1

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 166190 September 20, 2006

HEIRS OF VENANCIO BAJENTING and FELISA S. BAJENTING, NAMELY: Teresita A. Bajenting, Ruel A. Bajenting,
Gilbert A. Bajenting, Cresilda B. Puebla, Imelda B. Salac, Benedictina B. Ravina, Margarita B. Reusora, Renato A.
Bajenting, Lorena A. Bajenting, Elizalde A. Bajenting, Francisco Malda, Jr., B. Selecio Bajenting, Trinidad M. Antinola,
Roland B. Malda, Luisa B. Malda, Arsenia C. Ramirez, Angelina Ricarte, Editha Esteban, Lourdes M. Garcia, Nora M. Alivio,
Francisca B. Espina, Francisco Malda, Sr., and Venencio A. Bajenting, represented by VENENCIO A. BAJENTING,
Attorney-in-Fact, petitioners,
vs.
ROMEO F. BAEZ, SPOUSES JONATHAN and SONIA LUZ ALFAFARA, respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 76526, as well
as its October 31, 2004 Resolution2 denying the Motion for Reconsideration thereof.

The factual and procedural antecedents are as follows:

Venancio Bajenting applied for a free patent over a parcel of land, Lot 23 (Sgs. 546 D), Davao Cadastre, located in Langub,
Davao City, with an area of 104,140 square meters. The application was docketed as Free Patent Application No. IV-45340.
In the meantime, Venancio planted fruit trees in the property3 such as mango, lanzones, coconut and santol. He and his
wife, Felisa Bajenting, along with their children, also resided in a house which stood on the property.4

On February 18, 1974, Venancio died intestate.5 His application for a free patent was thereafter approved, and on
December 18, 1975, Free Patent No. 577244 was issued in his favor. On February 6, 1976, the Register of Deeds issued
Original Certificate of Title (OCT) No. P-5677 over the property in the name of "Venancio Bajenting, married to Felisa
Sultan."6 Selecio Bajenting continued cultivating the land.7

In the meantime, the Sangguniang Panglunsod approved City Ordinance No. 263, Series of 1982 and Resolution No. 10254
declaring the properties in Langub as a low density residential zone.8

On May 31, 1993, Felisa and the other heirs of Venancio (Heirs, for brevity),9 executed an Extrajudicial Settlement with
Deed of Absolute Sale over Lot 23. They alleged therein that when Venancio died intestate, they had agreed to adjudicate
unto themselves as heirs of the deceased the aforesaid property, as follows:

TO: FELISA S. BAJENTING, One half (1/2) share of the whole of Oct. No. P-5677, as her conjugal share; and the remaining
one-half (1/2) of OCT No. P-5677.

TO: FELISA S. BAJENTING, MARGARITA BAJENTING, FRANCISCA BAJENTING, SILVERIO BAJENTING (Deceased)
represented by his wife and children: Teresita Apas-Bajenting, Renato Bajenting, Gilbert Bajenting, Criselda Bejenting,
Imelda Bajenting, Venancio Bajenting and Elizalde Bajenting; MAXIMA BAJENTING (Deceased) represented by her
husband, Francisco Malda, and children: Lee B. Malda, Angelina B. Malda, Milagros B. Malda, Editha B. Malda and Susana
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B. Malda; BENEDICTINA BAJENTING, ARSENIA BAJENTING; and CELECISO BAJENTING, in equal share pro-
indiviso.10

In the same deed, a 50,000 square meter portion of the property was sold to the spouses Sonia Luz Alfafara; and the
54,140 square meter portion to Engr. Romeo F. Baez. The share of Felisa was included in the portion sold to Engr.
Baez.11 However, the deed was not notarized; neither was the sale approved by the Secretary of Environment and
Natural Resources. In the Agreement/Receipt executed by Felisa Bajenting and Romeo Baez, the parties declared that the
price of property was P500,000.00; P350,000.00 was paid by the vendees, the balance of P150,000.00 to be due and
payable on or before December 31, 1993 at the residence of the vendors.12 The owner's duplicate of title was turned over
to the vendees. However, the deed was not filed with the Office of the Register of Deeds.

The Heirs, including Felisa, tried to repurchase the property as provided under Section 119 of Commonwealth Act No. 141,
but Romeo Baez and Sonia Alfafara did not allow them to exercise their right.

On May 31, 1995, the Heirs, through Venencio Bajenting, filed a Complaint for recovery of title against Romeo Baez and
the spouses Alfafara in the Office of the Barangay Captain. When no settlement was reached, the Heirs filed a complaint for
Quieting of Title, Repurchase of Property, Recovery of Title plus Damages with the Regional Trial Court, claiming that they
had tried to repurchase the property from the defendants and that the latter had ignored the summons from the Barangay
Captain for an amicable settlement of the case. They prayed that after due proceedings, judgment be rendered in their
favor:

WHEREFORE, PREMISES CONSIDERED, it is prayed of this Honorable Court that after hearing, judgment be rendered in
favor of plaintiffs and against herein defendants, by quieting and removing any cloud on the Original Certificate of Title No.
P-5677, Free Patent No. 577244, of the Registry of Deeds of Davao City, and thereafter ordering the defendants to:

a) Return the owner's duplicate copy of Original Certificate of Title No. P-5677, Free Patent No. 577244 to plaintiff forthwith;

b) Vacate the premises including those who are acting for and in their behalf; and,

IN THE ALTERNATIVE, should the defendants prove their superior right over the subject property (i.e., sale) as against the
herein plaintiffs that they be ordered to resell back the said property to the plaintiffs consonant to the provision of Sec. 119,
C.A. No. 141, and in both instances, defendants be, jointly and severally, ordered to pay plaintiffs:

1. P50,000.00 - Moral Damages;

2. P50,000.00 - Exemplary Damages;

3. P70,000.00 - Actual Damages;

4. P50,000.00 - Attorney's fees.

Plaintiffs further pray for such relief just and equitable in the premises.13

On October 29, 1996, the Heirs filed an Amended Complaint, alleging the following:

5. Sometime in May 1993, the afore-described real property was sold to defendants for a consideration of Five Hundred
Thousand (P500,000.00) Pesos and several months thereafter, the owner's duplicate copy Original Certificate of Title No.
P-5677, Free Patent No. 577244, was handed to them and, thereafter, their representative occupied the area. x x x

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6. Defendants paid only the sum of THREE HUNDRED FIFTY THOUSAND (P350,000.00) but did not pay the remaining
purchase price in the amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS. x x x

7. The aforedescribed property sold to defendants, being a Free Patent, can be repurchased within five (5) years from date
of conveyance (1993) by the applicant, his widow, or legal heirs pursuant to Sec. 119, Commonwealth Act No. 141, as
amended, which provides that:

"That every conveyance of land acquired under the free patent provisions, when proper, shall be the subject to repurchase
by the applicant, his widow, or legal heirs, within a period of five (5) years from the date of the conveyance; (Underscoring
supplied).14

x x x x

13. Herein Plaintiffs have tendered the amount of THREE HUNDRED FIFTY THOUSAND (P350,000.00) as repurchase
price with the Office of the Clerk of Court as shown in hereto attached xerox copy of Official Receipt No. 6547953 as Annex
"L."15

The Amended Complaint contained the following prayer:

WHEREFORE, PREMISES CONSIDERED, it is prayed of this Honorable Court that after hearing, judgment be rendered
ordering defendants to resell the property back to herein plaintiffs in accordance with the provision of Sec. 119, C.A. No.
141 and ordering defendants further to:

a) Return the owner's duplicate copy of Original Certificate of Title No. P-5677, Free Patent No. 577244 to plaintiffs
forthwith;

b) Vacate the premises including those who are acting for and in their behalf; and

c) Jointly and severally, pay plaintiffs:

1) P 50,000.00 - Moral Damages;

2) P 50,000.00 - Exemplary Damages;

3) P 70,000.00 - Actual Damages;

4) P 50,000.00 - Attorney's fees.

Plaintiffs further pray for such relief just and equitable in the premises. 16

The Heirs deposited the amount of P350,000.00 with the Clerk of Court, and an official receipt was issued therefor.

In their Amended Answer to the Complaint, the defendants averred, inter alia, that: (1) the plaintiffs, who did not sign the
Extrajudicial Settlement and Deed of Absolute Sale, were not heirs of Venancio Bajenting; (2) it was only Venencio
Bajenting, Jr. who wanted to repurchase the property for and in behalf of a "speculator" i.e., for the sole use and enjoyment
of the interested buyer and not for cultivation of the heirs of the deceased homesteader; and (3) the Heirs have not tendered
any amount to perfect their repurchase of the property. They alleged, by way of Compulsory Counterclaim, that:

13. The parties herein have entered into an Extrajudicial Settlement of Estate with Deed of Absolute Sale to evidence their
agreement over the land in question. However, such deed has not yet been notarized. Pursuant to Art. 1357 in relation to
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Art. 1358 (1) of the Civil Code, defendants may require plaintiffs to deliver the proper document in the proper form to
evidence the conveyance of the property subject of this case and sufficient to effect the transfer of title to the same in favor
of defendants;17

The defendants prayed that, after due proceedings, judgment be rendered in their favor as follows:

WHEREFORE, PREMISES CONSIDERED, it is respectfully prayed of this Honorable Court that after trial on the merits, a
decision be rendered:

1. Finding that plaintiffs are not entitled to exercise their right to repurchase and confirming the right of the defendants to
continue to own, possess and enjoy the subject property;

2. Ordering plaintiffs to deliver to defendants the proper document in the proper form to evidence the conveyance of the
property subject of this case and sufficient to effect the transfer of title to the same in favor of defendants;

3. Finding that plaintiffs should pay defendants, jointly and severally, the sum of:

a). equivalent to 25% of the value of the property as attorney's fee and P50,000.00 as expenses of litigation;

b). P100,000.00 for each defendant as moral damages;

c). P50,000.00 for each defendant as exemplary damages;

Defendants further pray for such other equitable and legal reliefs as may be just and proper under the premises.18

During the pre-trial on January 19, 1998, considering the possibility that the parties would amicably settle the matter (that is,
they would agree to entrust the property to a receiver, later sell it to a third party and divide the proceeds among
themselves), the court ordered a resetting of the case.

On February 6, 1998, the plaintiffs, through counsel, filed a Manifestation with the trial court. The pertinent portion reads:

3. Plaintiffs are willing to receive the amount of FIVE MILLION (P5,000,000.00) Pesos, as an additional purchase price of
their property covered by Original Certificate of Title No. P-5677 within the period of two (2) months counted from today.
Should the defendant cannot (sic) pay said amount, the plaintiffs will no longer agree to the payment of P5,000,000.00.

4. Although, the plaintiffs have no intention whatsoever to sell the property, but in order to settle the case amicably, they are
willing to look for interested buyers of the property, subject matter of this repurchase, to sell the same for a consideration of
not less than P5,000,000.00. And out of the said purchase price, Plaintiffs are willing to give, by way of settlement to
defendant, the amount equivalent to twenty percent (20%) of the proceeds;

5. Plaintiffs shall go on with the presentation of their evidence;

6. During the pendency of this case, receiver shall be appointed to take charge of the property;

7. Plaintiffs are willing to meet the defendant for the discussion of the foregoing on February 11, 1998 at 2:30 in the
afternoon.19

The case was referred to the Barangay Captain and the Lupon Tagapamayapa for a possible settlement, to no avail.20

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The Heirs presented Vicente Ravino, the husband of Benedicta Bajenting, one of the daughters of Venancio and Felisa.
He testified that Felisa had died intestate on January 21, 1996.21 For a period of two years, he had been demanding that
the vendee pay the balance of the purchase price, P150,000.00, but the latter failed to pay the amount. The Heirs
authorized Venencio Bajenting22 to represent them for the purpose of repurchasing the property from the defendants.

The defendants adduced evidence that the Sangguniang Panglunsod approved Ordinance No. 4042, Series of 1996,
classifying the properties in Langub as part of a low density property zone.23 Such properties were primarily intended for
housing development with at least 20 dwelling units per hectare density and below per hectare.24 They pointed out that
under Presidential Decree (P.D.) No. 957, the lots could be used as first class residential. The City Planning Office and the
Regional Development Council had, likewise, recommended to the National Economic Development Authority the plan to
establish an astrodome, a government center to house government agencies, as well as the construction of a
circumferential road; however, no money had yet been appropriated to implement the said plans.25

Anne Reyes, a real estate agent, testified that in March 1993, Venencio Bajenting and Margarita Bajenting-Reusora,
another heir, asked her to help them sell the property for P350,000.00. She agreed. To enable her to offer the property for
sale, the Bajentings entrusted to her a copy of the owner's duplicate of OCT No. P-5677, Tax Declaration No. D-8-8-159,
Tax Clearance dated October 22, 1991 and a Certificate from the City Assessor.26 However, she failed to sell the property.
In December 1995, Margarita saw her again and asked her to return the said documents because she (Margarita) wanted to
sell the property for P10,000,000.00. Margarita told her that the property had been earlier sold for a cheaper price, but she
was requested to accompany any prospective buyers willing to pay P10,000,000.00 to Venencio Bajenting who had a
special power of attorney to sell the property in behalf of the Heirs.27 After her meeting with Margarita, nothing happened.
On cross-examination, Anne admitted that she had no written authority to sell the property.28 In December 1995, she
inquired from Engr. Baez if he was willing to resell the property to the heirs of Venancio Bajenting.29 In February 1996,
Engr. Baez, accompanied by Atty. Susan Cariaga, saw her (Anne) and asked if the Bajentings were indeed going to
repurchase the property; she answered in the affirmative and volunteered to testify.30

Ermelinda Oyco testified that during the proceedings of the case in the Office of the Barangay Captain, Margarita told her
and her sister that the Bajentings were going to repurchase the property and would resell the same. She told Margarita that
she had a prospective buyer, but withheld the person's identity. Margarita told her that the Bajentings would sell the property
for P10,000,000.00. Venencio Bajenting confirmed the price and told her that she would receive a 3% commission if she
succeeded in selling the property.31 On cross-examination, she declared that she was invited to testify for Engr. Baez and
that she agreed because she pitied him.

On rebuttal, Venencio Bajenting testified and declared that he did not meet Oyco and her mother in December 1996, and
that they had no interest to sell the property.32

Before she could testify, Margarita Reusora died on August 24, 1997.33

On March 1, 2002, the trial court rendered judgment in favor of the Heirs. The dispositive portion reads:

FOR THE FOREGOING, judgment is hereby rendered in favor of plaintiffs and against defendants, ordering the latter to
vacate subject property covered by Original Certificate of Title No. T-5677 and deliver said Certificate of Title to plaintiffs
within ten (10) days from receipt hereof.

Accordingly, the Clerk of Court of the Regional Trial Court, Davao City, is hereby ordered to release the amount of
P350,000.00 deposited by plaintiffs in favor of defendants, representing the repurchase money of subject property,
evidenced by Official Receipt No. 6547953, dated October 11, 1996. Further, the compulsory counter-claim filed by
defendants against plaintiffs is hereby DISMISSED.

SO ORDERED.34
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The RTC ruled that while there is evidence that first-class subdivisions are being developed in the vicinity, no budget had
been appropriated for the plans to construct the government center and the sports complex. However, it declared that the
defendants failed to present any evidence that the plaintiffs were repurchasing the property for and in behalf of a financier.

The spouses Alfafara, and Baez filed a motion for reconsideration, which the court denied. It declared that the ruling of this
Court in Santana V. Marias35 is not applicable, and that it was the case of Hernaez v. Mamalio36 that was controlling.

The spouses Alfafara, and Baez appealed the Decision to the CA, alleging that:

FIRST ASSIGNED ERROR

THE TRIAL COURT ERRED IN NOT FINDING THAT PLAINTIFFS' PURPOSE IN REPURCHASING THE PROPERTY IS
ONLY TO BE ABLE TO SELL THE SAME TO ANOTHER BUYER FOR A HIGHER PRICE OR MERELY FOR
SPECULATION.

SECOND ASSIGNED ERROR

THE TRIAL COURT ERRED IN NOT FINDING THAT THERE WAS NO PROPER BARANGAY CONCILIATION BEFORE
THIS CASE WAS FILED IN THE REGIONAL TRIAL COURT AND THAT THIS DEFECT WAS NEVER CURED.37

They averred that the trial court erred in not applying the ruling of this Court in Santana v. Marias,38 reiterated in
Quisumbing v. Court of Appeals39 and Lacorda v. Intermediate Appellate Court.40 They maintained that the Heirs were
exercising their right to repurchase the property for commercial purposes, not for the purpose of using the property for their
family home. They asserted that the property is surrounded by first-class subdivisions and is classified as a low-density
residential zone.

On February 27, 2004, the CA rendered judgment granting the appeal, and reversed the Decision of the trial court. The CA
ruled that as gleaned from the evidence on record and the pleadings of the Heirs, the property was sought to be
repurchased for profit, and not to preserve it for themselves and their families.41 The appellate court applied the ruling in
the Santana case.

The Heirs filed a motion for the reconsideration of the Decision, which the CA denied for lack of merit.

Hence, the instant Petition for Review on Certiorari, where petitioners allege that the CA erred in disregarding the findings of
the trial court based on the evidence on record in applying the Santana case, and in not resolving the issue of respondents'
failure to pay the balance of the purchase price of the property.

They insist that the factual backdrop in Santana is substantially different from that in this case. The speculative purpose
ascribed to them may as well apply to respondents, who refused to resell the property to petitioner, knowing that the value
of the property had considerably increased. As between the petitioners and the respondents, the law should be applied in
their favor, being the heirs of the beneficiaries under Commonwealth Act 141, as amended.

The petitioners aver that respondents failed to prove with clear and convincing evidence that they were exercising their right
to repurchase the property only for the purpose of reselling the same at a higher price, thereby rendering nugatory Section
119 of Commonwealth Act 141. The collective testimonies of Reyes and Oyco were hearsay and inadmissible in evidence
under the dead man's statute, Margarita Reusora having died on August 24, 1997 before the witnesses had even testified.
Neither Margarita nor Venencio Bajenting could have informed Reyes and Oyco that the petitioners were selling the
property for P10,000,000.00 because petitioners, through Venencio Bajenting, had filed a case against the respondents in
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the Office of the Barangay Captain. They insist that the CA erred in declaring as self-serving the testimony of petitioner
Venencio Bajenting.

Worse, petitioners aver, the CA ignored the fact that respondents had not paid them the balance of the purchase price of
the property worth P150,000.00; thus, they would have to file a separate suit to collect the amount.

For their part, respondents aver that only petitioner Venencio Bajenting signed the verification and certification of non-forum
shopping in the petition. Petitioners failed to attach any power of attorney authorizing Venencio Bajenting to sign the
Verification and Certification Against Forum Shopping for and in their behalf. As found by the CA, the testimonies of Reyes
and Oyco were credible and deserving of full probative weight. Indeed, their testimonies are buttressed by the trial court's
Order dated January 19, 1998. They add that the findings of the CA are binding on this Court, and that the dead man's
statute does not apply to the testimonies of Reyes and Oyco, being as they were, mere witnesses not parties to the case.

Respondents maintain that the ruling of this Court in Santana which reiterated its ruling in Simeon v. Pea,42 applies in this
case. They further claim that the CA cannot be faulted for not ordering them to pay the balance of P150,000.00 to
petitioners because it was not contained in their prayer.

Petitioners counter that they mentioned the non-payment by respondents of the balance of the purchase price, P150,000.00
to emphasize their point that it was unfair for the CA to reverse the decision of the RTC.

The issues are as follows: (a) whether or not petitioners complied with the rule on verification and certification against forum
shopping; (b) whether petitioners are entitled to repurchase the property from respondents; and (c) whether petitioners are
obliged to execute a notarized deed of absolute sale over the property.

The petition has no merit.

On the first issue, the Court notes that, of the 23 petitioners, only petitioner Venencio Bajenting signed the Verification and
Certification of Non-Forum Shopping. Petitioners did not append to their petition a special power of attorney authorizing
petitioner Venencio Bajenting to sign the Certification for and in their behalf. The rule is that the certification of non-forum
shopping must be signed by all the petitioners or plaintiffs and the signing by only one of them is not sufficient. However, in
Cavile v. Heirs of Clarita Cavile,43 the Court made the following pronouncement:

The rule is that the certificate of non-forum shopping must be signed by all the petitioners or plaintiffs in a case and the
signing by only one of them is insufficient. However, the Court has also stressed that the rules on forum shopping, which
were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective. The rule of substantial compliance may be availed of with
respect to the contents of the certification. This is because the requirement of strict compliance with the provisions regarding
the certification of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether
dispensed with or its requirements completely disregarded. It does not thereby interdict substantial compliance with its
provisions under justifiable circumstance.

We find that the execution by Thomas George Cavile, Sr. in behalf of all the other petitioners of the certificate of non-forum
shopping constitutes substantial compliance with the Rules. All the petitioners, being relatives and co-owners of the
properties in dispute, share a common interest thereon. They also share a common defense in the complaint for partition
filed by the respondents. Thus, when they filed the instant petition, they filed it as a collective, raising only one argument to
defend their rights over the properties in question. There is sufficient basis, therefore, for Thomas George Cavili, Sr. to
speak for and in behalf of his co-petitioners that they have not filed any action or claim involving the same issues in another
court or tribunal, nor is there other pending action or claim in another court or tribunal involving the same issues. Moreover,
it has been held that the merits of substantive aspects of the case may be deemed as "special circumstance" for the Court
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to take cognizance of a petition for review although the certification against forum shopping was executed and signed by
only one of the petitioners.44

In the present case, we find and so rule that petitioners substantially complied with the Rules of Court. Petitioners, as heirs
of the spouses Venancio and Felisa Bajenting (the patentees), sought to exercise their right under Section 119, Act 141 to
repurchase the property within the statutory period therefor. Petitioner Venencio Bajenting was empowered to act for and in
their behalf before the Barangay Captain and in the RTC for the enforcement of their right as such heirs. Petitioners have
not filed any action against respondents in another court or tribunal involving the same issues and property.

We note that the Secretary of Agriculture and Natural Resources had not approved the sale of the property (by the heirs of
the patentee) to respondents. It bears stressing that Free Patent No. 577244 which was granted in favor of Venancio
Bajenting on December 18, 1975 is subject to the following conditions therein:

NOW, THEREFORE, KNOW YE, That by authority of the Constitution of the Philippines, and in conformity with the
provisions thereof and of the aforecited Republic Act No. 782 and Commonwealth Act No. 141, as amended, there is hereby
granted unto said VENANCIO BAJENTING, Filipino, of legal age, married to Felisa Sultan, and residing in Langub, Ma-a,
Davao City the tract of land above-described.

TO HAVE AND TO HOLD the said tract of land, with the appurtenances thereunto of right belonging unto the said
VENANCIO BEJENTING and to his heirs and assigns forever, subject to the provisions of Sections 118, 119, 121, 122 and
124 of Commonwealth Act No. 141, as amended, which provide that except in favor of the Government or any of its
branches, units, or institutions, the land hereby acquired shall be inalienable and shall not be subject to encumbrance for a
period of five (5) years from the date of this patent, and shall not be liable for the satisfaction of any debt contracted prior to
the expiration of said period; that every conveyance of land acquired under the free patent provisions, when proper, shall be
subject to repurchase by the applicant, his widow, or legal heirs, within a period of five years from the date of the
conveyance; that it shall not be encumbered, alienated, or transferred to any person, not qualified to acquire lands of the
public domain under said Commonwealth Act No. 141, as amended; and that it shall not be subject to any encumbrance
whatsoever in favor of any corporation, association or partnership except with the consent of the grantee and the approval
of the Secretary of Natural Resources and solely for educational, religious or charitable purposes or for a right of way; and
subject finally to all conditions and public easements and servitudes recognized and prescribed by law especially those
mentioned in Sections 109, 110, 111, 113 and 114 of Commonwealth Act No. 141, as amended, and the right of the
Government to administer and protect the timber found thereon for a term of five (5) years from the date of this patent,
provided; however, that the grantee or heirs may cut and utilize such timber as may be needed for his use or their personal
use.

Sections 118, 119 and 122 of Commonwealth Act No. 141, as amended, reads:

SEC. 118. Except in favor of the Government or any of its branches, units, or institutions, or legally constituted banking
corporations, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation
from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent
or grant nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the
improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or corporations.

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after issuance of title
shall be valid without the approval of the Secretary of Agricultural and Natural Resources, which approval shall not be
denied except on constitutional and legal grounds.45

SEC. 119. Every conveyance of land acquired under the free patent or homestead provisions, when proper, shall be subject
to repurchase by the applicant, his widow, or legal heirs, within a period of five years from the date of the conveyance.

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SEC. 122. No land originally acquired in any manner under the provisions of this Act, nor any permanent improvement on
such land, shall be encumbered, alienated, or transferred, except to persons, corporations, associations, or partnerships
who may acquire lands of the public domain under this Act or to corporations organized in the Philippines authorized
therefore by their charters.

Except in cases of hereditary succession, no land or any portion thereof originally acquired under the free patent,
homestead, or individual sale provisions of this Act, or any permanent improvement on such land, shall be transferred or
assigned to any individual, nor shall such land or any permanent improvement thereon be leased to such individual, when
the area of said land, added to that of his own, shall exceed one hundred and forty-four hectares. Any transfer, assignment,
or lease made in violation hereof shall be null and void.46

OCT No. P-5677 was issued to and in the name of Venancio Bajenting over the property on February 6, 1976. The 25-year
period provided in Section 118 of the law was to expire on February 6, 2001. However, in May 1999, Felisa Bajenting and
her children sold the property to respondents without the approval of the Secretary of Environment and Natural Resources
(formerly the Department of Agriculture and Natural Resources). There is no showing in the records that the Secretary of
Environment and Natural Resources had approved the sale.

The failure of the vendors to secure the approval of the Secretary of the DENR does not, ipso facto, make the sale void. The
approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale had been
previously authorized. The approval of the sale subsequent thereto would have the effect of the Secretary's ratification and
adoption as if the sale had been previously authorized.47 The Secretary may disapprove the sale on legal grounds.

The second issue is factual because it involves the determination of petitioners' intention to repurchase the property to
enable them to amass a hefty net profit of P9,635,000.00 from its resale to a third party, and not for the purpose of
preserving the same for themselves and their families' use as envisioned in Com. Act No. 141, as amended.

Section 1, Rule 45 of the Rules of Court provides that only questions of law and not factual issues may be raised in this
Court. Settled is the rule that the jurisdiction of this Court in cases brought before it from the CA via Rule 45 of the Rules of
Court is limited to reviewing errors of law. However, while the findings of fact of the CA are conclusive on this Court, there
are, likewise, recognized exceptions, to wit: (1) when the findings are grounded entirely on speculations, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is a grave abuse of
discretion; (4) when the judgment is based on misappreciation of facts; (5) when the findings of fact are conflicting; (6) when
in making its findings are contrary to the admissions of both appellant and appellee; (7) when the findings are contrary to
those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based;
(9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the
respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the
evidence on record.48

In the present case, the findings and conclusions of the trial court are contrary to those of the CA. Indeed, the trial court
gave no probative weight to the testimonies of Reyes and Oyco despite the absence of any factual and legal basis for it to
do so. It is thus imperative for the Court to delve into and resolve this factual issue.

As elucidated by this Court, the object of the provisions of Act 141, as amended, granting rights and privileges to patentees
or homesteaders is to provide a house for each citizen where his family may settle and live beyond the reach of financial
misfortune and to inculcate in the individuals the feelings of independence which are essential to the maintenance of free
institution. The State is called upon to ensure that the citizen shall not be divested of needs for support, and reclined to
pauperism.49 The Court, likewise, emphasized that the purpose of such law is conservation of a family home in keeping
with the policy of the State to foster families as the factors of society, and thus promote public welfare. The sentiment of
patriotism and independence, the spirit of citizenship, the feeling of interest in public affairs, are cultivated and fostered
more readily when the citizen lives permanently in his own house with a sense of its protection and durability.50 It is
10
intended to promote the spread of small land ownership and the preservation of public land grants in the names of the
underprivileged for whose benefits they are specially intended and whose welfare is a special concern of the State.51 The
law is intended to commence ownership of lands acquired as homestead by the patentee or homesteader or his heirs.52

In Simeon v. Pea,53 the Court declared that the law was enacted to give the homesteader or patentee every chance to
preserve for himself and his family the land that the State had gratuitously given to him as a reward for his labor in cleaning
and cultivating it. In that sense, the law becomes unqualified and unconditional. Its basic objective, the Court stressed, is to
promote public policy, that is, to provide home and decent living for destitutes, aimed at providing a class of independent
small landholders which is the bulwark of peace and order.

To ensure the attainment of said objectives, the law gives the patentee, his widow or his legal heirs the right to repurchase
the property within five years from date of the sale. However, the patentee, his widow or legal heirs should not be allowed to
take advantage of the salutary policy of the law to enable them to recover the land only to dispose of it again to amass a
hefty profit to themselves.54 The Court cannot sustain such a transaction which would put a premium on speculation which
is contrary to the philosophy behind Section 119 of Act 141, as amended.

In this case, we agree with the ruling of the CA that, based on the pleadings of the parties and the evidence on record,
petitioners, through Venencio Bajenting and Margarita Reusora, sought to repurchase the property only for the purpose of
reselling the same for P10,000,000.00 and in the process, amass a net profit amounting to P9,650,000.00. We quote, with
approval, the findings of the CA, thus:

The almost conclusive effect of the findings of the trial court cannot be denied. This is anchored on the practical recognition
of the vantage position of the trial judge in observing the demeanor of the witness. However, such rule admits certain
exceptions. Almost as well-recognized as the general rule is the exception that We may nonetheless reverse the factual
findings of the trial court if by the evidence on record, or lack of it, it appears that the trial court erred. We find that such
exception exists in the present case.

The lack of documentary evidence proving that plaintiffs constituted Reyes and Oyco as agents for the sale of the subject
property merely shows that Reyes and Oyco were not constituted as agents in accordance with the specific form prescribed
by law. It does not, however, render their testimonies improbable nor does it have any tendency to lessen the credibility of
their testimonies respecting the fact sought to be proven. What is material and should have been considered by the trial
court were the assertions of Reyes and Oyco stating that plaintiff made negotiations for them to find a buyer for the subject
property since it would prove that plaintiffs want to repurchase the subject property only in order to resell it to another at a
higher price.

The testimony of plaintiff Venencio Bajenting denying the claim of Reyes and Oyco cannot be given much weight and
credence. Being one who has a direct interest in the case, Venencio Bajenting necessarily has a motive for coloring his
testimony. Besides, apart from his denials, his testimony is uncorroborated. In contrast, there is no evidence that Reyes and
Oyco were actuated by any ill motive in testifying against plaintiffs. In fact, their testimonies even show that their mother is a
relative of plaintiffs.

The profit motivation behind the instant complaint for repurchase is further shown by plaintiffs' declaration in their Opposition
to defendants' motion for reconsideration, that "the Three Hundred Fifty Thousand (P350,000.00) Pesos given for the ten-
hectare land would be too small for defendant to own the property." Evidently, it is the same profit motivation that impelled
plaintiffs to agree to a settlement during the early stages of the proceedings before the trial court. In the Manifestation filed
by plaintiffs on February 4, 1998, plaintiffs expressed their agreement to a settlement but only if defendants pay them an
additional purchase price of Five Million Pesos (PhP5,000,000.00) or if the subject property were to be sold to an interested
buyer for no less than the said amount with 80% of the proceeds going to the plaintiffs and offering 20% thereof to
defendant.

11
In fine, the trial court committed an error in not applying the doctrine laid down in the Santana case. As in the Santana
case, plaintiffs' motive in filing the present complaint for repurchase is not for the purpose of preserving the subject property
for themselves and their family but to dispose of it again at a much greater profit for themselves. Hence, the repurchase
should not be allowed.55

We note that petitioner Venencio Bajenting is merely a mechanic. He had not explained to the trial court how he and his co-
heirs were able to produce P350,000.00 in 1996 and deposit the same with the Clerk of Court when they filed their
amended complaint. There is no evidence on record that petitioners were financially capable to produce the amount in
1996, considering that they had to sell the property for P500,000.00 three years earlier. The foregoing circumstances
buttress the contention of respondents that petitioners, through Venencio Bajenting, sought to repurchase the property for
no other purpose than to generate a hefty profit of P9,650,000.00.

That petitioners had no intention of retaining the property for their and their families' use and purpose is fortified by the fact
that during pre-trial, they manifested their willingness to have the property sold to a third party and, from the proceeds
thereof, to receive the amount of P5,000,000.00; and that in the meantime, a receiver would be appointed by the court.

Contrary to the allegations of petitioners, the collective testimonies of Reyes and Oyco are admissible in evidence despite
the fact that when they testified, Margarita Reusora was already dead. Section 20(a), Rule 130 of the Revised Rules of
Court reads:


Section 20. Disqualification by reason of interest or relationship. The following persons cannot testify as to matters in
which they are interested, directly or indirectly as herein enumerated:

(a) Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an executor or
administrator or other representative of a deceased person, or against a person of unsound mind, upon a claim or demand
against the estate of such deceased person or against such person of unsound mind, cannot testify as to any matter of fact
occurring before the death of such deceased person or before such became of unsound mind.

The bar under aforequoted rule applies only to parties to a case, or assignors of parties to a case or persons in whose
behalf a case is prosecuted. Reyes and Oyco were mere witnesses for respondents, not parties in the court a quo, nor
assignors of any of the parties in whose behalf the case was prosecuted. Their testimonies were presented only to prove
that the petitioners intended to repurchase the property for profit, and not for the purpose of preserving it for their and their
families' use and enjoyment.56

We agree with the ruling of the CA that the ruling in Santana v. Marias57 applies in this case. As in Santana, the property
in this case was no longer agricultural but residential and commercial, in the midst of several high-class residential
subdivisions. The government had planned to construct in the vicinity a circumferential road, a government center and an
astrodome. As in Santana, petitioners, through counsel, declared their willingness to settle the case for the amount of
P5,000,000.00 and the sale of the property to a third party. The money which petitioners were to use to repurchase the
property was not theirs, but the money of petitioner Venencio Bajenting's employer.

Petitioner cannot find solace in the ruling of this Court in Hernaez v. Mamalio,58 which in part reads:

In an action to enforce the right to repurchase a homestead within five (5) years from the sale thereof, it is of no
consequence what exactly might be the motive of the plaintiff, and it is unnecessary for the Court to inquire before hand into
his financial capacity to make the repurchase for the simple reason that such question will resolve itself should he fail to
make the corresponding tender of payment within the prescribed period.

12
First. The decision of the trial court ordering petitioner to execute a deed of sale over the property in favor of respondent
is grounded on the fact that his record on appeal of petitioner, as appellant, does not contain sufficient relevant data
showing that the appeal was filed on time;

Second. The ruling in Hernaez has not been reiterated by this Court. On the other hand, this Court in Lacorda v.
Intermediate Appellate Court,59 ruled that:

While it is true that the offer to repurchase was made within the statutory period both the trial and appellate courts found as
a fact that the petitioners did not really intend to derive their livelihood from it but to resell part of it for a handsome profit. It
is now settled that homesteaders should not be allowed to take advantage of the salutary policy behind the Public Land Law
to enable them to recover the land in question from vendees only to dispose of it again at much greater profit. (Simeon v.
Pea, L-29049, Dec. 29, 1970, 36 SCRA 619 and other cases cited therein.)60

In a case of recent vintage, Fontanilla, Sr. v. Court of Appeals,61 this Court reiterated the doctrine that:

The foregoing construction is merely in keeping with the purpose of Section 119 "to enable the family of the applicant or
grantee to keep their homestead" for it is well settled that the law must be construed liberally in order to carry out that
purpose." As we held in Ferrer v. Magente

"x x x The applicant for a homestead is to be given all the inducement that the law offers and is entitled to its full protection.
Its blessings, however, do not stop with him. This is particularly so in this case as the appellee is the son of the deceased.
There is no question then as to his status of being a legal heir. The policy of the law is not difficult to understand. The
incentive for a pioneer to venture into developing virgin land becomes more attractive if he is assured that his effort will not
go for naught should perchance his life be cut short. This is merely a recognition of how closely bound parents and children
are in Filipino family. Logic, the sense of fitness and of right, as well as pragmatic considerations thus call for continued
adherence to the policy that not the individual applicant alone but those so closely related to him as are entitled to legal
succession may take full advantage of the benefits the law confers.62

On the third issue, we agree with respondents' contention that petitioners are obliged to execute a notarized deed of
absolute sale over the property upon payment of the P150,000.00 balance of the purchase price of the property. A contract
of sale is a consensual contract. Upon the perfection of the contract, the parties may reciprocally demand performance. The
vendee may compel transfer of ownership of the object of the sale, and the vendor may require the vendee to pay the thing
sold. In this case, the balance of the purchase price of the property was due on or before December 31, 1993.

IN VIEW OF ALL THE FOREGOING, the Petition is DENIED for lack of merit. The Decision of the Court of Appeals in CA-
G.R. CV No. 76526 is AFFIRMED with MODIFICATION. Petitioners are ORDERED to execute in favor of respondents a
Deed of Absolute Sale over the property upon payment of P150,000.00, the balance of the purchase price. This is without
prejudice to any action the Secretary of the Department of Environment and Natural Resources may take on the sale of the
property by the petitioners to the respondents. No costs.

SO ORDERED.









13
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 75198 October 18, 1988

SCHMID & OBERLY, INC., petitioner,
vs.
RJL MARTINEZ FISHING CORPORATION, respondent.

Sycip Salazar Hernandez & Gatmaitan Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for respondent.



CORTES, J.:

Petitioner seeks reversal of the decision and the resolution of the Court of Appeals, ordering Schmid & Oberly Inc.
(hereafter to be referred to simply as "SCHMID") to refund the purchase price paid by RJL Martinez Fishing Corporation
(hereafter to be referred to simply as "RJL MARTINEZ") to D. Nagata Co., Ltd. of Japan (hereafter to be referred to simply
as NAGATA CO.") for twelve (12) defective "Nagata"-brand generators, plus consequential damages, and attorneys fees.

The facts as found by the Court of Appeals, are as follows:

The findings of facts by the trial court (Decision, pp. 21-28, Record on Appeal) shows: that the plaintiff RJL Martinez Fishing
Corporation is engaged in deep-sea fishing, and in the course of its business, needed electrical generators for the operation
of its business; that the defendant sells electrical generators with the brand of "Nagata", a Japanese product; that the
supplier is the manufacturer, the D. Nagata Co. Ltd., of Japan, that the defendant Schmid & Oberly Inc. advertised the 12
Nagata generators for sale; that the plaintiff purchased 12 brand new Nagata generators, as advertised by herein
defendant; that through an irrevocable line of credit, the D. Nagata Co., Ltd., shipped to the plaintiff 12 electric generators,
and the latter paid the amount of the purchase price; that the 12 generators were found to be factory defective; that the
plaintiff informed the defendant herein that it shall return the 12 generators as in fact three of the 12 were actually returned
to the defendant; that the plaintiff sued the defendant on the warranty; asking for rescission of the contract; that the
defendant be ordered to accept the generators and be ordered to pay back the purchase money; and that the plaintiff asked
for damages. (Record on Appeal, pp. 27-28) [CA Decision, pp. 34; Rollo, pp. 47-48.]

On the basis thereof, the Court of Appeals affirmed the decision of the trial court ordering petitioner to refund to private
respondent the purchase price for the twelve (12) generators and to accept delivery of the same and to pay s and attorney's
fees, with a slight modification as to the amount to be refunded. In its resolution of the motion for reconsideration, the Court
of Appeals further modified the trial courts decision as to the award of consequential damages.

Ordinarily, the Court will not disturb the findings of fact of the Court of Appeals in petitions to review the latter's decisions
under Rule 45 of the Revised Rules of Court, the scope of the Court's inquiry being limited to a review of the imputed errors
of law [Chan v. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 77; Tiongco v. De la Merced, G.R. No. L-
24426, July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. 62482, April 28, 1983, 121 SCRA 865; Baniqued
v. Court of Appeals, G.R. No.
14
L-47531, January 30, 1984, 127 SCRA 596.] However, when, as in this case, it is the petitioner's position that the
appealed judgment is premised on a misapprehension of
facts, * the Court is compelled to review the Court of Appeal's factual findings [De la Cruz v. Sosing, 94 Phil. 26 (1953);
Castillo v. Court of Appeals, G.R. No. I,48290, September 29, 1983, 124 SCRA 808.]

Considering the sketchiness of the respondent court's narration of facts, whether or not the Court of Appeals indeed
misapprehended the facts could not be determined without a thorough review of the records.

Thus, after a careful scrutiny of the records, the Court has found the appellate court's narration of facts incomplete. It failed
to include certain material facts.

The facts are actually as follows:

RJL MARTINEZ is engaged in the business of deep-sea fishing. As RJL MARTINEZ needed electric generators for some of
its boats and SCHMIID sold electric generators of different brands, negotiations between them for the acquisition thereof
took place. The parties had two separate transactions over "Nagata"-brand generators.

The first transaction was the sale of three (3) generators. In this transaction, it is not disputed that SCHMID was the vendor
of the generators. The company supplied the generators from its stockroom; it was also SCHMID which invoiced the sale.

The second transaction, which gave rise to the present controversy, involves twelve (12) "Nagata"-brand generators. 'These
are the facts surrounding this particular transaction:

As RJL MARTINEZ was canvassing for generators, SC gave RJL MARTINEZ its Quotation dated August 19, 1975 [Exhibit
'A"] for twelve (12) "Nagata'-brand generators with the following specifications:

"NAGATA" Single phase AC Alternators, 110/220 V, 60 cycles, 1800 rpm, unity power factor, rectifier type and radio
suppressor,, 5KVA (5KW) $546.75 @

It was stipulated that payment would be made by confirming an irrevocable letter of credit in favor of NAGATA CO.
Furthermore, among the General Conditions of Sale appearing on the dorsal side of the Quotation is the following:

Buyer will, upon request, promptly open irrevocable Letter of Credit in favor of seller, in the amount stated on the face of this
memorandum, specifying shipment from any Foreign port to Manila or any safe Philippine port, permitting partial shipments
and providing that in the event the shippers are unable to ship within the specified period due to strikes, lack of shipping
space or other circumstances beyond their reasonable control, Buyer agrees to extend the said Letter of Credit for later
shipment. The Letter of Credit shall otherwise be subject to the conditions stated in this memorandum of contract.
[Emphasis supplied.]

Agreeing with the terms of the Quotation, RJL MARTINEZ opened a letter of credit in favor of NAGATA CO. Accordingly, on
November 20,1975, SCHMID transmitted to NAGATA CO. an order [Exhibit "4"] for the twelve (12) generators to be shipped
directly to RJL MARTINEZ. NAGATA CO. thereafter sent RJL MARTINEZ the bill of lading and its own invoice (Exhibit "B")
and, in accordance with the order, shipped the generators directly to RJL MARTINEZ. The invoice states that "one (1) case
of 'NAGATA' AC Generators" consisting of twelve sets wasbought by order and for account risk of Messrs. RJL Martinez
Fishing Corporation.

For its efforts, SCHMID received from NAGATA CO. a commission of $1,752.00 for the sale of the twelve generators to RJL
MARTINEZ. [Exhibits "9", "9-A", "9-B" and "9-C".]

15
All fifteen (15) generators subject of the two transactions burned out after continuous use. RJL MARTINEZ informed
SCHMID about this development. In turn, SCHMID brought the matter to the attention of NAGATA CO. In July 1976,
NAGATA CO. sent two technical representatives who made an ocular inspection and conducted tests on some of the
burned out generators, which by then had been delivered to the premises of SCHMID.

The tests revealed that the generators were overrated. As indicated both in the quotation and in the invoice, the capacity of
a generator was supposed to be 5 KVA (kilovolt amperes). However, it turned out that the actual capacity was only 4 KVA.

SCHMID replaced the three (3) generators subject of the first sale with generators of a different brand.

As for the twelve (12) generators subject of the second transaction, the Japanese technicians advised RJL MARTINEZ to
ship three (3) generators to Japan, which the company did. These three (3) generators were repaired by NAGATA CO. itself
and thereafter returned to RJL MARTINEZ; the remaining nine (9) were neither repaired nor replaced. NAGATA CO.,
however, wrote SCHMID suggesting that the latter check the generators, request for spare parts for replacement free of
charge, and send to NAGATA CO. SCHMID's warranty claim including the labor cost for repairs [Exhibit "I".] In its reply
letter, SCHMID indicated that it was not agreeable to these terms [Exhibit "10".]

As not all of the generators were replaced or repaired, RJL MARTINEZ formally demanded that it be refunded the cost of
the generators and paid damages. SCHMID in its reply maintained that it was not the seller of the twelve (12) generators
and thus refused to refund the purchase price therefor. Hence, on February 14, 1977, RJL MARTINEZ brought suit against
SCHMID on the theory that the latter was the vendor of the twelve (12) generators and, as such vendor, was liable under its
warranty against hidden defects.

Both the trial court and the Court of Appeals upheld the contention of RJL MARTINEZ that SCHMID was the vendor in the
second transaction and was liable under its warranty. Accordingly, the courts a quo rendered judgment in favor of RJL
MARTINEZ. Hence, the instant recourse to this Court.

In this petition for review, SCHMID seeks reversal on the following grounds:

(i) Schmid was merely the indentor in the sale [of the twelve (12) generators] between Nagata Co., the exporter and
RJL Martinez, the importer;

(ii) as mere indentor, Schmid is not liable for the seller's implied warranty against hidden defects, Schmid not having
personally assumed any such warranty.

(iii) in any event, conformably with Article 1563 of the Civil Code, there was no implied warranty against hidden defects
in the sale of these twelve (12) generators because these were sold under their trade name "Nagata"; and

(iv) Schmid, accordingly, is not liable for the reimbursement claimed by RJL Martinez nor for the latter's unsubstantiated
claim of PI 10.33 operational losses a day nor for exemplary damages, attorney's fees and costs. [Petition, p. 6.]

1. As may be expected, the basic issue confronting this Court is whether the second transaction between the parties was a
sale or an indent transaction. SCHMID maintains that it was the latter; RJL MARTINEZ claims that it was a sale.

At the outset, it must be understood that a contract is what the law defines it to be, considering its essential elements, and
not what it is caged by the contracting parties [Quiroga v. Parsons Hardware Co., 38 Phil. 501 (1918).]

The Civil Code defines a contract of sale, thus:

16
ART. 458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

It has been said that the essence of the contract of sale is transfer of title or agreement to transfer it for a price paid or
promised [Commissioner of Internal Revenue v. Constantino, G.R. No. L-25926, February 27, 1970, 31 SCRA 779, 785,
citing Salisbury v. Brooks, 94 SE 117,118-19.] "If such transfer puts the transferee in the attitude or position of an owner and
makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the
proceeds of a resale, the transaction is, a sale." [Ibid.]

On the other hand, there is no statutory definition of "indent" in this jurisdiction. However, the Rules and Regulations to
Implement Presidential Decree No. 1789 (the Omnibus Investments Code) lumps "indentors" together with "commercial
brokers" and "commission merchants" in this manner:

... A foreign firm which does business through the middlemen acting in their own names, such as indentors, commercial
brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial
brokers or commission merchants shall be the ones deemed to be doing business in the Philippines [Part I, Rule I, Section
1, par. g (1).]

Therefore, an indentor is a middlemen in the same class as commercial brokers and commission merchants. To get an Idea
of what an indentor is, a look at the definition of those in his class may prove helpful.

A broker is generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property
with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the
name of those who employed him; he is strictly a middleman and for some purpose the agent of both parties. (1 9 Cyc 186;
Henderson vs. The State, 50 Ind., 234; Black's Law Dictionary.) A broker is one whose occupation it is to bring parties
together to bargain, or to bargain for them, in matters of trade, commerce or navigation. Mechem on Agency, sec. 13;
Wharton on Agency, sec. 695.) Judge Storey, in his work on Agency, defines a broker as an agent employed to make
bargains and contracts between other persons, in matters of trade, commerce or navigation, for compensation commonly
called brokerage. (Storey on Agency, sec. 28.) [Behn Meyer and Co., Ltd. v. Nolting and Garcia, 35 Phil. 274, 279-80
(1916).]

A commission merchant is one engaged in the purchase or sale for another of personal property which, for this purpose, is
placed in his possession and at his disposal. He maintains a relation not only with his principal and the purchasers or
vendors, but also with the property which is subject matter of the transaction. [Pacific Commercial Co. v. Yatco, 68 Phil. 398,
401 (1939).]

Thus, the chief feature of a commercial broker and a commercial merchant is that in effecting a sale, they are merely
intermediaries or middle-men, and act in a certain sense as the agent of both parties to the transaction.

Webster defines an indent as "a purchase order for goods especially when sent from a foreign country." [Webster's Ninth
New Collegiate Dictionary 612 (1986).] It would appear that there are three parties to an indent transaction, namely, the
buyer, the indentor, and the supplier who is usually a non-resident manufacturer residing in the country where the goods are
to be bought [Commissioner of Internal Revenue v. Cadwallader Pacific Company, G.R. No. L-20343, September 29, 1976,
73 SCRA 59.] An indentor may therefore be best described as one who, for compensation, acts as a middleman in bringing
about a purchase and sale of goods between a foreign supplier and a local purchaser.

Coming now to the case at bar, the admissions of the parties and the facts appearing on record more than suffice to warrant
the conclusion that SCHMID was not a vendor, but was merely an indentor, in the second transaction.

17
In its complaint, RJL MARTINEZ admitted that the generators were purchased "through indent order" [Record on Appeal,
p. 6.] In the same vein, it admitted in its demand letter previously sent to SCHMID that twelve (12) of en (15) Nagata-brand
generators "were purchased through your company (SCHMID), by indent order and three (3) by direct purchase." [Exhibit
"D".] The evidence also show that RJL MARTINEZ paid directly NAGATA CO, for the generators, and that the latter
company itself invoiced the sale [Exhibit "B"], and shipped the generators directly to the former. The only participation of
SCHMID was to act as an intermediary or middleman between NAGATA CO. and RJL MARTINEZ, by procuring an order
from RJL MARTINEZ and forwarding the same to NAGATA CO. for which the company received a commission from
NAGATA CO. [Exhibits "9", "9-A", "9-B" and "9-C".]

The above transaction is significantly different from the first transaction wherein SCHMID delivered the goods from its own
stock (which it had itself imported from NAGATA CO.), issued its own invoice, and collected payment directly from the
purchaser.

These facts notwithstanding, RJL MARTINEZ insists that SCHMID was the vendor of the twelve generators on the following
grounds:

First, it is contended that the Quotation and the General Conditions of Sale on the dorsal side thereof do not necessarily
lead to the conclusion that NAGATA CO., and not SCHMID, was the real seller in the case of the twelve (12) generators in
that:

(i) the signing of the quotation, which was under SCHMID's letter-head, perfected the contract of sale (impliedly, as
between the signatories theretoi.e., RJL MARTINEZ and SCHMID);

(ii) the qualification that the letter of credit shall be in favor of NAGATA CO. constituted simply the manner of payment
requested by SCHMID (implying that SCHMID, as seller, merely chose to waive direct payment, stipulating delivery of
payment instead to NAGATA CO. as supplier);

Second, it is asserted that the acts of SCHMID after it was informed of the defect in the generators were indicative of its
awareness that it was the vendor and acknowledgment of its liability as such vendor. Attention is called to these facts: When
RJL MARTINEZ complained to SCHMID that the generators were defective, SCHMID immediately asked RJL MARTINEZ
to send the defective generators to its shop to determine what was wrong. SCHMID likewise informed NAGATA CO. about
the complaint of RJL MARTINEZ. When the Japanese technicians arrived, SCHMID made available its technicians, its shop
and its testing equipment. After the generators were found to have factory defects, SCHMID facilitated the shipment of three
(3) generators to Japan and, after their repair, back to the Philippines [Memorandum for the Respondent, p. 8.]

Third, it is argued that the contents of the letter from NAGATA CO. to SCHMID regarding the repair of the generators
indicated that the latter was "within the purview of a seller." [Ibid.]

Fourth, it is argued that if SCHMID is considered as a mere agent of NAGATA CO., a foreign corporation not licensed to do
business in the Philippines, then the officers and employees of the former may be penalized for violation of the old
Corporation Law which provided:

Sec. 69 ... Any officer or agent of the corporation or any person transacting business for any foreign corporation not having
the license prescribed shall be punished by imprisonment for not less than six months nor more than two years or by a fine
'of not less than two hundred pesos nor more than one thousand pesos or both such imprisonment and fine, in the
discretion of the Court.

The facts do not bear out these contentions.

18
The first contention disregards the circumstances surrounding the second transaction as distinguished from those
surrounding the first transaction, as noted above.

Neither does the solicitous manner by which SCHMID responded to RJL MARTINEZ's complaint prove that the former was
the seller of the generators. As aptly stated by counsel, no indentor will just fold its hands when a client complains about the
goods it has bought upon the indentor's mediation. In its desire to promote the product of the seller and to retain the
goodwill of the buyer, a prudent indentor desirous of maintaining his business would have to act considerably. towards his
clients.

Note that in contrast to its act of replacing the three (3) generators subject of the first transaction, SCHMID did not replace
any of the twelve (12) generators, but merely rendered assistance to both RJL TINES and NAGATA CO. so that the latter
could repair the defective generators.

The proposal of NAGATA CO. rejected by SCHMID that the latter undertake the repair of the nine (9) other defective
generators, with the former supplying the replacement parts free of charge and subsequently reimbursing the latter for labor
costs [Exhibit "I"], cannot support the conclusion that SCHMID is vendor of the generators of the second transaction or was
acting "within the purview of a seller."

Finally, the afore-quoted penal provision in the Corporation Law finds no application to SCHMID and its officers and
employees relative to the transactions in the instant case. What the law seeks to prevent, through said provision, is the
circumvention by foreign corporations of licensing requirements through the device of employing local representatives. An
indentor, acting in his own name, is not, however, covered by the above-quoted provision. In fact, the provision of the Rules
and Regulations implementing the Omnibus Investments Code quoted above, which was copied from the Rules
implementing Republic Act No. 5455, recognizes the distinct role of an indentor, such that when a foreign corporation does
business through such indentor, the foreign corporation is not deemed doing business in the Philippines.

In view of the above considerations, this Court rules that SCHMID was merely acting as an indentor in the purchase and
sale of the twelve (12) generators subject of the second transaction. Not being the vendor, SCHMID cannot be held liable
for the implied warranty for hidden defects under the Civil Code [Art. 1561, et seq.]

2. However, even as SCHMID was merely an indentor, there was nothing to prevent it from voluntarily warranting that
twelve (12) generators subject of the second transaction are free from any hidden defects. In other words, SCHMID may be
held answerable for some other contractual obligation, if indeed it had so bound itself. As stated above, an indentor is to
some extent an agent of both the vendor and the vendee. As such agent, therefore, he may expressly obligate himself to
undertake the obligations of his principal (See Art. 1897, Civil Code.)

The Court's inquiry, therefore, shifts to a determination of whether or not SCHMID expressly bound itself to warrant that the
twelve (12) generators are free of any hidden defects.

Again, we consider the facts.

The Quotation (Exhibit A is in writing. It is the repository of the contract between RJL MARTINEZ and SCHMID. Notably,
nowhere is it stated therein that SCHMID did bind itself to answer for the defects of the things sold. There being no
allegation nor any proof that the Quotation does not express the true intent and agreement of the contracting parties,
extrinsic parol evidence of warranty will be to no avail [See Rule 123, Sec. 22.]

The trial court, however, relied on the testimony of Patrocinio Balagtas, the head of the Electrical Department of RJL
MARTINEZ, to support the finding that SCHMID did warrant the twelve (12) generators against defects.

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Upon careful examination of Balagtas' testimony, what is at once apparent is that Balagtas failed to disclose the nature or
terms and conditions of the warranty allegedly given by SC Was it a warranty that the generators would be fit for the fishing
business of the buyer? Was it a warranty that the generators to be delivered would meet the specifications indicated in the
Quotation? Considering the different kinds of warranties that may be contracted, unless the nature or terms and conditions
of the warranty are known, it would not be possible to determine whether there has been a breach thereof.

Moreover, a closer examination of the statements allegedly made by the representative of SCHMID reveals that they merely
constituted an expression of opinion which cannot by any means be construed as a warranty [See Art. 1546, Civil Code.]

We quote from Balagtas' testimony:

Atty. CATRAL:

Q Did you not say at the start of your cross examination, Mr. Balagtas, that the only participation you had in the acquisition
of those twelve (12) units [of] generators was your having issued a purchase order to your own company for the purchase of
the units?

ATTY. AQUINO:

Misleading, your Honor.

Atty. CATRAL:

I am asking the witness.

COURT:

He has the right to ask that question because he is on cross. Moreover, if I remember, he mentioned something like that.
Witness may answer.

A Yes, sir. Before I submitted that, we negotiated with Schmid and Oberly the beat generators they can recommend
because we are looking for generators. The representative of Schmid and Oberly said that Nagata is very good. That is why
I recommended that to the management. [t.s.n., October 14, 1977, pp. 23-25.]

At any rate, when asked where SCHMID's warranty was contained, Balagtas testified initially that it was in the receipts
covering the sale. (At this point, it may be stated that the invoice [Exhibit "B-l"] was issued by NAGATA CO. and nowhere is
it stated therein that SCHMID warranted the generators against defects.) When confronted with a copy of the invoice issued
by NAGATA CO., he changed his assertion and claimed that what he meant was that the date of the commencement of the
period of SCHMID's warranty would be based on the date of the invoice. On further examination, he again changed his
mind and asserted that the warranty was given verbally [TSN, October 14, 1977, pp. 19-22.] But then again, as stated
earlier, the witness failed to disclose the nature or terms and conditions of the warranty allegedly given by SCHMID.

On the other hand, Hernan Adad SCHMID's General Manager, was categorical that the company does not warrant goods
bought on indent and that the company warrants only the goods bought directly from it, like the three generators earlier
bought by RJL MARTINEZ itself [TSN, December 19, 1977, pp. 63-64.] It must be recalled that SCHMID readily replaced
the three generators from its own stock. In the face of these conflicting testimonies, this Court is of the view that RJL has
failed to prove that SCHMID had given a warranty on the twelve (12) generators subject of the second transaction. Even
assuming that a warranty was given, there is no way to determine whether there has been a breach thereof, considering
that its nature or terms and conditions have not been shown.

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3. In view of the foregoing, it becomes unnecessary to pass upon the other issues.

WHEREFORE, finding the Court of Appeals to have committed a reversible error, the petition is GRANTED and the
appealed Decision and Resolution of the Court of Appeals are REVERSED. The complaint of RJL Martinez Fishing
Corporation is hereby DISMISSED. No costs.

SO ORDERED.