes 2. Lorenza R. Martinez 2. Carlito A. Reyes 3. Ambrosio M. Reyes 3. Estrellita A. Reyes 4. Concepcion Reyes-Ancheta 4. Yolanda [R.] Chiu 5. Julita R. Maylad 5. Virgilio A. Reyes 6. Lorenzo M. Reyes, Jr. 6. Pacita R. Bautista 7. Lydia R. Feliciano 8. Heirs of Mario M. Reyes xxxx In this connection, we wish to inform you that we are selling the lot under lease with you. Accordingly, we are giving you the opportunity to exercise your rights of pre-emption, made in writing within thirty (30) days upon receipt of this letter. If however, we do not hear from you after the lapse of the said period, we shall take it to mean that you are not interested to purchase the subject lot, which thereby give us the liberty to offer it to other interested parties . 5 (Emphasis supplied) Petitioner-lessees replied to the Administrative Committee on 14 June 1988, requesting for an extension of 30 days to submit their bid for the property. 6 On 13 July 1988, petitioner-lessees submitted their bid for the property to the Administrative Committee under the following terms and conditions: 1. Bid Price - - - - - - - - P4,000,000.00; 2. Upon the signing of the Absolute Deed of Sale, we will pay you 80% of the Bid Price amounting to - - - - - - - - P3,200,000.00; 3. Upon delivery of the Transfer Certificate of Title to each of us, we will pay you the 20% balance amounting to - - - - - - - - - 800,000.00. 7 In a letter 8 dated July 1988, the Administrative Committee informed petitioner-lessees of their receipt of notice of the P4,000,000 bid price. The Administrative Committee wrote that they requested petitioner30

lessees to increase their bid for the property but the latter failed to make another offer so the heirs have decided to sell to another buyer who offered a higher price. Nevertheless, the Administrative Committee indicated in the letter that they would wait for a reply within 15 days and that should the period lapse without any reply from petitioner-lessees, it would mean that petitioner-lessees were no longer interested in buying the property. On 2 August 1988, petitioner-lessees sent a reply, 9 advising the Administrative Committee that they were willing to make a nominal increase to their bid price of P4,000,000. Petitioner-lessees requested the Administrative Committee to state in writing their asking price for the property. On 3 August 1988, the Administrative Committee sent a letter to petitioner-lessees which reads: Dear Sirs: We are sorry for the oversight of the date of our last letter. Inasmuch as you received it on the 26th of July, let us then consider it as the official date of the letter. It is the customary agreement with the late Dr. Lorenzo C. Reyes that 15 years after the improvement was put up in the property, the said improvement reverts to the owner of the lot. Since you have put up the existing improvement in 1971, we feel that the said improvement was already owned by the late Lorenzo C. Reyes before his death. As early as 1985 the said Dr. Reyes has been paying real property taxes on the improvement; which shows that he was already the rightful owner of said improvement. Since the structure is not of strong materials, with the length of time of 17 yrs., we feel that same is now fully depreciated. We are also desirous of your buying the property. We have an offer of P5 Million which was submitted to us last month. If you could offer the same amount we will be very happy to accomodate you . We are sending you a xerox copy of TCT No. 49857, Tax Declaration of Real Property and the latest tax receipts. May we receive you[r] offer on or before Aug. 11, 1988. Please be guided accordingly. 10 (Emphasis supplied) In their letter-reply 11 dated 11 August 1988, petitioner-lessees insisted that they own the improvements on the property. Petitioner-lessees wrote that they were willing to reimburse the realty tax paid on the improvements by the late Dr. Lorenzo C. Reyes. Petitioner-lessees requested for a meeting with all the heirs to negotatiate the sale of the property, and informed the Administrative Committee that their final bid price will be submitted during the meeting. Petitioner-lessees sent their accountant, Benjamin C. Miranda ("Miranda"), to represent them in the conference to negotiate the sale of the property. On the other hand, not all the heirs of Dr. Lorenzo C. Reyes attended the conference. During the conference, the parties failed to agree on the price and terms for the sale of the property. On 18 October 1988, petitioner-lessees, excluding Rosa N. Sanchez, wrote another letter to the Administrative Committee which reads: The Administrative Committee Heirs of Dr. Lorenzo C. Reyes #22 18th Street, New Manila Quezon City Dear Sirs: 31

We waited for 68 days for your answer to our letter dated August 11, 1988 which did not come. Considering various economic reasons, you will be happy to hear from us (Lessees) that we have finally accepted your asking price of P5,000,000.00 for your property located at Evangelista Street, district of Sta. Cruz, Manila covered by T.C.T. No. 49857 issued to Dr. Lorenzo C. Reyes on September 3, 1936. Please prepare all the necessary papers and documents to make the sale legal for all intent and purposes. Any unpaid taxes such as income, estate, realty and science education fund and documentary stamps shall be for the account of the Heirs including documentation expenses. Terms of Payment: 95% upon signing of the documents; and 5% upon delivery of the Transfer Certificate of Title in the name of its individual Lessees. Expecting to hear your final confirmation soonest. 12 (Emphasis supplied) On 3 November 1988, the Administrative Committee replied: Mr. Atanacio M. Villegas Mr. Agripino M. Villegas Mrs. Corazon Sanchez 654 Evangelista, Quiapo, Manila Dear Sirs: This is with reference to your letter dated October 18, 1988. Several times in the past two months, Mr. Carlito A. Reyes and our other brothers and sisters have informed you that some of the co-owners of our property at the above-given address are no longer agreeable to selling the said property; however, other co-owners, representing a 75% share thereof, were still interested in selling their shares. It is, therefore, very clear from the foregoing that our offer to sell the entire property to you was no longer effective . Moreover, our offer was for the price of P5,000,000.00 net to the co-owners. Your letter of October 18, 1988 imposes the condition that unpaid taxes shall still be borne by us, which is unacceptable. We therefore, leave it up to some of the co-owners to negotiate for the sale of their shares with you. 13 (Emphasis supplied) Respondent-heirs, collectively owning 75% of the property, also sent a letter dated 3 November 1988 to petitioner-lessees: Mr. Atanacio M. Villegas Mr. Agripino M. Villegas Mrs. Corazon Sanchez 654 Evangelista, Quiapo, Manila Dear Sirs: This is with reference to your letter dated October 18, 1988 to the Administrative Committee of the properties owned by the heirs of Dr. Lorenzo C. Reyes. You will recall that in the past two months, some of us saw you and/or your representative, Mr. Ben Miranda and explained to you that some of the co-owners of the property at Evangelista Street, Sta. Cruz, Manila, covered by TCT No. 49857, were no longer interested in selling the said property. On the other hand, we the undersigned co-owners holding a 75% share of the said property, were offering to

sell our shares to you at the price of 75% of P5,000,000.00, or P3,750,000,000.00. Moreover, the said price was to be net to us, that is, all applicable taxes - capital gains tax, documentary stamp tax, municipal transfer tax and registration expenses - should be borne by you. It was obvious that our said offer superseded that of our Administrative Committee, which cannot convey the property to you without the unanimous consent of all the co-owners. We are reiterating our offer to sell our 75% share to you. However, since there is a new offer to purchase the entire property at P5,100,000.00, we are now offering our said 75% share for the price ofP3,825,000.00, net to us. If we do not hear from you within one week from your receipt hereof, we shall feel free to offer our said share to other buyers. 14 (Emphasis supplied) On 28 November 1988, respondent-heirs sold their 75% undivided interest in the property for P3,825,000 to Lita Sy. 15 Lita Sy also issued a check for P412,500 to Vicente M. Reyes as payment for taxes, agents commission and miscellaneous expenses. 16 The corresponding title, Transfer Certificate of Title No. 183718 17 was issued on 28 December 1988. The Administrative Committee informed petitioner-lessees of the sale in a letter dated 7 December 1988. 18 On 1 February 1989, the other heirs sold the remaining 25% portion of the property to Atanacio M. Villegas and Agripino M. Villegas ("Villegas brothers") for P1,250,000. 19 G.R. No. 111495 On 10 February 1989, petitioner-lessees filed an action against respondent-heirs and Spouses Sy for Annulment of Deed of Sale/Title, Specific Performance, and Consignation of Rentals with Damages. On 26 February 1990, the RTC Branch 2 rendered a decision, the dispositive portion of which reads: WHEREFORE, for all of the foregoing, judgment is hereby rendered in favor of the defendants and against the plaintiffs: 1. Dismissing the complaint; 2. Declaring the deed of sale executed by defendants in favor of spouses Lita Sy and Sy Bon Su and Transfer Certificate of Title No. 183718 issued as a consequence of the deed of sale, valid; 3. Ordering the plaintiffs to vacate the premises and surrender the possession thereof to the defendants; 4. Ordering the plaintiffs, jointly and severally, to pay the defendants the sum of P1,000.00 as expenses of litigation; P2,000.00 as attorneys fees, and to pay the costs. SO ORDERED. 20 On appeal, the Court of Appeals affirmed the decision of the RTC Branch 2. Upon motion for reconsideration, the Court of Appeals affirmed its decision with modification. The dispositive portion reads: In view of the foregoing, this Courts decision dated January 6, 1993, is AFFIRMED with the modification that the record of this case is ordered remanded to the court a quo for the parties to come into an agreement before the said court as to what portion and physical part of the building shall be occupied by the appellants and the appellees, in proportion to their respective shares in the property involved and for other arrangements regarding the matter. SO ORDERED. 21 G.R. No. 122404

On 18 May 1990, Spouses Sy filed a complaint for Specific Performance against the heirs of Atanacio Villegas, as represented by Soledad de Ocampo, 22 Agripino Villegas, and Ofelia R. Tungol. 23 On 10 May 1993, the RTC Branch 45 rendered a decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering defendants heirs of Atanacio Villegas to: a) accept the redemption price of P1,250,000.00, including interest thereon from February 1, 1989 until the plaintiffs exercised their right of redemption; b) to pay the sum of P10,000.00 as attorneys fees to the plaintiffs; c) and to pay the costs of suit. SO ORDERED. 24 On appeal, the Court of Appeals affirmed the decision of the RTC Branch 45. In a resolution dated 9 June 1999, this Court consolidated the two cases docketed as G.R. Nos. 111495 and 122404. 25 The Issues The issues in these consolidated cases can be summarized as follows: 1. Whether the contract of sale between respondent-heirs and Lita Sy violated the right of first refusal of petitioner-lessees; and 2. Whether Lita Sy, as co-owner of the property, validly and seasonably exercised her right to redeem the 25% undivided interest in the property, which undivided interest the other co-owners had sold to Atanacio M. Villegas and Agripino M. Villegas. The Ruling of the Court Right of First Refusal A right of first refusal is a contractual grant, not of the sale of a property, but of the first priority to buy the property in the event the owner sells the same. 26 The exercise of the right of first refusal is dependent not only on the owners eventual intention to sell the property but also on the final decision of the owner as regards the terms of the sale including the price. 27 When a lease contains a right of first refusal, the lessor has the legal duty to the lessee not to sell the leased property to anyone at any price until after the lessor has made an offer to sell the property to the lessee and the lessee has failed to accept it. Only after the lessee has failed to exercise his right of first priority could the lessor sell the property to other buyers under the same terms and conditions offered to the lessee, 28 or under terms and conditions more favorable to the lessor. The records show that the heirs of Dr. Lorenzo C. Reyes did recognize the right of first refusal of petitioner-lessees over the property. 29 This is clear from the letter dated 19 May 1988 informing petitioner-lessees that the property they were leasing is for sale. There was an exchange of letters between the Administrative Committee and petitioner-lessees evidencing the offer and counter-offer of both parties. Petitioner-lessees insist that there was already a perfected contract of sale when they accepted the P5,000,000 offer for the property in their letter dated 18 October 1988. Petitioner-lessees allege that the contract of sale between respondent-heirs and Lita Sy should be annuled since it violated the right of first refusal of petitioner-lessees. On the other hand, respondent-heirs maintain that the P5,000,000 offer in their letter dated 3 August 1988 already lapsed because petitioner-lessees did not accept the offer within the period granted. Instead, 32

petitioner-lessees opted for a conference during which the parties failed to agree on the price. There was therefore no perfected contract of sale because there was no meeting of minds between the parties. We agree with respondent-heirs that there was no meeting of the minds between the parties. Where a time is stated in an offer for its acceptance, the offer is terminated at the expiration of the time given for its acceptance. The offer may also be terminated when the person to whom the offer is made either rejects the offer outright or makes a counter-offer of his own. 30 The offer of P5,000,000 in the letter dated 3 August 1988 already lapsed when petitioner-lessees failed to accept it within the period granted. The offer was superseded by the new offer of respondent-heirs during the conference. However, it appears from the records that no settlement was reached between the parties during their conference. Engr. Ariel Reyes, son of Vicente M. Reyes, who was present in the conference testified: Q: I am showing to you here a letter dated August 11, 1988 marked as Exhibit 6, will you look at this document Mr. Witness and tell us what relation has this letter to that which you mentioned? A: Yes, sir, this is the letter that they were asking for a conference, sir. Q: Now, in connection with that conference being requested by the plaintiff, did you have a conference with the plaintiffs, Mr. Witness? A: Yes, sir, and I was in that conference. Q: All right, who were present in that conference, Mr. Witness? A: Two of the administrative committee Mrs. Maylad, Mr. Carlito Reyes, myself, the brothers and sisters of Mr. Carlito Reyes, sir. We had a meeting with a representative of theirs. Q: All right, were the plaintiffs present during that conference? A: No, they were not. The plaintiffs were not present at that time. Q: And who was present during that meeting? A: He introduced himself as Mr. Miranda, sir. Q: And did you ask Mr. Miranda why the plaintiffs were not around in that conference? A: I believe his answer was Mr. Villegas, the old Villegas was in the hospital at that time. COURT: Q: All right, what was the capacity of Mr. Miranda in that conference? A: He said he represents the Villegases and including the Sanchezes. The other tenants of the property because there are two tenants, Villegas and Sanchez, your honor. COURT: All right continue. ATTY. DELA CRUZ: Q: All right Mr. Witness, will you please tell this Honorable Court what transpired during your meeting with Mr. Benjamin Miranda? A: We discussed the price that we wanted because there was an offer much better than what they were offering and it seems that we did not get nowhere with their discussions, sir. Q: Why? 33

A: They cannot come up with the price that the others are offering, sir . Q: Would you mention specifically the price Mr. Witness? A: We wanted P5.1 Million for the property, all net of everything. Meaning, to all other expenses shall be borne by the buyer like capital gains tax, documentary stamps, etcetera. COURT: Q: All right, what was the last offer before that conference? A: I think it was P4 Million, your Honor. ATTY. DELA CRUZ: Q: Mr. Witness. . . COURT: Q: Is it not a fact that you made an earlier offer. . . Is it not a fact that you made an offer after the P4-Million in the amount of P5-Million? A: Yes, your Honor. Q: So, before you made the offer of P5-Million 1 hundred thousand pesos, your offer was P5-Million? A: I believe what was in the letter was better than P5-Million, your Honor. Q: I am asking you if you agreed with the plaintiff that you made an offer to the plaintiffs in the amount of P5-Million before you made an offer of P5.1 Million in that conference? A: I think so. I cannot remember because it was a long time already. xxxx ATTY. DELA CRUZ: Q: Will you just tell this Honorable Court Mr. Witness what happened to that conference which you said you had with Mr. Miranda? A: We did not agree on the price and terms of the property that they offered. Q: Well, how much was the price which you talked about in that conference? A: We informed the tenants that there was another offer given to us and we raised our price to P5.1-Million net. It was offered by another buyer. Q: Would you explain to this Honorable Court what you mean by P5.1-Million net? A: It is net of the capital gains and other taxes, government taxes. COURT: Q: Why did you make another offer of P5.1-Million when your former offer of P5-Million was already accepted? A: Can I explain to you, with due respect, your Honor. There was a letter given to them; that there should be an acceptance on or before August 11, 1988. What they replied is not acceptance but a conference. So, since that was not met, or since that was not accepted, meaning, we did not accept their offer, what we said on August 11 is that, they should come up with the money or the payment of the property and we will prepare for the Deed of Sale and documents pertaining to the sale. xxxx

Q: All right Mr. Witness. After that conference, you had with Mr. Miranda, did you receive any communication from the plaintiffs? A: Yes, sir, that was the time we received that Exhibit H. Q: All right, I am showing to you here a letter dated October 18, 1988 which was marked as Exhibit A, will you look at this document and tell us what relation has this document to that which you said you received after the conference? A: Yes, sir, this is the letter, sir, that they sent. Q: Now, what did you do after receiving this letter coming from the plaintiffs? A: There was a reply letter, sir. Q: You replied to this letter? A: Yes, sir, we replied to that letter. Q: If that reply letter to this October 18, 1988 letter will be shown to you, would you be able to identify the same? A: Yes, sir. Q: I am showing to you here a letter dated November 3, 1988 previously marked as Exhibit 9, and Exhibit 10, will you look at this letter Mr. Witness and tell us what relation has this letter to that which you mentioned? A: Yes, sir, this is the letter informing them that some of the heirs have sold their 75% shares to another interested party, 75% share of the property only, sir. COURT: Q: And one of the heirs composing the 75% share of the vendors included your father? A: Yes, your Honor. COURT: Q: All right, let me see Exhibit 9. (Exhibits 9 and 10 was shown to the Court). COURT: Q: All right, before the sale of the 75% share, did you inform the plaintiffs that you are selling the 75% of the whole property? A: During the conference, your Honor, because during the conference. . . That's why we did not agree. Q: Just answer the question. A: Yes, your Honor, we did. Q: Is it not a fact that you only informed the plaintiffs, thru your letter of November 3, 1988, Exhibit 9, that the vendors sold 75%? A: Are selling? Yes, sir. Q: Meaning, that when you sent Exhibit 9, the property was not yet sold? A: Yes, your Honor. 31 (Emphasis supplied) Even petitioner-lessees witness Miranda, who was their accountant since 1959, testified that petitionerlessees did not indicate their offer for the property in their letter dated 11 August 1988 but instead 34

requested for a conference with all the heirs of Dr. Lorenzo C. Reyes. Miranda admitted that the main reason for their request for a conference was because they knew that not all the heirs of Dr. Lorenzo C. Reyes were interested in selling the property. Miranda testified: ATTY. DELA CRUZ: Q: All right, in this letter Mr. Witness, there is in the dispositive portion of this letter the following statement and which I quote for the records: "May we received [sic] your offer on or before August 11, 1988. Please be guided accordingly." You read this portion? A: Yes sir. (referring to August 3, 1988 letter) xxxx Q: And as reply to this communication Mr. Witness, you prepared another letter dated August 11, 1988 addressed to the Administrative Committee and which was already marked as Exhibit G for the plaintiffs and Exhibit 6 for the defendants? Could you look at this letter if you are familiar with this? A: Yes, sir. Q: And you will agree with me Mr. Witness that in your August 11, 1988 letter, you did not make any offer or a counter offer or what not to the letter of the defendants-heirs on August 3, 1988? A: You are referring to the amount? Q: Yes, you did not mention any? A: I did not mention the offer but I requested them to have a 100% attendance because I know that the property being sold had a problem even among the family heirs, there is a problem that is why I wanted them to be present so that if ever who will buy the property we will know where the lessees should be placed out of the four doors because they are all selling three doors . Another thing, that is an inherited property. I requested them to show me a copy of their estate tax because under the internal revenue code, you cannot have a clean title unless the corresponding estate tax on the property is paid. That is why I made also that request, sir. xxxx Q: Now, in this August 11, 1988 letter, which is Exhibit G plaintiffs, you stated that you required complete attendance of the heirs and you did not mention yet a price? A: The bid price. Q: What was your reason for doing that complete attendance? A: Because I want to find out whether the four are not interested in selling, sir. Q: When you said four, are they the one representing the ownership of the 25%? A: Yes, sir. 32 (Emphasis supplied) Petitioner-lessees admit that there was an ongoing negotiation for the sale of the property. 33 Precisely, theP5,000,000 price for the property indicated by the Administrative Committee in the letter dated 3 August 1988 was superseded by the subsequent offer of respondent-heirs during the conference. Thus, the letter dated 18 October 1988 of petitioner-lessees is merely another counter-offer for the property in their continuing negotiation for the property. The latest offer of respondent-heirs was contained in their letter dated 3 November 1988 wherein only the 75% undivided interest of the property was for sale at P3,825,000. When petitioner-lessees opted not to respond to this offer, respondent-heirs had the right to sell the property to other buyers. Petitioner-lessees already exercised their right of first refusal when they refused to respond to the latest offer of respondent-heirs, which amounted to a rejection of the offer. Upon petitioner-lessees failure to

respond to this latest offer of respondent-heirs, the latter could validly sell the property to other buyers under the same terms and conditions offered to petitioner-lessees. 34 Thus, when respondent-heirs sold the property to Lita Sy, respondent-heirs did not violate the right of first refusal of petitioner-lessees. Indeed, petitioner-lessees were given more than ample opportunity to purchase the property. Petitioner-lessees allege that the price offered to Lita Sy was lower than the price offered to them. The records of the case reveal otherwise. The last price which respondent-heirs offered to petitioner-lessees was P3,825,000 for the 75% undivided interest in the property. The price of P3,825,000 was computed based on the price of P5,100,000 for the entire property. Moreover, capital gains tax, documentary stamp tax, municipal transfer tax and registration expenses should be paid by petitioner-lessees. However, petitioner-lessees were only willing to pay P5,000,000 for the entire property. Petitioner-lessees also indicated in their letter dated 8 October 1988 that unpaid taxes such as income, estate, realty & science education fund and documentary stamps should be borne by the heirs of Dr. Lorenzo C. Reyes. On the other hand, Lita Sy paid P3,825,000 for the 75% undivided interest in the property. This is exclusive of theP412,500 which Lita Sy paid to Vicente M. Reyes for taxes, agents commission and miscellaneous expenses. Thus, Lita Sy paid a total of P4,237,500. Clearly, this amount is not lower than the price offered to petitioner-lessees. Legal Redemption The Villegas brothers maintain that Lita Sy failed to exercise her right of redemption within the 30-day period prescribed under Article 1623 of the Civil Code. According to the Villegas brothers, Lita Sy received on 17 February 1989 a copy of the Deed of Sale evidencing the sale of the 25% portion of the property to the Villegas brothers. However, it was only in a demand letter dated 29 March 1990 that Lita Sy invoked her right of redemption. Articles 1620 and 1623 of the Civil Code provide: Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. The right of redemption of co-owners excludes that of adjoining owners. The records reveal that on 17 February 1989, Lita Sy received the complaint for Annulment of Deed of Sale/Title, Specific Performance, and Consignation of Rentals with Damages filed by petitioner-lessees. On the same date, Lita Sy also received together with the complaint the Deed of Sale of the 25% portion of the property. Lita Sy and the other defendants in that case filed their answer on 16 March 1989. 35 In their answer, Lita Sy invoked her right to redeem the property: xxxx 13. That the Deed of Sale (Annex "N") in favor of the plaintiffs was based on a Transfer Certificate of Title No. 183718 (Annex "M") where defendant Lita Sy is already a co-owner to the extent of 36/48 portion on 35

the subject property, which circumstance impliedly admits that defendants heirs have validly and legally disposed the 75% portion to defendant Lita Sy and plaintiffs are therefore estopped to deny it; 14. That as a co-owner with the sellers of the 25% portion of the subject lot, defendant Lita Sy has the right to redeem the shares disposed by the other co-owners in accordance with Art. 1620 of the New Civil Code and hereby exercise the same; 15. That the Deed of Sale (Annex "N" Complaint) allegedly executed by the other heirs constituting twenty five (25%) percent of the subject property cannot as yet vest full ownership over the same until the co-owner defendant Lita Sy shall have failed or waived her rights to redeem the aforesaid 25% of the subject property in question; xxxx PRAYER WHEREFORE, premises considered, it is respectfully prayed that after hearing a judgment be rendered dismissing the instant complaint for lack of merit and order the plaintiffs jointly and severally: xxxx e) To sell or execute a Deed of Sale in favor of defendant Lita Sy covering the remaining 25% portion of the subject property in full exercise of the right of redemption under the law. xxxx Lita Sy claims that the answer filed with the RTC Branch 2 is equivalent to a formal offer to redeem the 25% undivided interest in the property sold to the Villegas brothers. Lita Sy also claims that since she offered to redeem the property on 16 March 1989, which is within 30 days from her receipt of the notice of the sale on 17 February 1989, she has complied with the condition fixed by law and may bring an action to enforce the redemption. We hold that there was no valid and effective offer to redeem the 25% undivided interest in the property. Although Lita Sy invoked her right to redeem the property in the answer filed with the RTC Branch 2, she failed to consign in court the redemption price. Well-settled is the rule that a formal offer to redeem must be accompanied by a valid tender of the redemption price and that the filing of a judicial action, plus the consignation of the redemption price within the period of redemption, is equivalent to a formal offer to redeem. 36 As held by this Court in Tolentino v. Court of Appeals: [A] formal offer to redeem, accompanied by a bona fide tender of the redemption price, although proper, is not essential where, as in the instant case, the right to redeem is exercised thru the filing of a judicial action, which as noted earlier was made simultaneously with the deposit of the redemption price with the Sheriff, within the period of redemption. The formal offer to redeem, accompanied by a bona fide tender of the redemption price within the period of redemption prescribed by law, is only essential to preserve the right of redemption for future enforcement even beyond such period of redemption. The filing of the action itself, within the period of redemption, is equivalent to a formal offer to redeem. Should the court allow redemption, the redemptioners should then pay the amount already adverted to. 37 The importance of a valid tender or consignation of the redemption price was sufficiently explained by Justice J.B.L. Reyes in Conejero v. Court of Appeals: It is not difficult to discern why the redemption price should either be fully offered in legal tender or else validly consigned in court. Only by such means can the buyer become certain that the offer to redeem is one made seriously and in good faith. A buyer can not be expected to entertain an offer of redemption without attendant evidence that the redemptioner can, and is willing to, accomplish the repurchase immediately. A different rule would leave the buyer open to harrassment by speculators or crackpots, as

well as to unnecessary prolongation of the redemption period, contrary to the policy of the law. While consignation of the tendered price is not always necessary because legal redemption is not made to discharge a pre-existing debt (Asturias Sugar Central versus Cane Molasses Co., 60 Phil 253), a valid tender is indispensable, for the reasons already stated. Of course, consignation of the price would remove all controversy as to the petitioner's ability to pay at the proper time. 38 In Conejero, the Court held that to effectively exercise the right of redemption, the offer to redeem the property within the 30-day period must be accompanied by a reasonable and valid tender of the entire repurchase price. The Court held: [Conejero] failed to make a valid tender of the price of the sale paid by the Raffians within the period fixed by law. Conejero merely offered a check for P10,000, which was not even legal tender and which the Raffians rejected, in lieu of the price of P28,000 recited in the deed of sale. The factual finding of the Court of Appeals to this effect is final and conclusive. Nor were the vendees obligated to accept Conejeros promise to pay the balance by means of a loan to be obtained in futuro from a bank. Bona fide redemption necessarily imports a reasonable and valid tender of the entire repurchase price, and this was not done. There is no cogent reason for requiring the vendee to accept payment by installments from a redemptioner, as it would ultimately result in an indefinite extension of the 30-day redemption period, when the purpose of the law in fixing a short and definite term is clearly to avoid prolonged and antieconomic uncertainty as to ownership of the thing sold (cf Torrijos vs. Crisologo, et al., G.R. No. L-1773, Sept. 29, 1962). 39 In this case, Lita Sy failed to consign in court the redemption price when she invoked her right to redeem the 25% portion of the property in the answer filed with the RTC Branch 2. The evidence does not show that Lita Sy ever tendered the redemption price to the Villegas brothers. Even when Lita Sys lawyer sent a letter dated 29 March 1990 reiterating the demand for the Villegas brothers to resell the 25% interest in the property, still no tender of the redemption price was made. There is likewise no evidence that Lita Sy consigned the redemption price in court when she filed on 18 May 1990 a complaint for Specific Performance against the heirs of Atanacio Villegas, as represented by Soledad de Ocampo, Agripino Villegas, and Ofelia R. Tungol. Considering that there was no tender of the redemption price, nor was there consignation of the redemption price, we hold that there was no valid exercise of the right of redemption. WHEREFORE, we DENY the petition in G.R. No. 111495. We AFFIRM the Decision dated 6 January 1993 of the Court of Appeals in CA-G.R. CV No. 25974, as modified by its Resolution dated 17 August 1993. We GRANT the petition in G.R. No. 122404. We SET ASIDE the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 41931, and RENDER a new one: 1. Upholding the right of Atanacio M. Villegas and Agripino M. Villegas over the 25% undivided interest in the property; and 2. Denying the demand for legal redemption by Spouses Lita Sy and Sy Bon Su. No pronouncement on costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-10056 December 24, 1915 SONG FO & CO., plaintiff-appellant, vs. MANUEL ORIA, defendant-appellant. CARSON, J.: Song Fo & Co., the original plaintiff in this action, sold a launch to Oria, the defendant, for P16,500, payable in quarterly installments of P1,000, together with interest at the rate of ten per centum per annum. The launch was delivered to Oria in Manila, but was shipwrecked and became a total loss while en route to Oria's place of business in Samar. No part of the purchase price has ever been paid and this action was instituted for the recovery of the total amount of the purchase price with interest thereon until paid. The trial court gave judgment in favor of the plaintiff for P6,000 and interest, that being the amount of the unpaid installments due under the express terms of the contract at the date of the institution of the action; but declined to enter judgment for the balance of the indebtedness on the ground that, under the express terms of the contract, it was not due and payable when the complaint was filed. From this judgment both parties appealed, and the record is now before us on their duly perfected bills of exceptions. The defendant's contentions on this appeal are substantially limited to his claim that under the terms of the deed of sale of the launch, Song Fo & Co. had obligated themselves to insure the launch, and since they had failed and neglected to do so, they themselves should suffer the loss resulting from the shipwreck of the launch without insurance.1awphil.net It cannot be denied that if the contract of sale did in fact impose on Song Fo & Co. an imperative obligation to insure the launch, which under the terms of the contract was mortgaged to secure the payment of the purchase price, and if Song Fo & Co. did in fact fail and neglect to insure the launch in compliance with the terms of the contract, Oria would be entitled to have the amount of his indebtedness reduced by the amount of the insurance which he would have been entitled to have applied to the payment of the purchase price had Song Fo & Co. faithfully complied with the terms of the contract. But an examination of the terms of the deed of sale of the launch discloses that Song Fo & Co. did not expressly obligated themselves to insure and keep the launch insured, although it is true that the contract expressly authorized them to insure it in their own name. Counsel for Oria contend, however, that although the language of the contract did not in express terms obligate Song Fo & Co. to insure the launch, it was their duty so to do under all the circumstances, and it is insisted that they should not be permitted to evade the loss resulting from their negligence in the performance of that duty. The contract expressly authorized Song Fo & Co. to insure the launch in their own name and to charge the estimated cost of the premiums with interest at the rate of ten per centum to Oria, and there is much force in the contention of counsel for Oria at least to extent that under all the circumstances, it was the duty of Song Fo & Co. to insure the vessel if they could. But there is nothing in the record which would justify a holding that Song Fo & Co. obligated themselves to insure the launch at all events. There is nothing in the written contract, examined in the light of all the surrounding circumstances, which justifies an inference that there was any thought in the mind of either of the parties that the vendor of the launch would himself insure her against loss or damage during the long period allowed for the payment of the purchase price; yet that substantially would be the effect of the effect of the assumption of an obligation of an obligation to insure and keep her insured at all events. On the contrary, the language of the contract, which authorized Song Fo & Co. to take out insurance in their own name and to charge the amount of the premium to Oria, when read in the light of the transaction of which it was a part, imposed at most, a duty 36

upon Song Fo & Co. to take such reasonable measures looking to the insurance of the vessel as might be required of a prudent man in connection with the insurance of his own property. The undisputed evidence of record shows that Song Fo & Co. did in fact make a bona fide attempt to insure the launch, and to that end did all in their power and adopted all available means which could reasonably be required of them. It appears, however, that partly due to the dangerous nature of the coast of Samar along which Oria desired to operate the launch, and partly due to the some lack of confidence in the character and reputation of the owner of the property for which application for insurance was made, the local agents of the marine insurance companies declined to accept the risk without previous communication within their foreign principals: and the launch was lost before they could ascertain the wishes of these principals as to the execution of an insurance contract. It appears also that Oria, who had exclusive control of the operation of the vessel, sent her from Manila to Samar on the trip in the course of which she was shipwrecked, well knowing that she had not yet been insured: and that Song Fo & Co. had no power to interfere, or to keep her in port pending their application for insurance. Indeed it is evident that under the terms of the deed of sale, they would not have had the right to detain the vessel in a place of safety, against the wishes of Oria, had the insurance agents definitely declined their insurance proposals. Under these circumstances we are of opinion and so hold that Song Fo & Co. were in no wise responsible under the contract for the loss of the launch without insurance and that the contentions of the defendant in this regard furnish no defense to the action against him for the purchase agreed upon in the deed of sale. Coming now to examine the contentions of the plaintiffs on their appeal, we think that the trial judge erred in declining to render judgment in their favor for the total amount of the purchase price of the launch. He appears to have relied upon the provisions of article 1125 of the Civil Code but to have overlooked the corelated provisions of article 1129 of the same code. These articles are as follows:itc-a1f 1125. Obligations, the fulfillment of which has been fixed for a certain day, are exigible only when such day arrives. By a certain day is understood one which shall necessarily arrive, even when the date of arrival is unknown. When the uncertainty consists in the arrival or non-arrival of the day, then the obligations is conditional and shall be controlled by the proceeding section. 1129. The debtor shall lose all right to profit by the term: 1. When, after the obligation has been contracted, it appears that he is insolvent, unless he gives security for the debt. 2. When he does not give to the creditor the security he is bound to give. 3. When by his own acts, he acts, he has reduced such security after giving it, or when it disappears through an unforeseen event (vis major), unless it is immediately substituted by a new one equally safe. The security for the payment of the purchase price of the launch itself having disappeared as a result of an unforeseen event (vis major), and no other security having been substituted therefor, the plaintiffs were clearly entitled to recover judgment not only for the installments of the indebtedness due under the terms of the contract at the time when the instituted their action, but also for all installments which, but for the loss of the vessel had not matured at that time. The judgment entered in the court below should be modified by substituting for so much thereof as provides for the recovery by the plaintiff of P6,000 together with interest of November 1911, a provision for the recovery of P16,500 together with interest at the rate of ten per centum per annum, from the 15th day of November, 1911, and thus modified, the judgment appealed from should be affirmed with the costs of this instance against the appellant. So ordered. 37

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-2724 August 24, 1950 JOSE DE LEON, CECILIO DE LEON, in their individual capacity, and JOSE DE LEON and CECILIO DE LEON , as administrators of the intestate estate of Felix de Leon, petitioner, vs. ASUNCION SORIANO, respondent. TUASON, J.: This is an appeal by certiorari from a decision of the Court of Appeals affirming a judgment of the Court of First Instance of Bulacan. Jose de Leon, Cecilio de Leon and Albina de Leon, petitioners herein and defendants in the court below, were natural children of Felix de Leon, deceased, while Asuncion Soriano, respondent herein and plaintiff below, is his widow. In the administration and settlement of the decedent's estate then pending in the Court of First Instance, the said widow, on the one hand, and the natural children, on the other, reached on March 23, 1943 an agreement, approved by the probate court, whereby the natural children obligated themselves, among other things, as follows: 2. At the end of each of agricultural year, by which shall understood for the purposes of this agreement the month of March of every year, the following amounts of palay shall be given to the party of the FIRST PART (Asuncion Soriano) by the parties of the SECOND PART (De Leons): in the month of March of the current year 1943; one thousand two hundred (1,200) cavanes of palay (macan); in the month of March 1944, one thousand four hundred (1,400) cavanes of palay (macan); in the month March of 1945, one thousand five hundred (1,500) cavanes of palay (macan); and in the month of March 1946 and every succeeding year thereafter, one thousand six hundred (1,600) cavanes of palay (macan). Delivery of the palay shall be made in the warehouse required by the government, or if there be none such, at the warehouse to be selected by the party of the FIRST PART, in San Miguel, Bulacan, free from the cost of hauling, transportation, and from any all taxes or charges. It is expressly stipulated that this annual payment of palay shall cease upon the death of the party of the FIRST PART and shall not be transmissible to her heirs or to any other person, but during her lifetime this obligation for the annual payment of the palay hereinabove mentioned shall constitute a first lien upon all the rice lands of the estate of Dr. Felix de Leon in San Miguel, Bulacan. The defendants made deliveries to the plaintiff of 1,200 cavanes of palay in 1934, 700 in 1944, 200 in 1945, and another 200 in 1946, a total of 2,300 cavanes which was 3,400 cavanes short of the 5,700 cavanes which should have been delivered up to and including 1946. It was to recover this shortage or its value that this action was commenced. For answer, the defendants averred that their failure to pay the exact quantities of palay promised for 1944, 1945 and 1946 was due to "the Huk troubles in Central Luzon which rendered impossible full compliance with the terms of the agreement;" and it was contended that "inasmuch as the obligations of the defendants to deliver the full amount of the palay is depending upon the produce as this is in the nature of an annuity, . . . the obligations of the defendants have been fully fulfilled by delivering in good faith all that could be possible under the circumstances." The court gave judgment for the plaintiff for 3,400 cavanes of palay or its equivalent in cash, which was found to be 24,900, and legal interest. As above stated, that judgment was affirmed by the appellate court.

Article 1182 of the Civil Code which was in force at the time agreement in question was entered into, provide that "Any obligation which consists in the delivery of a determinate thing shall be extinguished if such thing should be lost or destroyed without fault on the part of the debtor and before he is in default. Inversely, the obligation is not extinguished if the thing that perishes is indeterminate. Manresa explains the distinction between determinate and generic thing in his comment on article 1096 of the Civil Code of Spain, saying that the first is a concrete, particularized object, indicated by its own individuality, while a generic thing is one of whose determination is confined to that of its nature, to the genus (genero) to which it pertains, such as a horse, a chair. These definitions are in accord with the popular meaning of the terms defined. Except as to quality and quantity, the first of which is itself generic, the contract sets no bounds or limits to the palay to be paid, nor was there even any stipulation that the cereal was to be the produce of any particular land. Any palay of the quality stipulated regardless of origin on however acquired (lawfully) would be obligatory on the part of the obligee to receive and would discharge the obligation. It seems therefore plain that the alleged failure of crops through alleged fortuitous cause did not excuse performance. As Escriche, in his Diccionario Razonado de Legislacion y Jurisprudencia, puts it, speaking of the effects of the loss of a thing: Extingue la obligacion del deudor cuando la cosa debida es un cuerpo cierto y determinado; pero si fuese generica o no estuviese determinada sino en cuanto a la especie, como por ejemplo, unaonza de oro, 50 panegas de trigo o 3 toneladas de vino, siempre se perderia, para el deudor, el cual, por consiguiente, no se libraria de la deuda, ya que se supone que el genero por su naturaleza nunca parece, "nun quan genusperit", ya porque aunque se diga que parece no puede parecer, sino para su dueo, que es el deudor "res domino suo perit". (Libro 18 y su glosa La Titulo 11, Partida 5.a) And he gives this example: Si prestais, pues, a Pedro una onza de oro que luego le roban, tendra que pagartela, porque su obligacion no consistia en haberte de dar aquella misma onza, sino generalmente una onza. In the case of Yu Tek & Co., vs. Gonzales (29 Phil., 384), it appeared that the plaintiff advanced P3,000 to defendant in payment of 600 piculs of sugar. The contract in writing did not specify that the sugar was to come from the crop on defendant's land which was destroyed. It was held that the sugar to be sold not having been segregated, the sale was not perfected and the loss of the crop, even though through force majeure did not extinguish defendant's obligation to deliver the sugar. In the more recent decision of this Court, in the case of Reyes vs. Caltex (Phil.) Inc. (47 Off. Gaz., 1193; 84 Phil., 654), a question similar to that at bar arose. There, we ruled that the inability of the lessee of a commercial property to pay the stipulated rent because of war and because the premises had been occupied by Japanese forces did not affect the lessee's liability to fulfill its commitments. Shifting to American authorities, we cited Pollardvs. Shaefer (1 Dall. [Pa.], 210), where the Court said that, "since by the lease, the lessee was to have the advantage of casual profits of the leased premises, he should run the hazard of casual losses during the term and not lay the whole burden of them upon the lessor." This court went on to say: The general rule on performance of contracts is graphically set forth in American treatises, which is also the rule, in our opinion, obtaining under the Civil Code. Where a person by a contract charges himself with an obligation possible to be performed, he must perform it, unless its performance is rendered impossible by the act of God, by the law, or by the other party, it being the rule that in case the party desires to be excused from performance in the event of contingencies arising, it is his duty to provide therefor in his 38

contract. Hence, performance is not excused by subsequent" inability to perform, by unforseen difficulties, by unusual or unexpected expenses, by danger, by inevitable accident, by the breaking of machinery, by strikes, by sickness, by failure of a party to avail himself of the benefits to be had under the contract, by weather conditions, by financial stringency, or by stagnation of business. Neither is performance excused by the fact that the contract turns out to be hard and improvident, unprofitable or impracticable, ill advised, or even foolish, or less profitable, or unexpectedly burdensome. (17 C. J. S. 946 - 948). In the absence of a statute to the contrary, conditions arising from a state of war in which the country is engaged, will not ordinarily constitute an excuse for non-performance of contract; and impossibility of performance arising from the acts of the legislature and the executive branch of government in war time does not, without more, constitute an excuse for nonperformance. (17 C.J.S., 953, 954.) A few words are in order to straighten out the apparent confusion (of ideas) that exists regarding the influence of fortuitous events in contracts; when they excuse performance and when not. In considering the effect of impossibility of performance on the rights of the parties, it is necessary to keep in mind the distinction between: (1) Natural impossibility preventing performance from the nature of the thingsand (2) impossibility in fact, in the absence of inherent impossibility in the nature of the thing stipulated to be performed. (17 C.J.S., 951.) In the words of one Court impossibility must consist in the nature of thing to be done and not in the inability of the party to do it. (City of Montpelier vs. National Surety Co., 122 A., 484; 97 Vt., Ill; 33 A.L.R., 489.) As others have put it, to bring the case within the rule of impossibility, it must appear that the thing to be done cannot by any means be accomplished, for if it is only improbable or out of the power of the obligor, it is not in law deemed impossible. (17 C.J.S., 442). The first class of impossibility goes to the consideration and renders the contract void. The second, which is the class of impossibility that we have to do here, does not. (17 C.J.S., 951, 952.) For illustration, where the entire product of a manufacturer was taken by the government under orders pursuant to a commandeering statute during the World War, it was held that such action excused non-performance of a contract to supply civilian trade. (40 S. Ct., 5; U.S., 493; 64 Law. ed., 1031.) Another example: where a party obligates himself to deliver certain (determinate) things and the things perish through war or in a shipwreck performance is excused, the destruction operating as a rescission or dissolution of the covenant. But if the promisor is unable to deliver the goods promised and his inability arises, not from their destruction but from, say, his inability to raise money to buy them due to sickness, typhoons, or the like, his liability is not discharged. In the first case the doing of the thing which the obligor finds impossible is the foundation of the undertaking. (C.J.S., 951, note.) In the second, the impossibility partakes of the nature of the risk which the promisor took within the limits of his undertaking of being able to perform. (C.J.S., supra, 946, note). It is a contingency which he could have taken due precaution to guard against in the contract. Summoning the above principles to our aid, and by way of hypothesis the defendant-appellee here would be relieved from the obligation to pay rent if the subject matter of the lease, were this possible had disappeared, for the personal occupation of the premises is the foundation of the contract, the consideration that induced it (lessee) to enter into the agreement. But a mere trespass with which the landlord had nothing to do is a casual disturbance not going to the essence of the undertaking. It is a collateral incident which might have been provided for by a proper stipulation. See also Lacson et al. vs. Diaz, supra, p. 150. The decision of the Court of Appeals is affirmed with costs against the petitioners and appellants.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-4440 August 29, 1952 BUNGE CORPORATION and UNIVERSAL COMMERCIAL AGENCIES, plaintiffs-appellees, vs. ELENA CAMENFORTE and COMPANY, doing business or trading under the name and style of Visayan Products Company, ET AL., defendants-appellants. Juan E. Yap and J.P. Garcia for appellants. Vicente L. Faelnar for appellees. BAUTISTA ANGELO, J.: Plaintiffs brought action against the defendants to recover certain damages they have allegedly sustained in view of the failure of the latter to deliver to the former the amount of Philippine copra which they had agreed to deliver within the time and under the conditions specified in the contract celebrated between them on October 22, 1947. Plaintiffs claim that on October 22, 1947, in the City of Cebu a contract was entered into between the Visayan Products Company and Bunge Corporation (represented by the Universal Commercial Agencies) whereby the former sold to the latter 500 long tons of merchantable Philippine copra in bulk at the prices of $188.80, U.S. currency, per ton, less 1 per cent brokerage per short ton of 2,000 pounds, C & F Pacific Coast, U.S.A.; that, according to the terms and conditions of the contract, the vendor should ship the stipulated copra during the month of November or December 1947, to San Francisco, California, U.S.A. for delivery to the vendee; that, notwithstanding repeated demands made by the vendee, the vendor failed to ship and deliver the copra during the period agreed upon; that believing in good faith that the vendor would ship and deliver the copra on time, the vendee sold to El Dorado Oil Works the quantity of copra it had purchased at the same price agreed upon; and that because of the failure of the vendor to fulfill its contract to ship and deliver the quantity of copra agreed upon within the period stipulated, the vendee has suffered damages in the amount of P180,00. Defendants answered separately the allegations set forth in the complaint and, with the exception of Vicente Kho, denied that the Visayan Products Company has ever entered into a contract of sale of copra with the plaintiffs, as mentioned in the complaint. They aver that if a contract of that tenor has ever been entered into between said company and the plaintiffs, the truth is that Vicente Kho who signed for and in behalf of the company never had any authority to act for that company either expressly or impliedly, inasmuch as the only ones who had the authority to do so are Elena Camenforte, the general manager, Tan Se Chong, the manager, and Tiu Kee, the assistant manager. Vicente Kho, on his part, after admitting that the commercial transaction mentioned in the complaint had actually taken place, avers that the contract was concluded with the Visayan Products Company which had its office in Tacloban, Leyte, and not with the Visayan Products Company established in Cebu, which is not a party to the transaction; that the Visayan Products Company organized in organized in Tacloban is the one that was presented by him in the transaction, of which he is the manager and controlling stockholder, which fact was clearly known to the plaintiffs when the contract was entered into believing that the company he was representing was the one recently organized in Cebu; that he, Vicente Kho, did his best to comply with the contract, but he failed because offorce majeure as follows: he informed the plaintiffs sometime in December, 1947, that he would have all the copra covered by the contract ready for shipment somewhere in the port of San Ramon, Samar, in order that they may make an arrangement for the booking of a ship, but before the arrival of the ship, a strong storm visited the place causing 39

the bodega where the copra was stored to be destroyed and the copra washed away into the sea; and that, because of this force majeure, he cannot now be held liable for damages. After trial, art which both parties presented their respective evidence, the court rendered decision ordering defendant Elena Camenforte & Company to pay to the plaintiffs the sum of P79,744, with legal interest thereon from the filing of the complaint, and the costs of action. The court ordered that, in case said company be unable to pay the judgment because of total or partial insolvency, the same be paid by its codefendants, jointly and severally, either in full or such part thereof as may be left unpaid. Defendants interposed the present appeal. At the outset, it should be stated that while in the lower court there was a dispute between plaintiffs and defendants as regards the real contract that was entered into between the parties and which he was given rise to this litigation, that defense apparently has been abandoned in this appeal, for the only issue now raised by appellants is one of law. Thus, appellants now admit, contrary to their stand in the lower court, that a contract of purchase and sale of copra was in effect entered into between the plaintiffs and the defendants under the terms and conditions embodied in the contract quoted in the complaint, and the only defense on which they now rely is that the copra they had gathered and stored for delivery to the appellees in Samar was destroyed by force majeure which under the law has the effect of exempting them from liability for damages. Consequently, appellants now contend that the lower court erred in condemning them for damages despite the fact that their failure to fulfill the contract is due to force majeure. A perusal of the contract is necessary to see the feasibility of this contention. The contract is embodied in Exhibit C. A perusal of this contract shows that the subject matter is Philippine copra. The sale is to be made by weight, 500 long tons. It does not refer to any particular or specific lot of copra, nor does it mention the place where the copra is to be acquired. No portion of the copra has been earmarked or segregated. The vendor was at liberty to acquire the copra from any part of the Philippines. The sale simply refers to 500 long tons of the Philippine copra. The subject-matter is, therefore, generic, not specific. Having this view in mind, it is apparent that the copra which appellants claim to have gathered and stored in abodega at San Ramon, Samar, sometime in December, 1947, in fulfillment of their contract, and which they claim was later destroyed by storm, in the supposition that the claim is true, cannot be deemed to be the one contemplated in the contract. It may be the one chosen by appellants in the exercise of the discretion given to them under the contract, which they could exercise in a manner suitable to their interest and convenience, but it cannot certainly be considered as the copra contemplated by the parties in the contract. And this must be so because the copra contemplated in the contract is generic and not specific. It appearing that the obligation of appellant is to deliver copra in a generic sense, the obligation cannot be deemed extinguised by the destruction or disappearance of the copra stored in San Ramon, Samar. Their obligation subsists as long as that commodity is available. A generic obligation is not extinguished by the loss of a thing belonging to a particular genus. Genus nunquan perit. Manresa explains the distinction between determinate and generic thing in his comment on article 1096 of the Civil Code of Spain, saying that the first is a concrete, particularized object, indicated by its own individuality, while a generic thing is one whose determination is confined to that of its nature, to the genus (genero) to which it pertains, such as a horse, a chair. These definition are in accord with the popular meaning of the terms defined. Except as to qualify and quantity, the first of which is itself generic, the contract sets no bounds or limits to the palay to be paid, nor was there even any stipulation that the cereal was to be the produce of any particular land. Any palay of the quality stipulated regardless of origin or however acquired (lawfully) would be obligatory on the part of the obligee to receive and would discharged the obligation. It seems therefore plain that the alleged failure of crops through

alleged fortuitos cause did not excuse performance." (De Leon vs. Soriano, 87 Phil., 193; 47 Off Gaz., Supplement No. 12, pp. 377, 379-380.) In binding himself to deliver centrifugal sugar, the defendant promised a generic thing. It could be any centrifugal sugar without regard to origin or how he secured it. Hence, his inability to produce sugar, irrespective of the cause, did not relieve him from his commitment. War, like floods and other catastrophies, was a contingency, a collateral incident, which he could have provided for by proper stipulation. (Reyes vs. Caltex, 84 Phil., 654; 47 Off, Gaz., 1193; Vda.Lacson vs. Diaz, 87 Phil., 150; 47 Off. Gaz., Supp. to No. 12, p. 337.) If appellants are not relieved of civil liability under the contract, what are then the damages for which they stand liable to the appellees? Appellees claim that, immediately after they had concluded their agreement to buy copra with the appellants, they agreed to sell to El Dorado Oil Works the 500 long tons of copra subject matter of the agreement, together with another lot of 500 tons, confident in their belief that the Visayan Products Company would comply with its agreement. The copra was to delivered by Bunge Corporation to El Dorado Oil Works not later than December 31, 1947. Because of the failure of the appellants to fulfill their aforementioned agreement, appellees failed to deliver the copra it sold with the result that they had to pay damages in the sum of $84,630.86 (or P169,461.72). The lower court, however, did not sustain this claim in view of the discrepancy of one day it note in the dates of execution of the contracts of sale of the copra in question. The court found that the contract signed by El Dorado Oil Works is dated October 21, 1947, (Exhibit O), whereas the contract signed by the Visayan Products Company is dated contract had been executed one day latter than the former, which gives rise to the belief that the copra that was sold to the El Dorado Oil Works could not have been the one purchased from the appellants. Nevertheless, the court awarded damages to the appellees taking into account the highest price of copra in the market during the month of December, 1947, as per statement Exhibit P, even though the appellees had made no allegation in their complaint of any offer or transaction they might have had with other copra dealers during the period contemplated in the contract in question. We are of the opinion that the lower court erred in disregarding the transaction with the El Dorado Oil Works simply because it found an apparent discrepancy in the dates appearing in the contracts Exhibits O and C. Exhibit C appears dated on October 22, 1947, and was executed in Cebu, Philippines, whereas Exhibit O appears dated on October 21, 1947, and was executed in New York City. the difference of one day in the execution of these documents is merely nominal because New York time is several hours behind Cebu time. In fact both transactions have been practically executed on the same day. Even supposing that the contract with the El Dorado Oil Works calls for future and not present deliveries. There is nothing improbable for the appellees to sell copra which they expect to acquire sometime in the future for purposes of speculation. But this error cannot now materially change the result of this case considering that plaintiffs-appellees did not appeal from the decision. "It has been held that appellee, who is not appellant, may also assign errors in his brief where his purpose is to maintain the judgment on other grounds, but he may not do so if his purpose is to have the judgment modified or reversed, for, in such case, he must appeal." (Saenz vs. Mitchell, 60 Phil., 69, 80; see Mendoza vs. Mendiola, 53 Phil., 267; Villavert vs. Lim, 62 Phil., 178; Bajaladia vs. Eusala, G. R. No. 42579). Wherefore, the decision appealed from is affirmed, with costs against appellants.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-34727 March 9, 1932 PACIFIC COMMERCIAL COMPANY, plaintiff-appellee, vs. ERMITA MARKET & COLD STORES, INC., defendant-appellant. Jose Perez Cardenas and Guevara, Francisco & Recto for appellant. Jose Yulo for appellee. OSTRAND, J.: This is an appeal from a judgment of the Court of First Instance of Manila, ordering defendant to pay plaintiff the sum of P1,740 with interest thereon at the rate of 10 per cent per annum from January 1, 1928, to date of payment; likewise, to pay plaintiff P174 for attorneys' fees and costs of collection; and to pay P250.67 with legal interest from date of filing of complaint to date of payment for work, labor, and services rendered and for materials used in the installation of a refrigerating machine for the defendant, and pay the costs. It appears that on September 14, 1927, the Pacific Commercial Co., the plaintiff herein, sold to the Ermita Market & Cold Stores, Inc., the defendant herein, an automatic refrigerating machine of the following description: Una maquina refrigeradora automatica York Style Y-26 capacidad Dos toneladas de refrigeracion consistente en: Compresor de amoniaco York, de Doble Cilinfro, Condensador, Recibidor, Separador de aciete, Juego de manometros, Valvulas, Valvula reguladora de agua, Control automatico, Aparato de seguridad, Motor Electrico G-E de cinco caballos de fuerza 220 volts Corriente alterna, de Una Fase, montadas todas en una basee de hierro, asi como tambien incluye una bomba centrifuga para circulacion de argua y correas. The parties signed the usual printed sales-contract form of the plaintiff company, the purchase price being P2,550, payable by installments on dates and in amounts stated in the sales contract. The delivery of the machines was made on December 7, 1927, and by mutual agreement between the vendor and the vendee, the former installed the machine which was completed on December 26, 1927. The installation, including materials used, amounted to P250.67, to be paid by the Ermita Market & Cold Stores, Inc., to the Pacific Commercial Company. Complying with the terms of the sales contract, the defendant paid the plaintiff the amount of P810 against the purchase price of the machine, leaving a balance of P1,740. A few days after installation of the automatic refrigerating machine, the Ermita Market & Cold Stores advised the Pacific Commercial Company that the machine was not serving the purpose for which it was sold to defendant and that it was lacking ammonia receiver and oil separator. The plaintiff company in turn advised the defendant that the machine installed was complete, having all the accessories as stated in the contract. However, upon the insistence of the defendant, the plaintiff, just to please the president of the defendant company, delivered and installed on the machine an additional oil separator without charge. The machine did not give the result expected from it, and the defendant refused to pay the installation of the machine. The Pacific Commercial Company thereupon brought this action. In its answer, the defendant generally and specially denied the allegations contained in plaintiff's complaint, and by way of special defense alleged substantially that the machine delivered to the defendant by the plaintiff was not the machine described in the contract of sale inasmuch as the said machine was not automatic and as it was lacking ammonia receiver, oil separator, and the implements necessary to make the said machine automatic. 40

By way of cross-complaint, the defendant further alleges that it bought the machine in question from the plaintiff for the purpose of running the business of cold storage; that the temperature in the refrigerating rooms did not reach, and had never reached, the necessary temperature for the preservation of meat, fish, vegetables, and fruits; that owing to the negligence of the plaintiff in not repairing or putting in good working condition the said refrigerating machine, the defendant had been forced to close its establishment and for which reason the defendant claimed damages against the plaintiff as follows: P5,000 for expenses in advertising and propaganda; P15,000 as the value of fish, pork, meat, vegetables and fruits alleged to have deteriorated in the refrigerating rooms; P30,000 for the loss of its clientele and decrease in its sales; P20,000 for the loss of the whole business; and "P3,600 for rentals of the premises, salaries of the manager, guard and warehouseman, from May 10, 1928, up to October of the same year, at the rate of P600 a month, because of the refusal of the plaintiff to withdraw the refrigerating machine in question from the premises where it was installed. In other words, the defendant asks for damages in the total sum of P73,600. Replying to the defendant's cross-complaint, the plaintiff denied generally and specifically each and every and every allegation in the said cross-complaint and by way of special defense, alleged that whatever defects or deficiency there might have been in the temperature in the refrigerating rooms of defendant's establishment, or in the functioning of the machine, these were due to the defects and imperfections of the coils which were supplied and installed by the defendant itself, as well as to the incompetency and inefficiency of the defendant's personnel to operate the machine. After trial, the court below rendered the judgment above mentioned, and, as hereinbefore stated, the defendant appealed to this court. After a careful examination of the record, we have not the least doubt that the plaintiff delivered the machine as described in the sales contract, and the fact that the defendant could not use it satisfactorily in the three cold stores division cannot be attributed to plaintiff's fault; as far as we can see, the machine was strictly in accordance with the written contract between the parties, and the defendant can hardly honestly say that there was any deception by the plaintiff. (See article 327, Code of Commerce; Palanca vs. Fred Wilson & Co., 37 Phil., 506.) But it is clear that the defendant company did not fully understand the use of the motor. It complains that the machine would not properly refrigerate the refrigerating rooms, but it is evident that the machine could not operate automatically when the defendant had three refrigerating rooms which it expected to maintain at three different temperatures. The defendant also complained that the machine was not equipped with a thermostat and that the lack of its obstructed the work of the refrigerating. In the first place, the thermostat was not include in the sales contract and in the second place it would not have been of any service to defendant because it could not possibly operate automatically at three different temperatures with the defendant's insufficient equipment. The defendant's complaint that the machine did not contain an oil separator is not true; the oil separator is combined with the receiver and condenser in a single combined piece in the machine. The evidence in this case is clear to us, and we cannot find any errors committed by the court below. It may be that the machine could have given satisfaction to the defendant if the coils had been installed properly and the machine had been operated by competent persons. Any deficiency in this regard could not be the plaintiff's fault; the coils were supplied and installed by someone other than the plaintiff, and the machine was being operated by the defendant itself. The judgment appealed from is therefore affirmed in its entirely, with costs against appellant. So ordered. 41

SECOND DIVISION [G.R. No. 137290. July 31, 2000] SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner, vs. SPOUSES ALFREDO HUANG and GRACE HUANG, respondents. DECISION MENDOZA, J.: This is a petition for review of the decision,[1] dated April 8, 1997, of the Court of Appeals which reversed the decision of the Regional Trial Court, Branch 153, Pasig City dismissing the complaint brought by respondents against petitioner for enforcement of a contract of sale. The facts are not in dispute. Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Part of its inventory are two parcels of land totalling 1, 738 square meters at the corner of Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig City, which are covered by TCT Nos. PT-82395 and PT-82396 of the Register of Deeds of Pasig City. On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter[2] dated March 24, 1994, Atty. Dauz signified her clients interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly installments from May to December, 1994. However, petitioner refused the counter-offer. On March 29, 1994, Atty. Dauz wrote another letter[3] proposing the following terms for the purchase of the properties, viz: This is to express our interest to buy your-above-mentioned property with an area of 1, 738 sq. meters. For this purpose, we are enclosing herewith the sum of P1,000,000.00 representing earnest-deposit money, subject to the following conditions. 1. We will be given the exclusive option to purchase the property within the 30 days from date of your acceptance of this offer. 2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI will secure the necessary Management and Board approvals; and we initiate the documentation if there is mutual agreement between us. 3. In the event that we do not come to an agreement on this transaction, the said amount of P1,000,000.00 shall be refundable to us in full upon demand. . . . Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate real estate, indicated his conformity to the offer by affixing his signature to the letter and accepted the "earnestdeposit" of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the properties. Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April 8, 1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day term. Atty. Dauz countered with an offer of six months within which to pay. On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner had not yet acted on her counter-offer. This prompted Atty. Dauz to propose a four-month period of amortization.

On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within which to exercise her option to purchase the property, adding that within that period, "[we] hope to finalize [our] agreement on the matter."[4] Her request was granted. On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was returning the amount of P1 million given as "earnest-deposit."[5] On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within five days of a deed of sale covering the properties. Respondents attempted to return the "earnestdeposit" but petitioner refused on the ground that respondents option to purchase had already expired. On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before the Regional Trial Court, Branch 133, Pasig City where it was docketed as Civil Case No. 64660. Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the complaint alleging that (1) the alleged "exclusive option" of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable and (2) the complaint did not allege a cause of action because there was no "meeting of the minds" between the parties and, therefore, no perfected contract of sale. The motion was opposed by respondents. On December 12, 1994, the trial court granted petitioners motion and dismissed the action. Respondents filed a motion for reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals which, on April 8, 1997, rendered a decision[6] reversing the judgment of the trial court. The appellate court held that all the requisites of a perfected contract of sale had been complied with as the offer made on March 29, 1994, in connection with which the earnest money in the amount of P1 million was tendered by respondents, had already been accepted by petitioner. The court cited Art. 1482 of the Civil Code which provides that "[w]henever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract." The fact the parties had not agreed on the mode of payment did not affect the contract as such is not an essential element for its validity. In addition, the court found that Sobrecarey had authority to act in behalf of petitioner for the sale of the properties.[7] Petitioner moved for reconsideration of the trial courts decision, but its motion was denied. Hence, this petition. Petitioner contends that the Court of Appeals erred in finding that there was a perfected contract of sale between the parties because the March 29, 1994 letter of respondents, which petitioner accepted, merely resulted in an option contract, albeit it was unenforceable for lack of a distinct consideration. Petitioner argues that the absence of agreement as to the mode of payment was fatal to the perfection of the contract of sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had authority to sell the subject real properties.[8] Respondents were required to comment within ten (10) days from notice. However, despite 13 extensions totalling 142 days which the Court had given to them, respondents failed to file their comment. They were thus considered to have waived the filing of a comment. The petition is meritorious. In holding that there is a perfected contract of sale, the Court of Appeals relied on the following findings: (1) earnest money was allegedly given by respondents and accepted by petitioner through its vicepresident and operations manager, Isidro A. Sobrecarey; and (2) the documentary evidence in the records show that there was a perfected contract of sale. With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented 42

the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an "earnest-deposit." In Spouses Doromal, Sr. v. Court of Appeals,[9] it was held: . . . While the P5,000 might have indeed been paid to Carlos in October, 1967, there is nothing to show that the same was in the concept of the earnest money contemplated in Art. 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We are more inclined to believe that the said P5,000.00 were paid in the concept of earnest money as the term was understood under the Old Civil Code, that is, as a guarantee that the buyer would not back out, considering that it is not clear that there was already a definite agreement as to the price then and that petitioners were decided to buy 6/7 only of the property should respondent Javellana refuse to agree to part with her 1/7 share.[10] In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions attached by respondents to their letter, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date of acceptance of the offer. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter.[11] All that respondents had was just the option to buy the properties which privilege was not, however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents. Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable. Equally compelling as proof of the absence of a perfected sale is the second condition that, during the option period, the parties would negotiate the terms and conditions of the purchase. The stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.[12] In the present case, the parties never got past the negotiation stage. The alleged "indubitable evidence"[13] of a perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner.

The appellate court opined that the failure to agree on the terms of payment was no bar to the perfection of the sale because Art. 1475 only requires agreement by the parties as to the price of the object. This is error. In Navarro v. Sugar Producers Cooperative Marketing Association, Inc.,[14] we laid down the rule that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. 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. As held in Toyota Shaw, Inc. v. Court of Appeals,[15] agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.[16] In Velasco v. Court of Appeals,[17] the parties to a proposed sale had already agreed on the object of sale and on the purchase price. By the buyers own admission, however, the parties still had to agree on how and when the downpayment and the installments were to be paid. It was held: . . . Such being the situation, it can not, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under Art. 1482 of the new Civil Code, as the petitioners themselves admit that some essential matter - the terms of the payment - still had to be mutually covenanted.[18] Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This issue, therefore, needs no further discussion. WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents complaint is DISMISSED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 166862 December 20, 2006 MANILA METAL CONTAINER CORPORATION, petitioner, REYNALDO C. TOLENTINO, intervenor, vs. PHILIPPINE NATIONAL BANK, respondent, DMCI-PROJECT DEVELOPERS, INC., intervenor. DECISION CALLEJO, SR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. No. 46153 which affirmed the decision2 of the Regional Trial Court (RTC), Branch 71, Pasig City, in Civil Case No. 58551, and its Resolution3 denying the motion for reconsideration filed by petitioner Manila Metal Container Corporation (MMCC). The Antecedents Petitioner was the owner of a 8,015 square meter parcel of land located in Mandaluyong (now a City), Metro Manila. The property was covered by Transfer Certificate of Title (TCT) No. 332098 of the Registry of Deeds of Rizal. To secure a P900,000.00 loan it had obtained from respondent Philippine National Bank (PNB), petitioner executed a real estate mortgage over the lot. Respondent PNB later granted petitioner a new credit accommodation of P1,000,000.00; and, on November 16, 1973, petitioner executed an Amendment4 of Real Estate Mortgage over its property. On March 31, 1981, petitioner secured another loan of P653,000.00 from respondent PNB, payable in quarterly installments of P32,650.00, plus interests and other charges.5 On August 5, 1982, respondent PNB filed a petition for extrajudicial foreclosure of the real estate mortgage and sought to have the property sold at public auction for P911,532.21, petitioner's outstanding obligation to respondent PNB as of June 30, 1982,6 plus interests and attorney's fees. After due notice and publication, the property was sold at public auction on September 28, 1982 where respondent PNB was declared the winning bidder for P1,000,000.00. The Certificate of Sale7 issued in its favor was registered with the Office of the Register of Deeds of Rizal, and was annotated at the dorsal portion of the title on February 17, 1983. Thus, the period to redeem the property was to expire on February 17, 1984. Petitioner sent a letter dated August 25, 1983 to respondent PNB, requesting that it be granted an extension of time to redeem/repurchase the property.8 In its reply dated August 30, 1983, respondent PNB informed petitioner that the request had been referred to its Pasay City Branch for appropriate action and recommendation.9 In a letter10 dated February 10, 1984, petitioner reiterated its request for a one year extension from February 17, 1984 within which to redeem/repurchase the property on installment basis. It reiterated its request to repurchase the property on installment.11 Meanwhile, some PNB Pasay City Branch personnel informed petitioner that as a matter of policy, the bank does not accept "partial redemption."12

43

Since petitioner failed to redeem the property, the Register of Deeds cancelled TCT No. 32098 on June 1, 1984, and issued a new title in favor of respondent PNB.13 Petitioner's offers had not yet been acted upon by respondent PNB. Meanwhile, the Special Assets Management Department (SAMD) had prepared a statement of account, and as of June 25, 1984 petitioner's obligation amounted to P1,574,560.47. This included the bid price of P1,056,924.50, interest, advances of insurance premiums, advances on realty taxes, registration expenses, miscellaneous expenses and publication cost.14 When apprised of the statement of account, petitioner remitted P725,000.00 to respondent PNB as "deposit to repurchase," and Official Receipt No. 978191 was issued to it.15 In the meantime, the SAMD recommended to the management of respondent PNB that petitioner be allowed to repurchase the property for P1,574,560.00. In a letter dated November 14, 1984, the PNB management informed petitioner that it was rejecting the offer and the recommendation of the SAMD. It was suggested that petitioner purchase the property for P2,660,000.00, its minimum market value. Respondent PNB gave petitioner until December 15, 1984 to act on the proposal; otherwise, its P725,000.00 deposit would be returned and the property would be sold to other interested buyers.16 Petitioner, however, did not agree to respondent PNB's proposal. Instead, it wrote another letter dated December 12, 1984 requesting for a reconsideration. Respondent PNB replied in a letter dated December 28, 1984, wherein it reiterated its proposal that petitioner purchase the property for P2,660,000.00. PNB again informed petitioner that it would return the deposit should petitioner desire to withdraw its offer to purchase the property.17 On February 25, 1985, petitioner, through counsel, requested that PNB reconsider its letter dated December 28, 1984. Petitioner declared that it had already agreed to the SAMD's offer to purchase the property forP1,574,560.47, and that was why it had paid P725,000.00. Petitioner warned respondent PNB that it would seek judicial recourse should PNB insist on the position.18 On June 4, 1985, respondent PNB informed petitioner that the PNB Board of Directors had accepted petitioner's offer to purchase the property, but for P1,931,389.53 in cash less the P725,000.00 already deposited with it.19 On page two of the letter was a space above the typewritten name of petitioner's President, Pablo Gabriel, where he was to affix his signature. However, Pablo Gabriel did not conform to the letter but merely indicated therein that he had received it.20 Petitioner did not respond, so PNB requested petitioner in a letter dated June 30, 1988 to submit an amended offer to repurchase. Petitioner rejected respondent's proposal in a letter dated July 14, 1988. It maintained that respondent PNB had agreed to sell the property for P1,574,560.47, and that since its P725,000.00 downpayment had been accepted, respondent PNB was proscribed from increasing the purchase price of the property.21 Petitioner averred that it had a net balance payable in the amount of P643,452.34. Respondent PNB, however, rejected petitioner's offer to pay the balance of P643,452.34 in a letter dated August 1, 1989.22 On August 28, 1989, petitioner filed a complaint against respondent PNB for "Annulment of Mortgage and Mortgage Foreclosure, Delivery of Title, or Specific Performance with Damages." To support its cause of action for specific performance, it alleged the following: 34. As early as June 25, 1984, PNB had accepted the down payment from Manila Metal in the substantial amount of P725,000.00 for the redemption/repurchase price of P1,574,560.47 as approved by its SMAD and considering the reliance made by Manila Metal and the long time that has elapsed, the approval of the higher management of the Bank to confirm the agreement of its SMAD is clearly a potestative condition which cannot legally prejudice Manila Metal which has acted and relied on the approval of SMAD. The Bank cannot take advantage of a condition which is entirely dependent upon its own will after accepting and benefiting from the substantial payment made by Manila Metal. 35. PNB approved the repurchase price of P1,574,560.47 for which it accepted P725,000.00 from Manila Metal. PNB cannot take advantage of its own delay and long inaction in 44

demanding a higher amount based on unilateral computation of interest rate without the consent of Manila Metal. Petitioner later filed an amended complaint and supported its claim for damages with the following arguments: 36. That in order to protect itself against the wrongful and malicious acts of the defendant Bank, plaintiff is constrained to engage the services of counsel at an agreed fee of P50,000.00 and to incur litigation expenses of at least P30,000.00, which the defendant PNB should be condemned to pay the plaintiff Manila Metal. 37. That by reason of the wrongful and malicious actuations of defendant PNB, plaintiff Manila Metal suffered besmirched reputation for which defendant PNB is liable for moral damages of at least P50,000.00. 38. That for the wrongful and malicious act of defendant PNB which are highly reprehensible, exemplary damages should be awarded in favor of the plaintiff by way of example or correction for the public good of at least P30,000.00.23 Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus: a) Declaring the Amended Real Estate Mortgage (Annex "A") null and void and without any legal force and effect. b) Declaring defendant's acts of extra-judicially foreclosing the mortgage over plaintiff's property and setting it for auction sale null and void. c) Ordering the defendant Register of Deeds to cancel the new title issued in the name of PNB (TCT NO. 43792) covering the property described in paragraph 4 of the Complaint, to reinstate TCT No. 37025 in the name of Manila Metal and to cancel the annotation of the mortgage in question at the back of the TCT No.37025 described in paragraph 4 of this Complaint. d) Ordering the defendant PNB to return and/or deliver physical possession of the TCT No. 37025described in paragraph 4 of this Complaint to the plaintiff Manila Metal. e) Ordering the defendant PNB to pay the plaintiff Manila Metal's actual damages, moral and exemplary damages in the aggregate amount of not less than P80,000.00 as may be warranted by the evidence and fixed by this Honorable Court in the exercise of its sound discretion, and attorney's fees of P50,000.00 and litigation expenses of at least P30,000.00 as may be proved during the trial, and costs of suit. Plaintiff likewise prays for such further reliefs which may be deemed just and equitable in the premises.24 In its Answer to the complaint, respondent PNB averred, as a special and affirmative defense, that it had acquired ownership over the property after the period to redeem had elapsed. It claimed that no contract of sale was perfected between it and petitioner after the period to redeem the property had expired. During pre-trial, the parties agreed to submit the case for decision, based on their stipulation of facts.25 The parties agreed to limit the issues to the following: 1. Whether or not the June 4, 1985 letter of the defendant approving/accepting plaintiff's offer to purchase the property is still valid and legally enforceable. 2. Whether or not the plaintiff has waived its right to purchase the property when it failed to conform with the conditions set forth by the defendant in its letter dated June 4, 1985. 3. Whether or not there is a perfected contract of sale between the parties.26

While the case was pending, respondent PNB demanded, on September 20, 1989, that petitioner vacate the property within 15 days from notice,27 but petitioners refused to do so. On March 18, 1993, petitioner offered to repurchase the property for P3,500,000.00.28 The offer was however rejected by respondent PNB, in a letter dated April 13, 1993. According to it, the prevailing market value of the property was approximately P30,000,000.00, and as a matter of policy, it could not sell the property for less than its market value.29 On June 21, 1993, petitioner offered to purchase the property for P4,250,000.00 in cash.30The offer was again rejected by respondent PNB on September 13, 1993.31 On May 31, 1994, the trial court rendered judgment dismissing the amended complaint and respondent PNB's counterclaim. It ordered respondent PNB to refund the P725,000.00 deposit petitioner had made.32 The trial court ruled that there was no perfected contract of sale between the parties; hence, petitioner had no cause of action for specific performance against respondent. The trial court declared that respondent had rejected petitioner's offer to repurchase the property. Petitioner, in turn, rejected the terms and conditions contained in the June 4, 1985 letter of the SAMD. While petitioner had offered to repurchase the property per its letter of July 14, 1988, the amount of P643,422.34 was way below the P1,206,389.53 which respondent PNB had demanded. It further declared that the P725,000.00 remitted by petitioner to respondent PNB on June 4, 1985 was a "deposit," and not a downpayment or earnest money. On appeal to the CA, petitioner made the following allegations: I THE LOWER COURT ERRED IN RULING THAT DEFENDANT-APPELLEE'S LETTER DATED 4 JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-APPELLANT'S OFFER TO PURCHASE THE SUBJECT PROPERTY IS NOT VALID AND ENFORCEABLE. II THE LOWER COURT ERRED IN RULING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE. III THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO PURCHASE THE SUBJECT PROPERTY WHEN IT FAILED TO CONFORM WITH CONDITIONS SET FORTH BY DEFENDANT-APPELLEE IN ITS LETTER DATED 4 JUNE 1985. IV THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT IT WAS THE DEFENDANT-APPELLEE WHICH RENDERED IT DIFFICULT IF NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT TO COMPLETE THE BALANCE OF THEIR PURCHASE PRICE. V THE LOWER COURT ERRED IN DISREGARDING THE FACT THAT THERE WAS NO VALID RESCISSION OR CANCELLATION OF SUBJECT CONTRACT OF REPURCHASE. VI THE LOWER COURT ERRED IN DECLARING THAT PLAINTIFF FAILED AND REFUSED TO SUBMIT THE AMENDED REPURCHASE OFFER. VII 45

THE LOWER COURT ERRED IN DISMISSING THE AMENDED COMPLAINT OF PLAINTIFFAPPELLANT. VIII THE LOWER COURT ERRED IN NOT AWARDING PLAINTIFF-APPELLANT ACTUAL, MORAL AND EXEMPLARY DAMAGES, ATTOTRNEY'S FEES AND LITIGATION EXPENSES.33 Meanwhile, on June 17, 1993, petitioner's Board of Directors approved Resolution No. 3-004, where it waived, assigned and transferred its rights over the property covered by TCT No. 33099 and TCT No. 37025 in favor of Bayani Gabriel, one of its Directors.34 Thereafter, Bayani Gabriel executed a Deed of Assignment over 51% of the ownership and management of the property in favor of Reynaldo Tolentino, who later moved for leave to intervene as plaintiff-appellant. On July 14, 1993, the CA issued a resolution granting the motion,35 and likewise granted the motion of Reynaldo Tolentino substituting petitioner MMCC, as plaintiff-appellant, and his motion to withdraw as intervenor.36 The CA rendered judgment on May 11, 2000 affirming the decision of the RTC.37 It declared that petitioner obviously never agreed to the selling price proposed by respondent PNB (P1,931,389.53) since petitioner had kept on insisting that the selling price should be lowered to P1,574,560.47. Clearly therefore, there was no meeting of the minds between the parties as to the price or consideration of the sale. The CA ratiocinated that petitioner's original offer to purchase the subject property had not been accepted by respondent PNB. In fact, it made a counter-offer through its June 4, 1985 letter specifically on the selling price; petitioner did not agree to the counter-offer; and the negotiations did not prosper. Moreover, petitioner did not pay the balance of the purchase price within the sixty-day period set in the June 4, 1985 letter of respondent PNB. Consequently, there was no perfected contract of sale, and as such, there was no contract to rescind. According to the appellate court, the claim for damages and the counterclaim were correctly dismissed by the court a quo for no evidence was presented to support it. Respondent PNB's letter dated June 30, 1988 cannot revive the failed negotiations between the parties. Respondent PNB merely asked petitioner to submit an amended offer to repurchase. While petitioner reiterated its request for a lower selling price and that the balance of the repurchase be reduced, however, respondent rejected the proposal in a letter dated August 1, 1989. Petitioner filed a motion for reconsideration, which the CA likewise denied. Thus, petitioner filed the instant petition for review on certiorari, alleging that: I. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THERE IS NO PERFECTED CONTRACT OF SALE BETWEEN THE PETITIONER AND RESPONDENT. II. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE AMOUNT OF PHP725,000.00 PAID BY THE PETITIONER IS NOT AN EARNEST MONEY. III. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW WHEN IT RULED THAT THE FAILURE OF THE PETITIONER-APPELLANT TO SIGNIFY ITS CONFORMITY TO THE TERMS CONTAINED IN PNB'S JUNE 4, 1985 LETTER MEANS THAT THERE WAS NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. IV. THE COURT OF APPEALS ERRED ON A QUESTION OF LAW THAT NON-PAYMENT OF THE PETITIONER-APPELLANT OF THE BALANCE OF THE OFFERED PRICE IN THE LETTER OF PNB DATED JUNE 4, 1985, WITHIN SIXTY (60) DAYS FROM NOTICE OF

APPROVAL CONSTITUTES NO VALID AND LEGALLY ENFORCEABLE CONTRACT OF SALE BETWEEN THE PARTIES. V. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LETTERS OF PETITIONER-APPELLANT DATED MARCH 18, 1993 AND JUNE 21, 1993, OFFERING TO BUY THE SUBJECT PROPERTY AT DIFFERENT AMOUNT WERE PROOF THAT THERE IS NO PERFECTED CONTRACT OF SALE.38 The threshold issue is whether or not petitioner and respondent PNB had entered into a perfected contract for petitioner to repurchase the property from respondent. Petitioner maintains that it had accepted respondent's offer made through the SAMD, to sell the property forP1,574,560.00. When the acceptance was made in its letter dated June 25, 1984; it then deposited P725,000.00 with the SAMD as partial payment, evidenced by Receipt No. 978194 which respondent had issued. Petitioner avers that the SAMD's acceptance of the deposit amounted to an acceptance of its offer to repurchase. Moreover, as gleaned from the letter of SAMD dated June 4, 1985, the PNB Board of Directors had approved petitioner's offer to purchase the property. It claims that this was the suspensive condition, the fulfillment of which gave rise to the contract. Respondent could no longer unilaterally withdraw its offer to sell the property for P1,574,560.47, since the acceptance of the offer resulted in a perfected contract of sale; it was obliged to remit to respondent the balance of the original purchase price of P1,574,560.47, while respondent was obliged to transfer ownership and deliver the property to petitioner, conformably with Article 1159 of the New Civil Code. Petitioner posits that respondent was proscribed from increasing the interest rate after it had accepted respondent's offer to sell the property for P1,574,560.00. Consequently, respondent could no longer validly make a counter-offer of P1,931,789.88 for the purchase of the property. It likewise maintains that, although theP725,000.00 was considered as "deposit for the repurchase of the property" in the receipt issued by the SAMD, the amount constitutes earnest money as contemplated in Article 1482 of the New Civil Code. Petitioner cites the rulings of this Court in Villonco v. Bormaheco39 and Topacio v. Court of Appeals.40 Petitioner avers that its failure to append its conformity to the June 4, 1984 letter of respondent and its failure to pay the balance of the price as fixed by respondent within the 60-day period from notice was to protest respondent's breach of its obligation to petitioner. It did not amount to a rejection of respondent's offer to sell the property since respondent was merely seeking to enforce its right to pay the balance of P1,570,564.47. In any event, respondent had the option either to accept the balance of the offered price or to cause the rescission of the contract. Petitioner's letters dated March 18, 1993 and June 21, 1993 to respondent during the pendency of the case in the RTC were merely to compromise the pending lawsuit, they did not constitute separate offers to repurchase the property. Such offer to compromise should not be taken against it, in accordance with Section 27, Rule 130 of the Revised Rules of Court. For its part, respondent contends that the parties never graduated from the "negotiation stage" as they could not agree on the amount of the repurchase price of the property. All that transpired was an exchange of proposals and counter-proposals, nothing more. It insists that a definite agreement on the amount and manner of payment of the price are essential elements in the formation of a binding and enforceable contract of sale. There was no such agreement in this case. Primarily, the concept of "suspensive condition" signifies a future and uncertain event upon the fulfillment of which the obligation becomes effective. It clearly presupposes the existence of a valid and binding agreement, the effectivity of which is subordinated to its fulfillment. Since there is no perfected contract in the first place, there is no basis for the application of the principles governing "suspensive conditions." According to respondent, the Statement of Account prepared by SAMD as of June 25, 1984 cannot be classified as a counter-offer; it is simply a recital of its total monetary claims against petitioner. Moreover, 46

the amount stated therein could not likewise be considered as the counter-offer since as admitted by petitioner, it was only recommendation which was subject to approval of the PNB Board of Directors. Neither can the receipt by the SAMD of P725,000.00 be regarded as evidence of a perfected sale contract. As gleaned from the parties' Stipulation of Facts during the proceedings in the court a quo, the amount is merely an acknowledgment of the receipt of P725,000.00 as deposit to repurchase the property. The deposit of P725,000.00 was accepted by respondent on the condition that the purchase price would still be approved by its Board of Directors. Respondent maintains that its acceptance of the amount was qualified by that condition, thus not absolute. Pending such approval, it cannot be legally claimed that respondent is already bound by any contract of sale with petitioner. According to respondent, petitioner knew that the SAMD has no capacity to bind respondent and that its authority is limited to administering, managing and preserving the properties and other special assets of PNB. The SAMD does not have the power to sell, encumber, dispose of, or otherwise alienate the assets, since the power to do so must emanate from its Board of Directors. The SAMD was not authorized by respondent's Board to enter into contracts of sale with third persons involving corporate assets. There is absolutely nothing on record that respondent authorized the SAMD, or made it appear to petitioner that it represented itself as having such authority. Respondent reiterates that SAMD had informed petitioner that its offer to repurchase had been approved by the Board subject to the condition, among others, "that the selling price shall be the total bank's claim as of documentation date x x x payable in cash (P725,000.00 already deposited) within 60 days from notice of approval." A new Statement of Account was attached therein indicating the total bank's claim to be P1,931,389.53 less deposit of P725,000.00, or P1,206,389.00. Furthermore, while respondent's Board of Directors accepted petitioner's offer to repurchase the property, the acceptance was qualified, in that it required a higher sale price and subject to specified terms and conditions enumerated therein. This qualified acceptance was in effect a counter-offer, necessitating petitioner's acceptance in return. The Ruling of the Court The ruling of the appellate court that there was no perfected contract of sale between the parties on June 4, 1985 is correct. 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.41 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 which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.42 Once perfected, they bind other contracting parties and the obligations arising therefrom have the form of law between the parties and should 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.43 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.44 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:45

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.46 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.47 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.48 In San Miguel Properties Philippines, Inc. v. Huang,49 the Court ruled that the stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. A negotiation is formally initiated by an offer, which, however, must be certain.50 At any time prior to the perfection of the contract, either negotiating party may stop the negotiation. At this stage, the offer may be withdrawn; the withdrawal is effective immediately after its manifestation. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional and without variance of any sort from the proposal. In Adelfa Properties, Inc. v. Court of Appeals,51 the Court ruled that: x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be shown by acts, conduct, or words of the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a party recognizing the existence of the contract of sale.52 A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis.53 Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer.54 The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds. In this case, petitioner had until February 17, 1984 within which to redeem the property. However, since it lacked the resources, it requested for more time to redeem/repurchase the property under such terms and conditions agreed upon by the parties.55 The request, which was made through a letter dated August 25, 1983, was referred to the respondent's main branch for appropriate action.56 Before respondent could act on the request, petitioner again wrote respondent as follows: 1. Upon approval of our request, we will pay your goodselves ONE HUNDRED & FIFTY THOUSAND PESOS (P150,000.00); 2. Within six months from date of approval of our request, we will pay another FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00); and 3. The remaining balance together with the interest and other expenses that will be incurred will be paid within the last six months of the one year grave period requested for.57

When the petitioner was told that respondent did not allow "partial redemption,"58 it sent a letter to respondent's President reiterating its offer to purchase the property.59 There was no response to petitioner's letters dated February 10 and 15, 1984. The statement of account prepared by the SAMD stating that the net claim of respondent as of June 25, 1984 wasP1,574,560.47 cannot be considered an unqualified acceptance to petitioner's offer to purchase the property. The statement is but a computation of the amount which petitioner was obliged to pay in case respondent would later agree to sell the property, including interests, advances on insurance premium, advances on realty taxes, publication cost, registration expenses and miscellaneous expenses. There is no evidence that the SAMD was authorized by respondent's Board of Directors to accept petitioner's offer and sell the property for P1,574,560.47. Any acceptance by the SAMD of petitioner's offer would not bind respondent. As this Court ruled in AF Realty Development, Inc. vs. Diesehuan Freight Services, Inc.:60 Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with the performance of authorized duties of such director, are held not binding on the corporation. Thus, a corporation can only execute its powers and transact its business through its Board of Directors and through its officers and agents when authorized by a board resolution or its by-laws.61 It appears that the SAMD had prepared a recommendation for respondent to accept petitioner's offer to repurchase the property even beyond the one-year period; it recommended that petitioner be allowed to redeem the property and pay P1,574,560.00 as the purchase price. Respondent later approved the recommendation that the property be sold to petitioner. But instead of the P1,574,560.47 recommended by the SAMD and to which petitioner had previously conformed, respondent set the purchase price at P2,660,000.00. In fine, respondent's acceptance of petitioner's offer was qualified, hence can be at most considered as a counter-offer. If petitioner had accepted this counter-offer, a perfected contract of sale would have arisen; as it turns out, however, petitioner merely sought to have the counter-offer reconsidered. This request for reconsideration would later be rejected by respondent. We do not agree with petitioner's contention that the P725,000.00 it had remitted to respondent was "earnest money" which could be considered as proof of the perfection of a contract of sale under Article 1482 of the New Civil Code. The provision reads: ART. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. This contention is likewise negated by the stipulation of facts which the parties entered into in the trial court: 8. On June 8, 1984, the Special Assets Management Department (SAMD) of PNB prepared an updated Statement of Account showing MMCC's total liability to PNB as of June 25, 1984 to be P1,574,560.47 and recommended this amount as the repurchase price of the subject property. 9. On June 25, 1984, MMCC paid P725,000.00 to PNB as deposit to repurchase the property. The deposit of P725,000 was accepted by PNB on the condition that the purchase price is still subject to the approval of the PNB Board.62 47

Thus, the P725,000.00 was merely a deposit to be applied as part of the purchase price of the property, in the event that respondent would approve the recommendation of SAMD for respondent to accept petitioner's offer to purchase the property for P1,574,560.47. Unless and until the respondent accepted the offer on these terms, no perfected contract of sale would arise. Absent proof of the concurrence of all the essential elements of a contract of sale, the giving of earnest money cannot establish the existence of a perfected contract of sale.63 It appears that, per its letter to petitioner dated June 4, 1985, the respondent had decided to accept the offer to purchase the property for P1,931,389.53. However, this amounted to an amendment of respondent's qualified acceptance, or an amended counter-offer, because while the respondent lowered the purchase price, it still declared that its acceptance was subject to the following terms and conditions: 1. That the selling price shall be the total Bank's claim as of documentation date (pls. see attached statement of account as of 5-31-85), payable in cash (P725,000.00 already deposited) within sixty (60) days from notice of approval; 2. The Bank sells only whatever rights, interests and participation it may have in the property and you are charged with full knowledge of the nature and extent of said rights, interests and participation and waive your right to warranty against eviction. 3. All taxes and other government imposts due or to become due on the property, as well as expenses including costs of documents and science stamps, transfer fees, etc., to be incurred in connection with the execution and registration of all covering documents shall be borne by you; 4. That you shall undertake at your own expense and account the ejectment of the occupants of the property subject of the sale, if there are any; 5. That upon your failure to pay the balance of the purchase price within sixty (60) days from receipt of advice accepting your offer, your deposit shall be forfeited and the Bank is thenceforth authorized to sell the property to other interested parties. 6. That the sale shall be subject to such other terms and conditions that the Legal Department may impose to protect the interest of the Bank.64 It appears that although respondent requested petitioner to conform to its amended counter-offer, petitioner refused and instead requested respondent to reconsider its amended counter-offer. Petitioner's request was ultimately rejected and respondent offered to refund its P725,000.00 deposit. In sum, then, there was no perfected contract of sale between petitioner and respondent over the subject property. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed decision is AFFIRMED. Costs against petitioner Manila Metal Container Corporation. SO ORDERED.

SECOND DIVISION [G.R. No. 123547. May 21, 2001] REV. FR. DANTE MARTINEZ, petitioner, vs. HONORABLE COURT OF APPEALS, HONORABLE JUDGE JOHNSON BALLUTAY, PRESIDING JUDGE, BRANCH 25, REGIONAL TRIAL COURT OF CABANATUAN CITY, HONORABLE JUDGE ADRIANO TUAZON, JR., PRESIDING JUDGE, BRANCH 28, REGIONAL TRIAL COURT OF CABANATUAN CITY, SPOUSES REYNALDO VENERACION and SUSAN VENERACION, SPOUSES MAXIMO HIPOLITO and MANUELA DE LA PAZ and GODOFREDO DE LA PAZ, respondents. DECISION MENDOZA, J.: This is a petition for review on certiorari of the decision, dated September 7, 1995, and resolution, dated January 31, 1996, of the Court of Appeals, which affirmed the decisions of the Regional Trial Court, Branches 25[1] and 28,[2] Cabanatuan City, finding private respondents spouses Reynaldo and Susan Veneracion owners of the land in dispute, subject to petitioners rights as a builder in good faith. The facts are as follows: Sometime in February 1981, private respondents Godofredo De la Paz and his sister Manuela De la Paz, married to Maximo Hipolito, entered into an oral contract with petitioner Rev. Fr. Dante Martinez, then Assistant parish priest of Cabanatuan City, for the sale of Lot No. 1337-A-3 at the Villa Fe Subdivision in Cabanatuan City for the sum of P15,000.00. The lot is located along Maharlika Road near the Municipal Hall of Cabanatuan City. At the time of the sale, the lot was still registered in the name of Claudia De la Paz, mother of private respondents, although the latter had already sold it to private respondent Manuela de la Paz by virtue of a Deed of Absolute Sale dated May 26, 1976 (Exh. N/Exh. 2Veneracion).[3] Private respondent Manuela subsequently registered the sale in her name on October 22, 1981 and was issued TCT No. T-40496 (Exh. 9).[4] When the land was offered for sale to petitioner, private respondents De la Paz were accompanied by their mother, since petitioner dealt with the De la Pazes as a family and not individually. He was assured by them that the lot belonged to Manuela De la Paz. It was agreed that petitioner would give a downpayment of P3,000.00 to private respondents De la Paz and that the balance would be payable by installment. After giving theP3,000.00 downpayment, petitioner started the construction of a house on the lot after securing a building permit from the City Engineers Office on April 23, 1981, with the written consent of the then registered owner, Claudia de la Paz (Exh. B/Exh, 1).[5] Petitioner likewise began paying the real estate taxes on said property (Exh. D, D1, D-2).[6] Construction on the house was completed on October 6, 1981 (Exh. V). [7] Since then, petitioner and his family have maintained their residence there.[8] On January 31, 1983, petitioner completed payment of the lot for which private respondents De la Paz executed two documents. The first document (Exh. A) read: 1-31-83 Ang halaga ng Lupa sa Villa Fe Subdivision na ipinagbili kay Fr. Dante Martinez ay P15,000.00 na pinangangako namin na ibibigay ang Deed of Sale sa ika-25 ng Febrero 1983. [SGD.] METRING HIPOLITO [SGD.] JOSE GODOFREDO DE LA PAZ[9] Cabanatuan City March 19, 1986 TO WHOM IT MAY CONCERN: This is to certify that Freddie dela Paz has agreed to sign tomorrow (March 20) the affidavit of sale of lot located at Villa Fe Subdivision sold to Fr. Dante Martinez. 48

The second writing (Exh. O) read:

[Sgd.] Freddie dela Paz FREDDIE DELA PAZ[10] However, private respondents De la Paz never delivered the Deed of Sale they promised to petitioner. In the meantime, in a Deed of Absolute Sale with Right to Repurchase dated October 28, 1981 (Exh. 10),[11] private respondents De la Paz sold three lots with right to repurchase the same within one year to private respondents spouses Reynaldo and Susan Veneracion for the sum of P150,000.00. One of the lots sold was the lot previously sold to petitioner.[12] Reynaldo Veneracion had been a resident of Cabanatuan City since birth. He used to pass along Maharlika Highway in going to the Municipal Hall or in going to and from Manila. Two of the lots subject of the sale were located along Maharlika Highway, one of which was the lot sold earlier by the De la Pazes to petitioner. The third lot (hereinafter referred to as the Melencio lot) was occupied by private respondents De la Paz. Private respondents Veneracion never took actual possession of any of these lots during the period of redemption, but all titles to the lots were given to him.[13] Before the expiration of the one year period, private respondent Godofredo De la Paz informed private respondent Reynaldo Veneracion that he was selling the three lots to another person for P200,000.00. Indeed, private respondent Veneracion received a call from a Mr. Tecson verifying if he had the titles to the properties, as private respondents De la Paz were offering to sell the two lots along Maharlika Highway to him (Mr. Tecson) for P180,000.00 The offer included the lot purchased by petitioner in February, 1981. Private respondent Veneracion offered to purchase the same two lots from the De la Pazes for the same amount. The offer was accepted by private respondents De la Paz. Accordingly, on June 2, 1983, a Deed of Absolute Sale was executed over the two lots (Exh. I/Exh. 5-Veneracion).[14] Sometime in January, 1984, private respondent Reynaldo Veneracion asked a certain Renato Reyes, petitioners neighbor, who the owner of the building erected on the subject lot was. Reyes told him that it was Feliza Martinez, petitioners mother, who was in possession of the property. Reynaldo Veneracion told private respondent Godofredo about the matter and was assured that Godofredo would talk to Feliza. Based on that assurance, private respondents Veneracion registered the lots with the Register of Deeds of Cabanatuan on March 5, 1984. The lot in dispute was registered under TCT No. T44612 (Exh. L/Exh. 4-Veneracion).[15] Petitioner discovered that the lot he was occupying with his family had been sold to the spouses Veneracion after receiving a letter (Exh. P/Exh. 6-Veneracion) from private respondent Reynaldo Veneracion on March 19, 1986, claiming ownership of the land and demanding that they vacate the property and remove their improvements thereon.[16] Petitioner, in turn, demanded through counsel the execution of the deed of sale from private respondents De la Paz and informed Reynaldo Veneracion that he was the owner of the property as he had previously purchased the same from private respondents De la Paz.[17] The matter was then referred to the Katarungang Pambarangay of San Juan, Cabanatuan City for conciliation, but the parties failed to reach an agreement (Exh. M/Exh. 13). [18] As a consequence, on May 12, 1986, private respondent Reynaldo Veneracion brought an action for ejectment in the Municipal Trial Court, Branch III, Cabanatuan City against petitioner and his mother (Exh. 14).[19] On the other hand, on June 10, 1986, petitioner caused a notice of lis pendens to be recorded on TCT No. T-44612 with the Register of Deeds of Cabanatuan City (Exh. U).[20] During the pre-trial conference, the parties agreed to have the case decided under the Rules on Summary Procedure and defined the issues as follows: 1. Whether or not defendant (now petitioner) may be judicially ejected. 2. Whether or not the main issue in this case is ownership. 49

3. Whether or not damages may be awarded.[21] On January 29, 1987, the trial court rendered its decision, pertinent portions of which are quoted as follows: With the foregoing findings of the Court, defendants [petitioner Rev. Fr. Dante Martinez and his mother] are the rightful possessors and in good faith and in concept of owner, thus cannot be ejected from the land in question. Since the main issue is ownership, the better remedy of the plaintiff [herein private respondents Veneracion] is Accion Publiciana in the Regional Trial Court, having jurisdiction to adjudicate on ownership. Defendants counterclaim will not be acted upon it being more than P20,000.00 is beyond this Courts power to adjudge. WHEREFORE, judgment is hereby rendered, dismissing plaintiffs complaint and ordering plaintiff to pay Attorneys fee of P5,000.00 and cost of suit. SO ORDERED.[22] On March 3, 1987, private respondents Veneracion filed a notice of appeal with the Regional Trial Court, but failed to pay the docket fee. On June 6, 1989, or over two years after the filing of the notice of appeal, petitioner filed a Motion for Execution of the Judgment, alleging finality of judgment for failure of private respondents Veneracion to perfect their appeal and failure to prosecute the appeal for an unreasonable length of time. Upon objection of private respondents Veneracion, the trial court denied on June 28, 1989 the motion for execution and ordered the records of the case to be forwarded to the appropriate Regional Trial Court. On July 11, 1989, petitioner appealed from this order. The appeal of private respondents Veneracion from the decision of the MTC and the appeal of petitioner from the order denying petitioners motion for execution were forwarded to the Regional Trial Court, Branch 28, Cabanatuan City. The cases were thereafter consolidated under Civil Case No. 670-AF. On February 20, 1991, the Regional Trial Court rendered its decision finding private respondents Veneracion as the true owners of the lot in dispute by virtue of their prior registration with the Register of Deeds, subject to petitioners rights as builder in good faith, and ordering petitioner and his privies to vacate the lot after receipt of the cost of the construction of the house, as well as to pay the sum of P5,000.00 as attorneys fees and the costs of the suit. It, however, failed to rule on petitioners appeal of the Municipal Trial Courts order denying their Motion for Execution of Judgment. Meanwhile, on May 30, 1986, while the ejectment case was pending before the Municipal Trial Court, petitioner Martinez filed a complaint for annulment of sale with damages against the Veneracions and De la Pazes with the Regional Trial Court, Branch 25, Cabanatuan City. On March 5, 1990, the trial court rendered its decision finding private respondents Veneracion owners of the land in dispute, subject to the rights of petitioner as a builder in good faith, and ordering private respondents De la Paz to pay petitioner the sum of P50,000.00 as moral damages and P10,000.00 as attorneys fees, and for private respondents to pay the costs of the suit. On March 20, 1991, petitioner then filed a petition for review with the Court of Appeals of the RTCs decision in Civil Case No. 670-AF (for ejectment). Likewise, on April 2, 1991, petitioner appealed the trial courts decision in Civil Case No. 44-[AF]-8642-R (for annulment of sale and damages) to the Court of Appeals. The cases were designated as CA G.R. SP. No. 24477 and CA G.R. CV No. 27791, respectively, and were subsequently consolidated. The Court of Appeals affirmed the trial courts decisions, without ruling on petitioners appeal from the Municipal Trial Courts order denying his Motion for Execution of Judgment. It declared the Veneracions to be owners of the lot in dispute as they were the first registrants in good faith, in accordance with Art. 1544 of the Civil Code. Petitioner Martinez failed to overcome the presumption of good faith for the following reasons:

1. when private respondent Veneracion discovered the construction on the lot, he immediately informed private respondent Godofredo about it and relied on the latters assurance that he will take care of the matter. 2. the sale between petitioner Martinez and private respondents De la Paz was not notarized, as required by Arts. 1357 and 1358 of the Civil Code, thus it cannot be said that the private respondents Veneracion had knowledge of the first sale.[23] Petitioners motion for reconsideration was likewise denied in a resolution dated January 31, 1996.[24] Hence this petition for review. Petitioner raises the following assignment of errors: I THE PUBLIC RESPONDENTS HONORABLE COURT OF APPEALS AND REGIONAL TRIAL COURT JUDGES JOHNSON BALLUTAY AND ADRIANO TUAZON ERRED IN HOLDING THAT PRIVATE RESPONDENTS REYNALDO VENERACION AND WIFE ARE BUYERS AND REGISTRANTS IN GOOD FAITH IN RESOLVING THE ISSUE OF OWNERSHIP AND POSSESSION OF THE LAND IN DISPUTE. II THAT PUBLIC RESPONDENTS ERRED IN NOT RESOLVING AND DECIDING THE APPLICABILITY OF THE DECISION OF THIS HONORABLE COURT IN THE CASES OF SALVORO VS. TANEGA, ET AL., G.R. NO. L 32988 AND IN ARCENAS VS. DEL ROSARIO, 67 PHIL 238, BY TOTALLY IGNORING THE SAID DECISIONS OF THIS HONORABLE COURT IN THE ASSAILED DECISIONS OF THE PUBLIC RESPONDENTS. III THAT THE HONORABLE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION FOR REVIEW IN CA G.R. SP. NO. 24477. IV THAT THE HONORABLE COURT OF APPEALS IN DENYING PETITIONERS PETITION FOR REVIEW AFORECITED INEVITABLY SANCTIONED AND/OR WOULD ALLOW A VIOLATION OF LAW AND DEPARTURE FROM THE USUAL COURSE OF JUDICIAL PROCEEDINGS BY PUBLIC RESPONDENT HONORABLE JUDGE ADRIANO TUAZON WHEN THE LATTER RENDERED A DECISION IN CIVIL CASE NO. 670-AF [ANNEX D] REVERSING THE DECISION OF THE MUNICIPAL TRIAL COURT JUDGE SENDON DELIZO IN CIVIL CASE NO. 9523 [ANNEX C] AND IN NOT RESOLVING IN THE SAME CASE THE APPEAL INTERPOSED BY DEFENDANTS ON THE ORDER OF THE SAME COURT DENYING THE MOTION FOR EXECUTION. V THAT THE RESOLUTION [ANNEX B] (OF THE COURT OF APPEALS) DENYING PETITIONERS MOTION FOR RECONSIDERATION [ANNEX I] WITHOUT STATING CLEARLY THE FACTS AND THE LAW ON WHICH SAID RESOLUTION WAS BASED, (IS ERRONEOUS). These assignment of errors raise the following issues: 1. Whether or not private respondents Veneracion are buyers in good faith of the lot in dispute as to make them the absolute owners thereof in accordance with Art. 1544 of the Civil Code on double sale of immovable property. 2. Whether or not payment of the appellate docket fee within the period to appeal is not necessary for the perfection of the appeal after a notice of appeal has been filed within such period. 3. Whether or not the resolution of the Court of Appeals denying petitioners motion for reconsideration is contrary to the constitutional requirement that a denial of a motion for reconsideration must state the legal reasons on which it is based. 50

First. It is apparent from the first and second assignment of errors that petitioner is assailing the findings of fact and the appreciation of the evidence made by the trial courts and later affirmed by the respondent court. While, as a general rule, only questions of law may be raised in a petition for review under Rule 45 of the Rules of Court, review may nevertheless be granted under certain exceptions, namely: (a) when the conclusion is a finding grounded entirely on speculation, surmises, or conjectures; (b) when the inference made is manifestly mistaken, absurd, or impossible; (c) where there is a grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issue of the case and the same is contrary to the admissions of both appellant and appellee; (g) when the findings of the Court of Appeals are contrary to those of the trial court; (h) when the findings of fact are conclusions without citation of specific evidence on which they are based; (i) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondents; (j) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence but is contradicted by the evidence on record; and (k) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion. [25] In this case, the Court of Appeals based its ruling that private respondents Veneracion are the owners of the disputed lot on their reliance on private respondent Godofredo De la Pazs assurance that he would take care of the matter concerning petitioners occupancy of the disputed lot as constituting good faith. This case, however, involves double sale and, on this matter, Art. 1544 of the Civil Code provides that where immovable property is the subject of a double sale, ownership shall be transferred (1) to the person acquiring it who in good faith first recorded it to the Registry of Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the person who presents the oldest title.[26] The requirement of the law, where title to the property is recorded in the Register of Deeds, is two-fold: acquisition in good faith and recording in good faith. To be entitled to priority, the second purchaser must not only prove prior recording of his title but that he acted in good faith, i.e., without knowledge or notice of a prior sale to another. The presence of good faith should be ascertained from the circumstances surrounding the purchase of the land.[27] 1. With regard to the first sale to private respondents Veneracion, private respondent Reynaldo Veneracion testified that on October 10, 1981, 18 days before the execution of the first Deed of Sale with Right to Repurchase, he inspected the premises and found it vacant.[28] However, this is belied by the testimony of Engr. Felix D. Minor, then building inspector of the Department of Public Works and Highways, that he conducted on October 6, 1981 an ocular inspection of the lot in dispute in the performance of his duties as a building inspector to monitor the progress of the construction of the building subject of the building permit issued in favor of petitioner on April 23, 1981, and that he found it 100 % completed (Exh. V).[29] In the absence of contrary evidence, he is to be presumed to have regularly performed his official duty.[30] Thus, as early as October, 1981, private respondents Veneracion already knew that there was construction being made on the property they purchased. 2. The Court of Appeals failed to determine the nature of the first contract of sale between the private respondents by considering their contemporaneous and subsequent acts.[31] More specifically, it overlooked the fact that the first contract of sale between the private respondents shows that it is in fact an equitable mortgage. The requisites for considering a contract of sale with a right of repurchase as an equitable mortgage are (1) that the parties entered into a contract denominated as a contract of sale and (2) that their intention was to secure an existing debt by way of mortgage.[32] A contract of sale with right to repurchase gives rise to the presumption that it is an equitable mortgage in any of the following cases: (1) when the price of a sale with a right to repurchase is unusually inadequate; (2) when the vendor remains in possession as lessee or otherwise; (3) when, upon or after the expiration of the right to repurchase, another instrument extending the period of redemption or granting a new period is executed; (4) when the purchaser retains for himself a part of the purchase price; (5) when the vendor binds himself to pay the taxes on the thing sold; (6) in any other case where it may be fairly inferred that the real intention of the

parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.[33] In case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage.[34] In this case, the following circumstances indicate that the private respondents intended the transaction to be an equitable mortgage and not a contract of sale: (1) Private respondents Veneracion never took actual possession of the three lots; (2) Private respondents De la Paz remained in possession of the Melencio lot which was co-owned by them and where they resided; (3) During the period between the first sale and the second sale to private respondents Veneracion, they never made any effort to take possession of the properties; and (4) when the period of redemption had expired and private respondents Veneracion were informed by the De la Pazes that they are offering the lots for sale to another person for P200,000.00, they never objected. To the contrary, they offered to purchase the two lots for P180,000.00 when they found that a certain Mr. Tecson was prepared to purchase it for the same amount. Thus, it is clear from these circumstances that both private respondents never intended the first sale to be a contract of sale, but merely that of mortgage to secure a debt ofP150,000.00. With regard to the second sale, which is the true contract of sale between the parties, it should be noted that this Court in several cases,[35] has ruled that a purchaser who is aware of facts which should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted in good faith. Private respondent Reynaldo himself admitted during the pre-trial conference in the MTC in Civil Case No. 9523 (for ejectment) that petitioner was already in possession of the property in dispute at the time the second Deed of Sale was executed on June 1, 1983 and registered on March 4, 1984. He, therefore, knew that there were already occupants on the property as early as 1981. The fact that there are persons, other than the vendors, in actual possession of the disputed lot should have put private respondents on inquiry as to the nature of petitioners right over the property. But he never talked to petitioner to verify the nature of his right. He merely relied on the assurance of private respondent Godofredo De la Paz, who was not even the owner of the lot in question, that he would take care of the matter. This does not meet the standard of good faith. 3. The appellate courts reliance on Arts. 1357 and 1358 of the Civil Code to determine private respondents Veneracions lack of knowledge of petitioners ownership of the disputed lot is erroneous. Art. 1357[36] and Art. 1358,[37] in relation to Art. 1403(2)[38] of the Civil Code, requires that the sale of real property must be in writing for it to be enforceable. It need not be notarized. If the sale has not been put in writing, either of the contracting parties can compel the other to observe such requirement.[39] This is what petitioner did when he repeatedly demanded that a Deed of Absolute Sale be executed in his favor by private respondents De la Paz. There is nothing in the above provisions which require that a contract of sale of realty must be executed in a public document. In any event, it has been shown that private respondents Veneracion had knowledge of facts which would put them on inquiry as to the nature of petitioners occupancy of the disputed lot. Second. Petitioner contends that the MTC in Civil Case No. 9523 (for ejectment) erred in denying petitioners Motion for Execution of the Judgment, which the latter filed on June 6, 1989, two years after private respondents Veneracion filed a notice of appeal with the MTC on March 3, 1987 without paying the appellate docket fee. He avers that the trial courts denial of his motion is contrary to this Courts ruling in the cases ofRepublic v. Director of Lands,[40] and Aranas v. Endona[41] in which it was held that where the appellate docket fee is not paid in full within the reglementary period, the decision of the MTC becomes final and unappealable as the payment of docket fee is not only a mandatory but also a jurisdictional requirement. Petitioners contention has no merit. The case of Republic v. Director of Lands deals with the requirement for appeals from the Courts of First Instance, the Social Security Commission, and the Court of Agrarian Relations to the Court of Appeals. The case of Aranas v. Endona, on the other hand, was decided under the 1964 Rules of Court and prior to the enactment of the Judiciary Reorganization Act of 51

1981 (B.P. Blg. 129) and the issuance of its Interim Rules and Guidelines by this Court on January 11, 1983. Hence, these cases are not applicable to the matter at issue. On the other hand, in Santos v. Court of Appeals,[42] it was held that although an appeal fee is required to be paid in case of an appeal taken from the municipal trial court to the regional trial court, it is not a prerequisite for the perfection of an appeal under 20[43] and 23[44] of the Interim Rules and Guidelines issued by this Court on January 11, 1983 implementing the Judiciary Reorganization Act of 1981 (B.P. Blg. 129). Under these sections, there are only two requirements for the perfection of an appeal, to wit: (a) the filing of a notice of appeal within the reglementary period; and (b) the expiration of the last day to appeal by any party. Even in the procedure for appeal to the regional trial courts,[45] nothing is mentioned about the payment of appellate docket fees. Indeed, this Court has ruled that, in appealed cases, the failure to pay the appellate docket fee does not automatically result in the dismissal of the appeal, the dismissal being discretionary on the part of the appellate court.[46] Thus, private respondents Veneracions failure to pay the appellate docket fee is not fatal to their appeal. Third. Petitioner contends that the resolution of the Court of Appeals denying his motion for reconsideration was rendered in violation of the Constitution because it does not state the legal basis thereof. This contention is likewise without merit. Art. VIII, Sec. 14 of the Constitution provides that No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the basis therefor. This requirement was fully complied with when the Court of Appeals, in denying reconsideration of its decision, stated in its resolution that it found no reason to change its ruling because petitioner had not raised anything new.[47]Thus, its resolution denying petitioners motion for reconsideration states: For resolution is the Motion for Reconsideration of Our Decision filed by the petitioners. Evidently, the motion poses nothing new. The points and arguments raised by the movants have been considered and passed upon in the Decision sought to be reconsidered. Thus, We find no reason to disturb the same. WHEREFORE, the motion is hereby DENIED. SO ORDERED.[48] Attorneys fees should be awarded as petitioner was compelled to litigate to protect his interest due to private respondents act or omission.[49] WHEREFORE, the decision of the Court of Appeals is REVERSED and a new one is RENDERED: (1) declaring as null and void the deed of sale executed by private respondents Godofredo and Manuela De la Paz in favor of private respondents spouses Reynaldo and Susan Veneracion; (2) ordering private respondents Godofredo and Manuela De la Paz to execute a deed of absolute sale in favor of petitioner Rev. Fr. Dante Martinez; (3) ordering private respondents Godofredo and Manuela De la Paz to reimburse private respondents spouses Veneracion the amount the latter may have paid to the former; (4) ordering the Register of Deeds of Cabanatuan City to cancel TCT No. T-44612 and issue a new one in the name of petitioner Rev. Fr. Dante Martinez; and (5) ordering private respondents to pay petitioner jointly and severally the sum of P20,000.00 as attorneys fees and to pay the costs of the suit. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-30486 October 31, 1972 MARIA SAN MIGUEL VDA. DE ESPIRITU, petitioner, vs. HON. COURT OF FIRST INSTANCE OF CAVITE, ANASTACIA TOPACIO, JOSEFA JARDINIANO and REGISTER OF DEEDS FOR THE PROVINCE OF CAVITE, respondents. Beltran, Beltran and Associates for petitioner. Remulla, Perez and Estrella for respondents. BARREDO, J.:p Petition for certiorari and mandamus; certiorari to set aside, for being null and void, the order of respondent court of July 27, 1967 in its Civil Case No. N-233, Maria San Miguel Vda. de Espiritu vs. Anastasia Topacio, et al., dismissing on the ground of prescription plaintiff's (herein petitioner's) action to compel defendants (herein private respondents) to execute the proper deed of conveyance of two parcels of land to said plaintiff, and the subsequent order for the return of the corresponding titles over said lands to defendants, as well as those combinedly dismissing plaintiff's appeal from said orders, for having been filed out of time. Petitioner's complaint in the court below which was filed on October 20, 1964 alleged that sometime in 1948, defendants had verbally sold to her the two parcels of land in question for Three Thousand (P3,000.00) Pesos and, in consequence, delivery thereof together with the corresponding transfer certificates of title was made to her, but no deed of sale was executed at the time because private respondents promised they would do so as soon as the titles which were then in the name of their predecessor in interest were transferred to their names, and that despite demands made "time and again" by her for the execution of such deed, said respondents, "without justifiable cause therefor adamantly failed and refused to comply with (such) just and valid demand." In their answer, defendants denied that the transaction was a sale and alleged that it was merely a contract of antichresis whereby petitioner had loaned to them P1,500.00, for which she demanded the delivery of the lands in question and the titles thereto as security, with the right to collect or receive the income therefrom pending the payment of the loan. And by way of affirmative defenses, respondents interposed (1) unenforceability by action of the alleged sale, under the statute of frauds, and (2) prescription of petitioner's action, the same having allegedly accrued in 1948. Subsequently, respondents reiterated their said affirmative defense of prescription in a formal motion to dismiss and as no opposition thereto was filed by petitioner, on July 31, 1967, respondent court issued the impugned order of dismissal reading as follows: Submitted for resolution is a motion to dismiss filed counsel for the defendants to which no opposition has been filed despite the fact that the plaintiff was furnished with a copy thereof. Finding the said motion to dismiss to be well-taken for the reasons stated therein, this Court grants the same and the complaint, dated October 16, 1964, is hereby dismissed with costs against the plaintiff. SO ORDERED. The other details leading to the issuance of this order and what took place thereafter up to the disapproval of the appeal of petitioner are recounted by the trial judge in his order of April 1, 1969 thus: 52

At this stage of the proceedings, the issues squarely presented to the Court relate to the approval of plaintiff's: (1) motion for reconsideration, dated November 9, 1968, and (2) record on appeal. Plaintiff seeks for a reconsideration of the Court's order, dated July 31, 1967, which dismissed this case, on the basis of defendants' motion to dismiss, dated January 30, 1967. Plaintiff contends that 'an action to compel compliance to a promise to execute the necessary public document of sale of real estate does not prescribe.' In their opposition, defendants lay stress on the fact that the order (dated July 31, 1967) had already become final and executory when plaintiff filed her motion for reconsideration (dated November 9, 1968). But the plaintiff argues, in her reply to the opposition (dated December 20, 1968), that the order of the Court was never served on or received by either the plaintiff or her attorneys. An examination, therefore, of the record is necessary. It appears that on January 13, 1967, in open Court, the counsel for the defendants was given 15 days within which to file a motion to dismiss on any of the grounds alleged in the affirmative defenses contained in the answer, and the attorneys for the plaintiff were given an equal number of days from receipt of a copy thereof within which to file an opposition. The hearing set for that date was reset to February 28, 1967. On January 31, 1967, counsel for the defendants filed the motion to dismiss, and furnished on the same date the two lawyers of the plaintiff. At the hearing on February 28, 1967, none of the lawyers for the plaintiff appeared, although the plaintiff herself verbally informed the Court that because her lawyers were suddenly called to an emergency she prayed that the hearing on the motion to dismiss be reset to another date. No objection having been interposed by counsel for the defendants, the hearing was reset to March 15, 1967, in open Court where counsel for the defendants and the plaintiff were notified. A copy of the Order was sent by ordinary mail to Atty. Arturo T. de Guia, one of the lawyers for the plaintiff, on March 2, 1967. At the hearing on March 15, 1967, one of the lawyers of the plaintiff was given 5 days within which to submit an opposition to the motion to dismiss, and to furnish counsel for the defendants with a copy thereof. As more than 4 months have elapsed and no such opposition has been filed, counsel for the defendants filed on July 26, 1967 an urgent motion to resolve the motion to dismiss. The attorneys for the plaintiff were furnished with a copy of the urgent motion on July 25. The Court, finding the motion to dismiss to be well-taken for the reasons stated therein, issued the Order of July 31, 1967 dismissing the complaint with costs against the plaintiff. Copies of this order were sent to both counsel for the parties by ordinary mail on July 31, 1967. Almost 6 months thereafter, that is, on January 16, 1968, counsel for the defendants filed a 'Motion for Return of Transfer Certificates of Title,' furnishing on the same date counsel for the plaintiff with a copy thereof and setting the same for the consideration and approval of the Court on January 23, 1968. It should be noted that in paragraph 1 of this motion counsel for the defendants expressly stated, "That on July 31, 1967 this Honorable Court, acting on defendants' Motion to Dismiss on the ground that the cause of action of the plaintiff has already prescribed, issued an Order dismissing plaintiff's Complaint'; hence although a copy of the Order dated July 31, 1967 was not sent to plaintiff's counsel by registered mail, but by ordinary mail because the Court was without money to defray the expenses of registered mail, plaintiff's counsel cannot validly claim that they were unaware of said Order. Moreover, in paragraph 3 of defendants' "Opposition to Motion for Reconsideration" filed on May 30, 1968 is expressly alleged the "dismissal of the Complaint for the reasons stated in the Motion to dismiss filed by the herein defendants." Copies of this opposition were sent to the two lawyers of the plaintiff, and not one of them ever denied the veracity of such

allegation. Finally, in defendants' "Memorandum in Support of Opposition to Motion for Reconsideration," dated August 2, 1968, the Order of this Court, dated July 31, 1967, is quoted verbatim. Although the two lawyers of the plaintiff were each furnished with a copy of this memorandum (see registry receipt attached to page 9 of the memorandum and registry return receipt attached to rejoinder to reply, dated January 3, 1969), none of them ever denied having received a copy of said quoted order. It should be noted that although copies of the Orders of this Court (dated October 14, 1965, November 29, 1965, September 26, 1966, October 17, 1966, December 12, 1966) were sent by ordinary mail to counsel for the plaintiff, they were actually received as shown by the fact that said counsel appeared in court on the date set in said Orders. In view of the foregoing, this Court is persuaded to share, as it hereby sustains, the view of the defendants that the Order of this Court, dated July 31, 1967, has already become final and executory. Hence, plaintiff's motion for reconsideration, dated November 9, 1968, is denied. Anent plaintiff's record on appeal, the record shows that a copy of the Order, dated January 23, 1968, was sent by registered mail to Atty. Arsenio Cabrera of the plaintiff on February 8, 1968. Said Order granted defendants' motion to dismiss and ordered the plaintiff to return to the defendants Transfer Certificates of Title No. 18517 and 18518 of the Registry of Deeds for the Province of Cavite within ten (10) days from receipt of a copy of the order. Plaintiff's counsel neither moved for a reconsideration of, nor manifested an intention to appeal from, said Order. It was only on May 6, 1968, almost four (4) months after the issuance of the Order, that a motion for reconsideration signed by the plaintiff herself, not by her counsel, was filed with the Court. It is obvious that the motion was filed out of time the order of the Court has become final and executory. Even on the basis of the allegation in said motion that the Order was "received on March 27, 1968," the Order has already become final and executory before the motion was filed on May 6, 1968. Consequently, the notice of appeal filed on October 30, 1968 and the record on appeal filed on November 12, 1968 were both filed beyond the reglamentary period and, hence, are hereby both denied. SO ORDERED. Petitioner now alleges as grounds for her petition that: I. THE HON. COURT OF FIRST INSTANCE OF CAVITE LACKED JURISDICTION AND COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE COMPLAINT, WITHOUT HEARING, ON THE GROUND OF PRESCRIPTION OF CAUSE OF ACTION, ALLEGED IN THE MOTION TO DISMISS, THERE BEING NO EVIDENCE NOR ALLEGATIONS IN THE COMPLAINT TO SUPPORT SAID DISMISSAL OR PRESCRIPTION; II. THE HON. COURT OF FIRST INSTANCE OF CAVITE LIKEWISE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN DENYING THE MOTION FOR RECONSIDERATION OF SAID ORDER OF DISMISSAL, AND IN ISSUING THE ORDER DATED JAN. 23, 1968 IMPLEMENTING THE ORDER OF DISMISSAL BY REQUIRING PETITIONER TO RETURN CERTIFICATES OF TITLE TO THE VENDORS; III. THE LOWER COURT UNLAWFULLY DENIED THE APPEAL TAKEN BY PETITIONER FROM THE ORDER TO RETURN THE TITLES; There are two vital points that standout in this case: (1) that the order of dismissal of July 31, 1967 has never been served upon counsel for petitioner nor upon her, and (2) that although it seems that copy of 53

the order of January 23, 1968 was sent by registered mail to Atty. Arsenio Cabrera, one of petitioner's counsel of record, on February 8, 1968, there is no showing as to when the same was received, whereas, there is no denying that another copy thereof was sent also by registered mail to petitioner herself and this was received by her on April 27, 1968. The first point is crucial for the simple reason that without such service being made, it is undeniable that when petitioner's counsel filed on November 11, 1968 their motion of November 9, 1968 for the reconsideration of the dismissal order of July 31, 1967, this order had not yet become final and executory. Needless to state, under Section 3 of Rule 41, the period for appeal from any final order or judgment starts only from the date from notice thereof, which means when it is duly served. 1 Section 7 of Rule 13 very explicitly enjoins that "(F)inal orders or judgments shall be served either personally or by registered mail", and "under this provision, a final order or judgment cannot be served by ordinary mail." 2 Indeed, Rule 13 constitutes an elaborate system of specific modes of filing and serving "pleadings, appearances, motions, notices, orders and other papers" which, of course, include a decision, 3 which is exactly what the dismissal order here in question is, and it would be subversive of this rule and productive of confusion, if any mode other than those respectively fixed by it for each particular situation therein expressly contemplated were to be sanctioned and given legal effect. Besides, Our jurisprudence is replete with cases wherein the Court refused to give its stamp of approval even to service actually and admittedly made upon a party merely because, under the rules, service must be made upon his lawyer of record, no matter if the party himself solicits the service and thereby factually learns of the judgment. 4 If service expressly admitted by a party to have been made to him has been considered ineffective only because it was not made in the manner prescribed, much more should such fate befall a defective service, proof of which does not exist, as in this case wherein there is no showing whatsoever that petitioner or her counsel did receive the ordinary mail containing the order of dismissal in dispute. It is contended that because copy of respondents' motion of January 16, 1968 for the return of their title, which included allegations attesting to the issuance of the order of dismissal, appears to have been "furnished" counsel for petitioner on the same date, petitioner must be deemed to have been on notice of said order since then. To start with, it is not very clear that petitioner's counsel was in fact served with such copy; in the second place and worse, in the light of the rulings just mentioned prescribing strict compliance with the requirements of service, such indirect way of imparting knowledge of the order to petitioner's counsel cannot serve as a mode of service within the contemplation of said rulings. Moreover, it is to be noted that significantly, there seems to have been no appearance for petitioner when the motion was heard on the day the court granted the same, hence, there is no affirmative act of petitioner or her counsel upon which an inference of possible waiver may be safely drawn, differently from what happened in the National Lumber case decided by this Court. 5 In this connection, it is likewise noteworthy that although His Honor's order of April 1, 1969 states that copy of the order of January 23, 1968 was sent to Counsel Cabrera of petitioner by registered mail, no mention is made of its actual receipt and the date of such receipt, although it is not disputed that a copy was actually received by petitioner by registered mail on April 27, 1968. Remarkable also is the fact that it was petitioner herself and not her counsel who signed the motion for reconsideration of May 6, 1968. In any event, since the order of dismissal on which this order of January 23, 1968 was premised, has not yet become final and executory, said later order is of secondary importance; its finality, if legally conceivable, cannot have any detracting effect upon the final outcome of the main controversy relative to the correctness or incorrectness of the order of dismissal. Understandably, if the order of dismissal is set aside, and the action of the petitioner is sustained, nothing in the order of January 23, 1968 can defeat or even minimize the right of petitioner to the lands in dispute. It is, therefore, idle to discuss whether or not said order has become final and unappealable. Upon the foregoing premises, and considering that there is in fact no showing that any entry of judgment was made before November 11, 1968, a decision granting herein petition could be in order, and in consequence, We could order that petitioner's appeal be given due course. It appears, however, that

looking at petitioner's position from another angle, as to its substantive merits, there is hardly any prospect of its being ultimately successful. To require the parties to return first to the lower court and then come back here, only to rediscuss the same points which after all both of them have already extensively taken up in their pleadings in this case will not serve the ends of justice. This Court has already ruled on several occasions, since as early as De la Cruz vs. Blanco, 73 Phil. 596 that mandamus to compel approval and certification of an appeal, even if otherwise well grounded, procedurally speaking, has to be denied where it is evident that there is no merit in the appeal itself, and "it would serve no useful purpose to reinstate" the same. 6 After all, mandamus is mainly a remedy in equity, and good conscience cannot countenance the idea of allowing a party to spend more time, effort and money, only to lose, with more or less certainty in the end, when, provided due process is not denied, an earlier determination of his claim is possible. It is petitioner's pose that respondent judge erred in holding that her action has already prescribed, predicating her contention on the theory that since she is seeking nothing more than to compel private respondents to execute a promised deed of sale in her favor, such action is imprescriptible under Section 38 of Art. 190, the Code of Civil Procedure, and per the ruling in Castillo vs. Court of Appeals, L-18046, March 31, 1964, 10 SCRA 549. We do not see it that way. Unlike in the Castillo case, petitioner's invocation here of Section 38 of Act 190 is being refuted by respondents with the citation principally of Article 2270 of the Civil Code of the Philippines which ordains that: ART. 2270. The following laws and regulations are hereby repealed: xxx xxx xxx (3) The provisions of the Code of Civil Procedure on prescription as far as inconsistent with this Code. and Article 2258, which provides: ART. 2258. Actions and rights which came into being but were not exercised before the effectivity of this Code, shall remain in full force in conformity with the old legislation; but their exercise, duration and the procedure to enforce them shall be regulated by this Code and by the Rules of Court. If the exercise of the right or action was commenced under the old laws, but is pending on the date this Code takes effect, and the procedure was different from that established in this new body of laws, the parties concerned may choose which method or course to pursue. (Rule 4). Indeed, the whole statute of limitations embodied in Chapter III of the Code of Civil Procedure must be deemed supplanted and replaced by Chapter 3, Title V, Book III of the Civil Code, which in itself is a complete and comprehensive body of rules on prescription intended to cover all conceivable situations. We cannot see any logic in thinking otherwise, having in mind the repealing clause just quoted. If Article 1357 which reads: ART. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. (1279a) is indicative of anything relevant to the point under discussion, it is simply that said article does not contemplate that the time to commence an action to compel the execution of a formal agreement can be longer than that for the filing of the suit for specific performance of the perfected contract itself. In other words, differently from the Code of Civil Procedure, the Civil Code does not consider the action by the vendee of real property to compel execution of a deed of conveyance as imprescriptible. In fact, under Article 1143, only the following rights "are not extinguished by prescription: (1) to demand a right of way, 54

regulated in Article 649 and (2) to bring an action to abate a public or private nuisance", which are actions involving public policy. Nor is there any other provision of the Civil Code or any unrepealed law or jurisprudential ruling of this Court, under which petitioner's claim of imprescriptibility can be sustained. We believe that the specific enumeration in the Civil Code of imprescriptible actions excludes any other ones. In a broad sense, at least, the nature of petitioner's action may be said to be one founded on an oral contract, which, to be sure, cannot be considered as among those rendered unenforceable by the statute of frauds, for the simple reason that it has already been, from petitioner's own point of view, almost fully consummated by the delivery of the lands and the corresponding titles to her. Consequently, respondents are right in maintaining that the applicable provision here is Article 1145 which reads thus: ART. 1145. The following actions must be commenced within six years: (1) Upon an oral contract; (2) Upon a quasi-contract. Assuming otherwise, the only other possibility is that petitioner's case comes under Article 1149 providing: ART. 1149. All other actions whose periods are not fixed in this Code or in other laws must be brought within five years from the time the right of action accrues. In either case, since the cause of action of petitioner accrued in 1948 and the present suit was instituted in 1964 or sixteen years later, and none of the interrupting circumstances enumerated in Article 1155 has been shown to have intervened, it is unquestionable that petitioner's action filed in the court below has already prescribed. It may be mentioned, for the rest, that petitioner contends that the order of dismissal above-quoted, being a decision, violates the constitutional requirement, as well as of the rules, that it should state the facts and the law on which it is based. The contention is not well taken. As may be seen, the said order adopts by reference the reasons, alleged in the motion to dismiss of respondents, which, the record reveals, includes the facts and the law in support thereof. There is, therefore, substantial compliance with the fundamental law and the rules, albeit, judges are advised that mere general reference should be avoided, since anyway it is not difficult to quote textually the subject of the reference for a closer adherence to the obvious spirit and reason behind the requirements. WHEREFORE, the petition is denied, with costs against petitioner.

THIRD DIVISION SPOUSES ADIEL DE LA CENA and CARIDAD AREVALO DE LA CENA, Petitioners, G.R. No. 160805 Present: QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.

- versus -

SPOUSES JOSE BRIONES and HERMINIA Promulgated: LLEDO BRIONES, Respondents. November 24, 2006 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION QUISUMBING, J.: For review on certiorari are the Decision[1] dated November 25, 2002 of the Court of Appeals in CA-G.R. CV No. 43335, and its Resolution dated October 16, 2003, denying the motion for reconsideration. The appellate court reversed the decision dated July 27, 1993 of the Regional Trial Court of Legazpi City, Branch 6, in Civil Case No. 8248 for quieting of title, recovery of possession and damages. The facts are as follows: Involved in this case is a six-meter by nine-meter portion of a 1,011-square meter lot located at Bagumbayan, Daraga, Albay. The whole lot is now registered under Transfer Certificate of Title (TCT) No. T-54600 in the name of petitioners, spouses Adiel de la Cena and Caridad Arevalo de la Cena (the de la Cenas).[2] It was previously owned by the spouses Antonio and Josefa Arevalo (the Arevalos), parents of petitioner Caridad Arevalo de la Cena. Sometime in 1969, the respondents, spouses Jose and Herminia Briones (the Brioneses), rented from the Arevalos, a house constructed on the contested portion of the aforementioned lot. Five months later, respondents bought the house. Then on January 31, 1977, respondents also bought the contested portion of said lot from the Arevalos. They paid P1,260 as downpayment.[3] Unknown to the Brioneses, the whole lot had been mortgaged by the Arevalos to Albay Development Bank. On April 24, 1979, TCT No. T-54600 was issued to petitioners, who paid an unspecified amount to the Arevalos for the whole lot and P9,000 to the bank representing the balance of the loan obtained by the Arevalos.[4] Thereafter, petitioners de la Cenas demanded that respondents Brioneses vacate the contested portion. When respondents refused and after a barangay conciliation failed, petitioners filed before the Regional Trial Court of Legazpi City a complaint for quieting of title, recovery of possession, and damages against respondents. The trial court decided in favor of petitioners de la Cenas, disposing of the case as follows: WHEREFORE, premises considered, decision is hereby rendered: 1) Declaring the claim of ownership of defendants [respondents herein] upon the property in question based upon exhibit 1 as invalid and ineffec[t]ive and is prejudicial to the 55

title of the plaintiffs [petitioners herein] and casting a cloud upon said title which cloud is hereby ordered removed and the plaintiffs title hereby ordered quieted. 2) The plaintiffs are hereby ordered to pay the defendants P35,952.93 as reimbursement for the value of the expenses incurred by the defendants in renovating or repairs inuring to plaintiffs benefits. 3) Within thirty (30) days from the payment of the aforesaid P35,952.93 by the plaintiffs to the defendants, the defendants shall vacate the property in question leaving the house behind. 4) Costs against both plaintiffs and defendants. SO ORDERED.[5] While the trial court found that there was a perfected contract of sale of the contested portion between respondents Brioneses and the Arevalos, it said that the sale did not bind petitioners de la Cenas because, (1) the acknowledgment receipt[6] issued by the Arevalos of the downpayment of respondents was not a public document under Article 1358 (1) [7] of the Civil Code; and (2) the sale was unregistered. The trial court further noted that petitioners de la Cenas were unaware of the previous sale of the contested portion to the Brioneses. Nonetheless, it faulted petitioners de la Cenas for not ascertaining the nature of respondents Brioneses possession of the contested portion, since the former were aware that the Brioneses had purchased the house that stood thereon. Upon respondents appeal, the Court of Appeals reversed the trial courts decision. Thus, WHEREFORE, the appeal is GRANTED. The assailed decision is REVERSED and SET ASIDE. The parties shall, at their expense share and share alike, cause a SURVEY to determine their respective portions of Lot No. 2 consistent with this decision. Thereafter, in accordance with the said survey, the Register of Deeds of Albay shall ISSUE a new transfer certificate of title to defendantsappellants [respondents herein] for the portion pertaining to them, while the remaining portion of Lot No. 2 shall continue to pertain to plaintiffs-appellees [petitioners herein] under their TCT No. T-54600. SO ORDERED.[8] The appellate court similarly held that there was a perfected contract of sale of the contested portion based on the receipt acknowledging the downpayment.[9] The appellate court found that the sale had been consummated and it took note of respondents full payment of the purchase price of P6,000 on installment basis, as testified to by respondent Herminia Briones.[10] The appellate court also concluded that petitioner Caridad Arevalo de la Cena had known of the sale of the house and the contested portion to respondents. Thus, the appellate court ruled that even if petitioners were first to register the sale, their registration was tainted with bad faith. The appellate court denied petitioners motion for reconsideration. Hence, the instant petition raising the following issues: 1. WHETHER OR NOT THERE EXISTED A PERFECTED CONTRACT OF SALE BETWEEN PETITIONERS PREDECESSORS-IN-INTEREST, THE AREVALO SPOUSES AND THE RESPONDENTS; AND 2. ASSUMING THAT THERE WAS SUCH A PERFECTED CONTRACT OF SALE, WHETHER OR NOT THE PETITIONERS HAD KNOWLEDGE

THEREOF PRIOR TO THE REGISTRATION OF THE PROPERTY IN THEIR NAMES.[11] We will resolve the issues in the order presented. Petitioners contend that the Court of Appeals erred in ruling that there was a perfected contract of sale based on the receipt acknowledging the downpayment. Petitioners also contend that the receipt neither stated the portion sold, nor the price, nor the buyer. They aver that there had yet been no meeting of the minds upon the object of the contract and the price. Respondents counter that a contract of sale is perfected by mere agreement of the parties; even without the receipt acknowledging the downpayment, there could still be a perfected contract of sale. At this juncture, we note that petitioners did not appeal the trial courts finding that there was a perfected contract of sale of the contested portion to respondents. By not appealing, petitioners are deemed to have accepted the trial courts factual findings and conclusions of law on this matter.[12] In addition, a contract of sale is perfected by mere consent, upon a meeting of the minds on the object of the contract and the price.[13] When the Arevalos accepted theP1,260 as downpayment, they had agreed to the sale of the contested portion to respondents. In fact, the contract of sale had already been consummated. Hence, its enforcement cannot be barred by the Statute of Frauds, which applies only to an executory agreement.[14] We note that the Arevalos delivered the contested portion to respondents; the respondents had paid the P1,260 as downpayment; the downpayment was received; the respondents had paid on installment the balance of the full purchase price of P6,000;[15] some installments were paid weekly as demanded by the Arevalos who did not issue receipts;[16] P400 owed by the Arevalos to respondent Herminia Brioness mother, was also used to offset the price;[17] respondents paid the last installment in 1980;[18] and respondents continued their actual possession. Moreover, ownership of the thing sold was transferred to the buyer upon actual or constructive delivery.[19] Petitioners also contend that the Court of Appeals erred in concluding that they knew of the sale between the Arevalos and respondents. They insist that they had no knowledge of the sale of the contested portion to respondents. Hence, they claim they were buyers in good faith who had also in good faith first registered the sale. In a double sale of immovable property, as in this case, ownership belongs to the person who in good faith first recorded it in the registry of property.[20] The requirement is two-fold: acquisition in good faith and registration in good faith. But here, petitioners failed to show that they were in good faith because as second buyers they were not ignorant of the first sale to respondents from the time petitioners acquired the whole lot until the title was transferred to them.[21] The records reveal that petitioner Caridad Arevalo de la Cena had testified on direct examination that at the time they acquired the whole lot from her parents, respondents were already staying on the contested portion, thus: q Now, at the time you acquired the property way back in 1979 were the [respondents] already staying in the property in question? a Yes, sir, they were already staying in the property.[22] (Emphasis supplied.) Further, Caridad knew of respondents claim that they bought the house from the formers parents. She also knew that respondents renovated the house after they bought it, as revealed by the testimony of Caridad on additional direct examination: q [Do] you have any knowledge when the [respondents] started renovating the house? 56

a It was long time but the renovation was gradual. They have started the renovation when they allegedly purchased it.[23] (Emphasis supplied.) The records also reveal that Caridad testified on cross-examination that she talked to respondents only after herein petitioners had bought the whole lot, to wit: q I am asking you whether you talked to [respondents] when you bought the property? a I talked to them after we purchased the property.[24] (Emphasis supplied.) Thus, Caridads testimony belie petitioners contention that their knowledge of respondents claims over the [contested] portion arose only after, not before, the lot had been titled or registered in their name or only after the demand to vacate was received by [25] respondents. On direct examination, Caridad testified: q Did [respondents] comply with your demands? a q They did not. Why? Do you know the reason why they refused?

a I have been hearing stories because they have been telling people that they have already purchased the property. q When was that[?] When did you learn of such allegation of the [respondents]? a Even before we asked them to vacate we have been hearing stories already.[26] (Emphasis supplied.) Patently, petitioners made no efforts to clarify the true nature of respondents possession, despite knowing of the latters claim of ownership and actual, visible and public possession of the contested portion. One who buys real property in actual possession of another should at least inquire as to the right of the ones in possession. Absent such inquiry, petitioners cannot be regarded as bona fide buyers as against respondents, the ones in possession of the contested portion.[27] The rule is that if a buyer 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 on him any right.[28] WHEREFORE, the petition is DENIED for lack of merit. Petitioners are ORDERED to reconvey to respondents the six-meter by nine-meter contested portion of the lot covered by Transfer Certificate of Title No. T-54600. Thereafter, the Register of Deeds of Albay shall issue the corresponding transfer certificate of title of the reconveyed portion. All expenses for the purpose shall be shared equally by the parties. The remaining area covered by TCT No. T-54600 shall remain with petitioners. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC GR No. L-47771 June 17, 1941 PACIFIC COMMERCIAL COMPANY, plaintiff and appellee, vs.. GRACIANO BRANCH, Defendant and Appellant. D. Mark S. Gomez representation of appellant. D. Adolfo T. Representation Reyes for appellee. PER CURIAM: The defendant appealed from the judgment of the Court of First Instance of Iloilo condemn him maintenan pay the sum of P2, 869.93, its 12 per cent interest per annum from January 18, 1938 until full payment, additional THE AMOUNT of P297.99 in honoracios concept of attorney and collection costs, and costs. The appeal was filed to the Court of Appeals, but that court raised to the Supreme Court given that does not arise any question of fact and law are raised. The September 18, 1937 the defendant commit to deadlines complainant a automivil La Salle, Sedan , and awarded in favor of this a promissory note in the amount of P3, 120 representing the unpaid balance of the price.To guarantee the amount of the promissory note the defendant mortgaged the same car, having been recorded the mortgage deed in the office of the Recorder of Deeds of Negros Occidental. Having failed to pay the defendant the first three times, except the amount of P200, and having beaten the other installments in accordance with the terms of the promissory note, the plaintiff, through his attorney, January 18, 1938 wrote an letter to Negros Occidental Provincial Sheriff requiring you to take possession of the mortgaged car and sell it at public auction on February 7 of that year, and the impact sent it a copy of the mortgage deed. The Sheriff notified the defendant the instructions he received from the applicant. The defendant informed the Sheriff that the car was in the repair shop Auterio Lizares. The Sheriff is directed to the shop and having found the car in, Lizares appoint as guardian or custodian of it and this was issued a receipt. The January 29, 1938 the plaintiff learned that the car had been in an accident for which reason he had been sent to the shop for repair, so he wrote another letter instructing the Sheriff to desist from foreclosing. The Sheriff replied that the applicant had been seized and the car and that was in power Lizares who designate as depositary. By letter dated February 4, 1938 and by telegram from 5 of the same month, led the Sheriff, the applicant reiterated his request that the official desist foreclose and sell the car. The 19th of the same month the applicant wrote another letter to the Sheriff requiring you to give him back the mortgage deed, and 7 year marzodel an agent of the applicant was personally seen with the Sheriff and required this quen laventa not continue with the car, what the Sheriff suspended the public auction sale, notice of the suspension either the defendant or the depositary. The applicant strike up the action to collect from the defendant the unsatisfied balance of the amount of the promissory note, the judgment appealed condemn the defendant to pay the amounts claimed, stated interest on capital, and court costs. The defendant does not contest the facts proven. He argues, however, that the Court mistakes by not declaring that the applicant had already opted to foreclose the car and cancel the sale in installments and, consequently, the Court mistakes by not finding that the applicant had lost its right saido claim the unpaid amount of the promissory note. The defendant bases his theory on what is stated in articulo1454-A of the Civil Code, which has been introduced by Law No. 4122, which reads as follows: Art. 1454-A. In a contract of sale of movable property payable in installments, the failure to pay two or more installments seller gives the right to the resolution of the sale or the execution of the mortgage, if already on the thing is made without reimbursement to buyer paid deadlines and if so has been agreed. 57

The seller, however, has opted for execution of the mortgage may not sue the buyer for the charges of any balance would have been against this, being void agreed. The same rule shall govern in cases of chattel leases with option to buy, when the lessor has opted for qauitar the tenant's enjoyment of the chattel. From this article it appears that the seller, then the buyer has failed to pay two or more installments and in the case that would have granted the thing sold mortgage, you can choose: (1) to resolve the sale recorbrando the thing sold, in which case the purchaser shall not be entitled to reembolos of the installments paid, if so has stipulated, (2) to foreclose on forms authorized by the Mortgage Law of Personal Property, in which case the seller shall be entitled to recourse against the buyer for the payment of any balance would have been against this, being void agreement to the contrary, and (3) or simply collect the remaining debt. The remedies conferred by the article are alternative, not cumulative, so that if you opt for one of them is understood to have given to others. The intended demanadado been seized by the Sheriff's car on the instructions of the principalenconmendando custody to a depository, the applicant and pr opto foreclose and therefore lost his right to collect the balance due the amount of the promissory note. We believe, and so hold, that the theory is untenable. When the law refers to the execution of the mortgage, as a remedy that produces a waiver of the other, it means the execution of the mortgage with all its incidents and steps to its termination, including, of course, the sale at public auction of the thing pledged. In this case the last processed, transferred to a third party that the title of the mortgaged thing has not been verified or compliment to a raise because the warehouse Sheriff's car and sold in subasata not published as required by Article 14 Law No. 1508. For this reason the error that the respondent attributed to the contested judgment does not exist. The defendant contends that the instructions iqualmente the applicant gave the Sheriff equivalent and involved the resolution of the sale. It does not seem well founded pretension. Instructions will be recalled that consisted in the Sheriff's car was seized and sold at public auction. This processed was necessary to do it the official to foreclose and in no way can be interpreted as a step given that the applicant had to show that she had solved the sale or had opted for the resolution of it. In addition, for the resolution of a Contrado was not enough the unilateral will of the applicant, it was necessary to file his action correspondeinte and final judgment is given effect. It confirms the contested decision, the costs of this instance the defendant-appellant. So ordered.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-8377 August 28, 1956 MANILA MOTOR COMPANY, INC., plaintiff-appellant, vs. R.F. FERNANDEZ, defendant-appellee. Zafra, Lara, De Leon and Veneracion for appellant. Jose P. Largosa for appellee. PARAS, C. J.: On February 24, 1939, the defendant-appellee purchased from the plaintiff-appellant a second-hand Ford Sedan for P1,125, P100 being paid in cash and the balance being payable in 34 fifteen-day installments with interest at the rate of twelve per cent per annum. As a security, the appellee executed in favor of the appellant a chattel mortgage on the car. Up to July 21, 1940, the appellee had paid the first ten installments and a part of the eleventh installment, thereby leaving a balance of P775.17. The appellee having defaulted in paying the other installments, the filed in 1940 a suit in which judgment was rendered in March 1941, sentencing the appellee to pay to the appellant the sum of P775.17, with interest at twelve per cent per annum, plus twenty-five per cent of the total amount due as liquidated damages and attorney's fees. This judgment was never executed due to the debt outbreak of the last was and the promulgation of the debt moratorium orders. The judicial records, including the judgment, were neither saved nor duly reconstituted. On February 19, 1054, the appellant filed in the Court of First Instance of Manila the present complaint for the collection of appellee's indebtedness, alleging substantially the foregoing facts; but upon motion of the appellant, the court dismissed the case so as to enable it to file another with the Municipal Court of Manila which has jurisdiction over the amount involved. Accordingly, on April 13, 1954, the appellant filed with the latter court a similar complaint, whereupon the appellee filed a motion to dismiss which was granted was the Court on the ground that appellant's cause of action was barred by the statute of limitations. The appellant elevated the case to the Court of First Instance of Manila wherein the appellee again filed a motion to dismiss which was also granted, on the grounds that appellant's cause of action had prescribed and that appellee's foreclosure suit in 1940 constituted a waiver of any unpaid balance. Hence this appeal by the plaintiff. It is contended for the appellant that the debt moratorium interrupted the running of the statute of limitations. This contention finds support in Ma-ao Sugar Central Co. vs. Barrios, 45 Off. Gaz., 2444, wherein it was held: While the debt moratorium is in force the defendant-petitioner has no obligation yet to pay the plaintiffs, and the latter can not file a suit against him in the courts of justice requiring him to recognize his debts to the plaintiffs and to pay them (after the moratorium) not only the amount of the indebtedness, but the legal interest thereon from the filing of the complaint, the attorney's fees of ten per centum of the amounts due, and the costs of the suits. There is no such action to compel defendant to acknowledge or recognize his debt which is not yet payable, distinct and different from the action for recovery or payment of a debt already due and payable, against the debtor who refuses to pay it. . . . . . . Said Executive Order No. 25 as amended by Executive Order No. 32 not only suspends the execution of the judgment that the court may render so far as it orders the payment of debts and other monetary obligations, as stated in the resolution in said case, but also suspends the filing of suit in the courts of justice for the enforcement of the payment of debts and other monetary obligations therein referred to, if timely objection is set up by the defendant debtor. 58

The complaint was filed on April 13, 1954, or 13 years, 1 month and 12 days after March 1, 1941 (assuming that this was the date when the judgment rendered in March 1941 became final). The debt moratorium lasted from November 18, 1944, when Executive Order No. 25 was promulgated, to July 26, 1948, when it was partially lifted by Republic Act No. 342, or 3 years, 8 month and 12 days, or less than the 10-year prescriptive period for an action based on judgment. The lower court erred in considering the present complaint as one based on a chattel mortgage. The following allegations sufficiently serve to make the judgment rendered in March 1941 as the basis of appellant's cause of action, or they would otherwise be unnecessary and meaningless: 7. That because defendant was delinquent in the payment of his obligations, plaintiff was forced to institute court action against the defendant sometime in 1940; that, in due course, judgment was rendered against the defendant sometime in March, 1941;. 8. That to the best of plaintiff's knowledge and recollection, the said judgment ordered the defendant to pay plaintiff the amount of P775.17 plus interest thereon at the contract rate of 12 per cent per annum, until the whole account be fully paid, and an additional amount of 25 per cent of the total amount due owing the plaintiff, as liquidated damages and attorney's fees; 9. That the said judgment was never executed due to the outbreak of the war and the Debt Moratorium orders; 10. That plaintiff's copy of the said judgment was lost or destroyed during the Battle for Liberation of Manila. (Allegations 7-10, Complaint.) Although a copy of the chattel mortgage was attached to the complaint and reference was made to certain provisions thereof, the purpose undoubtedly was to demonstrate the propriety of the judgment of 1941 and, as stated by counsel for appellant, to allow the introduction of secondary evidence of the contents of said judgment which was not reconstituted. The lower court likewise committed a mistake in assuming that the suit in 1940 was one of foreclosure. The allegations with reference to said suit and the corresponding judgment of 1941 do not contain any suggestion in support of the assumption. Upon the other hand, in appellee's motion to dismiss, it was stated that the car in question was commandeered from him by the Japanese occupation forces, thereby indicating that, even during the war period, the property was in appellee's possession and had not been sold at public auction. At any rate, it is the actual sale of the mortgaged chattel in accordance with section 14 of Act No. 1508 that would bar the creditor (who chooses to foreclosure) from recovering any unpaid balance (Pacific Commercial Company vs. De la Rama, 72 Phil., 380). Wherefore, the appealed order is reversed and the case will be as it is hereby remanded to the court of origin for further proceedings. So ordered with costs against the defendant-appellee.

Republic of the Philippines SUPREME COURT Manila EN BANC GR No. L-47784 April 18, 1941 LEVY BROTHERS, INC., plaintiff-appellant, vs.. PACIFIC COMMERCIAL CO., Dumdum and ROSARIO MANUEL pedor, defendants. Dumdum and ROSARIO MANUEL PEDRO, appealed. D. Rafael L. Almocen in representation of the appellant. D. Gaudencio D. Demaisip in representation of the appellees. DIAZ, J. : The question that presents the applicant's appeal against the judgment of the Court of First Instance of Iloilo is, if the contract hipotca she and husband Peter demandasos Manuel Dumdumy Rosary celebrated the November 28, 1936, is valid in all parts or not. The Court stated that it is not as also subject to tax, in addition to the six motor cars Dodge brand there if they describe, the lot and the house of those husbands, secure payment of the purchase price which had purchased those installments, saying that the contract violated, in that regard, Article disposicionnes 1454 of the Civil Code, according'm amended by Act No. 4122. The facts are: Taking Manuel Dumdum need six new motor car transport business purchase and hauling of gravel that obligao under contract to provide the Iloilo Provincial Government, held jointly with his wife Rosario Pedro, with the plaintiff, the contract contained in Exhibit A, so that it sells them six new motor cars Dodge brand. The sale price of these cars, agreed between the three, was to P13, 600, and as the couple wants could not afford a time dols that amount, granted in favor of the plaintiff, 40 promissory notes, which were to overcome on the dates mentioned in each of them and in the same Exhibit A mortgage agreement, undertaking to pay the amount of the last of these promissory notes, on or before July 28, 1938. They put as security for payment of the said promissory notes, not only the same six cars for them comoprados installment of the applicant, but also a site of your propiedu located in the municipality of Jaro in Iloilo Province, and a house of materials ubciada strong in the corner of Quezon and Jones-Delgado in Iloilo numicipio. No paid realize their obligation but only the amount of P4, 600, however the various requiremientos that the applicant had made them, being so even in duty to it, the amount of P9, 000 of its original debt P13, 600. To collect this balance and interest that the defendants owed the plaintiff pormovio this cuasa in the Court of First Instance of Iloilo pedier judgment is given in his favor, requiring pgarle aquellso to the sum of P12, 029.36 to then ascended the balance remaining unpaid for them but their due itnereses, the price of car accessories that you took the penalty, etc.., and interest on these amounts at the rate of 12 per ceinto the yea, more costs; is issued, in the event that the properties were not enough hipotecadacas for them to answer for their obligation, a commandment for the execution of the judgment in cualequiere other that they had, and that in the meantime they are ordered to deliver the goods mortgaged to Vicente Garcia, for their city and conservation. The Court, in its decision, did not grant the demadante but only what is expressed below, namely: that the defendants will pay P9, 000, but their interest at the rate of 12 percent per year from 20 st July 1937, to the payment of such amount competo, which also pay P484.20 for the spare parts you had taken, plus an amount equal to 15 percent of all amounts expressed, for attorney fees, to deposit such amounts held by the Clerk, lest they deliver dierectamente to the applicant, that the failure to do so, the court ordered the sale at public auction of six motor cars, Dodge brand, who bought in installments of the applicant to apply the proceeds of the sale thereof to the satisfaction of its debt, has been determined according to the decision, and the defendants to pay the costs. The applicant to appeal the decision of the Court of Iloilo, argues in his brief that the court committed the following errors:

First, the declrado having the mortgage contract awarded appellees their favor violates the provisions of Law No. 4122 amending Article 1454 of the Civil Code, as the site also gravel and characteristics of these appellees. Second, having excluded the effects of that contract hipotca, these two properties roots. Third, the case having applied to it the said Act No. 4122, and have stopped ordering that were sold at public auction also said solar home, to meet with the proceeds of the sale, your claim, and finally , Fourth, the having denied his motion for a new trial. It should be noted, to resolve the issue raised by the appellant, that the provisions of Law No. 4122 are to this effect: ART. 1454-A. In a contract of sale of furniture hoes pagardera in installments, failure to pay two or more installments gives the seller the right to the resolution of the sale or the execution of the mortgage, if already on the thing is made without reimbursement to buyer paid deadlines and if so has been agreed. The seller, however, it has opted for the mortgage ejercucion could not sue the buyer for any balance corbro would have been against this, being void agreed. As rega shall govern in cases of cos arrendameinto furniture with option to buy, when the lessor has opted for removing the tenant's enjoyment of the chattel. No effort is required to understand that the inclusion in the contrao of hipotec object in question, the soar and the cas of the appellees, poara better ensure they pay the price of a movable property bought in installments from the appellant, which are none other than the six motor cars Dodge brand, already mentioned, is to frustrate the true purpose of the Law No. 4122. They dictate precisely this law, as can be seen from the same text, pra prevent the owner of a chattel that can be sold in installments, besides enforcing the obligation ocntraida in their favor: either terminate the contract of sale back to make the movable thing sold, but staying with all compradoer partial payments that you have made, or foreclose granted in their favor, that sell at public auction to keep the proceeds of sale in addition to the payments and were made before, get after a writ of execution to collect the balance proves that even against the buyer, the other properties in this any. Under the law, only he is allowed now, alvendedor of movable, opt for one of these things require the obligation cumpolimiento quite aside buyer of the mortgage has been granted under the law of mortgage of movable , or terminate his contract of sale, retaking the poor movables sold, or foreclose, pore no right to demand payment of the buyer but that is made with dichoas poroducto selling goods. If you opted for the latter, then you should be satisfied with the product for sale at a public auction of the personal property sold to deadlines and quehaya that were mortgaged, but only chosen the appellant by such means of charging your credit, should not and can require the sale of the land and house of the appellees, because this eiquivaldria to get an execution against them in other propiedadeas own entirely different from those which they had sold to plasos and then gave him in payment mortgage to meet your price , which is contrary to the policy and purposes of the Act. Therefore, according to law being the original ruling, confirm it in all its parts, lapelante condenndo to pay the costs of prosecution in this instance. So ordered.

59

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-28074 May 29, 1970 NORTHERN MOTORS, INC., plaintiff-appellant, vs. CASIANO SAPINOSO and "JOHN DOE", defendants-appellees. Sycip, Salazar, Luna, Manalo & Feliciano for plaintiff-appellant. David F. Barrera for defendants-appellees. VILLAMOR, J.: Direct appeal on questions of law from the portion of the judgment of the Court of First Instance of Manila, Branch XXII, in its Civil Case No. 66199, ordering the plaintiff to pay defendant Casiano Sapinoso the sum of P1,250.00. The facts of this case are as follows: On June 4, 1965, Casiano Sapinoso purchased from Northern Motors, Inc. an Opel Kadett car for the price of P12,171.00, making a down payment and executing a promissory note for the balance of P10,540.00 payable in installments with interest at 12% per annum, as follows: P361.00 on July 5, 1965, and P351.00 on the 5th day of each month beginning August, 1965, up to and including December, 1967. To secure the payment of the promissory note, Sapinoso executed in favor of Northern Motors, Inc. a chattel mortgage on the car. The mortgage contract provided, among others, that upon default by the mortgagor in the payment of any part of the principal or interest due, the mortgagee may elect any of the following remedies: (a) sale of the car by the mortgagee; (b) cancellation of the contract of sale; (c) extrajudicial foreclosure; (d) judicial foreclosure; (e) ordinary civil action to exact fulfillment of the mortgage contract. It was further stipulated that "[w]hichever remedy is elected by the mortgagee, the mortgagor expressly waives his right to reimbursement by the mortgagee of any and all amounts on the principal and interest already paid by him." Sapinoso failed to pay the first installment of P361.00 due on July 5, 1965, and the second, third, fourth and fifth installments of P351.00 each due on the 5th day of August, September, October and November, 1965, respectively. Several payments were, however, made by Sapinoso, to wit: P530.52 on November 21, 1965, P480.00 on December 21, 1965, and P400.00 on April 30, 1966. The first and third payments aforesaid were applied to accrued interest up to April 17, 1966, while the second payment was applied partly (P158.10) to interest, and partly (P321.90) to the principal, thereby reducing the balance unpaid to P10,218.10. The vendee-mortgagor having failed to make further payments, Northern Motors, Inc. filed the present complaint on July 22, 1966, against Sapinoso and a certain person whose name, identity and address were still unknown to the plaintiff, hence denominated in the complaint as "John Doe." In its complaint, Northern Motors, Inc. stated that it was availing itself of the option given it under the mortgage contract of extrajudicially foreclosing the mortgage, and prayed that a writ of replevin be issued upon its filing of a bond for the seizure of the car and for its delivery to it; that after hearing, the plaintiff be adjudged to have the rightful possession and ownership of the car; that in default of delivery, the defendants be ordered to pay the plaintiff the sum of P10,218.10 with interest, at 12% per annum from April 18, 1966, until full payment of the said sum, as well as an amount equivalent to 25% of the sum due as and for attorney's 60

fees and expenses of collection, and the costs of the suit. Plaintiff also prayed for such other remedy as might be deemed just and equitable in the premises. Subsequent to the commencement of the action, but before the filing of his answer, defendant Sapinoso made two payments on the promissory note, the first on August 22, 1966, for P500.00, and the second on September 27, 1966, for P750.00. In the meantime, on August 9, 1966, upon the plaintiff's filing of a bond, a writ of replevin was issued by the court. On October 20, 1966, copies of the summons, complaint and annexes thereto were served on defendant Sapinoso by the sheriff who executed the seizure warrant by seizing the car from defendant Sapinoso on the same date, and turning over its possession to the plaintiff on October 25, 1966. On November 12, 1966, defendant Sapinoso filed an answer admitting the allegations in the complaint with respect to the sale to him of the car, the terms thereof, the execution of the promissory note and of the chattel mortgage contract, and the options open to the plaintiff under the said contract. He alleged, however, that he had paid the total sum of P4,230.52, leaving a balance of only P5,987.58; that upon demand he immediately surrendered the possession of the car to the plaintiff's representative; and that the value of the car was only about P5,000.00, and not P10,000.00 as alleged in the complaint. As special defenses the said defendant alleged that he failed to pay the installments due because the car was defective, and the plaintiff failed to have it fixed although he had repeatedly called the plaintiff's attention thereto, hence, the defendant had to procrastinate in his payments in order to move the plaintiff to repair the car; and that although the car could not be used, he paid P700.00 to the plaintiff upon the latter's assurance that the car would be fixed, but that instead of having the car fixed, the plaintiff, in bad faith, filed the present complaint. The defendant prayed that the complaint be dismissed and that the plaintiff be ordered to return the car to him. He stated in his prayer that he would be very much willing to pay the car in a compromise agreement between him and the plaintiff. After trial, the court a quo, in its decision dated April 4, 1967, held that defendant Sapinoso having failed to pay more than two (2) installments, plaintiff-mortgagee acquired the right to foreclose the chattel mortgage, which it could avail of as it has done in the present case by filing an action of replevin to secure possession of the mortgaged car as a preliminary step to the foreclosure sale contemplated in the Chattel Mortgage Law; and that the foreclosure of the chattel mortgage and the recovery of the unpaid balance of the price are alternative remedies which may not be pursued conjunctively, so that in availing itself of its right to foreclose the chattel mortgage, the plaintiff thereby renounced whatever claim it may have had on the promissory note, and, therefore, the plaintiff has no more right to the collection of the attorney's fees stipulated in the promissory note, and should return to defendant Sapinoso the sum of P1,250.00 which the plaintiff had received from the latter after having filed the present case on July 22, 1966, and elected to foreclose the chattel mortgage. The dispositive portion of the decision reads: WHEREFORE, the Court finds that the plaintiff has the right to the possession of the OPEL KADETT two-door station wagon Model 3464-91.5, with engine No. 10-0354333, and the delivery thereof to the plaintiff is hereby ratified and confirmed but said party is sentenced to pay to the defendant the sum of P1,250, with legal interest on P500 from August 22, 1966 and or P750 from September 27, 1966, until fully paid, without any pronouncement as to costs. In this appeal plaintiff-appellant claims that the court a quo erred in ordering it to reimburse to defendantappellee Sapinoso the sum of P1,250.00 which the latter had paid. It contends that under Article 1484 of the Civil Code it is the exercise, not the mere election, of the remedy of foreclosure that bars the creditor from recovering the unpaid balance of the debt; that what the said Article 1484 prohibits is "further action" to collect payment of the deficiency after the creditor has foreclosed the mortgage; and that in paying plaintiff-appellant the sum of P1,250.00 before defendant-appellee Sapinoso filed his answer, and in not filing a counterclaim for the recovery thereof, the said defendant-appellee in effect renounced whatever right he might have had to recover the said amount. The appeal is meritorious.

In issuing a writ of replevin, and, after trial, in upholding plaintiff-appellant's right to the possession of the car, and ratifying and confirming its delivery to the said plaintiff-appellant, the court below correctly considered the action as one of replevin to secure possession of the mortgaged vehicle as a preliminary step to this foreclosure sale contemplated in Section 14 of Act No. 1508 (Bachrach Motor Co. vs. Summers, 42 Phil., 3; Seo vs. Pestolante, G.R. No. L-11755, April 23, 1958). The said court however erred in concluding that the legal effect of the filing of the action was to bar plaintiff-appellant from accepting further payments on the promissory note. That the ultimate object of the action is the foreclosure of the chattel mortgage, is of no moment, for it is the fact of foreclosure and actual sale of the mortgaged chattel that bar further recovery by the vendor of any balance on the purchaser's outstanding obligation not satisfied by the sale. (Manila Motor Co., Inc. vs. Fernandez, 99 Phil., 782, 786; Bachrach Motor Co. vs. Millan, 61 Phil., 409; Manila Trading & Supply Co. vs. Reyes, 62 Phil. 461, 471; Cruz et al. vs. Filipinas Investment & Finance Corporation, G.R. No. L-24772, May 27, 1968 [23 SCRA 791, 796].) In any event, what Article 1484(3) prohibits is "further action against the purchaser to recover any unpaid balance of the price;" and although this Court has construed the word "action" in said Article 1484 to mean "any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy" (Cruz, et al. vs. Filipinas Investment & Finance Corporation, supra), there is no occasion at this stage to apply the restrictive provision of the said article, because there has not yet been a foreclosure sale resulting in a deficiency. The payment of the sum of P1,250.00 by defendant-appellee Sapinoso was a voluntary act on his part and did not result from a "further action" instituted by plaintiff-appellant. If the mortgage creditor, before the actual foreclosure sale, is not precluded from recovering the unpaid balance of the price although he has filed an action of replevin for the purpose of extrajudicial foreclosure, or if a mortgage creditor who has elected to foreclose but who subsequently desists from proceeding with the auction sale, without gaining any advantage or benefit, and without causing any disadvantage or harm to the vendee-mortgagor, is not barred from suing on the unpaid account (Radiowealth, Inc. vs. Lavin, et al., G.R. No. L-18563, April 27, 1963 [7 SCRA 804, 807]), there is no reason why a mortgage creditor should be barred from accepting, before a foreclosure sale, payments voluntarily tendered by the debtormortgagor who admits a subsisting indebtedness. PREMISES CONSIDERED, the judgment appealed from is modified by setting aside the portion thereof which orders plaintiff-appellant to pay defendant-appellee Sapinoso the sum of P1,250.00, with costs in this instance against the said defendant-appellee.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-43821 May 26, 1977 INDUSTRIAL FINANCE CORPORATION, petitioner, vs. HON. PEDRO A. RAMIREZ, Judge of the Court of First instance of Manila, and CONSUELO ALCOBA,respondents. C. R. Sanchez Law Office for petitioner. Salva, Carballo & Associates for respondent Consuelo Alcoba. AQUINO, J.: On December 4, 1970 Arnaldo Dizon sold to Consuelo Alcoba his 1966 model Chevrolet car for P13,157.89, payable in eighteen monthly installments, which were secured by a chattel mortgage on the car. On that same date, Dizon assigned for ten thousand pesos to Industrial Finance Corporation all his rights and interest in the chattel mortgage. Consuelo Alcoba defaulted in the payment of the first four installments. Because of that default and by virtue of the acceleration clause in the promissory note forming part of the mortgage, the whole obligation became due and demandable. As of February 27, 1972 Consuelo Alcoba owed Industrial Finance Corporation the sum of P7,678.05 computed as follows (Exh. D): Principal ObligationP13,157.89 Add: Interest on overdue instalments285.47 Premium on car insurance656.40 Total amount dueP14,099.76 Deduct payments: March 1, 1971 P 731.06 March 29,1971 730.99 July, 1, 1971 716.39 Insurance proceeds, 1-12-714,023.51 Interests219.76 6,421.71 Balance still due -P 7,678.05 On November 20, 1971, or less than a year after Industrial Finance Corporation had discounted Consuelo Alcoba's promissory, note to Dizon, the corporation sued her in the Court of First Instance of Manila (Civil Case No. 85583). The complaint, a printed form used by the corporation in collection cases, is denominated "replevin with damages". It is necessary to scrutinize the allegations of the complaint because of the controversy between the parties as to whether, by means of that complaint, Industrial Finance Corporation sought to foreclose the chattel mortgage as contemplated in article 1484 of the Civil Code, formerly Act No. 4122, otherwise known as the Recto Installment Sales Law. It is necessary to scrutinize the allegations of the complaint because of the controversy between the parties whether, by means of that complaint, Industrial Finance Corporation sought to foreclose the chattel mortgage as contemplated in article 1484 of the Civil Code, formerly Act No. 4122, otherwise known as the Recto Installment Sale Law. In its complaint Industrial Finance Corporation prayed for alternative reliefs. The main objective of its complaint was recovery of the mortgaged car by means of a writ of replevin. It submitted a redelivery 61

bond. Undoubtedly, the mortgagee-assignee wanted to foreclose extrajudicially the chattel mortgage but, before it could do so, the sheriff had to seize the car by means of the provisional remedy of an order for the delivery of personal property. Industrial Finance Corporation prayed that, if the car could not be recovered by means of replevin, then Consuelo Alcoba should be ordered to pay the corporation the sum of P11,083.38, plus twelve percent interest per annum, damages, and attorney's fees in the sum of P2,770.85. There was no prayer for the foreclosure of the mortgage, a relief that should be invoked if the complaint had been filed under section 8, Rule 68 of the Rules of Court. Consuelo Alcoba in her answer merely pleaded that Industrial Finance Corporation "waived the recovery" of the car by accepting the sum of P4,228.67. She did not state what that amount represented. It was the amount paid on January 12, 1972 by the Malayan Insurance Co., Inc., as insurer of the mortgaged car, to Industrial Finance Corporation. As indicated in the computation set forth above, the corporation applied that amount to the partial payment of Consuelo Alcoba's obligation. The record does not show why the insurance company paid that amount to Industrial Finance Corporation. Consuelo Alcoba's lawyer, after making reference to the corporation's acceptance of the sum of P4.228.68, incoherently pleaded that the corporation chose to "pursue the remaining balance of the loan extrajudicially". The lower court issued the writ of replevin. But the sheriff was not able to seize the mortgaged car. Consequently, there was no extrajudicial foreclosure of the mortgage since, for that purpose, possession of the car by the sheriff is necessary (Bachrach Motor Co. vs. Summers, 42 Phil. 3). Consuelo Alcoba did not appear at the pre-trial. She was declared in default. On the basis of the corporation's evidence, the trial court rendered judgment, ordering her to pay the corporation the sum of P7,678.05, plus twelve percent interest per annum from the filing of the complaint. No attorney's fees were awarded by the trial court maybe because the corporation paid only ten thousand pesos for a vote valued at P13,157.89. Consuelo Alcoba did not appeal. That judgment became final and executory. On September 27, 1973, or long after the judgment had become final, she paid Industrial Finance Corporation the sum of P2,000. The lower court issued writs of execution. The writs were returned unsatisfied. A second alias writ of execution was issued. The sheriff was able to levy upon the mortgaged car which was then in the possession of the Aco Motor Service of Dagupan City. At the execution sale held on April 25, 1974 Industrial Finance Corporation bought the mortgaged car for P4,000 (Exh. 3-A, p. 72, Expedients). However, in order to take possession of the car, the corporation had to pay P4,250 to the Aco Motor Service to satisfy its lien for the repair and storage of the car. The corporation contended that, because of that payment, it sustained a loss of P250 in the execution sale. It asked for a third alias writ of execution in order to satisfy the balance of Consuelo Alcoba's obligation which, together with the 12% interest, it computed at P11,300.92 as of September 26, 1975. Consuelo Alcoba opposed the motion for a third alias writ of execution. The lower court in its order of March 2, 1976 denied the motion for a third alias writ of execution. It treated the execution sale as a "virtual foreclosure of the chattel mortgage" which, although not beneficial to the mortgagee, Industrial Finance Corporation, barred it from recovering the deficiency under article 1484. That order of denial is assailed by the corporation in the instant certiorari case. The lower court relied on Filipinos Investment & Finance Corporation vs. Ridad, L- 27645, November 28, 1969, 30 SCRA 564. In the Ridad case, the mortgagee of a car, the price of which was payable in installments, filed a replevin suit against the mortgagor with an alternative prayer for the recovery of the unpaid price in case the car could not be seized. The car was actually seized. The mortgage was extrajudicially foreclosed. The trial 62

court rendered judgment against the mortgagor only for P300 as attorney's fees and P163.65 as expenses of foreclosure. There was no judgment for the balance of the mortgage debt. The mortgagors in the Ridad case appealed to this Court. They contested the correctness of the judgment for P463.65 as attorney's fees and expenses for foreclosure. This Court held that the mortgagors should pay the mortgagee attorney's fees and expenses of foreclosure because while the mortgagors should be protected against the capacity of the mortgagees, the law should not be construed as depriving the mortgagee of "protection against perverse mortgagors" (Castro, J, in Ridad case). It is obvious that the facts of the Ridad case are materially different from the facts of the instant case. Here, there was no extrajudicial foreclosure of the mortgage. Consuelo Alcoba, the mortgagee, acted perversely in not surrendering the mortgaged car to the corporation and in preventing extrajudicial foreclosure. Had she complied with the writ of replevin, then the corporation could have foreclosed the mortgage and, in that event, she would not be liable for any deficiency. But she violated the mortgage by removing the car from her residence at 3 Gladiola Street, Roxas District, Quezon City. She did not comply with the stipulation that, upon her default, the car should be delivered, on demand, to the mortgagee in Manila. The corporation's action was for specific performance or fulfillment of the obligation and not for judicial foreclosure Consuelo Alcoba's payment of P2,000 on account of the money judgment against her signified that she acquiesced in the action for specific performance. She cannot now be heard to say that the judgment resulting from that action could not be enforced because the mortgagees had opted for foreclosure of the mortgage. The Civil Code provides. ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (1454-A-a). According to article 1484, it is only when there has been a foreclosure that the mortgagor is not liable for any deficiency. In this case, there was no foreclosure. The mortgagee evidently chose the remedy of specific performance. It levied upon the car by virtue of an execution and not as an incident of a foreclosure proceeding. It is entitled to an alias writ of execution for the portion of the judgment that has not been satisfied. The rule is that in installment sales, if the action instituted is for specific performance and the mortgaged property is subsequently attached and sold, the sale thereof does not amount to a foreclosure of the mortgage. Hence, the seller-creditor is entitled to a deficiency judgment (Southern Motors, Inc. vs. Moscoso, 112 Phil. 94). WHEREFORE, the trial court's order denying the motion for a third writ of execution is reversed and set aside. Costs against respondent Consuelo Alcoba. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 82508 September 29, 1989 FILINVEST CREDIT CORPORATION, petitioner, vs. THE COURT OF APPEALS, JOSE SY BANG and ILUMINADA TAN SY BANG,*respondents. Labaquis, Loyola, Angara and Associates for petitioner. Alfredo 1. Raya for private respondents. SARMIENTO, J.: This is a petition for review on certiorari of the decision, 1 dated March 17, 1988, of the Court of Appeals which affirmed with modification the decision 2 of the Regional Trial Court of Quezon, Branch LIX, Lucena City. The controversy stemmed from the following facts: The private respondents, the spouses Jose Sy Bang and Iluminada Tan, were engaged in the sale of gravel produced from crushed rocks and used for construction purposes. In order to increase their production, they engaged the services of Mr. Ruben Mercurio, the proprietor of Gemini Motor Sales in Lucena City, to look for a rock crusher which they could buy. Mr. Mercurio referred the private respondents to the Rizal Consolidated Corporation which then had for sale one such machinery described as: ONE UNIT LIPPMAN PORTABLE CRUSHING PLANT (RECONDITIONED) [sic] JAW CRUSHER-10xl6 DOUBLE ROLL CRUSHER 16x16 3 UNITS PRODUCT CONVEYOR 75 HP ELECTRIC MOTOR 8 PCS. BRAND NEW TIRES CHASSIS NO. 19696 GOOD RUNNING CONDITION 3 Oscar Sy Bang, a brother of private respondent Jose Sy Bang, went to inspect the machine at the Rizal Consolidated's plant site. Apparently satisfied with the machine, the private respondents signified their intent to purchase the same. They were however confronted with a problem-the rock crusher carried a cash price tag of P 550,000.00. Bent on acquiring the machinery, the private respondents applied for financial assistance from the petitioner, Filinvest Credit Corporation. The petitioner agreed to extend to the private respondents financial aid on the following conditions: that the machinery be purchased in the petitioner's name; that it be leased (with option to purchase upon the termination of the lease period) to the private respondents; and that the private respondents execute a real estate mortgage in favor of the petitioner as security for the amount advanced by the latter. Accordingly, on May 18,1981, a contract of lease of machinery (with option to purchase) was entered into by the parties whereby the private respondents agreed to lease from the petitioner the rock crusher for two years starting from July 5, 1 981 payable as follows: P10,000.00 - first 3 months 23,000.00 - next 6 months 24,800.00 - next 15 months

The contract likewise stipulated that at the end of the two-year period, the machine would be owned by the private respondents. Thus, the private respondents issued in favor of the petitioner a check for P150,550.00, as initial rental (or guaranty deposit), and twenty-four (24) postdated checks corresponding to the 24 monthly rentals. In addition, to guarantee their compliance with the lease contract, the private respondents executed a real estate mortgage over two parcels of land in favor of the petitioner. The rock crusher was delivered to the private respondents on June 9, 1981. Three months from the date of delivery, or on September 7, 1981, however, the private respondents, claiming that they had only tested the machine that month, sent a letter-complaint to the petitioner, alleging that contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease contract, the machine could only process 5 tons of rocks and stones per hour. They then demanded that the petitioner make good the stipulation in the lease contract. They followed that up with similar written complaints to the petitioner, but the latter did not, however, act on them. Subsequently, the private respondents stopped payment on the remaining checks they had issued to the petitioner. 5 As a consequence of the non-payment by the private respondents of the rentals on the rock crusher as they fell due despite the repeated written demands, the petitioner extrajudicially foreclosed the real estate mortgage. 6 On April 18, 1983, the private respondents received a Sheriff s Notice of Auction Sale informing them that their mortgaged properties were going to be sold at a public auction on May 25, 1983 at 10:00 o'clock in the morning at the Office of the Provincial Sheriff in Lucena City to satisfy their indebtedness to the petitioner. 7 To thwart the impending auction of their properties, the private respondents filed before the Regional Trial Court of Quezon, on May 4, 1983, 8 a complaint against the petitioner, for the rescission of the contract of lease, annullment of the real estate mortgage, and for injunction and damages, with prayer for the issuance of a writ of preliminary injunction. 9On May 23, 1983, three days before the scheduled auction sale, the trial court issued a temporary restraining order commanding the Provincial Sheriff of Quezon, and the petitioner, to refrain and desist from proceeding with the public auction. 10 Two years later, on September 4, 1985, the trial court rendered a decision in favor of the private respondents, the dispositive portion of which reads: WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered: 1. making the injunction permanent; 2. rescinding the contract of lease of the machinery and equipment and ordering the plaintiffs to return to the defendant corporation the machinery subject of the lease contract, and the defendant corporation to return to plaintiffs the sum of P470,950.00 it received from the latter as guaranty deposit and rentals with legal interest thereon until the amount is fully restituted; 3. annulling the real estate mortgage constituted over the properties of the plaintiffs covered by Transfer Certificate of Title Nos. T32480 and T-5779 of the Registry of Deeds of Lucena City; 4. ordering the defendant corporation to pay plaintiffs P30,000.00 as attorney's fees and the costs of the suit. SO ORDERED. 11 Dissatisfied with the trial court's decision, the petitioner elevated the case to the respondent Court of Appeals. On March 17, 1988, the appellate court, finding no error in the appealed judgment, affirmed the same in toto. 12Hence, this petition. Before us, the petitioner reasserts that the private respondents' cause of action is not against it (the petitioner), but against either the Rizal Consolidated Corporation, the original owner-seller of the subject rock crusher, or Gemini Motors Sales which served as a conduit facilitator of the purchase of the said machine. The petitioner argues that it is a financing institution engaged in quasi-banking activities, 63

primarily the lending of money to entrepreneurs such as the private respondents and the general public, but certainly not the leasing or selling of heavy machineries like the subject rock crusher. The petitioner denies being the seller of the rock crusher and only admits having financed its acquisition by the private respondents. Further, the petitioner absolves itself of any liability arising out of the lease contract it signed with the private respondents due to the waiver of warranty made by the latter. The petitioner likewise maintains that the private respondents being presumed to be knowledgeable about machineries, should be held responsible for the detection of defects in the machine they had acquired, and on account of that, they are estopped from claiming any breach of warranty. Finally, the petitioner interposed the defense of prescription, invoking Article 1571 of the Civil Code, which provides: Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. We find the petitioner's first contention untenable. While it is accepted that the petitioner is a financing institution, it is not, however, immune from any recourse by the private respondents. Notwithstanding the testimony of private respondent Jose Sy Bang that he did not purchase the rock crusher from the petitioner, the fact that the rock crusher was purchased from Rizal Consolidated Corporation in the name and with the funds of the petitioner proves beyond doubt that the ownership thereof was effectively transferred to it. It is precisely this ownership which enabled the petitioner to enter into the "Contract of Lease of Machinery and Equipment" with the private respondents. Be that as it may, the real intention of the parties should prevail. The nomenclature of the agreement cannot change its true essence, i.e., a sale on installments. It is basic that a contract is what the law defines it and the parties intend it to be, not what it is called by the parties. 13 It is apparent here thatthe intent of the parties to the subject contract is for the so-called rentals to be the installment payments. Upon the completion of the payments, then the rock crusher, subject matter of the contract, would become the property of the private respondents. This form of agreement has been criticized as a lease only in name. Thus in Vda. de Jose v. Barrueco 14 we stated: Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of bargain, in the transfer of title to the lessee. 15 The importance of the criticism is heightened in the light of Article 1484 of the new Civil Code which provides for the remedies of an unpaid seller of movables on installment basis. Article 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. Under the aforequoted provision, the seller of movables in installments, in case the buyer fails to pay two or more installments may elect to pursue either of the following remedies: (1) exact fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3) foreclose the mortgage on the purchased property if 64

one was constituted thereon. It is now settled that the said remedies are alternative and not cumulative and therefore, the exercise of one bars the exercise of the others. Indubitably, the device contract of lease with option to buy is at times resorted to as a means to circumvent Article 1484, particularly paragraph (3) thereof.Through the set-up, the vendor, by retaining ownership over the property in the guise of being the lessor, retains, likewise, the right to repossess the same, without going through the process of foreclosure, in the event the vendee-lessee defaults in the payment of the installments. There arises therefore no need to constitute a chattel mortgage over the movable sold. More important, the vendor, after repossessing the property and, in effect, canceling the contract of sale, gets to keep all the installments-cum-rentals already paid. It is thus for these reasons that Article 1485 of the new Civil Code provides that: Article 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of possession or enjoyment of the thing. (Emphasis ours.) Unfortunately, even with the foregoing findings, we however fail to find any reason to hold the petitioner liable for the rock crusher's failure to produce in accordance with its described capacity. According to the petitioner, it was the private respondents who chose, inspected, and tested the subject machinery. It was only after they had inspected and tested the machine, and found it to their satisfaction, that the private respondents sought financial aid from the petitioner. These allegations of the petitioner had never been rebutted by the private respondents. In fact, they were even admitted by the private respondents in the contract they signed. Thus: LESSEE'S SELECTION, INSPECTION AND VERIFICATION.-The LESSEE hereby confirms and acknowledges that he has independently inspected and verified the leased property and has selected and received the same from the Dealer of his own choosing in good order and excellent running and operating condition and on the basis of such verification, etc. the LESSEE has agreed to enter into this Contract." 16 Moreover, considering that between the parties, it is the private respondents, by reason of their business, who are presumed to be more knowledgeable, if not experts, on the machinery subject of the contract, they should not therefore be heard now to complain of any alleged deficiency of the said machinery. It is their failure or neglect to exercise the caution and prudence of an expert, or, at least, of a prudent man, in the selection, testing, and inspection of the rock crusher that gave rise to their difficulty and to this conflict. A well- established principle in law is that between two parties, he, who by his negligence caused the loss, shall bear the same. At any rate, even if the private respondents could not be adjudged as negligent, they still are precluded from imputing any liability on the petitioner. One of the stipulations in the contract they entered into with the petitioner is an express waiver of warranties in favor of the latter. By so signing the agreement, the private respondents absolved the petitioner from any liability arising from any defect or deficiency of the machinery they bought. The stipulation on the machine's production capacity being "typewritten" and that of the waiver being "printed" does not militate against the latter's effectivity. As such, whether "a capacity of 20 to 40 tons per hour" is a condition or a description is of no moment. What stands is that the private respondents had expressly exempted the petitioner from any warranty whatsoever. Their Contract of Lease Of Machinery And Equipment states: WARRANTY-LESSEE absolutely releases the lessor from any liability whatsoever as to any and all matters in relation to warranty in accordance with the provisions hereinafter stipulated. 17 Taking into account that due to the nature of its business and its mode of providing financial assistance to clients, the petitioner deals in goods over which it has no sufficient know-how or expertise, and the selection of a particular item is left to the client concerned, the latter, therefore, shoulders the responsibility of protecting himself against product defects. This is where the waiver of warranties is of paramount importance. Common sense dictates that a buyer inspects a product before purchasing it (under the principle of caveat emptor or "buyer beware") and does not return it for defects discovered

later on, particularly if the return of the product is not covered by or stipulated in a contract or warranty. In the case at bar, to declare the waiver as non-effective, as the lower courts did, would impair the obligation of contracts. Certainly, the waiver in question could not be considered a mere surplusage in the contract between the parties. Moreover, nowhere is it shown in the records of the case that the private respondent has argued for its nullity or illegality. In any event, we find no ambiguity in the language of the waiver or the release of warranty. There is therefore no room for any interpretation as to its effect or applicability vis-a- vis the deficient output of the rock crusher. Suffice it to say that the private respondents have validly excused the petitioner from any warranty on the rock crusher. Hence, they should bear the loss for any defect found therein. WHEREFORE, the Petition is GRANTED; the Decision of the Court of Appeals dated March 17, 1988 is hereby REVERSED AND SET ASIDE, and another one rendered DISMISSING the complaint. Costs against the private respondents. SO ORDERED.

SECOND DIVISION [G.R. No. 109966. May 31, 1999] ELISCO TOOL MANUFACTURING CORPORATION, petitioner, vs. COURT OF APPEALS, ROLANDO LANTAN, and RINA LANTAN, respondents DECISION MENDOZA, J.: This is a petition for review of the decision[1] of the Court of Appeals which affirmed in toto the decision of the Regional Trial Court of Pasig, Branch 51, declaring respondent spouses Rolando Lantan and Rina Lantan owners of a 1979 model 2-door Colt Lancer car which they had acquired under a car plan for top employees of the Elizalde group of companies. The facts are as follows: Private respondent Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its cash department. On January 9, 1980, he entered into an agreement with the company which provided as follows:[2] That, EMPLOYER is the owner of a car Colt Lancer 2 door, Model 1979, with Serial No. 3403 under LTC Registration Certificate No. 0526558; That, for and in consideration of a monthly rental of ONE THOUSAND TEN & 65/100 ONLY (P1,010.65) Philippine Currency, EMPLOYER desire to lease and EMPLOYEE accept in lease the motor vehicle aforementioned for a period of FIVE (5) years; That, the EMPLOYEE agree as he hereby agreed to pay the lease rental thru salary deduction from his monthly remuneration in the amount as above specified for a period of FIVE (5) years; That, for the duration of the lease contract, all expenses and costs of registration, insurance, repair and maintenance, gasoline, oil, part replacement inclusive of all expenses necessary to maintain the vehicle in top condition shall be for the account of the EMPLOYEE; That, at the end of FIVE (5) year period or upon payment of the 60th monthly rental, EMPLOYEE may exercise the option to purchase the motor vehicle from the EMPLOYER and all monthly rentals shall be applied to the payment of the full purchase price of the car and further, should EMPLOYEE desire to exercise this option before the 5-year period lapse, he may do so upon payment of the remaining balance on the five year rental unto the EMPLOYER, it being understood however that the option is limited to the EMPLOYEE; That, upon failure of the EMPLOYEE to pay THREE (3) accumulated monthly rentals will vest upon the EMPLOYER the full right to lease the vehicle to another EMPLOYEE; That, in the event of resignation and or dismissal from the service, the EMPLOYEE shall return the subject motor vehicle to the EMPLOYER in its compound at Kalawaan Sur, Pasig, Metro Manila in good working and body condition. On the same day, January 9, 1980, private respondent executed a promissory note reading as follows:[3] PROMISSORY NOTE P60,639.00 FOR VALUE RECEIVED, we promise to pay [to] the order of ELISCO TOOL MFG. CORP. SPECIAL PROJECT, at its office at Napindan, Taguig, Metro Manila, Philippines, the sum of ONE THOUSAND TEN & 65/100 PESOS (P1,010.65), Philippine Currency, beginning January 9, 1980, without the 65

necessity of notice or demand in accordance with the schedule of payment hereto attached as an integral part hereof. In case of default in the payment of any installment on the stipulated due date, we agree to pay as liquidated damages 2% of the amount due and unpaid for every thirty (30) days of default or fraction thereof. Where the default covers two successive installments, the entire unpaid balance shall automatically become due and payable. It is further agreed that if upon such default attorneys services are availed of, an additional sum equal to TWENTY (20%) percent of the total amount due thereon, but in no case be less than P1,000.00 shall be paid to holder(s) hereof as attorneys fees in addition to the legal costs provided for by law. We agree to submit to the jurisdiction of the proper courts of Makati, Metro Manila or the Province of Rizal, at the option of the holder(s) waiving for this purpose any other venue. In case extraordinary inflation or deflation of the currency stipulated should occur before this obligation is paid in full, the value of the currency at the time of the establishment of the obligation will be the basis of payment. Holder(s) may accept partial payment reserving his right of recourse against each and all endorsers who hereby waive DEMAND PRESENTMENT and NOTICE. Acceptance by the holder(s) of payment or any part thereof after due date shall not be considered as extending the time for the payment of the aforesaid obligation or as a modification of any of the condition hereof. After taking possession of the car, private respondent installed accessories therein worth P15,000.00. In 1981, Elisco Tool ceased operations, as a result of which private respondent Rolando Lantan was laid off. Nonetheless, as of December 4, 1984, private respondent was able to make payments for the car in the total amount of P61,070.94. On June 6, 1986, petitioner filed a complaint, entitled replevin plus sum of money, against private respondent Rolando Lantan, his wife Rina, and two other persons, identified only as John and Susan Doe, before the Regional Trial Court of Pasig, Metro Manila. Petitioner alleged that private respondents failed to pay the monthly rentals which, as of May 1986, totalled P39,054.86; that despite demands, private respondents failed to settle their obligation thereby entitling petitioner to the possession of the car; that petitioner was ready to post a bond in an amount double the value of the car, which was P60,000; and that in case private respondents could not return the car, they should be held liable for the amount of P60,000 plus the accrued monthly rentals thereof, with interest at the rate of 14% per annum, until fully paid. Petitioners complaint contained the following prayer: WHEREFORE, plaintiffs prays that judgment be rendered as follows: ON THE FIRST CAUSE OF ACTION Ordering defendant Rolando Lantan to pay the plaintiff the sum of P39,054.86 plus legal interest from the date of demand until the whole obligation is fully paid; ON THE SECOND CAUSE OF ACTION To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly described in paragraph 3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina Lantan, John Doe, Susan Doe and other person or persons in whose possession the said motor vehicle may be found, complete with accessories and equipment, and direct deliver thereof to plaintiff in accordance with law, and after due hearing to confirm said seizure and plaintiffs possession over the same; ON THE ALTERNATIVE CAUSE OF ACTION 66

In the event that manual delivery of the subject motor vehicle cannot be effected for any reason, to render judgment in favor of plaintiff and against defendant Rolando Lantan ordering the latter to pay the sum of SIXTY THOUSAND PESOS (P60,000.00) which is the estimated actual value of the above-described motor vehicle, plus the accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum until fully paid; PRAYER COMMON TO ALL CAUSES OF ACTION 1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to twenty-five percent (25%) of his outstanding obligation, for and as attorneys fees; 2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees and other incidental expenses to be proved during the trial; and 3. Ordering defendants to pay the costs of suit. Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable under the premises. Upon petitioners posting a bond in the amount of P120,000, the sheriff took possession of the car in question and after five (5) days turned it over to petitioner.[4] In due time, private respondents filed their answer. They claimed that the agreement on which the complaint was based had not been signed by petitioners representative, Jose Ma. S. del Gallego, although it had been signed by private respondent Rolando Lantan; that their true agreement was to buy and sell and not lease with option to buy the car in question at a monthly amortization of P1,000; and that petitioner accepted the installment payments made by them and, in January 1986, agreed that the balance of the purchase price would be paid on or before December 31, 1986. Private respondents cited the provision of the agreement making respondent Rolando Lantan liable for the expenses for registration, insurance, repair and maintenance, gasoline, oil and part replacements, inclusive of all necessary expenses, as evidence that the transaction was one of sale. Private respondents further alleged that, in any event, petitioner had waived its rights under the agreement because of the following circumstances: (a) while the parties agreed that payment was to be made through salary deduction, petitioner accepted payments in cash or checks; (b) although they agreed that upon the employees resignation, the car should be returned to the employer, private respondent Rolando Lantan was not required to do so when he resigned in September 1982; (c) petitioner did not lease the vehicle to another employee after private respondent Rolando Lantan had allegedly failed to pay three monthly rentals; and (d) petitioner failed to enforce the manner of payment under the agreement by its acceptance of payments in various amounts and on different dates. In its reply, petitioner maintained that the contract between the parties was one of lease with option to purchase and that the promissory note was merely a nominal security for the agreement. It contended that the mere acceptance of the amounts paid by private respondents and for indefinite periods of time was not evidence that the parties agreement was one of purchase and sale. Neither was it guilty of laches because, under the law, an action based on a written contract can be brought within ten (10) years from the time the action accrues. On August 31, 1987, the trial court[5] rendered its decision. The trial court sustained private respondents claim that the agreement in question was one of sale and held that the latter had fully paid the price of the car having paid the total amount of P61,070.94 aside from installing accessories in the car worth P15,000.00. Said the trial court: Plaintiff now comes claiming ownership of the car in question and has succeeded in repossessing the same by virtue of the writ of seizure issued in this case on July 29, 1986. Not content with recovering possession of the said car, plaintiff still asks that defendants should pay it the sum of P39,054.86, allegedly representing the rentals due on the car from the time of the last payment made by defendants to its repossession thereof. This is indeed a classic case of one having his cake and eating it too! Under

the Recto law (Arts. 1484 & 1485, Civil Code), the vendor who repossesses the goods sold on installments, has no right to sue the vendee for the unpaid balance thereof. The Court can take judicial notice of the practice wherein executives enjoy car plans in progressive companies. The agreement of January 9, 1980 between the parties is one such car plan. If defendant Rolando Lantan failed to keep up with his amortizations on the car in question, it was not because of his own liking but rather he was pushed to it by circumstances when his employer folded up and sent him to the streets. That plaintiff was giving all the chance to defendants to pay the value of the car and acquire full ownership thereof is shown by the delay in instituting the instant case. . . . The court likewise found that the amount of P61,070.94 included a 2% penalty for late payments for which there was no stipulation in the agreement: . . . The agreement and defendant Rolando Lantans promissory note of January 9, 1980 do not provide even for interest on the remaining balance of the purchase price of the car. This privilege extended by corporations to their top executives is considered additional emolument to them. And so the reason for the lack of provision for interest, much less penalty charges. Therefore, all payments made by defendant should be applied to the principal account. Since the principal was only P60,639.00, the defendants have made an overpayment of P431.94 which should be returned to defendant by plaintiff. For this reason, it ordered petitioner to pay private respondents the amount of P431.94 as excess payment, as well as rentals at the rate of P1,000 a month for depriving private respondents of the use of their car, and moral damages for the worry, embarrassment, and mental torture suffered by them on account of the repossession of the car. The dispositive portion of the trial courts decision reads as follows: WHEREFORE, judgment is hereby rendered in favor of defendants and against plaintiff, dismissing plaintiffs complaint; declaring defendants the lawful owners of that Colt Lancer 2-door, Model 1979 with Serial No. 3403 under Registration Certificate No. 0526558; ordering plaintiff to deliver to defendants the aforesaid motor vehicle complete with all the accessories installed therein by defendants; should for any reason plaintiff is unable to deliver the said car to defendants, plaintiff is ordered to pay to defendants the value of said car in the sum of P60,639.00 plus P15,000.00, the value of the accessories, plus interest of 12% on the said sums from August 6, 1986; and sentencing plaintiff to pay defendants the following sums: a) P12,431.94 as actual damages broken down as follows: 1) P431.94 overpayment made by defendants to plaintiff; and 2) P12,000.00 rental on the car in question from August 6, 1986 to August 5, 1987, plus the sum of P1,000.00 a month beginning August 6, 1987 until the car is returned by plaintiff to, and is received by, defendant; b) the sum of P20,000.00 as moral damages; c) the sum of P5,000.00 as exemplary damages; and d) the sum of P5,000.00 as attorneys fees. Costs against the plaintiff. SO ORDERED. Petitioner appealed to the Court of Appeals. On the other hand, private respondents filed a motion for execution pending appeal. In its resolution of March 9, 1989, the Court of Appeals granted private respondents motion and, upon the filing of a bond, in the amount of P70,000.00, it issued a writ of execution, pursuant to which the car was delivered to private respondents on April 16, 1989.[6] 67

On August 26, 1992, the Court of Appeals rendered its decision, affirming in toto the decision of the trial court. Hence, the instant petition for review on certiorari. Petitioner contends that the Court of Appeals erred (a) in disregarding the admission in the pleadings as to what documents contain the terms of the parties agreement. (b) in holding that the interest stipulation in respondents Promissory Note was not valid and binding. (c) in holding that respondents had fully paid their obligations. It further argues that On the assumption that the Lease Agreement with option to buy in this case may be treated as a sale on installments, the respondent Court of Appeals nonetheless erred in not finding that the parties have validly agreed that the petitioner as seller may [i] cancel the contract upon the respondents default on three or more installments, [ii] retake possession of the personalty, and [iii] keep the rents already paid. First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in question under a car plan for executives of the Elizalde group of companies. Under a typical car plan, the company advances the purchase price of a car to be paid back by the employee through monthly deductions from his salary. The company retains ownership of the motor vehicle until it shall have been fully paid for.[7] However, retention of registration of the car in the companys name i s only a form of a lien on the vehicle in the event that the employee would abscond before he has fully paid for it. There are also stipulations in car plan agreements to the effect that should the employment of the employee concerned be terminated before all installments are fully paid, the vehicle will be taken by the employer and all installments paid shall be considered rentals per agreement.[8] This Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. As this Court noted in Vda. de Jose v. Barrueco:[9] Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of the bargain, in the transfer of title to the lessee. In an earlier case, Manila Gas Corporation v. Calupitan,[10] which involved a lease agreement of a stove and a water heater, the Court said: . . . [W]e are of the opinion, and so hold, that when in a so-called contract of lease of personal property it is stipulated that the alleged lessee shall pay a certain amount upon signing the contract, and on or before the 5th of every month, another specific amount, by way of rental, giving the alleged lessee the right of option to buy the said personal property before the expiration of the period of lease, which is the period necessary for the payment of the said amount at the rate of so much a month, deducting the payments made by way of advance and alleged monthly rentals, and the said alleged lessee makes the advance payment and other monthly installments, noting in his account and in the receipts issued to him that said payments are on account of the price of the personal property allegedly leased, said contract is one of sale on installment and not of lease.[11]

In U.S. Commercial v. Halili,[12] a lease agreement was declared to be in fact a sale of personal property by installment. Said the Court:[13] . . . There can hardly be any question that the so-called contracts of lease on which the present action is based were veritable leases of personal property with option to purchase, and as such come within the purview of the above article [Art. 1454-A of the old Civil Code on sale of personal property by installment]. In fact the instruments (exhibits `A and `B) embodying the contracts bear the heading or title `Lease-Sale (Lease-Sale of Transportation and/or Mechanical Equipment). The contracts fix the value of the vehicles conveyed to the lessee and expressly refer to the remainder of said value after deduction of the down payment made by the lessee as `the unpaid balance of the purchase price of the leased equipment. The contracts also provide that upon the full value (plus stipulated interest) being paid, the lease would terminate and title to the leased property would be transferred to the lessee. Indeed, as the defendantappellant points out, the inclusion of a clause waiving benefit of article 1454-A of the old Civil Code is conclusive proof of the parties understanding that they were entering into a lease contract with option to purchase which come within the purview of said article. Being leases of personal property with option to purchase as contemplated in the above article, the contracts in question are subject to the provision that when the lessor in such case has chosen to deprive the lessee of the enjoyment of such personal property, he shall have no further action against the lessee for the recovery of any unpaid balance owing by the latter, agreement to the contrary being null and void. It was held that in choosing to deprive the defendant of possession of the leased vehicles, the plaintiff waived its right to bring an action to recover unpaid rentals on the said vehicles. In the case at bar, although the agreement provides for the payment by private respondents of monthly rentals, the fifth paragraph thereof gives them the option to purchase the motor vehicle at the end of the 5th year or upon payment of the 60th monthly rental when all monthly rentals shall be applied to the payment of the full purchase price of the car. It is clear that the transaction in this case is a lease in name only. The so-called monthly rentals are in truth monthly amortizations on the price of the car. Second. The contract being one of sale on installment, the Court of Appeals correctly applied to it the following provisions of the Civil Code: ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendees failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the others.[14] This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art. 1485.[15] The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6, 1986 and thereby deprived private respondents of its use. [16] The car was not returned to private respondent until 68

April 16, 1989, after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution.[17] Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that they were supposed to pay as of May 1986, plus interest at the legal rate. [18] At the same time, it prayed for the issuance of a writ of replevin or the delivery to it of the motor vehicle complete with accessories and equipment.[19] In the event the car could not be delivered to petitioner, it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60,000.00, the estimated actual value of the car, plus accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per annum until fully paid.[20] This prayer of course cannot be granted, even assuming that private respondents have defaulted in the payment of their obligation. This led the trial court to say that petitioner wanted to eat its cake and have it too. Notwithstanding this impossibility in petitioners choice of remedy, this case should be considered as one for specific performance, pursuant to Art. 1484(1), consistent with its prayer with respect to the unpaid installments as of May 1986. In this view, the prayer for the issuance of a writ of replevin is only for the purpose of insuring specific performance by private respondents. Both the trial court and the Court of Appeals correctly ruled that private respondents could no longer be held liable for the amounts of P39,054.86 or P60,000.00 because private respondents had fulfilled their part of the obligation. The agreement does not provide for the payment of interest on unpaid monthly rentals or installments because it was entered into in pursuance of a car plan adopted by the company for the benefit of its deserving employees. As the trial court correctly noted, the car plan was intended to give additional benefits to executives of the Elizalde group of companies. Petitioner contends that the promissory note provides for such interest payment. However, as the Court of Appeals held: The promissory note in which the 2% monthly interest on delayed payments appears does not form part of the contract. There is no consideration for the promissory note. There is nothing to show that plaintiff advanced the purchase price of the vehicle for Lantan so as to make the latter indebted to the former for the amount stated in the promissory note. Thus, as stated in the complaint: That sometime in January, 1980, defendant Rolando Lantan entered into an agreement with the plaintiff for the lease of a motor vehicle supplied by the latter, with the option to purchase at the end of the period of lease . . . . In other words, plaintiff did not buy the vehicle for Rolando Lantan, advancing the purchase price for that purpose. There is nothing in the complaint or in the evidence to show such arrangement. Therefore, there was no indebtedness secured by a promissory note to speak of. There being no consideration for the promissory note, the same, including the penalty clause contained thereon, has no binding effect.[21] There is no evidence that private respondents received the amount of P60,639.00 indicated in the promissory note as its value. What was proven below is the fact that private respondents received from petitioner the 2-door Colt Lancer car which was valued at P60,000 and for which private respondent Rolando Lantan paid monthly amortizations of P1,010.65 through salary deductions. Indeed, as already stated, private respondents default in paying installments was due to the cessation of operations of Elizalde Steel Corporation, petitioners sister company. Petitioners acceptance of payments made by private respondents through cash and checks could have been impelled solely by petitioners inability to deduct the amortizations from private respondent Rolando Lantans salary which he stopped receiving when his employment was terminated in September 1982. Apparently, to minimize the adverse consequences of the termination of private respondents employment, petitioner accepted even late payments. That petitioner accepted payments from private respondent Rolando Lantan more than two (2) years after the latters employment had been terminated constitutes a waiver of petitioners right to collect interest upon the delayed payments. The 2% surcharge is not provided for in the agreement. Its collection by the company would in fact run counter to the purpose of providing added emoluments to its deserving employees. Consequently, the total amount of

P61,070.94 already paid to petitioner should be considered payment of the full purchase price of the car or the total installments paid. Third. Private respondents presented evidence that they felt bad, were worried, embarrassed and mentally tortured by the repossession of the car.[22] This has not been rebutted by petitioner. There is thus a factual basis for the award of moral damages. In addition, petitioner acted in a wanton, fraudulent, reckless and oppressive manner in filing the instant case, hence, the award of exemplary damages is justified.[23] The award of attorneys fees is likewise proper considering that private respondents were compelled to incur expenses to protect their rights.[24] WHEREFORE, the decision of the Court of Appeals is AFFIRMED with costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-46378 December 17, 1938 MANILA GAS CORPORATION, plaintiff-appellee, vs. ALFREDO B. CALUPITAN, defendant-appellant. Alfredo B. Calupitan in his own behalf. DeWitt, Perkins and Ponce Enrile for appellee. VILLA-REAL, J.: The defendant, Alfredo B. Calupitan, appeals to this court from the decision of the Court of First Instance of Manila, the dispositive part of which reads: Judgment is therefore rendered, sentencing the defendant to return the stove and the gas water heater described in the complaint, and to pay for the use of the gas water heater the sum of P5 a month from June, 1934, and for the use of the Krefft Stove the sum of P4 a month from January, 1934, until they are returned, with costs of suit. In support of his appeal the appellant assigns six errors allegedly committed by the trial court in its decision, on which we shall dwell in the course of this decision. From the evidence of record are gathered the following facts: On May 3, 1933, the Manila Corporation and the defendant-appellant, Alfredo B. Calupitan, entered into a contract (Exhibit A), containing the following pertinent recitals: LEASE AGREEMENT This agreement, made in the City of Manila, P. I., this 3rd day of May, 1933, between the Manila Gas Corporation, a domestic corporation duly organized and existing under and by virtue of the laws of the Philippine Islands, and having its principal place of business therein in the City of Manila, with its main office at Calle Otis, Paco, in said City of Manila, hereinafter called the "OWNER", and Alfredo B. Calupitan, of age and a resident of No. 9 Baldwin, Sta. Cruz, P. I., hereinafter called the "LESSEE". WITNESSETH: That 1. The Owner hereby leases unto the Lessee and the Lessee hereby hires from the Owner, for a term of . . . months, which term may be extended at the will of the Owner, the following described personal property, to wit: 1. No. 234 Krefft stove of 4 brs. S. H. which the Lessee acknowledges having received in good state and condition, and the value of which is hereby mutually agreed to be P60, subject to and under the terms and conditions hereinafter specified. 2. The Lessee hereby agrees (a) To pay to the Owner, at its office above stated, for the use of the above described property, the sum of P5, upon the signing of this agreement, and a monthly rental of P4, on or before the 5th day of each succeeding month, beginning with the month next ensuing the date thereof. 69

4. The Owner agrees that at any time before the expiration of the terms of this lease, the Lessee may purchase the said property by paying to the owner, in cash, the full value under as above fixed, less all payments theretofore made under this agreement, for the use of said property. On March 3, 1934, that is, ten months after the execution of the contract Exhibit A, above-quoted, the same parties entered into another contract (Exhibit B) of the same tenor, except with respect to the article and the terms of payment, which are as follows: 1. No. 400 Piccolo Inst. Water Heater which the Lessee acknowledges having received in good state and condition, and the value of which is hereby mutually agreed to be P95, subject to and under the terms and conditions hereinafter specified. 2. Lessee hereby agrees (1) to pay to the Owner, at its office above stated, for the use of the above described property, the sum of P5 upon the signing of this agreement, and a monthly rental of P5, on or before the 5th day of each succeeding month, beginning with the month next ensuing the date thereof. In accordance with the terms of both contracts, the said defendant paid to the plaintiff, when the latter delivered to him the stove, the sum of P5, and another sum of P5 when the water heater "Piccolo Inst. Water Heater" was delivered to him, and monthly thereafter, the total of said payments amounting to P42: P27 by virtue of the contract Exhibit A and P15 by virtue of the contract Exhibit B, for which receipts were issued in the following form (Exhibit 1):lawphil.net Received from Mr. Alfredo Calupitan .......... pesos (P.........) as partial payment on Gas appliance Bill No. ......... leaving a balance thereon of P...... MANILA GAS CORPORATION Cashier Collector Notwithstanding repeated demands to pay alleged rentals, due and unpaid for months, or to return the stove and the water heater, the said defendant paid no heed to said demands and continued to make use of the said articles for more than five years without compensation of any kind. Inasmuch as the said defendant neither paid what he owed to the plaintiff for the stove and the water heater nor returned them to the latter, the said plaintiff filed the re-amended complaint found in the bill of exceptions, with the following prayer: Wherefore, the plaintiff demands judgment against the defendant for the delivery to the plaintiff of said stove and Piccolo Water Heater above described and for the sum of P267 as rentals for the use of the same by the plaintiff, or for their values in the total sum of P155 in case delivery cannot be made, and for costs of this suit and for such further and other relief as this court may deem just and equitable.lawphil.net Being one of procedure, we shall first consider the question raised in the fourth assignment of error, wherein it is alleged that the trial court erred in taking cognizance of the present case and in not dismissing the same despite the fact that the amount involved in each contract is within the exclusive jurisdiction of the municipal court of Manila. Upon the said ground the defendant interposed a demur which was overruled by the lower court, this action of the court being the subject matter of the assignment of error under consideration. 70

By the filing of the said demurrer the defendant admitted hypothetically that the contract entered into between him and the plaintiff is one of lease of personal property; that the kitchen stove and the water heater belong to the said plaintiff; and that he has neither paid the stipulated rentals nor returned the said goods. The complaint has to do not only with the collection of rentals, but also, implicitly, with the rescission of the two contracts of lease of personal property for non-compliance with the obligation to pay rentals (art. 1124, Civil Code),and the personal delivery thereof (sec. 262, Act No. 190). With respect to the complaint for the rescission of the contract of lease of personal property and the personal delivery thereof, the Court of First Instance of Manila has original exclusive jurisdiction to take cognizance thereof irrespective of the amount of the due and unpaid rentals. The trial court, therefore, had original jurisdiction to take cognizance of the complaint. As to the first assignment of error, wherein it is alleged that the trial court erred in holding that the two contracts Exhibits A and B are contracts of lease and not of sale of personal property on installment, we have seen above that in both contracts the defendant, Alfredo B. Calupitan, paid in advance P5 for the kitchen stove (Exhibit A) and another P5 for the water heater (Exhibit B), plus P4 and P5 every month for said stove and water heater, respectively. The price of the stove is P60 and that of the water heater, P95, the said defendant being able to purchase said goods at said price respectively, before the expiration of the period of the alleged lease, deducting in each case the amounts, already paid therefor. The periods of the alleged leases have not been fixed in the contracts; but considering the prices of the goods and monthly payments to be made, said periods are the number of months which would result by dividing P60 by P4, which is the supposed monthly rental of the stove, and P95 by P5, which is supposed to be the monthly rental of the water heater, that is, 15 and 18 months, respectively. In the accounts Exhibit A-1 and B-1 of the said defendant, which the plaintiff carries, the monthly payments made by the former to the latter for said goods were made to appear as paid upon the account of their value and were deducted therefrom, stating the balances after each monthly payment; and in the receipt issued to the said defendant on March 8, 1935 (Exhibit 1) there was noted the payment of P3 made by him as "partial payment on Gas Appliance Bill No. 63781 leaving a balance of P33." None of the advance and monthly payments made by Alfredo B. Calupitan has been stated as having been made by way of advance payment of rentals, or of deposit to secure said payment, or of monthly rentals. The P5 which the plaintiff demanded of the defendant to pay upon signing the contract Exhibit A could not be by way of advance payment of rentals, inasmuch as the rental for the use of the stove was P4. Neither could it be by way of deposit to secure the payment of rental, as it does not appear that such was the intention of the parties. Moreover, according to the contracts, in case the defendant should elect to purchase the goods, the said amount of P5 would be deducted from the cost of the stove and that of the water heater, together with the alleged monthly rentals which had been paid for each of them. The P4 which the defendant should pay on or before the 5th of each month for the stove and the P5 for the water heater, while they are said to be for rentals in the respective contracts, are in reality part payments of the prices of the respective kitchen and bathroom articles, as shown by the lists of payment Exhibit A-1 and B-1 and the receipt Exhibit 1 which we have above described. What has gone before shows that the contracts entered into between the plaintiff and the defendant with respect to the kitchen stove and the water heater are those of sale on installment rather than of lease. The first assignment of alleged error is, therefore, well- founded. Having reached this conclusion, we do not find it necessary to discuss the remaining assignments of error which have been impliedly resolved. For the foregoing considerations, we are of the opinion and so hold, that when in a so-called contract of lease of personal property it is stipulated that the alleged lessee shall pay a certain amount upon signing the contract, and on or before the 5th of every month, another specific amount, by way of rental, giving the alleged lessee the right of option to buy the said personal property before the expiration of the period of lease, which is the period necessary for the payment of the said amount at the rate of so much a

month, deducting the payments made by way of advance and alleged monthly rentals, and the said alleged lessee makes the advance payment and other monthly installments, noting in his account and in the receipts issued to him that said payments are on account of the price of the personal property allegedly leased, said contract is one of sale on installment and not of lease. Wherefore, the appealed decision is reversed and it is held that the contracts Exhibits A and B, entered into between the plaintiff Manila Gas Corporation, and the defendant, Alfredo B. Calupitan, are those of sale on installment; and the said defendant having failed to comply with the terms of payment, the plaintiff may elect between compliance with or rescission of the obligation, with indemnity for damages and interest in either case, without special pronouncement as to the costs. So ordered. G.R. No. L-5535 May 29, 1953

Republic of the Philippines SUPREME COURT Manila EN BANC U. S. COMMERCIAL CO., plaintiff-appellant, vs. FORTUNATO F. HALILI, defendant-appellee. Jose G. Macatangay for appellant. Arnaldo J. Guzman for appellee. REYES, J.: This an action to recover unpaid rentals on used army vehicles alleged to have been leased by plaintiff by the defendants. The case was submitted in the court below on a stipulation of facts from which it appears that on December 22, 1945, plaintiff, as representative of the U. S. Government, entered into a contract with the defendant leasing to the latter for a term of one year two used army vehicles, and on February 18, 1946, plaintiff again entered into a contract with the same defendant leasing to the latter for the same term six use army vehicles; that under the terms of both contracts the value of the vehicles was fixed and then after deducting therefrom a substantial initial payment made by the lessee, the balance was divided into twelve equal parts and each part was made the monthly rental or payment which the lessee was to make to the lessor together with 6 per cent interest "on the unpaid balance of the value of the lease equipment;" that the contracts provided that the title to the vehicles was to remain in the lessor during the term of the lease until all the rentals or payment collected from the lessee should equal the total value fixed for them, on which event the lease would terminate and payment of any further rental would cease and the lessor would then transfer to the lessee title to the vehicles, provided the lessee had complained with the other conditions of the contracts; that the lessor would have the right to terminate the contracts and repossess the trucks should the lessee fail to make payment on the dates specified or fulfill any of the obligations under the contracts, but that failure to exercise the right of repossession on any default would not be a waiver of such right upon any subsequent default; that in the event the contracts were terminated on account of the lessee's default in the performance of his obligations then all the payment theretofore made should remain the property of the lessor and not be recoverable by the lessee, the latter also waiving "the benefit of section 145-A, Philippine Civil Code;" that after paying several installments or rentals under the two contracts, the lessee defaulted in the payment of subsequent rents and that one year after such default the lessor requested the lessee to return all the eight vehicles and the lessee voluntarily complied with said request, but there after refused to pay all rentals in areas. Hence the present action. Holding that the contracts in question were leases of personal property with option to purchase and come within the purview of article 145-A of the old Civil Code, the trial court, ruled that plaintiff's possessions of the vehicles precluded it from the bringing an action to recover the unpaid rents, the notwithstanding the fact that the lessee had waived the benefit of said article, the court declaring said waiver to be null and void. The Court, therefore, rendered judgment, dismissing the plaintiff's complaint with costs. From this judgment plaintiff has appealed to this court, contending that (1) defendant's voluntary surrender of the vehicles to the plaintiff took the case out of the operation of article 1454-A of the old Civil code, and (2) defendant's waiver of the benefit of said article was valid. The article in question reads: ART. 1454-A. In a contract for the sale of personal property payable installments, failure to pay two or more installments shall confer upon the vendor the right to cancel the sale or foreclose 71

the mortgage if one has been given in the property, without reinbursement to the purchaser to the installments already paid, if there an agreement to this effect. However, if the vendor has choosen to foreclose the mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same, and any agreement to the contrary shall be null and void. The same rule shall apply to the leases of personal property with option to purchase, when the lessor has chosen to deprived the lessee of the enjoyment of such personal property. (Old Civil Code.) There can be hardly be any question that the so-called contracts of lease on which the present action is based were varitable lease of personal property with option to purchase, and as much come within the purview of the above article. In fact the instruments (exhibit "A" and "B") embodying the contracts bear the heading or title "Lease-Sale (Lease-Sale of Transportation and/or Mechanical Equipment)." The contracts fixed the value of the vehicles conveyed to the lessee and expressly refer to the remainder of said value after deduction of the down payment made by the lessee as "the unpaid balance of the purchase price of the leased equipment." The contracts also provided that upon the full value (plus stipulated interest) being paid, the lease would terminate and title to the leased property would be transferred to the lessee. Indeed, as the defendant-appellee points out, the inclusion of a clause waiving benefit of article 1454-A of the old Civil Code is conclusive proof of the parties' understanding that they were entering into a lease contract with option to purchase which come within the purview of said article. Being leases of personal property with option to purchase as contemplated in the above article, the contracts in question are subject to the provision that when the lessor in such case "has chosen to deprive the lessee of the enjoyment of such personal property," "he shall have no further action" against the lessee "for the recovery of any unpaid balance" owing by the latter, "any agreement to the contrary being null and void." Plaintiff and appellant, however, contents that defend- ant and appellee's voluntary surrender to the property taken the case out of the purview of the article. But it appears from the stipulation of facts that the voluntary delivery of the vehicles was made in obedience to plaintiff's demands so that there is no escaping the conclusion that plaintiff has in facts choosen to deprive the lessee of the enjoyment of the property leased. The article does not require that the privation of the enjoyment of the property be brought about thru court action. And in the present case court action for such purpose was not essential because the contracts specifically authorized the lessor to repossess the vehicle whenever the lessee de- faulted in the payment of rent and the lessee could not in that event refuse to demand for the delivery of the vehicles without violating the terms of her undertaking. As to the second ground of appeal, not much need be said, for the article itself seeks to forestall waiver of its benefits by providing that "any agreement to the contrary shall be null and void." The waiver inserted in the contracts in this case being contrary to both the letter and the policy of the law, the same cannot be given effect. Plaitiff could recovered all the rentals due by suing for them in the courts. In choosing the alternative remedy of depriving the defendant of the enjoyment of the vehicles leased with option to purchase, plaintiff waived its right to bring such action. Wherefore, the judgment appealed from is affirmed, with costs against the appellant.

2. FACTS ISSUE RULING

Co vs. CA, 312 SCRA 528

1. FACTS ISSUE RULING

Direct Funder Holding vs. Lavina, 373 SCRA 645

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ISSUE 3. FACTS ISSUE RULING 4. FACTS ISSUE RULING 5. FACTS ISSUE RULING 6. FACTS ISSUE RULING 7. FACTS ISSUE RULING FACTS ISSUE RULING 8. FACTS ISSUE RULING 9. FACTS
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Adelfa Properties vs. CA, 240 SCRA 565

RULING

Abalos vs. Macatangay, 439 SCRA 649

10. Soriano vs. Latono, 87 Phil. 757 FACTS Villegas vs. CA, 499 SCRA 276 ISSUE RULING 11. Vde de Espiritu vs. CFI, 47 SCRA 354 FACTS ISSUE Song Fo & Co vs. Oria, 33 Phil. 3 RULING 12. Lim vs. Lim, 10 Phil. 633 FACTS ISSUE De Leon vs. Soriano, 87 Phil. 193 RULING 13. Dela Cena vs. Briones, 508 SCRA 62

Bunge Corp vs. Camenforte, 91 Phil. 861 FACTS ISSUE RULING

14. Pacific Commercial Co vs. Dela Rama, 72 Phil. 380

15. Dela Cruz vs. Asian Consumer, 214 SCRA 103 Pacific Comml Co vs. Ermita Market, 56 Phil. 617 FACTS ISSUE

RULING 23. US Commercial vs. Halili, 93 Phil. 271 16. Manila Motors Co vs Fernandez, 99 Phil. 782 FACTS ISSUE RULING 17. Levy Hermanos vs Pacific Commercial, 71 Phil. 587 FACTS ISSUE RULING 18. Northern Motors vs. Sapinoso, 33 SCRA 356 FACTS ISSUE RULING 19. Industrial Finance vs. Ramirez, 77 SCRA 152 FACTS ISSUE RULING 20. Filinvest vs. CA, 178 SCRA 188 FACTS ISSUE RULING 21. Elisco tool vs. Mfg. Corp., 307 SCRA 731 FACTS ISSUE RULING FACTS ISSUE RULING

22. Manila Gas vs. Calupitan, 66 Phil. 747 FACTS ISSUE RULING
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