Sales I. Introduction 1. Coronel v. CA (GR 103577, 7 October 1996) Coronel v. CA [G.R. No. 103577. October 7, 1996.

] Third division, Melo (J): 3 co ncur, 1 took no part. Facts: On 19 January 1985, Romulo Coronel, et al. executed a document entitled Receipt of Down Payment in favor of Ramona Patricia Alcaraz f or P50,000 downpayment of the total amount of P1.24M as purchase price for an in herited house and lot (TCT 119627, Registry of Deeds of Quezon City), promising to execute a deed of absolute sale of said property as soon as such has been tra nsferred in their name. The balance of P1.19M is due upon the execution of said deed. On the same date, Concepcion D. Alcaraz, mother of Ramona, paid the down p ayment of P50,000.00. On 6 February 1985, the property originally registered in the name of the Coronels father was transferred in their names (TCT 327043). Howe ver, on 18 February 1985, the Coronels sold the property to Catalina B. Mabanag for P1,580,000.00 after the latter has paid P300,000.00. For this reason, Corone ls canceled and rescinded the contract with Alcaraz by depositing the down payme nt in the bank in trust for Alcaraz. On 22 February 1985, Alcaraz filed a compla int for specific performance against the Coronels and caused the annotation of a notice of lis pendens at the back of TCT 327403. On 2 April 1985, Mabanag cause d the annotation of a notice of adverse claim covering the same property with th e Registry of Deeds of Quezon City. On 25 April 1985, the Coronels executed a De ed of Absolute Sale over the subject property in favor of Mabanag. On 5 June 198 5, a new title over the subject property was issued in the name of Mabanag under TCT 351582. In the course of the proceedings, the parties agreed to submit the case for decision solely on the basis of documentary exhibits. Upon submission o f their respective memoranda and the corresponding comment or reply thereto, and on 1 March 1989, judgment was handed down in favor of the plaintiffs, ordering the defendant to execute a deed of absolute sale of the land covered by TCT 3274 03 and canceling TCT 331582 and declaring the latter without force and effect. C laims for damages by plaintiffs and counterclaims by the defendants and interven ors were dismissed. A motion for reconsideration was thereafter filed, which was denied. Petitioners interposed an appeal, but on 16 December 1991, the CA rende red its decision fully agreeing with the trial court. Hence, the instant petitio n. The Supreme Court dismissed the petition and affirmed the appealed judgment. 1. Receipt of downpayment a binding contract; Meeting of the minds The document embodied the binding contract between Ramona Patricia Alcaraz and the heirs of C onstancio P. Coronel, pertaining to a particular house and lot covered by TCT 11 9627, as defined in Article 1305 of the Civil Code of the Philippines. 2. Defini tion of contract of sale The Civil Code defines a contract of sale, in Article 1 458, as one of the contracting parties obligates himself to transfer the ownershi p of and to deliver a determinate thing, and the other to pay therefor a price c ertain in money or its equivalent. Sale, thus, by its very nature a consensual co ntract because it is perfected by mere consent. 3. Elements of contract of sale; Contract to sell not contract of sale due to the lack of first element; Distinc tion necessary when property is sold to a third person The essential elements of a contract of sale are (a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (b) Determinate subject matter; a nd (c) Price certain in money or its equivalent. A Contract to Sell may not be c onsidered as a Contract of Sale because the first essential element is lacking. It is essential to distinguish between a contract to sell and a conditional cont ract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person. 4. Contract to sell: Seller agrees to sell property when purchase price is delivered to him; seller reserves transfer of title until fulfillment of suspensive condition (pa yment) In a contract to sell, the prospective seller explicitly reserves the tra nsfer of title to the prospective buyer, meaning, the prospective seller does no t as yet agree or consent to transfer ownership of the property subject of the c ontract to sell until the happening of an event, which for present purposes take n to be the full payment of the purchase price. What the seller agrees or Page 1 of 87

obliges himself to do is to fulfill his promise to sell the subject property whe n the entire amount of the purchase price is delivered to him. In other words th e full payment of the purchase price partakes of a suspensive condition, the non -fulfillment of which prevents the obligation to sell from arising and thus, own ership is retained by the prospective seller without further remedies by the pro spective buyer. 5. Contract to sell: failure to deliver payment is not a breach but event preventing vendor to convey title; obligation demandable upon full pay ment of price; promise binding if supported by payment distinct from the price W hen a contract is a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, cas ual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force (Roque v. Lapuz). Upon the fulfillm ent of the suspensive condition which is the full payment of the purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code (A promise to buy and sell a determinate thing fo r a price certain is reciprocally demandable.) An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promi ssor if the promise is supported by a consideration distinct from the price. 6. Contract to sell defined A contract to sell be defined as a bilateral contract w hereby the prospective seller, while expressly reserving the ownership of the su bject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. 7. Co ntract to sell not a conditional contract of sale (existence of first element) A contract to sell may not even be considered as a conditional contract of sale w here the seller may likewise reserve title to the property subject of the sale u ntil the fulfillment of a suspensive condition, because in a conditional contrac t of sale, the first element of consent is present, although it is conditioned u pon the happening of a contingent event which may or may not occur. 8. Condition al contract of sale: if suspensive condition not fulfilled, pefection abated; if fulfilled, contract of sale perfected and ownership automatically transfers to buyer If the suspensive condition is not fulfilled, the perfection of the contra ct of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of App eals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, t he contract of sale is thereby perfected, such that if there had already been pr evious delivery of the property subject of the sale to the buyer, ownership ther eto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. 9. Contract to sell: if suspensive co ndition fulfilled, seller has still to convey title even if property is previous ly delivered In a contract to sell, upon the fulfillment of the suspensive condi tion which is the full payment of the purchase price, ownership will not automat ically transfer to the buyer although the property may have been previously deli vered to him. The prospective seller still has to convey title to the prospectiv e buyer by entering into a contract of absolute sale. 10. Contract to sell: ther e is no double sale; if property sold to another, the seller may be sued for dam ages In a contract to sell, there being no previous sale of the property, a thir d person buying such property despite the fulfillment of the suspensive conditio n such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconv eyance of the property. There is no double sale in such case. Title to the prope rty will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damage s by the intending buyer. 11. Conditional contract of sale: sale becomes absolut e upon fulfillment of condition; if property sold to another, first buyer may se ek reconveyance In a conditional contract of sale, upon the fulfillment of the s uspensive condition, the sale becomes absolute and this will definitely affect t he sellers title thereto. In fact, if there had been previous delivery of the sub ject property, the sellers ownership or title to the property is automatically tr

ansferred to the buyer such that, the seller will no longer have any title to tr ansfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to disc over such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, th e first buyer may seek reconveyance of the property subject of the sale. Page 2 of 87

12. Interpretation of contracts, natural and meaning of words unless technical m eaning was intended It is a canon in the interpretation of contracts that the wo rds used therein should be given their natural and ordinary meaning unless a tec hnical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). 13. Document entitled Receipt of Down Payment indicates Conditional Contract of Sale and not contract to sell The agreement could not have been a contract to sell be cause the sellers made no express reservation of ownership or title to the subje ct parcel of land. Furthermore, the circumstance which prevented the parties fro m entering into an absolute contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of t he purchase price. Under the established facts and circumstances of the case, ha d the certificate of title been in the names of petitioners-sellers at that time , there would have been no reason why an absolute contract of sale could not hav e been executed and consummated right there and then. Moreover, unlike in a cont ract to sell, petitioners did not merely promise to sell the property to private respondent upon the fulfillment of the suspensive condition. On the contrary, h aving already agreed to sell the subject property, they undertook to have the ce rtificate of title changed to their names and immediately thereafter, to execute the written deed of absolute sale. What is clearly established by the plain lan guage of the subject document is that when the said Receipt of Down Payment was pr epared and signed by petitioners, the parties had agreed to a conditional contra ct of sale, consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners father to their names. The suspensive condition was fulfilled on 6 February 1985 and thus, the conditional contract of sale between the parties became obligatory, the only act required fo r the consummation thereof being the delivery of the property by means of the ex ecution of the deed of absolute sale in a public instrument, which petitioners u nequivocally committed themselves to do as evidenced by the Receipt of Down Payme nt. 14. Article 1475 and 1181 applies to present case; Perfection of a contract o f sale and Conditional obligation based on the happening of the event Article 14 75 of the New Civil Code provides that the contract of sale is perfected at the m oment there is a meeting of minds upon the thing which is the object of the cont ract and upon the price. From that moment, the parties may reciprocally demand pe rformance, subject to the provisions of the law governing the form of contracts. Article 1181 of the same code provides that in conditional obligations, the acqu isition of rights, as well as the extinguishment or loss of those already acquir ed, shall depend upon the happening of the event which constitutes the condition . In the present case, since the condition contemplated by the parties which is t he issuance of a certificate of title in petitioners names was fulfilled on 6 Feb ruary 1985, the respective obligations of the parties under the contract of sale became mutually demandable, i.e. the sellers were obliged to present the TCT al ready in their names to he buyer, and to immediately execute the deed of absolut e sale, while the buyer on her part, was obliged to forthwith pay the balance of the purchase price amounting to P1,190,000.00. 15. Condition deemed fulfilled w hen obligor voluntary prevents its fulfillment; Condition fulfilled, such fact c ontrolling over hypothetical arguments Article 1186 provides that the condition s hall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. T hus, in the present case, the petitioners having recognized that they entered in to a contract of sale subject to a suspensive condition, as evidenced in the fir st paragraph in page 9 of their petition, cannot now contend that there could ha ve been no perfected contract of sale had the petitioners not complied with the condition of first transferring the title of the property under their names. It should be stressed and emphasized that the condition was fulfilled on 6 February 1985, when TCT 327403 was issued in petitioners name, and such fact is more cont rolling than mere hypothetical arguments. 16. Retroactivity of conditional oblig ation to day of constitution of obligation Article 1187 provides that the effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect o f the condition that has been complied with. In the present case, the rights and

obligations of the parties with respect to the perfected contract of sale becam e mutually due and demandable as of the time of fulfillment or occurrence of the suspensive condition on 6 February 1985. As of that point in time, reciprocal o bligations of both seller and buyer arose. 17. Succession as a mode of transferr ing ownership Article 774 of the Civil Code defines Succession as a mode of tran sferring ownership, providing succession is a mode of acquisition by virtue of wh ich the property, rights and obligations to the extent and value of the inherita nce of a person are transmitted through his death to another or others by his wi ll or by operation of law. In the present case, petitioners-sellers being the son s and daughters of the decedent Constancio P. Coronel are compulsory heirs who w ere called to succession by operation of law. Thus, at the instance of their fat hers death, petitioners stepped into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became bindin g and enforceable upon them. It is expressly Page 3 of 87

provided that rights to the succession are transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1 952]). 18. Estoppel, as to lack of capacity Article 1431 provides that through es toppel an admission or representation is rendered conclusive upon the person mak ing it, and cannot be denied or disproved as against the person relying thereon. In the present case, the petitioners, having represented themselves as the true owners of the subject property at the time of sale, cannot claim now that they w ere not yet the absolute owners thereof at the time they entered into agreement. 19. Mere allegation is not evidence The supposed grounds for petitioners resciss ion, are mere allegations found only in their responsive pleadings, which by exp ress provision of the rules, are deemed controverted even if no reply is filed b y the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are abso lutely bereft of any supporting evidence to substantiate petitioners allegations. We have stressed time and again that allegations must be proven by sufficient e vidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SC RA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil . 376 [1947]). 20. No stipulation to authorize extrajudicial rescission of contr act of sale Even assuming arguendo that Ramona P. Alcaraz was in the United Stat es of America on 6 February 1985, petitioners-sellers act of unilaterally and ext rajudicially rescinding the contract of sale cannot be justified as there was no express stipulation authorizing the sellers to extrajudicially rescind the cont ract of sale. (cf Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 1 32 SCRA 722 [1984]) 21. Estoppel, acceptance of check from buyers mother; buyers a bsence not a ground for rescission Petitioners are estopped from raising the all eged absence of Ramona P. Alcaraz because although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and i n behalf of her daughter, if not also in her own behalf. Indeed, the down paymen t was made by Concepcion D. Alcaraz with her own personal check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is no evidence showing that petitione rs ever questioned Concepcions authority to represent Ramona P. Alcaraz when they accepted her personal check. Neither did they raise any objection as regards pa yment being effected by a third person. Accordingly, as far as petitioners are c oncerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind t he contract of sale. 22. Buyer not in default as there is no proof that seller p resented the TCT and signify their readiness to execute the deed of absolute sal e Article 1169 of the Civil Code defines when a party in a contract involving re ciprocal obligations may be considered in default. Said article provides that tho se obliged to deliver or to do something, incur in delay from the time the oblig ee judicially or extrajudicially demands from them the fulfillment of their obli gation. xxx In reciprocal obligations, neither party incurs in delay if the othe r does not comply or is not ready to comply in a proper manner with what is incu mbent upon him. From the moment one of the parties fulfill his obligation, delay by the other begins. In the present case, there is no proof offered whatsoever t o show that the seller actually presented the new transfer certificate of title in their names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their agreement. Ramonas corresponding oblig ation to pay the balance of the purchase price in the amount of P1,190,000.00 (a s buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default. 23. Double sale; Article 1544, paragraph 2 applies in the present case Article 1544 of the Civil Code provides that If the same thing shou ld have been sold to different vendees, the ownership shall be transferred to th e person who may have first taken possession thereof in good faith, if it should be movable property. Should if be immovable property, the ownership shall belon g to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence there of to the person who presents the oldest title, provided there is good faith. In the present case, the record of the case shows that the Deed of Absolute Sale da ted 25 April 1985 as proof of the second contract of sale was registered with th

e Registry of Deeds of Quezon City giving rise to the issuance of a new certific ate of title in the name of Catalina B. Mabanag on 5 June 1985. Thus, the second paragraph of Article 1544 shall apply. 24. Double sale presumes title to pass t o first buyer, exceptions Page 4 of 87

Article 1544, the provision on double sale, presumes title or ownership to pass to the first buyer, the exceptions being: (a) when the second buyer, in good fai th, registers the sale ahead of the first buyer, and (b) should there be no insc ription by either of the two buyers, when the second buyer, in good faith, acqui res possession of the property ahead of the first buyer. Unless, the second buye r satisfies these requirements, title or ownership will not transfer to him to t he prejudice of the first buyer. 25. Prius tempore, potior jure (first in time, stronger in right); First to register in good faith The governing principle is p rius tempore, potior jure (first in time, stronger in right). Knowledge by the f irst buyer of the second sale cannot defeat the first buyers rights except when t he second buyer first registers in good faith the second sale (Olivares vs. Gonz ales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the firs t sale defeats his rights even if he is first to register, since knowledge taint s his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. N o. 58530, 26 December 1984). It was further held that it is essential, to merit the protection of Article 1544, second paragraph, that the second realty buyer m ust act in good faith in registering his deed of sale (Cruz v. Cabana, 129 SCRA 656, citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992). 26. Double sale; good faith in recording of secon d sale, not in buying In a case of double sale, what finds relevance and materia lity is not whether or not the second buyer was a buyer in good faith but whethe r or not said second buyer registers such second sale in good faith, that is, wi thout knowledge of any defect in the title of the property sold. In the present case, Mabanag could not have in good faith registered the sale entered into on 1 8 February 1985 because as early as 22 February 1985, a notice of lis pendens ha d been annotated on the TCT in the names of petitioners, whereas Mabanag registe red the said sale sometime in April 1985. At the time of registration, therefore , petitioner knew that the same property had already been previously sold to Cor onel, or, at least, she was charged with knowledge that a previous buyer is clai ming title to the same property. Mabanag thus cannot close her eyes to the defec t in petitioners title to the property at the time of the registration of the pro perty. 27. Double sale; Bad faith in registration does not confer registrant any right If a vendee in a double sale registers the sale after he has acquired kno wledge that there was a previous sale of the same property to a third party or t hat another person claims said property in a previous sale, the registration wil l constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1981];citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.) 28. Agency; The issue whether Concepcion, mother of Ramona, is an agent or a co-buyer is undisturbed Although there may be ample indications that there wa s in fact an agency between Ramona as principal and Concepcion, her mother, as a gent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarel y raised in the instant petition, nor in such assumption disputed between mother and daughter. The Court did not touch this issue and did not disturb the lower courts ruling on this point. 2. Romero v. CA (GR 107207, 23 November 1995) Romero v. CA [GR 107207, 23 November 1995] Third division, Vitug (J): 4 concur F acts: Virgilio R. Romero, a civil engineer, was engaged in the business of produ ction, manufacture and exportation of perlite filter aids, permalite insulation and process perlite ore. In 1988, Romero and his foreign partners decided to put up a central warehouse in Metro Manila on a land area of approximately 2,000 sq . m. The project was made known to several freelance real estate brokers. A day or so after the announcement, Alfonso Flores and his wife, accompanied by a brok er, offered a parcel of land measuring 1,952 sq. m. Located in Barangay San Dion isio, Paraaque, Metro Manila, the lot was covered by TCT 361402 in the name of En

riqueta Chua Vda. de Ongsiong. Romero visited the property and, except for the p resence of squatters in the area, he found the place suitable for a central ware house. Later, the Flores spouses called on Romero with a proposal that should he advance the amount of P50,000.00 which could be used in taking up an ejectment case against the squatters, Ongsiong would agree to sell the property for only P 800.00 per sq. m. Romero expressed his concurrence. On 09 June 1988, a contract, denominated Deed of Conditional Sale, was executed between Romero and Ongsiong. F lores, in behalf of Ongsiong, forthwith received and acknowledge a check for P50 ,000.00 from Romero. Pursuant to this agreement, Ongsiong filed a complaint for ejectment (Civil Case 7579) against Melchor Musa and 29 other squatter families with the MTC Paraaque. A few months later, or on 21 February 1989, judgment was r endered ordering the Page 5 of 87

defendants to vacate the premises. The decision was handed down beyond the 60-da y period (expiring 09 August 1988) stipulated in the contract. The writ of execu tion of the judgment was issued, still later, on 30 March 1989. In a letter, dat ed 07 April 1989, Ongsiong sought to return the P50,000.00 she received from Rom ero since, she said, she could not get rid of the squatters on the lot. Atty. Serg io A.F. Apostol, counsel for Romero, refused the tender, citing the favorable de cision and the writ of execution issued pursuant thereto, and expressed Romeros w illingness to underwrite the expenses for the execution of the judgment and ejec tment of the occupants chargeable to the purchase price of the land. Meanwhile, the Presidential Commission for the Urban Poor (PCUD), through its Regional Direct or for Luzon (Viloria), asked the MTC Paraaque for a grace period of 45 days from 21 April 1989 within which to relocate and transfer the squatter families. Acti ng favorably on the request, the court suspended the enforcement of the writ of execution accordingly. On 08 June 1989, Atty. Apostol reminded Ongsiong on the e xpiry of the 45-day grace period and reiterated his clients willingness to underw rite the expenses for the execution of the judgment and ejectment of the occupan ts. On 19 June 1989, Atty. Joaquin Yuseco, Jr., counsel for Ongsion, advised Att y. Apostol that the Deed of Conditional Sale had been rendered null and void by virtue of his clients failure to evict the squatters from the premises within the agreed 60-day period. He added that private respondent had decided to retain the property. Meanwhile, on 25 August 1989, the MTC issued an alias writ of executio n in Civil Case 7579 on motion of Ongsiong but the squatters apparently still st ayed on. On 27 June 1989, Ongsiong prompted by Romeros continued refusal to accep t the return of the P50,000.00 advance payment, filed with the RTC Makati (Branc h 133, Civil Case 89-4394) for a rescission of the deed of conditional sale, plus damages, and for the consignation of P50,000.00 cash. On 26 June 1990, the RTC r endered decision holding that Ongsiong had no right to rescind the contract sinc e it was she who violated her obligation to eject the squatters from the subject property and that Romero, being the injured party, was the party who could, under Article 1191 of the Civil Code, rescind the agreement. The lower court, thus di smissed the complaint and ordered Ongsiong to eject or cause the ejectment of th e squatters from the property and to execute the absolute deed of conveyance upo n payment of the full purchase price by Romero. Ongsiong appealed to the Court o f Appeals. On 29 May 1992, the appellate court rendered its decision, reversed a nd set aside the decision appealed from and entered another declaring he contrac t of conditional sale of 9 June 1988 cancelled and ordering Romero to accept the return of the downpayment in the amount of P50,000 deposited with the trial cou rt; without pronouncement as to cost. Failing to obtain a reconsideration, Romer o filed his petition for review on certiorari before the Supreme Court. The Supr eme Court reversed and set aside the questioned decision of the Court of Appeals , and entered another ordering Romero to pay Ongsiong the balance of the purchas e price and the latter to execute the deed of absolute sale in favor of petition er; without costs. 1. Perfected contract of sale, absolute or conditional A perf ected contract of sale may either be absolute or conditional depending on whethe r the agreement is devoid of, or subject to, any condition imposed on the passin g of title of the thing to be conveyed or on the obligation of party thereto. Wh en ownership is retained until the fulfillment of a positive condition the breac h of the condition will simply prevent the duty to convey title from acquiring a n obligatory force. If the condition is imposed on an obligation of a party whic h is not complied with, the other party may either refuse to proceed or waive sa id condition (Art. 1545, Civil Code). Where, of course, the condition is imposed upon the perfection of the contract itself, the failure of such condition would prevent the juridical relation itself from coming into existence. 2. Real chara cter of a contract, substance more significant than title given to it by parties In determining the real character of the contract, the title given to it by the parties is not as much as significant as its substance. For example, a deed of sale, although denominated as a deed of conditional sale, may be treated as abso lute in nature, if title to the property sold is not reserved in the vendor or i f the vendor is not granted the right to unilaterally rescind the contract predi cated on the fulfillment or non-fulfillment, as the case may be, of the prescrib

ed condition. 3. Condition in the context of a perfected contract of sale The te rm condition in the context of a perfected contract of sale pertains, in reality, to the compliance by one party of an undertaking the fulfillment of which would beckon, in turn, the demandability of the reciprocal prestation of the other par ty. The reciprocal obligations referred to would normally be, in the case of ven dee, the payment of the agreed purchase price and, Page 6 of 87

in the case of the vendor, the fulfillment of certain express warranties (which, in the present case is the timely eviction of the squatters on the property). 4 . Perfection of a sale; Parties bound to fulfill what is expressly stipulated an d all consequences in keeping with good faith, usage and law A sale is at once p erfected where a person (the seller) obligates himself, for a price certain, to deliver and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. From the moment the contract is perfected, the parties are bound not only to the fulfillment of what has been expressly sti pulated but also to all the consequences which, according to their nature, may b e in keeping with good faith, usage and law. In the present cas, under the agree ment, Ongsiong is obligated to evict the squatters on the property. The ejectmen t of the squatters is a condition the operative act of which sets into motion th e period of compliance by Romero of his own obligation, i.e., to pay the balance of the purchase price. 5. Options available under Article 1545 belongs to injur ed party Ongsiongs failure to remove the squatters from the property within the sti pulated period gives Romero the right to either refuse to proceed with the agree ment or waive that condition in consonance with Article 1545 of the Civil Code. This option clearly belongs to petitioner (Romero) and not to private respondent (Ongsiong). In contracts of sale particularly, Article 1545 of the Civil Code a llows the obligee to choose between proceeding with the agreement or waiving the performance of the condition. Evidently, Romero has waived the performance of t he condition imposed on Ongsiong to free the property from squatters. 6. Potesta tive condition is mixed, and not dependent on the sole will of the debtor; If co ndition is imposed on the fulfillment of the obligation and not the birth thereo f, only the condition is avoided and does not affect obligation itself The under taking required of private respondent does not constitute a potestative condition dependent solely on his will that might, otherwise, be void in accordance with A rticle 1182 of the Civil Code but a mixed condition dependent not on the will of th e vendor alone but also of third persons like the squatters and government agenc ies and personnel concerned. However, where the so-called potestative condition is imposed not on the birth of the obligation but on its fulfillment, only the cond ition is avoided, leaving unaffected obligation itself. 7. Rescission by non-inj ured party not warranted; Article 1191 The right of resolution of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of fai th by the other party violates the reciprocity between them. In the present case , Ongsiongs action for rescission was not warranted as she was not the injured pa rty. It was Ongsiong who has failed in her obligation under the contract. Romero did not breach the agreement. He has agreed, in fact, to shoulder the expenses of the execution of the judgment in the ejectment case and to make arrangement w ith the sheriff to effect such execution. Parenthetically, this offer to pay, hi ring been made prior to the demand for rescission, assuming for the sake of argu ment that such a demand is proper under Article 1592 of the Civil Code, would li kewise suffice to defeat Ongsiongs prerogative to rescind thereunder. 8. Petition er, opting to proceed with sale, may not demand the reimbursement of the advance payment When petitioner having opted to proceed with the sale, neither may peti tioner demand its reimbursement from private respondent. Further, private respon dent may not subject it to forfeiture. 3. Fule v. CA (GR 112212, 2 March 1998) Fule v. CA [G.R. No. 112212. March 2, 1998.] Third division, Romero (J): 3 concu r Facts: Fr. Antonio Jacobe initially mortgage a 10-hectare property in Tanay, R izal (covered by TCT 320725) to the Rural Bank of Alaminos, Laguna to secure a l oan in the amount of P10,000. Said mortgage was later foreclosed and the propert y offered for public auction upon his default. In June 1984, Gregorio Fule, as c orporate secretary of the bank, asked Remelia Dichoso and Olivia Mendoza to look for a buyer who might be interested in the Tanay property. The two found one in the person of Ninevetch Cruz. It so happened that in January of said year, Greg

orio Fule, also a jeweler, has shown interest in buying a pair of emerald-cut di amond earrings owned by Dr. Cruz. Dr. Cruz has declined Fules offer to buy said j ewelry for P100,000; and a subsequent bid by Fule to buy them for US$6,000 at $1 to P25 while making a sketch of said jewelry during an inspection at the lobby of Prudential Bank (the latter instance was declined, since the exchange rate ap preciated to P19 per dollar). Subsequently, however, negotiations for the barter of the jewelry and the Tanay property ensued. Atty. Belarmino was requested by Dr. Cruz Page 7 of 87

to check the property and found out that no sale or barter was feasible as the 1 -year period of redemption has not expired. In an effort to cut through any lega l impediment, Fule executed on 19 October 1984, a deed of redemption on behalf o f Fr. Jacobe purportedly in the amount of P15,987.78, and on even date, Fr. Jaco be sold the property to Fule for P75,000.00. The haste with which the two deeds were executed is shown by the fact that the deed of sale was notarized ahead of the deed of redemption. As Dr. Cruz had already agreed to the proposed barter, F ule went to Prudential Bank to take a look at the jewelry. On 23 October 1984, F ule met Atty. Belarmino at the latters residence to prepare the documents of sale . Atty. Belarmino accordingly caused the preparation of a deed of absolute sale while Fule and Dr. Cruz attended to the safekeeping of the jewelry. The followin g day, Fule, together with Dichoso and Mendoza, arrived at the residence of Atty . Belarmino to finally execute a deed of absolute sale. Fule signed the deed and gave Atty. Belarmino the amount of P13,700.00 for necessary expenses in the tra nsfer of title over the Tanay property; and issued a certification to the effect that the actual consideration of the sale was P200,000.00 and not P80,000.00 as indicated in the deed of absolute sale (the disparity purportedly aimed at mini mizing the amount of the capital gains tax that Fule would have to shoulder). Si nce the jewelry was appraised only at P160,000.00, the parties agreed that the b alance of P40,000.00 would just be paid later in cash. Thereafter, at the bank, as prearranged, Dr. Cruz and the cashier opened the safety deposit box, and deli vered the contents thereof to Fule. Fule inspected the jewelry, near the electri c light at the banks lobby, for 10-15 minutes. Fule expressed his satisfaction by nodding his head when asked by Dr. Cruz if the jewelry was okay. For services r endered, Fule paid the agents, Dichoso and Mendoza, the amount of US$300.00 and some pieces of jewelry. He did not, however, give them half of the pair of earri ngs in question, which he had earlier promised. Later in the evening, Fule arriv ed at the residence of Atty. Belarmino complaining that the jewelry given him wa s fake. Dichoso, who borrowed the car of Dr. Cruz, called up Atty. Belarmino. In formed that Fule was at the lawyers house, went there posthaste thinking that Ful e had finally agreed to give them half of the pair of earrings, only to find Ful e demonstrating with a tester that the earrings were fake. Fule then accused Dic hoso and Mendoza of deceiving him which they, however, denied. They countered th at Fule could not have been fooled because he had vast experience regarding jewe lry. Fule nonetheless took back the US$300.00 and jewelry he had given them. The reafter, the group decided to go to the house of a certain Macario Dimayuga, a j eweler, to have the earrings tested. Dimayuga, after taking one look at the earr ings, immediately declared them counterfeit. At around 9:30 p.m., Fule went to o ne Atty. Reynaldo Alcantara residing at Lakeside Subdivision in San Pablo City, complaining about the fake jewelry. Upon being advised by the latter, Fule repor ted the matter to the police station where Dichoso and Mendoza likewise executed sworn statements. On 26 October 1984, Fule filed a complaint before the RTC San Pablo City against private respondents praying, among other things, that the co ntract of sale over the Tanay property be declared null and void on the ground o f fraud and deceit. On 30 October 1984, the lower court issued a temporary restr aining order directing the Register of Deeds of Rizal to refrain from acting on the pertinent documents involved in the transaction. On 20 November 1984, howeve r, the same court lifted its previous order and denied the prayer for a writ of preliminary injunction. After trial, the lower court rendered its decision on 7 March 1989; holding that the genuine pair of earrings used as consideration for the sale was delivered by Dr. Cruz to Fule, that the contract was valid even if the agreement between the parties was principally a barter contract, that the ag reement has been consummated at the time the principal parties parted ways at th e bank, and that damages are due to the defendants. From the trial courts adverse decision, petitioner elevated the matter to the Court of Appeals. On 20 October 1992, the Court of Appeals, however, rendered a decision affirming in toto the lower courts decision. His motion for reconsideration having been denied on 19 Oc tober 1993. Hence, the petition for review on certiorari. The Supreme Court affi rmed in toto the decision of the Court of Appeals, but ordered Dr. Cruz to pay F ule the balance of the purchase price of P40,000 within 10 days from the finalit

y of the decision; with costs against petitioner. 1. New factual issues cannot b e examined as it unduly transcends the limits of the Supreme Courts review power The Supreme Court cannot entertain a factual issue, and thus examine and weigh a new the facts regarding the genuineness of the earrings bartered in exchange for the Tanay property, as this would unduly transcend the limits of the Courts revi ew power in petitions of this nature which are confined merely to pure questions of law. As a general rule, the Supreme Court accords conclusiveness to a lower courts findings of fact unless it is shown, inter alia, that: (1) the conclusion is a finding grounded on speculations, surmises or conjectures; (2) the inferenc e is manifestly mistaken, absurd and impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5 ) when the findings of fact are conflicting; and (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contr ary to the admission of both parties. To reiterate, the Supreme Courts jurisdicti on is only limited to reviewing errors of law in the absence of any showing that the findings complained of are totally devoid of support in the record or that they are glaringly erroneous as to constitute serious abuse of discretion. 2. Im mediate rendition of decision not anomalous No proof has been adduced that Judge Jaramillo was motivated by a malicious or sinister intent in disposing of the c ase with dispatch. Neither is there proof that someone else wrote the decision f or him. The immediate rendition of the decision was no Page 8 of 87

more than Judge Jaramillos compliance with his duty as a judge to dispose of the c ourts business promptly and decide cases within the required periods. The two-year period within which Judge Jaramillo handled the case provided him with all the time to study it and even write down its facts as soon as these were presented t o court. In fact, the Supreme Court does not see anything wrong in the practice of writing a decision days before the scheduled promulgation of judgment and lea ving the dispositive portion for typing at a time close to the date of promulgat ion, provided that no malice or any wrongful conduct attends its adoption. The p ractice serves the dual purposes of safeguarding the confidentiality of draft de cisions and rendering decisions with promptness. Neither can Judge Jaramillo be made administratively answerable for the immediate rendition of the decision. Th e acts of a judge which pertain to his judicial functions are not subject to dis ciplinary power unless they are committed with fraud, dishonesty, corruption or bad faith. Hence, in the absence of sufficient proof to the contrary, Judge Jara millo is presumed to have performed his job in accordance with law and should in stead be commended for his close attention to duty. 3. Contract perfected by mer e consent, binds parties to stipulation and all the consequences; Contract of sa le perfected upon meeting of minds upon the thing object of the contract and upo n price; Embodiment of contract in public instrument only for convenience, and r egistration only to affect third parties; Lack of formal requirements does not i nvalidate the contract The Civil Code provides that contracts are perfected by m ere consent. From this moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, a ccording to their nature, may be in keeping with good faith, usage and law. A co ntract of sale is perfected at the moment there is a meeting of the minds upon t he thing which is the object of the contract and upon the price. Being consensua l, a contract of sale has the force of law between the contracting parties and t hey are expected to abide in good faith by their respective contractual commitme nts. Article 1358 of the Civil Code which requires the embodiment of certain con tracts in a public instrument, is only for convenience, and registration of the instrument only adversely affects third parties. Formal requirements are, theref ore, for the benefit of third parties. Non-compliance therewith does not adverse ly affect the validity of the contract nor the contractual rights and obligation s of the parties thereunder. 4. Voidable or annullable contracts Contracts that are voidable or annullable, even though there may have been no damage to the con tracting parties are: (1) those where one of the parties is incapable of giving consent to a contract; and (2) those where the consent is vitiated by mistake, v iolence, intimidation, undue influence or fraud. The contract can be voided in a ccordance with law so as to compel the parties to restore to each other the thin gs that have been the subject of the contract with their fruits, and the price w ith interest. 5. Fraud; No inducement made by the private respondents There is f raud when, through the insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. In the present case, the records, are bare of any evid ence manifesting that private respondents employed such insidious words or machi nations to entice petitioner into entering the contract of barter. Neither is th ere any evidence showing that Dr. Cruz induced petitioner to sell his Tanay prop erty or that she cajoled him to take the earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede to petitioners proposal to bu y the said jewelry. Rather, it appears that it was petitioner, through his agent s, who led Dr. Cruz to believe that the Tanay property was worth exchanging for her jewelry as he represented that its value was P400,000.00 or more than double that of the jewelry which was valued only at P160,000.00. If indeed petitioners property was truly worth that much, it was certainly contrary to the nature of a businessman-banker like him to have parted with his real estate for half its pr ice. In short, it was in fact petitioner who resorted to machinations to convinc e Dr. Cruz to exchange her jewelry for the Tanay property. 7. Mistake; Mistake c aused by manifest negligence cannot invalidate a judicial act To invalidate a co ntract, mistake must refer to the substance of the thing that is the object of th e contract, or to those conditions which have principally moved one or both part

ies to enter into the contract. An example of mistake as to the object of the con tract is the substitution of a specific thing contemplated by the parties with a nother. In the present case, the petitioner failed to prove the fact that prior to the delivery of the jewelry to him, private respondents endeavored to make su ch substitution of an inferior one or one with Russian diamonds for the jewelry he wanted to exchange with his 10-hectare land. Further, on account of his work as a banker-jeweler, it can be rightfully assumed that he was an expert on matte rs regarding gems. He had the intellectual capacity and the business acumen as a banker to take precautionary measures to avert such a mistake, considering the value of both the jewelry and his land. A mistake caused by manifest negligence cannot invalidate a juridical act. As the Civil Code provides, (t)here is no mist ake if the party alleging it knew the doubt, contingency or risk affecting the o bject of the contract. 8. Contract of sale absolute if no stipulation that title to property is reserved to seller until full payment; Ownership transferred upon actual or constructive delivery Page 9 of 87

A contract of sale being absolute in nature, title passed to the vendee upon del ivery of the thing sold since there was no stipulation in the contract that titl e to the property sold has been reserved in the seller until full payment of the price or that the vendor has the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Such stipulations are not manifest in the contract of sale. In the present case, both the trial and appell ate courts, therefore, correctly ruled that there were no legal bases for the nu llification of the contract of sale. Ownership over the parcel of land and the p air of emerald-cut diamond earrings had been transferred to Dr. Cruz and Fule, r espectively, upon the actual and constructive delivery thereof. 9. Contract sile nt when balance is due and demandable; non-payment does not invalidate the contr act While it is true that the amount of P40,000.00 forming part of the considera tion was still payable to Fule, its nonpayment by Dr. Cruz is not a sufficient c ause to invalidate the contract or bar the transfer of ownership and possession of the things exchanged considering the fact that their contract is silent as to when it becomes due and demandable. 10 No interest due if it is not stipulated Failure to pay the balance of the purchase price does not result in the payment of interest thereon. Article 1589 of the Civil Code prescribes the payment of in terest by the vendee for the period between the delivery of the thing and the pay ment of the price in cases (1) Should it have been so stipulated; (2) Should the t hing sold and delivered produce fruits or income; (3) Should he be in default, f rom the time of judicial or extrajudicial demand for the payment of the price. 11 . Case distinguished from de la Cruz v Legaspi The present case should be distin guished from De la Cruz v. Legaspi, where the court held that failure to pay the consideration after the notarization of the contract as previously promised res ulted in the vendees liability for payment of interest. In the present, there is no stipulation for the payment of interest in the contract of sale nor proof tha t the Tanay property produced fruits or income. Neither did petitioner demand pa yment of the price as in fact he filed an action to nullify the contract of sale . 12 Award of moral and exemplary damages Moral and exemplary damages may be awa rded without proof of pecuniary loss. In awarding such damages, the court shall take into account the circumstances obtaining in the case and assess damages acc ording to its discretion. To warrant the award of damages, it must be shown that the person to whom these are awarded has sustained injury. He must likewise est ablish sufficient data upon which the court can properly base its estimate of th e amount of damages. Statements of facts should establish such data rather than mere conclusions or opinions of witnesses. Thus, for moral damages to be awarded , it is essential that the claimant must have satisfactorily proved during the t rial the existence of the factual basis of the damages and its causal connection with the adverse partys acts. If the court has no proof or evidence upon which t he claim for moral damages could be based, such indemnity could not be outrightl y awarded. The same holds true with respect to the award of exemplary damages wh ere it must be shown that the party acted in a wanton, oppressive or malevolent manner. 13. Rule that moral damages cannot be recovered from person who filed a complaint does not apply in present case While, as a rule, moral damages cannot be recovered from a person who has filed a complaint against another in good fai th because it is not sound policy to place a penalty on the right to litigate, t he same, however, cannot apply in the present case. This is not a situation wher e petitioners complaint was simply found later to be based on an erroneous ground which, under settled jurisprudence, would not have been a reason for awarding m oral and exemplary damages. Instead, the cause of action of the instant case app ears to have been contrived by petitioner himself. The factual findings of the c ourts a quo to the effect that petitioner filed this case because he was the vic tim of fraud; that he could not have been such a victim because he should have e xamined the jewelry in question before accepting delivery thereof, considering h is exposure to the banking and jewelry businesses; and that he filed the action for the nullification of the contract of sale with unclean hands, all deserve fu ll faith and credit to support the conclusion that petitioner was motivated more by ill will than a sincere attempt to protect his rights in commencing suit aga inst respondents. It must be noted that before petitioner was able to convince D

r. Cruz to exchange her jewelry for the Tanay property, petitioner took pains to thoroughly examine said jewelry, even going to the extent of sketching their ap pearance. Why at the precise moment when he was about to take physical possessio n thereof he failed to exert extra efforts to check their genuineness despite th e large consideration involved has never been explained at all by petitioner. Hi s acts thus failed to accord with what an ordinary prudent man would have done i n the same situation. 4. Ong v. CA (GR 97347, 6 July 1999) Ong v. CA [G.R. No. 97347. July 6, 1999.] First division, Ynares-Santiago (J): 4 concur Facts: On 10 May 1983, Jaime Ong and spouses Miguel and Alejandra Robles executed an Agreement of Purchase and Sale respecting 2 parcels of land situated at Barrio Puri, San Antonio, Quezon (agricultural including rice mill, piggery) for P2M (initial Page 10 of 87

payment of P600,000 broken into P103,499.91 directly paid to seller on 22 March 1983 and P496,500.09 directly paid to BPI to answer for part of sellers loan with the bank; and balance of 1.4M to be paid in 4 equal quarterly installments of P 350,000 the first of which due and demandable on 15 June 1983); binding themselv es that upon the payment of the total purchase price the seller delivers a good and sufficient deed of sale and conveyance for the parcels of land free and clea r from liens and encumbrances, that seller delivers, surrenders and transfers th e parcels of land including all improvements thereon and to transfer the operati ons of the piggery and rice mill to the buyer; and that all payments due and dem andable under the contract effected in the residence of the seller unless otherw ise designated by the parties in writing. On 15 May 1983, Ong took possession of the subject parcels of land together with the piggery, building, ricemill, resi dential house and other improvements thereon. Pursuant to the contract, Ong paid the spouses the sum of P103,499.91 2 by depositing it with the UUCPB. Subsequen tly, Ong deposited sums of money with the BPI, in accordance with their stipulat ion that petitioner pay the loan of the spouses with BPI. To answer for his bala nce of P 1.4M, Ong issued 4 post-dated Metro Bank checks payable to the spouses in the amount of P350,000.00 each (Check 137708-157711). When presented for paym ent, however, the checks were dishonored due to insufficient funds. Ong promised to replace the checks but failed to do so. To make matters worse, out of the P4 96,500.00 loan of the spouses with BPI, which ong, as per agreement, should have paid, Ong only managed to dole out no more than P393,679.60. When the bank thre atened to foreclose the spouses mortgage, they sold 3 transformers of the rice mi ll worth P51,411.00 to pay off their outstanding obligation with said bank, with the knowledge and conformity of Ong. Ong, in return, voluntarily gave the spous es authority to operate the rice mill. He, however, continued to be in possessio n of the two parcels of land while the spouses were forced to use the rice mill for residential purposes. On 2 August 1985, the spouses, through counsel, sent O ng a demand letter asking for the return of the properties. Their demand was lef t unheeded, so, on 2 September 1985, they filed with the RTC Lucena City, Branch 60, a complaint for rescission of contract and recovery of properties with dama ges. Later, while the case was still pending with the trial court, Ong introduce d major improvements on the subject properties by constructing a complete fence made of hollow blocks and expanding the piggery. These prompted the spouses to a sk for a writ of preliminary injunction; which the trial court granted, and thus enjoined Ong from introducing improvements on the properties except for repairs . On 1 June 1989, the trial court rendered a decision in favor of the spouses: o rdering the contract entered into by the parties set aside, ordering the deliver y of the parcels of land and the improvements thereon to the spouses, ordering t he return of the sum of P497,179.51 to Ong by the spouses, ordering Ong to pay t he spouses P100,000 for exemplary damages and P20,000 as attorneys fees and litig ation expenses. From this decision, petitioner appealed to the Court of Appeals, which affirmed the decision of the RTC but deleted the award of exemplary damag es. In affirming the decision of the trial court, the Court of Appeals noted tha t the failure of petitioner to completely pay the purchase price is a substantia l breach of his obligation which entitles the private respondents to rescind the ir contract under Article 1191 of the New Civil Code. Hence, the petition for re view on certiorari. The Supreme Court affirmed the decision rendered by the Cour t of Appeals with the modification that the spouses are ordered to return to Ong the sum P48,680.00 in addition to the amounts already awarded; with costs again st petitioner Ong. 1. Reevaluation of evidence not the function of the Supreme C ourt It is not the function of the Supreme Court to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties to an a ppeal, particularly where the findings of both the trial court and the appellate court on the matter coincide. There is no cogent reason shown that would justif y the court to discard the factual findings of the two courts below and to super impose its own. 2. Rescission as a remedy to secure the reparation of damages ca used by a contract; Article 1380 Rescission, as contemplated in Articles 1380, e t seq., of the New Civil Code, is a remedy granted by law to the contracting par ties and even to third persons, to secure the reparation of damages caused to th

em by a contract, even if this should be valid, by restoration of things to thei r condition at the moment prior to the celebration of the contract. It implies a contract, which even if initially valid, produces a lesion or a pecuniary damag e to someone. 3. Rescission applicable to reciprocal obligations under Article 1 191 Article 1191 of the New Civil Code refers to rescission applicable to recipr ocal obligations. Reciprocal obligations are those which arise from the same cau se, and in which each party is a debtor and a creditor of the other, such that t he obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. 4. Rescission of reciprocal obligati ons under Article 1191 distinguished from rescission of contract under Article 1 383 Rescission of reciprocal obligations under Article 1191 of the New Civil Cod e should be distinguished from rescission of contracts under Article 1383. Altho ugh both presuppose contracts validly entered into and subsisting and both requi re mutual restitution when proper, they are not entirely identical. While Articl e 1191 uses the term rescission, the original term which was used in the old Civil Code, from which the article was based, was resolution. Resolution is a principal action which is based on breach Page 11 of 87

of a party, while rescission under Article 1383 is a subsidiary action limited t o cases of rescission for lesion under Article 1381 of the New Civil Code. 5. Re scissible contract under Article 1381 Article 1381 of the New Civil Code enumera tes rescissible contracts as (1) those which are entered into by guardians whenev er the wards whom they represent suffer lesion by more than one fourth of the va lue of the things which are the object thereof; (2) those agreed upon in represe ntation of absentees, if the latter suffer the lesion stated in the preceding nu mber; (3) those undertaken in fraud of creditors when the latter cannot in any m anner collect the claims due them; (4) those which refer to things under litigat ion if they have been entered into by the defendant without the knowledge and ap proval of the litigants or of competent judicial authority; (5) all other contra cts specially declared by law to be subject to rescission. In the present case, t he contract entered into by the parties obviously does not fall under any of tho se mentioned by Article 1381. Consequently, Article 1383 is inapplicable. 6. Con tract to sell distinguished from contract of sale In a contract of sale, the tit le to the property passes to the vendee upon the delivery of the thing sold; whi le in a contract to sell, ownership is, by agreement, reserved in the vendor and is not to pass to the vendee until full payment of the purchase price. In a con tract to sell, the payment of the purchase price is a positive suspensive condit ion, the failure of which is not a breach, casual or serious, but a situation th at prevents the obligation of the vendor to convey title from acquiring an oblig atory force. 7. Agreement of Purchase and Sale is in the nature of contract to sel l A careful reading of the parties Agreement of Purchase and Sale shows that it is in the nature of a contract to sell. The spouses bound themselves to deliver a d eed of absolute sale and clean title covering the two parcels of land upon full payment by the buyer of the purchase price of P2M. This promise to sell was subj ect to the fulfillment of the suspensive condition of full payment of the purcha se price by the Ong. The non-fulfillment of the condition of full payment render ed the contract to sell ineffective and without force and effect. It must be str essed that the breach contemplated in Article 1191 of the New Civil Code is the obligors failure to comply with an obligation already extant, not a failure of a condition to render binding that obligation. Failure to pay, in this instance, i s not even a breach but merely an event which prevents the vendors obligation to convey title from acquiring binding force. Hence, the agreement of the parties t he present case may be set aside, but not because of a breach on the part of Ong for failure to complete payment of the purchase price. Rather, his failure to d o so brought about a situation which prevented the obligation of the spouses to convey title from acquiring an obligatory force. 8. Contract was not novated as to the manner and time of payment; Novation not presumed Article 1292 of the New Civil Code states that, In order that an obligation may be extinguished by anoth er which substitutes the same, it is imperative that it be so declared in unequi vocal terms, or that the old and the new obligations be on every point incompati ble with each other. Novation is never presumed, it must be proven as a fact eith er by express stipulation of the parties or by implication derived from an irrec oncilable incompatibility between the old and the new obligation. In the present case, the parties never even intended to novate their previous agreement. It is true that Ong paid the spouses small sums of money amounting to P48,680.00, in contravention of the manner of payment stipulated in their contract. These insta llments were, however, objected to by the spouses, and ong replied that these re presented the interest of the principal amount which he owed them. Records furth er show that Ong agreed to the sale of MERALCO transformers by the spousess to p ay for the balance of their subsisting loan with BPI. Although the parties agree d to credit the proceeds from the sale of the transformers to petitioners obligat ion, he was supposed to reimburse the same later to respondent spouses. This can only mean that there was never an intention on the part of either of the partie s to novate petitioners manner of payment. 9. Requisites of novation In order for novation to take place, the concurrence of the following requisites is indispen sable: (1) there must be a previous valid obligation; (2) there must be an agree ment of the parties concerned to a new contract; (3) there must be the extinguis hment of the old contract; and (4) there must be the validity of the new contrac

t. In the present case, the requisites are not found. The subsequent acts of the parties hardly demonstrate their intent to dissolve the old obligation as a con sideration for the emergence of the new one. Novation is never presumed, there m ust be an express intention to novate. 10. Builder in bad faith As regards the i mprovements introduced by Ong to the premises and for which he claims reimbursem ent, the Court found no reason to depart from the ruling of the trial court and the appellate court that petitioner is a builder in bad faith. He introduced the improvements on the premises knowing fully well that he has not paid the consid eration of the contract in full and over the vigorous objections of respondent s pouses. Moreover, Ong introduced major improvements on the premises even while t he case against him was pending before the trial court. Page 12 of 87

11. Deletion of award of exemplary damages correct The award of exemplary damage s was correctly deleted by the Court of Appeals inasmuch as no moral, temperate, liquidated or compensatory damages in addition to exemplary damages were awarde d. 5. Gaite v. Fonacier (GR L-11827, 31 July 1961) Gaite v. Fonacier [G.R. No. L-11827. July 31, 1961.] En Banc, Reyes JBL (J): 9 c oncur Facts: Isabelo Fonacier was the owner and/or holder of 11 iron lode minera l claims (Dawahan Group), situated in Jose Panganiban, Camarines Norte. By a Deed of Assignment dated 29 September 1952, Fonacier constituted and appointed Fernan do A. Gaite as his true and lawful attorney-in-fact to enter into a contract wit h any individual or juridical person for the exploration and development of the mining claims on a royalty basis of not less than P0.50 per ton of ore that migh t be extracted therefrom. On 19 March 1954, Gaite in turn executed a general ass ignment conveying the development and exploitation of said mining claims unto th e Larap Iron Mines, owned solely by him. Thereafter Gaite embarked upon the deve lopment and exploitation of the mining claims, opening and paving roads within a nd outside their boundaries, making other improvements and installing facilities therein for use in the development of the mines, and in time extracted therefro m what he claimed and estimated to be approximately 24,000 metric tons of iron o re. For some reason or another, Isabelo Fonacier decided to revoke the authority granted by him to Gaite, and Gaite assented thereto subject to certain conditio ns. As a result, a document entitled Revocation of Power of Attorney and Contract was executed on 8 December 1954, wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the royalties that Fonacier would receive from the mining claims, all his rights and interests on all the roads, improveme nts, and facilities in or outside said claims, the right to use the business nam e Larap Iron Mines and its goodwill, and all the records and documents relative to the mines. In the same document, Gaite transferred to Fonacier all his rights a nd interests over the 24,000 tons of iron ore, more or less that the former had al ready extracted from the mineral claims, in consideration of the sum of P75,000, P10,000, of which was paid upon the signing of the agreement, and the balance t o be paid out of the first letter of credit covering the first shipment of iron ores or the first amount derived from the local sale of iron ore made by the Lar ap Mines & Smelting Co. To secure the payment of the balance, Fonacier promised to execute in favor of Gaite a surety bond; delivered on 8 December 1954 with Fo nacier as principal and the Larap Mines and Smelting Co. and its stockholders as sureties. A second bond was executed by the parties to the first bond, on the s ame day, with the Far Eastern Surety and Insurance Co. as additional surety, but it provided that the liability of the surety company would attach only when the re had been an actual sale of iron ore by the Larap Mines & Smelting Co. for an amount of not less than P65,000. Both bond were attached and made integral parts of the Revocation of Power of Attorney and Contract. On the same day that Fonacie r revoked the power of attorney, Fonacier entered into a Contract of Mining Opera tion with Larap Mines and Smelting Co., Inc. to grant it the right to develop, ex ploit, and explore the mining claims, together with the improvements therein and the use of the name Larap Iron Mines and its goodwill, in consideration of certai n royalties. Fonacier likewise transferred, in the same document, the complete t itle to the approximately 24,000 tons of iron ore which he acquired from Gaite, to the Larap Mines & Smelting Co., in consideration for the signing by the compa ny and its stockholders of the surety bonds delivered by Fonacier to Gaite. On 8 December 1955, the bond with respect to the Far Eastern Surety and Insurance Co mpany expired with no sale of the approximately 24,000 tons of iron ore, nor had the 65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties. Whereupon, Gaite demanded from Fonacier and his sureties payment o f said amount. When Fonacier and his sureties failed to pay as demanded by Gaite , the latter filed a complaint against them in the CFI Manila (Civil Case 29310)

for the payment of the P65,000 balance of the price of the ore, consequential d amages, and attorneys fees. Judgment was, accordingly, rendered in favor of plain tiff Gaite ordering defendants to pay him, jointly and severally, P65,000 with i nterest at 6% per annum from 9 December 1955 until full payment, plus costs. Fro m this judgment, defendants jointly appealed to the Supreme Court as the claims involved aggregate to more than P200,000. The Supreme Court affirmed the decisio n appealed from, with costs against appellants. 1. Shipment or local sale of ore not a condition precedent but a suspensive period or term The shipment or local sale of the iron ore is not a condition precedent (or suspensive) to the paymen t of the balance of P65,000, but was only a suspensive period or term. What char acterizes a conditional obligation is the fact that its efficacy or obligatory f orce (as distinguished from its demandability) is subordinated to the happening of a future and uncertain event; so that if the suspensive condition does not ta ke place, the parties would stand as if the conditional obligation had never exi sted. 2. The words of the contract express no contingency in the buyers obligatio n to pay. The contract stipulates that the balance of Sixty-Five Thousand Pesos ( P65,000) will be paid out of the first letter of credit Page 13 of 87

covering the first shipment of iron ore . . . etc. There is no uncertainty that t he payment will have to be made sooner or later; what is undetermined is merely the exact date at which it will be made. By the very terms of the contract, ther efore, the existence of the obligation to pay is recognized; only its maturity o r demandability is deferred. 3. Contract of sale commutative and onerous; Each p arty assume correlative obligation and anticipate performance from the other A c ontract of sale is normally commutative and onerous: not only does each one of t he parties assume a correlative obligation (the seller to deliver and transfer o wnership of the thing sold and the buyer to pay the price), but each party antic ipates performance by the other from the very start. While in a sale the obligat ion of one party can be lawfully subordinated to an uncertain event, so that the other understands that he assumes the risk of receiving nothing for what he giv es (as in the case of a sale of hopes or expectations, emptio spei), it is not i n the usual course of business to do so; hence, the contingent character of the obligation must clearly appear. In the present case, nothing is found in the rec ord to evidence that Gaite desired or assumed to run the risk of losing his righ ts over the ore without getting paid for it, or that Fonacier understood that Ga ite assumed any such risk. The fact that appellants did put up such bonds indica tes that they admitted the definite existence of their obligation to pay the bal ance of P65,000. 4. To consider sale as a condition precedent leaves the payment at the discretion o fthe debtor To subordinate the obligation to pay the remain ing P65,000 to the sale or shipment of the ore as a condition precedent, would b e tantamount to leaving the payment at the discretion of the debtor, for the sal e or shipment could not be made unless the appellants took steps to sell the ore . Appellants would thus be able to postpone payment indefinitely. Such construct ion of the contract should be avoided. 5. Interpretation incline in favor of the greatest reciprocity of interests Assuming that there could be doubt whether by t he wording of the contract the parties intended a suspensive condition or a susp ensive period (dies ad quem) for the payment of the P65,000, the rules of interp retation would incline the scales in favor of the greatest reciprocity of interes ts, since sale is essentially onerous. The Civil Code of the Philippines, Article 1378, paragraph 1, in fine, provides if the contract is onerous, the doubt shall be settled in favor of the greatest reciprocity of interests and there can be no question that greater reciprocity obtains if the buyers obligation is deemed to be actually existing, with only its maturity (due date) postponed or deferred, t han if such obligation were viewed as non-existent or not binding until the ore was sold. 6. Sale of ore to Fonacier was a sale on credit, not an aleatory contr act The sale of the ore to Fonacier was a sale on credit, and not an aleatory co ntract where the transferor, Gaite, would assume the risk of not being paid at a ll; and that the previous sale or shipment of the ore was not a suspensive condi tion for the payment of the balance of the agreed price, but was intended merely to fix the future date of the payment. 7. Non-renewal of bond impaired the secu rities given to the creditor Appellants have forfeited the right to compel Gaite to wait for the sale of the ore before receiving payment of the balance of P65, 000, because of their failure to renew the bond of the Far Eastern Surety Compan y or else replace it with an equivalent guarantee. The expiration of the bonding companys undertaking on 8 December 1955 substantially reduced the security of th e vendors rights as creditor for the unpaid P65,000, a security that Gaite consid ered essential and upon which he had insisted when he executed the deed of sale of the ore to Fonacier. The case squarely comes under paragraphs 2 and 3 of Arti cle 1198 of the Civil Code of the Philippines which provides (2) When he does not furnish to the creditor the guaranties or securities which he has promised. (3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through fortuitous event they disappear, unless he immed iately gives new ones equally satisfactory. Appellants failure to renew or extend the surety companys bond upon its expiration plainly impaired the securities give n to the creditor (appellee Gaite), unless immediately renewed or replaced. 8. N o waiver intended by creditor Gaites acceptance of the surety companys bond with f ull knowledge that on its face it would automatically expire within one year was not a waiver of its renewal after the expiration date. No such waiver could hav

e been intended, for Gaite stood to lose and had nothing to gain thereby; and if there was any, it could be rationally explained only if the appellants had agre ed to sell the ore and pay Gaite before the surety companys bond expired on 8 Dec ember 1955. But in the latter case the defendantsappellants obligation to pay bec ame absolute after 1 year from the transfer of the ore to Fonacier by virtue of the deed. Page 14 of 87

9. No short-delivery made by Gaite This is a case of a sale of a specific mass o f fungible goods for a single price or a lump sum, the quantity of 24,000 tons of iron ore, more or less, stated in the contract, being a mere estimate by the par ties of the total tonnage weight of the mass; and second, that the evidence show s that neither of the parties had actually measured or weighed the mass, so that they both tried to arrive at the total quantity by making an estimate of the vo lume thereof in cubic meters and then multiplying it by the estimated weight per ton of each cubic meter. The sale between the parties is a sale of a specific m ass of iron ore because no provision was made in their contract for the measurin g or weighing of the ore sold in order to complete or perfect the sale, nor was the price of P75,000 agreed upon by the parties based upon any such measurement (see Art. 1480, second par., New Civil Code). The subject-matter of the sale is, therefore, a determinate object, the mass, and not the actual number of units o r tons contained therein, so that all that was required of the seller Gaite was to deliver in good faith to his buyer all of the ore found in the mass, notwiths tanding that the quantity delivered is less than the amount estimated by them (M obile Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc. 171 So. 8 72, applying art. 2459 of the Luisiana Civil Code). The contract expressly state d the amount to be 24,000 tons, more or less. Applying the tonnage factor provid ed by the chief of Mines and Metallurgical Division of the Bureau of Mines which was between 3 metric tons minimum to 5 metric tons maximum, which was near the 3.3 metric ton tonnage factor adopted by Engr. Gamatero (at the request of Krako wer, a stockholder of Larap), and if appellants witness is correct in his estimat e of 6,609 cubic meters of ore, the product is 21,809.7 tons which is not far fr om the 24,000 tons estimate. (cf. Pine River Logging & Improvement Co. vs. U. S. , 186 U.S. 279, 46, L. Ed. 1164). Thus, there was no short-delivery as would ent itle appellants to the payment of damages, nor could Gaite have been guilty of a ny fraud in making any misrepresentation to appellants as to the total quantity of ore in the stockpiles of the mining claims in question since Gaites estimate a ppears to be substantially correct. 6. Acap v. CA (GR 118114, 7 December 1995) Acap v. CA [G.R. No. 118114. December 7, 1995.] First Division, Padilla (J): 4 c oncur Facts: The title to Lot 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT R-12179. The lot has an area of 13,720 sq. m. Th e title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled Declaration of Heirship and Deed of Absolute Sale in favor of Cosme Pido. Since 1960, Teodor o Acap had been the tenant of a portion of the said land, covering an area of 9, 500 sq. m. When ownership was transferred in 1975 by Felixberto to Cosme Pido, A cap continued to be the registered tenant thereof and religiously paid his lease hold rentals to Pido and thereafter, upon Pidos death, to his widow Laurenciana. The controversy began when Pido died interstate and on 27 November 1981, his sur viving heirs executed a notarized document denominated as Declaration of Heirship and Waiver of Rights of Lot 1130 Hinigaran Cadastre, wherein they declared to ha ve adjudicated upon themselves the parcel of land in equal share, and that they waive, quitclaim all right, interests and participation over the parcel of land in favor of Edy de los Reyes. The document was signed by all of Pidos heirs. Edy de los Reyes did not sign said document. It will be noted that at the time of Co sme Pidos death, title to the property continued to be registered in the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of R ights in his favor, de los Reyes filed the same with the Registry of Deeds as pa rt of a notice of an adverse claim against the original certificate of title. Th ereafter, delos Reyes sought for Acap to personally inform him that he had becom e the new owner of the land and that the lease rentals thereon should be paid to him. Delos Reyes alleged that he and Acap entered into an oral lease agreement

wherein Acap agreed to pay 10 cavans of palay per annum as lease rental. In 1982 , Acap allegedly complied with said obligation. Page 15 of 87

In 1983, however, Acap refused to pay any further lease rentals on the land, pro mpting delos Reyes to seek the assistance of the then Ministry of Agrarian Refor m (MAR) in Hinigaran, Negros Occidental. The MAR invited Acap, who sent his wife , to a conference scheduled on 13 October 1983. The wife stated that the she and her husband did not recognize delos Reyess claim of ownership over the land. On 28 April 1988, after the lapse of four (4) years, delos Reys field a complaint f or recovery of possession and damages against Acap, alleging that as his leaseho ld tenant, Acap refused and failed to pay the agreed annual rental of 10 cavans of palay despite repeated demands. On 20 August 1991, the lower court rendered a decision in favor of delos Reyes, ordering the forfeiture of Acaps preferred rig ht of a Certificae of Land Transfer under PD 27 and his farmholdings, the return of the farmland in Acaps possession to delos Reyes, and Acap to pay P5,000.00 as attorneys fees, the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages. Aggrieved, petitioner appealed to the Court of Ap peals. Subsequently, the CA affirmed the lower courts decision, holding that de l os Reyes had acquired ownership of Lot No. 1130 of the Cadastral Survey of Hinig aran, Negros Occidental based on a document entitled Declaration of Heirship and Waiver of Rights, and ordering the dispossession of Acap as leasehold tenant of t he land for failure to pay rentals. Hence, the petition for review on certiorari . The Supreme Court granted the petition, set aside the decision of the RTC Negr os Occidental, dismissed the complaint for recovery of possession and damages ag ainst Acap for failure to properly state a cause of action, without prejudice to private respondent taking the proper legal steps to establish the legal mode by which he claims to have acquired ownership of the land in question. 1. Asserted right or claim to ownership not sufficient per se to give rise to ownership ove r the res An asserted right or claim to ownership or a real right over a thing a rising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfil ling certain conditions imposed by law. Hence, ownership and real rights are acq uired only pursuant to a legal mode or process. While title is the juridical jus tification, mode is the actual process of acquisition transfer of ownership over a thing in question. 2. Classes of modes of acquiring ownership Under Article 7 12 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e, through occupation, acquis itive prescription, law or intellectual creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum). 3. Contract of Sale; Decla ration of Heirship and Waiver of Rights an extrajudicial settlement between heirs under Rule 74 of the Rules of Court In a Contract of Sale, one of the contracti ng parties obligates himself to transfer the ownership of and to deliver a deter minate thing, and the other party to pay a price certain in money or its equival ent. On the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intesta te heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs u nder Rule 74 of the Rules of Court. In the present case, the trial court erred i n equating the nature and effect of the Declaration of Heirship and Waiver of Ri ghts the same with a contract (deed) of sale. 4. Sale of hereditary rights and w aiver of hereditary rights distinguished There is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties. The second is, technically speaking, a mode of extinction of ownership where there is an abdica tion or intentional relinquishment of a known right with knowledge of its existe nce and intention to relinquish it, in favor of other persons who are co-heirs i n the succession. In the present case, de los Reyes, being then a stranger to th e succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale, or a donation, or any other derivative mode of acquiring owne rship. 5. Summon of Ministry of Agrarian Reform does not conclude actuality of s ale nor notice of such sale The conclusion, made by the trial and appellate cour

ts, that a sale transpired between Cosme Pidos heirs and de los Reyes and that Acap acquired actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss de los Reyes claim over the lot in question, has no ba sis both in fact and in law. 6. A notice of adverse claim does not prove ownersh ip over the lot; Adverse claim not sufficient to cancel the certificate of tile and for another to be issued in his name A notice of adverse claim, by its natur e, does not however prove private respondents ownership over the tenanted lot. A n otice of adverse claim is nothing but a notice of a claim adverse to the registe red owner, the validity of which is yet to be established in court at some futur e date, and is no better than a notice of lis pendens which is a notice of a cas e already pending Page 16 of 87

in court. In the present case, while the existence of said adverse claim was duly proven (thus being filed with the Registry of Deeds which contained the Declara tion of Heirship with Waiver of rights an was annotated at the back of the Origi nal Certificate of Title to the land in question), there is no evidence whatsoev er that a deed of sale was executed between Cosme Pidos heirs and de los Reyes tr ansferring the rights of the heirs to the land in favor of de los Reyes. De los Reyes right or interest therefore in the tenanted lot remains an adverse claim wh ich cannot by itself be sufficient to cancel the OCT to the land and title to be issued in de los Reyes name. 7. Transaction between heirs and de los Reyes bindi ng between parties, but cannot affect right of Acap to tenanted land without cor responding proof thereof While the transaction between Pidos heirs and de los Rey es may be binding on both parties, the right of Acap as a registered tenant to t he land cannot be perfunctorily forfeited on a mere allegation of de los Reyes ow nership without the corresponding proof thereof. Acap had been a registered tena nt in the subject land since 1960 and religiously paid lease rentals thereon. In his mind, he continued to be the registered tenant of Cosme Pido and his family (after Pidos death), even if in 1982, de los Reyes allegedly informed Acap that he had become the new owner of the land. 8. No unjustified or deliberate refusal to pay the lease rentals to the landowner / agricultural lessor De los Reyes ne ver registered the Declaration of Heirship with Waiver of Rights with the Regist ry of Deeds or with the MAR, but instead, he filed a notice of adverse claim on the said lot to establish ownership thereof (which cannot be done). It stands to reason, therefore, to hold that there was no unjustified or deliberate refusal by Acap to pay the lease rentals or amortizations to the landowner/agricultural lessor which, in this case, de los Reyes failed to established in his favor by c lear and convincing evidence. This notwithstanding the fact that initially, Acap may have, in good faith, assumed such statement of de los Reyes to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982 to latte r. For in 1983, it is clear that Acap had misgivings over de los Reyes claim of o wnership over the said land because in the October 1983 MAR conference, his wife Laurenciana categorically denied all of de los Reyes allegations. In fact, Acap even secured a certificate from the MAR dated 9 May 1988 to the effect that he c ontinued to be the registered tenant of Cosme Pido and not of delos Reyes. 9. Sa nction of forfeiture of tenants preferred right and possession of farmholdings sh ould not be applied The sanction of forfeiture of his preferred right to be issu ed a Certificate of Land Transfer under PD 27 and to the possession of his farmh oldings should not be applied against Acap, since de los Reyes has not establish ed a cause of action for recovery of possession against Acap. 7. Quijada v. CA (GR 126444, 4 December 1998) Quijada v. CA [G.R. No. 126444. December 4, 1998.] Second Division, Martinez (J) : 3 concur Facts: Petitioners (Alfonso, Cresente, Reynalda, Demetrio, Eliuteria, Eulalio, and Warlito) are the children of the late Trinidad Corvera Vda. de Qui jada. Trinidad was one of the heirs of the late Pedro Corvera and inherited from the latter the 2-hectare parcel of land subject of the case, situated in the ba rrio of San Agustin, Talacogon, Agusan del Sur. On 5 April 1956, Trinidad Quijad a together with her sisters Leonila Corvera Vda. de Sequea and Paz Corvera Cabilt es and brother Epapiadito Corvera executed a conditional deed of donation of the 2-hectare parcel of land in favor of the Municipality of Talacogon, the conditi on 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, Tri nidad remained in possession of the parcel of land despite the donation. On 29 J uly 1962, Trinidad sold 1 hectare of the subject parcel of land to Regalado Mond ejar. Subsequently, Trinidad verbally sold the remaining 1 hectare to Mondejar w ithout 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, fil ed a complaint for forcible entry against Mondejar, which complaint was, however

, dismissed for failure to prosecute. In 1987, the proposed provincial high scho ol having failed to materialize, the Sangguniang Bayan of the municipality of Ta lacogon enacted a resolution reverting the 2 hectares of land donated back to th e donors. In the meantime, Mondejar sold portions of the land to Fernando Bautis ta, Rodolfo Goloran, Efren Guden, and Ernesto Goloran. On 5 July 1988, the petit ioners filed a complaint against private respondents (Mondejar, Rodulfo and Erne sto Goloran, Asis, Ras, Abiso, Bautista, Macasero and Maguisay) for quieting of title, recovery of possession and ownership of parcels of land with claim for at torneys fees and damages. The trial court rendered judgment in favor of the petit ioners, holding that Trinidad Quijada did not have legal title or right to sell the land to Mondejar as it belongs to the Municipality of Talacogon at that time , and that the deed of sale in favor of Mondejar did not carry the conformity an d acquiescence of her children considering that Trinidad was already 63 years ol d and a widow. The trial court ordered the defendants (private respondents), and any person acting in defendants behalf to return and vacate the 2 hectares of la nd to the plaintiff, and to remove their improvements constructed Page 17 of 87

on the lot; ordered the cancellation of the deed of sale executed by Trinidad to Mondejar, as well as the deeds of sale/relinquishments executed by Mondejar to the other defendants; and ordered the defendants to pay the plaintiffs, in solid um, the amount of P10,000, P8,000, and P30,000 as attorneys fees, expenses of lit igation and moral damages, respectively. On appeal, the Court of Appeals reverse d and set aside the judgment a quo ruling that the sale made by Trinidad Quijada to respondent Mondejar was valid as the former retained an inchoate interest on the lots by virtue of the automatic reversion clause in the deed of donation. T hereafter, petitioners filed a motion for reconsideration. When the CA denied th eir motion, petitioners instituted a petition for review to the Supreme Court. T he Supreme Court affirmed the assailed decision of the Court of Appeals. 1. Cond ition valid in donation if not contrary to law, morals, good customs, public ord er or public policy The donation made on April 5, 1956 by Trinidad Quijada and h er brother and sisters was subject to the condition that the donated property sh all be used solely and exclusively as a part of the campus of the proposed Provin cial High School in Talacogon. The donation further provides that should the propo sed Provincial High School be discontinued or if the same shall be opened but fo r some reason or another, the same may in the future be closed the donated proper ty shall automatically revert to the donor. Such condition, not being contrary t o law, morals, good customs, public order or public policy was validly imposed i n the donation. 2. Donation as mode of acquiring ownership When the Municipalitys acceptance of the donation was made known to the donor, the former became the n ew owner of the donated property, donation being a mode of acquiring and transmi tting ownership, notwithstanding the condition imposed by the donee. The donatio n is perfected once the acceptance by the donee is made known to the donor. Acco rdingly, ownership is immediately transferred to the latter and that ownership w ill only revert to the donor if the resolutory condition is not fulfilled. 3. Co ndition to construct school is a resolutory condition The resolutory condition, in the present case, is the construction of the school. It has been ruled that w hen a person donates land to another on the condition that the latter would buil d upon the land a school, the condition imposed is not a condition precedent or a suspensive condition but a resolutory one. So long as the resolutory condition subsists and is capable of fulfillment, the donation remains effective and the donee continues to be the owner subject only to the rights of the donor or his s uccessors-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 reasonab le period. Such period, however, became irrelevant herein when the donee manifes ted that it cannot comply with the condition and the same was made known to the donor. Only then, when the non-fulfillment of the resolutory condition was broug ht to the donors knowledge, that ownership of the donated property reverted to th e donor as provided in the automatic reversion clause of the deed of donation. 4 . Inchoate interest may be subject of contract including a contract of sale; Int erest over property under conditional deed of donation, not the land itself 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 th e subject of contracts including a contract of sale. In the present case, howeve r, what the donor sold was the land itself which she no longer owns. It would ha ve 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 owners hip arising from the nonfulfillment of the resolutory condition. 5. Laches, elem ents Laches presupposes failure or neglect for an unreasonable and unexplained l ength of time, to do that which, by exercising due diligence, could or should ha ve been done earlier; it is negligence or omission to assert a right within a rea sonable time, thus, giving rise to a presumption that the party entitled to asse rt it either has abandoned or declined to assert it. Its essential elements of (a ) Conduct on the part of the defendant, or of one under whom he claims, giving r ise to the situation complained of; (b) Delay in asserting complainants right aft er he had knowledge of the defendants conduct and after he has an opportunity to sue; (c) Lack of knowledge or notice on the part of the defendant that the compl

ainant would assert the right on which he bases his suit; and, (d) Injury or pre judice to the defendant in the event relief is accorded to the complainant are ab sent in this case. In the present case, petitioners cause of action to quiet titl e commenced only when the property reverted to the donor and/or his successors-i n-interest in 1987, not in the 1960s when 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. 6. Sale, be ing a consensual contract, is perfected by mere consent; Seller need not own pro perty when sold but when delivered Page 18 of 87

Sale, being a consensual contract, is perfected by mere consent, which is manife sted the moment there is a meeting of the minds as to the offer and acceptance t hereof on three (3) elements: subject matter, price and terms of payment of the price. Ownership by the seller on the thing sold at the time of the perfection o f the contract of sale is not an element for its perfection. What the law requir es is that the seller has the right to transfer ownership at the time the thing sold is delivered. Perfection per se does not transfer ownership which occurs up on the actual or constructive delivery of the thing sold. A perfected contract o f sale cannot be challenged on the ground of non-ownership on the part of the se ller at the time of its perfection; hence, the sale is still valid. 7. Sellers ti tle passes by operation of law to the buyer The consummation of the perfected co ntract is another matter. It occurs upon the constructive or actual delivery of the subject matter to the buyer when the seller or her successors-in-interest su bsequently acquires ownership thereof. In the present case, such circumstance ha ppened in this case when petitioners (Trinidads heirs) became the owners of the s ubject property upon the reversion of the ownership of the land to them. Consequ ently, ownership is transferred to Mondejar and those who claim their right from him. Article 1434 of the New Civil Code supports the ruling that the sellers titl e passes by operation of law to the buyer. This rule applies not only when the su bject matter of the contract of sale is goods, but also to other kinds of proper ty, including real property. 8. Article 1409 (4) does not provide that the prope rties of a municipality are outside the commerce of man; Objects outside of the commerce of man are those which cannot be appropriated 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, are outside the commerce of men; so as to render the contract involving the same inexistent and void from the beginning when sold. In the present case, the lots were conditionally owned by the munici pality. To rule that the donated properties are outside the commerce of men woul d 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 outside the commerce of man are those which cannot be appropriate d, such as the open seas and the heavenly bodies. 9. No factual or legal basis f or the award of fees and damages There is neither factual nor legal basis for th e trial courts award of attorneys fees, litigation expenses and moral damages. Att orneys fees and expenses of litigation cannot, following the general rule in Arti cle 2208 of the New Civil Code, be recovered in the present case, there being no stipulation to that effect and the case does not fall under any of the exceptio ns. It cannot be said that private respondents had compelled petitioners to liti gate with third persons. Neither can it be ruled that the former acted in gross a nd evident bad faith in refusing to satisfy the latters claims considering that pr ivate 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 jus tified as none of the circumstances enumerated under Articles 2219 27 and 2220 2 8 of the New Civil Code concur in this case. 8. Celestino v. CIR (GR L-8506, 31 August 1956) Celestino Co v. Collector of Internal Revenue [G.R. No. L-8506. August 31, 1956. ] First Division, Bengzon (J): 7 concur Facts: Celestino Co & Company is a duly registered general copartnership doing business under the trade name of Oriental Sash Factory. From 1946 to 1951 it paid percentage taxes of 7% on the gross recei pts of its sash, door and window factory, in accordance with section 186 of the National Revenue Code imposing taxes on sales of manufactured articles. However in 1952 it began to claim liability only to the contractors 3% tax (instead of 7% ) under section 191 of the same Code; and having failed to convince the Bureau o f Internal Revenue, it brought the matter to the Court of Tax Appeals, where it also failed. Hence, the appeal. The Supreme Court affirmed the appealed decision . 1. Business name and income militates against claim as ordinary contractor The

company has taken all the trouble and expense of registering a special trade na me for its sash business and has ordered company stationery carrying the bold pr int Oriental Sash Factory (Celestino Co & Company, Prop.) 926 Raon St. Quiapo, Ma nila, Tel. No. 33076, Manufacturers of all kinds of doors, windows, sashes, furn itures, etc. used season-dried and kiln-dried lumber, of the best quality workma nship. It is unlikely that these act were made solely for the purpose of supplyin g the needs for doors, windows and sash of its special and limited customers. Fu rther, the Company has chosen for its tradename and has offered itself to the pu blic as a Factory, which means it is out to do business, in its chosen lines on a big scale. Moreover, as shown from the investigation of the Companys books of acc ounts (for transactions covering the period of 1 January 1952 to 30 September 19 52), it sold sash, doors and windows worth P188,754.69. It will be difficult to believe that such amount that ran to six figures was derived entirely from its f ew customers who made special orders. Thus, Celestino Co & Company habitually Page 19 of 87

makes sash, windows and doors, as it has represented in its stationery and adver tisements to the public, and it has admitted by the appellant itself that the co mpany manufactures. 2. Construction work contractors defined Construction work con tractors are those who alter or repair buildings, structures, streets, highways, sewers, street railways, railroads, logging roads, electric, steam or water pla nts telegraph and telephone plants and lines, electric lines or power lines, and includes any other work for the construction, altering or repairing for which m achinery driven by mechanical power is used. (Payton vs. City of Anadardo 64 P. 2d 878, 880, 179 Okl. 68). 3. Nature of business does not fall in any of the occ upation that may be classified as contractor within the purview of Section 191 o f the National Internal Revenue Code Even if it were to believe that the company does not manufacture ready-made sash, doors and windows for the public and that it makes these articles only upon special order of its customers, that does not make it a contractor within the purview of section 191 of the National Internal Revenue Code. There are no less than fifty occupations enumerated in the said s ection of the National Internal Revenue Code subject to percentage tax, not one under which the business enterprise of petitioner could appropriately fall. It w ould require a stretch of the law to make the business of manufacturing sash, do ors and windows upon special order of customers fall under the category of road, building, navigation, artesian well, water works and other construction work con tractors. 4. Percentage tax imposed under Section 191 of the Tax Code a tax on s ales of service, while tax imposed by Section 186 a tax on original sales of art icles The percentage tax imposed in section 191 of the Tax Code is generally a t ax on the sales of services, in contradiction with the tax imposed in section 18 6 of the same Code which is a tax on the original sales of articles by the manuf acturer, producer or importer. (Formillezas Commentaries and Jurisprudence on the National Internal Revenue Code, Vol II, p. 744). The fact that the articles sol d are manufactured by the seller does not exchange the contract from the purview of section 186 of the National Internal Revenue Code as a sale of articles. 5. Custom specifications required by customer does not alter character of business, the company does not become an employee or servant of the customer Nobody will say that when a sawmill cuts lumber in accordance with the peculiar specificatio ns of a customer, sizes not previously held in stock for sale to the public, it thereby becomes an employee or servant of the customer, not the seller of lumber . The same consideration applies to this sash manufacturer. The Sash Factory doe s nothing more than sell the goods that it mass-produces or habitually makes; sa sh, panels, mouldings, frames, cutting them to such sizes and combining them in such forms as its customers may desire. 6. Installation of window panels not con struction work in common parlance Petitioners idea of being a contractor doing co nstruction jobs is untenable. Nobody would regard the doing of two window panels as construction work in common parlance. 7. Contract of sale distinguished from a contract for a piece of work Article 1467 of the New Civil Code provides that a contract for the delivery at a certain price of an article which the vendor in the ordinary course of his business manufactures or procures for the general ma rket, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the customer and upon his spe cial order, and not for the general market, it is contract for a piece of work. I n the present case, it is apparent that the Factory did not merely sell its serv ices to Teodoro & Co. because it also sold the materials. When it sold materials ordinarily manufactured by it (sash, panels, mouldings), although in such form or combination as suited the fancy of the purchaser, such new form does not dive st the Factory of its character as manufacturer. Neither does it take the transa ction out of the category of sales under Article 1467 because although the Facto ry does not, in the ordinary course of its business, manufacture and keep on sto ck doors of the kind sold to Teodoro, it could stock and/or probably had in stoc k the sash, mouldings and panels it used therefor. 8. Contract for a piece of wo rk in Factory happens if the use of extraordinary or additional equipment is req uired or if it involves services not generally performed by it When the Factory accepts a job that requires the use of extraordinary or additional equipment, or involves services not generally performed by it, it thereby contracts for a pie

ce of work, i.e. filling special orders within the meaning of Article 1467. In t he present case, however, the orders exhibited were not shown to be special. The y were merely orders for work, regular work. 9. Transfers under Section 186 of t he Tax Code If all the work of appellant is only to fill orders previously made, such orders should not be called special work, but regular work; and supposing for the moment that the transactions were not sales, they were neither lease of services nor contract jobs by a Page 20 of 87

contractor. Still, as the doors and windows had been admittedly manufactured by th e Sash Factory, such transactions could be, and should be taxed as transfers there of under section 186 of the National Revenue Code. 9. CIR v. Engineering Equipment (GR L-27044, 30 June 1975) CIR v. Engineering Equipment and Supply [G.R. No. L-27044. June 30, 1975.] Engin eering Equipment and Supply v. CIR [G.R. No. L-27452. June 30, 1975.] First Divi sion, Esguerra (J): 4 concur Facts: Engineering Equipment and Supply Co. is an e ngineering and machinery firm; and being an operator of an integrated engineerin g ship, is engaged in the design and installation of central type air conditioni ng system, pumping plants and steel fabrications. On 27 July 1956, one Juan de l a Cruz, wrote the then Collector, now Commissioner, of Internal Revenue denounci ng the Company for tax evasion by misdeclaring its imported articles and failing to pay the correct percentage taxes due thereon in connivance with its foreign suppliers. The Company was likewise denounced to the Central Bank for alleged fr aud in obtaining its dollar allocations. Acting on these denunciations, a raid a nd search was conducted by a joint team of Central Bank, (CB), National Bureau o f Investigation (NBI) and Bureau of Internal Revenue (BIR) agents on 27 Septembe r 1956, on which occasion voluminous records of the firm were seized and confisc ated. On 30 September 1957, revenue examiners reported and recommended to the th en Collector, now Commissioner, of Internal Revenue that the Company be assessed for P480,912.01 as deficiency advance sales tax on the theory that it misdeclar ed its importation of air conditioning units and parts and accessories thereof w hich are subject to tax under Section 185(m) 1 of the Tax Code, instead of Secti on 186 of the same Code. This assessment was revised on 23 January 1959, in line with the observation of the Chief, BIR Law Division, and was raised to P916,362 .56 representing deficiency advance sales tax and manufacturers sales tax, inclu sive of the 25% and 50% surcharges. On 3 March 1959, the Commissioner assessed a gainst, and demanded upon, the Company payment of the increased amount and sugge sted that P10,000 be paid as compromise in extrajudicial settlement of the Compa nys penal liability for violation of the Tax Code. The firm, however, contested t he tax assessment and requested that it be furnished with the details and partic ulars of the Commissioners assessment. The Commissioner replied that the assessme nt was in accordance with law and the facts of the case. On 30 July 1959, the Co mpany appealed the case to the Court of Tax Appeals (CTA) and during the pendenc y of the case the investigating revenue examiners reduced the Companys deficiency tax liabilities from P916,362.65 to P740,587.86, based on findings after confer ences had with the Companys Accountant and Auditor. On 29 November 1966, the CTA rendered its decision, modifying the decision appealed from, declaring the Compa ny as contractor exempt from the deficiency manufacturers sales tax covering the period from 1 June 1948 to 2 September 1956 but ordered said company to pay the Commissioner, or his collection agent, the sum of P174,141.62 as compensating t ax and 25% surcharge for the period from 1953 to September 1956; With costs agai nst the Company. The Commissioner, not satisfied with the decision of the CTA, a ppealed to the Supreme Court on 18 January 1967, (GR L-27044). On the other hand , the Company, on 4 January 1967, filed with the CTA a motion for reconsideratio n; which was denied on 6 April 1967, prompting the Company to file also with the Supreme Court its appeal (GR L-27452). Since the two cases involve the same par ties and issues, the Court decided to consolidate and jointly decide them. The S upreme Court affirmed the decision appealed from with modification that the Comp any is also made liable to pay the 50% fraud surcharge. 1. Manufacturer defined Section 194 of the Tax code provides that Manufacturer includes every person who by physical or chemical process alters the exterior texture or form or inner subst ance of any raw material or manufactured or partially manufactured products in s uch manner as to prepare it for a special use or uses to which it could not have been put in its original condition, or who by any such process alters the quali ty of any such material or manufactured or partially manufactured product so as

to reduce it to marketable shape, or prepare it for any of the uses of industry, or who by any such process combines any such raw material or manufactured or pa rtially manufactured products with other materials or products of the same or of different kinds and in such manner that the finished product of such process of manufacture can be put to special use or uses to which such raw material or man ufactured or partially manufactured products in their original condition could n ot have been put, and who in addition alters such raw material or manufactured o r partially manufactured products, or combines the same to produce such finished products for the purpose of their sale or distribution to others and not for hi s own use or consumption. 2. Test to distinguish contract of sale and contract fo r work, labor and materials The distinction between a contract of sale and one f or work, labor and materials is tested by the inquiry whether the thing Page 21 of 87

transferred is one not in existence and which never would have existed but for t he order of the party desiring to acquire it, or a thing which would have existe d and has been the subject of sale to some other persons even if the order had n ot been given. If the article ordered by the purchaser is exactly such as the pl aintiff makes and keeps on hand for sale to anyone, and no change or modificatio n of it is made at defendants request, it is a contract of sale, even though it m ay be entirely made after, and in consequence of, the defendants order for it. 3 . Contract of sale distinguished from a contract for a piece of work The New Civ il Code distinguishes a contract of sale from a contract for a piece of work. Ar ticle 1467 provides that a contract for the delivery at a certain price of an art icle which the vendor in the ordinary course of his business manufactures or pro cures for the general market, whether the same is on hand at the time or not, is a contract of sale, but if the goods are to be manufactured specially for the c ustomer and upon his special order and not for the general market, it is a contr act for a piece of work. 4. Contractor defined; Test to determine contractor The word contractor has come to be used with special reference to a person who, in the pursuit of the independent business, undertakes to do a specific job or piece o f work for other persons, using his own means and methods without submitting him self to control as to the petty details. (Araas, Annotations and Jurisprudence on the National Internal Revenue Code, p. 318, par. 191(2), 1970 Ed.) The true tes t of a contractor as was held in the cases of Luzon Stevedoring Co., vs. Trinida d 43, Phil. 803, 807-808, and La Carlota Sugar Central vs. Trinidad 43, Phil. 81 6, 819, would seem to be that he renders service in the course of an independent occupation, representing the will of his employer only as to the result of his work, and not as to the means by which it is accomplished. 5. Engineering Equipm ent Co. is a contractor and not a manufacturer The Company did not manufacture a ir conditioning units for sale to the general public, but imported some items (a s refrigeration compressors in complete set, heat exchangers or coils), which we re used in executing contracts entered into by it. The Company fabricates, assem bles, supplies and installs in the buildings of its various customers the centra l type air conditioning system; prepares the plans and specifications therefor w hich are distinct and different from each other; the air conditioning units and spare parts or accessories thereof used are not the window type of air condition er which are manufactured, assembled and produced locally for sale to the genera l market; and the imported air conditioning units and spare parts or accessories thereof are supplied and installed upon previous orders of its customers confor mably with their needs and requirements. The facts and circumstances support the theory that the Company is a contractor rather than a manufacturer. 6. Engineeri ng Equipment Co. subject to contractors tax (Section 191); As it imports goods n ot subject to sales tax, it also liable to 30% compensation tax (Section 190 in relation to Section 18[m], but without the 50% mark up provided in Section 183[b ] The Company, being a contractor and not a manufacturer, is subject to the cont ractors tax prescribed by Section 191 of the Code and not to the advance sales t ax imposed by Section 185(m) in relation to Section 194 of the same Code. Since it has been proved that the Company imported air conditioning units parts or acc essories thereof for use in its construction business and these items were never sold resold bartered or exchanged the Company should be held liable to pay taxe s prescribed under Section 190 of the Code. This compensating tax is not a tax o n the importation of goods but a tax on the use of imported goods not subject to sales tax. The Company, therefore, should be held liable to the payment of 30% compensating tax in accordance with Section 190 of the Tax Code in relation to S ection 185(m) of the same, but without the 50% mark up provided in Section 183(b ). 7. Air conditioning equipment grouped into 2 classifications, unitary and cen tral system There is a great variety of equipment in use to do air conditioning. Some devices are designed to serve a specific type of space; others to perform a specific function; and still others as components to be assembled into a tailo r-made system to fit a particular building. Generally, however, they may be grou ped into two classifications, unitary and central system. The unitary equipment classification includes those designs such as room air conditioner, where all of the functional components are included in one or two packages, and installation

involves only making service connection such as electricity, water and drains. Central-station systems, often referred to as applied or built-up systems, requi re the installation of components at different points in a building and their in terconnection. The room air conditioner is a unitary equipment designed specific ally for a room or similar small space. It is unique among air conditioning equi pment in two respects: It is in the electrical appliance classification, and it is made by a great number of manufacturers (Engineering handbook by LC Morrow). The central type air conditioning system is an engineering job that requires pla nning and meticulous layout due to the fact that usually architects assign defin ite space and usually the spaces they assign are very small and of various sizes , in buildings dissimilar to existing buildings. The window type air conditioner is a sort of compromise; it cannot control humidity to the desired level; rathe r the manufacturers, by hit and miss, were able to satisfy themselves that the d esired comfort within a room could be made by a Page 22 of 87

definite setting of the machine as it comes from the factory; whereas the centra l type system definitely requires an intelligent operator. 8. Celestino Co v. CI R, Advertising Associates v. Collector of customs, Manila Trading v. City of Man ila not applicable The Company did not and was not engaged in the manufacture of air conditioning units but had its services contracted for the installation of a central system. The cases cited by the Commissioner (Advertising Associates, I nc. vs. Collector of Customs, 97, Phil. 636; Celestino Co & Co. vs. Collector of Internal Revenue, 99 Phil. 841 and Manila Trading & Supply Co. vs. City of Mani la, 56 O.G. 3629), are not in point. Neither are they applicable because the fac ts in all the cases cited are entirely different. In Celestino Co, the Court hel d the taxpayer to be a manufacturer rather than a contractor of sash, doors and windows manufactured in its factory. From the very start, Celestino Co intended itself to be a manufacturer of doors, windows, sashes etc. as it did register a special trade name for its sash business and ordered company stationery carrying the bold print ORIENTAL SASH FACTORY (CELESTINO CO AND COMPANY, PROP.) 926 Raon St., Quiapo, Manila, Tel. No. etc., Manufacturers of All Kinds of Doors, Windows . . . Likewise, Celestino Co never put up a contractors bond as required by Artic le 1729 of the Civil Code. Also, as a general rule, sash factories receive order s for doors and windows of special design only in particular cases, but the bulk of their sales is derived from ready-made doors and windows of standard sizes f or the average home, which sales were reflected in their books of accounts totalli ng P118,754.69 for the period of only nine (9) months. The Court found said sum difficult to have been derived from its few customers who placed special orders for these items. In the present case, the Company advertised itself as Engineeri ng Equipment and Supply Company, Machinery Mechanical Supplies, Engineers, Contr actors, 174 Marques de Comillas, Manila and not as manufacturers. It likewise pa id the contractors tax on all the contracts for the design and construction of c entral system. Similarly, ot did not have ready-made air conditioning units for sale. 9. SM Lawrence Co. v. McFarland, CIR of the State of Tennessee and McCanle ss is on all fours with present case The case of S.M. Lawrence Co. vs. McFarland , Commissioner of Internal Revenue of the State of Tennessee and McCanless, 355 SW 2d, 100, 101, is the one on all fours with the present case, where the cause p resents the question of whether one engaged in the business of contracting for t he establishment of air conditioning system in buildings, which work requires, i n addition to the furnishing of a cooling unit, the connection of such unit with electrical and plumbing facilities and the installation of ducts within and thr ough walls, ceilings and floors to convey cool air to various parts of the build ing, is liable for sale or use tax as a contractor rather than a retailer of tan gible personal property. Appellee took the position that appellant was not engag ed in the business of selling air conditioning equipment as such but in the furn ishing to its customers of completed air conditioning systems pursuant to contra ct, was a contractor engaged in the construction or improvement of real property , and as such was liable for sales or use tax as the consumer of materials and e quipment used in the consummation of contracts, irrespective of the tax status o f its contractors. To transmit the warm or cool air over the buildings, the appe llant installed system of ducts running from the basic units through walls, ceil ings and floors to registers. The contract called for completed air conditioning systems which became permanent part of the buildings and improvements to the re alty. The Court held the appellant a contractor which used the materials and the equipment upon the value of which the tax herein imposed war levied in the perfo rmance of its contracts with its customers, and that the customers did not purch ase the equipment and have the same installed. 10. Engineering Equipment had int ent to misdeclare its importation as evidenced by its communications; Company li able to 50% fraud surcharge The communications (between the Company and various suppliers such as Trane Co., Acme Industries Inc., and Owens-Corning Fiberglass Corp.) presented as exhibits in the case were strongly indicative of the fraudul ent intent of the Company to misdeclare its importation of air conditioning unit s and spare parts or accessories thereof to evade payment of the 30% tax. Since the commission of fraud is altogether too glaring, the Court cannot agree with t he CTA in absolving the Company from the 50% fraud surcharge, otherwise it will

be tantamount to giving premium to a plainly intolerable act of tax evasion. 11. Company liable to 25% compensation tax; Section 190 as amended The original tex t of Section 190 of Commonwealth Act 466, otherwise know as the National Interna l Revenue Code, as amended by CA 503, effective on 1 October 1939, does not prov ide for the filing of a compensating tax return and payment of the 25% surcharge for late payment thereof. Under the original text of Section 190 of the Tax Cod e, as amended by CA 503, the contention of the Company that it is not subject to the 25% surcharge appears to be legally tenable. However, Section 190 of the Ta x Code was subsequently amended by RA 48, 253, 361, 1511 and 1612 effective 1 Oc tober 1946, 1 July 1948, 9 June 1949, 16 June 1956 and 24 August 1956 respective ly, which invariably provides among others, that if any article withdrawn from th e customhouse or the post office without payment of the compensating tax is subs equently used by the importer for other purposes corresponding entry should be m ade in the looks of accounts if any are kept or a written notice thereof sent to the Collector of Internal Revenue and payment of the corresponding compensating tax made within 30 days from the date of such entry or notice and if tax is not paid within such period the amount of the tax shall be increased by 25% the inc rement to be a part of the tax, and that since the imported air conditioning units and spare parts or accessories thereof are subject to the Page 23 of 87

compensating tax of 30% as the same were used in the construction business of En gineering, it is incumbent upon the latter to comply with the aforequoted requir ement of Section 190 of the Code, by posting in its books of accounts or notifyi ng the Collector of Internal Revenue that the imported articles were used for ot her purposes within 30 days. . . . Consequently, as the 30% compensating tax was not paid by petitioner within the time prescribed by Section 190 of the Tax Cod e as amended, it is therefore subject to the 25% surcharge for delinquency in th e payment of the said tax. 12. Prescription not yet set in; Prescription of tax a ssessment is 10 years if based on false or fraudulent return to evade tax A revi ew of the record reveals that the Company filed a tax return or declaration with the Bureau of Customs before it paid the advance sales tax of 7%, and the decla ration filed reveals that it did in fact misdeclare its importations. Section 33 2 (a) of the Tax Code therefore is applicable. Section 332 (a) provides for the exceptions as to period of limitation of assessment and collection of taxes, pro viding that (a) in the case of a false or fraudulent return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a proceeding i n court for the collection of such tax may be begun without assessment at any ti me within ten years after the discovery of the falsity, fraud or omission. Thus, considering the preponderance of evidence of fraud with the intent to evade the higher rate of percentage tax due from the Company, the tax assessment was made within the period prescribed by law and prescription had not set in against the Government. 10. Engineering Machinery v. CA (GR 52267, 24 January 1996) Engineering and Machinery Corp. v. CA [G.R. No. 52267. January 24, 1996.] Third Division, Panganiban (J): 3 concur Facts: Pursuant to the contract dated 10 Sept ember 1962 between the Engineering and Machinery Corporation (the Corporation) a nd Almeda, the former undertook to fabricate, furnish and install the air-condit ioning system in the latters building along Buendia Avenue, Makati in considerati on of P12,000.00. The Corporation was to furnish the materials, labor, tools and all services required in order to so fabricate and install said system. The sys tem was completed in 1963 and accepted by Almeda, who paid in full the contract price. On 2 September 1965, Almeda sold the building to the National Investment and Development Corporation (NIDC). The latter took possession of the building b ut on account of NIDCs noncompliance with the terms and conditions of the deed of sale, Almeda was able to secure judicial rescission thereof. The ownership of t he building having been decreed back to Almeda, he re-acquired possession someti me in 1971. It was then that he learned from some NIDC employees of the defects of the air-conditioning system of the building. Acting on this information, Alme da commissioned Engineer David R. Sapico to render a technical evaluation of the system in relation to the contract with the Corporation. In his report, Sapico enumerated the defects of the system and concluded that it was not capable of mai ntaining the desired room temperature of 76F 2F. On the basis of this report, Almed a filed on 8 May 1971 an action for damages against the Corporation with the the n CFI Rizal (Civil Case 14712). The complaint alleged that the air-conditioning system installed by the Corporation did not comply with the agreed plans and spe cifications, hence, Almeda prayed for the amount of P210,000.00 representing the rectification cost, P100,000.00 as damages and P15,000.00 as attorneys fees. The Corporation moved to dismissed the case, alleging prescription, but which was d enied by the Court. Thereafter, Almeda filed an ex-parte motion for preliminary attachment on the strength of the Corporations own statement to the effect that i t had sold its business and was no longer doing business in Manila. The trial co urt granted the motion and, upon Almedas posting of a bond of P50,000.00, ordered the issuance of a writ of attachment. In due course, and on 15 April 1974, the trial court rendered a decision, which ordered the Corporation to pay Almeda the amount needed to rectify the faults and deficiencies of the air-conditioning sy stem installed by the Corporation in Almedas building, plus damages, attorneys fee

s and costs). Petitioner appealed to the Court of Appeals, which affirmed on 28 November 1978 the decision of the trial court. Hence, it instituted a petition f or review on certiorari under Rule 45 of the Rules of Court. The Supreme Court d enied the petition and affirmed the decision assailed; without costs. 1. The Cou rts power to review The Supreme Court reviews only errors of law in petitions for review on certiorari under Rule 45. It is not the function of this Court to reexamine the findings of fact of the appellate court unless said findings are not supported by the evidence on record or the judgment is based on a misapprehensi on of facts. The Court has consistently held that the factual findings of the tr ial court, as well as the Court of Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional circumstances where a reassessment of facts found by the lower courts is allowed are when the conclusion is a find ing grounded entirely on speculation, surmises or conjectures; when the inferenc e made is manifestly absurd, mistaken or impossible; when there is grave abuse o f discretion in the appreciation of facts; when the judgment is premised on a mi sapprehension of facts; when the findings went beyond the issues of the case and the same are contrary to the admissions of Page 24 of 87

both appellant and appellee. After a careful study of the case at bench, we find none of the above grounds present to justify the re-evaluation of the findings of fact made by the courts below. 2. Contract of a piece of work defined Article 1713 of the Civil Code defines a contract for a piece of work as by the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contract or may either employ only his labor or skill, or also furnish the material. 3. Co ntract for a piece of work distinguished from a contract of sale A contract for a piece of work, labor and materials may be distinguished from a contract of sal e by the inquiry as to whether the thing transferred is one not in existence and which would never have existed but for the order of the person desiring it . In such case, the contract is one for a piece of work, not a sale. On the other ha nd, if the thing subject of the contract would have existed and been the subject of a sale to some other person even if the order had not been given, then the c ontract is one of sale. A contract for the delivery at a certain price of an arti cle which the vendor in the ordinary course of his business manufactures or proc ures for the general market whether the same is on hand at the time or not is a contract of sale, but if the goods are to be manufactured specially for the cust omer and upon his special order, and not for the general market, it is a contrac t for a piece of work (Art. 1467, Civil Code). The mere fact alone that certain articles are made upon previous orders of customers will not argue against the i mposition of the sales tax if such articles are ordinarily manufactured by the t axpayer for sale to the public. (Celestino Co. vs. Collector, 99 Phil. 8411). To Tolentino, the distinction between the two contracts depends on the intention of the parties. Thus, if the parties intended that at some future date an object h as to be delivered, without considering the work or labor of the party bound to deliver, the contract is one of sale. But if one of the parties accepts the unde rtaking on the basis of some plan, taking into account the work he will employ p ersonally or through another, there is a contract for a piece of work. 4. Contra ct in question is one for a piece of work The contract in question is one for a piece of work. It is not the Corporations line of business to manufacture air-con ditioning systems to be sold off-the-shelf. Its business and particular field of e xpertise is the fabrication and installation of such systems as ordered by custo mers and in accordance with the particular plans and specifications provided by the customers. Naturally, the price or compensation for the system manufactured and installed will depend greatly on the particular plans and specifications agr eed upon with the customers. 5. Obligations of a contractor for a piece of work The obligations of a contractor for a piece of work are set forth in Articles 17 14 and 1715 of the Civil Code. Article 1714 provides that if the contractor agree s to produce the work from material furnished by him, he shall deliver the thing produced to the employer and transfer dominion over the thing. This contract sh all be governed by the following articles as well as by the pertinent provisions on warranty of title and against hidden defects and the payment of price in a c ontract of sale. Article 1715 provides that the contractor shall execute the work in such a manner that it has the qualities agreed upon and has no defects which destroy or lessen its value or fitness for its ordinary or stipulated use. Shoul d the work be not of such quality, the employer may require that the contractor remove the defect or execute another work. If the contractor fails or refuses to comply with this obligation, the employer may have the defect removed or anothe r work executed, at the contractors cost. 6. Provisions on warranty against hidden defects The provisions on warranty against hidden defects, referred to in Artic le 1714, are found in Articles 1561 and 1566. Article 1561 provides that the vend or shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had th e vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them. A rticle 1566 provides that the vendor is responsible to the vendee for any hidden

faults or defects in the thing sold, even though he was not aware thereof, and pr ovides further that the provision shall not apply if the contrary has been stipul ated, and the vendor was not aware of the hidden faults or defects in the thing sold. 7. Remedy against violation of the warranty against hidden defects The reme dy against violations of the warranty against hidden defects is either to withdr aw from the contract (rehibitory action) or to demand a proportionate reduction of the price (accion quanti minoris), with damages in either case. 8. Prescripti ve period as specified in express warranty, or in the absence of which, 4 years; Prescriptive period of 6 months for rehibitory action is applicable only in imp lied warranties While it is true that Article 1571 of the Civil Code provides fo r a prescriptive period of six months for a rehibitory action, a Page 25 of 87

cursory reading of the ten preceding articles to which it refers will reveal tha t said rule may be applied only in case of implied warranties; and where there i s an express warranty in the contract, the prescriptive period is the one specif ied in the express warranty, and in the absence of such period, the general rule on rescission of contract, which is four years (Article 1389, Civil Code) shall apply. (Villostas v. CA) 9. Original complaint is one for arising from breach o f a written contact and not a suit to enforce warranty against hidden defects; A rticle 1715 in relation to Article 1144 apply, prescription in 10 years; Action not prescribed The lower courts opined and so held that the failure of the defen dant to follow the contract specifications and said omissions and deviations hav ing resulted in the operational ineffectiveness of the system installed makes th e defendant liable to the plaintiff in the amount necessary to rectify to put th e air conditioning system in its proper operational condition to make it serve t he purpose for which the plaintiff entered into the contract with the defendant. Thus, having concluded that the original complaint is one for damages arising f rom breach of a written contract, and not a suit to enforce warranties against h idden defects, the governing law therefore is Article 1715. However, inasmuch as this provision does not contain a specific prescriptive period, the general law on prescription, which is Article 1144 of the Civil Code, will apply. Said prov ision states, inter alia, that actions upon a written contract prescribe in 10 yea rs. Since the governing contract was executed on 10 September 1962 and the compl aint was filed on 8 May 1971, it is clear that the action has not prescribed. 10 . Acceptance of the work by the employer does not relieve the contractor of liab ility for any defect in the work The mere fact that Almeda accepted the work doe s not, ipso facto, relieve the Corporation from liability for deviations from an d violations of the written contract, as the law gives him 10 years within which to file an action based on breach thereof. As held by the Court of Appeals, as t he breach of contract consisted in appellants omission to install the equipment * sic+, parts and accessories not in accordance with the plan and specifications p rovided for in the contract and the deviations made in putting into the air-cond itioning system parts and accessories not in accordance with the contract specif ications, it is evident that the defect in the installation was not apparent at the time of the delivery and acceptance of the work, considering further that Al meda is not an expert to recognize the same. From the very nature of things, it is impossible to determine by the simple inspection of air conditioning system i nstalled in an 8-floor building whether it has been furnished and installed as p er agreed specifications. 11. Puyat and Sons v. Arco Amusement (GR 47538, 20 June 1941) Puyat & Sons v. Arco Amusement [G.R. No. 47538. June 20, 1941.] First Division, Laurel (J): 4 concur Facts: In the year 1929, the Teatro Arco, was engaged in the business of operating cinematographs. In 1930, its name was changed to Arco Amus ement Company. About the same time, Gonzalo Puyat & Sons, Inc., in addition to i ts other business, was acting as exclusive agents in the Philippines for the Sta rr Piano Company of Richmond, Indiana, USA, which dealt in cinematograph equipme nt and machinery. Arco, desiring to equip its cinematograph with sound reproduci ng devices, approached Puyat. After some negotiations, it was agreed between the parties, Puyat would, on behalf of Arco Amusement, order sound reproducing equi pment from the Star Piano Company and that Arco Amusement would pay Puyat, in ad dition to the price of the equipment, 10% commission, plus all expenses, such as , freight, insurance, banking charges, cables, etc. At the expense of the Arco, Puyat sent a cable to the Starr Piano Company, inquiring about the equipment des ired and making the said company to quote its price of $1,700 FOB factory Richmo nd, Indiana. Puyat informed the plaintiff of the price of $1,700, and being agre eable to the price, Arco, in a letter dated 19 November 1929, formally authorize d the order. The equipment arrived about the end of the year 1929, and upon deli very of the same to Arco and the presentation of necessary papers, the price of

$1,700, plus the 10% commission agreed upon the plus all the expenses and charge s, was duly paid by the Arco to Puyat. he following year, another order for soun d reproducing equipment was placed by Arco with Puyat, on the same terms as the first order. The equipment under the second order arrived in due time, and the d efendant was duly paid the price of $1,600 with its 10 per cent commission, and $160, for all expenses and charges. This amount of $160 does not represent actua l out-of-pocket expenses paid by Puyat, but a mere flat charge and rough estimat e made by Puyat equivalent to 10% of the price of $1,600 of the equipment. Three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes against Puyat, the officials of the Arco discovered that the price quoted to th em by Puyat with regard to their two orders was not the net price but rather the list price, and that the defendant had obtained a discount from the Starr Piano Company. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, said officials of Arco were convinced that the prices charged them by the defendant were much too high including the charges for out-o f-pocket expenses. For these reasons, they sought to obtain a reduction from Puy at or rather a reimbursement. Failing in this they brought an action with the CF I Manila. Page 26 of 87

The trial court held that the contract between the parties was one of the outrig ht purchase and sale, and absolved Puyat from the complaint. The appellate court , however, held that the relation between the parties was that of agent and prin cipal, Puyat acting as agent of Arco in the purchase of the equipment in questio n, and sentenced Puyat to pay Arco alleged overpayments in the total sum of $1,3 35.52 or P2,671.04, together with legal interest thereon from the date of the fi ling of the complaint until said amount is fully paid, as well as to pay the cos ts of the suit in both instances. Hence, the petition for the issuance of a writ of certiorari to the Court of Appeals for the purposed of reviewing its decisio n in civil case GR 1023. The Supreme Court granted the writ of certiorari, rever sed the decision of the appellate court, and absolved Puyat & Sons from the comp laint in GR 1023, without pronouncement regarding costs. 1. Contract, and those agreed upon, is the law between the parties; What does not appear are regarded a s dealers or traders not binding the parties The contract is the law between the p arties and should include all the things they are supposed to have been agreed u pon. What does not appear on the face of the contract should be regarded merely as dealers or traders talk, which can not bind either party. (Nolbrook v. Conner, 56 S o., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120 Ill., 161; Bank v. Palmer, 47 Ill., 92; Hosser v. Copper, 8 Allen, 334; Doles v. Merrill, 173 Mass., 411.) The letters which Arco accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing equipment subject of its contract with Puyat, are clear in their terms and admit of no other interpretation than that Arco agreed to purch ase from Puyat the equipment in question at the prices indicated which are fixed and determinate. 2. Agency; Agent exempt from all liability in discharge of com mission if in accordance with instructions received from principal In agency, th e agent is exempted from all liability in the discharge of his commission provid ed he acts in accordance with the instructions received from his principal (sect ion 254, Code of Commerce), and the principal must indemnify the agent for all d amages which the latter may incur in carrying out the agency without fault or im prudence on his part (article 1729, Civil Code). The fact that whatever unforseen events might have taken place unfavorable to the defendant (petitioner), such a s change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as per specifications, the plaintiff (respondent) might still legally hold the defe ndant (petitioner) to the prices fixed of $1,700 and $1,600 is incompatible with the pretended relation of agency between the parties. 3. Commission does not nec essarily make one the agent of the other While the letters state that Puyat was to receive 10% commission, this does not necessarily make the petitioner an agen t of the respondent, as this provision is only an additional price which the res pondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. (See Quiroga vs. Parsons Hardware Co., 38 Phil., 501.) 4. Puyat & Sons already the agent of Starr Piano Company of Richmond, Indi ana, in the Philippines To hold the petitioner an agent of Arco in the purchase of equipment and machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact that Puyat is the exclusive agent of Starr Piano in the Philippines. It is out of the ordinary for one to be the agent of b oth the vendor and the purchaser. The facts and circumstances indicated to not p oint to anything but plain ordinary transaction where Arco enters into a contrac t transaction, a contract of purchase and sale, with Puyat, the latter as exclus ive agent of the Starr Piano Company in the United States. 5. Vendor not bound t o reimburse difference of cost and sales price A vendor is not bound to the vend ee for any difference between the cost price and the sales price which represent s the profit realized by the vendor out of the transaction. This is the very ess ence of commerce without which merchants or middleman would not exist. 6. Not ev ery concealment is fraud, maybe business acumen; Buyer estopped when it agreed t o conditions and price It is well known that local dealers acting as agents of f oreign manufacturers, aside from obtaining a discount from the home office, some times add to the list price when they resell to local purchasers. It was apparen tly to guard against an exhorbitant additional price that Arco sought to limit i t to 10%t. Arco is estopped from questioning that additional price. If the respo

ndent later on discovers itself at the short end of a bad bargain. it alone must bear the blame, and it cannot rescind the contract, much less compel a reimburs ement of the excess price, on that ground alone. The fact that Puyat obtained mo re or less profit than Arco calculated before entering into the contract of purc hase and sale, is no ground for rescinding the contract of purchase and sale, is no ground for rescinding the contract or reducing the price agreed upon between the parties. Puyat was not duty bound to reveal the private arrangement it had with the Starr Piano Company relative to such discount to its prospective custom ers. Not every concealment is fraud; and short of fraud, it were better that, wi thin certain limits, business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world. Page 27 of 87

12. Quiroga v. Parsons (GR 11491, 23 August 1918) Quiroga v. Parsons Hardware [G.R. No. 11491. August 23, 1918.] En Banc, Avancena (J): 5 concur Facts: On 24 January 1911, in Manila, a contract was entered into by and between the Quiroga and J. Parsons (to whose rights and obligations Pars ons Hardware later subrogated itself) for the exclusive sale of Quiroga Beds in the Visayan Islands. Quiroga was to furnish the Parson with the beds (which the latter might order, at the price stipulated) and that Parson was to pay the pric e in the manner stipulated. The price agreed upon was the one determined by Quir oga for the sale of these beds in Manila, with a discount of from 20 to 25 per c ent, according to their class. Payment was to be made at the end of sixty days, or before, at Quirogas request, or in cash, if Parson so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. Quir oga alleges that Parson violated its obligation not to sell the beds at higher p rices than those of the invoices; to have an open establishment in Iloilo; itsel f to conduct the agency; to keep the beds on public exhibition, and to pay for t he advertisement expenses for the same; and to order the beds by the dozen and i n no other manner. None of these, except the obligation to order the beds by the dozen and in no other manner, are expressly set forth in the contract. Quiroga maintains that Parsons is his agent for the sale of his bed in Iloilo, and such obligations implied in a contract of commercial agency. The Supreme Court held t hat the contract by and between the plaintiff and the defendant was one of purch ase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law. Th e Court thus affirmed the judgment appealed from, with costs against the appella nt. 1. Essential clauses given due regard to classify a contract; Contract of pu rchase and sale In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, the clauses, constituting its c ause and subject matter, are precisely the essential features of a contract of p urchase and sale. There was the obligation on the part of Quiroga to supply the beds, and, on the part of Parson, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent r eceived the thing to sell it, and does not pay its price, but delivers to the pr incipal the price he obtains from the sale of the thing to a third person, and i f he does not succeed in selling it, he returns it. By virtue of the contract be tween Quiroga and Parson, the latter, on receiving the beds, was necessarily obl iged to pay their price within the term fixed, without any other consideration a nd regardless as to whether he had or had not sold the beds. 2. Commission on sa le merely a discount, other clauses are not incompatible with contract of purcha se and sale The contract by and between the defendant and the plaintiff is one o f purchase and sale. Besides the clause made in the basis of a commission on sal es, none of the other clauses of the contract is found to substantially support Quirogas contention. None of these conveys the idea of an agency. The words commi ssion on sales used in clause (A) of article 1 mean nothing else than a mere dis count on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell Quirogas beds in t he Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. 3 . Classification of a contract defined by law, and not one called by the parties The agreements contained in the document that has been drafted, constitute a co ntract of purchase and sale, and not one of commercial agency. In the classifica tion of the contract, it must be understood that a contract is what the law defi nes it to be, and not what it is called by the contracting parties. 4. Acts subs equent to contract suppletory, not considered when essential agreements are set forth in the contract The acts of the parties merely show that, on the part of e ach of them, there was mutual tolerance in the performance of the contract in di sregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the co

ntracting parties, subsequent to, and in connection with, the execution of the c ontract, must be considered for the purpose interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its essentia l agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. 5. Effect of breach, and effect of subsequen t consent to such breach In respect to the defendants obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant mig ht place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will. II. Parties to a contract of sale Page 28 of 87

13. Medina v. CIR (GR L-15113, 28 January 1961) Medina v. Collector of Internal Revenue [G.R. No. L-15113. January 28, 1961.] En Banc, Reyes JBL (J): 6 concur Facts: On 20 May 1944, Antonio Medina married Ant onia Rodriguez. Before 1946, the spouses had neither property nor business of th eir own. Later, however, Antonio acquired forest concessions in the municipaliti es of San Mariano and Palanan, Isabela. From 1946 to 1948, the logs cut and remo ved by the Antonio from his concessions were sold to different persons in Manila through his agent, Mariano Osorio. In 1949, Antonia started to engage in busine ss as a lumber dealer, and up to around 1952, Antonio sold to her almost all the logs produced in his San Mariano concession. Antonia, in turn, sold in Manila t he logs bought from her husband through the same agent, Mariano Osorio. The proc eeds were either received by Osorio for Antonio or deposited by said agent in An tonios current account with the PNB. On the thesis that the sales made by Antonio to his wife were null and void pursuant to the provisions of Article 1490 of th e Civil Code of the Philippines, the Collector considered the sales made by Anto nia as Antonios original sales taxable under Section 186 of the National Internal Revenue Code and, therefore, imposed a tax assessment on Antonio. On 30 Novembe r 1963, Antonio protested the assessment; however, the Collector insisted on his demand. On 9 July 1954, Antonio filed a petition for reconsideration, revealing for the first time the existence of an alleged premarital agreement of complete separation of properties between him and his wife, and contending that the asse ssment for the years 1946 to 1952 had already prescribed. After one hearing, the Conference Staff of the Bureau of Internal Revenue eliminated the 50% fraud pen alty and held that the taxes assessed against him before 1948 had already prescr ibed. Based on these findings, the Collector issued a modified assessment, deman ding the payment of only P3,325.68. Antonio again requested for reconsideration, but the Collector, in his letter of 4 April 1955, denied the same. Antonio appe aled to the Court of Tax Appeals, which rendered judgment upholding a tax assess ment of the Collector of Internal Revenue except with respect to the imposition of so-called compromise penalties, which were set aside. Hence a petition to rev iew the decision of the CTA. The Supreme Court affirmed the appealed decision wi th cost against the petitioner. 1. No evidence proving pre-marital agreement of absolute separation between the spouses Aside from the material inconsistencies in the testimony of petitioners witnesses, the circumstantial evidence is against petitioners claim. (1) It appears that at the time of the marriage between the p etitioner and his wife, they neither had any property nor business of their own, as to have really urged them to enter into the supposed property agreement. (2) The testimony that the separation of property agreement was recorded in the Reg istry of Property 3 months before the marriage, is patently absurd, since such a pre-nuptial agreement could not be effective before marriage is celebrated. (3) Despite their insistence on the existence of the ante-nuptial contract, the cou ple, strangely enough, did not act in accordance with its alleged covenants; but that even during their taxable years, the ownership, usufruct, and administrati on of their properties and business were in the husband. (4) Although petitioner already knew that Article 1490 prohibits sales between spouses married under a community system, it was not until July 1954 that the allege the existence of th e alleged property separation agreement. (5) The Day Book of the Register of Dee ds on which the agreement would have been entered, which was saved from the rava ges of war, did not show that the document in question was among those recorded therein. 2. Trial courts judgment on the degree of credence of witness considered seriously by the Supreme Court When the credibility of witnesses is the one at issue, the trial courts judgment as to their degree of credence deserves serious consideration by this Court (Collector vs. Bautista, et al., G. R. Nos. L-12250, L-12259, May 27, 1959). This is all the more true because not every copy of the supposed agreement, particularly the one that was said to have been filed with the Clerk of Court of Isabela, was accounted for as lost; so that, applying the b est evidence rule, the court did right in giving little or no credence to the sec

ondary evidence to prove the due execution and contents of the alleged document (see Comments on the Rules of Court, Moran, 1957 Ed., Vol. 3, pp. 10-12). 3. Art icle 7 and 10 of Code of Commerce does not exempt from the prohibition of sale b etween spouses under Article 1490 of the Civil Code Article 7 and 10 of the Code of Commerce merely state, under certain conditions, a presumption that the wife is authorized to engage in business and for the incidents that flow therefrom w hen she so engages therein. The transactions permitted therein however are those entered into with strangers, and do not constitute exceptions to the prohibitor y provisions of Article 1490 against sales between spouses. 4. Government always an interested party in taxable transactions The government is always an interes ted party to all matters involving taxable transactions and qualified to questio n their Page 29 of 87

validity or legitimacy whenever necessary to block tax evasion. It cannot be con tended thus that the Collector cannot assail the questioned sales, he being a st ranger to said transactions. 5. Contracts violative of Article 1490 null and voi d Contracts violative of the provisions of Article 1490 of the Civil Code are nu ll and void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca, 45 Phil. 43). In the present case, being void transactions, the sales made by the petiti oner to his wife were correctly disregarded by the Collector in his tax assessme nts that considered as the taxable sales those made by the wife through the spou ses common agent, Mariano Osorio. 6. (?) Illegally obtained documents and papers admissible to evidence; Revenue officers can require production of books of acco unts and other records from taxpayers Illegally obtained documents and papers ar e admissible in evidence, if they are found to be competent and relevant to the case (see Wong & Lee vs. Collector of Internal Revenue, 104 Phil., 469). Petitio ners imputation, that the documentary evidence is illegally seized, is vehemently denied by him, and relying on Sections 3, 9, 337 and 338 of the Tax Code and th e pertinent portions of Revenue Regulations No. V-1 and citing this Courts ruling in U.S. vs. Aviado 38 Phil., 10, the Collector maintains that he and other inte rnal revenue officers and agents could require the production of books of accoun ts and other records from a taxpayer. 14. Calimlim-Canulas v. Fortun (GR 57499, 22 June 1984) Calimlim-Canullas v. Fortun [G.R. No. 57499. June 22, 1984.] First Division, Mel encio-Herrera (J): 5 concur Facts: Mercedes Calimlim-Canullas and Fernando Canul las were married on 19 December 1962. They begot five children. They lived in a small house on the residential land in question with an area of approximately 89 1 sq. m., located at Bacabac, Bugallon, Pangasinan. After Canullas father died in 1965, he inherited the land. In 1978, Canullas abandoned his family and lived w ith Corazon Daguines. On 15 April 1980, Canullas sold the subject property with the house thereon to Daguines for the sum of P2,000.00. In the document of sale, Canullas described the house as also inherited by me from my deceased parents. Un able to take possession of the lot and house, Daguines initiated a complaint beo re the CFI Pangasinan (Branch 1, Civil Case 15620) on 19 June 1980 for quieting of title and damages against Calimlim-Canullas. Calimlim-Canullas resisted and c laimed that the house in dispute where she and her children were residing, inclu ding the coconut trees on the land, were built and planted with conjugal funds a nd through her industry; that the sale of the land together with the house and i mprovements to Daguines was null and void because they are conjugal properties a nd she had not given her consent to the sale. On 6 October 1980, the trial court ruled in favor of Daguines as the lawful owner of the land as well as of the ho use erected on the land. Upon reconsideration and on 27 November 1980, however, the lower court modified the judgment by declaring Daguines as the lawful owner of the land and 10 coconut trees thereon but declaring the sale of the conjugal house including 3 coconuts and other crops during the conjugal relation of the s pouses null and void. A petition for review on certiorari was filed with Supreme Court. During the pendency of the appeal, however, Fernando Canullas and Corazo n Daguines were convicted of concubinage in a judgment rendered on 27 October 19 81 by the then CFI Pangasinan, Branch II, which judgment has become final. The S upreme Court set aside the decision and resolution of the lower court, and decla red the sale of the lot, house and improvements null and void; without costs. 1. Land and building belongs to the conjugal partnership, spouse owning the land b ecomes the creditor of the conjugal partnership Pursuant to the second paragraph of Article 158 of the Civil Code, which provides that buildings constructed at t he expense of the partnership during the marriage on land belonging to one of th e spouses also pertain to the partnership, but the value of the land shall be re imbursed to the spouse who owns the same, both the land and the building belong t o the conjugal partnership but the conjugal partnership is indebted to the husba nd for the value of the land. The spouse owning the lot becomes a creditor of th

e conjugal partnership for the value of the lot, which value would be reimbursed at the liquidation of the conjugal partnership. 2. Padilla v. Paterno is better rule than Maramba v. Lozano; Spouse cannot alienate property without the consen t of the other In the case of Maramba vs. Lozano, it was held that the land belo nging to one of the spouses, upon which the spouses have built a house, becomes conjugal property only when the conjugal partnership is liquidated and indemnity paid to the owner of the land. The better rule, however, is that held in Padill a vs. Paterno, where the conversion of the properties from paraphernal to Page 30 of 87

conjugal assets should be deemed to retroact to the time the conjugal buildings were first constructed thereon or at the very latest, to the time immediately be fore the death of one spouse that ended the conjugal partnership. They can not b e considered to have become conjugal property only as of the time their values w ere paid to the estate of the widow because by that time the conjugal partnershi p no longer existed and it could not acquire the ownership of said properties. T he acquisition by the partnership of the properties was, under the 1943 decision , subject to the suspensive condition that their values would be reimbursed to t he widow at the liquidation of the conjugal partnership; once paid, the effects of the fulfillment of the condition should be deemed to retroact to the date the obligation was constituted (Article 1187, New Civil Code). Thus, in the present case, considering the foregoing premises, Canullas cannot have alienated the ho use and lot to Daguines since the wife had not given her consent to the sale. 3. Contract of sale null and void for being contrary to morals and public policy A rticle 1409 of the Civil Code provides contracts whose cause, object, or purpose is contrary to law, morals, good customs, public order, or public policy are voi d and inexistent from the very beginning. Article 1352 also provides that contract s without cause, or with unlawful cause, produce no effect whatsoever. The cause is unlawful if it is contrary to law, morals, good customs, public order, or pu blic policy. In the present case, the contract of sale was null and void for bein g contrary to morals and public policy. The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home wher e his wife and children lived and from whence they derived their support. That s ale was subversive of the stability of the family, a basic social institution wh ich public policy cherishes and protects. 4. Law prohibits sale and donation bet ween husband and wife, such applies even those living together without benefit o f marriage The law prohibits the spouses from selling property to each other sub ject to certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers or conveyances between spou ses were allowed during marriage, that would destroy the system of conjugal part nership, a basic policy in civil law. It was also designed to prevent the exerci se of undue influence by one spouse over the other, as well as to protect the in stitution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple living as husband and wife without benefit of marriage, otherw ise, the condition of those who incurred guilt would turn out to be better than t hose in legal union. Those provisions are dictated by public interest and their c riterion must be imposed upon the will of the parties. (Buenaventura v. Bautista [CA]) 5. Disabilities attached to marriage also applies to concubinage The ruli ng in Buenaventura vs. Bautista [CA] was cited in Matabuena vs. Cervantes, reite rating that while Article 133 of the Civil Code considers as void a donation bet ween the spouses during the marriage, policy considerations of the most exigent character as well as the dictates of morality require that the same prohibition should apply to a common-law relationship. If the policy of the law is to prohib it donations in favor of the other consort and his descendants because of fear o f undue influence and improper pressure upon the donor, a prejudice deeply roote d in our ancient law, then there is every reason to apply the same prohibitive p olicy to persons living together as husband and wife without benefit of nuptials . For it is not to be doubted that assent to such irregular connection for thirt y years bespeaks greater influence of one party over the other, so that the dang er that the law seeks to avoid is correspondingly increased. Moreover, as pointe d out by Ulpian, it would not be just that such donations should subsist, lest t he conditions of those who incurred guilt should turn out to be better. So long as marriage remains the cornerstone of our family law, reason and morality alike demand that the disabilities attached to marriage should likewise attach to con cubinage. 15. Guiang v. CA (GR 125172, 26 June 1998)

Guiang v. CA [G.R. No. 125172. June 26, 1998.] First Division, Panganiban (J): 4 concur Facts: Gilda and Judie Corpuz were married civilly on 24 December 1968 i n Bacolod City. The couple have 3 children (Junie, Harriet, and Jodie or Joji. O n 14 February 1983, the Corpuzes, with Gilda Corpuz as vendee, bought a 421 sq. m. lot (Lot 8, Block 9, (LRC) Psd-165409) located in Barangay Gen. Paulino Santo s (Bo. 1), Koronadal, South Cotabato from Manuel Callejo who signed as vendor th rough a conditional deed of sale for a total consideration of P14,735.00. The co nsideration was payable in installment, with right of cancellation in favor of v endor should vendee fail to pay 3 successive installments. On 22 April 1988, the Corpuzes sold portion of their lot to spouses Antonio and Luzviminda Guiang. Th e latter have since then occupied the portion and built their house thereon. The y are thus adjoining neighbors of the Corpuzes. On June 1989, Gilda Corpuz left for Manila, with the consent of her husband, to look for work abroad. Unfortunat ely, she became a victim of an unscrupulous illegal recruiter, was not able to g o abroad, and stayed for sometime in Manila. Sometime in January 1990, Harriet C orpuz learned that her father intended to sell the remaining portion including t heir house, of their homelot to the Guiangs. She wrote a letter to her mother in forming her, who in turn replied that she was objecting to the sale. Harriet, ho wever, did not inform her father Page 31 of 87

about this; but instead gave the letter to Mrs. Luzviminda Guiang so that Guiang would advise her father. However, in the absence of his wife Gilda Corpuz, and on 1 March 1990, Judie Corpuz sold the remaining portion of the lot and the hous e thereon to Luzviminda Guiang thru a document known as Deed of Transfer of Right s (Exh. A) for a total consideration of P30,000.00 of which P5,000.00 was to be pai d in June 1990. Judie Corpuzs children Junie and Harriet signed the document as w itnesses. On 5 March 1990, obviously to cure whatever defect in Judie Corpuzs tit le over the lot transferred, Luzviminda Guiang as vendee executed another agreem ent over the lot with Manuela Jimenez Callejo, widow of Manuel Callejo (the orig inal registered owner), who signed as vendor for a consideration of P9,000.00. J udie Corpuz signed as a witness to the sale. The new sale describes the lot sold as Lot 8, Block 9, (LRC) Psd-165408. As a consequence of the sale, the Guiangs spent P600.00 for the preparation of the Deed of Transfer of Rights; P9,000.00 a s the amount they paid to Mrs. Manuela Callejo, having assumed the remaining obl igation of the Corpuzes to Mrs. Callejo; P100.00; a total of P759.62 basic tax a nd special educational fund on the lot; P127.50 as the total documentary stamp t ax on the various documents; P535.72 for the capital gains tax; P22.50 as transf er tax; a standard fee of P17.00; certification fee of P5.00. These expenses par ticularly the taxes and other expenses towards the transfer of the title to the Guiangs were incurred for the whole Lot 9, Block 8, (LRC) Psd-165409. On 11 Marc h 1990, Gilda Corpuz returned home. She gathered her children, who were staying in different households, together and stayed at their house. Her husband was now here to be found. She was informed by her children that their father had a wife already. For staying in their house sold by her husband, Gilda was complained ag ainst by the Guiangs before the Barangay authorities of Barangay General Paulino Santos (Bo. 1), Koronadal, South Cotabato, for trespassing (Barangay Case 38). On 16 March 1990, the parties thereat signed a document known as amicable settlem ent requiring the Corpuzes to leave the house voluntarily on or before 7 April 19 90, without any charge. Believing that she had received the shorter end of the b argain, Gilda approached the Barangay Captain for the annulment of the settlemen t. Annulment not having been made, Gilda stayed put in her house and lot. The Gu iangs followed thru the amicable settlement with a motion for the execution of t he amicable settlement, filing the same with the MTC Koronadal, South Cotabato. The proceedings [are] still pending before the said court, with the filing of th e instant suit. On 28 May 1990, Gilda Corpuz filed an Amended Complaint against her husband Judie Corpuz and the Guiangs. The said Complaint sought the declarat ion of a certain deed of sale, which involved the conjugal property of private r espondent and her husband, null and void. On 9 September 1992, The RTC Koronodal , South Cotabato (Branch 25) rendered a decision in favor of Gilda Corpuz, recog nizing her lawful and valid ownership and possession over the remaining portion of the lot, declaring the deed of transfer of rights and the amicable settlement null and void, and ordering Gilda Corpuz to reimburse the Guiangs the amount of P9,000 corresponding to the payment made by the Guiangs to Callejo for the unpa id balance and another P379.62 representing of the amount of realty taxes paid b y the Guiangs, both with legal interests thereon computed from the finality of t he decision; without pronouncement as to costs. Dissatisfied, the Guiangs filed an appeal with the Court of Appeals. On 30 January 1996, the appellate court aff irmed the decision of the lower court. Their motion for reconsideration was also denied. A petition for review was before the Supreme Court. The Supreme Court d enied the petition, and affirmed the challenged decision and resolution; with co sts against the Guiangs. 1. Valid contract, elements To constitute a valid contr act, the Civil Code requires the concurrence of the following elements: (1) caus e, (2) object, and (3) consent. The last element is indubitably absent in the pr esent case, thus the nullity of the contract of sale is premised on the absence of private respondents consent. 2. Contract void for lack of consent by the other spouse The consent of one spouse to the contract of sale of the conjugal proper ty was totally inexistent or absent. This being the case, said contract properly falls within the ambit of Article 124 of the Family Code. Article 124 of the Fa mily Code provides that the administration and enjoyment of the conjugal partners hip property shall belong to both spouses jointly. In case of disagreement, the

husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision and that in the event that one spouse is incap acitated or otherwise unable to participate in the administration of the conjuga l properties, the other spouse may assume sole powers of administration. These p owers do not include the powers of disposition or encumbrance which must have th e authority of the court or the written consent of the other spouse. In the abse nce of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding c ontract upon the acceptance by the other spouse or authorization by the court be fore the offer is withdrawn by either or both offerors. (165a) 3. Amendatory effe ct of Article 124 FC to Article 166 NCC in relation to Article 173 NCC Under Art icle 166 of the Civil Code, the husband cannot generally alienate or encumber an y real property of the conjugal partnership without the wifes consent. The aliena tion or encumbrance if so made however is not null and void. It is merely voidab le. The offended wife may bring an action to annul the said alienation or encumb rance. Thus, the provision of Article 173 Page 32 of 87

of the Civil Code of the Philippines provides that the wife may, during the marri age and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may demand the value of property fraudulently alienated by the hus band. The particular provision giving the wife 10 years during the marriage to an nul the alienation or encumbrance was not carried over to the Family Code. It is thus clear that any alienation or encumbrance made after 3 August 1988 when the Family Code took effect by the husband of the conjugal partnership property wit hout the consent of the wife is null and void. 4. Execution of document amicable settlement does not affect void character of deed of sale The fraud and the intim idation referred to by petitioners were perpetrated in the execution of the docu ment embodying the amicable settlement. Gilda Corpuz alleged during trial that b arangay authorities made her sign said document through misrepresentation and co ercion. In any event, its execution does not alter the void character of the dee d of sale between the husband and the Guiangs. The fact remains that such contra ct was entered into without the wifes consent. 5. Void contract cannot be ratifie d By the specific provision of the law [Article 1390, Civil Code], the Deed of T ransfer of Rights cannot be ratified, even by an amicable settlement. The particip ation by some barangay authorities in the amicable settlement cannot otherwise val idate an invalid act. Moreover, it cannot be denied that the amicable settlement e ntered into by Gilda Corpuz and the Guiangs is a contract. It is a direct offsho ot of the Deed of Transfer of Rights. By express provision of law (Article 1422) , such a contract is also void. Article 1422 of the Civil Code provides that a co ntract which is the direct result of a previous illegal contract, is also void a nd inexistent. 6. Amicable settlement cannot be considered a continuing offer Nei ther can the amicable settlement be considered a continuing offer that was accepte d and perfected by the parties, following the last sentence of Article 124. The order of the pertinent events is clear: after the sale, the Guiangs filed a comp laint for trespassing against Gilda Corpuz, after which the barangay authorities secured an amicable settlement and the Guiangs filed before the MTC a motion for its execution. The settlement, however, does not mention a continuing offer to s ell the property or an acceptance of such a continuing offer. Its tenor was to t he effect that the Guiangs would vacate the property. By no stretch of the imagi nation, can the Court interpret this document as the acceptance mentioned in Art icle 124. 16. Rubias v. Batiller (GR L-35702, 29 May 1973) Rubias v. Batiller [G.R. No. L-35702. May 29, 1973.] First Division, Teehankee ( J): 8 concur Facts: Francisco Militante claimed ownership of a parcel of land lo cated in the Barrio General Luna, Barotac Viejo, Iloilo, which he caused to be s urveyed on 18-31 July 1934, whereby he was issued a plan Psu-99791 (containing a n area of 171.3561 hectares.) Before the war with Japan, Militante filed with th e CFI Iloilo an application for the registration of title of the land technicall y described in Psu-99791 opposed by the Director of Lands, the Director of Fores try and other oppositors. However, during the war with Japan, the record of the case was lost before it was heard, so after the war Militante petitioned the Cou rt to reconstitute the record of the case. The record was reconstituted in the C FI Iloilo (Land Case R-695, GLRO Rec. 54852). The CFI heard the land registratio n case on 11 November 1952, and after trial the Court dismissed the application for registration. Militante appealed to the Court of Appeals (CA-GR 13497-R). Pe nding the disposal of the appeal or on 18 June 1956, Militante sold to Domingo R ubias, his son-in-law and a lawyer by profession, the land technically described in Psu-99791. The sale was duly recorded in the Office of the Register of Deeds for the Province of Iloilo (Entry 13609) on 14 July 1960. On 22 September 1958,

the CA promulgated its judgment confirming the decision of the trial court dism issing the Application for Registration filed by Militante. Domingo Rubias decla red the land for taxation purposes under Tax Declaration (TD) 8585 for 1957; TD 9533 and TD 10019 for 1961; TD 9868 for 1964, paying the land taxes under TD 858 5 and TD 9533. Militante has also declared the land for taxation purposes under TD 5172 in 1940, under TD T-86 for 1945, under TD 7122 for 1948, and paid the la nd taxes for 1940, for 194546, for 1947, for 1947 & 1948, for 1948, and for 1948 and 1949. TD 2434 in the name of Liberato Demontao for the land described therei n was cancelled by TD 5172 of Militante. Demontao paid the land tax under TD 2434 on 20 December 1939 for the years 1938 and 1959. Isaias Batiller had declared f or taxation purposes Lot 2 of Psu-144241 under TD 8583 for 1957 and a portion of Lot 2 under TD 8584 for 1945. TD 8483 was revised by TD 9498 while TD 9584 was cancelled by TD 9584 both in the name of Batiller. Batiller paid the land taxes for Lot 2 on 9 November 1960 for the year 1945 and 1946, 1950 and 1960 as shown Page 33 of 87

by the certificate of the treasurer.The land claimed by Batiller as his own was surveyed on 6-7 June 1956, and a plan approved by Director of Lands on 15 Novemb er 1956 was issued, identified as Psu 155241. On 22 April 1960, Rubias filed a f orcible Entry and Detainer case against Batiller in the Justice of the Peace Cou rt of Barotac Viejo, Iloilo. On May 1961 and after trial, the Municipal Court of Barotac Viejo decided the case in favor of the Batiller. Rubias appealed from t he decision of the Municipal Court of Barotac Viejo to the CFI Iloilo. On 26 Nov ember 1964 and after the trial, the CFI decided the case likewise in favor of Ba tiller, holding that he has better right to possess the land in question having b een in the actual possession thereof under a claim of title many years before Mi litante sold the land to Rubias. On 31 August 1964, Rubias filed a suit to recov er the ownership and possession of certain portions of lot under Psu-99791, boug ht from his father-in-law, Francisco Militante in 1956, against its present occu pant Batiller, who allegedly entered said portions of the lot in 1945 and in 195 9. Rubias prayed also for damages and attorneys fees. On 17 August 1965, the CFI dismissed the case, the court therein practically agreeing that the contract bet ween Rubias and Militante was null and void. Rubias filed a motion for reconside ration, which was likewise denied by the lower court on 14 January 1966. Thereaf ter, Rubias filed an appeal before the Court of Appeals, which certified said ap peal to the Supreme as involving purely legal questions. The Supreme Court affir med the order of dismissal appealed, with costs against Rubias. 1. Pre-trial pra ctically amounted to a full dress trial when parties agreed and stipulated on fa cts and submitted their respective documentary exhibits The pre-trial conference held by the trial court at which the parties with their counsel agreed and stip ulated on the material and relevant facts and submitted their respective documen tary exhibits as referred to in the pre-trial order, practically amounted to a f ull dress trial which placed on record all the facts and exhibits necessary for adjudication of the case. Rubias evidence dealing with the source of the alleged right and title of Militantes predecessors are already made of record. The chain of Militantes alleged title and right to the land allegedly tracing back to Demon tano in the land registration case and was rejected by the Iloilo land registrat ion court, the decision of which was affirmed by final judgment by the Court of Appeals. Batillers evidence dealing with his and his ancestors continuous, open, p ublic and peaceful possession in the concept of owner of the land and the Direct or of Lands approval of his survey plan thereof, are likewise already duly establ ished facts of record, in the land registration case as well as in the ejectment case wherein the Iloilo CFI recognized the superiority of Batillers right to the land as against Rubias. Therefore, the lower court did not err in dismissing Ru bias complaint upon Batillers motion after the pretrial. 2. Rubias had no cause of action Rubias complaint, to be declared absolute owner of the land and to be re stored to possession thereof with damages, was bereft of any factual or legal ba sis. The CAs final judgment affirming the dismissal of Militantes application of r egistration made it conclusive that Militante lack rightful claim or title to th e land. There was no right or title to the land that could be transferred or sol d by Militantes purported sale in favor of Rubias in 1956. 3. Purchase of a lawye r of a property in litigation prohibited; Contract void and cannot be ratified T he purchase by a lawyer of the property in litigation from his client is categor ically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code (Th e following persons cannot acquire any purchase, even at a public or judicial au ction, either in person or through the mediation of another xxx [5] Justices, ju dges, prosecuting attorneys, clerks of superior and inferior courts, and other o fficers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within wh ose jurisdiction or territory their exercise their respective functions; this pr ohibition includes the act of acquiring by assignment and shall apply to lawyers , with respect to the property and rights which may be the object of any litigat ion in which they may take part by virtue of their profession.) and that conseque ntly, Rubias purchase of the property in litigation from his client(and father-in -law) was void and could produce no legal effect, by virtue of Article 1409, par agraph (7) of our Civil Code which provides that contracts expressly prohibited o

r declared void by law are inexistent and void from the beginning and that (T)hese c ontracts cannot be ratified. Neither can the right to set up the defense of ille gality be waived. 4. Wolfson v. Estate of Martinez superceded by case of Director of Lands v. Abagat The 1911 case of Wolfson v. Estate of Martinez which held th at a sale of property in litigation to the party litigants lawyer its not void but voidable at the election of the vendor has been superseded by the 1929 case of D irector of Lands vs. Abagat. In this later case of Abagat, the Court expressly c ited two antecedent cases involving the same transaction of purchase of property in litigation by the lawyer which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the vendor-client but by the adverse parties against whom the lawyer was seeking to enforce his ri ghts as vendee thus acquired. Thus, the Court in Abagat affirmed the invalidity and nullity of the lawyers purchase of the land in litigation from his client, or dered the issuance of a writ of possession for the return of the land by the law yer to the adverse parties without reimbursement of the price paid by him and Page 34 of 87

other expenses, and ruled that the purchaser-lawyer is a lawyer and is presumed to know the law. He must, therefore, from the beginning, have been well aware of the defect in his title and is, consequently, a possessor in bad faith. 5. Proh ibitions under Article 1491 NCC (Article 1459 Spanish Civil Code) Article 1491 o f our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their pecu liar control over the property, from acquiring such property in their trust or c ontrol either directly or indirectly and even at a public or judicial auction, as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law. 6. Wolfson case decided in line w ith Manresas view In Wolfson, the Court expressly reserved decision on whether or not the judgment in question actually falls within the prohibition of the articl e and held only that the sales voidability can not be asserted by one not a propert y to the transaction or his representative, citing from Manresa that (C)onsidering the question from the point of view of the civil law, the view taken by the cod e, the Court must limit ourselves to classifying as void all acts done contrary to the express prohibition of the statute. Now then: As the code does not recogn ize such nullity by the mere operation of law, the nullity of the acts hereinbef ore referred to must be asserted by the person having the necessary legal capaci ty to do so and decreed by a competent court. 7. Manresas view not applicable unde r the NCC; Spanish Supreme Court and modern authors have veered away from Manres a on this point The reason given by Manresa in considering such prohibited acqui sitions under Article 1459 of the Spanish Civil Code as merely voidable at the i nstance and option of the vendor and not void is that the Code does not recognize such nullity de pleno derecho. This is no longer true and applicable to the Phil ippine Civil Code which does recognize the absolute nullity of contracts whose ca use, object, or purpose is contrary to law, morals, good customs, public order o r public policy or which are expressly prohibited or declared void by law and decla res such contracts inexistent and void from the beginning. The Supreme Court of Sp ain and modern authors have likewise veered from Manresas view of the Spanish cod al provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spai n ruled that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy, that violation of the prohibition contract cannot be validated by confirmation or ratification. The criterion of nullity of such prohibited co ntracts under Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) as a matter of public order and policy as applied by the Supreme Court of Spain to administrators and agents should certainly apply with greater reason to judges, judicial officers, fiscals and lawyers under paragraph 5 of the codal a rticle. [also see viewpoints of Gullon Ballesteros in Curso de Derecho Civil (Co ntratos Especiales 1968), of Perez Gonzales, and of Castan] 8. Nullity of prohib ited contracts definite and permanent and cannot be cured by ratification; If ob ject has subsequently become legal, such may be subject to second contract The n ullity of prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification. In this aspect, the permanent disqualifica tion of public and judicial officers and lawyers grounded on public policy diffe rs from the first three cases of guardians, agents and administrators (Article 1 491, Civil Code), as to whose transactions, it has been opined that they may be r atified by means of and in the form of a new contract, in which case its validity shall be determined only by the circumstances at the time of execution of such n ew contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of the ratificati on or second contract; or the service which was impossible may have become possi ble; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its ex ecution; however, it does not retroact to the date of the first contract. 9. Who may invoke the inexistence of contract; Proper action to be filed Tolentino, in his treaties on the Civil Code, stated that (as to persons affected) any person

may invoke the inexistence of the contract whenever juridical effects founded th ereon are asserted against him. Thus, if there has been a void transfer of prope rty, the transferor can recover it by the accion reivindicatoria; and any posses sor may refuse to deliver it to the transferee, who cannot enforce the contract. Creditors may attach property of the debtor which has been alienated by the lat ter under a void contract; a mortgagee can allege the inexistence of a prior enc umbrance; a debtor can assert the nullity of an assignment of credit as a defens e to an action by the assignee. He further stated that (as to action on contract) even when the contract is void or inexistent, an action is necessary to declare its inexistence, when it has already been fulfilled. Nobody can take the law int o his own hands; hence, the intervention of the competent court is necessary to declare the absolute nullity of the contract and to decree the restitution of wh at has been given under it. The judgment, however, will retroact to the very day when the contract was entered into. If the void contract is still fully executo ry, no party need bring an action to declare its nullity; but if any party shoul d bring an action to enforce it, the other party can simply set up the nullity a s a defense. Page 35 of 87

17. Philippine Trust Co. v. Roldan (GR L-8477, 31 May 1956) Philippine Trust Co. v. Roldan [G.R. No. L-8477. May 31, 1956.] En Banc, Bengzon (J): 8 concur Facts: 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited by Mariano L. Bernardo from his father, the late Marcelo B ernardo. In view of his minority, guardianship proceedings were instituted, wher ein Socorro Roldan, surviving spouse of Bernardo and stepmother to Mariano, was appointed his guardian. On 27 July 1947, Roldan filed in said guardianship proce edings (Special Proceeding 2485, Manila), a motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700 to Dr. Fidel C. Ramos, her bro ther-in-law, the purpose of the sale being allegedly to invest the money in a re sidential house, which the minor desired to have on Tindalo Street, Manila. The motion was granted. On 5 August 1947, Roldan, as guardian, executed the proper d eed of sale in favor of Ramos, and on 12 August 1947 obtained a judicial confirm ation of the sale. On 13 August 1947, Ramos executed in favor of Roldan, a deed of conveyance covering the same 17 parcels, for the sum of P15,000. On 21 Octobe r 1947, Roldan sold 4 parcels out of the 17 to Emilio Cruz for P3,000, reserving to herself the right to repurchase. The Philippine Trust Company replaced Rolda n as guardian on 10 August 1948. Two months later, the Company, as guardian, fil ed before the CFI Manila a complaint against Roldan to annul 2 contracts regardi ng 17 parcels of land claiming that the stepmother in effect, sold to herself, t he properties of her ward, and the sale should be annulled for violating Article 1459 of the Civil Code prohibiting the guardian from purchasing the property of her ward. The trial court upheld the contracts but allowing the minor to repurc hase all the parcels by paying P15,000, within 1 year. The CA affirmed the judgm ent. Hence, the appeal. The Supreme Court annulled the 3 contracts of sale in qu estion; declared the minor as the owner of the 17 parcels of land, with the obli gation to return to Roldan the price of P14,700 with legal interest from 12 Augu st 1947; ordered Roldan and Emilio Cruz to deliver said parcels of land to the m inor; required Roldan to pay him beginning with 1947 the fruits, which her attor ney admits, amounted to P1,522 a year; authorized the minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned, the sum of P3,000; and charged appellees with the costs. 1. Guardianship is a trust of the highest order; Article 1459 applies Remembering the general doctrine that guardianship i s a trust of the highest order, and the trustee cannot be allowed to have any in ducement to neglect his wards interest and in line with the courts suspicion whene ver the guardian acquires the wards property, the Court has no hesitation to decl are that, in the eyes of the law, the guardian (Roldan) took by purchase her war ds parcels (thru Dr. Ramos), and that Article 1459 of the Civil Code applies. 2. Annulment of the transaction, even if no collusion is proved, would uphold equit y and justice The guardian may have acted without malice; there may have been no previous agreement between her and Dr. Ramos to the effect that the latter woul d buy the lands for her but the fact remains that she acquired her proteges prope rties, through her brother-in-law. That she planned to get them for herself at t he time of selling them to Dr. Ramos, may be deduced from the very short time be tween the two sales. The temptation which naturally besets a guardian so circums tanced, necessitates the annulment of the transaction, even if no actual collusi on is proved (so hard to prove) between such guardian and the intermediate purch aser. This would uphold a sound principle of equity and justice. 3. Rodriguez v. Mactal does not apply; length of time different, sufficient to dispel suspicion In Rodrigues v. Mactal, where the guardian Mactal sold in January 1926 the prop erty of her ward to Silverio Chioco, and in March 1928 she bought it from Chioco , the Court declared the in order to bring the sale in this case within the part of Article 1459, quoted above, it is essential that the proof submitted establis h some agreement between Silverio Chioco and Trinidad Mactal to the effect that Chioco should buy the property for the benefit of Mactal. If there was no such a greement, either express or implied, then the sale cannot be set aside. The subse quent purchase of Mactal, in said case, cannot be annulled as there was no proof

of a previous agreement between Chioco and her. Two years had elapsed between t he sales, and such period of time was sufficient to dispel the natural suspicion of the guardians motives or actions. In the present case, only 1 week had elapse d. And if we were technical, only 1 day had elapsed from the judicial approval o f the sale (August 12), to the purchase by the guardian (August 13). 4. Minor on losing end in the transaction The calculation, that the investment in the Tinda lo Street house produces to the minor the rentals of P2,400 yearly while the par cels of land yield for the stepmother an average o P1,522 yearly, does not inclu de the price of the lot on which the house was erected. Estimating such lot at P 14,700 only, (ordinarily the city lot is more valuable than the building) the re sult is that the price paid for the 17 parcels gave the minor an income of only P1,200 a year, whereas the harvest from the seventeen parcels netted his step-mo ther a yearly profit of P1,522.00. The minor was on the losing end. Page 36 of 87

5. Three Sales void From both the legal and equitable standpoints these three sa les should not be sustained: the first two for violation of article 1459 of the Civil Code; and the third because Roldan could pass no title to Emilio Cruz. The annulment carries with is (Article 1303 Civil Code) the obligation of Roldan to return the 17 parcels together with their fruits and the duty of the minor, thr ough his guardian to repay P14,700 with legal interest. III. Subject Matter of Sale 18. Pichel v. Alonzo (GR L-36902, 30 January 1982) Pichel v. Alonzo [G.R. No. L-36902. January 30, 1982.] First Division, Guerrero (J): 5 concur Facts: Prudencio Alonzo was awarded by the Government that parcel of land designated as Lot 21 of Subdivision Plan Psd-32465 of Balactasan, Lamita n, Basilan City in accordance with RA 477. The award was cancelled by the Board of Liquidators on 27 January 1965 on the ground that, previous thereto, Alonzo w as proved to have alienated the land to another, in violation of law. In 1972, A lonzos rights to the land were reinstated. On 14 August 1968, Alonzo and his wife sold to Pichel through a deed of sale all the fruits of the coconut trees which m ay be harvested in the land for the period, from 15 September 1968 to 1 January 1976, in consideration of P4,200.00. It was further stipulated that the vendors r ight, title, interest and participation herein conveyed is of his own exclusive and absolute property, free from any liens and encumbrances and he warrants to t he Vendee good title thereto and to defend the same against any and all claims o f all persons whomsoever. Even as of the date of sale, however, the land was sti ll under lease to one Ramon Sua, and it was the agreement that part of the consi deration of the sale, in the sum of P3,650.00, was to be paid by Pichel directly to Ramon Sua so as to release the land from the clutches of the latter. Pending said payment Alonzo refused to allow the Pichel to make any harvest. In July 19 72, Pichel for the first time since the execution of the deed of sale in his fav or, caused the harvest of the fruit of the coconut trees in the land. Alonzo fil ed an action for the annulment of a Deed of Sale before the CFI Basilan City. On 5 January 1973, the lower court rendered its decision holding that although the a greement in question is denominated by the parties as a deed of sale of fruits o f the coconut trees found in the vendors land, it actually is, for all legal inte nts and purposes, a contract of lease of the land itself; an encumbrance prohibi ted under RA 477. The court thus held that the deed of sale is null and void, an d ordered Alonzo to pay back Pichel the consideration of the sale in the sum of P4,200 with interests from the date of the filing of the complaint until paid, a nd Pichel to pay the sum of P500.00 as attorneys fees; with costs against Pichel. Hence, the petition to review on certiorari was raised before the Supreme Court . The Supreme Court set aside the judgment of the lower court and entered anothe r dismissing the complaint; without costs. 1. Vendor grantee under RA 477, and c ould exercise all the rights pertaining thereto, following ruling in Ras v. Sua In Ras vs. Sua, it was categorically stated that a cancellation of an award gran ted pursuant to the provisions of RA 477 does not automatically divest the award ee of his rights to the land. Such cancellation does not result in the immediate reversion of the property subject of the award, to the State. Until and unless an appropriate proceeding for reversion is instituted by the State, and its reac quisition of the ownership and possession of the land decreed by a competent cou rt, the grantee cannot be said to have been divested of whatever right that he m ay have over the same property. In the present case, there is nothing in the rec ord to show that at any time after the supposed cancellation of the award on 27 January 1965, reversion proceedings against Lot 21 were instituted by the State. Instead, the admitted fact is that the award was reinstated in 1972. Applying t he doctrine announced in the Ras case, therefore, Alonzo is not deemed to have l ost any of his rights as grantee of Lot 21 under RA 477 during the period materi al to the present case, i.e., from the cancellation of the award in 1965 to its reinstatement in 1972. Within said period, Alonzo could exercise all the rights pertaining to a grantee with respect to Lot 21. 2. Court to apply the contract a

ccording to its express terms The first and fundamental duty of the courts is th e application of the contract according to its express terms, interpretation bei ng resorted to only when such literal application is impossible. 3. Contract cle ar and unequivocal; Construction or interpretation of document not called for Co nstruction or interpretation of the document in question is not called for. A pe rusal of the deed fails to disclose any ambiguity or obscurity in its provisions , nor is there doubt as to the real intention of the contracting parties. The te rms of the agreement are clear and unequivocal, hence the literal and plain mean ing thereof should be observed. Such is the mandate of the Civil Code of the Phi lippines which provides that if the terms of a contract are clear and leave no do ubt upon the intention of the contracting parties, the literal meaning of its st ipulation shall control. In the present case, the Deed of Sale dated 14 August 1968 is precisely what it purports to be. It is a document evidencing the agreement of herein parties for the sale of coconut Page 37 of 87

fruits of Lot 21, and not for the lease of the land itself. In clear and express terms, the document defines the object of the contract thus: the herein sale of coconut fruits are for all the fruits on the aforementioned parcel of land durin g the years from 15 September 1968; up to 1 January 1976. 4. Contract of sale val id, essential elements valid The document in question expresses a valid contract of sale as it has the essential elements of a contract of sale as defined under Article 1458 of the New Civil Code. Article 1458 provides that by the contract o f sale one of the contracting parties obligates himself to transfer the ownershi p of and to deliver a determinate thing, and the other to pay therefor a price c ertain in money or its equivalent, and that a contract of sale may be absolute or conditional. The subject matter of the contract of sale are the fruits of the coc onut trees on the land during the years from 15 September 1968 up to 1 January 1 976, which subject matter is a determinate thing. 5. Things having potential exi stence may be the object of the contract of sale Under Article 1461 of the New C ivil Code, things having a potential existence may be the object of the contract of sale. A valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into exi stence (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Excha nge, 21 Am. St. Rep., 63). Things of this nature are said to have a potential ex istence. A man may sell property of which he is potentially and not actually pos sessed. He may make a valid sale of the wine that a vineyard is expected to prod uce; or the grain a fieldmay grow in a given time; or the milk a cow may yield d uring the coming year; or the wool that shall thereafter grow upon sheep; or wha t may be taken at the next case of a fishermans net; or fruits to grow; or young animals not yet in existence; or the good will of a trade and the like. The thin g sold, however, must be specific and identified. They must be also owned at the time by the vendor (Hull vs. Hull, 48 Conn., 250; 40 Am. Rep., 165) pp. 522-523) . Thus, pending crops which have potential existence may be the subject matter o f sale (Sibal vs. Valdez, 50 Phil. 512). 6. Contract of sale and lease of things distinguished The essential difference between a contract of sale and a lease o f things is that the delivery of the thing sold transfers ownership, while in le ase no such transfer of ownership results as the rights of the lessee are limite d to the use and enjoyment of the thing leased. In the present case, the lower c ourts holding that the contract in question fits the definition of a lease of thi ngs wherein one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain and for a period which may be definite or in definite (Art. 1643, Civil Code of the Philippines) is erroneous. 7. Contract of lease, enjoyment of property Article 1543 of the Civil Code defines the contrac t of lease as the giving or the concession of the enjoyment or use of a thing fo r a specified time and fixed price, and since such contract is a form of enjoyme nt of the property, it is evident that it must be regarded as one of the means o f enjoyment referred to in said Article 398, inasmuch as the terms enjoyment, us e, and benefit involve the same and analogous meaning relative to the general ut ility of which a given thing is capable. (104 Jurisprudencia Civil, 443; Rodrigu ez vs. Borromeo, 43 Phil. 479, 490). 8. Transfer of accessory does not transfer principal The possession and enjoyment of the coconut trees cannot be said to be the possession and enjoyment of the land itself because these rights are distin ct and separate from each other, the first pertaining to the accessory or improv ements (coconut trees) while the second, to the principal (the land). A transfer of the accessory or improvement is not a transfer of the principal. It is the o ther way around, the accessory follows the principal. In the present case, the s ale of the nuts cannot be interpreted nor construed to be a lease of the trees, much less extended further to include the lease of the land itself. In cannot be said that the possession and enjoyment of the coconut trees to be the possessio n and enjoyment of the land itself because the lessee in order to enjoy his righ t under the contract, he actually takes possession of the land, at least during harvest time, gathers all of the fruits of the coconut trees in the land, and ga ins exclusive use thereof without the interference or intervention of the lessor

. 9. Grantee under RA 477 not prohibited to sell the natural/industrial fruits o f the land awarded to him The grantee of a parcel of land under RA 477 is not pr ohibited from alienating or disposing of the natural and/or industrial fruits of the land awarded to him, pursuant to the terms of the first paragraph of Sectio n 8. What the law expressly disallows is the encumbrance or alienation of the la nd itself or any of the permanent improvements thereon. Permanent improvements o n a parcel of land are things incorporated or attached to the property in a fixe d manner, naturally or artificially. They include whatever is built, planted or sown on the land which is characterized by fixity, immutability or immovability. Houses, buildings, machinery, animal houses, trees and plants would fall under the category of permanent improvements, the alienation or encumbrance of which i s prohibited by RA 477. While coconut trees are permanent improvements of a land , their nuts are natural or industrial fruits which are meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of by th e owner of the land. Hence, the grantee of Lot 21 had the right and prerogative to sell the coconut fruits of the trees growing on the property. Page 38 of 87

10. Purpose of RA 477, and Section 8 thereof By virtue of RA 477, bona fide occu pants, veterans, members of guerilla organizations and other qualified persons w ere given the opportunity to acquire government lands by purchase, taking into a ccount their limited means. It was intended for these persons to make good and p roductive use of the lands awarded to them, not only to enable them to improve t heir standard of living, but likewise to help provide for the annual payments to the Government of the purchase price of the lots awarded to them. Section 8 was included to protect the grantees from themselves and the incursions of opportuni sts who prey on their misery and poverty. It is there to insure that the grantees themselves benefit from their respective lots, to the exclusion of other person s. 11. Legislature does not intend to prohibit the grantee from selling natural and industrial fruits of his land The purpose of the law is not violated when a grantee sells the produce or fruits of his land. On the contrary, the aim of the law is thereby achieved, for the grantee is encouraged and induced to be more i ndustrious and productive, thus making it possible for him and his family to be economically self-sufficient and to lead a respectable life. At the same time, t he Government is assured of payment on the annual installments on the land. It c ould not have been the intention of the legislature to prohibit the grantee from selling the natural and industrial fruits of his land, for otherwise, it would lead to an absurd situation wherein the grantee would not be able to receive and enjoy the fruits of the property in the real and complete sense. 12. Party cann ot impugn the validity of the contract after receiving the consideration for the sale The vendor-grantee, after having received the consideration for the sale o f his coconut fruits, cannot be allowed to impugn the validity of the contracts he entered into, to the prejudice of petitioner who contracted in good faith and for a consideration. The vendor cannot claim that he has the privilege to change his mind and claim it as (an) implied lease, and he has the legitimate right to fi le an action for annulment which no law can stop as there is a perfected and valid contract. 13. Grant of attorneys fees not justified Article 2208 of the Civil Co de provides that in the absence of stipulation, attorneys fees and expenses of lit igation, other than judicial costs, cannot be recovered, except (1) When exempla ry damages are awarded; (2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his in terest; (3) In criminal cases of malicious prosecution against the plaintiff; (4 ) In case of a clearly unfounded civil action or proceeding against the plaintif f; (5) Where the defendant acted in gross and evident bad faith in refusing to s atisfy the plaintiffs plainly valid, just and demandable claim; (6) In actions fo r legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmens compens ation and employers liability laws; (9) In a separate civil action to recover civ il liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In all cases, the attorneys fees and expenses of litigation must be reasonable. None of the legal g rounds enumerated exists to justify or warrant the grant of attorneys fees. 19. Melliza v. City of Iloilo (GR L-24732, 30 April 1968) Melliza v. Iloilo City [G.R. No. L-24732. April 30, 1968.] En Banc, Bengzon JP ( J): 8 concur, 1 on leave Facts: Juliana Melliza during her lifetime owned, among other properties, 3 parcels of residential land in Iloilo City (OCT 3462). Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot 12 14 was 29,073 sq. m. On 27 November 1931 she donated to the then Municipality of Iloilo, 9,000 sq. m. of Lot 1214, to serve as site for the municipal hall. The donation was however revoked by the parties for the reason that the area donated was found inadequate to meet the requirements of the development plan of the mu nicipality, the so- called Arellano Plan. Subsequently, Lot 1214 was divided by Ce rteza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214

-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As app roved by the Bureau of Lands, Lot 1214-B-1, with 4,562 sq. m., became known as L ot 1214-B; Lot 1214-B-2, with 6,653 sq. m., was designated as Lot 1214-C; and Lo t 1214-B-3, with 4,135 sq. m., became Lot 1214-D. On 15 November 1932, Juliana M elliza executed an instrument without any caption providing for the absolute sal e involving all of lot 5, 7669 sq. m. of Lot 2 (sublots 2-B and 2-C), and a port ion of 10,788 sq. m. of Lot 1214 (sublots 1214-B2 and 1214-B3) in favor of the M unicipal Government of Iloilo for the sum of P6,422; these lots and portions bei ng the ones needed by the municipal government for the construction of avenues, parks and City hall site according the Arellano plan. On 14 January 1938, Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva (thereafter TCT 18178). Remedios in turn on 4 November 1946 transferred her rights to said p ortion of land to Pio Sian Melliza (thereafter TCT 2492). Annotated at the back of Pio Sian Mellizas title certificate was the following that a portion of 10,788 sq. m. of Lot 1214 now designated as Lots 1412-B-2 and 1214-B-3 of the subdivisi on plan belongs to the Municipality of Iloilo as per instrument dated 15 Novembe r 1932. On 24 August 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building Page 39 of 87

thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of Lots 1214-B, 1214-C and 1214-D, with a total area of 15,350 sq. m., more or less. Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by Pio Sian Melliza, the City did not have funds. The University of the Philippines, meanwhile, obtai ned Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D. On 10 December 1955 Pio Sian Melizza filed an action in the CFI Iloilo against Iloilo City and the University of the Philippines for recover y of Lot 1214-B or of its value. After stipulation of facts and trial, the CFI r endered its decision on 15 August 1957, dismissing the complaint. Said court rul ed that the instrument executed by Juliana Melliza in favor of Iloilo municipali ty included in the conveyance Lot 1214-B, and thus it held that Iloilo City had the right to donate Lot 1214-B to UP. Pio Sian Melliza appealed to the Court of Appeals. On 19 May 1965, the CA affirmed the interpretation of the CFI that the portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included whatever was needed for the construc tion of avenues, parks and the city hall site. Nonetheless, it ordered the reman d of the case for reception of evidence to determine the area actually taken by Iloilo City for the construction of avenues, parks and for city hall site. Hence , the appeal by Pio San Melliza to the Supreme Court. The Supreme Court affirmed the decision appealed from insofar as it affirms that of the CFI, and dismissed the complaint; without costs. 1. Interpretation of contract involves question o f law The interpretation of the public instrument dated 15 November 1932 involve s a question of law, since the contract is in the nature of law as between the p arties and their successors in interest. 2. Intent of the parties as to the obje ct of the public instrument The paramount intention of the parties was to provid e Iloilo municipality with lots sufficient or adequate in area for the construct ion of the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation for this purpose between the same parties was revoked by them , because of inadequacy of the area of the lot donated. Said instrument describe d 4 parcels of land by their lot numbers and area; and then it goes on to furthe r describe, not only those lots already mentioned, but the lots object of the sa le, by stating that said lots were the ones needed for the construction of the c ity hall site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the specified lots (Lots 2, 5, 1214-C and 1214D), there would scarcely have been any need for the next paragraph, since these lots were already plainly and very clearly described by their respective lot number and a reas. Said next paragraph does not really add to the clear description that was already given to them in the previous one. It is therefore the more reasonable i nterpretation to view it as describing those other portions of land contiguous t o the lots that, by reference to the Arellano plan, will be found needed for the purpose at hand, the construction of the city hall site. 3. Requirement, that s ale must have a determinate thing as object, is fulfilled if object of sale is c apable of being made determinate at the time of the contract The requirement of the law that a sale must have for its object a determinate thing, is fulfilled a s long as, at the time the contract is entered into, the object of the sale is c apable of being made determinate without the necessity of a new or further agree ment between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement that the lots objec t of the sale are the ones needed for city hall site; avenues and parks, accordi ng to the Arellano plan, sufficiently provides a basis, as of the time of the ex ecution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties. 4. Arellano plan in existence since 1928; Area of land needed for the city hall site known The Arellano plan was in existence as early as 1928. Tthe previous donation of land for city hall site o n 27 November 1931 was revoked on 6 March 1932 for being inadequate in area unde r said Arellano plan. The area needed under that plan for city hall site was the n already known; that the specific mention of some of the lots covered by the sa

le in effect fixed the corresponding location of the city hall site under the pl an; that, therefore, considering the said lots specifically mentioned in the pub lic instrument, and the projected city hall site, with its area, as then shown i n the Arellano plan (Exhibit 2), it could be determined which, and how much of t he portions of land contiguous to those specifically named, were needed for the construction of the city hall site. 5. Lot 1214-B is contiguous to Lot 1214-C an d 1214-D, and is in the heart of the city hall site Lot 1214-B is contiguous to Lots 1214-C and 1214-D, admittedly covered by the public instrument. It is stipu lated that, after execution of the contract, the Municipality of Iloilo possesse d it together with the other lots sold. It sits practically in the heart of the city hall site. Page 40 of 87

6. Pio Sian Melliza a notary public and thus aware of the terms of the public in strument Pio Sian Melliza, from the stipulation of facts, was the notary public of the public instrument. As such, he was aware of its terms. Said instrument wa s also registered with the Register of Deeds and such registration was annotated at the back of the corresponding title certificate of Juliana Melliza. From the se stipulated facts, it can be inferred that Pio Sian Melliza knew of the afores aid terms of the instrument or is chargeable with knowledge of them; that knowin g so, he should have examined the Arellano plan in relation to the public instru ment; that furthermore, he should have taken notice of the possession first by t he Municipality of Iloilo, then by the City of Iloilo and later by the Universit y of the Philippines of Lot 1214-B as part of the city hall site conveyed under that public instrument, and raised proper objections thereto if it was his posit ion that the same was not included in the same. 7. Principles of civil law, as w ell as laches, estoppel and equity applied; Lot included in conveyance For 20 lo ng years, Pio Sian Melliza and his predecessors-in-interest, did not object to s aid possession, nor exercise any act of possession over Lot 1214-B. Applying, th erefore, principles of civil law, as well as laches, estoppel, and equity, said lot must necessarily be deemed included in the conveyance in favor of Iloilo mun icipality, now Iloilo City. 20. Yutek v. Gonzales (GR 9935, 1 February 1915) Yu Tek v. Gonzales [G.R. No. 9935. February 1, 1915.] First Division, Trent (J): 4 concur, 1 dissents Facts: A written contract was executed between Basilio Gon zalez and Yu Tek and Co., where Gonzales was obligated to deliver 600 piculs of sugar of the 1st and 2nd grade to Yu Tek, within the period of 3 months (1 Janua ry-31 March 1912) at any place within the municipality of Sta. Rosa, which Yu Te k & Co. or its representative may designate; and in case, Gonnzales does not del iver, the contract will be rescinded and Gonzales shall be obligated to return t he P3,000 received and also the sum of P1,200 by way of indemnity for loss and d amages. No sugar had been delivered to Yu Tek & Co. under this contract nor had it been able to recover the P3,000. Yu Tek & Co. filed a complaint against Gonza les, and prayed for judgment for the P3,000 and the additional P1,200. Judgment was rendered for P3,000 only, and from this judgment both parties appealed. The Supreme Court affirmed the judgment appealed from with the modification allowing the recovery of P1,200 under paragraph 4 of the contract, without costs. 1. Rig hts determined by the writing itself Parties are presumed to have reduced to wri ting all the essential conditions of their contract. The rights of the parties m ust be determined by the writing itself. 2. Parol evidence not admissible as it should not serve to incorporate additional conditions into a contract While paro l evidence is admissible in a variety of ways to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additi onal contemporaneous conditions which are not mentioned at all in the writing, u nless there has been fraud or mistake. In the present case, Gonzales alleged tha t the court erred in refusing to permit parol evidence showing that the parties intended that the sugar was to be secured from the crop which the defendant rais ed on his plantation, and that he was unable to fulfill the contract by reason o f the almost total failure of his crop. The case appears to be one to which the rule which excludes parol evidence to add to or vary the terms of a written cont ract is decidedly applicable. There is not the slightest intimation in the contr act that the sugar was to be raised by Gonzales. In the contract, Gonzales under took to deliver a specified quantity of sugar within a specified time. The contr act placed no restriction upon him in the matter of obtaining the sugar, as he w as at liberty to purchase it on the market or raise it himself, notwithstanding that he owned a plantation himself. 3. Cases where parol evidence was denied by the Court In Pastor v. Gaspar (2 Phil 592) the Court declined to allow parol evi dence showing that a party to a written contract was to become a partner in a fi rm instead of a creditor of the firm. In Eveland vs. Eastern Mining Co. (14 Phil

509) a contract of employment provided that the plaintiff should receive from t he defendant a stipulated salary and expenses The defendant in said case sought to interpose as a defense to recovery that the payment of the salary was conting ent upon the plaintiffs employment redounding to the benefit of the defendant com pany. The contract contained no such condition and the court declined to receive parol evidence thereof. 4. Perfected contract of sale defined; Relief for non-d elivery Article 1450 defines a perfected sale as follows: The sale shall be perfe cted between vendor and vendee and shall be binding on both of them, if they hav e agreed upon the thing which is the object of the contract and upon the price, even when neither has been delivered. Article 1452 provides that the injury to or the profit of the thing sold shall, after the contract has been Page 41 of 87

perfected, be governed by the provisions of articles 1096 and 1182. There is a pe rfected sale with regard to the thing whenever the article of sale has been physic ally segregated from all other articles. 6. Perfected sale; Cases In McCullough vs. Aenlle & Co. (3 Phil 285), a particular tobacco factory with its contents wa s held sold under a contract which did not provide for either delivery of the pr ice or of the thing until a future time. In Barretto vs. Santa Marina (26 Phil 2 00), specified shares of stock in a tobacco factory were held sold by a contract which deferred delivery of both the price and the stock until the latter had be en appraised by an inventory of the entire assets of the company. In Borromeo vs . Franco (5 Phil. Rep., 49) a sale of a specific house was held perfected betwee n the vendor and vendee, although the delivery of the price was withheld until t he necessary documents of ownership were prepared by the vendee. In Tan Leonco v s. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp i nto the warehouse of the defendant. The defendant drew a bill of exchange in the sum of P800, representing the price which had been agreed upon for the hemp thu s delivered. Prior to the presentation of the bill for payment, in said case, th e hemp was destroyed. Whereupon, the defendant suspended payment of the bill. It was held that the hemp having been already delivered, the title had passed and the loss was the vendees. It is our purpose to distinguish the case at bar from a ll these cases. 7. Contract in present case merely an executory agreement: a pro mise of sale and not a sale The contract in the present case was merely an execu tory agreement; a promise of sale and not a sale. As there was no perfected sale , it is clear that articles 1452, 1096, and 1182 are not applicable. The agreeme nt upon the thing which was the object of the contract was not within the meaning of article 1450. Sugar is one of the staple commodities of this country. For the purpose of sale its bulk is weighed, the customary unit of weight being denomin ated a picul. There was no delivery under the contract. If called upon to designat e the article sold, it is clear that Gonzales could only say that it was sugar. He could only use this generic name for the thing sold. There was no appropriation o f any particular lot of sugar. Neither party could point to any specific quantit y of sugar. 8. Present case different from cases cited with perfected contracts The contract in the present case is different from the contracts discussed in th e cases referred to. In the McCullough case, for instance, the tobacco factory w hich the parties dealt with was specifically pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco case, where a quantity of hemp was the subject of the contract, it wa s shown that quantity had been deposited in a specific warehouse, and thus set a part and distinguished from all other hemp. 9. American jurisprudence; Executory contracts In Witt Shoe Co. vs. Seegars & Co. (122 La., 145; 47 Sou., 444), a co ntract was entered into by a traveling salesman for a quantity of shoes, the sal es having been made by sample. Since Mitchell was offering to sell by sample sho es, part of which had not been manufactured and the rest of which were incorpora ted in Witt Shoe Co.s stock in Lynchburg, Va., it was impossible that he and Seeg ars & Co. should at that time have agreed upon the specific objects, the title t o which was to pass, and hence there could have been no sale. In State vs. Shiel ds, et al. (110 La., 547, 34 Sou., 673), it was held that in receiving an order for a quantity of goods, of a kind and at a price agreed on, to be supplied from a general stock, warehoused at another place, the agent receiving the order mer ely enters into an executory contract for the sale of the goods, which does not divest or transfer the title of any determinate object, and which becomes effect ive for that purpose only when specific goods are thereafter appropriated to the contract; and, in the absence of a more specific agreement on the subject, that such appropriation takes place only when the goods as ordered are delivered to the public carriers at the place from which they are to be shipped, consigned to the person by whom the order is given, at which time and place, therefore, the sale is perfected and the title passes. 10. American jurisprudence: Recovery of p ayment; Applicability to present case In Larue & Prevost vs. Rugely, Blair & Co. (10 La. Ann., 242), the defendants therein had made a contract for the sale, by weight, of a lot of cotton, had received $3,000 on account of the price, and ha

d given an order for its delivery, which had been presented to the purchaser, an d recognized by the press in which the cotton was stored, but that the cotton ha d been destroyed by fire before it was weighed. It was held that it was still at the risk of the seller, and that the buyer was entitled to recover the $3,000 p aid on account of the price. Similarly, in the present case, Gonzales having def aulted in his engagement, Yu Tek & Co. is entitled to recover the P3,000 which i t advanced to Gonzales. 11. Contracting parties free to stipulate; Stipulation c lear, no room for interpretation; Liquidated damage The contract plainly states that if Gonzales fails to deliver the 600 piculs of sugar within the time agreed on, the contract will be rescinded and he will be obliged to return the P3,000 and pay the sum of P1,200 by way of indemnity for loss and damages. There cannot be the slightest doubt about the meaning of this language or the intention of t he parties. There is no room for either interpretation or construction. Under th e provisions of article 1255 of the Civil Code contracting parties are free to e xecute the contracts that they may consider suitable, provided they are not in c ontravention of law, morals, or public order. In Page 42 of 87

our opinion there is nothing in the contract under consideration which is oppose d to any of these principles. Thus, this is a clear case of liquidated damages. 21. National Grains Administration v. IAC (GR 74470, 8 March 1989) National Grains Authority v. IAC [G.R. No. 74470. March 8, 1989.] Third Division , Medialdea (J): 4 concur Facts: National Grains Authority (now National Food Au thority, NFA) is a government agency created under PD 4. One of its incidental f unctions is the buying of palay grains from qualified farmers. On 23 August 1979 , Leon Soriano offered to sell palay grains to the NFA, through the Provincial M anager (William Cabal) of NFA in Tuguegarao, Cagayan. He submitted the documents required by the NFA for pre-qualifying as a seller, which were processed and ac cordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the Farmers Information Sheet represented the maximum number of cavans of palay that Soriano may sell to the NFA. On 23 and 24 August 1979, Soriano delivered 630 ca vans of palay. The palay delivered were not rebagged, classified and weighed. Wh en Soriano demanded payment of the 630 cavans of palay, he was informed that its payment will be held in abeyance since Mr. Cabal was still investigating on an information he received that Soriano was not a bona fide farmer and the palay de livered by him was not produced from his farmland but was taken from the warehou se of a rice trader, Ben de Guzman. On 28 August 1979, Cabal wrote Soriano advis ing him to withdraw from the NFA warehouse the 630 cavans stating that NFA canno t legally accept the said delivery on the basis of the subsequent certification of the BAEX technician (Napoleon Callangan) that Soriano is not a bona fide farm er. Instead of withdrawing the 630 cavans of palay, Soriano insisted that the pa lay grains delivered be paid. He then filed a complaint for specific performance and/or collection of money with damages on 2 November 1979, against the NFA and William Cabal (Civil Case 2754). Meanwhile, by agreement of the parties and upo n order of the trial court, the 630 cavans of palay in question were withdrawn f rom the warehouse of NFA. On 30 September 1982, the trial court found Soriano a bona fide farmer and rendered judgment ordering the NFA, its officers and agents to pay Soriano the amount of P47,250.00 representing the unpaid price of the 63 0 cavans of palay plus legal interest thereof (12% per annum, from the filing of complaint on 20 November 1979 until fully paid). NFA and Cabal filed a motion f or reconsideration, which was denied by the court on 6 December 1982. Appeal was filed with the Intermediate Appellate Court. On 23 December 1986, the then IACu pheld the findings of the trial court and affirmed the decision ordering NFA and its officers to pay Soriano the price of the 630 cavans of rice plus interest. The motion for reconsideration of the appellate courts decision was denied in a r esolution dated 17 April 1986. Hence, the present petition for review with the s ole issue of whether or not there was a contract of sale in the present case. Th e Supreme Court dismissed the instant petition for review, and affirmed the assa iled decision of the then IAC (now Court of Appeals) is affirmed; without costs. 1. Sale defined Article 1458 of the Civil Code of the Philippines defines sale as a contract whereby one of the contracting parties obligates himself to transf er the ownership of and to deliver a determinate thing, and the other party to p ay therefore a price certain in money or its equivalent. 2. Contract defined; re quisites A contract, on the other hand, is a meeting of minds between two (2) pe rsons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code of the Philippines). The essentia l requisites of contracts are: (1) consent of the contracting parties, (2) objec t certain which is the subject matter of the contract, and (3) cause of the obli gation which is established (Art. 1318, Civil Code of the Philippines.) 3. Prese nt case involves a perfected contract of sale In the present case, Soriano initi ally offered to sell palay grains produced in his farmland to NFA. When the latt er accepted the offer by noting in Sorianos Farmers Information Sheet a quota of 2 ,640 cavans, there was already a meeting of the minds between the parties. The o bject of the contract, being the palay grains produced in Sorianos farmland and t

he NFA was to pay the same depending upon its quality. The contention that since the delivery were not rebagged, classified and weighed in accordance with the p alay procurement program of NFA, there was no acceptance of the offer thus this is a clear case of policitation or an unaccepted offer to sell, is untenable. 4. Quantity being indeterminate does not affect perfection of contract; No need to create new contract The fact that the exact number of cavans of palay to be del ivered has not been determined does not affect the perfection of the contract. A rticle 1349 of the New Civil Code provides that the fact that the quantity is not determinate shall not be an obstacle Page 43 of 87

to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. In the present case, the re was no need for NFA and Soriano to enter into a new contract to determine the exact number of cavans of palay to be sold. Soriano can deliver so much of his produce as long as it does not exceed 2,640 cavans. 5. Sale a consensual contrac t; Acceptance is on the offer and not the goods delivered Sale is a consensual c ontract, there is perfection when there is consent upon the subject matter and pr ice, even if neither is delivered. (Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560) Article 1475 of the Civil Code provides that The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is t he object of the contract and upon the price. The acceptance referred to which de termines consent is the acceptance of the offer of one party by the other and no t of the goods delivered. 6. Compliance of mutual obligations once a contract of sale is perfected From the moment the contract of sale is perfected, it is incu mbent upon the parties to comply with their mutual obligations or the parties may reciprocally demand performance thereof. (Article 1475, Civil Code, 2nd par.) 22. Johannes-Schuback v. CA (GR 105387, 11 November 1993) Schuback & Sons v. CA [G.R. No. 105387. November 11, 1993.] Third Division, Rome ro (J): 4 concur Facts: In 1981, Ramon San Jose (Philippine SJ Industrial Tradin g) established contact with Johannes Schuback & Sons Philippine Trading Corporat ion through the Philippine Consulate General in Hamburg, West Germany, because h e wanted to purchase MAN bus spare parts from Germany. Schuback communicated wit h its trading partner, Johannes Schuback and Sohne Handelsgesellschaft m.b.n. & Co. (Schuback Hamburg) regarding the spare parts San Jose wanted to order. On 16 October 1981, San Jose submitted to Schuback a list of the parts he wanted to p urchase with specific part numbers and description. Schuback referred the list t o Schuback Hamburg for quotations. Upon receipt of the quotations, Schuback sent to San Jose a letter dated 25 November 1981 enclosing its offer on the items li sted. On 4 December 1981, San Jose informed Schuback that he preferred genuine t o replacement parts, and requested that he be given a 15% discount on all items. On 17 December 1981, Schuback submitted its formal offer containing the item nu mber, quantity, part number, description, unit price and total to San Jose. On 2 4 December 1981, San Jose informed Schuback of his desire to avail of the prices of the parts at that time and enclosed its Purchase Order 0101 dated 14 Decembe r 1981. On 29 December 1981, San Jose personally submitted the quantities he wan ted to Mr. Dieter Reichert, General Manager of Schuback, at the latters residence . The quantities were written in ink by San Jose in the same PO previously submi tted. At the bottom of said PO, San Jose wrote in ink above his signature: NOTE: Above PO will include a 3% discount. The above will serve as our initial PO. Schu back immediately ordered the items needed by San Jose from Schuback Hamburg. Sch uback Hamburg in turn ordered the items from NDK, a supplier of MAN spare parts in West Germany. On 4 January 1982, Schuback Hamburg sent Schuback a proforma in voice to be used by San Jose in applying for a letter of credit. Said invoice re quired that the letter of credit be opened in favor of Schuback Hamburg. San Jos e acknowledged receipt of the invoice. An order confirmation was later sent by S chuback Hamburg to Schuback which was forwarded to and received by San Jose on 3 February 1981. On 16 February 1982, Schuback reminded San Jose to open the lett er of credit to avoid delay in shipment and payment of interest. In the meantime , Schuback Hamburg received invoices from NDK for partial deliveries on Order 12 204. On 16 February 1984, Schuback Hamburg paid NDK. On 18 October 1982, Schubac k again reminded San Jose of his order and advised that the case may be endorsed to its lawyers. San Jose replied that he did not make any valid PO and that the re was no definite contract between him and Schuback. Schuback sent a rejoinder explaining that there is a valid PO and suggesting that San Jose either proceed with the order and open a letter of credit or cancel the order and pay the cance llation fee of 30% F.O.B. value, or Schuback will endorse the case to its lawyer

s. Schuback Hamburg issued a Statement of Account to Schuback enclosing therewit h Debit Note charging Schuback 30% cancellation fee, storage and interest charge s in the total amount of DM 51,917.81. Said amount was deducted from Schubacks ac count with Schuback Hamburg. Demand letters sent to San Jose by Schubacks counsel dated 22 March 1983 and 9 June 1983 were to no avail. Schuback filed a complain t for recovery of actual or compensatory damages, unearned profits, interest, at torneys fees and costs against San Jose. In its decision dated 13 June 1988, the trial court ruled in favor of Schuback by ordering San Jose to pay it, among oth ers, actual compensatory damages in the amount of DM 51,917.81, unearned profits in the amount of DM 14,061.07, or their peso equivalent. San Jose elevated his case before the Court of Appeals. On 18 February 1992, the appellate court rever sed the decision of the trial court and dismissed Schubacks complaint. It ruled t hat there was no perfection of contract since there was no meeting of the minds as to the price between the last week of December 1981 and the first week of Jan uary 1982. Hence, the petition for review on certiorari. The Supreme Court grant ed the petition, and reinstated the decision of the trial court dated 13 June 19 88 with modification. Page 44 of 87

1. Perfection of a contract of sale A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. 2. Consent manifested: Offer and acceptance Article 1319 of t he Civil Code provides that consent is manifested by the meeting of the offer and acceptance upon the thing and the cause which are to constitute the contract. T he offer must be certain and the acceptance absolute. A qualified acceptance con stitutes a counter offer. In the present case, the facts indicate that consent on both sides has been manifested. The offer was manifested on 17 December 1981 wh en Schuback submitted its proposal containing the item number, quantity, part nu mber, description, the unit price and total to San Jose. On 24 December 1981, Sa n Jose informed Schuback of his desire to avail of the prices of the parts at th at time and simultaneously enclosed its PO 0101 dated 14 December 1981. At this stage, a meeting of the minds between vendor and vendee has occurred, the object of the contract being the spare parts and the consideration, the price stated i n Schubacks offer dated 17 December 1981 and accepted by San Jose on 24 December 1981. 3. Quantity is immaterial to the perfection of a sales contract Although t he quantity to be ordered was made determinate only on 29 December 1981, quantit y is immaterial in the perfection of a sales contract. What is of importance is the meeting of the minds as to the object and cause, which from the facts disclo sed, show that as of 24 December 1981, these essential elements had already conc urred. Thus, perfection of the contract took place, not on 29 December 1981, but rather on 24 December 1981. 4. Letter of credit only a mode of payment, not an essential requirement of sale The opening of a letter of credit in favor of a ve ndor is only a mode of payment. It is not among the essential requirements of a contract of sale enumerated in Article 1305 and 1474 of the Civil Code, the abse nce of any of which will prevent the perfection of the contract from taking plac e. In the present case, when San Jose failed to open an irrevocable letter of cr edit without recourse in favor of Schuback Hamburg, such did not prevent the per fection of the contract between the parties, for the opening of a letter of cred it is not to be deemed a suspensive condition. Schuback did not reserve title to the goods until San Juan had opened a letter of credit. Schuback did not incorp orate any provision declaring their contract of sale without effect until after the fulfillment of the act of opening a letter of credit. To adopt the Court of Appeals ruling that the contract of sale was dependent on the opening of a letter of credit would be untenable from a pragmatic point of view because San Jose wo uld not be able to avail of the old prices which were open to him only for a lim ited period of time. 23. Noel v. CA (GR 59550, 11 January 1995) Noel v. CA [G.R. No. 59550. January 11, 1995.] Mercado v. CA [G.R. No. 60636. Ja nuary 11, 1995.] First Division, Quiason (J): 4 concur Facts: Gregorio Nanaman a nd Hilaria Tabuclin were a childless, legally-married couple. Gregorio, however, had a child named Virgilio Nanaman by another woman. Virgilio was reared by the Nanaman spouses since he was two years old. During their marriage, Gregorio and Hilaria acquired certain property including a 34.7-hectare land in Tambo, Iliga n City on which they planted sugarcane, corn and bananas; where they lived with Virgilio and 15 tenants. On 2 October 1945, Gregorio died. Hilaria then administ ered the property with the help of Virgilio. Through their tenants, Hilaria and Virgilio enjoyed the produce of the land to the exclusion of Juan Nanaman, the b rother of Gregorio, and Esperanza and Caridad Nanaman, Gregorios daughters by sti ll another woman. In 1953, Virgilio declared the property in his name for taxati on purposes under Tax Declaration 5534. On 1 November 1952, Hilaria and Virgilio , mortgaged the 34.7-hectare land in favor of Jose C. Deleste, in consideration of the amount of P4,800.00. On 16 February 1954, Hilaria and Virgilio executed a deed of sale over the same tract of land also in favor of Deleste in considerat ion of the sum of P16,000.00. Witnesses to the sale were the wife of Virgilio, R osita S. Nanaman, Rufo C. Salas (Delestes driver), and Remedios Pilotan. The docu

ment was notarized on 17 February 1954 and was registered with the Register of D eeds of Iligan City on 2 March 1954. Having discovered that the property was in arrears in the payment of taxes from 1952, Deleste paid the taxes for 1952, 1953 and 1954. From then on, Deleste has paid the taxes on the property. On 15 May 1 954, Hilaria died. On 27 October 1954, Esperanza and Caridad Nanaman filed intes tate estate proceedings concerning the estate of their father, Gregorio. As only Esperanza, Caridad and Virgilio Nanaman were named as heirs of Gregorio in the petition, Juan Nanaman opposed it. On 26 November 1954, the petition was amended to include the estate of Hilaria with Alejo Tabuclin, Hilarias brother, and Juli o Tabuclin, a son of Hilarias deceased brother, Jose, as additional petitioners. Having been appointed special administrator of the estate of the Nanaman couple, Juan Nanaman included the 34.7-hectare land in the list of the assets of the es tate. On 16 June 1956, when Edilberto Noel took over as regular administrator of the estate, he was not able to take possession of the land in question because it was in the possession of Deleste and some heirs of Hilaria. On 18 July 1957, Deleste and the heirs of the Nanaman spouses executed an amicable settlement of the Page 45 of 87

Nanaman estate. In the document, Deleste agreed to relinquish his rights to of th e entire parcel of land in Tambo, Iligan City sold to him by Hilaria Tabuclin, i n favor of all the heirs of the intestate estate for the reason that not all of the heirs of Gregorio Nanaman have signed and agreed. The court approved the ami cable settlement but when it was questioned by some heirs, the court set aside i ts approval and declared it null and void. The court thereafter ordered Noel, as regular administrator, to file an action to recover the 34.7-hectare land from Deleste. Consequently, on 30 April 1963, Noel filed an action against Deleste fo r the reversion of title over the 34.7-hectare land to the Nanaman estate and to order Deleste to pay the rentals and attorneys fees to the estate. On 14 Decembe r 1973, the trial court rendered a decision, holding that the action for annulme nt of the deed of sale had prescribed in 1958 inasmuch as the sale was registere d in 1954 and that Gregorios heirs had slept on their rights by allowing Hilaria to exercise rights of ownership over Gregorios share of the conjugal property aft er his death in 1945. Noel appealed to the Court of Appeals. On 18 February 1980 , the appellate court ruled that the transaction between Hilaria and Virgilio, a nd Deleste, was indeed a sale. It found that no fraud, mistake or misrepresentat ion attended in the execution of the deed of sale and that no proof was shown th at the contract was merely a mortgage. The appellate court, however, agreed with Noel that Hilaria could not validly sell the 37.7hectare land because it was co njugal property, and Hilaria could sell only her share thereof. The Court also r uled that the prescriptive period of 10 years had not yet elapsed when the actio n to recover the property was filed in 1963.; and held that in the absence of pr oof of adverse possession by Hilaria, she should be considered as holding the pr operty pursuant to her usufructuary rights over the same under the provisions of the Spanish Civil Code of 1889, the law in force at the time of the death of Gr egorio. The Court further ordered Deleste to return the land in question to the administrator of the estate, to pay the sum of P2,500 as rental of the interest of the estate from 1957 until the land is returned, and to pay the expenses of l itigation and the sum of P3,000 as attorneys fees. Deleste filed a motion for the reconsideration of said decision praying for the total affirmance of the decisi on of the trial court. On 14 May 1981, the Court of Appeals promulgated an amend ed decision. It affirmed its previous decision regarding the due execution of th e deed of sale adding that since no fraud attended its execution, there was no b asis for the action to annul the sale and therefore there was no starting point in reckoning the prescriptive period of four years. It reconsidered the Decision of 18 February 1980 insofar as it declared Deleste and the estate of Gregorio a s co-owners of the 34.7-hectare land. Pinito W. Mercado, as new administrator of the estate, appealed to the Supreme Court, questioning the Court of Appeals Amen ded Decision applying the doctrine of laches and equating the said doctrine with acquisitive prescription (GR 59550). Subsequently, another petition for certior ari to declare the sale to Deleste as an equitable mortgage, was filed by Atty. Bonifacio Legaspi, representing the heirs of Hilaria (GR 60636). The two cases, arising from the same decision of the Court of Appeals, were consolidated in the resolution of 2 September 1991 and were jointly considered. The Supreme Court r eversed and set aside the amended decision dated 14 May 1981 of the Court of App eals, and reinstated and affirmed in toto the Decision dated 18 February 1980. 1 . Seemingly inadequate consideration does not render a contract of sale as one o f mortgage The contract involving the 34.7-hectare property was one of sale and not of mortgage in the absence of a showing that the findings complained of are totally devoid of support in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion (Andres v. Manufacturers Hanover & Trust Corporation, 177 SCRA 618 [1989]). It should be noted that two contracts h ad been executed involving said property (the 1 November 1952 mortgage and the 1 6 February 1954 sale). In the absence of proof of gross inadequacy of the price, that the sale was made with what might appear as an inadequate consideration do es not make the contract one of mortgage (Askay v. Cosalan, 46 Phil. 179 [1924]) . 2. Succession in the present case governed by the Civil Code of 1889 Gregorio died in 1945 long before the effectivity of the Civil Code of the Philippines on 30 August 1950. Under Article 2263 of the said Code, rights to the inheritance o

f a person who died, with or without a will, before the effectivity of this Code , shall be governed by the Civil Code of 1889, by other previous laws, and by th e Rules of Court. Thus, succession to the estate of Gregorio was governed primari ly by the provisions of the Spanish Civil Code of 1889. 3. 1889 Civil Code; Wife has full ownership of undivided half-interest and the usufruct over the other; Right to alienate halfinterest Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or sisters or children of brothers or sisters of th e decedent was entitled to receive in usufruct the part of the inheritance perta ining to said heirs. Hilaria, however, had full ownership, not merely usufruct, over the undivided half of the estate (Spanish Civil Code of 1889, Art. 493). It is only this undivided half-interest that she could validly alienate. Under the law in force in 1945, the surviving spouse was given the management of the conj ugal property until the affairs of the conjugal partnership were terminated. The surviving spouse became the owner of one-half interest of the conjugal estate i n his own right. He also became a trustee with respect to the other half for the benefit of whoever may be legally entitled to inherit the said portion. Page 46 of 87

4. 1889 Civil Code; Virgilio is not a heir of Gregorio, being illegitimate; No r ight to transfer ownership Virgilio was not an heir of Gregorio under the Spanis h Civil Code of 1889. Although he was treated as a child by the Nanaman spouses, illegitimate children who were not natural were disqualified to inherit under t he said Code (Cid v. Burnaman, 24 SCRA 434 [1968]). Article 998 of the Civil Cod e of the Philippines, which gave an illegitimate child certain hereditary rights , could not benefit Virgilio because the right of ownership of the collateral he irs of Gregorio had become vested upon his death (Civil Code of the Philippines, Art. 2253; Uson v. Del Rosario, 92 Phil. 530 [1953]). Therefore, Virgilio had n o right at all to transfer ownership over which he did not own. 5. Contract of s ale; essential that seller is the owner of the property In a contract of sale, i t is essential that the seller is the owner of the property he is selling. The p rincipal obligation of a seller is to transfer the ownership of the property sold (Civil Code of the Philippines, Art. 1458). This law stems from the principle th at nobody can dispose of that which does not belong to him (Azcona v. Reyes, 59 Phil. 446 [1934]; Coronel v. Ona, 33 Phil. 456 [1916]). NEMO DAT QUAD NON HABET . 6. Mistake attended sale of undivided interest in property belonging to the co llateral heirs of Gregorio While it cannot be said that fraud attended the sale to Deleste, clearly there was a mistake on the part of Hilaria and Virgilio in s elling an undivided interest in the property which belonged to the collateral he irs of Gregorio. 7. Purchaser is a trustee of an implied trust if property is ac quired by mistake or fraud The sale, having been made in 1954, was governed by t he Civil Code of the Philippines. Under Article 1456 of said Code, an implied tr ust was created on the one-half undivided interest over the 34.7-hectare land in favor of the real owners. Said Article provides that if the property is acquired through mistake or fraud, the person obtaining it is, by force of law, consider ed a trustee of an implied trust for the benefit of the person from whom the pro perty comes. In Diaz v. Gorricho, 103 Phil. 261 (1958), the Court said that Artic le 1456 merely expresses a rule recognized in Gayondato v. Insular Treasurer, 49 Phil. 244 (1926). Applying said rule, the Gayondato court held that the buyer o f a parcel of land at a public auction to satisfy a judgment against a widow acq uired only one-half interest on the land corresponding to the share of the widow and the other half belonging to the heirs of her husband became impressed with a constructive trust in behalf of said heirs. 8. Surviving spouse cannot acquire a title by prescription over said administered half Being a trustee with respec t to the other half for the benefit of whoever may be legally entitled to inheri t the said portion, the surviving spouse could therefore no more acquire a title by prescription against those for whom he was administering the conjugal estate than could a guardian against his ward or a judicial administrator against the h eirs of an estate. The surviving husband as the administrator and liquidator of the conjugal estate occupies the position of a trustee of the highest order and is not permitted by the law to hold that estate or any portion thereof adversely to those for whose benefit the law imposes upon him the duty of administration and liquidation (Pamittan v. Lasam, 60 Phil. 908 *1934+). 9. Virgilios possession not under the claim of ownership The possession of Virgilio, his registration of the land in his name for tax purposes, his hiring of tenants to till the land, and his enjoyment of the produce of the tenants, appear more as acts done to hel p Hilaria in managing the conjugal property. There is no evidence to prove indub itably that Virgilio asserted a claim of ownership over the property in his own right and adverse to all including Hilaria. 10. Laches do not apply; Doctrine ca nnot prejudice the rights of an owner or original transferee The doctrine of lac hes does not apply. Upon orders of the court in the intestate proceedings, Noel, the administrator of the estate of the Nanaman spouses, immediately filed an ac tion to recover possession and ownership of the property. There is no evidence s howing any failure or neglect on his part, for an unreasonable and unexplained l ength of time, to do that which, by exercising due diligence, could or should ha ve been done earlier (Cristobal v. Melchor, 78 SCRA 175 [1977]). The doctrine of stale demands would apply only where by reason of the lapse of time, *i+t would be inequitable to allow a party to enforce his legal rights (Z.E. Lotho, Inc. v. Ice and Cold Storage Industries of the Philippines, Inc., 3 SCRA 744 *1961+). Mo

reover, this Court, except for very strong reasons, is not disposed to sanction the application of the doctrine of laches to prejudice or defeat the rights of a n owner or original transferee (Raneses v. Intermediate Appellate Court, 187 SCR A 397 [1990]). 11. Prescription is ten years in an action to recover the undivid ed half-interest The action to recover the undivided half-interest of the collat eral heirs of Gregorio prescribes in 10 years. The cause of action is based on A rticle 1456 of the Civil Code of the Philippines, which made Deleste a trustee o f an implied trust in favor of the said heirs. Under Article 1144 of the Civil C ode of the Philippines, actions based upon an obligation created by law, can be brought within ten years from the time the right of action accrues (Rosario v. A uditor General, 103 Phil. 1132 [1958]). The 10-year prescriptive period within w hich the collateral heirs of Gregorio could file an action to recover their shar e in the property sold to Deleste (prescripcion extintiva) accrued only on 2 Mar ch 1954, when the deed of sale was registered with the Register of Deeds (Cf. Ar radaza v. Court of Appeals, 170 SCRA 12 [1987]). From 2 March 1954 to 30 April 1 963, when the complaint for the Page 47 of 87

recovery of the property was filed, less than 10 years had elapsed. Therefore, t he action had not been barred by prescription. The 10-year prescriptive period b efore title to real estate shall vest by adverse possession (prescripcion adquis itiva) is also reckoned in the case of Deleste from 2 March 1954 (Corporacion de PP. Agustinos Recoletos v. Crisostomo, 32 Phil. 427 [1915]). 24. Nool v. CA (GR 116635, 24 July 1997) Nool v. CA [G.R. No. 116635. July 24, 1997.] Third Division, Panganiban (J): 4 c oncur Facts: One lot formerly owned by Victorio Nool (TCT T-74950) has an area o f 1 hectare. Another lot previously owned by Francisco Nool (TCT T-100945) has a n area of 3.0880 hectares. Both parcels are situated in San Manuel, Isabela. Spo uses Conchita Nool and Gaudencio Almojera (plaintiffs) alleged that they are the owners of the subject land as they bought the same from Victorio and Francisco Nool, and that as they are in dire need of money, they obtained a loan from the Ilagan Branch of the DBP (Ilagan, Isabela), secured by a real estate mortgage on said parcels of land, which were still registered in the names of Victorino and Francisco Nool, at the time, and for the failure of the plaintiffs to pay the s aid loan, including interest and surcharges, totaling P56,000.00, the mortgage w as foreclosed; that within the period of redemption, the plaintiffs contacted An acleto Nool for the latter to redeem the foreclosed properties from DBP, which t he latter did; and as a result, the titles of the 2 parcels of land in question were transferred to Anacleto; that as part of their arrangement or understanding , Anacleto agreed to buy from Conchita the 2 parcels of land under controversy, for a total price of P100,000.00, P30,000.00 of which price was paid to Conchita , and upon payment of the balance of P14,000.00, the plaintiffs were to regain p ossession of the 2 hectares of land, which amounts spouses Anacleto Nool and Emi lia Nebre (defendants) failed to pay, and the same day the said arrangement was made; another covenant was entered into by the parties, whereby the defendants a greed to return to plaintiffs the lands in question, at anytime the latter have the necessary amount; that latter asked the defendants to return the same but de spite the intervention of the Barangay Captain of their place, defendants refuse d to return the said parcels of land to plaintiffs; thereby impelling the plaint iffs to come to court for relief. On the other hand, defendants theorized that t hey acquired the lands in question from the DBP, through negotiated sale, and we re misled by plaintiffs when defendant Anacleto Nool signed the private writing, agreeing to return subject lands when plaintiffs have the money to redeem the s ame; defendant Anacleto having been made to believe, then, that his sister, Conc hita, still had the right to redeem the said properties. It should be stressed t hat Manuel S. Mallorca, authorized officer of DBP, certified that the 1-year red emption period (from 16 March 1982 up to 15 March 1983) and that the mortgagors r ight of redemption was not exercised within this period. Hence, DBP became the a bsolute owner of said parcels of land for which it was issued new certificates o f title, both entered on 23 May 1983 by the Registry of Deeds for the Province o f Isabela. About 2 years thereafter, on 1 April 1985, DBP entered into a Deed of Conditional Sale involving the same parcels of land with Anacleto Nool as vende e. Subsequently, the latter was issued new certificates of title on 8 February 1 988. The trial court ruled in favor of the defendants, declaring the private wri ting to be an option to sell, not binding and considered validly withdrawn by th e defendants for want of consideration; ordering the plaintiffs to return to the defendants the sum of P30,000.00 plus interest thereon at the legal rate, from the time of filing of defendants counterclaim until the same is fully paid; to de liver peaceful possession of the 2 hectares; and to pay reasonable rents on said 2 hectares at P5,000.00 per annum or at P2,500.00 per cropping from the time of judicial demand until the said lots shall have been delivered to the defendants ; and to pay the costs. The plaintiffs appealed to the Court of Appeals (CA GR C V 36473), which affirmed the appealed judgment in toto on 20 January 1993. Hence , the petition before the Supreme Court. The Supreme Court denied the petition,

and affirmed the assailed decision of the Court of Appeals. 1. Contract of repur chase arising out of a contract of sale where the seller does not have title not valid A contract of repurchase arising out of a contract of sale where the sell er did not have any title to the property sold is not valid. Since nothing was sol d, then there is also nothing to repurchase. 2. Article 1370 NCC applicable only to valid and enforcement contracts Article 1370 of the Civil Code, which provid es that if the terms of a contract are clear and leave no doubt upon the intentio n of the contracting parties, the literal meaning of its stipulations shall cont rol, is applicable only to valid and enforceable contracts. 3. A void contract ca nnot give rise to a valid one A void contract cannot give rise to a valid one. A rticle 1422 of the Civil Code provides that a contract which is the direct result of a previous illegal contract, is also void and inexistent. In the present case . the alleged contract of repurchase being Page 48 of 87

dependent on the validity of the contract of sale, it is itself void. Thus, the principal contract of sale and the auxiliary contract of repurchase are both voi d. 4. Clarification of sale of property, when seller is no longer the owner, null and void; Sale possible even if owner is not owner at time of sale, provided tha t he acquires title to the property at time of delivery In the case of Dignos v. CA, the Court did not cite its basis for ruling that a sale is null and void wher e the sellers were no longer the owners of the property. Such a situation (where t he sellers were no longer owners) does not appear to be one of the void contract s enumerated in Article 1409 of the Civil Code. Moreover, the Civil Code itself recognizes a sale where the goods are to be acquired by the seller after the perf ection of the contract of sale, clearly implying that a sale is possible even if the seller was not the owner at the time of sale, provided he acquires title to the property later on. 5. Void contracts (Article 1409 [5]); those which contemp lates an impossible service Article 1459 of the Civil Code provides that the vend or must have a right to transfer the ownership thereof *object of the sale] at t he time it is delivered. Here, delivery of ownership is no longer possible. The s ellers can no longer deliver the object of the sale to the buyers, as the buyers themselves have already acquired title and delivery thereof from the rightful o wner, the DBP. Thus, such contract may be deemed to be inoperative and may thus fall, by analogy, under item 5 of Article 1409 of the Civil Code: Those which con template an impossible service. 6. Nono dat quod non habet, No one can give what he does not have; Contract of repurchase inoperative thus void Article 1505 of t he Civil Code provides that where goods are sold by a person who is not the owner thereof, and who does not sell them under authority or with consent of the owne r, the buyer acquires no better title to the goods than the seller had, unless t he owner of the goods is by his conduct precluded from denying the sellers author ity to sell. Jurisprudence, on the other hand, teaches us that a person can sell o nly what he owns or is authorized to sell; the buyer can as a consequence acquir e no more than what the seller can legally transfer. No one can give what he does not have nono dat quod non habet. In the present case, there is no allegation a t all that petitioners were authorized by DBP to sell the property to the privat e respondents. Further, the contract of repurchase that the parties entered into presupposes that petitioners could repurchase the property that they sold to priv ate respondents. As petitioners sold nothing, it follows that they can also repurch ase nothing. In this light, the contract of repurchase is also inoperative and by the same analogy, void. 7. Right to repurchase presupposes a valid contract of sale One repurchases only what one has previously sold. In other words, the right to repurchase presupposes a valid contract of sale between the same parties. Und isputedly, private respondents acquired title to the property from DBP, and not from petitioners. 8. Arguendo, Scenario where the Contract of repurchase distinc t from that of sale; Petitions still do not acquire a right to repurchase the pr operty; Unilateral promise to pay only binding if supported by consideration dis tinct from price Assuming arguendo that the contract of repurchase is separate a nd distinct from the contract of sale and is not affected by the nullity of the latter, still petitioners do not thereby acquire a right to repurchase the prope rty. In that scenario, the contract of repurchase ceases to be a right to repurch ase ancillary and incidental to the contract of sale; rather, it becomes an accep ted unilateral promise to sell. Article 1479 of the Civil Code, however, provide s that an accepted unilateral promise to buy or sell a determinate thing for a pr ice certain is binding upon the promissor if the promise is supported by a consi deration distinct from the price. In the present case, the alleged written contra ct of repurchase is bereft of any consideration distinct from the price. Accordi ngly, as an independent contract, it cannot bind private respondents. 9. Convent ional redemption; Compliance with Article 1616 and other agreed stipulations Art icle 1601 of the Civil Code provides that conventional redemption shall take plac e when the vendor reserves the right to repurchase the thing sold, with the obli gation to comply with the provisions of Article 1616 and other stipulations whic h may have been agreed upon. 10. Right of repurchase a right granted by vendor in the same instrument of sale, not in a subsequent instrument In Villarica v. CA ( 29 November 1968), the Court ruled that the right of repurchase is not a right g

ranted the vendor by the vendee is a subsequent instrument, but is a right reser ved by the vendor in the same instrument of sale as one of the stipulations of t he contract. Once the instrument of absolute sale is executed, the vendor can no longer reserve the right to repurchase, and any right thereafter granted the ve ndor by the vendee in a separate instrument cannot be a right of repurchase but some other right (like the option to buy). 11. Sale, without agreement to repurc hase, absolute In Ramos, et al. vs. Icasiano, et al. (1927) the Court ruled that an agreement to repurchase becomes a promise to sell when made after the sale, b ecause when the sale is made without such an agreement, the purchaser acquires t he thing sold Page 49 of 87

absolutely. and if he afterwards grants the vendor the right to repurchase, it i s a new contract entered into by the purchaser, as absolute owner already of the object. In that case the vendor has not reserved to himself the right to repurc hase. 12. Option to repurchase a promise to sell, governed by Article 1479 The O ption to Repurchase executed by private respondent in the present case, was mere ly a promise to sell, which must be governed by Article 1479 of the Civil Code w hich provides that a promise to buy and sell a determinate thing for a price cert ain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the pr omise is supported by a consideration distinct from the price. 13. Arguendo, Sect ion 119 of Public Land Act The brothers Victorino and Francisco Noel, together w ith Conchita Nool and Anacleto Nool, were all siblings and heirs qualified to re purchase the two parcels of land under Section 119 of the Public Land Act which provides that (e)very conveyance of land acquired under the free patent or homest ead provisions, when proper, shall be subject to repurchase by the applicant, hi s widow or legal heirs, within a period of 5 years from the date of conveyance. A ssuming the applicability of this statutory provision to the present case, it is indisputable that Anacleto Nool already repurchased from DBP the contested prop erties. Hence, there was no more right of repurchase that his sister Conchita or brothers Victorino and Francisco could exercise. The properties were already ow ned by an heir of the homestead grantee and the rationale of the provision to ke ep homestead lands within the family of the grantee was thus fulfilled. 14. Acti on/Defense for the declaration of an inexistent contract does not prescribe; Val idity of a contract cannot be acquired through estoppel The private respondents cannot be estopped from raising the defense of nullity of contract, specially in this case where they acted in good faith, believing that indeed petitioners cou ld sell the two parcels of land in question. Article 1410 of the Civil Code mand ates that the action or defense for the declaration of the inexistence of a contr act does not prescribe. It is a well-settled doctrine that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or it is against public policy. It is not within the competence of any citizen to barter away what public policy by law seeks to preserve. Thus, it is immateria l that private respondents initially acted to implement the contract of sale, be lieving in good faith that the same was valid. A contract void at inception cann ot be validated by ratification or prescription and certainly cannot be binding on or enforceable against private respondents. 15. Petitioners required to retur n sum of P30,000 with interest and to pay rent The balance of P14,000.00 under t he void contract of sale may not be enforced. Petitioners are the ones who have an obligation to return what they unduly and improperly received by reason of th e invalid contract of sale. Since they cannot legally give title to what they sol d, they cannot keep the money paid for the object of the sale. It is basic that ev ery person who through an act of performance by another, or any other means, acq uires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same. Thus, if a void contract has alread y been performed, the restoration of what has been given is in order. 16. Interest runs from the time tolerance ceased upon counterclaim Interest to the amount wi ll run only from the time of private respondents demand for the return of this am ount in their counterclaim, for the petitioners possession and cultivation of the two hectares are anchored on private respondents tolerance. The latters tolerance ceased upon their counterclaim and demand on the former to vacate. Hence, their right to posses and cultivate the land ipso facto ceased. 25. Villaflor v. CA (GR 95694, 9 October 1997) Villaflor v. CA [G.R. No. 95694. October 9, 1997.] Third Division, Panganiban (J ): 3 concur, 1 took no part Facts: On 16 January 1940, Cirilo Piencenaves, in a Deed of Absolute Sale, sold to Vicente Villafor, a parcel of agricultural land ( planted to Abaca) containing an area of 50 hectares, more or less. The deed stat

es that the land was sold to Villaflor on 22 June 1937, but no formal document w as then executed, and since then until the present time, Villaflor has been in p ossession and occupation of the same. Before the sale of said property, Piencena ves inherited said property form his parents and was in adverse possession of su ch without interruption for more than 50 years. On the same day, Claudio Otero, in a Deed of Absolute Sale sold to Villaflor a parcel of agricultural land (plan ted to corn), containing an area of 24 hectares, more or less; Hermogenes Patete , in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (p lanted to abaca and corn), containing an area of 20 hectares, more or less. Both deed state the same details or circumstances as that of Piencenaves. On 15 Febru ary 1940, Fermin Bocobo, in a Deed of Absolute Sale sold to Villaflor, a parcel of agricultural land (planted with abaca), containing an area of 18 hectares, mo re or less. Page 50 of 87

On 8 November 1946, Villaflor leased to Nasipit Lumber Co., Inc. a parcel of lan d, containing an area of 2 hectares, together with all the improvements existing thereon, for a period of 5 years (from 1 June 1946) at a rental of P200.00 per annum to cover the annual rental of house and building sites for 33 houses or bu ildings. The lease agreement allowed the lessee to sublease the premises to any person, firm or corporation; and to build and construct additional houses with t he condition the lessee shall pay to the lessor the amount of 50 centavos per mo nth for every house and building; provided that said constructions and improveme nts become the property of the lessor at the end of the lease without obligation on the part of the latter for expenses incurred in the construction of the same . On 7 July 1948, in an Agreement to Sell Villaflor conveyed to Nasipit Lumber, 2 parcels of land. Parcel 1 contains an area of 112,000 hectares more or less, div ided into lots 5412, 5413, 5488, 5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858, 5857, 5853, and 5852; and containing abaca, fruit trees , coconuts and thirty houses of mixed materials belonging to the Nasipit Lumber Company. Parcel 2 contains an area of 48,000 more or less, divided into lots 541 1, 5410, 5409, and 5399, and containing 100 coconut trees, productive, and 300 c acao trees. From said day, the parties agreed that Nasipit Lumber shall continue to occupy the property not anymore in concept of lessee but as prospective owne rs. On 2 December 1948, Villaflor filed Sales Application V-807 with the Bureau of Lands, Manila, to purchase under the provisions of Chapter V, XI or IX of CA 141 (The Public Lands Act), as amended, the tract of public lands. Paragraph 6 o f the Application, states: I understand that this application conveys no right to occupy the land prior to its approval, and I recognize that the land covered by the same is of public domain and any and all rights I may have with respect the reto by virtue of continuous occupation and cultivation are hereby relinquished to the Government. On 7 December 1948, Villaflor and Nasipit Lumber executed an A greement, confirming the Agreement to Sell of 7 July 1948, but with reference to the Sales Application filed with the Bureau of Land. On 31 December 1949, the Re port by the public land inspector (District Land Office, Bureau of Lands, in But uan) contained an endorsement of the said officer recommending rejection of the Sales Application of Villaflor for having leased the property to another even be fore he had acquired transmissible rights thereto. In a letter of Villaflor date d 23 January 1950, addressed to the Bureau of Lands, he informed the Bureau Dire ctor that he was already occupying the property when the Bureaus Agusan River Val ley Subdivision Project was inaugurated, that the property was formerly claimed as private property, and that therefore, the property was segregated or excluded from disposition because of the claim of private ownership. Likewise, in a lett er of Nasipit Lumber dated 22 February 1950 addressed to the Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real own er, claimant and occupant of the land; that since June 1946, Villaflor leased 2 hectares inside the land to the company; that it has no other interest on the la nd; and that the Sales Application of Villaflor should be given favorable consid eration. On 24 July 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit Lumber offered the highest bid of P41.00 per h ectare, but since an applicant under CA 141, is allowed to equal the bid of the highest bidder, Villaflor tendered an equal bid, deposited the equivalent of 10% of the bid price and then paid the assessment in full. On 16 August 1950, Villa flor executed a document, denominated as a Deed of Relinquishment of Rights, in fa vor on Nasipit Lumber, in consideration of the amount of P5,000 that was to be r eimbursed to the former representing part of the purchase price of the land, the value of the improvements Villaflor introduced thereon, and the expenses incurr ed in the publication of the Notice of Sale; in light of his difficulty to devel op the same as Villaflor has moved to Manila. Pursuant thereto, on 16 August 195 0, Nasipit Lumber filed a Sales Application over the 2 parcels of land, covering an area of 140 hectares, more or less. This application was also numbered V-807 . On 17 August 1950 the Director of Lands issued an Order of Award in favor of Nas ipit Lumber; and its application was entered in the record as Sales Entry V-407. On 27 November 1973, Villafor wrote a letter to Nasipit Lumber, reminding the l atter of their verbal agreement in 1955; but the new set of corporate officers r

efused to recognize Villaflors claim. In a formal protest dated 31 January 1974 w hich Villaflor filed with the Bureau of Lands, he protested the Sales Applicatio n of Nasipit Lumber, claiming that the company has not paid him P5,000.00 as pro vided in the Deed of Relinquishment of Rights dated 16 August 1950. On 8 August 1977, the Director of Lands found that the payment of the amount of P5,000.00 in the Deed and the consideration in the Agreement to Sell were duly proven, and o rdered the dismissal of Villaflors protest. On 6 July 1978, Villaflor filed a com plaint in the trial court for Declaration of Nullity of Contract (Deed of Relinqu ishment of Rights), Recovery of Possession (of two parcels of land subject of th e contract), and Damages at about the same time that he appealed the decision of the Minister of Natural Resources to the Office of the President. On 28 January 1983, he died. The trial court ordered his widow, Lourdes D. Villaflor, to be su bstituted as petitioner. After trial in due course, the then CFI Agusan del Nort e and Butuan City, Branch III, dismissed the complaint on the grounds that: (1) petitioner admitted the due execution and genuineness of the contract and was es topped from proving its nullity, (2) the verbal lease agreements were unenforcea ble under Article 1403 (2)(e) of the Civil Code, and (3) his causes of action we re barred by extinctive prescription and/or laches. It ruled that there was pres cription and/or laches because the alleged verbal lease ended in 1966, but the a ction was filed only on 6 January 1978. The 6-year period within which to file a n action on an oral contract per Article 1145 (1) of the Civil Code expired in 1 972. Nasipit Lumber was declared the lawful owner and actual physical possessor of the 2 parcels of land (containing a total Page 51 of 87

area of 160 hectares). The Agreements to Sell Real Rights and the Deed of Relinq uishment of Rights over the 2 parcels were likewise declared binding between the parties, their successors and assigns; with double costs against Villaflor. The heirs of petitioner appealed to the Court of Appeals which, however, rendered j udgment against them via the assailed Decision dated 27 September 1990 finding p etitioners prayers (1) for the declaration of nullity of the deed of relinquishme nt, (2) for the eviction of private respondent from the property and (3) for the declaration of petitioners heirs as owners to be without basis. Not satisfied, p etitioners heirs filed the petition for review dated 7 December 1990. In a Resolu tion dated 23 June 1991, the Court denied this petition for being late. On reconsi deration, the Court reinstated the petition. The Supreme Court dismissed the pet ition. 1. Doctrine of primary jurisdiction; Court does not interfere if question is within jurisdiction of an administrative tribunal Underlying the rulings of the trial and appellate courts is the doctrine of primary jurisdiction; i.e., co urts cannot and will not resolve a controversy involving a question which is wit hin the jurisdiction of an administrative tribunal, especially where the questio n demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine t echnical and intricate matters of fact. In cases where the doctrine of primary j urisdiction is clearly applicable, the court cannot arrogate unto itself the aut hority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of special competence. 2. Doctrine of primary juris diction; may apply even to questions which are judicial character It has been th e jurisprudential trend to apply the doctrine to cases involving matters that de mand the special competence of administrative agencies even if the question invo lved is also judicial in character. It applies where a claim is originally cogniz able in the courts, and comes into play whenever enforcement of the claim requir es the resolution of issues which, under a regulatory scheme, have been placed w ithin the special competence of an administrative body; in such case, the judici al process is suspended pending referral of such issues to the administrative bo dy for its view. 3. Doctrine of primary jurisdiction; cases In Machete vs. Court of Appeals, the Court upheld the primary jurisdiction of the Department of Agrar ian Reform Adjudicatory Board (DARAB) in an agrarian dispute over the payment of back rentals under a leasehold contract. In Concerned Officials of the Metropol itan Waterworks and Sewerage System vs. Vasquez, the Court recognized that the M WSS was in the best position to evaluate and to decide which bid for a waterwork s project was compatible with its development plan. In the present case, the que stions on the identity of the land in dispute and the factual qualification of p rivate respondent as an awardee of a sales application require a technical deter mination by the Bureau of Lands as the administrative agency with the expertise to determine such matters. Because these issues preclude prior judicial determin ation, it behooves the courts to stand aside even when they apparently have stat utory power to proceed, in recognition of the primary jurisdiction of the admini strative agency. 4. Interpretation of contracts and determination of private rig hts no longer uniquely judicial function One thrust of the multiplication of adm inistrative agencies is that the interpretation of contracts and the determinati on of private rights thereunder is no longer a uniquely judicial function, exerc isable only by our regular courts. 5. Primary jurisdiction of director of lands and minister or natural resources regarding identity of disputed land and qualif ication of awardee of a sales patent The primary jurisdiction of the director of lands and the minister of natural resources over the issues regarding the ident ity of the disputed land and the qualification of an awardee of a sales patent i s established by Sections 3 and 4 of CA 141, also known as the Public Land Act. Section 3 of said act provides that the Secretary of Agriculture and Commerce (no w Secretary of Natural Resources) shall be the executive officer charged with ca rrying out the provisions of this Act through the Director of Lands, who shall a ct under his immediate control. Section 4 provides that subject to said control, t he Director of Lands shall have direct executive control of the survey, classifi cation, lease, sale or any other form of concession or disposition and managemen t of the lands of the public domain, and his decision as to questions of fact sh

all be conclusive when approved by the Secretary of Agriculture and Commerce. Sec tions 3 and 4 of the Public Land Law mean that the Secretary of Agriculture and Natural Resources shall be the final arbiter on questions of fact in public land conflicts (Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442). The Supreme Court has recognized that the Director of Lands is a quasi-jud icial officer who passes on issues of mixed facts and law (Ortua vs. Bingson Enc arnacion, 59 Phil 440). 6. Finding of fact by administrative agency accorded gre at respect Reliance by the trial and the appellate courts on the factual finding s of the Director of Lands and the Minister of Natural Resources is not misplace d. By reason of the special knowledge and expertise of said administrative agenc ies over matters falling under their jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of fact in that regard are gener ally accorded great respect, if not finality, by the courts. The findings of fac t of an administrative agency must be respected as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even Page 52 of 87

preponderant. It is not the task of an appellate court to weigh once more the ev idence submitted before the administrative body and to substitute its own judgme nt for that of the administrative agency in respect of sufficiency of evidence. 7. Finding of fact by administrative agency accorded great respect ; Exception t o the rule The rule that factual findings of an administrative agency are accord ed respect and even finality by courts admits of exceptions. This is true also i n assessing factual findings of lower courts. It is incumbent on the petitioner to show that the resolution of the factual issues by the administrative agency a nd/or by the trial court falls under any of the exceptions. Otherwise, this Cour t will not disturb such findings. 8. Public land; Lack of Technical description does not prove that the findings lacked substantial evidence The lack of technic al description did not prove that the finding of the Director of Lands lacked su bstantial evidence. The evidence adduced by petitioner to establish his claim of ownership over the subject area consists of deeds of absolute sale executed in his favor. However, an examination of the technical descriptions of the tracts o f land subject of the deeds of sale will disclose that said parcels are not iden tical to, and do not tally with, the area in controversy. 9. Public land; Proper ty admitted to be public, cannot now be claimed otherwise The provision of the l aw is specific that public lands can only be acquired in the manner provided for therein and not otherwise (Sec. 11, CA. No. 141, as amended). In his sales appl ication, petitioner expressly admitted that said property was public land. This is formidable evidence as it amounts to an admission against interest. The recor ds show that Villaflor had applied for the purchase of lands in question with th is Office (Sales Application V-807) on 2 December 948. There is a condition in t he sales application to the effect that he recognizes that the land covered by t he same is of public domain and any and all rights he may have with respect ther eto by virtue of continuous occupation and cultivation are relinquished to the G overnment of which Villaflor is very much aware. It also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land. He partic ipated in the public auction where he was declared the successful bidder. He had fully paid the purchase price thereof. It would be a height of absurdity for Vi llaflor to be buying that which is owned by him if his claim of private ownershi p thereof is to be believed. The area in dispute is not the private property of the petitioner. 10. Lands belong to the state, unless alienated It is a basic as sumption of public policy that lands of whatever classification belong to the st ate. Unless alienated in accordance with law, it retains its rights over the sam e as dominus. (Santiago vs. de los Santos, L-20241, November 22, 1974, 61 SCRA 1 52). No public land can be acquired by private persons without any grant, expres s or implied from the government. It is indispensable then that there be showing of title from the state or any other mode of acquisition recognized by law. (Le e Hong Hok, et al. vs. David, et al., L-30389, December 27, 1972, 48 SCRA 379). 11. Filing of sales application acknowledges that the land is not the private pr operty of the applicant As such sales applicant manifestly acknowledged that he does not own the land and that the same is a public land under the administratio n of the Bureau of Lands, to which the application was submitted, all of its act s prior thereof, including its real estate tax declarations, characterized its p ossessions of the land as that of a sales applicant. And consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner. (Palawan Agricultural and Industrial Co., Inc. vs. Director of Lands, L-25914, March 21, 1972, 44 SCRA 15). 12. Rule on the interpretation of contracts is used in affirming, not negating, their validity The rule on the interpretation of co ntracts (Article 1371) is used in affirming, not negating, their validity. Artic le 1373, which is a conjunct of Article 1371, provides that, if the instrument i s susceptible of two or more interpretations, the interpretation which will make it valid and effectual should be adopted. In this light, it is not difficult to understand that the legal basis urged by petitioner does not support his allega tion that the contracts to sell and the deed of relinquishment are simulated and fictitious. 13. Simulation not existing in the present case Simulation occurs w hen an apparent contract is a declaration of a fictitious will, deliberately mad e by agreement of the parties, in order to produce, for the purpose of deception

, the appearance of a juridical act which does not exist or is different from th at which was really executed. Such an intention is not apparent in the agreement s. The intent to sell, on the other hand, is as clear as daylight. The fact, tha t the agreement to sell (7 December 1948) did not absolutely transfer ownership of the land to private respondent, does not show that the agreement was simulate d. Petitioners delivery of the Certificate of Ownership and execution of the deed of absolute sale were suspensive conditions, which gave rise to a corresponding obligation on the part of the private respondent, i.e., the payment of the last installment of the consideration mentioned in the Agreement. Such conditions di d not affect the perfection of the contract or prove simulation. 14. Nonpayment of the consideration does not prove simulation Nonpayment, at most, gives the ve ndor only the right to sue for collection. Generally, in a contract of sale, pay ment of the price is a resolutory condition and the remedy of the seller is to e xact fulfillment or, in case of a substantial breach, to rescind the Page 53 of 87

contract under Article 1191 of the Civil Code. However, failure to pay is not ev en a breach, but merely an event which prevents the vendors obligation to convey title from acquiring binding force. 15. Burden of proof rests upon the party who asserts the affirmative of an issue Prior to the amendment of the rules on evid ence on March 14, 1989, Section 1, Rule 131, states that each party must prove h is or her own affirmative allegations. Thus, the burden of proof in any cause re sted upon the party who, as determined by the pleadings or the nature of the cas e, asserts the affirmative of an issue and remains there until the termination o f the action. Although nonpayment is a negative fact which need not be proved, t he party seeking payment is still required to prove the existence of the debt an d the fact that it is already due. Petitioner showed the existence of the obliga tion with the presentation of the contracts, but did not present any evidence th at he demanded payment from private respondent. The demand letters dated January 2 and 5, 1974, adduced in evidence by petitioner, were for the payment of back rentals, damages to improvements and reimbursement of acquisition costs and real ty taxes, not payment arising from the contract to sell. 16. Lack of Notice of t he Award not a suppression of evidence The lack of notice for petitioner (not li sted as one of the parties to furnished a copy by the Director of Lands) can be easily explained. Petitioner was not entitled to said notice of award from the D irector of Lands, because by then, he had already relinquished his rights to the disputed land in favor of private respondent. In the heading of the order, he w as referred to as sales applicant-assignor. In paragraph number 4, the order sta ted that, on 16 August 1950, he relinquished his rights to the land subject of t he award to private respondent. From such date, the sales application was consid ered to be a matter between the Bureau of Lands and private respondent only. Con sidering these facts, the failure to give petitioner a copy of the notice of the award cannot be considered as suppression of evidence. Furthermore, this order was in fact available to petitioner and had been referred to by him since 31 Jan uary 1974 when he filed his protest with the Bureau of Lands. 17. Requirement fo r a sales application under CA 141 The requirements for a sales application unde r the Public Land Act are: (1) the possession of the qualifications required by said Act (under Section 29) and (2) the lack of the disqualifications mentioned therein (under Sections 121, 122, and 123). Section 121 of the Act pertains to a cquisitions of public land by a corporation from a grantee: The private responde nt, not the petitioner, was the direct grantee of the disputed land. Sections 12 2 and 123 disqualify corporations, which are not authorized by their charter, fr om acquiring public land; the records do not show that private respondent was no t so authorized under its charter. 18. Determination of qualification of applica nt included in the powers to dispose public lands In Espinosa vs. Makalintal, th e Court ruled that, by law, the powers of the Secretary of Agriculture and Natur al Resources regarding the disposition of public lands including the approval, r ejection, and reinstatement of applications are of executive and administrative nature. (Such powers, however, do not include the judicial power to decide contr oversies arising from disagreements in civil or contractual relations between th e litigants.) Consequently, the determination of whether private respondent is q ualified to become an awardee of public land under CA 141 by sales application i s included therein. 19. Prohibition of 1973 Constitution against the holding of public alienable lands by corporation not retroactive In Ayog vs. Cusi, Jr., the Court ruled that the constitutional prohibition of the 1973 Constitution agains t the holding of alienable lands of the public domain by corporations had no ret roactive effect and could not prevail over a vested right to the land. Vested ri ghts have to be respected. It could not be abrogated by the new Constitution. Se ction 2, Article XIII of the 1935 Constitution allowed private corporations to p urchase public agricultural lands not exceeding 1,024 hectares. Action for prohi bition is barred by the doctrine of vested rights in constitutional law. 20. Ves ted right A right is vested when the right to enjoyment has become the property of some particular person or persons as a present interest. It is the privilege to enjoy property legally vested, to enforce contracts, and enjoy the rights of property conferred by existing law or some right or interest in property which h as become fixed and established and is no longer open to doubt or controversy (D

owns vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51 Phil, 498, 50 2). Generally, the term vested right expresses the concept of present fixed intere st, which in right reason and natural justice should be protected against arbitr ary State action, or an innately just and imperative right which an enlightened free society, sensitive to inherent and irrefragable individual rights, cannot d eny (16 C.J.S. 1174, Note 71, No. 5, citing Pennsylvania Greyhound Lines, Inc. v s. Rosenthal, 192 At. 2nd 587). 21. Due process prohibits annihilation of vested rights The due process clause prohibits the annihilation of vested rights. A st ate may not impair vested rights by legislative enactment, by the enactment or b y the subsequent repeal of a municipal ordinance, or by a change in the constitu tion of the State, except in a legitimate exercise of the police power. Page 54 of 87

22. Vested interest in sales application; Opinions of the Secretary of Justice I n Opinion 64, series of 1973, the Secretary of Justice held that where the appli cant, before the Constitution took effect, had fully complied with all his oblig ations under the Public Land Act in order to entitle him to a sales patent, ther e would seem to be no legal or equitable justification for refusing to issue or release the sales patent. In Opinion 140, series of 1974, the Secretary of Justi ce held that as soon as the applicant had fulfilled the construction or cultivat ion requirements and has fully paid the purchase price, he should be deemed to h ave acquired by purchase the particular tract of land and to him the area limita tion in the new Constitution would not apply. In Opinion 185, series of 1976, th e Secretary of Justice held that where the cultivation requirements were fulfill ed before the new Constitution took effect but the full payment of the price was completed after 17 January 1973, the applicant was, nevertheless, entitled to a sales patent. 23. Executive construction given great respect A contemporaneous construction of the constitutional prohibition by a high executive official carr ies great weight and should be accorded much respect. It is a correct interpreta tion of section 11 of Article XIV. 24. Implementation of DOJ Opinion 64, s. 1973 ; Sales application for fishponds and for agricultural use Implementing Opinion 64, the then Secretary of Agriculture and Natural Resources issued a memorandum, dated 18 February 1974, providing that sales application of private individuals covering areas in excess of 24 hectares and those of corporations, associations , or partnership which fall under any of the following categories shall be given due course and issued patents, to wit: Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to 17 January 1973, the land covered thereby was awarded; cultivation requirements of law were complied with as shown by investigation reports submitted prior to 17 January 1973; land was surveyed and survey returns already submitted to the Director of Lands for v erification and approval; and purchase price was fully paid. IV. Price 26. Loyola v. CA (GR 115734, 3 February 2000) Loyola v. CA [G.R. No. 115734. February 23, 2000.] Second Division, Quisumbing ( J): 3 concur, 1 on leave Facts: A parcel of land (Lot 115-A-1 of subdivision pla n [LRC] Psd-32117, a portion of Lot 115-A described on Plan Psd-55228, LRC [GLRO ] Record 8374, located in Poblacion, Binan, Laguna, and containing 753 sq.m., TC T T-32007) was originally owned in common by the siblings Mariano and Gaudencia Zarraga, who inherited it from their father. Mariano predeceased his sister who died single, without offspring on 5 August 1983, at the age of 97. Victorina Zar raga vda. de Loyola and Cecilia Zarraga, are sisters of Gaudencia and Mariano. T he property was subject of Civil Case B-1094 before the then CFI Laguna (Branch 1, Spouses Romualdo Zarraga, et al. v. Gaudencia Zarraga, et al.). Romualdo Zarr aga was the plaintiff in Civil Case B-1094. The defendants were his siblings: Ni eves, Romana, Guillermo, Purificacion, Angeles, Roberto, Estrella, and Jose, all surnamed Zarraga, as well as his aunt, Gaudencia. The trial court decided Civil Case B-1094 in favor of the defendants. Gaudencia was adjudged owner of the 1/2 portion of Lot 115-A1. Romualdo elevated the decision to the Court of Appeals a nd later the Supreme Court. The petition (GR 59529) was denied by the Court on 1 7 March 1982. On 24 August 1980, nearly 3 years before the death of Gaudencia wh ile GR 59529 was still pending before the Supreme Court. On said date, Gaudencia allegedly sold to the children of Mariano Zarraga (Nieves, Romana, Romualdo, Gu illermo, Lucia, Purificacion, Angeles, Roberto, Estrella Zarraga) and the heirs of Jose Zarraga Aurora, Marita, Jose, Ronaldo, Victor, Lauriano, and Ariel Zarra ga; first cousins of the Loyolas) her share in Lot 115-A- 1 for P34,000.00. The sale was evidenced by a notarized document denominated as Bilihang Tuluyan ng Kal ahati (1/2) ng Isang Lagay na Lupa. Romualdo, the petitioner in GR 59529, was amo ng the vendees. The decision in Civil Case B-1094 became final. The children of Mariano Zarraga and the heirs of Jose Zarraga (private respondents) filed a moti on for execution. On 16 February 1984, the sheriff executed the corresponding de

ed of reconveyance to Gaudencia. On 23 July 1984, however, the Register of Deeds of Laguna, Calamba Branch, issued in favor of private respondents, TCT T-116067 , on the basis of the sale on 24 August 1980 by Gaudencia to them. On 31 January 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case B-2194, w ith the RTC of Bian, Laguna, for the purpose of annulling the sale and the TCT. V ictorina died on 18 October 1989, while Civil Case B-2194 was pending with the t rial court. Cecilia died on 4 August 1990, unmarried and childless. Victorina an d Cecilia were substituted by Ruben, Candelaria, Lorenzo, Flora, Nicadro, Rosari o, Teresita and Vicente Loyola as plaintiffs. The trial court rendered judgment in favor of Page 55 of 87

complainants; declaring the simulated deed of absolute sale as well as the issua nce of the corresponding TCT null and void, ordering the Register of Deeds of La guna to cancel TCT T-116087 and to issue another one in favor of the plaintiffs and the defendants as co-owners and legal heirs of the late Gaudencia, ordering the defendants to reconvey and deliver the possession of the shares of the plain tiff on the subject property, ordering the defendants to pay P20,000 as attorneys fees and cost of suit, dismissing the petitioners claim for moral and exemplary damages, and dismissing the defendants counterclaim for lack of merit. On appeal, and on 31 August 1993, the appellate court reversed the trial court (CA-GR CV 3 6090). On September 15, 1993, the petitioners (as substitute parties for Victori na and Cecilia, the original plaintiffs) filed a motion for reconsideration, whi ch was denied on 6 June 1994. Hence, the petition for review on certiorari. The Supreme Court denied the petition, and affirmed the assailed decision of the Cou rt of Appeals; with costs against petitioners. 1. Presumption of regularity of n otarized document A notarized document carries the evidentiary weight conferred upon it with respect to its due execution, and documents acknowledged before a n otary public have in their favor the presumption of regularity. In the present c ase, the petitioners allege that since the notary public who prepared and acknow ledged the questioned Bilihan did not personally know Gaudencia, the execution o f the deed was suspect. However, the notary public testified that he interviewed Gaudencia prior to preparing the deed of sale. By their failure to overcome thi s presumption, with clear and convincing evidence, petitioners are estopped from questioning the regularity of the execution of the deed. 2. Jose Zarraga alive when the sale took place Petitioners charge that one of the vendees, Jose Zarrag a, was already dead at the time of the sale. However, the records reveal that Jo se died on 29 July 1981. He was still alive on 24 August 1980, when the sale too k place. 3. Simulation defined Simulation is the declaration of a fictitious will , deliberately made by agreement of the parties, in order to produce, for the pu rposes of deception, the appearances of a juridical act which does not exist or is different what that which was really executed. Characteristic of simulation is that the apparent contract is not really desired or intended to produce legal e ffect or in any way alter the juridical situation of the parties. Further, in a simulated contract, the parties have no intention to be bound by the contract. I n the present case, perusal of the questioned deed shows that the sale of the pr operty would convert the coowners to vendors and vendees, a clear alteration of the juridical relationships. This is contrary to the requisite of simulation tha t the apparent contract was not really meant to produce any legal effect. The pa rties clearly intended to be bound by the contract of sale, an intention they di d not deny. 4. Simulation, requisites The requisites for simulation are: (a) an outward declaration of will different from the will of the parties; (b) the fals e appearance must have been intended by mutual agreement; and (c) the purpose is to deceive third persons. In the present case, none of these are present in the assailed transaction. 5. Contracts binding only upon parties executing them Con tracts are binding only upon the parties who execute them. Article 1311 of the C ivil Code clearly covers this situation. In the present case Romualdo had no kno wledge of the sale, and thus, he was a stranger and not a party to it. Even if c uriously Romualdo, one of those included as buyer in the deed of sale, was the o ne who questioned Gaudencias ownership in Civil Case B-1094, Romana testified tha t Romualdo really had no knowledge of the transaction and he was included as a b uyer of the land only because he was a brother. 6. Fraud is never presumed Fraud is never presumed, but must be both alleged and proved. For a contract to be an nulled on the ground of fraud, it must be shown that the vendor never gave conse nt to its execution. If a competent person has assented to a contract freely and fairly, said person is bound. There also is a disputable presumption, that priv ate transactions have been fair and regular. Applied to contracts, the presumpti on is in favor of validity and regularity. In the present case, the allegations of fraud was unsupported, and the presumption stands that the contract Gaudencia entered into was fair and regular. 7. Person not incapacitated to contract mere ly because of advanced age or due to physical infimities A person is not incapac itated to contract merely because of advanced years or by reason of physical inf

irmities. Only when such age or infirmities impair his mental faculties to such extent as to prevent him from properly, intelligently, and fairly protecting his property rights, is he considered incapacitated. In the present case, petitione rs show no proof that Gaudencia had lost control of her mental faculties at the time of the sale. The notary public who interviewed her, testified that when he talked to Page 56 of 87

Gaudencia before preparing the deed of sale, she answered correctly and he was c onvinced that Gaudencia was mentally fit and knew what she was doing. 8. Undue i nfluence defined, circumstances considered; Article 1337 Article 1337 of the Civ il Code provides that there is undue influence when a person takes improper advan tage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: confidentia l, family, spiritual, and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weak ness, or was ignorant or in financial distress. 9. Undue influence case-to-case b asis; Elements Undue influence depends upon the circumstances of each case and n ot on bare academic rules. For undue influence to be established to justify the cancellation of an instrument, three elements must be present: (a) a person who can be influenced; (b) the fact that improper influence was exerted; (c) submiss ion to the overwhelming effect of such unlawful conduct. 10. Confidential or fid uciary relationship In the absence of a confidential or fiduciary relationship b etween the parties, the law does not presume that one person exercised undue inf luence upon the other. A confidential or fiduciary relationship may include any relation between persons, which allows one to dominate the other, with the oppor tunity to use that superiority to the others disadvantage. Included are those of attorney and client, physician and patient, nurse and invalid, parent and child, guardian and ward, member of a church or sect and spiritual adviser, a person a nd his confidential adviser, or whenever a confidential relationship exists as a fact. To prove a confidential relationship from which undue influence may arise , the relationship must reflect a dominant, overmastering influence which contro ls over the dependent person. In the present case, that Gaudencia looked after R omana in her old age is not sufficient to show that the relationship was confide ntial. Petitioners failed to show that Romana used her aunts reliance upon her to take advantage or dominate her and dictate that she sell her land. 11. Undue in fluence cannot be inferred from age, sickness, or debility of body Undue influen ce is not to be inferred from age, sickness, or debility of body, if sufficient intelligence remains. In the present case. petitioners never rebutted the testim ony of the notary public that he observed Gaudencia still alert and sharp. 12. S olicitation, importunity, argument, and persuasion not undue influence In Baez v. Court of Appeals, (59 SCRA 15 [1974]), it was held that solicitation, importuni ty, argument, and persuasion are not undue influence. A contract is not to be se t aside merely because one party used these means to obtain the consent of the o ther. In Martinez v. Hongkong and Shanghai Bank (15 Phil. 252 [1910]), that infl uence obtained by persuasion, argument, or by appeal to the affections is not pr ohibited either in law or morals, and is not obnoxious even in courts of equity. In the present case, absent any proof that Romana exerted undue influence, the presumption is that she did not. 13. Issue cannot be raised for the first time o n appeal Lesion was not an issue raised before the lower courts. An issue which was neither averred in the complaint nor raised in the court below, cannot be ra ised for the first time on appeal. To do so would be offensive to the basic rule s of fair play. 14. Grounds of simulated sale and inadequacy of the price not re concilable Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1 for being absolutely simulated or for inadequacy of the price. These two grounds are irreconcilable. If there exists an actual consideration for tra nsfer evidenced by the alleged act of sale, no matter how inadequate it be, the transaction could not be a simulated sale. No reversible error was thus committed by the Court of Appeals in refusing to annul the questioned sale for alleged ina dequacy of the price. 27. Uy v. CA (GR 120465, 9 September 1999) Uy v. CA [G.R. No. 120465. September 9, 1999.] First Division, Kapunan (J): 3 co ncur, 1 on leave Facts: William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by the owners thereof. By virtue of such authority, they offe

red to sell the lands, located in Tuba, Tadiangan, Benguet to National Housing A uthority (NHA) to be utilized and developed as a housing project. On 14 February 1989, the NHA Board passed Resolution 1632 approving the acquisition of said la nds, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the su bject lands. Of the 8 parcels of land, however, only 5 were paid for by the NHA because of the report it received from the Land Geosciences Bureau of the Depart ment of Environment and Natural Resources (DENR) that the remaining area is loca ted at an active landslide area and therefore, not suitable for development into a housing project. Page 57 of 87

On 22 November 1991, the NHA issued Resolution 2352 cancelling the sale over the 3 parcels of land. The NHA, through Resolution 2394, subsequently offered the a mount of P1.225 million to the landowners as daos perjuicios. On 9 March 1992, pe titioners Uy and Roxas filed before the RTC Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages. Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court an d entered a new one dismissing the complaint. It held that since there was suffic ient justifiable basis in cancelling the sale, it saw no reason for the award of da mages. The Court of Appeals also noted that petitioners were mere attorneys-in-f act and, therefore, not the real parties-ininterest in the action before the tri al court. Their motion for reconsideration having been denied, petitioners seek relief from the Supreme Court. The Supreme Court denied the petition. 1. Real pa rty-in-interest defined; Action to be prosecuted in the name of a party whose ri ght is sought to be enforced Section 2, Rule 3 of the Rules of Court requires th at every action must be prosecuted and defended in the name of the real party-in -interest. The real party-in-interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. Interes t, within the meaning of the rule, means material interest, an interest in the is sue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Cases construing the real par ty-in-interest provision can be more easily understood if it is borne in mind th at the true meaning of real party-in-interest may be summarized as follows: An a ction shall be prosecuted in the name of the party who, by the substantive law, has the right sought to be enforced. 2. Action brought by an attorney-in-fact in his name and not in the name of his principal dismissed Where the action is bro ught by an attorney-in-fact of a land owner in his name, (as in our present acti on) and not in the name of his principal, the action was properly dismissed (Fer rer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil. 1175) becau se the rule is that every action must be prosecuted in the name of the real part ies-in-interest (Section 2, Rule 3, Rules of Court). 3. Article 1311 of the Civi l Code Article 1311 of the Civil Code, provides that Contracts take effect only b etween the parties, their assigns, and heirs, except in case where the rights an d obligations arising from the contract are not transmissible by their nature, o r by stipulation, or by provision of law. If a contract should contain some stip ulation in favor of a third person, he may demand its fulfillment provided he co mmunicated his acceptance to the obligor before its revocation. A mere incidenta l benefit or interest of a person is not sufficient. The contracting parties mus t have clearly and deliberately conferred a favor upon a third person. 4. Agents rendering service in behalf of parties do not render them parties to the contrac t of sale Petitioners are not parties to the contract of sale between their prin cipals and NHA. They are mere agents of the owners of the land subject of the sa le. As agents, they only render some service or do something in representation o r on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a cont ract may be violated only by the parties thereto as against each other, the real parties-in-interest, either as plaintiff or defendant, in an action upon that c ontract must, generally, either be parties to said contract. Neither has there b een any allegation, much less proof, that petitioners are the heirs of their pri ncipals. 5. Assignment of rights In McMicking vs. Banco Espaol-Filipino, it was h eld that the rule requiring every action to be prosecuted in the name of the rea l party-in-interest recognizes the assignments of rights of action and also reco gnizes that when one has a right of action assigned to him he is then the real p arty in interest and may maintain an action upon such claim or right. The purpos e is to require the plaintiff to be the real party in interest, or, in other wor ds, he must be the person to whom the proceeds of the action shall belong, and t o prevent actions by persons who have no interest in the result of the same. Thu s, an agent, in his own behalf, may bring an action founded on a contract made f

or his principal, as an assignee of such contract. 6. Section 372 (1) of the Res tatement of the Law on Agency Section 372 (1) of the Restatement of the Law on A gency *Agent as Owner of Contract Right+ declares that Unless otherwise agreed, a n agent who has or who acquires an interest in a contract which he makes on beha lf of his principal can, although not a promisee, maintain such action thereon a s might a transferee having a similar interest. 7. Agent-transferee; Section 372 (1) explained One who has made a contract on behalf of another may become an ass ignee of the contract and bring suit against the other Page 58 of 87

party to it, as any other transferee. The customs of business or the course of c onduct between the principal and the agent may indicate that an agent who ordina rily has merely a security interest is a transferee of the principals rights unde r the contract and as such is permitted to bring suit. If the agent has settled with his principal with the understanding that he is to collect the claim agains t the obligor by way of reimbursing himself for his advances and commissions, th e agent is in the position of an assignee who is the beneficial owner of the cho se in action. He has an irrevocable power to sue in his principals name. And, und er the statutes which permit the real party in interest to sue, he can maintain an action in his own name. This power to sue is not affected by a settlement bet ween the principal and the obligor if the latter has notice of the agents interes t. Even though the agent has not settled with his principal, he may, by agreemen t with the principal, have a right to receive payment and out of the proceeds to reimburse himself for advances and commissions before turning the balance over to the principal. In such a case, although there is no formal assignment, the ag ent is in the position of a transferee of the whole claim for security; he has a n irrevocable power to sue in his principals name and, under statutes which permi t the real party in interest to sue, he can maintain an action in his own name. 8. Petitioners not assignees Petitioners have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established a ny agreement granting them the right to receive payment and out of the proceeds t o reimburse themselves for advances and commissions before turning the balance o ver to the principals. Further, it does not appear that petitioners are beneficia ries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale clearly and deliberately conferring a favor to any third person. 9. Section 3 72 (2) of the Restatement of the Law on Agency Section 372 (2) of the Restatemen t of the Law on Agency (Second) provides that An agent does not have such an inte rest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entitled to a portion of the proceeds as compensa tion for making it or because he is liable for its breach. The fact that an agent who makes a contract for his principal will gain or suffer loss by the performa nce or nonperformance of the contract by the principal or by the other party the reto does not entitle him to maintain an action on his own behalf against the ot her party for its breach. An agent entitled to receive a commission from his pri ncipal upon the performance of a contract which he has made on his principals acc ount does not, from this fact alone, have any claim against the other party for breach of the contract, either in an action on the contract or otherwise. An age nt who is not a promisee cannot maintain an action at law against a purchaser me rely because he is entitled to have his compensation or advances paid out of the purchase price before payment to the principal. 10. Failure to obtain commissio ns due non-performance of contract does not entitle petitioners to file action a gainst NHA In Hopkins vs. Ives, the Supreme Court of Arkansas, citing Section 37 2 (2) above, denied the claim of a real estate broker to recover his alleged com mission against the purchaser in an agreement to purchase property. In Goduco vs . Court of Appeals, it was held that granting that appellant had the authority to sell the property, the same did not make the buyer liable for the commission sh e claimed. At most, the owner of the property and the one who promised to give h er a commission should be the one liable to pay the same and to whom the claim s hould have been directed. Similarly, in the present case, that petitioners did no t obtain their commissions or recoup their advances because of the non-performan ce of the contract did not entitle them to file the action below against NHA. As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulatio n pour autrui under the contracts of sale, they do not, under substantive law, p ossess the right they seek to enforce. 11. Decision pointless if petitioners are not real parties-in-interest Petitioners not being the real parties-in-interest , any decision rendered would be pointless since the same would not bind the rea l parties-in-interest. 12. Cancellation of contract in present case not rescissi on under Article 1191 The right of rescission or, more accurately, resolution, o

f a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that violates the reciprocity between them. The power to res cind, therefore, is given to the injured party. Article 1191 states that the powe r to rescind obligations is implied in reciprocal ones, in case one of the oblig ors should not comply with what is incumbent upon him. The injured party may cho ose between the fulfillment and the rescission of the obligation, with the payme nt of damages in either case. He may also seek rescission, even after he has cho sen fulfillment, if the latter should become impossible. In the present case, the NHA did not rescind the contract. Indeed, it did not have the right to do so fo r the other parties to the contract, the vendors, did not commit any breach, muc h less a substantial breach, of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof. 13. Cancellation based on the negation of cause The cancellation was based on the negation of the caus e arising from the realization that the lands, which were the object of the sale , were not suitable for housing. Page 59 of 87

14. Cause defined; Distinguished from motive Cause is the essential reason which moves the contracting parties to enter into it. The cause is the immediate, dir ect and proximate reason which justifies the creation of an obligation through t he will of the contracting parties. Cause, which is the essential reason for the contract, should be distinguished from motive, which is the particular reason o f a contracting party which does not affect the other party. For example, in a c ontract of sale of a piece of land, such as in this case, the cause of the vendo r in entering into the contract is to obtain the price. For the vendee, it is th e acquisition of the land. The motive of the NHA, on the other hand, is to use s aid lands for housing. 15. Motives ordinarily affects the contract, unless if it predetermines the cause; motive thus may be regarded as the cause Ordinarily, a partys motives for entering into the contract do not affect the contract. Howeve r, when the motive predetermines the cause, the motive may be regarded as the ca use. In Liguez vs. Court of Appeals, it was noted that Manresa himself (Vol. 8, p p. 641-642), while maintaining the distinction and upholding the inoperativeness of the motives of the parties to determine the validity of the contract, expres sly excepts from the rule those contracts that are conditioned upon the attainme nt of the motives of either party. The same view is held by the Supreme Court of Spain, in its decisions of 4 February 1941, and 4 December 1946, holding that th e motive may be regarded as causa when it predetermines the purpose of the contr act. In the present case, it is clear that NHA would not have entered into the c ontract were the lands not suitable for housing. The quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA , therefore, the motive was the cause for its being a party to the sale. 16. Rep ort of Land Geosciences Bureau is sufficient basis for the cancellation of the s ale The findings contained in the report of the Land Geosciences Bureau dated 15 July 1991 sufficient basis for the cancellation of the sale. The report stated that In Tadiangan, Tuba, the housing site is situated in an area of moderate topo graphy. There are more areas of less sloping ground apparently habitable. The si te is underlain by thick slide deposits (4-45m) consisting of huge conglomerate boulders mixed with silty clay materials. These clay particles when saturated ha ve some swelling characteristics which is dangerous for any civil structures esp ecially mass housing development. 17. Assessment preliminary only insofar as to the ascertainment of geological attributes; otherwise conclusive The portion sta ting that there is a need to conduct further geottechnical [sic] studies in the N HA property. Standard Penetration Test (SPT) must be carried out to give an esti mate of the degree of compaction (the relative density) of the slide deposit and also the bearing capacity of the soil materials. Another thing to consider is t he vulnerability of the area to landslides and other mass movements due to thick soil cover. Preventive physical mitigation methods such as surface and subsurfa ce drainage and regrading of the slope must be done in the area mean only that fu rther tests are required to determine the degree of compaction, the bearing capacit y of the soil materials, and the vulnerability of the area to landslides, since the tests already conducted were inadequate to ascertain such geological attributes . It is only in this sense that the assessment was preliminary. 18. Vendee justifi ed in canceling contract; Requisites of contract NHA was justified in cancelling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexis tent. Article 1318 of the Civil Code states that 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; and (3) Cause of the obliga tion which is established. 19. Petitioners not entitled to damages Assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, th ey would not be entitled to any award of damages, as the cancellation of the con tract is justified. 28. Mapalo v. Mapalo (GR L-21489 and L-21628, 19 May 1966) [ haystack ]

Mapalo v. Mapalo [G.R. No. L-21489 and L-21628. May 19, 1966.] En Banc, Bengzon JP (J): 10 concur Facts: Spouses Miguel Mapalo and Candida Quiba, simple illiter ate farmers, were registered owners of a 1,635 sq.ms. residential land in Manaoa g, Pangasinan (OCT 46503). The spouses-owners, out of love and affection for Max imo Mapalo, brother of Miguel who was about to get married, decided to donate th e eastern half of the land to him. OCT 46503 was delivered. As a result, however , they were deceived into signing, on 15 October 1936, a deed of absolute sale o ver the entire land in his favor. Their signature thereto were procured by fraud , i.e. they were made to believe by Maximo Mapalo and the attorney who acted as notary public who translated the document, that the same was a deed of donation in Maximos favor covering (the eastern half) of their land. Although the document o f sale stated a consideration of P500, the spouses did not receive anything Page 60 of 87

of value for the land. The attorneys misbehavior was the subject of an investigat ion but its result does not appear on record. Following the execution of the doc ument the spouses immediately built a fence of permanent structure in the middle of their land segregating the eastern portion from its western portion. Said fe nce still exists. The spouses have always been in continued possession over the western half of the land up to the present. Unknown to them, Maximo Mapalo, on 1 5 March 1938, registered the deed of sale in his favor and obtained in his name TCT 12829 over the entire land. 13 years later, on 20 October 1951, he sold for P2,500.00 said entire land in favor Evaristo, Petronila, Pacifico and Miguel Nar ciso. The sale to the Narcisos was in turn registered on 5 November 1951 and TCT 11350 was issued for the whole land in their names. The Narcisos took possessio n only of the eastern portion of the land in 1951, after the sale in their favor was made. On 7 February 1952 the Narcisos filed suit in the CFI Pangasinan (Civ il Case 11991) to be declared owners of the entire land; for possession of its w estern portion; for damages; and for rentals. It was brought against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land with the consent of the spouses Mapalo and Quiba . The Mapalo spouses filed their answer with a counterclaim on 17 March 1952, se eking cancellation of the TCT of the Narcisos as to the western half of the land , on the grounds that their signatures to the deed of sale of 1936 were procured by fraud and that the Narcisos were buyers in bad faith. They asked for reconve yance to them of the western portion of the land and issuance of a TCT in their names as to said portion. In addition, the Mapalo spouses filed on 16 December 1 957 their own complaint in the CFI Pangasinan (Civil Case U-133) against the the Narcisos and Maximo Mapalo. They asked that the deeds of sale of 1936 and of 19 51 over the land in question declared null and void as to the western half of sa id land. Judge Amado Santiago of the CFI Pangasinan located in the municipality of Urdaneta the two cases jointly. Said court rendered judgment on 18 January 19 61 dismissing the complaint in Civil Case 11991, declaring the deed as that of d onation only over the eastern half portion of the land, and as null and void wit h respect to the western half portion thereof, declaring TCT 12829 issued to Max imo Mapalo as regards the western portion of the land null and void and without legal force as well as TCT 11350 subsequently issued to the Narcisos, ordering t he Mapalo spouses and the Narcisos to have the land subdivided by a competent la nd surveyor, the expenses of which to be borne out by the parties pro-rata, orde ring the Register of Deed to issue in lieu of TCT 11350 two new titles upon comp letion of the subdivision plan (one in favor of the Mapalo spouses for the weste rn portion, and one for the Narcisos covering the eastern half), and ordering Ma ximo Mapalo and the Narcisos to pay the costs. The Narcisos appealed to the Cour t of Appeals. In its decision on 28 May 1963, the Court of Appeals reversed the Judgment of the CFI, solely on the ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by fraud, the same was voidabl e, not void ab initio, and, therefore, the action to annul the same, within 4 ye ars from notice of the fraud, had long prescribed. It reckoned said notice of th e fraud from the date of registration of the sale on 15 March 1938. The CFI and the CA are therefore unanimous that the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on prescription that they lost in the Court o f Appeals. From said decision of the Court of Appeals, the Mapalo spouses appeal ed to the Court. The Supreme Court reversed and set aside the decision of the Co urt of Appeals, and rendered another affirming in toto the judgment of the CFI, with attorneys fees on appeal in favor of the Mapalo Spouses in the amount of P1, 000.00, plus the costs, both against Maximo Mapalo and the Narcisos. 1. Contract ; Requisites Under the Civil Code, either old or the new, for a contract to exis t at all, three essential requisites must concur: (1) consent; (2) object, and ( 3) cause or consideration. 2. Eastern half donated; Finding of the lower court a s to the donation not assailed and thus is final As regards the eastern portion of the land, the Mapalo spouses are not claiming the same, it being their stand that they had donated and freely given said half of their land to Maximo Mapalo. And since they did not appeal from the decision of the trial court finding that there was a valid and effective donation of the eastern portion of their land i

n favor of Maximo Mapalo, the same pronouncement has become final as to them, re ndering it no longer proper herein to examine the existence, validity or efficac y of said donation as to said eastern portion. 3. Contracts without a cause void Under the Civil Code, be it the old or the new, is that contracts without a cau se or consideration produce no effect whatsoever. 4. Old Civil Code; Contracts w ith false consideration voidable; Prescription of voidable contracts Under the O ld Civil Code, the statement of a false consideration renders the contract voida ble, unless it is proven that it is supported by another real and licit consider ation. And it is further provided by the Old Civil Code that the action for annu lment of a contract on the ground of falsity of consideration shall last 4 years , the term to run from the date of the consummation of the contract. 5. False co nsideration a real consideration but not the one stated in the document Page 61 of 87

According to Manresa, what is meant by a contract that states a false considerat ion is one that has in fact a real consideration but the same is not the one sta ted in the document. (The difference between simulation and the contract with fra udulent intention (purpose). This, although illicit is real; but the first is fa lse in fact, although it appears to be real. *Manresa, Civil Code Volume VIII, vo l. II, p. 354]). 6. Only a disturbed man would contract without cause; False cau se vitiates consent and annuls contract (Sanchez Roman) The inspection of cause in the contract is necessary, and that without it they are null; it can only be conceived that a disturbed man would, in his reason, contract without cause. For the same reason of the necessity of inspection of cause in the contract, it is precise that such is real and not supposed, as it pretends or appears. The falsi fication of the cause vitiates the consent and annuls the contract, that is, not only as a doctrine undoubtedly of scientific law, but also of old laws of Casti le, that in multitude of laws that declare it. (Sanchez Roman, Civil Right, Volum e IV, p. 206.) 7. No consideration does not mean false consideration for Article 1276 to be applied Where there was in fact no consideration, the statement of o ne in the deed will not suffice to bring it under the rule of Article 1276 of th e Old Civil Code as stating a false consideration. 8. Oceio Perez v. Flores appl ies; Contract null and void if without cause or consideration The ruling of the Court in Ocejo Perez & Co. vs. Flores (40 Phil. 921), is squarely applicable her ein. In that case, it was ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consi deration in that the purchase price which appears thereon as paid has in fact ne ver been paid by the purchaser to the vendor. 9. Void contract incurable and can not be subject of prescription The inexistence of a contract is permanent and in curable and cannot be the subject of prescription. The nonexistence is perpetual and irreplaceable not being able to be object of confirmation nor prescription. As held in Eugenio vs. Perdido (97 Phil. 41, 42-43 *1932+), it was stated that u nder the existing classification, such contract would be inexistent and the action or defense for declaration of such inexistence does not prescribe. (Art. 1410, New Civil Code.) While it is true that this is a new provision of the New Civil Code , it is nevertheless a principle recognized since Tipton vs. Velasco (6 Phil. 67 ) that mere a lapse of time cannot give efficacy to contracts that are null and v oid. 10. Narcisos not purchasers in good faith It has been positively shown by th e undisputed testimony of Candida Quiba that Pacifico Narciso and Evaristo Narci so stayed for some days on the western side of the land until their house was re moved in 1940 by the spouses Mapalo. Also, Pacifico Narciso admitted in his test imony that when they bought the property, Miguel Mapalo was still in the premise s in question (western part) which he is occupying and his house is still standi ng thereon. Moreover, Pacifico Narciso when presented as a rebuttal and sub-rebu ttal witness categorically declared that before buying the land in question he w ent to the house of spouses Mapalo and asked them if they will permit Maximo Map alo to sell the property. Further, as the parties in the cases are neighbors (ex cept Maximo Mapalo), it is clear that the Narcisos were aware of the extent of t he interest of Maximo Mapalo over the land before and after the execution of the deed of sale. Under the situation, thus, the Narcisos may be considered in valu e but certainly not as purchasers in good faith. 11. No need to remand case to t rial court as facts of trial court sustained by Court of Appeals As the Court of Appeals declared that on the merits, the appealed decision called have been uphe ld under Article 1332 of Civil Code and the following authorities: Ayola vs. Val derrama Lumber Manufacturers Ca., Inc., 49 OG 980, 982; Trasporte Beltran, 51 OG 1434, 1435; Cortez vs. Cortez, CA- 18451-R, August 8, 1961; Castilllo vs. Laber into, CA-G.R. No. 18118-R, December 20, 1961; and 13 C. J. 372-373, as well as t he several facts and circumstances appreciated by the trial court as supporting the Mapalo spouses case, it thus sustained barring only its ruling on prescription the judgment and findings of the trial court, including that of bad faith on th e part of the Narcisos in purchasing the land in question. The Supreme Court thu s do not see the need to further remand the case to the Court of Appeals for a r uling on the point in the event that the 1936 contract is held to be inexistent as regards the western portion of the land. 12. Bad faith justifies award of att

orneys fees In view of the Narcisos bad faith under the circumstances we deem it j ust and equitable to award, in the Mapalo spouses favor, attorneys fees on appeal, in the amount of P1,000.00 as prayed for in the counterclaim. 29. Ong v. Ong (GR L-67888, 8 October 1985) Ong v. Ong [G.R. No. L-67888. October 8, 1985.] First Division, Relova (J): 5 co ncur, 1 concur in result Page 62 of 87

Facts: On 25 February 1976, Imelda Ong for and in consideration of P1 and other valuable considerations, executed in favor of Sandra Maruzzo, then a minor, a Qu itclaim Deed whereby she transferred, released, assigned and forever quitclaimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and p articipation in 1/2 undivided portion of a parcel of land (Lot 10B of the subdiv ision plan (LRC) Psd-157841, a portion of lot 10 Block 18 of PSD-13288 LCR (GLRC ) Record 2029, situated in Makati, containing 125 square meters. On 19 November 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter, on 20 January 1982 donated the whole property to her son, Rex Ong Jimenez. On 20 June 1983, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed with the RTC Makati an action against Imelda Ong, for the recovery of ownership/possessio n and nullification of the Deed of Donation over the portion belonging to her an d for accounting. Imelda Ong claimed that the Quitclaim Deed is null and void in asmuch as it is equivalent to a Deed of Donation, acceptance of which by the don ee is necessary to give it validity. Further, it is averred that the donee, Sand ra Maruzzo, being a minor, had no legal personality and therefore incapable of a ccepting the donation. Upon admission of the documents involved, the parties fil ed their responsive memoranda and submitted the case for decision. On 12 Decembe r 1983, the trial court rendered judgment in favor of Maruzzo and held that the Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid con veyance in favor of the latter. Imelda Ong appealed to the Intermediate Appellat e Court. On 20 June 1984, IAC promulgated its Decision affirming the appealed ju dgment and held that the Quitclaim Deed is a conveyance of property with a valid cause or consideration; that the consideration is P1 which is clearly stated in the deed itself; that the apparent inadequacy is of no moment since it is the u sual practice in deeds of conveyance to place a nominal amount although there is a more valuable consideration given. Hence, the petition for review on certiora ri. On 15 March 1985, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed an Omnibus Motion informing this Court that she has reached the age of ma jority as evidenced by her Birth Certificate and she prays that she be substitut ed as private respondent in place of her guardian ad litem. On 15 April 1985, th e Court issued a resolution granting the same. The Supreme Court affirmed the ap pealed decision of the IAC, with costs against Imelda Ong. 1. Consideration or c ause is not P1 alone but also other valuable considerations The subject deed rev eals that the conveyance of the 1/2 undivided portion of the property was for an d in consideration of P1 and the other valuable considerations paid by Sandra Ma ruzzo, through her representative, Alfredo Ong, to petitioner Imelda Ong. Stated differently, the cause or consideration is not P1 alone but also the other valu able considerations. 2. Cause not stated in contract is presumed existing unless proven to the contrary; Execution of deed a prima facie evidence of existence o f valuable consideration Although the cause is not stated in the contract it is presumed that it is existing unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the disputable presumptions is that there is a suffi cient cause of the contract (Section 5, (r), Rule 131, Rules of Court). It is a legal presumption of sufficient cause or consideration supporting a contract eve n if such cause is not stated therein (Article 1354, New Civil Code) This presum ption cannot be overcome by a simple assertion of lack of consideration especial ly when the contract itself states that consideration was given, and the same ha s been reduced into a public instrument with all due formalities and solemnities . To overcome the presumption of consideration the alleged lack of consideration must be shown by preponderance of evidence in a proper action. (Samanilla vs. C ajucom, et al., 107 Phil. 432). The execution of a deed purporting to convey own ership of a realty is in itself prima facie evidence of the existence of a valua ble consideration, the party alleging lack of consideration has the burden of pr oving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2 536). 3. Acceptance by legal representatives of minor applies to onerous and con ditional donations Granting that the Quitclaim deed is a donation, Article 741 o f the Civil Code provides that the requirement of the acceptance of the donation in favor of minor by parents of legal representatives applies only to onerous a nd conditional donations where the donation may have to assume certain charges o

r burdens (Article 726, Civil Code). The acceptance by a legal guardian of a sim ple or pure donation does not seem to be necessary (Perez vs. Calingo, CA-40 O.G . 53). Thus, Supreme Court ruled in Kapunan vs. Casilan and CA (109 Phil. 889) t hat the donation to an incapacitated donee does not need the acceptance by the l awful representative if said donation does not contain any condition. In simple and pure donation, the formal acceptance is not important for the donor requires no right to be protected and the donee neither undertakes to do anything nor as sumes any obligation. The Quitclaim in question does not impose any condition. 4 . Bad faith and inadequacy of monetary consideration does not render conveyance inexistent, assignors liberality may be sufficient cause for a valid contract It is not unusual in deeds of conveyance adhering to the Anglo-Saxon practice of st ating that the consideration given is the sum of P1, although the actual conside ration may have been much more. Moreover, assuming that said consideration of P1 is Page 63 of 87

suspicious, this circumstance, alone, does not necessarily justify the inference that the vendees were not purchasers in good faith and for value. Neither does this inference warrant the conclusion that the sales were null and void ab initi o. Indeed, bad faith and inadequacy of the monetary consideration do not render a conveyance inexistent, for the assignors liberality may be sufficient cause for a valid contract (Article 1350, Civil Code), whereas fraud or bad faith may ren der either rescissible or voidable, although valid until annulled, a contract co ncerning an object certain entered into with a cause and with the consent of the contracting parties(See Morales Development v. CA, 27 SCRA 484). 30. Bagnas v. CA (GR 38498, 10 August 1989) Bagnas v. CA [G.R. No. 38498. August 10, 1989.] First Division, Narvasa (J): 4 c oncur Facts: Hilario Mateum of Kawit, Cavite, died on 11 March 1964, single, wit hout ascendants or descendants, and survived only by collateral relatives, of wh om Isaac, Encarnacion, Silvestre, Maximina, and Sixto Bagtas, and Agatona Encarn acion, his first cousins, were the nearest. Mateum left no will, no debts, and a n estate consisting of 29 parcels of land in Kawit and Imus, Cavite, 10 of which are involved in the case. On 3 April 1964, Rosa L. Retonil, Teofilo Encarnacion and Jose B. Nambayan, themselves collateral relatives of Mateum though more rem ote in degree, registered with the Registry of Deeds for the Province of Cavite 2 deeds of sale purportedly executed by Mateum in their favor covering 10 parcel s of land. Both deeds were in Tagalog, save for the English descriptions of the lands conveyed under one of them; and each recited the reconsideration of the sa le to be P1, services rendered and to be rendered for Mateums benefit. One deed w as dated 6 February 1963 and covered 5 parcels of land, and the other was dated 4 March 1963, covering 5 other parcels, both, therefore, antedating Mateums death by more than a year. It is asserted by the Bagtas, et.al., but denied by Retoni l, et.al., that said sales notwithstanding, Mateum continued in the possession o f the lands purportedly conveyed until his death, that he remained the declared owner thereof and that the tax payments thereon continued to be paid in his name . Whatever the truth, however, is not crucial; what is not disputed is that on t he strength of the deeds of sale, Retonil, et.al. were able to secure title in t heir favor over 3 of the 10 parcels of land conveyed thereby. On 22 May 1964, Ba gtas et.al. commenced suit against Retonil, et.al. in the CFI Cavite, seeking an nulment of the deeds of sale as fictitious, fraudulent or falsified, or, alterna tively, as donations void for want of acceptance embodied in a public instrument . Claiming ownership pro indiviso of the lands subject of the deeds by virtue of being intestate heirs of Hilario Mateum, Bagtas, et. al. prayed for recovery of ownership and possession of said lands, accounting of the fruits thereof and da mages. Although the complaint originally sought recovery of all the 29 parcels o f land left by Mateum, at the pre-trial the parties agreed that the controversy be limited to the 10 parcels subject of the questioned sales, and the Trial Cour t ordered the exclusion of the 19 other parcels from the action. Of the 10 parce ls which remained in litigation, 9 were assessed for purposes of taxation at val ues aggregating P10,500.00. The record does not disclose the assessed value of t he tenth parcel, which has an area of 1,443 sq.ms. Retonil, et.al. denied the al legations. After Bagtas, et.al. had presented their evidence, Retonil, et.al. fi led a motion for dismissal in effect, a demurrer to the evidence reasserting the defense set up in their answer that Bagtas, et.al., as mere collateral relative s of Hilario Mateum had no right to impugn the latters disposition of his propert ies by means of the questioned conveyances and submitting, additionally, that no evidence of fraud tainting said transfers had been presented. The Trial Court g ranted the motion to dismiss, holding on the authority of Armentia vs. Patriarca , that Bagtas, et.al., as mere collateral relatives, not forced heirs, of Hilari o Mateum, could not legally question the disposition made by said deceased durin g his life time, regardless of whether, as a matter of objective reality, said d ispositions were valid or not; and that Bagtas, et.al.s evidence of alleged fraud

was insufficient, the fact that the deeds of sale each stated a consideration o f only P1 not being in itself evidence of fraud or simulation. On appeal by Bagt as, et. al. to the Court of Appeals, that court affirmed, adverting with approva l to the Trial Courts reliance on the Armentia ruling which, it would appear, bot h courts saw as denying, without exception, to collaterals, of a decedent, not f orced heirs, the right to impugn the latters dispositions inter vivos of his prop erty. The Supreme Court reversed the appealed Decision of the Court of Appeals, and declared the questioned transfers void and of no force or effect. The Court ordered the annulment of such certificates of title Retonil, et.al. may have obt ained over the properties subject of said transfers, and ordered them to return to Bagtas, et.al. possession of all the properties involved in the action, to ac count to the latter for the fruits thereof during the period of their possession , and to pay the costs. No damages, attorneys fees or litigation expenses were aw arded, there being no evidence thereof before the Court. 1. Void contracts: Caus e not existing at time of transaction and contract without or with false cause ( where no hidden cause is proved) Under the Civil Code of the Philippines, Articl e 1409, paragraph 3, Contracts, with a cause that did not exist at the time of t he Page 64 of 87

transaction are in existent and void from the beginning. The same is true of con tracts stating a false cause (consideration) unless the persons interested in up holding the contract should prove that there is another true and lawful consider ation therefor. (Article 1353). 2. Intestate heirs have legal standing; Property subject of void contract does not leave patrimony of transferor and recoverable by the heirs or the estate administrator The heirs intestate have legal standin g to contest the conveyance made by the deceased if the same were made without a ny consideration, or for a false and fictitious consideration. If therefore the contract has no causa or consideration, or the causa is false and fictitious (an d no true hidden causa is proved) the property allegedly conveyed never really l eaves the patrimony of the transferor, upon the latters death without a testament , such property would passed to the transferors hairs intestate and be, recoverab le by them or by the Administrator of the transferors estate. 3. Armentia ruling clarified Concepcion and Solis rulings; False cause without hidden cause now not merely voidable, but void ab initio The Armentia ruling does not reject, and is not to be construed as rejecting, the Concepcion and Solis rulings (Concepcion vs. Sta. Ana, 87 Phil. 787 and Solis vs. Chua Pua Hermanos, 50 Phil. 536) as out rightly erroneous. On the contrary, those rulings undoubtedly read and applied c orrectly the law extant in their time: Article 1276 of the Civil Code of 1889 un der which the statement of a false cause in a contract rendered it voidable only , not void ab initio. The fact that the law as it is now (during the time of Arm entia) no longer deems contracts with a false cause, or which are absolutely sim ulated or fictitious, merely voidable, but declares them void, i.e., inexistent (nulo) unless it is shown that they are supported by another true and lawful cause or consideration. 4. Armentia case; Effect of the change in the juridical statu s of contracts based on false cause A logical consequence of that change is the juridical status of contracts without, or with a false, cause is that conveyance s of property affected with such a vice cannot operate to divest and transfer ow nership, even if unimpugned. If afterwards the transferor dies the property desc ends to his heirs, and without regard to the manner in which they are called to the succession, said heirs may bring an action to recover the property from the purported transferee. Such an action is not founded on fraud, but on the premise that the property never leaves the estate of the transferor and is transmitted upon his death to heirs, who would labor under no incapacity to maintain the act ion from the mere fact that they may be only collateral relatives and bound neit her principally or subsidiarily under the deed / contract of conveyance. 5. Arme ntia case; Conveyance merely annullable as action based on fraud vitiating conve yance In Armentia, the Court determined that the conveyance questioned was merel y annullable, not void ab initio, and that the action was based on fraud vitiati ng said conveyance. The court found that Marta Armentia executed the document, a fact uncontroverted by the cases plaintiff. Also, the vendees, being minors, mak es the contract, at worst, only annullable by them. Moreover, inadequacy of cons ideration does not imply total want of consideration. Further, the purported act s of Marta Armentia after the sale did not indicate that the said sale was void from the beginning. Thus, in essence the plaintiffs case is bottomed on fraud, wh ich renders the contract merely voidable. 6. Armentia case applies to voidable c ontracts obtained or made fraudulently; does not apply to transfers which are vo id for lack or falsity of consideration As a precedent, Armentia only ruled that transfers made by a decedent in his lifetime, which are voidable for having bee n fraudulently made or obtained, cannot be posthumously impugned by collateral r elatives succeeding to his estate who are not principally or subsidiarily bound by such transfers. That ruling is not extendible to transfers which, though made under closely similar circumstances, are void ab initio for lack or falsity of consideration. 7. False and fictitious consideration, without any alternative tr ue or lawful cause presented, renders contract void Upon the consideration alone that the apparent gross, not to say enormous, disproportion between the stipula ted price in each deed of P1 plus unspecified and unquantilled services and the undisputably valuable real estate allegedly sold (worth at least P10,500.00 goin g only by assessments for tax purposes which, it is well-known, are notoriously low indicators of actual value) plainly and unquestionably demonstrates that the

y state a false and fictitious consideration, and no other true and lawful cause having been shown, the Court finds both said deeds, insofar as they purport to be sales, not merely voidable, but void ab initio. 10. Donations of immovable pr operty must be made and accepted in a public document; Liberality as cause denie d The validity of the conveyances cannot be defended on the theory that their tr ue causa is the liberality of the transferor and they may be considered in reali ty donations, because the law also prescribes that donations of immovable proper ty, to be valid, must be made and accepted in a public instrument, and it is not denied by Retonil, et. al. that there has been no such acceptance which they cl aim is not required. Page 65 of 87

11. Properties remained as part of estate of Mateum, and thus recoverable The tr ansfers in question being void, it follows as a necessary consequence and confor mably to the concurring opinion in Armentia, with which the Court fully agrees, that the properties purportedly conveyed remained part of the estate of Hilario Mateum, said transfers notwithstanding, recoverable by his intestate heirs, i.e. Bagtas, et.al., whose status as such is not challenged. 12. Lack of proof that could have saved transfers from taint of invalidity; Burden of proof in the exis tence of a valid and licit contract Retonil, et.al. have only themselves to blam e for the lack of proof that might have saved the questioned transfers from the taint of invalidity as being fictitious and without licit cause; proof, to be br ief, of the character and value of the services, past, present, and future, cons tituting according to the very terms of said transfers the principal considerati on therefor. The onus of showing the existence of valid and licit consideration for the questioned conveyances rested on Retonil, et.al.. But even on a contrary assumption, and positing that Bagnas, et.al. initially had the burden of showin g that the transfers lacked such consideration as they alleged in their complain t, that burden was shifted to Retonil, et.al. when Bagnas, et.al. presented the deeds which they claimed showed that defect on their face and it became the duty of Retonil, et.al. to offer evidence of existent, lawful consideration. 13. Dem urrer to evidence; Effect Retonil, et. al., opting to rely on a demurrer to Bagt as, et. al.s evidence and upon the thesis that the latter, being mere collateral relatives of the deceased transferor, were without right to the conveyances in q uestion. In effect, they gambled their right to adduce evidence on a dismissal i n the Trial Court and lost, it being the rule that when a dismissal thus obtaine d is reversed on appeal, the movant loses the right to present evidence in his b ehalf. 31. Mate v. CA (GR 120724-25, 21 May 1998) [ haystack ] Mate v. CA [G.R. Nos. 120724-25. May 21, 1998.] Second Division, Martinez (J): 4 concur Facts: On 6 October 1986 Josefina R. Rey and Inocencio Tan went to the r esidence of Fernando Mate at Tacloban City. Josie who is a cousin of Mates wife s olicited his help to stave off her and her familys prosecution by Tan for violati on of BP 22 on account of the rubber checks that she, her mother, sister and bro ther issued to Tan amounting to P4,432,067.00. She requested Mate to cede to Tan his 3 lots in Tacloban City in order to placate him. On hearing Josies proposal, he immediately rejected it as he owed Tan nothing and he was under no obligatio n to convey to him his properties. Furthermore, his lots were not for sale. Josi e explained to him that he was in no danger of losing his properties as he will merely execute a simulated document transferring them to Tan but they will be re deemed by her with her own funds. After a long discussion, he agreed to execute a fictitious deed of sale with right to repurchase covering his 3 lots, subject to the conditions that the amount to be stated in the document is P1,400,000.00 with interest thereon at 5% a month; the properties will be repurchased within 6 months or on or before 4 April 1987; although it would appear in the document t hat Mate is the vendor, it is Josie who will provide the money for the redemptio n of the properties with her own funds; and the titles to the properties will be delivered to Tan but the sale will not be registered in the Register of Deeds a nd annotated on the titles. Josie, to assure Mate that she will redeem the prope rties, issued him 2 BPI checks both postdated 15 December 1986. One check was fo r P1,400,000.00 supposedly for the selling price and the other was for P420,000. 00 corresponding to the interests for 6 months. Immediately thereafter Mate prep ared the Deed of Sale with Right to Repurchase and after it has been signed and notarized, it was given to Tan together with the titles of the properties and th e latter did not register the transaction in the Register of Deeds as agreed upo n. On 14 January 1987, Mate deposited the check for P1,400,000.00 in his account at the UCPB and the other check for P420,000.00 in his account at MetroBank pre paratory to the redemption of his properties. Both of them were dishonored by th

e drawee bank for having been drawn against a closed account. Realizing that he was swindled, he sent Josie a telegram about her checks and when she failed to r espond, he went to Manila to look for her but she could not be found. Mate retur ned to Tacloban City and filed Criminal Cases 8310 and 8312 against her for viol ation of BP 22 but the cases were later archived as the accused (Josie) could no t be found as she went into hiding. To protect his interest, he filed Civil Case 7396 of the RTC Leyte (Branch VII, Mate vs. Rey and Tan) for Annulment of Contr act with Damages. Josie was declared in default and the case proceeded against T an. But during the trial the RTC court asked Tan to file an action for consolida tion of ownership of the properties subject of the sale and pursuant thereto he filed Civil Case 7587 that was consolidated with the case he filed earlier which were later decided jointly by the trial court in favor of Tan and was subsequen tly appealed to the Court of Appeals. The appellate court, on 29 August 1994 (CA -GR CV 28225-26), affirmed the decision with modification that Mate is ordered t o pay Tan the sum of P140,000 for and as attorneys fees; with costs against Mate. Thereupon, Mate filed a motion to reconsider the decision but it was denied. He nce, the petition for review. Page 66 of 87

The Supreme Court affirmed the decision of the Court of Appeals dated 29 August 1994, and denied due course to the petition for review for lack of merit. 1. Con sideration exist in the Deed of Sale with Right to Repurchase (Sale with Pacto d e Retro) To ensure that he could repurchase his lots, Mate got a check of P1,400 ,000.00 from Josie. By allowing his titles to be in possession of Tan for a peri od of 6 months, Mate secured from her another check for P420,000.00. It is thus plain that consideration existed at the time of the execution of the deed of sal e with right of repurchase. It is not only Mates kindness to Josefina, being his cousin, but also his receipt of P420,000.00 from her which impelled him to execu te such contract. While Mate did not receive the P1.4M purchase price from Tan, he had in his possession a postdated check of Josie in an equivalent amount prec isely to repurchase the 2 lots on or before the 6th month. 2. No basis to file a n action to annul the pacto de retro sale; Proper cause of action is BP 22 again st Josie; Filing of criminal case a tacit admission that there is consideration of the pacto de retro sale There is absolutely no basis for Mate to file a compl aint against Tan and Josie to annul the pacto de retro sale on the ground of lac k of consideration, invoking his failure to encash the two checks. Mates cause of action was to file criminal actions against Josie under BP 22, which he did. Th e filing of the criminal cases was a tacit admission by petitioner that there wa s a consideration of the pacto de retro sale. Mate knew that he was bound by the deed of sale with right to repurchase, as evidenced by his filing criminal case s against Josie when the two checks bounced. 3. Singson v. Isabela Sawmill does not apply Mates reliance on the doctrine in Singson vs. Isabela Sawmill (88 SCRA 633, 643), where the Court said that where one or two innocent persons must suffe r, that person who gave occasion for the damages to be caused must bear conseque nces is misplaced. He is not an innocent person. As a matter of fact, he gave occ asion for the damage caused by virtue of the deed of sale with right to repurcha se which he prepared and signed. Thus, there is the equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done sho uld be the one to bear the resulting loss. 4. Tan incurred no false pretense; Ma te has no one to blame but himself for his misfortune; Mate a lawyer Tan did not employ any devious scheme to make the former sign the deed of sale. Tan waived his right to collect from Josie by virtue of the pacto de retro sale. In turn, J osie gave Mate a postdated check in the amount of P1.4M to ensure that the latte r would not lose his two lots. Mate, a lawyer, should have known that the transa ction was fraught with risks since Josie and family had a checkered history of i ssuing worthless checks. But had Mate not agreed to the arrangement, Tan would n ot have agreed to waive prosecution of Josie. Apparently, it was Mates greed for a huge profit that impelled him to accede to the scheme of Josie even if he knew it was a dangerous undertaking. When he drafted the pacto de retro document, he threw caution to the winds forgetting that prudence might have been the better course of action. When Josies checks bounced, he should have repurchased his lots with his own money. Instead, he sued not only Josie but also Tan for annulment of contract on the ground of lack of consideration and false pretenses on their part. 5. Contracts A contract is a contract. Once agreed upon, and provided all the essential elements are present, it is valid and binding between the parties. 32. Ladanga v. CA (GR-L 55999m 24 August 1984) Spouses Ladanga v. CA [G.R. No. L-55999. August 24, 1984.] Second Division, Aqui no (J): 4 concur, 1 took no part, 1 reserved vote Facts: Clemencia A. Aseneta, a spinster who retired as division superintendent of public schools at 65 in 1961 , had a nephew named Bernardo S. Aseneta, the child of her sister Gloria, and a niece named Salvacion, the daughter of her sister Flora. She legally adopted Ber nardo in 1961. On a single date, 6 April 1974, she 9then 78 years old) signed 9 deeds of sale in favor of Salvacion, for various real properties. One deed of sa le concerned the said Paco property (166 sq. m. lot located at 1238 Sison Street Paco Manila and administered by the Ladanga spouses, Agustin and Salvacion) whi

ch purportedly was sold to Salvacion for P26,000. The total price involved in th e 9 deeds of sale and in the 10th sale executed on 8 November 1974 was P92,200. The deed of sale for the Paco property was signed in the office of the Quezon Ci ty registry of deeds. In May 1975, Bernardo, as guardian of Clemencia, filed an action for reconveyance of the Paco property, accounting of the rentals and dama ges, with the CFI Manila. Clemencia was not mentally incompetent but she was pla ced under guardianship because she was an easy prey for exploitation and deceit. Clemencia testified and denied having received even one centavo of the price of P 26,000), much less the P92,000. This testimony was corroborated by Soledad L. Ma ninang, 69, a dentist with whom Clemencia had lived for more than 30 years in Ka muning, Quezon City. The notary public stated that he did not see Salvacion Page 67 of 87

hand any money to Clemencia for the purported sale when the deed was signed in t he registry of deeds. The trial court declared void the sale of the Paco propert y. Clemencia died on 21 May 1977 at the age of 80. She allegedly bequeathed her properties in a holographic will dated 23 November 1973 to Doctor Maninang. In t hat will she disinherited Bernardo. The will was presented for probate. The test ate case was consolidated with the intestate proceeding filed by Bernardo in the sala of Judge Ricardo L. Pronove at Pasig, Rizal. He dismissed the testate case . He appointed Bernardo as administrator in the intestate case. On appeal, the C ourt of Appeals affirmed the decision of the CFI, ordered the register of deeds to issue a new title to Clemencia, and ordered the spouses to pay Clemencias esta te P21,000 as moral and exemplary damages and attorneys fees and to render to Ber nardo an accounting of the rentals of the property from 6 April 1974. The spouse s appealed to the Supreme Court. The Supreme Court affirmed the judgment of the Appellate Court with the modification that the adjudication for moral and exempl ary damages is discarded; Without costs. 1. Only legal issues may be raised in a review of the decision of the appellate court As a rule, only important legal i ssues, as contemplated in section 4, Rule 45 of the Rules of Court, may be raise d in a review of the Appellate Courts decision. The present case does not fall wi thin any of the exceptions to that rule (2 Morans Comments on the Rules of Court, 1979 Ed. p. 475; Ramos vs. Pepsi-Cola Bottling Co., 125 Phil. 701). 2. Burden o f proof Clemencia herself testified that the price of P26,000 was not paid to he r; and thus, the burden of the evidence shifted to the Ladanga spouses. They wer e not able to prove the payment of that amount, thus the sale was fictitious. 3. Void contract in the absence of price being paid; Sale inexistent and cannot be considered consummated A contract of sale is void and produces no effect whatso ever where the price, which appears therein as paid, has in fact never been paid by the purchaser to the vendor (Meneses Vda. de Catindig vs. Heirs of Catalina Roque, L-25777, November 26, 1976, 74 SCRA 83, 88; Mapalo vs. Mapalo, 123 Phil. 979, 987; Syllabus, Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921). Such a sale is inexistent and cannot be considered consummated (Borromeo vs. Borromeo, 98 Phil. 432; Cruzado vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs. Garan ciang, L-22351, May 21, 1969, 28 SCRA 229). 4. No evidence of intention of vendo r to donate the property Clemencia did not intended to donate the Paco property to the Ladangas. Her testimony and the notarys testimony destroyed any presumptio n that the sale was fair and regular and for a true consideration. It seemed tha t the Ladangas abused Clemencias confidence and defrauded her of properties with a market value of P393,559.25 when she was already 78 years old. 5. Bernardos cap acity to sue Bernardo was Clemencias adopted son. Moreover, Clemencia, by testify ing in this case, tacitly approved the action brought in her behalf. Bernardo ha d the right to institute the instant action. 6. Award of moral damages not sanct ioned The moral damages awarded by the trial court is not sanctioned by articles 2217 to 2220 of the Civil Code. Clemencias own signature in the deed brought abo ut the mess within which she was entangled. 33. Balatbat v. CA (GR 109410, 28 August 1996) Balatbat v. CA [G.R. No. 109410. August 28, 1996.] Second division, Torres Jr (J ): 4 concur Facts: On 15 June 1977, Aurelio A. Roque filed a complaint for parti tion against his children Corazon, Feliciano, Severa and Osmundo Roque, and Albe rto de los Santos before the CFI Manila (Branch IX, Civil Case 109032). The Roqu e children were declared in default and Aurelio presented evidence ex-parte. On 29 March 1979, the trial court rendered a decision in favor of Aurelio; holding that Aurelio and his wife Maria Mesina acquired the lot (TCT 51330) during their conjugal union, as well as the house that was constructed thereon; that when Ma ria Mesina died on 28 August 1966, leaving no debt, Aurelio (as surviving spouse ) was entitled to share pro-indiviso of the conjugal property (i.e. house and lo t) and that Aurelio and his 4 children were entitled to 1/5 share pro-indiviso e ach of the share pro-indiviso forming the estate of Maria Mesina; ordering the p

artition of the properties; and dismissing Aurelios claim for moral, exemplary an d actual damages and attorneys fees; without pronouncement as to costs. On 2 June 1979, the decision became final and executory; with the corresponding entry of judgment made 29 March 1979. On 5 October 1979, the Register of Deeds of Manila issued TCT 135671 (with Aurelio Roque having 6/10 share; and the Roque children with 1/10 share each). Page 68 of 87

On 1 April 1980, Aurelio sold his 6/10 share in TCT 135671 to spouses Aurora Tua zon-Repuyan and Jose Repuyan as evidenced by a Deed of Absolute Sale. On 21 July 1 980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse cla im on the TCT 135671, claiming that she bought 6/10 portion of the property from Aurelio Roque for the amount of P50,000.00 with a downpayment of P5,000.00 and t he balance of P45,000.00 to be paid after the partition and subdivision of the p roperty. On 20 August 1980, Aurelio Roque filed a complaint for Rescission of Cont ract against spouses Repuyan before the then CFI Manila (Branch IV, Civil Case 13 4131). The complaint is grounded on spouses Repuyans failure to pay the balance o f P45,000.00 of the purchase price. On 5 September 1980, spouses Repuyan filed t heir answer with counterclaim. In the meantime, the trial court issued an order in Civil Case 109032 (Partition case) dated 2 February 1982, ordering the Deputy Clerk of the court to sign the deed of absolute sale for and in behalf of Roque children pursuant to Section 10, Rule 39 of the Rules of Court, in order to eff ect the partition of the property involved in the case (P100,000 purchase price for the 84 sq. ms. In Callejon Sulu, Sta. Cruz, Manila is reasonable and fair; a nd that opportunities have been given to the children to sign the deed voluntari ly). A deed of absolute sale was executed on 4 February 1982 between Aurelio, Co razon, Feliciano, Severa and Osmundo Roque and Clara Balatbat, married to Alejan dro Balatbat. On 14 April 1982, Clara Balatbat filed a motion for the issuance o f a writ of possession which was granted by the trial court on 14 September 1982 subject, however, to valid rights and interest of third persons over the same po rtion thereof, other than vendor or any other person or persons privy to or clai ming any rights or interest under it. The corresponding writ of possession was is sued on 20 September 1982. On 20 May 1982, Clara Balatbat filed a motion to inte rvene in Civil Case 134131 which was granted as per courts resolution of 21 Octob er 1982. However, Clara Balatbat failed to file her complaint in intervention. O n 15 April 1986, the trial court rendered a decision dismissing the complaint, a nd declaring the Deed of Absolute Sale dated 1 April 1980 as valid and enforceab le and Aurelio is, as he is hereby ordered, to partition and subdivide the land covered by TCT 135671, and to aggregate therefrom a portion equivalent to 6/10 t hereof, and cause the same to be titled in the name of spouses Repuyan, and afte r which, the latter to pay Aurelio the sum of P45,000.00. Considering further th at the spouses suffered damages since they were forced to litigate unnecessarily , by way of their counterclaim, Aurelio is hereby ordered to pay the spouses the sum of P15,000.00 as moral damages, attorneys fees in the amount of P5,000.00; w ith costs against Aurelio. On 3 March 1987, Balatbat filed a notice of lis pende ns in Civil Case 109032 before the Register of Deeds of Manila. On 9 December 19 88, Balatbat and her husband filed a complaint for delivery of the owners duplic ate copy of TCT 135671 before the RTC Manila (Branch 24, Civil Case 88-47176) ag ainst Jose and Aurora Repuyan. On 27 January 1989, spouses Repuyan filed their a nswer with affirmative defenses and compulsory counterclaim. The Repuyans and th e Balatbats submitted their memoranda on 13 November 1989 and 23 November 1989, respectively. On 2 August 1990, the RTC Manila rendered a decision dismissing th e complaint, finding that the Balatbats were not able to establish their cause o f action against the Repuyans and have no right to the reliefs demanded in the c omplaint, and ordering Balatbat to pay the Repuyans the amount of P10,000 as att orneys fees, P5,000 as costs of litigation, and to pay the costs of the suit. Dis satisfied, Balatbat filed an appeal before the Court of Appeals (CA-GR CV 29994) which rendered decision on 12 August 1992, affirming the judgment appealed from with modification deleting the awards of P10,000 for attomeys fees and P5,000 as costs of litigation. On 22 March 1993, the Court of Appeals denied Balatbats mot ion for reconsideration. Hence, the petition for review pursuant to Rule 45 of t he Revised Rules of Court. The Supreme Court dismissed the petition for review f or lack of merit; without pronouncement as to costs. 1. 1 April 1980 sale consum mated, valid and enforceable The sale dated 1 April 1980 in favor the Repuyan sp ouses is consummated, hence, valid and enforceable; not merely executory for the reason that there was no delivery of the subject property and that consideratio n/price was not fully paid. In a decision dated 15 April 1986 of the RTC Manila (Branch IV, Civil Case 134131), the Court dismissed Aurelio complaint for rescis

sion of the deed of sale and declared that the sale dated 1 April 1980, as valid and enforceable. No appeal having been made, the decision became final and exec utory. It must be noted that Balatbat filed a motion for intervention in that ca se but did not file her complaint in intervention. 2. 1 April 1980 Deed of Sale devoid of stipulation withholding ownership of thing until full payment; Ownersh ip pass upon delivery of thing sold even if purchase price not fully paid The te rms and conditions of the Deed of Sale dated 1 April 1980, the P45,000.00 balance is payable only after the property covered by TCT 135671 has been partitioned an d subdivided, and title issued in the name of the buyer hence, the vendor cannot demand payment of the balance unless and until the property has been subdivided and titled in the name of the Repuyan spouses. Devoid of any stipulation that ow nership in the thing shall not pass to the purchaser until he has fully paid the price, ownership in the thing shall pass from the vendor to the vendee upon actu al or constructive delivery of the thing sold even if the purchase price has not yet been fully paid. Page 69 of 87

3. Non-payment in a contract of sale merely creates right to demand fulfillment of obligation or rescission of contract; Article 1191 The failure of the buyer t o make good the price does not, in law, cause the ownership to revest to the sel ler unless the bilateral contract of sale is first rescinded or resolved pursuan t to Article 1191 of the New Civil Code. Non-payment only creates a right to dem and the fulfillment of the obligation or to rescind the contract. With respect t o the non-delivery of the possession of the subject property to the private resp ondent, suffice it to say that ownership of the thing sold is acquired only from the time of delivery thereof, either actual or constructive. 28 4. Ownership of a thing sold acquired from time of actual or constructive delivery; Possession of public instrument of the land accords buyer rights of ownership Article 1498 of the Civil Code provides that when the sale is made through a public instrumen t, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot be inferred. The execution of the public instrument, without actual deliv ery of the thing, transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. It is not necessary t hat vendee be physically present at every square inch of the land bought by him, possession of the public instrument of the land is sufficient to accord him the rights of ownership. Thus, delivery of a parcel of land may be done by placing the vendee in control and possession of the land (real) or by embodying the sale in a public instrument (constructive). In the present case, vendor Roque delive red the owners certificate of title to the Repuyan spouses. 5. Necessity of publi c document merely for convenience, and not for validity or enforceability of a c ontract of sale The provision of Article 1358 on the necessity of a public docum ent is only for convenience, not for validity or enforceability. It is not a req uirement for the validity of a contract of sale of a parcel of land that this be embodied in a public instrument. 6. Contract of sale consensual, perfected by m ere consent of the parties; Non-payment does not render sale null and void for l ack of consideration A contract of sale being consensual, it is perfected by the mere consent of the parties. Delivery of the thing bought or payment of the pri ce is not necessary for the perfection of the contract; and failure of the vende e to pay the price after the execution of the contract does not make the sale nu ll and void for lack of consideration but results at most in default on the part of the vendee, for which the vendor may exercise his legal remedies. 7. Present case is a double sale The present case is a case of double sale contemplated un der Article 1544 of the New Civil Code. In the present case, Aurelio Roque sold 6/10 portion of his share in TCT 135671 to the Repuyan spouses on 1 April 1980. Subsequently, the same lot was sold again by vendor Aurelio Roque (6/10) and his children (4/10), represented by the Clerk of Court pursuant to Section 10, Rule 39 of the Rules of Court, on 4 February 1982. 8. Article 1544; Double sale Arti cle 1544 of the New Civil Code provides that if the same thing should have been s old to different vendees, the ownership shall be transferred to the person who m ay have first taken possession thereof in good faith, if it should be movable pr operty. Should it be movable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Sh ould there be no inscription, the ownership shall pertain to the person who in g ood faith was first in the possession and in the absence thereof, to the person who present the oldest title, provided there is good faith. Article 1544 of the C ivil Code provides that in case of double sale of an immovable property, ownersh ip shall be transferred (1) to the person acquiring it who in good faith first r ecorded it in the Registry of Property; (2) in default thereof, to the person wh o in good faith was first in possession; and (3) in default thereof, to the pers on who presents the oldest title, provided there is good faith. 9. Ownership ves ts in person who acquired the immovable property in good faith and who first rec orded it in the Registry of Property; Annotation of adverse claim sufficient In an instance of a double sale of an immovable property, the ownership shall vests in the person acquiring it who in good faith first recorded it in the Registry of Property. In the present case, the Repuyan spouses caused the annotation of a n adverse claim on the title of the subject property denominated as Entry 5627/T

-135671 on 21 July 1980. The annotation of the adverse claim on TCT 135671 in th e Registry of Property is sufficient compliance as mandated by law and serves no tice to the whole world. Balatbat, on the other hand, filed a notice of lis pend ens only on 2 February 1982. Accordingly, the Repuyan spouses who first caused t he annotation of the adverse claim in good faith shall have a better right over Balatbat. 10. Possession of Balatbat merely provisionary The physical possession of Balatbat by virtue of a writ of possession issued by the trial court on 20 S eptember 1982 is subject to the valid rights and interest of third persons over t he same portion thereof, other than vendor or any other person or persons privy to or claiming any rights to interest under it. Page 70 of 87

11. First registrant, first in possession, else oldest title As between two purc hasers, the one who has registered the sale in his favor, has a preferred right over the other who has not registered his title even if the latter is in actual possession of the immovable property. Even in default of the first registrant or first in possession, the Repuyan spouses have presented the oldest title. Thus, the spouses who acquired the subject property in good faith and for valuable co nsideration established a superior right as against Balatbat. 12. Due diligence in the purchase of real estate required to allege good faith It is incumbent upo n the vendee of the property to ask for the delivery of the owners duplicate copy of the title from the vendor. A purchaser of a valued piece of property cannot just close his eyes to facts which should put a reasonable man upon his guard an d then claim that he acted in good faith and under the belief that there were no defect in the title of the vendor. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired ti tle thereto in good faith as against the true owner of the land or of an interes t therein; and the same rule must be applied to one who has knowledge of facts w hich should have put him upon such inquiry and investigation as might be necessa ry to acquaint him with the defects in the title of his vendor. Good faith, or t he want of it is not a visible, tangible fact that can be seen or touched, but r ather a state or condition of mind which can only be judged of by actual or fanc ied tokens or signs. 13. Balatbat not a buyer in good faith Balatbat cannot be c onsidered as a buyer in good faith. In the complaint for rescission filed by Aur elio Roque on 20 August 1980, Balatbat filed a motion for intervention on 20 May 1982 but did not file her complaint in intervention, hence, the decision was re ndered adversely against her. If Balatbat did investigate before buying the land on 4 February 1982, she should have known that there was a pending case and an annotation of adverse claim was made in the title of the property before the Reg ister of Deeds and she could have discovered that the subject property was alrea dy sold to the Repuyan spouses. 14. Gross negligence equvalent to intentional wr ong Balatbat had nobody to blame but herself in dealing with the disputed proper ty for failure to inquire or discover a flaw in the title to the property, thus, it is axiomatic that culpa lata dolo aequiparatur gross negligence is equivalen t to intentional wrong. 34. Heirs of Escanlar v. CA (GR 119777, 23 October 1997) Heirs of Escanlar, et.al. v. CA [G.R. No. 119777. October 23, 1997.] Holgado, et . al. v. CA [G.R. No. 120690. October 23, 1997.] Third division, Romero (J): 3 c oncur, 1 on leave Facts: Spouses Guillermo Nombre and Victoriana Cari-an died wi thout issue in 1924 and 1938, respectively. Nombres heirs include his nephews and grandnephews. Victoriana Cari-an was succeeded by her late brothers son, Gregori o Cari-an. The latter was declared as Victorianas heir in the estate proceedings for Nombre and his wife (Special Proceeding 7-7279). After Gregorio died in 1971 , his wife, Generosa Martinez, and children, Rodolfo, Carmen, Leonardo and Fredi sminda Cari-an, were also adjudged as heirs by representation to Victorianas esta te. Leonardo Cari-an passed away, leaving his widow, Nelly Chua vda. de Cari-an and minor son Leonell, as his heirs. 2 parcels of land, denominated as Lot 1616 and 1617 of the Kabankalan Cadastre with an area of 29,350 sq.ms. and 460,948 sq .ms., respectively, formed part of the estate of Nombre and Cari-an. On 15 Septe mber 1978, Gregorio Cari-ans heirs executed the Deed of Sale of Rights, Interests and Participation in favor of Pedro Escanlar and Francisco Holgado portion proindiviso of Lot 1616 and 1617 of the Kabankalan Cadastre, pertaining to the port ion pro-indiviso of the late Victoriana Cari-an in consideration of P275,000 to be paid to the heirs except the share of the minor Leonell Cari-an, which shall be deposited with the Municipal Treasurer of Himamaylan, Negros Occidental; purs uant to the order of the CFI Negros Occidental (Branch VI) Hiimamaylan; said con tract of sale being effective only upon the approval of said CFI in Himamaylan. Escanlar and Holgado, the vendees, were concurrently the lessees of the lots ref

erred to. They stipulated that the balance of the purchase price (P225,000.00) s hall be paid on or before May 1979 in a Deed of Agreement executed by the partie s on the same day confirming and affirming the Deed of Sale of 15 September 1978 ; that pending complete payment thereof, the vendees are not to assign, sell, le ase, nor mortgage the rights, interests and participation over said land; and th at in the event the vendees fail and/or omit to pay the balance of said purchase price on 31 May 1979 and the cancellation of said Contract of Sale is made ther eby, the sum of P50,000.00 shall be deemed as damages thereof to vendors. Escanl ar and Holgado were unable to pay the Cari-an heirs individual shares, amounting to P55,000.00 each, by the due date. However, said heirs received at least 12 in stallments from them after May 1979. Rodolfo Cari-an was fully paid by 21 June 1 979. Generosa Martinez, Carmen Cari-an and Fredisminda Carian were likewise full y compensated for their individual shares, per receipts given in evidence. The m inor Leonells share was Page 71 of 87

deposited with the RTC on 7 September 1982. Being former lessees, Escanlar and H olgado continued in possession of Lots 1616 and 1617. Interestingly, they contin ued to pay rent based on their lease contract. On 10 September 1981, Escanlar an d Holgado moved to intervene in the probate proceedings of Nombre and Cari-an as the buyers of the Cari-ans share in Lots 1616 and 1617. Their motion for approva l of the 15 September 1978 sale before the same court, filed on 10 November 1981 , was opposed by the Cari-ans on 5 January 1982. On 16 September 1982, the proba te court approved a motion filed by the heirs of Cari-an and Nombre to sell thei r respective shares in the estate. On 21 September 1982, the Cari-ans, in additi on to some heirs of Guillermo Nombre, sold their shares in 8 parcels of land inc luding Lots 1616 and 1617 to the spouses Ney Sarrosa Chua and Paquito Chua for P 1,850,000.00. A week later, the vendor-heirs, including the Cari-ans, filed a mo tion for approval of sale of hereditary rights, i.e. the sale made on 21 Septemb er 1982 to the Chuas. The Cari-ans instituted a case for cancellation of sale ag ainst Escanlar and Holgado on 3 November 1982. They complained of the latters fai lure to pay the balance of the purchase price by 31 May 1979 and alleged that th ey only received a total of P132,551.00 in cash and goods. Escanlar and Holgado replied that the Cari-ans, having been paid, had no right to resell the subject lots; that the Chuas were purchasers in bad faith; and that the court approval o f the sale to the Chuas was subject to their existing claim over said properties . On 20 April 1983, Escanlar and Holgado also sold their rights and interests in the subject parcels of land (Lots 1616 and 1617) to Edwin Jayme for P735,000.00 and turned over possession of both lots to the latter. The Jaymes in turn, were included in the civil case as fourth-party defendants. On 3 December 1984, the probate court approved the 21 September 1982 sale without prejudice to whatever r ights, claims and interests over any of those properties of the estate which can not be properly and legally ventilated and resolved by the court in the same int estate proceedings. The certificates of title over the 8 lots sold by the heirs o f Nombre and Cari-an were later issued in the name of the spouses Chua. The tria l court allowed a third-party complaint against the spouses Chua on 7 January 19 86 where Escanlar and Holgado alleged that the Cari-ans conspired with the Chuas when they executed the second sale on 21 September 1982 and that the latter sal e is illegal and of no effect. Spouses Chua countered that they did not know of the earlier sale of portion of the subject lots to Escanlar and Holgado. Both pa rties claimed damages. On 28 April 1988, the trial court approved the Chuas motio n to file a fourth-party complaint against the spouses Jayme. Spouses Chua alleg ed that the Jaymes refused to vacate said lots despite repeated demands; and tha t by reason of the illegal occupation of Lots 1616 and 1617 by the Jaymes, they suffered materially from uncollected rentals. Meanwhile, the RTC Himamaylan whic h took cognizance of Special Proceeding 7-7279 (Intestate Estate of Guillermo No mbre and Victoriana Cari-an) had rendered its decision on 30 October 1987. The p robate court concluded that since all the properties of the estate were disposed of or sold by the declared heirs of both spouses, the case is considered termin ated and the intestate estate of Guillermo Nombre and Victoriana Cari-an is clos ed, and thus found it unnecessary to resolve the Motion for Subrogation of movan ts Escanlar and Holgado in view of the proceedings summary nature and the probate courts lack of jurisdiction upon the validity of sale of rights of the Nombre an d Cari-an heirs to third parties. On 18 December 1991, the trial court resolved the case in favor of the cancellation of the 15 September 1978 sale as it was no t approved by the probate court as required by the contested deed of sale of rig hts, interests and participation and because the Cari-ans were not fully paid. C onsequently, the Deed of Sale executed by the heirs of Nombre and Cari-an in fav or of the spouses Chua, which was approved by the probate court, was upheld. Thu s, the court declared the 15 September 1978 Deed of Sale, and likewise the Deed of Agreement of the same date, executed by the heirs in favor of Escanlar and Ho lgado; the 20 April 1983 Deed of sale, and likewise the sale of leasehold rights , executed by Escanlar and Holgado in favor of spouses Jayme; were declared null and void and of no effect. The court also declared the amount of P50,000 as for feited in favor of the heirs but ordering the heirs to return to Escanlar and Ho lgado the amounts they received after 31 May 1979 and the amount of P35,218.75 d

eposited with the Treasurer of Himamaylan; declared the 23 September 1982 Deed o f Sale in favor of spouses Chua as legal, valid and enforceable subject to the b urdens of the estate; ordered Holgado, Escanlar and spouses Jayme to pay in soli dum the amount of P100,000 as moral damages, P30,000 as attorneys fees to spouses Chua; ordered spouses Jayme to pay spouses Chua the sum of P157,000 as rentals for the Riceland and P3,200,000 as rentals for the fishpond from October 1985 to 24 July 1989 plus rentals from the latter date until the property is delivered to the spouses Chua; ordered Escanlar, Holgado and spouses Jayme to immediately vacate Lots 1616 and 1617, and to pay the costs. Escanlar and Holgado raised the case to the Court of Appeals (CA-GR CV 39975). The appellate court affirmed the decision of the trial court on 17 February 1995 and held that the questioned de ed of sale of rights, interests and participation is a contract to sell because it shall become effective only upon approval by the probate court and upon full payment of the purchase price. Their motion for reconsideration was denied by th e appellate court on 3 April 1995. Hence, the consolidated petitions for review. Page 72 of 87

The Supreme Court granted the petitions; reversed and set aside the decision of the Court of Appeals under review; remanded the case to the RTC Negros Occidenta l (Branch 61) for Escanlar and Holgado and the Cari-ans or their successors-in-i nterest to determine exactly which portion of Lots 1616 and 1617 will be owned b y each party, at the option of Escanlar and Holgado; and directed the trial cour t to order the issuance of the corresponding certificates of title in the name o f the respective parties and to resolve the matter of rental payments of the lan d not delivered to the Chua spouses subject to the rates specified by the Court with legal interest from date of demand. 1. Distinction with contracts of sale a nd contract to sell with reserved title The distinction between contracts of sal e and contracts to sell with reserved title has been recognized by the Court in repeated decisions, such as that in Luzon Brokerage Co. Inc. v. Maritime Buildin g Co., Inc., upholding the power of promisors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate th e operation of the contract, refuse the conveyance, and retain the sums of insta llments already received where such rights are expressly provided for. 2. Contra ct to sell vs. Deed of conditional sale In contracts to sell, ownership is retai ned by the seller and is not to pass until the full payment of the price. Such p ayment is a positive suspensive condition, the failure of which is not a breach of contract but simply an event that prevented the obligation of the vendor to c onvey title from acquiring binding force. To illustrate, although a deed of cond itional sale is denominated as such, absent a proviso that title to the property sold is reserved in the vendor until full payment of the purchase price nor a s tipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period, by its nature, it shall be declared a deed of absolute sale. 3. The 15 September 1978 Deed of Sale of Righ ts, Interests and Participation a contract of sale The 15 September 1978 sale of rights, interests and participation as to portion pro indiviso of the 2 subject lots is a contract of sale for the reasons that (1) the sellers did not reserve unto themselves the ownership of the property until full payment of the unpaid balance of P225,000.00; (2) there is no stipulation giving the sellers the right to unilaterally rescind the contract the moment the buyer fails to pay within t he fixed period. 4. Delivery effected for the 15 September 1978 deed of sale; Tr aditio brevi manu Prior to the sale, Escanlar were in possession of the subject property as lessees. Upon sale to them of the rights, interests and participatio n as to the portion pro indiviso, they remained in possession, not in concept of lessees anymore but as owners now through symbolic delivery known as traditio b revi manu. Under Article 1477 of the Civil Code, the ownership of the thing sold is acquired by the vendee upon actual or constructive delivery thereof. 5. Nonpayment of price in a contract of sale; Remedies In a contract of sale, the nonpayment of the price is a resolutory condition which extinguishes the transactio n that, for a time, existed and discharges the obligations created thereunder. T he remedy of an unpaid seller in a contract of sale is to seek either specific p erformance or rescission. 6. Contracts, Requisites Under Article 1318 of the Civ il Code, the essential requisites of a contract are: consent of the contracting parties; object certain which is the subject matter of the contract and cause of the obligation which is established. Absent one of the above, no contract can a rise. Conversely, where all are present, the result is a valid contract. 7. Moda lities and restrictions do not affect validity of the contract, merely its effec tivity Some parties introduce various kinds of restrictions or modalities, the l ack of which will not, however, affect the validity of the contract. In the pres ent case, the Deed of Sale is a valid one, even if it did not bear the stamp of approval of the probate court. The contracts validity was not affected for in the words of the stipulation, this Contract of Sale of rights, interests and partici pations shall become effective only upon the approval by the Honorable Court. Onl y the effectivity and not the validity of the contract is affected. 8. Need of p robate courts approval exists where specific properties of the estate are sold an d not when ideal and indivisible shares of an heir are disposed of The need for approval by the probate court exists only where specific properties of the estat e are sold and not when only ideal and indivisible shares of an heir are dispose

d of. In Dillena v. Court of Appeals, the Court declared that it is within the j urisdiction of the probate court to approve the sale of properties of a deceased person by his prospective heirs before final adjudication. The probate courts ap proval is necessary for the validity of any disposition of the decedents estate. However, reference to judicial approval cannot adversely affect the substantive rights of the heirs to dispose of their ideal share in the coheirship and/or coownership among the heirs. It must be recalled that during the period of indivis ion of a decedents estate, each heir, being a co-owner, has full ownership of his part and may therefore alienate it. But the effect of the alienation with Page 73 of 87

respect to the co-owners shall be limited to the portion which may be allotted t o him in the division upon the termination of the co-ownership. 9. Hereditary ri ghts in an estate validly sold without need of court approval Hereditary rights in an estate can be validly sold without need of court approval. In the present case, when the Cari-ans sold their rights, interests and participation in Lots 1 616 and 1617, they could legally sell the same without the approval of the proba te court. 10. Contractual stipulations considered law between parties; Exception : contemporaneous acts of parties As a general rule, the pertinent contractual s tipulation (requiring court approval) should be considered as the law between th e parties. However, the presence of two factors militate against this conclusion : (1) the evident intention of the parties appears to be contrary to the mandato ry character of said stipulation. Whoever crafted the document of conveyance, mu st have been of the belief that the controversial stipulation was a legal requir ement for the validity of the sale. But the contemporaneous and subsequent acts of the parties reveal that the original objective of the parties was to give eff ect to the deed of sale even without court approval. Receipt and acceptance of t he numerous installments on the balance of the purchase price by the Cari-ans, a lthough the period to pay the balance of the purchase price expired in May 1979, and leaving Escanlar and Holgado in possession of Lots 1616 and 1617 reveal the ir intention to effect the mutual transmission of rights and obligations. The Ca ri-ans did not seek judicial relief until late 1982 or three years later; (2) th e requisite approval was virtually rendered impossible by the Cari-ans because t hey opposed the motion for approval of the sale filed by Escanlar and Holgado, a nd sued the latter for the cancellation of that sale. Having provided the obstac le and the justification for the stipulated approval not to be granted, the Cari -ans should not be allowed to cancel their first transaction with Escanlar and H olgado because of lack of approval by the probate court, which lack is of their own making. 11. Rescission of a sale of real property; Vendee may pay beyond due date as long as there is no judicial or notarial demand for rescission With res pect to rescission of a sale of real property, Article 1592 of the Civil Code go verns. The provides that in the sale of immovable property, even though it may ha ve been stipulated that upon failure to pay the price at the time agreed upon th e rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, a long as no demand for rescission of the c ontract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. In the present case, the sellers gave the buyers until May 1979 to pay the balance of the purchase price. After the latter failed to pay installments due, the former made no judicial demand fo r rescission of the contract nor did they execute any notarial act demanding the same, as required under Article 1592. Consequently, the buyers could lawfully m ake payments even after the May 1979 deadline, as in fact they paid several inst allments to the sellers which the latter accepted. 12. Acceptance of payment bey ond due date a waiver to right to rescind; Sellers estopped As the sellers, upon the expiration of the period to pay, made no move to rescind but continued acce pting late payments, such act cannot but be construed as a waiver of the right t o rescind. When the sellers, instead of availing of their right to rescind, acce pted and received delayed payments of installments beyond the period stipulated, and the buyers were in arrears, the sellers in effect waived and are now estopp ed from exercising said right to rescind. 13. Evidence does not prove Escanlar a nd Holgado were unable to complete payments Despite all her claims, Fredismindas testimony fails to convince the Court that the heirs were not fully compensated by Escanlar and Holgado. Fredisminda admits that her mother and her sister signe d their individual receipts of full payment on their own and not in her presence . The receipts presented in evidence show that Generosa Martinez was paid P45,62 5.00; Carmen Carian, P45,625.00; Rodolfo Cari-an, P47,500.00 on June 21, 1979; N elly Chua vda. de Cari-an, P11,334.00 and the sum of P34,218.00 was consigned in court for the minor Leonell Cari-an. Fredisminda insists that she signed a rece ipt for full payment without receiving the money therefor and admits that she di d not object to the computation. It is incredible that a mature woman like Fredi sminda Cari-an, would sign a receipt for money she did not receive. Furthermore,

her claims regarding the actual amount of the installments paid to her and her kin are quite vague and unsupported by competent evidence. She even admits that all the receipts were taken by Escanlar. Supporting testimony from her co-heirs and siblings Carmen Cari-an, Rodolfo Cari-an and Nelly Chua vda. de Cari-an is a lso absent. Thus, in the absence of proof on the contrary, the Cari-ans were ind eed paid the balance of the purchase price, despite having accepted installments therefor belatedly. There is thus no ground to rescind the contract of sale bec ause of non-payment. 14. Continued payment of lease indicate vendees did not tak e undue advantage of the Cari-an heirs Escanlar and Holgado, in continuing to pa y the rent for the parcels of land they allegedly bought until 1986 in complianc e with their lease contract, only proves that they respected the contract and di d not take undue advantage of the heirs of Nombre and Cari-an who benefited from the lease; contrary to the findings of the lower court that such act admits tha t the purchase price was not fully paid the Cari-ans. It should be stressed that Escanlar and Holgado purchased the hereditary shares solely of the Page 74 of 87

Cari-ans and not the entire lot. 15. Subsequent sale of 8 parcels of land to spo uses Chua is valid except to the extent of what was sold to Escanlar and Holgado on 15 September 1978 It must be emphasized that what was sold to Escanlar and H olgado was only the Cari-ans hereditary shares in Lots 1616 and 1617 being held p ro indiviso by them and is thus a valid conveyance only of said ideal shares. Sp ecific or designated portions of land were not involved. Thus, the subsequent sa le of 8 parcels of land, including Lots 1616 and 1617, to the spouses Chua is va lid except to the extent of what was sold to Escanlar and Holgado in the 15 Sept ember 1978 conveyance. 16. Intestate proceedings final and cannot be re-opened; Need for the Supreme Court to resolve case definitively The proceedings surround ing the estate of Nombre and Cari-an having attained finality for nearly a decad e since, the same cannot be re-opened. It must be noted that the probate court d esisted from awarding the individual shares of each heir because all the propert ies belonging to the estate had already been sold. Thus it is not certain how mu ch the Cari-ans were entitled to with respect to the two lots, or if they were e ven going to be awarded shares in said lots. The protracted proceedings which ha ve undoubtedly left the property under a cloud and the parties involved in a sta te of uncertainty compels the Supreme Court to resolve it definitively. 17. Cari -an heirs (and successor-in-interest) entitled to half of the estate, or half in terest in each property in the estate The Cari-ans are the sole heirs by represe ntation of Victoriana Cari-an who was indisputably entitled to half of the estat e. There being no exact apportionment of the shares of each heir and no competen t proof that the heirs received unequal shares in the disposition of the estate, it can be assumed that the heirs of Victoriana Cari-an collectively are entitle d to half of each property in the estate. More particularly, the Cari-ans are en titled to half of Lots 1616 and 1617 (14,675 sq.ms. of Lot 1616 and 230,474 sq.m s. of Lot 1617). Consequently, Escanlar and Holgado, as their successors-in-inte rest, own said half of the subject lots and ought to deliver the possession of t he other half, as well as pay rents thereon, to the spouses Chua but only if the former (Escanlar and Holgado) remained in possession thereof. 18. Rate of renta ls The rate of rental payments to be made were given in evidence by Ney Sarrosa Chua in her unrebutted testimony on 24 July 1989: For the fishpond (Lot 1617) Fr om 1982 up to 1986, rental payment of P3,000.00 per hectare; from 1986-1989 (and succeeding years), rental payment of P10,000.00 per hectare. For the riceland ( Lot 1616) 15 cavans per hectare per year; from 1982 to 1986, P125.00 per cavan; 1987-1988; P175.00 per cavan; and 1989 and succeeding years, P200.00 per cavan. 35. Republic v. Philippine Resources Development (GR L-10141, 31 January 1958) Republic v. Philippine Development Corp. [G.R. No. L-10141. January 31, 1958.] E n Banc, Padilla (J): 10 concur Facts: On 6 May 1955, the Republic of the Philipp ines in representation of the Bureau of Prisons instituted against Macario Apost ol and the Empire Insurance Co. a complaint with the CFI Manila (Civil Case 2616 6). The complaint alleges that Apostol submitted the highest bid in the amount o f P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the Bure au of Prisons; that a contract therefor was drawn and by virtue of which, Aposto l obtained goods from the Bureau of Prisons valued P15,878.59; that of said acco unt, Apostol paid only P691.10 leaving a balance obligation of P15, 187.49. The complaint further avers that Apostol submitted the best bid with the Bureau of P risons for the purchase of 3 million board feet of logs at P88.00 per 1,000 boar d feet; that a contract was executed between the Director of Prisons and Apostol pursuant to which contract Apostol obtained deliveries of logs valued at P65,83 0.00; and that Apostol failed to pay a balance account of P18,827.57. All told, the total demand set forth in complaint against Apostol is for P34,015.06 with l egal interests thereon from 8 January 1952. The Empire Insurance Company was inc luded in the complaint having executed a performance bond of P10,000.00 in favor of Apostol. In his answer, Apostol interposed payment as a defense and sought t he dismissal of the complaint. On 19 July 1955, the Philippine Resources Develop

ment Corp. moved to intervene, appending to its motion, the complaint in interve ntion of even date. The complaint recites that for sometime prior to Apostols tra nsactions the corporate had some goods deposited in a warehouse at 1201 Herran, Manila; that Apostol, then the president of the corporation but without the know ledge or consent of the stockholders thereof, disposed of said goods by deliveri ng the same to the Bureau of Prisons in an attempt to settle his personal debts with the latter entity; that upon discovery of Apostols act, the corporation took steps to recover said goods by demanding from the Bureau of Prisons the return thereof; and that upon the refusal of the Bureau to return said goods, the corpo ration sought leave to intervene in Civil Case 26166. The Judge (Magno Gatmaitan ) denied the motion for intervention and Page 75 of 87

thereby issued an order to this effect on 23 July 1955. A motion for the reconsi deration of said order was filed by the corporation and the same was likewise de nied on 18 August 1955. On 3 September 1955, the corporation filed a petition fo r a writ of certiorari with the Court of Appeals by. On 12 December 1955 the Cou rt of Appeals set aside the order denying the motion to intervene and ordered th e trial court to admit the corporations complaint-in-intervention, with costs aga inst Macario Apostol. On 9 January 1956 the Government filed a petition under Ru le 46 to review the judgment rendered by the appellate court (CA-GR 15767-R) wit h the Supreme Court. The Government contends that the intervenor has no legal in terest in the matter in litigation, because the action brought in the CFI Manila against Macario Apostol and the Empire Insurance Company (Civil Case 26166) is just for the collection from the defendant Apostol of a sum of money, the unpaid balance of the purchase price of logs and almaciga bought by him from the Burea u of Prisons, whereas the intervenor seeks to recover ownership and possession o f G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes that it clai ms it owns an intervention which would change a personal action into one ad rem and would unduly delay the disposition of the case. The Supreme Court affirmed t he judgment under review, without pronouncement as to costs. 1. Intervenor has l egal capacity as it stands to be adversely affected by the judgment of the court It is true that the very subject matter of the original case is a sum of money, but it is likewise true as borne out by the records, that the materials purport edly belonging to the corporation have been assessed and evaluated and their pri ce equivalent in terms of money have been determined; and that said materials fo r whatever price they have been assessed, have been assigned by Apostol as token s of payment of his private debts with the Bureau of Prisons. In view of these c onsiderations, it becomes enormously plain in the event the judge decides to cre dit Macario Apostol with the value of the goods delivered by the latter to the B ureau of Prisons, the corporation stands to be adversely affected by such judgme nt. The conclusion is inescapable that the corporation possesses a legal interes t in the matter in litigation and that such interest is of an actual, material, direct and immediate nature as to entitle the corporation to intervene. 2. Lower court has discretion to allow or disapprove a motion for intervention; Principl e Section 3 of Rule 13 of the Rules of Court endows the lower court with discret ion to allow or disapprove a motion for intervention (Santarromana et al. vs. Ba rrios, 63 Phil. 456); and that in the exercise of such discretion, the court sha ll consider whether or not the intervention will unduly delay or prejudice the a djudication of the rights of the original parties and whether or not the interve nors rights may be fully protected in a separate proceeding. In the present case, the corporation is positively authorized to file a separate action against any of all the respondents; but considering that the resolution of the issues raised in and joined by the pleadings in the main case, would vitally affect the right s not only of the original parties but also of the corporation; that far from un duly delaying or prejudicing the adjudication of the rights of the original part ies or bringing about confusion in the original case, the admission of the compl aint in intervention would help clarify the vital issue of the true and real own ership of the materials involved, besides preventing an abhorrent multiplicity o f suits. The motion to intervene should be given due course. 3. Article 1458 adm its purchaser may pay a price certain in money or its equivalent The Government argues that Price is always paid in terms of money and the supposed payment being in kind, it is no payment at all, citing article 1458 of the new Civil Code. How ever, the same article provides that the purchaser may pay a price certain in mon ey or its equivalent, which means that payment of the price need not be in money. Whether the G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes c laimed by the corporation to belong to it and delivered to the Bureau of Prisons by Apostol in payment of his account is sufficient payment therefor, is for the Court to pass upon and decide after hearing all the parties in the case. Should the trial court hold that it is as to credit Apostol with the value or price of the materials delivered by him, certainly the corporation would be affected adv ersely if its claim of ownership of such sheets, plates, bars and pipes is true. 4. Authority of corporate counsel presumed By virtue of Section 20 of Rule 127,

the authority of corporations counsel is presumed. Withal, the claim of the coun sel for the petitioner that a resolution to proceed against Apostol, had been un animously adopted by the stockholders of the corporation, has not been refuted. It cannot be said that the counsel is acting merely in an individual capacity wi thout the benefit of a corporate act authorizing him to bring suit. As counsels a uthority to appear for the corporation was never questioned in the CFI, it is to be presumed that he was properly authorized to file the complaint-in interventi on and appear for his client. It was only in the Court of Appeals where his auth ority to appear was questioned. As the Court of Appeals was satisfied that couns el was duly authorized by his client to file the complaint-in-intervention and t o appear in its behalf, the resolution of the Court of Appeals should not be dis turbed. 5. Corporation has separate personality from president or stockholder; P ower to sue lodged in the board of directors and not the president Page 76 of 87

Philippine Resource Corporation is a duly organized corporation with offices at the Samanillo Building and that as such, it is endowed with a personality distin ct and separate from that of its president or stockholders. It has the right to bring suit to safeguard its interests and ordinarily, such right is exercised at the instance of the president. However, under the circumstance, such right prop erly devolves upon the other officers of the corporation as said right is sought to be exercised against the president himself who is the very object of the int ended suit. The power of a corporation to sue and be sued in any court is lodged in the board of directors which exercises its corporate powers, and not in the president. 6. Counsel is the secretary-treasurer of the corporation Granting tha t counsel has not been actually authorized by the board of directors to appear f or and in behalf of the corporation, the fact that counsel is the secretary-trea surer of the corporation and a member of the board of directors; and that the ot her members of the board, namely, Macario Apostol, the president, and his wife P acita R. Apostol, who should normally initiate the action to protect the corpora te properties and interests are the ones to be adversely affected thereby, a sin gle stockholder under such circumtances may sue in behalf of the corporation. Co unsel as a stockholder and director of the corporation may sue in its behalf and file the complaint-in-intervention in the proper court. 36. Torres v. CA (GR 134559, 9 December 1999) Torres v. CA [G.R. No. 134559. December 9, 1999.] Third division, Panganiban (J) : 4 concur Facts: Sisters Antonia Torres and Emeteria Baring entered into a joint venture agreement with Manuel Torres for the development of a parcel of land int o a subdivision. Pursuant to the contract, they executed a Deed of Sale covering the said parcel of land in favor of Manuel, who then had it registered in his n ame. By mortgaging the property, Manuel obtained from Equitable Bank a loan of P 40,000 which, under the Joint Venture Agreement, was to be used for the developm ent of the subdivision. All 3 of them also agreed to share the proceeds from the sale of the subdivided lots. The project did not push through, and the land was subsequently foreclosed by the bank. Antonia and Emeteria alleged that the proj ect failed because of Manuels lack of funds or means and skills. They add that Manu el used the loan not for the development of the subdivision, but in furtherance of his own company, Universal Umbrella Company.On the other hand, Manuel alleged that he used the loan to implement the Agreement. With the said amount, he was able to effect the survey and the subdivision of the lots. He secured the Lapu L apu City Councils approval of the subdivision project which he advertised in a lo cal newspaper. He also caused the construction of roads, curbs and gutters. Like wise, he entered into a contract with an engineering firm for the building of 60 low-cost housing units and actually even set up a model house on one of the sub division lots. He did all of these for a total expense of P85,000. He further cl aimed that the subdivision project failed because Antonia and Emeteria and their relatives had separately caused the annotations of adverse claims on the title to the land, which eventually scared away prospective buyers. Despite his reques ts, Antonia and Emeteria refused to cause the clearing of the claims, thereby fo rcing him to give up on the project. Antonia and Emeteria filed a criminal case for estafa against Manuel and his wife, who were however acquitted. Thereafter, they filed the present civil case which, upon Manuels motion, was later dismissed by the trial court in an Order dated 6 September 1982. On appeal, however, the appellate court remanded the case for further proceedings. Thereafter, the RTC C ebu City (Civil Case R-21208) issued its assailed Decision, which was affirmed b y the CA on 5 March 1998 (CA-GR CV 42378). Reconsideration was denied by the Cou rt of Appeals through its Resolution of 5 March 1998. Hence, the petition for re view on certiorari. The Supreme Court denied the petition and affirmed the chall enged decision; with costs against Antonia and Emeteria. 1. Partnership exists A reading of the terms embodied in the Agreement indubitably shows the existence of a partnership pursuant to Article 1767 of the Civil Code, which provides that

By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing t he profits among themselves. In the present case, Antonia and Emeteria would cont ribute property to the partnership in the form of land which was to be developed into a subdivision; while Manuel would give, in addition to his industry, the a mount needed for general expenses and other costs. Furthermore, the income from the said project would be divided according to the stipulated percentage. Clearl y, the contract manifested the intention of the parties to form a partnership. 2 . Parties implemented contract; Partners may contribute not only money or proper ty but also industry The parties implemented the contract. Antonia and Emeteria transferred the title to the land to facilitate its use in the name of Manuel. O n the other hand, Manuel caused the subject land to be mortgaged, the proceeds o f which were used for the survey Page 77 of 87

and the subdivision of the land. He developed the roads, the curbs and the gutte rs of the subdivision and entered into a contract to construct low-cost housing units on the property. Manuels actions clearly belie Antonias and Emeterias content ion that he made no contribution to the partnership. Under Article 1767 of the C ivil Code, a partner may contribute not only money or property, but also industr y. 3. Contract binds party to stipulations and all necessary consequences thereo f Under Article 1315 of the Civil Code, contracts bind the parties not only to w hat has been expressly stipulated, but also to all necessary consequences thereo f. Article 1315 provides that Contracts are perfected by mere consent, and from t hat moment the parties are bound not only to the fulfillment of what has been ex pressly stipulated but also to all the consequences which, according to their na ture, may be in keeping with good faith, usage and law. It is undisputed that Ant onia and Emeteria are educated and are thus presumed to have understood the term s of the contract they voluntarily signed. If it was not in consonance with thei r expectations, they should have objected to it and insisted on the provisions t hey wanted. 4. Courts may not extricate parties from the necessary consequences of their acts Courts may not extricate parties from the necessary consequences o f their acts, and the fact that the terms of a contract turn out to be financial ly disadvantageous to them will not relieve them of their obligations therein. T hey cannot now disavow the relationship formed from such agreement due to their supposed misunderstanding of its terms. 5. Article 1773 must be interpreted in r elation to Article 1771; Present case does not prejudice third parties The lack of an inventory of real property will not ipso facto release the contracting par tners from their respective obligations to each other arising from acts executed in accordance with their agreement. Article 1773 providing that a contract of pa rtnership is void, whenever immovable property is contributed thereto, if an inv entory of said property is not made, signed by the parties, and attached to the public instrument was intended primarily to protect third persons. Tolentino stat es that under the provision which is a complement of Article 1771, the execution of a public instrument would be useless if there is no inventory of the property contributed, because without its designation and description, they cannot be su bject to inscription in the Registry of Property, and their contribution cannot prejudice third persons. This will result in fraud to those who contract with th e partnership in the belief [in] the efficacy of the guaranty in which the immov ables may consist. Thus, the contract is declared void by the law when no such i nventory is made. The present case does not involve third parties who may be prej udiced. 6. Parties cannot adopt inconsistent positions in regard to a contract A ntonia and Emeteria invoke the allegedly void contract as basis for their claim that Manuel should pay them 60% of the value of the property. They cannot in one breath deny the contract and in another recognize it, depending on what momenta rily suits their purpose. Parties cannot adopt inconsistent positions in regard to a contract and courts will not tolerate, much less approve, such practice. 7. Nullity of partnership does not prevent courts from considering Joint Venture A greement as an ordinary contract The alleged nullity of the partnership will not prevent courts from considering the Joint Venture Agreement an ordinary contrac t from which the parties rights and obligations to each other may be inferred and enforced. 8. Joint Venture Agreement states consideration The Joint Venture Agr eement clearly states that the consideration for the sale was the expectation of profits from the subdivision project. Its first stipulation states that Antonia and Emeteria did not actually receive payment for the parcel of land sold to Ma nuel. Thus, it cannot be contended that the Joint Venture Agreement is void unde r Article 1422 of the Civil Code, because it is the direct result of an earlier illegal contract, which was for the sale of the land without valid consideration . 9. Consideration or cause may take many forms Consideration, more properly den ominated as cause, can take different forms, such as the prestation or promise o f a thing or service by another. In the present case, the cause of the contract of sale consisted not in the stated peso value of the land, but in the expectati on of profits from the subdivision project, for which the land was intended to b e used. The land was in effect given to the partnership as Antonias and Emeterias participation therein. There was therefore a consideration for the sale, Antonia

and Emeteria acting in the expectation that, should the venture come into fruit ion, they would get 60% of the net profits. 10. Factual issues cannot be resolve d on a petition of review under Rule 45; Damages not due Factual issues cannot b e resolved in a petition for review under Rule 45, as in the present case. Anton ia and Emeteria have not alleged, not to say shown, that their petition constitu tes one of the exceptions to this doctrine. The Court of Appeals held that the a cts of Antonia and Emeteria did not cause the failure of the project, nor was Ma nuel responsible therefore. In imputing the blame solely to him, Antonia and Eme teria failed to give any reason why the Court should disregard the factual findi ngs of the appellate court relieving him of fault. Antonia and Emeteria, thus, a re not entitled to damages. Page 78 of 87

37. Toyota Shaw v. CA (GR 116650, 23 May 1995) [ haystack ] Toyota Shaw v. CA [G.R. No. 116650. May 23, 1995.] First Division, Davide Jr (J) : 3 concur, 1 on leave Facts: Sometime in June 1989, Luna L. Sosa wanted to purc hase a Toyota Lite Ace. It was then a sellers market and Sosa had difficulty find ing a dealer with an available unit for sale. But upon contracting 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 Shaw Boulevard, Pasig, Metro Manila. They met Popong Bernardo, a sales representative of Toyota. Sosa emphasized to Bernar do that he needed the Lite Ace not later than 17 June 1989 because he, his famil y, and a balikbayan guest would use it on 18 June 1989 to go Marinduque, his hom e province, where he would celebrate his birthday on 19 June. He added that if h e does not arrive in his hometown with the new car, he would become a laughing st ock. Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a.m. o n 17 June 1989. Bernardo then signed a document entitled Agreements Between Mr. S osa & Popong Bernardo of Toyota Shaw, Inc, stipulating that all necessary documen ts will be submitted to Toyota Shaw (Popong Bernardo) a week after, upon arrival of Mr. Sosa from the Province (Marinduque) where the unit will be used on the 1 9 June; that the downpayment of P100,000.00 will be paid by Mr. Sosa on 15 June 1989; and that the Toyota Shaw, Inc. will be released a yellow Lite Ace unit. It was also agreed upon by the parties that the balance of the purchase price woul d be paid by credit financing through B.A. Finance, and for this Gilbert, on beh alf of his father, signed the documents of Toyota and B.A. Finance pertaining to the application for financing. The next day, 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) 928, on which Gilbert signed under the s ubheading conforme. This document shows that the customers name is Mr. Luna Sosa with home address at 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 installm ent, to be financed by B.A., with the initial cash outlay of P100,000.00 (downpayme nt: P53,148.00; insurance: P13,970.00; BLT registration fee: P1,067.00; CHMO fee : P2,715.00; Service fee: P500.00; and accessories: P29,000.00) and the balance to be financed is P274,137.00. The spaces provided for delivery terms were not fil led-up. It also contains conditions of sales providing that the sale is subject to the availability of the unit, and that the stated price is subject to change without prior notice, and that the price prevailing and in effect at time of sel ling will apply. Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP. On 17 June (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 agr eed upon but at 2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert met Bern ardo at the latters office. According to Sosa, Bernardo informed them that the Li te Ace was being readied for delivery. After waiting for about an hour, Bernardo told them that the car could not be delivered because it was acquired by a more influential person. Toyota contends, however, that the Lite Ace was not deliver ed to Sosa because of the disapproval of B.A. Finance of the credit financing ap plication of Sosa. It further alleged that a particular unit had already been re versed and earmarked for Sosa but could not be released due to the uncertainty o f 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 as ked that his downpayment be refunded. Toyota did so on the very same day by issu ing a Far East Bank check for the full amount of P100,000.00, the receipt of whi ch was shown by a check voucher of Toyota, which Sosa signed with the reservatio n, without prejudice to our future claims for damages. Thereafter, Sosa sent two l etters to Toyota: one on 27 June 1989 demanding the refund, within 5 days from r eceipt, 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 Toyotas failure to do so he would be constrained to take legal action; and the other on 4 November 198

9 (signed by M.O. Caballes, Sosas counsel) demanding P1M representing interest an d damages, again, with a warning that legal action would be taken if payment was not made within 3 days. Toyotas counsel answered through as letter dated 27 Nove mber 1989 8 refusing to accede to the demands of Sosa. But even before the answe r was made and received by Sosa, the latter filed on 20 November 1989 with the R TC Marinduque (Branch 38) a complaint against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of P1,230,000.00. After trial on the issue agreed upon during the pre-trial session, the trial court rendered on 18 February 1992 a decision in favor of Sosa. It ruled that the Agreement betwee n Mr. Sosa and Popong Bernardo, was a valid perfected and contract of sale betwee n 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; that Bernardo, as an authorized sales executive of Toy ota Shaw, was the latters agent and thus bound Toyota Shaw; that Luna Sosa proved his social standing in the community and suffered besmirched reputation, wounde d feelings and sleepless nights for which he ought to be compensated; and thus r endered judgment ordering Toyota Shaw to pay Sosa the sum of P75,000 as moral da mages, P10,000 as exemplary damages, P30,000 as attorneys fees plus P2,000 lawyers transportation fare per trip in attending to the hearing of the case, P2,000 fo r Sosas transportation fare per trip in attending the hearing of the case, and to pay the cost of the suit. Page 79 of 87

Dissatisfied with the trial courts judgment, Toyota appealed to the Court of Appe als (CA-GR CV 40043). In its decision promulgated on 29 July 1994, the Court of Appeals affirmed in toto the appealed decision. Hence the petition for review by certiorari by Toyota Shaw. The Supreme Court granted the petition, and dismisse d the challenged decision of the Court of Appeals and that of Branch 38 of the R egional Trial Court of Marinduque, and the counterclaim therein; without pronoun cement as to costs. 1. Contract of sale defined; Kinds Article 1458 of the Civil Code defines a contract of sale as By the contract of the sale one of the contra cting parties obligates himself to transfer the ownership of and to deliver a de terminate thing, and the other to pay therefor a price certain in money or its e quivalent. A contract of sale may be absolute or conditional. 2. Contract of sal e, when perfected; Effect Article 1475 of the Civil Code specifically provides w hen the contract of sale is deemed perfected, i.e. The contract of sale is perfec ted 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 reciproca lly demand performance, subject to the provisions of the law governing the form of contracts. 3. Agreement between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc . not a contract of sale The Agreements between Mr. Sosa & Popong Bernardo of Toyo ta Shaw, Inc. executed on 4 June 1989, is not a contract of sale. No obligation o n 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 certai n appears therein. The provision on the downpayment of P100,000.00 made no speci fic reference to a sale, it could only refer to a sale on installment basis, as the VSP executed the following day confirmed. But nothing was mentioned about th e full purchase price and the manner the installments were to be paid. Neither l ogic nor recourse to ones imagination can lead to the conclusion that such agreem ent is a perfected contract of sale. 4. Definitive price is an essential element in the formation of a binding and enforceable contract of sale A definite agree ment on the manner of payment of the price is an essential element in the format ion of a binding and enforceable contract of sale. This is so because the agreem ent 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. Definite ness as to the price is an essential element of a binding agreement to sell pers onal property. 5. No meeting of the minds The Agreements between Mr. Sosa & Popon g Bernardo of Toyota Shaw, Inc. shows the absence of a meeting of minds between T oyota and Sosa. Sosa did not even sign it. Further, Sosa was well aware from its title, written in bold letters, and thus knew that he was not dealing with Toyo ta but with Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any Toyota vehicle. 6. Prudence and reasonable diligence in inquiring authority of agent Sosa knew that Bernardo was only a sales represe ntative of Toyota and hence a mere agent of the latter. It was incumbent upon So sa to act with ordinary prudence and reasonable diligence to know the extent of Bernardos authority as an agent in respect of contracts to sell Toyotas vehicles. A person dealing with an agent is put upon inquiry and must discover upon his pe ril the authority of the agent. 7. Three stages in the contract of sale There ar e three stages in the contract of sale, namely (a) preparation, conception, or g eneration, which is the period of negotiation and bargaining, ending at the mome nt of agreement of the parties; (b) perfection of birth of the contract, which i s 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 ag reed upon in the contract. In the present case, the Agreements between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc. may be considered as part of the initial ph ase of the generation of negotiation stage of a contract sale. The second phase of the generation or negotiation stage was the execution of the VSP (the downpay ment of the purchase price was P53,148.00 while the balance to be paid on instal lment should be financed by B.A. Finance. It is assumed that B.A Finance was acc eptable to Toyota). 8. Financing companies defined Financing companies are defin ed in Section 3(a) of RA 5980, as amended by PDs 1454 and 1793, as corporations o r partnerships, except those regulated by the Central Bank of the Philippines, t he Insurance Commission and the and the Cooperatives Administration Office, whic

h are primarily organized for the purpose of extending credit facilities to cons umers and to industrial, commercial, or agricultural enterprises, either by disc ounting or factoring commercial papers or accounts receivable, or by buying and selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by leasing of Page 80 of 87

motor vehicles, heavy equipment and industrial machinery, business and office ma chines and equipment, appliances and other movable property. 9. Parties in a sale on installment basis financed by a financing company; No meeting of minds as fi nancing application was disapproved In a sale on installment basis which is fina nced by a financing company, 3 parties are thus involved: (1) the buyer who exec utes a note or notes for the unpaid balance of the price of the thing purchased on installment, (2) the seller who assigns the notes or discounts them with a fi nancing company, and (3) the financing company which is subrogated in the place of the seller, as the creditor of the installment buyer. Since B.A. Finance did not approve Sosas application, there was then no meeting of minds on the sale on installment basis. 10. Toyotas version of circumstances leading to non-release of vehicle more credible Toyotas version that B.A. Finance disapproved Sosas applica tion for which reason it suggested to Sosa that he pay the full purchase price i s more credible. When the latter refused, Toyota cancelled the VSP and returned to him his P100,000.00. Sosas version, that the VSP was cancelled because the veh icle was delivered to another because of a more influential client, is contradic ted by paragraph 7 of his complaint which states that Bernardo 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. 11. VS P mere proposal and did not create demandable right in favor of Sosa when it was aborted The VSP was a mere proposal which was aborted in lieu of subsequent eve nts. Thus, 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 indemnifi able injury. 12. Award of moral damages without legal basis The award of moral d amages is without legal basis. The only ground upon which Sosa claimed moral dam ages 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 suf fered humiliation, shame, and sleepless nights when the van was not delivered. T he 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 created an impression against his business standing and reputatio n. At the bottom of this claim is nothing but misplaced pride and ego. He should not have announced his plan to buy Toyota Lite Ace knowing that he might not be able to pay the full purchase price. It was he who brought embarrassment upon h imself by bragging about a thing which he did not own yet. 13. Award of exemplar y damages without basis; Purpose of exemplary damages Since Sosa is not entitled to moral damages and there being no award for temperate, liquidated, or compens atory damages, he is likewise not entitled to exemplary damages. Under Article 2 229 of the Civil Code, exemplary or corrective damages are imposed by way of exa mple or correction for the public good, in addition to moral, temperate, liquida ted, or compensatory damages. 14. Award of attorneys fees without basis For attor neys fees to be granted the court must explicitly state in the body of the decisi on, and not only in the dispositive portion thereof, the legal reason for the aw ard of attorneys fees. No such explicit determination thereon was made in the bod y of the decision of the trial court. Thus, no reason exists for such award. 38. Velasco v. CA (GR L-31018, 29 June 1973) Velasco v. CA [G.R. No. L-31018. June 29, 1973.] First Division, Castro (J):3 co ncur, 1 concurs with reservation, 2 dissents, 1 concurring with a dissent, 1 too k no part Facts: A suit for specific performance filed by Lorenzo Velasco agains t the Magdalena Estate (Civil Case 7761) on the allegation that on 29 November 1 962, Velasco and the Magdalena Estate had entered into a contract of sale by vir tue of which Magdalena Estate offered to sell Velasco, to which the latter agree d to buy, a parcel of land with an area of 2,059 sq.ms. (Lot 15, Block 7, Psd-61 29,) located at No. 39 corner 6th Street and Pacific Avenue, New Manila, Quezon City, for the total purchase price of P100,000.00. Velasco alleged that he was t o give a down payment of P10,000.00 to be followed by P20,000.00 and the balance

of P70,000.00 would be paid in installments, the equal monthly amortization of which was to be determined as soon as the P30,000.00 down payment had been compl eted. He further alleged that he paid the downpayment on 29 November 1962 (Recei pt 207848) and that when on 8 January 1964 he tendered to the payment of the add itional P20,000.00 to complete the P30,000.00, Magdalena Estate refused to accep t and that eventually it likewise refused to execute a formal deed of sale obvio usly agreed upon. Velasco demanded P25,000.00 exemplary damages, P2,000.00 actua l damages and P7,000.00 attorneys fees. Magdalena Estate denied that it has had a ny direct-dealings, much less, contractual relations with the Lorenzo Velasco Page 81 of 87

regarding the property in question, and contends that the alleged contract descr ibed in the document attached to the complaint is entirely unenforceable under t he Statute of Frauds; that the truth of the matter is that a portion of the prop erty in question was being leased by a certain Socorro Velasco who, on 29 Novemb er 1962, went to the office of Magdalena Estate indicated her desire to purchase the lot; that the latter indicated its willingness to sell the property to her at the price of P100,000.00 under the condition that a down payment of P30,000.0 0 be made, P20,000.00 of which was to be paid on 31 November 1962, and that the balance of P70,000.00 including interest at 9% per annum was to be paid on insta llments for a period of 10 years at the rate of P5,381.32 on June 30 and Decembe r of every year until the same shall have been fully paid; that on 29 November 1 962, Socorro Velasco offered to pay P10,000.00 as initial payment instead of the agreed P20,000.00 but because the amount was short of the alleged P20,000.00 th e same was accepted merely as deposit and upon request of Socorro Velasco the re ceipt was made in the name of her brother-in-law ,Lorenzo Velasco; that Socorro Velasco failed to complete the down payment of P30,000.00 and neither has she pa id any installments on the balance of P70,000.00 up to the present time; that it was only on 8 January 1964 that Socorro Velasco tendered payment of P20,000.00, which offer Magdalena Estate refused to accept because it had considered the of fer to sell rescinded on account of her failure to complete the down payment on or before 31 December 1962. On 3 November 1968, the CFI Quezon City rendered a d ecision, dismissing the complaint filed by Lorenzo and Socorro Velasco against t he Magdalena Estate, Inc. for the purpose of compelling specific performance by Magdalena Estate of an alleged deed of sale of a parcel of residential land in f avor of the Velascos. The basis for the dismissal of the complaint was that the alleged purchase and sale agreement was not perfected. On 18 November 1968, after the perfection of their appeal to the Court of Appeals, the Velascos received a notice from the said court requiring them to file their printed record on appeal within 60 days from receipt of said notice. This 60-day term was to expire on 1 7 January 1969. Allegedly on 15 January 1969, the Velascos allegedly sent to the CA and to counsel for Magdalena Estate, by registered mail allegedly deposited personally by its mailing clerk, one Juanito D. Quiachon, at the Makati Post Off ice, a Motion For Extension of Time To File Printed Record on Appeal. The extensio n of time was sought on the ground of mechanical failures of the printing machine s, and the voluminous printing job now pending with the Vera Printing Press. On 1 0 February 1969, the Velascos filed their printed record on appeal in the CA. Th ereafter, the Velascos received from Magdalena Estate a motion filed on 8 Februa ry 1969 praying for the dismissal of the appeal on the ground that the Velascos had failed to file their printed record on appeal on time. The CA, on 25 Februar y 1969, denied the Magdalena Estates motion to dismiss, granted the Velascos motio n for 30-day extension from 15 January 1969, and admitted the latters printed rec ord on appeal. On 11 March 1969, Magdalena Estate prayed for a reconsideration o f said resolution. The Velascos opposed the motion for reconsideration and submi tted to the CA the registry receipts (0215 and 0216), both stamped 15 January 19 69, which were issued by the receiving clerk of the registry section of the Maka ti Post Office covering the mails for the disputed motion for extension of time to file their printed record on appeal and the affidavit of its mailing clerk. A fter several other pleadings and manifestations relative to the motion for recon sideration and on 28 June 1969, the CA promulgated a resolution granting the mot ion for reconsideration and ordered Atty. Patrocinio Corpuz (Velascos counsel) to show cause within 10 days from notice why he should not be suspended from the p ractice of his profession for deceit, falsehood and violation of his sworn duty to the Court, and directed the Provincial Fiscal of Rizal to conduct the necessa ry investigation against Juanito D. Quiachon of the Salonga, Ordoez, Yap, Sicat & Associates Law Office and Flaviano O. Malindog, a letter carrier at the Makati Post Office, and to file the appropriate criminal action against them (it appear s that Malindog postmark the letters 15 January 1969 on 7 February 1969 at the r equest of Quiachon). On 5 September 1969, the CA promulgated another resolution, denying the motion for reconsideration of the Velascos but, at the same time, a ccepting as satisfactory the explanation of Atty. Corpuz why he should not be su

spended from the practice of the legal profession. On 20 September 1969, the Fir st Assistant Fiscal of Rizal notified the Court of Appeals that he had found a p rima facie case against Malindog and would file the corresponding information fo r falsification of public documents against him, but dismissed the complaint aga inst Quiachon for lack of sufficient evidence. A petition for certiorari and man damus was filed by the Velascos against the resolution of the Court of Appeals d ated 28 June 1969 in CA-GR 42376, which ordered the dismissal of the appeal inte rposed by them from a decision of the CFI Quezon City on the ground that they ha d failed seasonably to file their printed record on appeal. The Supreme Court de nied the instant petition; without pronouncement as to costs. 1. Issues raised b y Velascos; Some issues are subject of appeal on certiorari under Rule 45 rather than that of certiorari under Rule 65 The Velascos contend that the Court of Ap peals acted without or in excess of jurisdiction, or with such whimsical and gra ve abuse of discretion as to amount to lack of jurisdiction, because (a) it decl ared that the motion for extension of time to file the printed record on appeal was not mailed on 15 January 1969, when, in fact, it was mailed on the said date as evidenced by the registry receipts and the post office stamp of the Makati P ost Office; (b) it declared that the record on appeal was filed only on 10 Febru ary 1969, beyond the time authorized by the appellate court, when the truth is t hat the said date of filing was within Page 82 of 87

the 30-day extension granted by it; (c) the adverse conclusions of the appellate court were not supported by the records of the case, because the said court ign ored the affidavit of the mailing clerk of the petitioners counsel, the registry receipts and postmarked envelopes and, instead, chose to rely upon the affidavit of the mail carrier Malindog, which affidavit was prepared by counsel for Magda lena Estate at the affiant himself so declared at the preliminary investigation at the Fiscals office which absolved the Velascos counsel mailing clerk Quiachon f rom any criminal liability; (d) section 1, Rule 50 of the Rules of Court, which enumerates the grounds upon which the Court of Appeals may dismiss an appeal, do es not include as a ground the failure to file a printed record on appeal; (e) t he said section does not state either that the mismailing of a motion to extend the time to file the printed record on appeal, assuming this to be the case, may be a basis for the dismissal of the appeal; (f) the Court of Appeals has no jur isdiction to revoke the extension of time to file the printed record on appeal i t had granted to the petitioners based on a ground not specified in section 1, R ule 50 of the Rules of Court; and (g) the objection to an appeal may be waived a s when the appellee has allowed the record on appeal to be printed and approved. Some of the objections raised by the Velascos to the questioned resolution of t he Court of Appeals are obviously matters involving the correct construction of our rules of procedure and, consequently, are proper subjects of an appeal by wa y of certiorari under Rule 45 of the Rules of Court, rather than a special civil action for certiorari under Rule 65. The petitioners, however, have correctly a ppreciated the nature of its objections and have asked this Court to treat the i nstant petition as an appeal by way of certiorari under Rule 45 in the event that the Supreme Court should deem that an appeal is an adequate remedy The nature of the present case permits a disquisition of both types of assignments. 2. Date s tamped on receipts and envelopes; Henning and Caltex cases do not apply While it is true that stamped on the registry receipts 0215 and 0216 as well as on the e nvelopes covering the mails in question is the date 15 January 1969, this, by it self, does not establish an unrebuttable presumption of the fact or date of mail ing. The Henning and Caltex cases are not in point because the specific adjectiv e issue resolved in those cases was whether or not the date of mailing a pleadin g is to be considered as the date of its filing, The issue in the present case i s whether or not the motion of the petitioners for extension of time to file the printed record on appeal was, in point of fact, mailed (and, therefore, filed) on 15 January 1969. 3. Certification of postmasters and Malindogs sworn declarati on believable; Malindog induced to issue false registry receipts for the Velascos counsel The certifications issued by the two postmasters of Makati, Rizal and t he sworn declaration of the mail carrier Malindog describing how the said regist ry receipts came to be issued, are worthy of belief. It will be observed that th e said certifications explain clearly and in detail how it was improbable that t he registry receipts in question could have been issued to Velascos counsel in th e ordinary course of official business, while Malindogs sworn statement, which co nstitutes a very grave admission against his own interest, provides ample basis for a finding that where official duty was not performed it was at the behest of a person interested in the Velascos side of the action below. That at the prelim inary investigation at the Fiscals office, Malindog failed to identify Quiachon a s the person who induced him to issue falsified receipts, contrary to what he de clared in his affidavit, is of no moment since the findings of the inquest fisca l as reflected in the information for falsification filed against Malindog indic ate that someone did induce Malindog to make and issue false registry receipts t o the counsel for the Velascos. 4. Right to appeal a statutory privilege and not a natural right nor a part of due process In Bello vs. Fernando, it was held th at the right to appeal is not a natural right nor a part of due process; it is m erely a statutory privilege. and may he exercised only in the manner provided by law. 5. Duty of appellant to file printed record on appeal with CA within 60 da ys from receipt of notice The Rules of Court expressly makes it the duty of an a ppellant to file a printed record on appeal with the Court of Appeals within 60 days from receipt of notice from the clerk of that court that the record on appe al approved by the trial court has already been received by the said court. Sect

ion 5 of Rule 46 (Duty of appellant upon receipt of notice) states that It shall be the duty of the appellant within 15 days from the date of the notice referred to in the preceding section, to pay the clerk of the Court of Appeals the fee f or the docketing of the appeal, and within 60 days from such notice to submit to the court 40 printed copies of the record on appeal, together with proof of ser vice of 15 printed copies thereof upon the appellee. 6. Appellate court did not a buse its discretion After a careful study and appraisal of the pleadings, admiss ions and denials respectively adduced and made by the parties, it is clear that the Court of Appeals did not gravely abuse its discretion and did not act withou t or in excess of its jurisdiction. As the Velascos failed to comply with the du ty to file the printed record on appeal within 60 days from receipt of notice wh ich the Rules of Court enjoins, and considering that there was a deliberate effo rt on their part to mislead the said Court in granting them an extension of time within which to file their printed record on appeal, it stands to reason that t he appellate court cannot be said to have abused its discretion or to have acted without or in excess of its jurisdiction in ordering the dismissal of their app eal. Page 83 of 87

7. Jurisprudence replete with cases where Court dismissed appeal on grounds not mentioned specifically in Rule 50, Section 1 Jurisprudence is replete with cases in which this Court dismissed an appeal on grounds not mentioned specifically i n Section 1, Rule 50 of the Rules of Court. (See, for example, De la Cruz vs. Bl anco, 73 Phil. 596 (1942); Government of the Philippines vs. Court of Appeals. 1 08 Phil. 86 (1960); Ferinion vs. Sta. Romana, L-25521, February 28, 66, 16 SCRA 370, 375). 8. Motion for extension of period must be made before the expiration of the period to be extended Inasmuch as the motion for extension of the period to file the printed record on appeal was belatedly filed, then, it is as though the same were non-existent. In Baquiran vs. Court of Appeals, it was stated that the motion for extension of the period for filing pleadings and papers in court must be made before the expiration of the period to be extended. The soundness of this dictum in matters of procedure is self-evident. For, were the doctrine oth erwise, the uncertainties that would follow when litigants are left to determine and redetermine for themselves whether to seek further redress in court forthwi th or take their own sweet time will result in litigations becoming more unbeara ble than the very grievances they are intended to redress. 9. Objection to appea l not waived Magdalena Estate did file a motion in the Court of Appeals on 8 Feb ruary 1969 praying for the dismissal of the appeal on the ground that up to the said date the Velascos had not yet filed their record on appeal and, therefore, must be considered to have abandoned their appeal. The objection to an appeal wa s thus not waived, contrary to Velascos argument that it was waived when the appe llee allows the record on appeal to be printed and approved/ 10. No contract of sale perfected because the minds of the parties did not meet in regard to the ma nner of payment No contract of sale was perfected because the minds of the parti es did not meet in regard to the manner of payment. The material averments contain ed in Velascos complaint themselves disclose a lack of complete agreement in regar d to the manner of payment of the lot in question. The complaint states pertinent ly that plaintiff and defendant further agreed that the total down payment shall be P30,000.00, including the P10,000.00 partial payment mentioned in paragraph 3 hereof, and that upon completion of the said down payment of P30,000.00, the ba lance of P70,000.00 shall be paid by the plaintiff to the defendant in 10 years from November 29, 1962; and that the time within which the full down payment of the P30,000.00 was to be completed was not specified by the parties but the defe ndant was duly compensated during the said time prior to completion of the down payment of P30,000.00 by way of lease rentals on the house existing thereon whic h was earlier leased by defendant to the plaintiffs sister-in-law, Socorro J. Vel asco, and which were duly paid to the defendant by checks drawn by plaintiff. The Velascos themselves admit that they and Magdalena Estate still had to meet and agree on how and when the down payment and the installment payments were to be p aid. Such being the situation, it cannot be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. 11. D efinite agreement on the matter of payment of purchase price an essential elemen t to form binding and enforceable contract of sale A definite agreement on the m anner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. In the present case, the Velascos delivered to Magdalena Estate the sum of P10,000 as part of the downpayment tha t they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties under article 1482 of the ne w Civil Code, as the Velascos themselves admit that some essential matter (the t erms of payment) still had to be mutually covenanted. 39. Ereneta v. Bezore (GR L-29746, 26 November 1973) Intestate Estate of Emilio Camon; Ereneta v. Bezore [G.R. No. L-29746. November 26, 1973.] First Division, Castro (J): 5 concur Facts: Emilio Camon was the less ee of the hacienda Rosario, located in Pontevedra, Negros Occidental, for the pe riod from crop year 1940-41 to crop year 1960-61. pro-indiviso of the said sugar

plantation belonged to Ignatius Henry Bezore, Elwood Knickerbocker and Mary Ire ne Fallon McCormick (as their inheritance from the late Thomas Fallon), while th e other half belonged to Petronila Alunan vda. de Sta. Romana, Amparo Sta. Roman a and Alberta vda. de Hopon (as their inheritance from their mother Rosario Sta. Romana). Upon the death of Emilio Camon in 1967, his widow, Concepcion Ereeta, f iled a petition in the CFI Negros Occidental (Special Proceeding 8366) praying f or the grant to her of letters of administration of the estate of the deceased C amon. The petition was granted. Thereafter, the court issued an order requiring all persons with money claims against the estate to file their claims within the period prescribed in the order.Thru their judicial administrator and counsel, M artiniano O. de la Cruz, Bezore, et al. filed a claim against the estate in the amounts of P62,065 as the money value of sugar allotments and allowances and P2, 100 as Page 84 of 87

the money value of palay and rentals, or a total of P64,165, appertaining to the claimants half-share in the hacienda. Bezore, et. al. and Ereneta are agreed tha t the late Emilio Camon appropriated for himself the amounts claimed. Bezore, et . al. had demanded payment of their claim from Emilio Camon when he was still al ive, but Ereneta ignored the demands. At the trial, 3 documents were submitted i n evidence by Ereneta, the authenticity of each of which is not controverted by Bezore, et.al.; i.e. (1) An Agreement to Sell, executed on 11 January 1961, whereb y Bezore, et al., agreed to sell their share in the hacienda Rosario to Amparo S ta. Romana and Alberta vda. de Hopon; (2) A Release and Waiver of Claims, executed on 12 January 961, whereby Amparo Sta. Romana and Alberta vda. de Hopon, for an d in consideration of their gratitude for the various services, financial and per sonal extended to them by Emilio Camon, released him from any and all claims that may have accrued pertaining to the 2/4 pro-indiviso share in Hacienda Rosario own ed by Bezore, et. al. who had bound themselves to sell their share in the said Ha cienda Rosario to Amparo and Alberta, including rights accrued or accruing, and whe reby Amparo and Alberta bound themselves to waive in favor of Mr. Emilio Camon fo r his own use and benefit said rights accrued or accruing; and (3) A Deed of Sale, executed on 4 August 1961, whereby Bezore, et al., for and in consideration of t he sum of P78,000, to be paid in the manner stated in the instrument, sold, tran sferred and conveyed all their rights, title, interest and participation, whether accrued or accruing in their 2/4 pro-indiviso share in the hacienda Rosario, toge ther with all the improvements existing thereon, including its sugar quota, in fa vor of Amparo Sta. Romana and Alberta vda. de Hopon. On 20 July 1968, the lower court dismissed the claim, rejecting Bezore et.als contention that the sugar allo tments and allowances, subject of their claim against the estate of Emilio Camon , were not included in the sale, and held that by the positive and categorical t erms of the deed of sale, all benefits accrued and accruing to the appellants be fore 4 August 1961 were included in the sale. Bezore, et.al. filed a direct appe al with the Supreme Court. The Supreme Court affirmed the order of the lower cou rt, at Bezore et. al.s cost. 1. Right to accrued claims not waived in January 196 1 At the time of the execution, on 12 January 1961, of the deed of Release and Wa iver of Claims, Amparo Sta. Romana and Alberta vda. de Hopon could not release or waive accrued claims belonging to Bezore et..al, because the right that Amparo and Alberta then had was a mere promise by Bezore, et.al. to sell their share in the hacienda, not the right to the accrued claims. What was agreed to be sold i n the future was different from what was purportedly waived; and even if the obj ect in both contracts were the same, the waiver would still be invalid for it is essential that a right, in order that it may be validly waived, must be in exis tence at the time of the waiver. 2. Defect in waiver cured in August 1961; Bezor e, et.al. parted with their accrued rights Whatever defect there was in the waiv er was subsequently cured by the deed of sale of 4 August 1961 by virtue of whic h Bezore, et.al. sold not only their pro-indiviso half-share in the hacienda but also their accrued rights therein. It is immaterial that Emilio Camon was not t he vendee since what mattered is that Bezore, et.al. parted with their accrued r ights for a valuable consideration. 3. Question of fact not reviewable in direct appeal to Supreme Court Whether the vendees (Bezore etal) represented to Martin iano O. de la Cruz that the sugar quedans and palay were not included in the sal e and that such was the intention of the parties, involves a question of fact wh ich is not reviewable in a direct appeal to the Supreme Court. 4. Accrued or accr uing; Literal meaning of contractual stipulations control if terms are clear The words accrued or accruing in the deed of sale are not obscure and, as the lower co urt declared, are in fact positive and categorical enough to include accrued all otments and allowances. Since the said words are not ambiguous, there is no need to interpret them. Article 1370 of the Civil Code provides that if the terms of a contract are clear and leave no doubt upon the intention of the contracting pa rties, the literal meaning of its stipulations shall control. 5. Inadequacy of ca use does not of itself invalidates the contract That the consideration in the sa le was cheap is not a ground for the infirmity of the sale. Inadequacy of cause in a contract does not of itself invalidate the contract. 6. Silence as to demand letters not admission of debt The silence of Camon with respect to the several d

emand letters sent to him was an admission of his debt, is without support or sa nction in law of evidence. 7. No change in the juridical relationship between ha cienda owners and Emilio Camon after the written contract of lease; Continued cu ltivation merely implied a new lease, did not convert into express trust There w as no change in the juridical relationship between the hacienda owners and Emili o Camon when, after the expiration of their written contract of lease, he contin ued cultivating the hacienda during the crop years 1952-53 to 1960-61. The conti nuance in the cultivation, with the acquiescence of the owners, did not convert the original relationship into an express Page 85 of 87

trust but merely implied a new lease over the property, with the same terms and conditions provided in the original contract, except as to the period of the lea se. 8. Article 1670 of the Civil Code Article 1670 of the Civil Code provides th at if at the end of the contract the lessee should continue enjoying the thing le ased for 15 days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for t he time established in articles 1682 and 1687. The other terms of the original c ontract shall be revived. 9. Fiduciary relationship an essential characteristic o f trust; No express trust There is nothing in the record that evidence the creat ion of a fiduciary relationship between the lessors and the lessee after the exp iration of their written contract of lease. Fiduciary relationship is an essenti al characteristic of trust, and no written instrument has been pointed to as est ablishing an express trust, which writing is required in express trusts over imm ovables. There is no basis for the claim that an express trust was created when Camon continued to cultivate the land after the expiration of the written contra ct of lease. 40. Vda. de Gordon v. CA (GR L-37831, 23 November 1981) Vda. De Gordon v. CA [G.R. No. L-37831. November 23, 1981.] First Division, Teeh ankee (J): 4 concur, 1 took no part Facts: Two parcels of land belong to Restitu ta V. Vda. De Gordon (covered by TCT 12204 and 12205). For the years 1953 to 196 3, inclusive, the taxes against said parcels of land remained unpaid. The combin ed assessed value of the parcels of land is P16,800 and the residential house on the land was assessed at P45,580. The City Treasurer of Quezon City, upon warra nt of a certified copy of the record of such delinquency, advertised for sale th e parcels of land to satisfy the taxes, penalties and costs for a period of 30 d ays prior to the sale on 3 December 1964, by keeping a notice of sale posted at the main entrance on the City Hall and in a public and conspicuous place in the district where the same is located and by publication of said notice once a week for 3 weeks in the Daily Mirror, a newspaper of general circulation in Quezon Cit y, the advertisement stating the amount of taxes and penalties due, time and pla ce of sale, name of the taxpayer against whom the taxes are levied, approximate area, lot and block number, location by district, street and street number of th e property. The public sale on 3 December 1964, the parcels of land were sold to Rosario Duazo for the amount of P10,500.00 representing the tax, penalty and co sts. The certificate of sale executed by the City Treasurer was duly registered on 28 December 1964 in the office of the Register of Deeds of Quezon City. Upon the failure of the registered owner to redeem the parcels of land within the 1-y ear period prescribed by law, the City Treasurer of Quezon City executed on 4 Ja nuary 1966 a final deed of sale of said lands and the improvements thereon. Said final deed of sale was also registered in the Office of the Register of Deeds o f Quezon City on 18 January 1966. Later on, Duazo filed a petition for consolida tion of ownership. The appellate court upheld the tax sale of the real propertie s at which Duazo acquired the same and her ownership upon vda. de Gordons failure to redeem the same, having found the sale to have been conducted under the direc tion and supervision of the City Treasurer of Quezon City after the proper proce dure and legal formalities had been duly accomplished. The Supreme Court affirmed the appellate courts decision under review; Without costs. 1. (CA Decision) Mate rial averments admitted The opposition *to Duazos petition for consolidation of o wnership+ has not controverted by specific denials the material averments in the petition. Hence, the material averments in the petition are deemed admitted. (S ection 1, Rule 9, Revised Rules of Court) 2. (CA Decision) Issue on the irregula rity of public sale of parcels of land waived The opposition has not raised the issue of irregularity in the public sale of the two parcels of land in question. This defense is deemed waived. (Section 2, Rule 9, id.) 3. (CA Decision) Price in auction sale not grossly inadequate to be shocking to the conscience of court

Noting that the 1961 assessment of the combined value of the two parcels of lan d is P16,800, and the residential house on the land is P45,580; that the present value of the house would be much less considering the depreciation for over 10 years; and that while the price of P10,500 is less than the total assessed value of the land and the improvement thereon, said price cannot be considered so gro ssly inadequate as to be shocking to the conscience of the court. Page 86 of 87

4. (CA Decision) Director of Lands v. Abarca: Price inadequate to shock conscien ce of court In Director of Lands vs. Abarca (61 Phil. 70), the Supreme Court con sidered the price of P877.25 as so inadequate to shock the conscience of the cou rt because the assessed value of the property in question was P60,000.00. The as sessed value of the land was more than 60 times the price paid at the auction sa le. In the present case, the price of P10,500.00 is about 1/6 of the total asses sed value of the two parcels of land in question and the residential house there on. The finding of the lower court that the house and land in question have a fa ir market value of not less than P200,000.00 has no factual basis. It cannot be said, therefore, that the price of P10,500.00 is so inadequate as to be shocking to the conscience of the court. 5. (CA Decision) Mere inadequacy of price not g round to annul public sale, unlike in ordinary sale; Inadequacy of price an adva ntage in relation to owners right to redeem Mere inadequacy of the price alone is not sufficient ground to annul the public sale. (Barrozo vs. Macaraeg, 83 Phil. 378) In Velasquez vs. Coronel (5 SCRA 985, 988), it was held that while in ordin ary sales for reasons of equity a transaction may be invalidated on the ground o f inadequacy of price, or when such inadequacy shocks ones conscience as to justi fy the courts to interfere, such does not follow when the law gives to the owner the right to redeem, as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemptio n. And so it was aptly said: When there is the right to redeem, inadequacy of pri ce should not be material, because the judgment debtor may reacquire the propert y or also sell his right to redeem and thus recover the loss he claims to have s uffered by reason of the price obtained at the auction sale. 6. (CA Decision) Pub lic Sale governed by Section 40 of CA 470 The public sale is governed by Section 40 of Commonwealth Act 470 which gives the delinquent taxpayer a period of 1 ye ar from the date of the sale within which to repurchase the property sold. In ca se the delinquent taxpayer does not repurchase the property sold within the peri od of 1 year from the date of the sale, it becomes a mandatory duty of the provi ncial treasurer to issue in favor of the purchaser a final deed of sale. (Velasq uez vs. Coronel) 7. No lack of personal notice of tax sale The alleged lack of p ersonal notice of the tax sale is negated by her own averments in her own opposi tion filed in the lower court a quo that the Oppositor in the petition is a woman 80 years of age. She was not aware of the auction sale conducted by the City Tr easurer of Quezon City on 3 December 1964 or if there was any notice sent to her , the same did not reach her or it must have escaped her mind considering her ag e. 8. Quezon City Charter (CA 502), not RA 1275, controlling on length of redemp tion period; Special law prevails over general law The period for redemption is not the 2-year period provided in RA 1275, since the specific law governing tax sales of properties in Quezon City is the Quezon City Charter, Commonwealth Act 502 which provides in section 31 thereof for a 1-year redemption period. The spe cial law covering Quezon City necessarily prevails over the general law. In the present case, since the filing of Duazos brief in 1974, Vda. De Gordon had not so ught to exercise her alleged right of redemption or make an actual tender thereo f. 9. Gross inadequacy of purchase price not material if owner has right to rede em As held in Velasquez vs. Coronel, alleged gross inadequacy of price is not ma terial when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption. 10. Laws on tax sales for delinquent taxes ne cessary as taxes essential to life of Government As stressed in Tajonera vs. Cou rt of Appeals, the law governing tax sales for delinquent taxes may be harsh and drastic, but it is a necessary means of insuring the prompt collection of taxes so essential to the life of the Government. Page 87 of 87