G.R. No.

203786 October 23, 2013

AQUILES RIOSA, Petitioner,
vs.
TABACO LA SUERTE CORPORATION, Respondent.
D E C I S I O N
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the May 30 2012
Decision
1
of the Court of Appeals CA), and its September 20 2012 Resolution
2
in CA-G.R. CV No. 96459 reversing the September
30 2010 Decision
3
of the Regional Trial Court Branch 15 Tabaco City Albay RTC), which granted the complaint for
annulment/declaration of nullity of the deed of absolute sale and transfer certificate of title reconveyance and damages.
The Facts
On February 26, 2002, petitioner Aquiles Riosa (Aquiles) filed his Complaint for Annulment/Declaration of Nullity of Deed of
Absolute Sale and Transfer Certificate of Title, Reconveyance and Damages against respondent Tabaco La Suerte Corporation (La
Suerte) before the RTC.
In his complaint, Aquiles alleged that he was the owner and in actual possession of a 52-square meter commercial lot situated in
Barangay Quinale, Tabaco City, Albay; that he acquired the said property through a deed of cession and quitclaim executed by
his parents, Pablo Riosa, Sr. and Sabiniana Biron; that he declared the property in his name and had been religiously paying the
realty tax on the said property; that thereafter, his daughter, Annie Lyn Riosa Zampelis, renovated the commercial building on
the lot and introduced improvements costing no less thanP300,000.00; that subsequently, on three (3) occasions, he obtained
loans from Sia Ko Pio in the total amount ofP50,000.00; that as a security for the payment of loans, Sia Ko Pio requested from
him a photocopy of the deed of cession and quitclaim; that Sia Ko Pio presented to him a document purportedly a receipt for
the P50,000.00 loan with an undertaking to pay the total amount of P52,000.00 including the P2,000.00 attorneys fees; that
without reading the document, he affixed his signature thereon; and that in September 2001, to his surprise, he received a letter
from La Suerte informing him that the subject lot was already registered in its name.
Aquiles claimed that by means of fraud, misrepresentation and deceit employed by Sia Ko Pio, he was made to sign the
document which he thought was a receipt and undertaking to pay the loan, only to find out later that it was a document of sale.
Aquiles averred that he did not appear before the notary public to acknowledge the sale, and that the notary public, a municipal
judge, was not authorized to notarize a deed of conveyance. He further claimed that he could not have sold the commercial
building on the lot as he had no transmissible right over it, as it was not included in the deed of cession and quitclaim. He, thus,
prayed for the nullification of the deed of sale and certificate of title in the name of La Suerte and the reconveyance of the
subject property to him.
4

In its Answer, La Suerte averred that it was the actual and lawful owner of the commercial property, after purchasing it from
Aquiles on December 7, 1990; that it allowed Aquiles to remain in possession of the property to avoid the ire of his father from
whom he had acquired property inter vivos, subject to his obligation to vacate the premises anytime upon demand; that on
February 13, 1991, the Register of Deeds of Albay issued Transfer Certificate of Title (TCT) No. T-80054 covering the subject
property in its name; that Aquiles necessarily undertook the cost of repairs and did not pay rent for using the premises; that
Aquiles transacted with it, through Sia Ko Pio, now deceased, who was then its Chief Executive Officer; that his opinion that only
the land was sold was absurd because the sale of the principal included its accessories, not to mention that he did not make any
reservation at the time the deed was executed; that it repeatedly asked Aquiles to vacate the premises but to no avail; that,
instead, he tried to renovate the building in 2001 which prompted it to lodge a complaint with the Office of the Mayor on the
ground that the renovation work was without a building permit; and that Aquiles complaint was barred by prescription, laches,
estoppel and indefeasibility of La Suertes title.
5

During the trial, Aquiles and his daughter, Anita Riosa Cabanele, testified to prove his causes of action. To defend its rightful
claim, La Suerte presented the testimony of Juan Pielago Sia (Juan), the son of Sia Ko Pio and a member of the board. Aquiles
also presented his wife, Erlinda, as rebuttal witness.
On September 30, 2010, the RTC ruled in favor of Aquiles, disposing as follows:
Wherefore, foregoing premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant.
1. Ordering the annulment of sale of the subject lot purportedly executed by plaintiff Aquiles Riosa in favor of defendant
corporation;
2. Annulling the Transfer Certificate of Title No. 80054 in the name of defendant corporation;
3. Ordering defendant corporation to pay plaintiff the amount of Twenty Thousand Pesos (P20,000.00) as Attorneys fees;
4. Ordering defendant to pay plaintiff the amount of Twenty Thousand (P20,000.00) as exemplary damages; and
5. Ordering defendant to pay plaintiff the amount of Twenty Thousand Pesos (P20,000.00) as Attorneys fees.
SO ORDERED.
6

The RTC gave credence to the testimony of Aquiles that he was made to sign an instrument of sale without his knowledge
because he trusted Sia Ko Pio and he was of the belief that what he had signed was merely an instrument of indebtedness. It
cited, as legal basis, Article 1330 of the Civil Code which provides that a contract where the consent is given thru violence,
intimidation, undue influence or fraud is voidable. Inasmuch as the property was acquired thru fraud, the person who obtained it
by force of law was considered a trustee of an implied trust for the benefit of the person from whom the property came. Thus,
according to the RTC, La Suerte was bound to reconvey to Aquiles the subject property.
With its motion for reconsideration denied, La Suerte appealed to the CA. In its May 30, 2012 Decision, the CA reversed the RTC
decision and upheld the validity of the subject deed of sale in favor of La Suerte. It declared La Suerte as the lawful owner of the
subject lot and improvements thereon, subject to the right of reimbursement for the renovation expenses. The CA held that tax
declarations or realty tax payments by Aquiles were not conclusive evidence of ownership, citing Spouses Camara v. Spouses
Malabao,
7
where it was ruled that a partys declaration of real property and his payment of realty taxes could not defeat a
certificate of title which was an absolute and indefeasible evidence of ownership of the property in favor of the person whose
name appeared thereon. The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the instant appeal is GRANTED. The September 30, 2010 Decision of the Regional Trial Court
of Tabaco City, Albay, Branch 15, is REVERSED and SET ASIDE and a new one is rendered:
1. DISMISSING the complaint for annulment of deed of sale and transfer certificate of title, without prejudice to the right
of plaintiff-appellees daughter to a reimbursement for the renovation works she made on the structure/building on the
lot; and
2. GRANTING defendant-appellants counterclaim although in the reduced amount of P100,000.00.
SO ORDERED.
8

Aquiles filed his Motion for Reconsideration
9
of the CA decision, but the same was denied by the CA in its September 20, 2012
Resolution. Hence, Aquiles filed the present petition before this Court raising the following
ISSUES
1. Whether or not the Honorable Court of Appeals committed serious error in reversing the decision of the Trial Court
disregarding the conclusion and findings of the Trial court;
2. Whether the Honorable Court of Appeals committed serious error of law in holding that the personal loan of
petitioner obtained and granted by Sia Ko Pio is a consideration of sale of the property in favor of the respondent
corporation La Suerte Corporation;
3. Whether the Honorable Court of Appeals erred in finding that there was a valid and perfected contract of sale of real
property between petitioner and respondent corporation La Suerte Corporation;
4. Whether the Honorable Court of Appeals committed serious error of law and applicable jurisprudence in resolving
petitioners actual physical possession of the property in question; and 5. Whether the Honorable Court of Appeals
committed serious error of law by awarding damages to the respondent.
10

The primordial issue to be resolved is whether there was a perfected and valid contract of sale for the subject property between
Aquiles and La Suerte, through its Chief Executive Officer, Sia Ko Pio.
Aquiles argues that there was no perfected contract to sell because (1) there was no transaction between La Suerte and Aquiles
for the sale of the property in question; (2) there was no board resolution authorizing Sia Ko Pio to purchase the property; (3)
there was no evidence that the money received by Aquiles from Sia Ko Pio came from La Suerte; and (4) he did not appear
before the notary public for notarization of the instrument of sale. Moreover, there was a discrepancy in the date appearing in
the deed of sale and the date in the acknowledgment and the notarial reference.
La Suerte, in its Comment,
11
argued that Aquiles petition should be dismissed because it raised only questions of fact as only
pure question of law is allowed in a petition for certiorari under Rule 45. It counters that the notarized deed of sale was the very
evidence of the agreement between them. According to it, said deed of sale was binding and enforceable between them, albeit
there was a discrepancy in the dates, for the time-honored rule is that even a verbal contract of sale of real estate produces legal
effect between the parties. La Suerte adds that the absence of a board resolution for the purchase of the property has no
controlling consequence as La Suerte had ratified the act of Sia Ko Pio.
The Courts Ruling
Notably, the issues raised in the petition are factual in nature. Essentially, Aquiles asks the Court to review the factual
determination of the CA. As a rule, only questions of law may be raised in a petition for review on certiorari because the Court is
not a trier of facts and is not to review or calibrate the evidence on record.
12
When supported by substantial evidence, the
findings of fact by the CA are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls
under any of the recognized exceptions.
13
An acceptable exception is where there is a conflict between the factual determination
of the trial court and that of the appellate court. In such a case, it becomes imperative to digress from this general rule and
revisit the factual circumstances surrounding the controversy.
14

In this case, although the RTC and the CA were one in ruling that the prescriptive period of reconveyance did not run against
Aquiles because he remained in possession of the subject property, they differred in their findings of fact and conclusions on the
question of whether there was a perfected and valid contract of sale.
The RTC annulled the sale of the subject properties on the ground of fraud as Aquiles was made to sign an instrument which he
believed to be a receipt of indebtedness. On the contrary, the CA ruled that the contract of sale was valid. The CA wrote:
Nevertheless, We rule that the subject deed of sale is valid. We are not convinced of Aquiles bare assertion that the said
document was executed through fraud, misrepresentation or deceit, and that his wifes signature thereon was forged. The rule is
that for an action for reconveyance based on fraud to prosper, the party seeking reconveyance must prove by clear and
convincing evidence his title to the property and the fact of fraud. It must be stressed that mere allegations of fraud are not
enough. Intentional acts to deceive and deprive another of his right, or in some manner, injure him, must be specifically alleged
and proved.
15

After an assiduous assessment of the evidentiary records, the Court holds otherwise.
The Court agrees with the finding of the RTC that there was no perfected contract of sale. It is a hornbook doctrine that the
findings of fact of the trial court are entitled to great weight on appeal and should not be disturbed except for strong and valid
reasons, because the trial court is in a better position to examine the demeanor of the witnesses while testifying.
16

The 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; and c] price certain in money or its equivalent.
17

In this case, there was no clear and convincing evidence that Aquiles definitely sold the subject property to La Suerte, nor was
there evidence that La Suerte authorized its chief executive officer, Sia Ko Pio, to negotiate and conclude a purchase of the
property. Aquiles narration in open court is clear that he did not intend to transfer ownership of his property. The pertinent parts
of his testimony read:
Q How much is your debt to the father of Jhony known as Pia Wo?
ATTY. GONZAGA: The question refers to Sia Ko Pio?
ATTY. BROTAMONTE: Pia Wa.
A At first I borrowed P3,000.00.
Q Thereafter is there any additional amount?
A Then, he give me P10,000.00.
Q Thereafter, is there any additional amount?
A After the money was exhausted, I borrowed P10,000.00.
Q After that P10,000.00, did you borrow another loan? A The next amount I borrowed from him is P20,000.00.
Q Now did you sign any document showing receipt of that amount you received from Pia Wa? A The last time that I
borrowed from him he wants to buy the property but I told him that I will not sell it.
ATTY. BROTAMONTE:
Q What happened when you did not like to sell the property?
A He did not say anything but he made me sign a paper evidencing my debt from him.
Q Were you able to read the papers you signed if there is wording or statement?
A I did not read it anymore because I trust him.
Q What happened thereafter?
A After several years we come to know that our property is already in their name.
18
[Emphases supplied]
The foregoing testimony negates any intention on the part of Aquiles to sell the property in exchange for the amounts
borrowed. Evidently, it was a series of transactions between Aquiles and Sia Po Ko, but not between the parties. The transactions
were between Aquiles, as borrower, and Sia Ko Pio, as lender. It was not a sale between Aquiles, as vendor, and La Suerte, as
vendee. There was no agreement between the parties. As the first element was wanting, Aquiles correctly argued that there was
no contract of sale. Under Article 1475 of the Civil Code, the contract of sale is perfected at the moment there is a meeting of
minds on the thing which is the object of the contract and on the price.
Aquiles acknowledged that he signed the receipt for the total loan amount of P50,000.00 plus P2,000.00 as attorneys fees. There
is, however, no proof that it came from La Suerte as the consideration of the sale. Accordingly, there is no basis for a holding that
the personal loan of Aquiles from Sia Ko Pio was the consideration for the sale of his property in favor of La Suerte. As to La
Suertes contention that a deed of absolute sale was purportedly executed by Aquiles in its favor, it failed to adduce convincing
evidence to effectively rebut his consistent claim that he was not aware that what he had signed was already an instrument of
sale, considering his trust and confidence on Sia Ko Pio who was his long-time friend and former employer.
The fact that the alleged deed of sale indubitably bore Aquiles signature deserves no evidentiary value there being no consent
from him to part with his property. Had he known that the document presented to him was an instrument of sale, he would not
have affixed his signature on the document. It has been held that the existence of a signed document purporting to be a
contract of sale does not preclude a finding that the contract is invalid when the evidence shows that there was no meeting of
the minds between the seller and buyer.
19

Indeed, if Aquiles sold the property in favor of La Suerte, he would not have religiously and continuously paid the real property
taxes. Also of note is the fact that his daughter spent 300,000.00 for the renovation of improvements. More important, La
Suerte did not earlier ask him to transfer the possession thereof to the company. These uncontroverted attendant circumstances
bolster Aquiles positive testimony that he did not sell the property.
And for said reasons, the CA should not have favorably considered the validity of the deed of absolute sale absent any written
authority from La Suertes board of directors for Sia Ko Pio to negotiate and purchase Aquiles property on its behalf and to use
its money to pay the purchase price. The Court notes that when Sia Ko Pios son, Juan was presented as an officer of La Suerte,
he admitted that he could not find in the records of the corporation any board resolution authorizing his father to purchase
disputed property.
20
In Spouses Firme v. Bukal Enterprises and Development Corporation,
21
it was written:
It is the board of directors or trustees which exercises almost all the corporate powers in a corporation. Thus, the Corporation
Code provides:
SEC. 23. The board of directors or trustees. Unless otherwise provided in this Code, the corporate powers of all corporations
formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by
the board of directors or trustees to be elected from among the holders of stock, or where there is no stock, from among the
members of the corporation, who shall hold office for one (1) year and until their successors are elected and qualified. x x x
SEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the power and capacity:
x x x x
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal
property, including securities and bonds of other corporations, as the transaction of a lawful business of the corporation may
reasonably and necessarily require, subject to the limitations prescribed by the law and the Constitution.
x x x x
Under these provisions, the power to purchase real property is vested in the board of directors or trustees. While a corporation
may appoint agents to negotiate for the purchase of real property needed by the corporation, the final say will have to be with
the board, whose approval will finalize the transaction. A corporation can only exercise its powers and transact its business
through its board of directors and through its officers and agents when authorized by a board resolution or its by-laws. As held
in AF Realty & Development, Inc. v. Dieselman Freight Services, Co.:
Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the
board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors
of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a
corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such
valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation,
but not in the course of, or connected with, the performance of authorized duties of such director, are held not binding on the
corporation.
22
[Emphases supplied]
In the case at bench, Sia Ko Pio, although an officer of La Suerte, had no authority from its Board of Directors to enter into a
contract of sale of Aquiles property. It is, thus, clear that the loan obtained by Aquiles from Sia Ko Pio was a personal loan from
the latter, not a transaction between Aquiles and La Suerte. There was no evidence to show that Sia Ko Pio was clothed with
authority to use his personal fund for the benefit of La Suerte. Evidently, La Suerte was never in the picture.
The CA also failed to consider the glaring material discrepancies on the dates appearing in the purported deed of absolute sale
notarized by Judge Arsenio Base, Municipal Court Presiding Judge of Tabaco City (Judge Base).
An examination of the alleged contract of sale shows three (3) dates:
1. In witness whereof, I have hereunto affixed my signature this 8th day of December 1999 in Tabaco, Albay, Philippines;
2. Before me, this 7th day of December, 1990 in Tabaco, Albay; and
3. Doc. No. 587;
Page No. 12;
Book No. 4;
Series of 1990.
The document was dated 1999, but the date in the acknowledgment and notarial reference was an earlier date, 1990. The ex-
oficio notary public, Judge Base, was not presented to explain the apparent material discrepancy of the dates appearing on the
questioned document. This only confirms the claim of Aquiles that he signed the receipt representing his loan at the bodega of
Sia Ko Pio sometime in 1990, and not at the office of Judge Base in 1999.
La Suerte insists that the discrepancy on the dates was a mere clerical error that did not invalidate the deed of sale. It is worthy to
stress that a notarial document is evidence of the facts in the clear unequivocal manner therein expressed and has in its favor the
presumption of regularity. While it is true that an error in the notarial inscription does not generally invalidate a sale, if indeed it
took place, the same error can only mean that the document cannot be treated as a notarial document and thus, not entitled to
the presumption of regularity. The document would be taken out of the realm of public documents whose genuineness and due
execution need not be proved.
23

An even more substantial irregularity raised by Aquiles pertains to the capacity of the notary public, Judge Base, to notarize the
deed of sale. Judge Base, who acted as ex-oficio notary public, is not allowed under the law to notarize documents not
connected with the exercise of his official duties. The case of Tigno v. Aquino
24
is enlightening:
There are possible grounds for leniency in connection with this matter, as Supreme Court Circular No. I-90 permits notaries
public ex officio to perform any act within the competency of a regular notary public provided that certification be made in the
notarized documents attesting to the lack of any lawyer or notary public in such municipality or circuit. Indeed, it is only when
there are no lawyers or notaries public that the exception applies. The facts of this case do not warrant a relaxed attitude towards
Judge Cario's improper notarial activity. There was no such certification in the Deed of Sale. Even if one was produced, we
would be hard put to accept the veracity of its contents, considering that Alaminos, Pangasinan, now a city, was even then not an
isolated backwater town and had its fair share of practicing lawyers.
25

In this case, no such certification was attached to the alleged notarized document.1wphi1 Also, the Court takes note of Aquiles
averment that there were several lawyers commissioned as notary public in Tabaco City. With Judge Base not being authorized
to notarize a deed of conveyance, the notarized document cannot be considered a valid registrable document in favor of La
Suerte.
Moreover, Aquiles wife, Erlinda, who appeared to have affixed her signature as a witness to the purported document of sale,
categorically stated that she never signed such an instrument and never appeared before a notary public.
Although it is true that the absence of notarization of the deed of sale would not invalidate the transaction evidenced
therein,
26
yet an irregular notarization reduces the evidentiary value of a document to that of a private : document, which
requires proof of its due execution and authenticity to be admissible as evidence.
27

It should be noted that the deed of sale was offered in evidence as authentic by La Suerte, hence, the burden was upon it to
prove its authenticity and due execution. La Suerte unfortunately failed to discharge this burden. Accordingly, the preponderance
of evidence is in favor of Aquiles.
In fine, considering the irregularities or defects in the execution and notarization of the deed of sale, the Court finds Itself unable
to stamp its seal of approval on it. The R TC was correct in ordering its annulment.
WHEREFORE, the petition is GRANTED. The May 30, 2012 Decision of the Court of Appeals in CA-G.R. CV No. 96459 is REVERSED
and SET ASIDE. The September 30, 2010 Decision of the Regional Trial Court, Branch 15 Tabaco City, Albay, is REINSTATED.
This disposition is without prejudice to any valid claim of the heirs of Sia Ko Pio against Aquiles. SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice

G.R. No. 162826 October 14, 2013
NARCISO DEGAOS,
1
Petitioner,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.
D E C I S I O N
BERSAMIN, J.:
Novation is not a mode of extinguishing criminal liability under the penal laws of the country. Only the. State may validly waive
the criminal action against an accused. Novation is relevant only to determine if the parties have meanwhile altered the nature of
the obligation prior to the commencement of the criminal prosecution in order to prevent the incipient criminal liability of the
accused.
Antecedents
In an amended information dated March 23, 1994, the Office of the Provincial Prosecutor of Bulacan charged Brigida D. Luz, alias
Aida Luz, and Narciso Degaos in the Regional Trial Court in Malolos, Bulacan with estafa under Article 315 paragraph 1 b) of the
Revised Penal Code, allegedly committed as follows:
That on or about the 27th day of April, 1987 until July 20, 1987, in the municipality of Meycauayan, province of Bulacan,
Philippines, and within the jurisdiction of this Honorable Court, the above-named accused conspiring, confederating and helping
one another, received from Spouses Atty. Jose Bordador and Lydia Bordador gold and pieces of jewelry worth P438,702.00,
under express obligation to sell the same on commission and remit the proceeds thereof or return the unsold gold and pieces of
jewelry, but the said accused, once in possession of the said merchandise and far from complying with their aforesaid obligation,
inspite of repeated demands for compliance therewith, did then and there willfully, unlawfully and feloniously, with intent of gain
and grave abuse of confidence misapply, misappropriate and convert to their own use and benefit the said merchandise and/or
the proceeds thereof, to the damage and prejudice of said Sps. Atty. Jose Bordador and Lydia Bordador in the said amount
of P438,702.00.
Contrary to law.
2

The decision of the Court of Appeals (CA) summarized the evidence of the parties as follows:
Prior to the institution of the instant case, a separate civil action for the recovery of sum of money was filed on June 25, 1990 by
the private complainants spouses Jose and Lydia Bordador against accused Brigida D. Luz alias Aida D. Luz and Narciso Degaos.
In an amended complaint dated November 29, 1993, Ernesto Luz, husband of Brigida Luz, was impleaded as party defendant.
The case docketed as Civil Case No. 412-M-90 was raffled to Branch 15, RTC of Malolos, Bulacan. On June 23, 1995, the said
court found Narciso Degaos liable and ordered him to pay the sum of P725,463,98 as actual and consequential damages plus
interest and attorneys fees in the amount of P10,000.00. On the other hand, Brigida Luz alias Aida Luz was ordered to pay the
amount ofP21,483.00, representing interest on her personal loan. The case against Ernesto Luz was dismissed for insufficiency of
evidence. Both parties appealed to the Court of Appeals. On July 9, 1997, this Court affirmed the aforesaid decision. On further
appeal, the Supreme Court on December 15, 1997 sustained the Court of Appeals. Sometime in 1994, while the said civil case
was pending, the private complainants instituted the present case against the accused.
EVIDENCE FOR THE PROSECUTION
The prosecution evidence consists of the testimonies of the private complainants-spouses, Jose and Lydia Bordador.
Private complainant Lydia Bordador, a jeweler, testified that accused Narciso Degaos and Brigida/Aida Luz are brother and
sister. She knew them because they are the relatives of her husband and their Kumpadre/kumadre. Brigida/Aida Luz was the one
who gave instructions to Narciso Degaos to get gold and jewelry from Lydia for them to sell. Lydia came to know Narciso
Degaos because the latter frequently visited their house selling religious articles and books. While in their house, Narciso
Degaos saw her counting pieces of jewelry and he asked her if he could show the said pieces of jewelry to his sister,
Brigida/Aida Luz, to which she agreed. Thereafter, Narciso Degaos returned the jewelry and Aida/Brigida Luz called her to ask if
she could trust Narciso Degaos to get the pieces of jewelry from her for Aida/Brigida Luz to sell. Lydia agreed on the condition
that if they could not pay it in cash, they should pay it after one month or return the unsold jewelry within the said period. She
delivered the said jewelry starting sometime in 1986 as evidenced by several documents entitled "Katibayan at Kasunduan", the
earliest of which is dated March 16, 1986. Everytime Narciso Degaos got jewelry from her, he signed the receipts in her
presence. They were able to pay only up to a certain point. However, receipt nos. 614 to 745 dated from April 27, 1987 up to July
20, 1987 (Exhs. "A"-"O") were no longer paid and the accused failed to return the jewelry covered by such receipts. Despite oral
and written demands, the accused failed and refused to pay and return the subject jewelry. As of October 1998, the total
obligation of the accused amounted toP725,000.00.
Private complainant Atty. Jose Bordador corroborated the testimony of his wife, Lydia. He confirmed that their usual business
practice with the accused was for Narciso Degaos to receive the jewelry and gold items for and in behalf of Brigida/Aida Luz
and for Narciso Degaos to sign the "Kasunduan at Katibayan" receipts while Brigida/Aida Luz will pay for the price later on. The
subject items were usually given to Narciso Degaos only upon instruction from Brigida/Aida Luz through telephone calls or
letters. For the last one year, the "Kasunduan at Katibayan" receipts were signed in his presence. Said business arrangement went
on for quite sometime since Narciso Degaos and Brigida/Aida Luz had been paying religiously. When the accused defaulted in
their payment, they sent demand letters. It was the accuseds sister, Julie dela Rosa, who responded, seeking an extension of time
for the accused to settle their obligation.
EVIDENCE FOR THE DEFENSE
The defense presented accused Brigida/Aida Luz, who testified that she started transacting business of selling gold bars and
jewelry with the private complainants sometime in 1986 through her brother, Narciso Degaos. It was the usual business practice
for Narciso Degaos to get the gold bars and pieces of jewelry from the private complainants after she placed orders through
telephone calls to the private complainants, although sometimes she personally went to the private complainants house to get
the said items. The gold bars and pieces of jewelry delivered to her by Narciso Degaos were usually accompanied by a pink
receipt which she would sign and after which she would make the payments to the private complainants through Narciso
Degaos, which payments are in the form of postdated checks usually with a thirty-day period. In return, the private
complainants would give the original white receipts to Narciso Degaos for him to sign. Thereafter, as soon as the postdated
checks were honored by the drawee bank, the said white receipts were stamped "paid" by Lydia Bordador, after which the same
would be delivered to her by Narciso Degaos.
On September 2, 1987, she sent a letter to private complainant Lydia Bordador requesting for an accounting of her indebtedness.
Lydia Bordador made an accounting which contained the amount of P122,673.00 as principal and P21,483.00 as interest.
Thereafter, she paid the principal amount through checks. She did not pay the interest because the same was allegedly excessive.
In 1998, private complainant Atty. Jose Bordador brought a ledger to her and asked her to sign the same. The said ledger
contains a list of her supposed indebtedness to the private complainants. She refused to sign the same because the contents
thereof are not her indebtedness but that of his brother, Narciso Degaos. She even asked the private complainants why they
gave so many pieces of jewelry and gold bars to Narciso Degaos without her permission, and told them that she has no
participation in the transactions covered by the subject "Kasunduan at Katibayan" receipts.
Co-accused Narciso Degaos testified that he came to know the private complainants when he went to the latters house in 1986
to sell some Bible books. Two days later he returned to their house and was initially given a gold bracelet and necklace to sell. He
was able to sell the same and paid the private complainants with the proceeds thereof. Since then he started conducting similar
business transactions with the private complainants. Said transactions are usually covered by receipts denominated as
"Kasunduan at Katibayan". All the "Kasunduan at Katibayan" receipts were issued by the private complainants and was signed by
him. The phrase "for Brigida Luz" and for "Evely Aquino" were written on the receipts so that in case he fails to pay for the items
covered therein, the private complainants would have someone to collect from. He categorically admitted that he is the only one
who was indebted to the private complainants and out of his indebtedness, he already made partial payments in the amount
of P53,307.00. Included in the said partial payments is the amount of P20,000.00 which was contributed by his brothers and
sisters who helped him and which amount was delivered by Brigida Luz to the private complainants.
3

Ruling of the RTC
On June 23, 1999, the RTC found Degaos guilty as charged but acquitted Luz for insufficiency of evidence, imposing on
Degaos twenty years of reclusion temporal, viz:
WHEREFORE, judgment is hereby rendered as follows:
1. finding accused Narciso Degaos GUILTY beyond reasonable doubt of the crime of estafa penalized under Article 315,
Subsection 1, paragraph (b) of the Revised Penal code and hereby sentences him to suffer the penalty of TWENTY YEARS
(20) of reclusion temporal;
2. finding accused Brigida Luz NOT GUILTY and is hereby ACQUITTED on the ground of insufficiency of evidence.
SO ORDERED.
4

Decision of the CA
On appeal, Degaos assailed his conviction upon the following grounds, to wit:
I
THE HONORABLE COURT A QUO ERRED IN NOT FINDING THAT THE AGREEMENT BETWEEN THE PRIVATE COMPLAINANT LYDIA
BORDADOR AND THE ACCUSED WAS ONE OF SALE ON CREDIT.
II
THE HONORABLE COURT A QUO ERRED IN NOT FINDING THAT NOVATION HAD CONVERTED THE LIABILITY OF THE ACCUSED
INTO A CIVIL ONE.
III
THE HONORABLE COURT ERRED IN NOT APPLYING THE INDETERMINATE SENTENCE LAW.
5

On September 23, 2003, however, the CA affirmed the conviction of Degaos but modified the prescribed penalty,
6
thusly:
WHEREFORE, the appealed Decision finding the accused-appellant Narciso Degaos guilty beyond reasonable doubt of the
crime of Estafa under Article 315 (1) par. b of the Revised Penal code is hereby AFFIRMED with the modification that the accused-
appellant is sentenced to suffer an indeterminate penalty of imprisonment of four (4) years and two (2) months of prision
correccional in its medium period, as the minimum, to twenty (20) years of reclusion temporal as maximum .
SO ORDERED.
7

Issues
Hence, Degaos has appealed, again submitting that:
I.
THE HONORABLE COURT A QUO ERRED IN NOT FINDING THAT THE AGREEMENT BETWEEN THE PRIVATE COMPLAINANT LYDIA
BORDADOR AND THE ACCUSED WAS ONE OF SALE ON CREDIT;
II.
THE HONORABLE COURT A QUO ERRED IN NOT FINDING THAT NOVATION HAD CONVERTED THE LIABILITY OF THE ACCUSED
INTO A CIVIL ONE.
8

Ruling
The appeal lacks merit.
I.
Transaction was an agency, not a sale on credit
Degaos contends that his agreement with the complainants relative to the items of jewelry and gold subject of the amended
information as embodied in the relevant Kasunduan at Katibayan was a sale on credit, not a consignment to sell on commission
basis.
The contention of Degaos is devoid of factual and legal bases.
The text and tenor of the relevant Kasunduan at Katibayan follow:
KASUNDUAN AT KATIBAYAN
x x x x
Akong nakalagda sa ibaba nito ay nagpapatunay na tinanggap ko kay Ginang LYDIA BORDADOR ng Calvario, Meycauayan,
Bulacan ang mga hiyas (jewelries) [sic] na natatala sa ibaba nito upang ipagbili ko sa kapakanan ng nasabing Ginang. Ang
pagbibilhan ko sa nasabing mga hiyas ay aking ibibigay sa nasabing Ginang, sa loob ng __________ araw at ang hindi mabili ay
aking isasauli sa kanya sa loob din ng nasabing taning na panahon sa mabuting kalagayan katulad ng aking tanggapin. Ang
bilang kabayaran o pabuya sa akin ay ano mang halaga na aking mapalabis na mga halagang nakatala sa ibaba nito. Ako ay
walang karapatang magpautang o kaya ay magpalako sa ibang tao ng nasabing mga hiyas.
9

x x x x
Based on the express terms and tenor of the Kasunduan at Katibayan , Degaos received and accepted the items under the
obligation to sell them in behalf of the complainants ("ang mga hiyas (jewelries) na natatala sa ibaba nito upang ipagbili ko sa
kapakanan ng nasabing Ginang"), and he would be compensated with the overprice as his commission ("Ang bilang kabayaran o
pabuya sa akin ay ano mang halaga na aking mapalabis na mga halagang nakatala sa ibaba nito."). Plainly, the transaction was a
consignment under the obligation to account for the proceeds of sale, or to return the unsold items. As such, he was the agent
of the complainants in the sale to others of the items listed in the Kasunduan at Katibayan.
In contrast, according the first paragraph of Article 1458 of the Civil Code, one of the contracting parties in a contract of sale
obligates himself to transfer the ownership of and to deliver a determinate thing, while the other party obligates himself to pay
therefor a price certain in money or its equivalent. Contrary to the contention of Degaos, there was no sale on credit to him
because the ownership of the items did not pass to him.
II.
Novation did not transpire as to prevent
the incipient criminal liability from arising
Degaos claims that his partial payments to the complainants novated his contract with them from agency to loan, thereby
converting his liability from criminal to civil. He insists that his failure to complete his payments prior to the filing of the
complaint-affidavit by the complainants notwithstanding, the fact that the complainants later required him to make a formal
proposal before the barangay authorities on the payment of the balance of his outstanding obligations confirmed that novation
had occurred.
The CA rejected the claim of Degaos, opining as follows:
Likewise untenable is the accused-appellants argument that novation took place when the private complainants accepted his
partial payments before the criminal information was filed in court and therefore, his criminal liability was extinguished.
Novation is not one of the grounds prescribed by the Revised Penal Code for the extinguishment of criminal liability.1wphi1 It is
well settled that criminal liability for estafa is not affected by compromise or novation of contract, for it is a public offense which
must be prosecuted and punished by the Government on its own motion even though complete reparation should have been
made of the damage suffered by the offended party. A criminal offense is committed against the People and the offended party
may not waive or extinguish the criminal liability that the law imposes for the commission of the offense. The criminal liability for
estafa already committed is not affected by the subsequent novation of the contract.
10

We sustain the CA.
Degaos claim was again factually unwarranted and legally devoid of basis, because the partial payments he made and his
purported agreement to pay the remaining obligations did not equate to a novation of the original contractual relationship of
agency to one of sale. As we see it, he misunderstands the nature and the role of novation in a criminal prosecution.
Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one that
terminates the first, either by (a) changing the object or principal conditions; or (b) substituting the person of the debtor; or (c)
subrogating a third person in the rights of the creditor. In order that an obligation may be extinguished by another that
substitutes the former, it is imperative that the extinguishment be so declared in unequivocal terms, or that the old and the new
obligations be on every point incompatible with each other.
11
Obviously, in case of only slight modifications, the old obligation
still prevails.
12

The Court has further pointed out in Quinto v. People:
13

Novation is never presumed, and the animus novandi, whether totally or partially, must appear by express agreement of the
parties, or by their acts that are too clear and unequivocal to be mistaken.
The extinguishment of the old obligation by the new one is necessary element of novation which may be effected either
expressly or impliedly. The term "expressly" means that the contracting parties incontrovertibly disclose that their object in
executing the new contract is to extinguish the old one. Upon the other hand, no specific form is required for an implied
novation, and all that is prescribed by law would be an incompatibility between the two contracts. While there is really no hard
and fast rule to determine what might constitute to be a sufficient change that can bring about novation, the touchstone for
contrarity, however would be an irreconcilable incompatibility between the old and the new obligations.
There are two ways which could indicate, in fine, the presence of novation and thereby produce the effect of extinguishing an
obligation by another which substitutes the same. The firs t is when novation has been explicitly stated and declared in
unequivocal terms. The second is when the old and the new obligations are incompatible on every point. The test of
incompatibility is whether or not the two obligations can stand together, each one having its independent existence. If they
cannot, they are incompatible and the latter obligation novates the first. Corollarily, changes that breed incompatibility must be
essential in nature and not merely accidental. The incompatibility must take place in any of the essential elements of the
obligation, such as its object, cause or principal conditions thereof; otherwise, the change would be merely modificatory in
nature and insufficient to extinguish the original obligation.
The changes alluded to by petitioner consists only in the manner of payment.1wphi1 There was really no substitution of debtors
since private complainant merely acquiesced to the payment but did not give her consent to enter into a new contract.
14
x x x
The legal effects of novation on criminal liability were explained by the Court, through Justice J.B.L. Reyes, in People v. Nery,
15
viz:
The novation theory may perhaps apply prior to the filing of the criminal information in court by the state prosecutors because
up to that time the original trust relation may be converted by the parties into an ordinary creditor-debtor situation, thereby
placing the complainant in estoppel to insist on the original trust. But after the justice authorities have taken cognizance of the
crime and instituted action in court, the offended party may no longer divest the prosecution of its power to exact the criminal
liability, as distinguished from the civil. The crime being an offense against the state, only the latter can renounce it (People vs.
Gervacio, 54 Off. Gaz. 2898; People vs. Velasco, 42 Phil. 76; U.S. vs. Montaes, 8 Phil. 620).
It may be observed in this regard that novation is not one of the means recognized by the Penal Code whereby criminal liability
can be extinguished; hence, the role of novation may only be to either prevent the rise of criminal liability or to cast doubt on the
true nature of the original basic transaction, whether or not it was such that its breach would not give rise to penal responsibility,
as when money loaned is made to appear as a deposit, or other similar disguise is resorted to (cf. Abeto vs. People, 90 Phil. 581;
U.S. vs. Villareal, 27 Phil. 481).
Even in Civil Law the acceptance of partial payments, without further change in the original relation between the complainant
and the accused, can not produce novation. For the latter to exist, there must be proof of intent to extinguish the original
relationship, and such intent can not be inferred from the mere acceptance of payments on account of what is totally due. Much
less can it be said that the acceptance of partial satisfaction can effect the nullification of a criminal liability that is fully matured,
and already in the process of enforcement. Thus, this Court has ruled that the offended partys acceptance of a promissory note
for all or part of the amount misapplied does not obliterate the criminal offense (Camus vs. Court of Appeals, 48 Off. Gaz. 3898).
Novation is not a ground under the law to extinguish criminal liability. Article 89 (on total extinguishment)
16
and Article 94 (on
partial extinguishrnent)
17
of the Revised Penal Code list down the various grounds for the extinguishment of criminal liability. Not
being included in the list, novation is limited in its effect only to the civil aspect of the liability, and, for that reason, is not an
efficient defense in estafa. This is because only the State may validly waive the criminal action against an accused.
18
The role of
novation may only be either to prevent the rise of criminal liability, or to cast doubt on the true nature of the original basic
transaction, whether or not it was such that the breach of the obligation would not give rise to penal responsibility, as when
money loaned is made to appear as a deposit, or other similar disguise is resorted to.
19

Although the novation of a contract of agency to make it one of sale may relieve an offender from an incipient criminal liability,
that did not happen here, for the partial payments and the proposal to pay the balance the accused made during the barangay
proceedings were not at all incompatible with Degafios liability under the agency that had already attached. Rather than
converting the agency to sale, therefore, he even thereby confirmed his liability as the sales agent of the complainants.
VHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on September 23, 2003; and ORDERS
petitioner to pay the costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice

G.R. No. 179594 September 11, 2013
MANUEL UY & SONS, INC., Petitioner,
vs.
VALBUECO, INCORPORATED, Respondent.
D E C I S I O N
PERALTA, J.:
This is a petition for review on certiorari
1
of the Court of Appeals Decision
2
dated December 11, 2006 in CA-G.R. CV No. 85877,
and its Resolution dated September 4, 2007, denying petitioners motion for reconsideration.
The Court of Appeals reversed and set aside the Decision
3
of the Regional Trial Court (RTC) of Manila, Branch 1, dismissing the
Complaint for specific performance and damages. The Court of Appeals reinstated the Complaint and directed petitioner to
execute deeds of absolute sale in favor of respondent after payment of the purchase price of the subject lots.
The facts, as stated by the Court of Appeals, are as follows:
Petitioner Manuel Uy & Sons, Inc. is the registered owner of parcels of land located in Teresa, Rizal covered by Transfer
Certificate of Title(TCT) No. 59534, covering an area of about 6,119 square meters; TCT No.59445, covering an area of about
6,838 square meters; TCT No. 59446,covering an area of about 12,389 square meters; and TCT No. 59444,covering an area of
about 32,047 square meters.
On November 29, 1973, two Conditional Deeds of Sale were executed by petitioner, as vendor, in favor of respondent Valbueco,
Incorporated, as vendee. The first Conditional Deed of Sale
4
covered TCT Nos. 59534, 59445 and 59446, and contained the
following terms and conditions:
That for and in consideration of the sum of ONE HUNDREDSIXTY-FOUR THOUSAND SEVEN HUNDRED FORTY-
NINE(Php164,749.00) PESOS, Philippine currency, the VENDOR hereby agrees to SELL, CEDE, TRANSFER and CONVEY unto the
VENDEE xx x the aforementioned properties, payable under the following terms and conditions:
1. The sum of FORTY-ONE THOUSAND ONE HUNDREDEIGHTY-SEVEN and 25/100 (Php 41,187.25) PESOS shall be paid
upon signing of this conditional deed of sale; and
2. The balance of ONE HUNDRED TWENTY-THREETHOUSAND FIVE HUNDRED SIXTY-ONE and 75/100 (Php123,561.75)
PESOS shall be paid within a period of one (1) year from November 15, 1973, with interest of 12% per annum based on
the balance, in the mode and manner specified below:
a) January 4, 1974 P16,474.90 plus interest
b) On or before May 15, 1974 P53,543.43 plus interest
c) On or before November 15, 1974 P53,543.32 plus interest
3. That the vendee shall be given a grace period of thirty (30)days from the due date of any installment with
corresponding interest to be added, but should the VENDEE fail to make such payment within the grace period this
contract shall be deemed rescinded and without force and effect after notice in writing by VENDOR to VENDEE.
4. That the VENDOR agrees to have the existing Mortgages on the properties subject of this sale released on or before
May 20, 1974.
5. That the VENDOR agrees to have the above-described properties freed and cleared of all lessees, tenants, adverse
occupants or squatters within 100 days from the execution of this conditional deed of sale. In case of failure by the
VENDOR to comply with the undertaking provided in this paragraph and the VENDEE shall find it necessary to file a case
or cases in court to eject the said lessees, tenants, occupants and/or squatters from the land, subject of this sale, the
VENDOR agrees to answer and pay for all the expenses incurred and to be incurred in connection with said cases until
the same are fully and finally terminated.
6. That the VENDOR and the VENDEE agree that during the existence of this Contract and without previous expressed
written permission from the other, they shall not sell, cede, assign, transfer or mortgage, or in any way encumber unto
another person or party any right, interest or equity that they may have in and to said parcels of land. x x x x
8. That it is understood that ownership of the properties herein conveyed shall not pass to the VENDEE until after
payment of the full purchase price; provided, however, that the VENDOR shall allow the annotation of this Conditional
Deed of Sale at the back of the titles of the above-described parcels of land in the corresponding Registry of Deeds x xx.
9. That upon full payment of the total purchase price, a Deed of Absolute Sale shall be executed in favor of the VENDEE
and the VENDOR agrees to pay the documentary stamps and the science stamp tax of the Deed of Sale; while the
VENDEE agrees to pay the registration and other expenses for the issuance of a new title.
10. That it is mutually agreed that in case of litigation, the venue of the case shall be in the courts of Manila, having
competent jurisdiction, any other venue being expressly waived.
5

On the other hand, the second Conditional Deed of Sale
6
covering Lot No. 59444 provides, thus:
1. The sum of FIFTY-TWO THOUSAND SEVENTY-SIXAND 37/100 (Php 52,076.37) PESOS, shall be paid upon signing of
this conditional deed of sale; and
2. The balance of ONE HUNDRED FIFTY-SIXTHOUSAND TWO HUNDRED TWENTY-NINE and 13/100 (Php156,229.13)
PESOS shall be paid within a period of one (1) year from November 15, 1973, with interest of 12% per annum based on
the balance, in the mode and manner specified below:
a) January 4, 1974 P20,830.55 plus interest
b) On or before May 15, 1974 P67,699.29 plus interest
c) On or before November 15, 1974, P67,699.29 plus interest
3. That the VENDEE shall be given a grace period of thirty (30) days from the due date of any installment with
corresponding interest to be added, but should the VENDEE fail to make such payment within the grace period, this
contract shall be deemed rescinded and without force and effect after notice in writing by VENDOR to VENDEE.
4. That the VENDOR agrees and acknowledges that any and all payments to be made by the VENDEE by reason of this
presents unless hereafter advised by VENDOR to the contrary, shall be made in favor of and to the Philippine Trust
Company by way of liquidation and payment of the existing mortgage on the property subject of this sale.
5. That after each payment adverted to above the VENDOR shall issue the corresponding receipt for the amount paid by
the VENDOR to the Philippine Trust Company.
6. That the VENDOR agrees to have the above-described property freed and cleared of all lessees, tenants, adverse
occupants or squatters within 100 days from the execution of this conditional deed of sale. In case of failure by the
VENDOR to comply with this undertaking provided in this paragraph and the VENDEE shall find it necessary to file a case
or cases in court to eject the said lessees, tenants, occupants and/or squatters from the land, subject of this sale, the
VENDOR agrees to answer and pay for all the expenses incurred and to be incurred in connection with said cases until
the same are fully and finally terminated.
7. That the VENDOR and the VENDEE agree that during the existence of this Contract and without previous expressed
written permission from the other, they shall not sell, cede, assign, transfer or mortgage, or in any way encumber unto
another person or party any right, interest or equity that they may have in and to said parcel of land.
x x x x
9. That it is understood that ownership of the property herein conveyed shall not pass to the VENDEE until after payment
of the full purchase price, provided, however, that the VENDOR shall allow the annotation of the Conditional Deed of
Sale at the back of the Title of the above-described parcel of land in the corresponding Registry of Deeds; x xx.
10. That upon full payment of the total purchase price, a Deed of Absolute Sale shall be executed in favor of the VENDEE
and the VENDOR agrees to pay the documentary stamps and the science stamp tax of the Deed of Sale; while the
VENDEE agrees to pay the registration and other expenses for the issuance of a new title.
11. That it is mutually agreed that in case of litigation, the venue of the case shall be in the courts of Manila, having
competent jurisdiction, any other venue being expressly waived.
7

Respondent was able to pay petitioner the amount of P275,055.55
8
as partial payment for the two properties corresponding to
the initial payments and the first installments of the said properties.
At the same time, petitioner complied with its obligation under the conditional deeds of sale, as follows: (1) the mortgage for
TCT No. 59446 was released on May 18, 1984, while the mortgages for TCT Nos. 59445and 59534 were released on July 19, 1974;
(2) the unlawful occupants of the lots covered by TCT Nos. 59444, 59534, 59445 and 59446 surrendered their possession and use
of the said lots in consideration of the amount of P6,000.00 in a document
9
dated November 19, 1973, and they agreed to
demolish their shanties on or before December 7, 1973; and (3) the mortgage with Philippine Trust Company covering TCT No.
59444 was discharged
10
in 1984.
However, respondent suspended further payment as it was not satisfied with the manner petitioner complied with its obligations
under the conditional deeds of sale. Consequently, on March 17, 1978, petitioner sent respondent a letter
11
informing
respondent of its intention to rescind the conditional deeds of sale and attaching therewith the original copy of the respective
notarial rescission.
On November 28, 1994, respondent filed a Complaint
12
for specific performance and damages against petitioner with the RTC of
Antipolo City. However, on January 15, 1996, the case was dismissed without prejudice
13
for lack of interest, as respondent's
counsel failed to attend the pre-trial conference.
Five years later, or on March 16, 2001, respondent again filed with the RTC of Manila, Branch 1 (trial court) a Complaint
14
for
specific performance and damages, seeking to compel petitioner to accept the balance of the purchase price for the two
conditional deeds of sale and to execute the corresponding deeds of absolute sale. Respondent contended that its non-payment
of the installments was due to the following reasons:(1) Petitioner refused to receive the balance of the purchase price as the
properties were mortgaged and had to be redeemed first before a deed of absolute sale could be executed; (2) Petitioner
assured that the existing mortgages on the properties would be discharged on or before May 20,1974, or that petitioner did not
inform it (respondent) that the mortgages on the properties were already released; and (3) Petitioner failed to fully eject the
unlawful occupants in the area.
In its Answer,
15
petitioner argued that the case should be dismissed, as it was barred by prior judgment. Moreover, petitioner
contended that it could not be compelled to execute any deed of absolute sale, because respondent failed to pay in full the
purchase price of the subject lots. Petitioner claimed that it gave respondent a notice of notarial rescission of both conditional
deeds of sale that would take effect 30 days from receipt thereof. The notice of notarial rescission was allegedly received by
respondent on March 17,1978. Petitioner asserted that since respondent failed to pay the full purchase price of the subject lots,
both conditional deeds of sale were rescinded as of April 16, 1978; hence, respondent had no cause of action against it.
In its Reply,
16
respondent denied that it received the alleged notice of notarial rescission. Respondent also denied that the
alleged recipient (one Wenna Laurenciana)
17
of the letter dated March 17, 1978, which was attached to the notice of notarial
rescission, was its employee. Respondent stated that assuming arguendo that the notice was sent to it, the address (6th Floor,
SGC Bldg., Salcedo Street, Legaspi Village, Makati, Metro Manila) was not the given address of respondent. Respondent
contended that its address on the conditional deeds of sale and the receipts issued by it and petitioner showed that its principal
business address was the 7th Floor, Bank of P.I. Bldg, Ayala Avenue, Makati, Rizal.
On August 1, 2005, the trial court rendered a Decision,
18
dismissing the complaint, as petitioner had exercised its right to rescind
the contracts. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the complaint is DISMISSED for lack of merit.
Claims and counterclaims for damages are also dismissed.
19

The trial court stated that the issues before it were: (1) Did petitioner unlawfully evade its obligation to execute the final deed of
sale and to eject the squatters/occupants on the properties; (2) Is the case barred by prior judgment; and (3) Does respondent
have a cause of action against petitioner.
The trial court said that both conditional deeds of sale clearly provided that "ownership x x x shall not pass to the VENDEE until
after full payment of the purchase price." Respondent admitted that it has not yet fully paid the purchase price. The trial court
held that the conditions in the conditional deeds of sale being suspensive, that is, its fulfillment gives rise to the obligation, the
reasons for the inability of respondent to fulfill its own obligations is material, in order that the obligation of petitioner to
execute the final deeds of absolute sale will arise. The trial court stated that the evidence showed that petitioner had exercised its
right to rescind the contract by a written notice dated March 17, 1978 and notarial acts both dated March15, 1978. The trial court
noted that respondent denied having received the notice and disclaimed knowing the recipient, Wenna Laurenciana. However,
on cross-examination, respondent's witness, Gaudencio Juan, who used to be respondent's Personnel Manager and Forester at
the same time, admitted knowing Laurenciana because she was the secretary of Mr. Valeriano Bueno, respondent's president at
that time, although Laurenciana was not employed by respondent, but she was employed by Mahogany Products Corporation,
presumably one of the 14 other companies being controlled by Mr. Bueno.
20

The trial court held that the conditional deeds of sale were executed on November 29, 1973 and were already covered by
Republic Act (R.A.) No. 6552, otherwise known as the Realty Installment Buyer Act. Under Section 4 of the law, if the buyer fails to
pay the installments due at the expiration of the grace period, which is not less than 60 days from the date the installment
became due, the seller may cancel the contract after 30 days from receipt of the buyer of the notice of cancellation or the
demand for rescission of the contracts by notarial act. The trial court found no lawful ground to grant the relief prayed for and
dismissed the complaint for lack of merit.
Respondent appealed the decision of the trial court to the Court of Appeals, and made these assignments of error: (1) the trial
court erred in holding that petitioner did not unlawfully evade executing a final deed of sale, since respondent's failure to fulfill
its own obligation is material; (2) the trial court erred in holding that it is unbelievable and a self-contradiction that respondent
was informed of the mortgage only when it was paying the balance of the properties; and (3) the trial court erred in holding that
as early as November 19, 1973, petitioner had already taken necessary steps to evict the squatters/occupants through the
intercession of the agrarian reform officer.
On December 11, 2006, the Court of Appeals rendered a Decision, reversing and setting aside the Decision of the trial court. It
reinstated the complaint of respondent, and directed petitioner to execute deeds of absolute sale in favor of respondent after
payment of the balance of the purchase price of the subject lots. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the August 1, 2005Decision of the Regional Trial Court of Manila, Branch 1, in Civil Case No.
01-100411, is hereby REVERSED and SET ASIDE.
A new one is hereby entered: REINSTATING the complaint and defendant-appellee MANUEL UY & SONS INC. is hereby
DIRECTED, pursuant to Sec. 4, R. A. No. 6552, otherwise known as the Maceda Law, to EXECUTE and DELIVER:
(1) Deeds of Absolute Sale in favor of VALBUECO, INC.; and
(2) Transfer Certificates of Title pertaining to Nos. 59534, 59445,59446 and 59444, in the name of plaintiff-appellant
VALBUECO, INC., after VALBUECO pays MANUEL UY & SONS, without additional interest, within thirty days from finality
of this judgment, the balance of the contract price.
If MANUEL UY & SONS refuses to deliver the Deeds of Absolute Sale and the co-owner's copy of the TCTs, the Register of Deeds
of Antipolo, Rizal is hereby DIRECTED to CANCEL the latest TCTs issued derived from TCT Nos. 59534, 59445, 59446 and 59444,
and to
ISSUE new TCTS in the name of VALBUECO.
Only if VALBUECO fails in the payment directed above, then defendant-appellee MANUEL UY & SONS INC. has the opportunity
to serve a valid notice of notarial rescission.
SO ORDERED.
21

The Court of Appeals held that the two conditional deeds of sale in this case are contracts to sell. It stated that the law applicable
to the said contracts to sell on installments is R.A. No. 6552, specifically Section 4thereof, as respondent paid less than two years
in installments. It held that upon repeated defaults in payment by respondent, petitioner had the right to cancel the said
contracts, but subject to the proper receipt of respondent of the notice of cancellation or the demand for the rescission of the
contracts by notarial act.
However, the Court of Appeals found that petitioner sent the notice of notarial rescission to the wrong address. The business
address of respondent, as used in all its transactions with petitioner, was the 7th Floor, Bank of the Philippine Islands Building,
Ayala Avenue, Makati City, but the notice of notarial rescission was sent to the wrong address at the 6th Floor, SGC Building,
Salcedo Street, Legaspi Village, Makati, Metro Manila. Petitioner served the notice to the address of Mahogany Products
Corporation. It was established that the person who received the notice, one Wenna Laurenciana, was an employee of Mahogany
Products Corporation and not an employee of respondent or Mr. Valeriano Bueno, the alleged president of Mahogany Products
Corporation and respondent company.
22
The appellate court stated that this cannot be construed as to have been contructively
received by respondent as the two corporations are two separate entities with a distinct personality independent from each
other. Thus, the Court of Appeals held that the notarial rescission was in validly served. It stated that it is a general rule that when
service of notice is an issue, the person alleging that the notice was served must prove the fact of service by a preponderance of
evidence. In this case, the Court of Appeals held that there was no evidence that the notice of cancellation by notarial act was
actually received by respondent. Thus, for petitioner's failure to cancel the contract in accordance with the procedure provided
by law, the Court of Appeals held that the contracts to sell on installment were valid and subsisting, and respondent has the right
to offer to pay for the balance of the purchase price before actual cancellation.
Petitioner's motion for reconsideration was denied for lack of merit by the Court of Appeals in a Resolution
23
dated September 4,
2007.
Petitioner filed this petition raising the following issues:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED INREVERSING THE RTC DECISION AND REINSTATING THECOMPLAINT
WHEN ON ITS FACE IT HAS LONG BEENPRESCRIBED, AS IT WAS FILED AFTER 27 YEARS AND HAS NOJURISDICTION (SIC).
II
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ANDGRAVELY ABUSED ITS DISCRETION IN COMPELLINGPETITIONER
TO EXECUTE A FINAL DEED OF ABSOLUTE SALE EVEN IF RESPONDENT JUDICIALLY ADMITTED ITS NON-PAYMENT OF THE
BALANCE OF THE DEEDS OF CONDITIONALSALE DUE SINCE 1974.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED INGRANTING THE RELIEFS PRAYED BY RESPONDENT IN ITSCOMPLAINT
FOR SPECIFIC PERFORMANCE WHEN IT WASRESPONDENT WHO BREACHED THE CONTRACT.
IV
THE HONORABLE COURT OF APPEALS COMMITTED GRAVEINJUSTICE WHEN IT PENALIZED PETITIONER FOR EXERCISINGITS
LEGAL RIGHT AND DID NOT COMMIT AN ACTIONABLEWRONG WHILE IT HEFTILY REWARDED RESPONDENT, WHOBREACHED
THE CONTRACT, AND ORDERED TO PAY WITHOUTINTEREST PHP 97,998.95, WHICH IS DUE SINCE 1974 UNDER THECONTRACT,
FOR FOUR (4) PARCELS OF LAND (57,393 SQUAREMETERS), NOW WORTH HUNDRED MILLIONS.
V
THE HONORABLE COURT OF APPEALS GRAVELY ERRED INANNULING THE NOTARIAL RESCISSION WHEN THE COMPLAINT IS
ONLY FOR SPECIFIC PERFORMANCE AND WAS NOT AN ISSUE RAISED IN THE PLEADINGS OR DURING THETRIAL.
24

The main issue is whether respondent is entitled to the relief granted by the Court of Appeals. Petitioner contends that the Court
of Appeals erred in directing it to execute deeds of absolute sale over the subject lots even if respondent admitted non-payment
of the balance of the purchase price.
As found by the Court of Appeals, the two conditional deeds of sale entered into by the parties are contracts to sell, as they both
contained a stipulation that ownership of the properties shall not pass to the vendee until after full payment of the purchase
price. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to the vendee until full
payment of the purchase price.
25
The full payment of the purchase price partakes of a suspensive condition, and non-fulfillment
of the condition prevents the obligation to sell from arising.
26
To differentiate, a deed of sale is absolute when there is no
stipulation in the contract that title to the property remains with the seller until full payment of the purchase price.
Ramos v. Heruela
27
held that Articles 1191 and 1592 of the Civil Code
28
are applicable to contracts of sale, while R.A. No. 6552
applies to contracts to sell.
The Court of Appeals correctly held that R.A. No. 6552, otherwise known as the Realty Installment Buyer Act, applies to the
subject contracts to sell. R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply an
event that prevents the obligation of the vendor to convey title from acquiring binding force.
29

It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments
30
as follows:
Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including
residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under Republic Act
Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred eighty-nine, where the
buyer has paid at least two years of installments, the buyer is entitled to the following rights in case he defaults in the payment
of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him which is
hereby fixed at the rate of one month grace period for every one year of installment payments made: Provided, That this
right shall be exercised by the buyer only once in every five years of the life of the contract and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional five
per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual cancellation
of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation of the total number of installment
payments made. chanrobles a law library
Sec. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not less than
sixty days from the date the installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after thirty
days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act.
31

In this case, respondent has paid less than two years of installments; therefore, Section 4 of R.A. No. 6552 applies.
The Court of Appeals held that even if respondent defaulted in its full payment of the purchase price of the subject lots, the
conditional deeds of sale remain valid and subsisting, because there was no valid notice of notarial rescission to respondent, as
the notice was sent to the wrong address, that is, to Mahogany Products Corporation, and it was received by a person employed
by Mahogany Products Corporation and not the respondent. The Court of Appeals stated that the allegation that Mahogany
Products Corporation and respondent have the same President, one Valeriano Bueno, is irrelevant and has not been actually
proven or borne by evidence. The appellate court held that there was insufficient proof that respondent actually received the
notice of notarial rescission of the conditional deeds of sale; hence, the unilateral rescission of the conditional deeds of sale
cannot be given credence.
However, upon review of the records of this case, the Court finds that respondent had been served a notice of the notarial
rescission of the conditional deeds of sale when it was furnished with the petitioner's Answer, dated February 16, 1995, to its first
Complaint filed on November 28, 1994with the RTC of Antipolo City, which case was docketed as Civil Case No.94-3426, but the
complaint was later dismissed without prejudice on January15, 1996.
32

It appears that after respondent filed its first Complaint for specific performance and damages with the RTC of Antipolo City on
November 28,1994, petitioner filed an Answer and attached thereto a copy of the written notice dated March 17, 1978 and
copies of the notarial acts of rescission dated March 15, 1978, and that respondent received a copy of the said Answer with the
attached notices of notarial rescission. However, to reiterate, the first Complaint was dismissed without prejudice.
Five years after the dismissal of the first Complaint, respondent again filed this case for specific performance and damages, this
time, with the RTC of Manila. Petitioner filed an Answer, and alleged, among others, that the case was barred by prior judgment,
since respondent filed a complaint on November 28, 1994 before the RTC of Antipolo City, Branch 73, against it (petitioner)
involving the same issues and that the case, docketed as Civil Case No. 94-3426, was dismissed on January 15, 1996 for lack of
interest. Respondent filed a Reply
33
dated July 18, 2001, asserting that petitioner prayed for the dismissal of the first case filed on
November 28, 1994 (Civil Case No. 94-3426) on the ground of improper venue as the parties agreed in the deeds of conditional
sale that in case of litigation, the venue shall be in the courts of Manila. To prove its assertion, respondent attached to its Reply a
copy of petitioners Answer to the first Complaint in Civil Case No. 94-3426, which Answer included the written notice dated
March 17, 1978 and two notarial acts of rescission, both dated March 15, 1978, of the two conditional deeds of sale. Hence,
respondent is deemed to have had notice of the notarial rescission of the two conditional deeds of sale when it received
petitioners Answer to its first complaint filed with the RTC of Antipolo, since petitioners Answer included notices of notarial
rescission of the two conditional deeds of sale. The first complaint was filed six years earlier before this complaint was filed. As
stated earlier, the first complaint was dismissed without prejudice, because respondents counsel failed to appear at the pre-trial.
Since respondent already received notices of the notarial rescission of the conditional deeds of sale, together with petitioners
Answer to the first Complaint five years before it filed this case, it can no longer deny having received notices of the notarial
rescission in this case, as respondent admitted the same when it attached the notices of notarial rescission to its Reply in this
case. Consequently, respondent is not entitled to the relief granted by the Court of Appeals.
Under R.A. No. 6552, the right of the buyer to refund accrues only when he has paid at least two years of installments.
34
In this
case, respondent has paid less than two years of installments; hence, it is not entitled to a refund.
35

Moreover, petitioner raises the issue of improper venue and lack of jurisdiction of the RTC of Manila over the case. It contends
that the complaint involved real properties in Antipolo City and cancellation of titles; hence, it was improperly filed in the RTC of
Manila.
Petitioner's contention lacks merit, as petitioner and respondent stipulated in both Conditional Deeds of Sale that they mutually
agreed that in case of litigation, the case shall be filed in the courts of Manila.
36

Further, petitioner contends that the action has prescribed. Petitioner points out that the cause of action is based on a written
contract; hence, the complaint should have been brought within 10 years from the time the right of action accrues under Article
1144 of the Civil Code. Petitioner argues that it is evident on the face of the complaint and the two contracts of conditional sale
that the cause of action accrued in 1974; yet, the complaint for specific performance was filed after 27 years. Petitioner asserts
that the action has prescribed.
The contention is meritorious.
Section 1, Rule 9 of the 1997 Rules of Civil Procedure provides:
Section 1. Defense and objections not pleaded. - Defenses and objections not pleaded whether in a motion to dismiss or in the
answer are deemed waived. However, when it appears from the pleadings that the court has no jurisdiction over the subject
matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior
judgment or by statute of limitations, the court shall dismiss the claim.
37

In Gicano v. Gegato,
38
the Court held:
x x x (T)rial courts have authority and discretion to dismiss an action on the ground of prescription when the parties' pleadings or
other facts on record show it to be indeed time-barred; (Francisco v. Robles, Feb, 15,1954; Sison v. Mc Quaid, 50 O.G. 97; Bambao
v. Lednicky, Jan. 28, 1961;Cordova v. Cordova, Jan. 14, 1958; Convets, Inc. v. NDC, Feb. 28, 1958;32 SCRA 529; Sinaon v. Sorongan,
136 SCRA 408); and it may do so on the basis of a motion to dismiss (Sec. 1,f, Rule 16, Rules of Court), or an answer which sets
up such ground as an affirmative defense (Sec. 5, Rule16), or even if the ground is alleged after judgment on the merits, as in a
motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the defense has not been asserted at all, as where no
statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA 250;PNB v. Pacific Commission House, 27 SCRA 766;
Chua Lamco v.Dioso, et al., 97 Phil. 821);
or where a defendant has been declared in default (PNB v. Perez, 16 SCRA 270). What is essential only, to repeat, is that the facts
demonstrating the lapse of the prescriptive period, be otherwise sufficiently and satisfactorily apparent on the record; either in
the averments of the plaintiff's complaint, or otherwise established by the evidence.
39

Moreover, Dino v. Court of Appeals
40
held:
Even if the defense of prescription was raised for the first time on appeal in respondent's Supplemental Motion for
Reconsideration of the appellate court's decision, this does not militate against the due process right of the petitioners. On
appeal, there was no new issue of fact that arose in connection with the question of prescription, thus it cannot be said that
petitioners were not given the opportunity to present evidence in the trial court to meet a factual issue. Equally important,
petitioners had the opportunity to oppose the defense of prescription in their Opposition to the Supplemental Motion for
Reconsideration filed in the appellate court and in their Petition for Review in this Court.
41

In this case, petitioner raised the defense of prescription for the first time before this Court, and respondent had the opportunity
to oppose the defense of prescription in its Comment to the petition. Hence, the Court can resolve the issue of prescription as
both parties were afforded the opportunity to ventilate their respective positions on the matter. The Complaint shows that the
Conditional Deeds of Sale were executed on November 29, 1973, and payments were due on both Conditional Deeds of Sale on
November 15, 1974. Article 1144
42
of the Civil Code provides that actions based upon a written contract must be brought within
ten years from the time the right of action accrues. Non-fulfillment of the obligation to pay on the last due date, that is, on
November 15, 1974, would give rise to an action by the vendor, which date of reckoning may also apply to any action by the
vendee to determine his right under R.A. No. 6552. The vendee, respondent herein, filed this case on March 16, 2001, which is
clearly beyond the 10-year prescriptive period; hence, the action has prescribed.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated December 11, 2006, in CA-G.R. CV No. 85877
and its Resolution dated September 4, 2007 are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Manila,
Branch I, dated August 1, 2005 in Civil Case No. 01-100411, dismissing the case for lack of merit, is REINSTATED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

G.R. No. 160322 August 24, 2011
PILIPINO TELEPHONE CORPORATION, Petitioner,
vs.
RADIOMARINE NETWORK (SMARTNET) PHILIPPINES, INC., Respondent.
D E C I S I O N
ABAD, J.:
This case is about a partys right to summary judgment when the pleadings show that there are no genuine issues of fact to be
tried.
The Facts and the Case
On December 11, 1996 petitioner Pilipino Telephone Corporation (Piltel) expressed its willingness, on purely best effort, to buy in
1997 from respondent Radiomarine Network, Inc. (Smartnet) 300,000 units of various brands of cellular phones and accessories
(Motorola, Mitsubishi, and Ericsson).
1

On the following day, December 12, 1996, Piltel agreed to sell to Smartnet a 3,500-square meter lot,
2
known as the Valgoson
Property, in Makati City for P560 million. Smartnet agreed to pay Piltel P180 million as down payment with the balance of P380
million to be partly set off against the obligations that Piltel was to incur from its projected purchase of cellular phones and
accessories from Smartnet. Smartnet agreed to settle any unpaid portion of the purchase price of the land after the set off on or
about April 30, 1997.
The contract to sell between the parties provides:
The total consideration of FIVE HUNDRED SIXTY MILLION PESOS (P560,000,000.00) shall be paid by the VENDEE [Smartnet],
without the need of any demand, to the VENDOR [Piltel] in the following manner:
(a) a downpayment in the amount of ONE HUNDRED EIGHTY MILLION (P180,000,000.00) PESOS, to be paid on or before
December 28, 1996;
(b) Any and all outstanding payables which the VENDOR [Piltel] owes to the VENDEE [Smartnet] in consideration of the
cellular phone units and accessories ordered by the VENDOR [Piltel] and delivered by the VENDEE [Smartnet] between
the initial downpayment date i.e. December 28, 1996 and April 30, 1997, shall be credited to the VENDEE [Smartnet] as
additional payment of the purchase price.
(c) The remaining balance, after deducting (a) and (b) above, shall be paid on or about April 30, 1997. It is expressly
understood however, that the VENDOR [Piltel] shall submit to the VENDEE [Smartnet], on or about April 20, 1997, a
Statement of Account updating the deliveries of cellular phones and its outstanding amount in order that the VENDEE
[Smartnet] can prepare the final payment. In this way, the amount of final payment shall be made to the VENDOR [Piltel]
on or before April 30, 1997. Should the VENDOR [Piltel] be delayed in the submission of the said Statement on the
stipulated date, the date of payment of the remaining balance shall be automatically adjusted for a period equivalent to
the number of days by which the VENDOR [Piltel] is delayed in the submission thereof.
3

The parties also agreed on a rescission and forfeiture clause
4
which provided that, if Smartnet fails to pay the full price of the
land within the stipulated period and within five days after receipt of a notice of delinquency, it would automatically forfeit to
Piltel 10% of the P180 million down payment or P18 million and the contract shall be without force and effect.
Smartnet failed to pay the P380 million balance of the purchase price on or about the date it fell due. On December 19, 1997
Piltel returned P50 million to Smartnet, a portion of the P180 million down payment that it received. Smartnet later requested
Piltel for the return of the remaining P130 million but the latter failed to do so.
5

On December 1, 1999 Smartnet filed a complaint
6
against Piltel for rescission of their contract to sell involving the Valgoson
Property or its partial specific performance before the Regional Trial Court (RTC)
7
of Makati City in Civil Case 99-2041. Smartnet
alleged, among other things, that it withheld payment of the balance of the purchase price of the subject property because Piltel
reneged on its commitment to purchase from Smartnet 300,000 units of cellular phones and accessories.
Smartnet asked the court to (a) order Piltel to convey to Smartnet at least 32% interest in the Valgoson Property, representing
the value of its down payment of P180 million or, in the alternative, order Piltel to return to Smartnet its P180 million down
payment plus interest; (b) order Piltel to pay Smartnet P81,300,764.96, representing the value of the 300,000 units of various
cellular phones which it acquired pursuant to Piltels commitment to buy them but which commitment Piltel disregarded, plus
interest, as actual and compensatory damages; and (c) order Piltel to pay Smartnet P500,000.00 in attorneys fees.
In its answer with counterclaims,
8
Piltel claimed that the agreement to purchase cellular phones and accessories was not part of
its contract with Smartnet for the sale of the Valgoson Property and that Piltel committed to buy equipment from Smartnet only
on a best effort basis. For this reason, Piltel pointed out, Smartnet did not have the power to rescind the contract to sell the
Valgoson Property and, hence, cannot invoke that contracts rescission and forfeiture clause. Piltel sought full payment by
Smartnet of the purchase price for the Valgoson Property, moral damages, exemplary damages, and litigation expenses.
On October 3, 2000 Smartnet filed a motion for partial summary judgment
9
for the return of the down payment it paid Piltel. The
RTC granted the motion on November 13, 2000
10
and ordered Piltel to return the P180 million down payment that it received
less the forfeited amount of P18 million and the cash advance of P50 million or a net of P112 million, with interest at 6% per
annum from the time of the extrajudicial demand on it on October 20, 1998 until finality of the judgment and an additional 12%
legal interest after the judgment becomes final and executory until the same is satisfied. Piltel filed a motion for reconsideration
which the RTC denied for lack of merit on January 30, 2001.
On March 15, 2001 Smartnet filed a manifestation and motion, withdrawing its two remaining causes of action and praying for
the issuance of a writ of execution. On March 20, 2001 it filed an alternative motion for execution pending appeal of the RTCs
partial decision.
On April 4, 2001 Piltel filed with the Court of Appeals (CA)
11
a special civil action for certiorari with application for a temporary
restraining order and a writ of preliminary injunction. Piltel alleged that the RTC presiding judge, Reinato G. Quilala, gravely
abused his discretion when he issued a partial summary judgment in the case and denied Piltels motion for reconsideration. But
the CA dismissed the petition, prompting Piltel to challenge such dismissal before this Court in G.R. 152092.
Meantime, on April 23, 2001 the RTC granted (a) Smartnets motion to withdraw its remaining causes of action and (b) its motion
for execution pending appeal.
12
Consequently, a writ of execution was issued on April 24, 2001.
On April 25, 2001 Piltel filed a notice of appeal to the CA from the judgment of November 13, 2000 and from the April 23, 2001
Order that allowed execution pending appeal. The appeal to the CA was docketed as CA-G.R. CV 71805.
On April 26, 2001 Piltel filed with the RTC a motion to defer execution pending appeal upon the posting of a supersedeas bond.
The RTC denied the motion. Piltel filed a motion for reconsideration but the court denied it on August 14, 2001
13
and directed
Piltel to pay 12% interest on the judgment amount from April 23, 2001, when it allowed the execution pending appeal. Piltel filed
a supplemental notice of appeal to the CA from this last order.
On June 11, 2003 the CA dismissed Piltels appeal in CA-G.R. CV 71805.
14
The appellate court held that the RTC did not err when
it granted summary judgment since there were no genuine issues involved in the case. The CA said that Smartnets failure to pay
the balance of the purchase price ipso facto avoids the contract to sell. With the denial of its motion for reconsideration,
15
Piltel
filed this petition under Rule 45 of the Rules of Court.
Meantime, the Court in G.R. 152092
16
denied Piltels petition on August 4, 2010. The Court affirmed the CAs ruling in CA-G.R. SP
64155 that appeal, and not certiorari, is the proper remedy. Moreover, it held that Piltel committed forum shopping when it filed
a petition for certiorari and a notice of appeal to assail the same resolutions and orders of the RTC.
With the denial of G.R. 152092, the Court is now left with this petition assailing the CAs dismissal of Piltels appeal in CA-G.R. CV
71805.
The Issue Presented
The core issue for resolution is whether or not there are genuine issues of fact to be tried in this case.
The Courts Ruling
A genuine issue of fact is that which requires the presentation of evidence, as distinguished from a sham, fictitious, contrived or
false issue. When the facts as pleaded appear uncontested or undisputed, then there is no real or genuine issue. Summary
judgment is proper in such a case.
17

Here, Piltel contends that summary judgment is out of place because the parties raise factual issues of fraud and breach of
contract. Although their contract has a built-in rescission and forfeiture clause, this becomes operative only upon the occurrence
of the following conditions: 1) Piltel sends a Statement of Account to Smartnet; 2) Smartnet fails to pay within 10 days from
receipt of the statement; 3) Piltel sends a Notice of Delinquency to Smartnet; and 4) Smartnet fails to pay within five days from
receipt of the notice.
The rescission and forfeiture clause thus reads:
In case the VENDEE fails to fully pay, within the stipulated period, the balance of the total consideration under Article 2(c) of this
Contract to Sell, the VENDOR shall send a notice of delinquency to the VENDEE. Failure on the part of the VENDEE to pay within
five (5) days from receipt of said notice, ten (10%) percent of the downpayment or EIGHTEEN MILLION PESOS (P18,000,000.00)
PESOS, Philippine Currency shall automatically be forfeited in favor of the VENDOR and the Contract to Sell shall be without
force and effect.
18

Notably, however, both Piltel and Smartnet admit that they entered into a contract to sell covering the Valgoson Property; that
Smartnet agreed to pay Piltel P560 million for it, with a down payment of P180 million; and that Smartnet failed to pay the
balance of the purchase price on or about April 30, 1997.
With these common admissions, it is clear that there are no genuine issues of fact as to the existence and nature of the contract
to sell as well as Smartnets failure to pay the balance of the purchase price within the agreed period. Thus, the RTC was correct
in skipping trial and deciding the case through a summary judgment based on the undisputed facts.
Smartnets allegations respecting fraud and breach of contract referred to what appears to be Piltels non-binding promise to
buy cellular phones and accessories from Smartnet. These are matters independent of the parties agreement concerning Piltels
sale of the Valgoson Property to Smartnet. The contract to sell of such property was not legally linked or made dependent on the
aborted cellular phone deal between the parties. Indeed, Smartnet dropped with leave of court its causes of action relating to
such deal.
All that matters is that since Smartnet failed to pay the balance of the purchase price, automatic rescission set in and this placed
Piltel under an obligation to return the down payment it received, less the portion that it forfeited due to Smartnets default.
Consequently, it is but proper for Piltel to fully abide by such obligation. Piltel cannot avoid rescission since it in fact partially
abided by rescissions consequences when it returned to Smartnet on December 19, 1997 a P50 million portion of the down
payment it received.
By returning part of the down payment, it is clear that Piltel recognized that the contract to sell the Valgoson Property had
reached the point of automatic rescission. Piltel is, therefore, in estoppel to deny rescission based on a claim that it had not yet
sent a statement of account or a notice of delinquency to Smartnet regarding the latters default. Such statement of account and
notice of delinquency had become academic.
Piltel argues that Smartnet cannot, as a defaulting buyer, rescind the contract to sell between them by the simple act of refusing
to pay. But, Smartnets nonpayment of the full price of the property was not an act of rescission. It was but an event that
rendered the contract to sell without force and effect. In a contract to sell, the prospective seller binds himself to part with his
property only upon fulfillment of the condition agreed, in this case, the payment in full of the purchase price. If this condition is
not fulfilled, the seller is then released from his obligation to sell.
As the Court said in Heirs of Cayetano Pangan and Consuelo Pangan v. Perreras,
19
the payment of the purchase price in a
contract to sell is a positive suspensive condition, the failure of which is not a breach but a situation that results in the
cancellation of the contract. Strictly speaking, therefore, there can be no rescission or resolution of an obligation that is still non-
existent due to the non-happening of the suspensive condition.
20

Likewise, a cause of action for specific performance does not arise where the contract to sell has been cancelled due to
nonpayment of the purchase price.
21
Smartnet obviously cannot demand title to the Valgoson Property because it did not pay
the purchase price in full. For its part, Piltel also cannot insist on full payment since Smartnets failure to pay resulted in the
cancellation of the contract to sell. Indeed, in the case of Ayala Life Assurance, Inc. v. Ray Burton Devt. Corp.,
22
the Court rejected
the sellers demand for full payment and instead ordered it to refund to the buyer all sums previously paid. The order to refund is
correct based on the principle that no one should unjustly enrich himself at the expense of another.
23
1avvphil
Lastly, the Court sustains the CAs imposition of 12% interest pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals.
24

WHEREFORE, premises considered, the Court DENIES the petition and AFFIRMS the June 11, 2003 Decision and the October 6,
2003 Resolution of the Court of Appeals in CA-G.R. CV 71805.
SO ORDERED.

G.R. No. 153820 October 16, 2009
DELFIN TAN, Petitioner,
vs.
ERLINDA C. BENOLIRAO, ANDREW C. BENOLIRAO, ROMANO C. BENOLIRAO, DION C. BENOLIRAO, SPS. REYNALDO
TANINGCO and NORMA D. BENOLIRAO, EVELYN T. MONREAL, and ANN KARINA TANINGCO,Respondents.
D E C I S I O N
Is an annotation made pursuant to Section 4, Rule 74 of the Rules of Court (Rules) on a certificate of title covering real property
considered an encumbrance on the property? We resolve this question in the petition for review on certiorari
1
filed by Delfin Tan
(Tan) to assail the decision of the Court of Appeals (CA) in CA-G.R. CV No. 52033
2
and the decision of the Regional Trial Court
(RTC)
3
that commonly declared the forfeiture of his P200,000.00 down payment as proper, pursuant to the terms of his contract
with the respondents.
THE ANTECEDENTS
The facts are not disputed. Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and Norma Taningco were the
co-owners of a 689-square meter parcel of land (property) located in Tagaytay City and covered by Transfer Certificate of Title
(TCT) No. 26423. On October 6, 1992, the co-owners executed a Deed of Conditional Sale over the property in favor of Tan for
the price of P1,378,000.00. The deed stated:
a) An initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND PESOS, Philippine Currency, upon signing of
this contract; then the remaining balance of ONE MILLION ONE HUNDRED SEVENTY EIGHT THOUSAND (P1,178,000.00)
PESOS, shall be payable within a period of one hundred fifty (150) days from date hereof without interest;
b) That for any reason, BUYER fails to pay the remaining balance within above mentioned period, the BUYER shall have a
grace period of sixty (60) days within which to make the payment, provided that there shall be an interest of 15% per
annum on the balance amount due from the SELLERS;
c) That should in case (sic) the BUYER fails to comply with the terms and conditions within the above stated grace period,
then the SELLERS shall have the right to forfeit the down payment, and to rescind this conditional sale without need of
judicial action;
d) That in case, BUYER have complied with the terms and conditions of this contract, then the SELLERS shall execute and
deliver to the BUYER the appropriate Deed of Absolute Sale;
Pursuant to the Deed of Conditional Sale, Tan issued and delivered to the co-owners/vendors Metrobank Check No. 904407
for P200,000.00 as down payment for the property, for which the vendors issued a corresponding receipt.
On November 6, 1992, Lamberto Benolirao died intestate. Erlinda Benolirao (his widow and one of the vendors of the property)
and her children, as heirs of the deceased, executed an extrajudicial settlement of Lambertos estate on January 20, 1993. On the
basis of the extrajudicial settlement, a new certificate of title over the property, TCT No. 27335, was issued on March 26, 1993 in
the names of the Spouses Reynaldo and Norma Taningco and Erlinda Benolirao and her children. Pursuant to Section 4, Rule 74
of the Rules, the following annotation was made on TCT No. 27335:
x x x any liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years,
with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao
As stated in the Deed of Conditional Sale, Tan had until March 15, 1993 to pay the balance of the purchase price. By agreement
of the parties, this period was extended by two months, so Tan had until May 15, 1993 to pay the balance. Tan failed to pay and
asked for another extension, which the vendors again granted. Notwithstanding this second extension, Tan still failed to pay the
remaining balance due on May 21, 1993. The vendors thus wrote him a letter demanding payment of the balance of the
purchase price within five (5) days from notice; otherwise, they would declare the rescission of the conditional sale and the
forfeiture of his down payment based on the terms of the contract.
Tan refused to comply with the vendors demand and instead wrote them a letter (dated May 28, 1993) claiming that the
annotation on the title, made pursuant to Section 4, Rule 74 of the Rules, constituted an encumbrance on the property that
would prevent the vendors from delivering a clean title to him. Thus, he alleged that he could no longer be required to pay the
balance of the purchase price and demanded the return of his down payment.
When the vendors refused to refund the down payment, Tan, through counsel, sent another demand letter to the vendors on
June 18, 1993. The vendors still refused to heed Tans demand, prompting Tan to file on June 19, 1993 a complaint with the RTC
of Pasay City for specific performance against the vendors, including Andrew Benolirao, Romano Benolirao, Dion Benolirao as
heirs of Lamberto Benolirao, together with Evelyn Monreal and Ann Karina Taningco (collectively, the respondents). In his
complaint, Tan alleged that there was a novation of the Deed of Conditional Sale done without his consent since the annotation
on the title created an encumbrance over the property. Tan prayed for the refund of the down payment and the rescission of the
contract.
On August 9, 1993, Tan amended his Complaint, contending that if the respondents insist on forfeiting the down payment, he
would be willing to pay the balance of the purchase price provided there is reformation of the Deed of Conditional Sale. In the
meantime, Tan caused the annotation on the title of a notice of lis pendens.
On August 21, 1993, the respondents executed a Deed of Absolute Sale over the property in favor of Hector de Guzman (de
Guzman) for the price of P689,000.00.
Thereafter, the respondents moved for the cancellation of the notice of lis pendens on the ground that it was inappropriate since
the case that Tan filed was a personal action which did not involve either title to, or possession of, real property. The RTC issued
an order dated October 22, 1993 granting the respondents motion to cancel the lis pendens annotation on the title.
Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman registered the property and TCT No. 28104 was issued
in his name. Tan then filed a motion to carry over the lis pendens annotation to TCT No. 28104 registered in de Guzmans name,
but the RTC denied the motion.
On September 8, 1995, after due proceedings, the RTC rendered judgment ruling that the respondents forfeiture of Tans down
payment was proper in accordance with the terms and conditions of the contract between the parties.
4
The RTC ordered Tan to
pay the respondents the amount of P30,000.00, plus P1,000.00 per court appearance, as attorneys fees, and to pay the cost of
suit.
On appeal, the CA dismissed the petition and affirmed the ruling of the trial court in toto. Hence, the present petition.
THE ISSUES
Tan argues that the CA erred in affirming the RTCs ruling to cancel the lis pendens annotation on TCT No. 27335. Due to the
unauthorized novation of the agreement, Tan presented before the trial court two alternative remedies in his complaint either
the rescission of the contract and the return of the down payment, or the reformation of the contract to adjust the payment
period, so that Tan will pay the remaining balance of the purchase price only after the lapse of the required two-year
encumbrance on the title. Tan posits that the CA erroneously disregarded the alternative remedy of reformation of contract when
it affirmed the removal of the lis pendens annotation on the title.
Tan further contends that the CA erred when it recognized the validity of the forfeiture of the down payment in favor of the
vendors. While admitting that the Deed of Conditional Sale contained a forfeiture clause, he insists that this clause applies only if
the failure to pay the balance of the purchase price was through his own fault or negligence. In the present case, Tan claims that
he was justified in refusing to pay the balance price since the vendors would not have been able to comply with their obligation
to deliver a "clean" title covering the property.
Lastly, Tan maintains that the CA erred in ordering him to pay the respondents P30,000.00, plus P1,000.00 per court appearance
as attorneys fees, since he filed the foregoing action in good faith, believing that he is in the right.
The respondents, on the other hand, assert that the petition should be dismissed for raising pure questions of fact, in
contravention of the provisions of Rule 45 of the Rules which provides that only questions of law can be raised in petitions for
review on certiorari.
THE COURTS RULING
The petition is granted.
No new issues can be raised in the Memorandum
At the onset, we note that Tan raised the following additional assignment of errors in his Memorandum: (a) the CA erred in
holding that the petitioner could seek reformation of the Deed of Conditional Sale only if he paid the balance of the purchase
price and if the vendors refused to execute the deed of absolute sale; and (b) the CA erred in holding that the petitioner was
estopped from asking for the reformation of the contract or for specific performance.
The Courts September 27, 2004 Resolution expressly stated that "No new issues may be raised by a party in his/its
Memorandum." Explaining the reason for this rule, we said that:
The raising of additional issues in a memorandum before the Supreme Court is irregular, because said memorandum is supposed
to be in support merely of the position taken by the party concerned in his petition, and the raising of new issues amounts to the
filing of a petition beyond the reglementary period. The purpose of this rule is to provide all parties to a case a fair opportunity
to be heard. No new points of law, theories, issues or arguments may be raised by a party in the Memorandum for the reason
that to permit these would be offensive to the basic rules of fair play, justice and due process.
5

Tan contravened the Courts explicit instructions by raising these additional errors. Hence, we disregard them and focus instead
on the issues previously raised in the petition and properly included in the Memorandum.
Petition raises a question of law
Contrary to the respondents claim, the issue raised in the present petition defined in the opening paragraph of this Decision
is a pure question of law. Hence, the petition and the issue it presents are properly cognizable by this Court.
Lis pendens annotation not proper in personal actions
Section 14, Rule 13 of the Rules enumerates the instances when a notice of lis pendens can be validly annotated on the title to
real property:
Sec. 14. Notice of lis pendens.
In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when affirmative
relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a
notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense,
and a description of the property in that province affected thereby. Only from the time of filing such notice for record shall a
purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the
action, and only of its pendency against the parties designated by their real names.
The notice of lis pendens hereinabove mentioned may be cancelled only upon order of the court, after proper showing that the
notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused
it to be recorded.
The litigation subject of the notice of lis pendens must directly involve a specific property which is necessarily affected by the
judgment.
6

Tans complaint prayed for either the rescission or the reformation of the Deed of Conditional Sale. While the Deed does have
real property for its object, we find that Tans complaint is an in personam action, as Tan asked the court to compel the
respondents to do something either to rescind the contract and return the down payment, or to reform the contract by
extending the period given to pay the remaining balance of the purchase price. Either way, Tan wants to enforce his personal
rights against the respondents, not against the property subject of the Deed. As we explained in Domagas v. Jensen:
7

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in personam,
or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a
proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person,
although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or
dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the
judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this character are suits to
compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him.
Furthermore, as will be explained in detail below, the contract between the parties was merely a contract to sell where the
vendors retained title and ownership to the property until Tan had fully paid the purchase price. Since Tan had no claim of
ownership or title to the property yet, he obviously had no right to ask for the annotation of a lis pendens notice on the title of
the property.
Contract is a mere contract to sell
A contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties
call it.
8
Article 1485 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or promised.
9

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the
prospective buyer upon fulfillment of the condition agreed, i.e., full payment of the purchase price.
10
A contract to sell may not
even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the
sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is
present, although it is conditioned upon the happening of a contingent event which may or may not occur.
11

In the present case, the true nature of the contract is revealed by paragraph D thereof, which states:
x x x
d) That in case, BUYER has complied with the terms and conditions of this contract, then the SELLERS shall execute and deliver to
the BUYER the appropriate Deed of Absolute Sale;
x x x
Jurisprudence has established that where the seller promises to execute a deed of absolute sale upon the completion by the
buyer of the payment of the price, the contract is only a contract to sell.
12
Thus, while the contract is denominated as a Deed of
Conditional Sale, the presence of the above-quoted provision identifies the contract as being a mere contract to sell.
A Section 4, Rule 74 annotation is an encumbrance on the property
While Tan admits that he refused to pay the balance of the purchase price, he claims that he had valid reason to do so the
sudden appearance of an annotation on the title pursuant to Section 4, Rule 74 of the Rules, which Tan considered an
encumbrance on the property.
We find Tans argument meritorious.
The annotation placed on TCT No. 27335, the new title issued to reflect the extrajudicial partition of Lamberto Benoliraos estate
among his heirs, states:
x x x any liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years,
with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao [Emphasis supplied.]
This annotation was placed on the title pursuant to Section 4, Rule 74 of the Rules, which reads:
Sec. 4. Liability of distributees and estate. - If it shall appear at any time within two (2) years after the settlement and distribution
of an estate in accordance with the provisions of either of the first two sections of this rule, that an heir or other person has been
unduly deprived of his lawful participation in the estate, such heir or such other person may compel the settlement of the estate
in the courts in the manner hereinafter provided for the purpose of satisfying such lawful participation. And if withinthe same
time of two (2) years, it shall appear that there are debts outstanding against the estate which have not been paid, or
that an heir or other person has been unduly deprived of his lawful participation payable in money, the court having
jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of such debts or lawful
participation and order how much and in what manner each distributee shall contribute in the payment thereof, and
may issue execution, if circumstances require, against the bond provided in the preceding section or against the real
estate belonging to the deceased, or both. Such bond and such real estate shall remain charged with a liability to creditors,
heirs, or other persons for the full period of two (2) years after such distribution, notwithstanding any transfers of real estate that
may have been made. [Emphasis supplied.]
Senator Vicente Francisco discusses this provision in his book The Revised Rules of Court in the Philippines,
13
where he states:
The provision of Section 4, Rule 74 prescribes the procedure to be followed if within two years after an extrajudicial partition or
summary distribution is made, an heir or other person appears to have been deprived of his lawful participation in the estate, or
some outstanding debts which have not been paid are discovered. When the lawful participation of the heir is not payable in
money, because, for instance, he is entitled to a part of the real property that has been partitioned, there can be no other
procedure than to cancel the partition so made and make a new division, unless, of course, the heir agrees to be paid the value
of his participation with interest. But in case the lawful participation of the heir consists in his share in personal property of
money left by the decedent, or in case unpaid debts are discovered within the said period of two years, the procedure is not to
cancel the partition, nor to appoint an administrator to re-assemble the assets, as was allowed under the old Code, but the court,
after hearing, shall fix the amount of such debts or lawful participation in proportion to or to the extent of the assets they have
respectively received and, if circumstances require, it may issue execution against the real estate belonging to the decedent, or
both. The present procedure is more expedient and less expensive in that it dispenses with the appointment of an administrator
and does not disturb the possession enjoyed by the distributees.
14
[Emphasis supplied.]
An annotation is placed on new certificates of title issued pursuant to the distribution and partition of a decedents real
properties to warn third persons on the possible interests of excluded heirs or unpaid creditors in these properties. The
annotation, therefore, creates a legal encumbrance or lien on the real property in favor of the excluded heirs or creditors. Where
a buyer purchases the real property despite the annotation, he must be ready for the possibility that the title could be subject to
the rights of excluded parties. The cancellation of the sale would be the logical consequence where: (a) the annotation clearly
appears on the title, warning all would-be buyers; (b) the sale unlawfully interferes with the rights of heirs; and (c) the rightful
heirs bring an action to question the transfer within the two-year period provided by law.
As we held in Vda. de Francisco v. Carreon:
15

And Section 4, Rule 74 xxx expressly authorizes the court to give to every heir his lawful participation in the real estate
"notwithstanding any transfers of such real estate" and to "issue execution" thereon. All this implies that, when within the
amendatory period the realty has been alienated, the court in re-dividing it among the heirs has the authority to direct
cancellation of such alienation in the same estate proceedings, whenever it becomes necessary to do so. To require the
institution of a separate action for such annulment would run counter to the letter of the above rule and the spirit of these
summary settlements. [Emphasis supplied.]
Similarly, in Sps. Domingo v. Roces,
16
we said:
The foregoing rule clearly covers transfers of real property to any person, as long as the deprived heir or creditor vindicates his
rights within two years from the date of the settlement and distribution of estate. Contrary to petitioners contention, the effects
of this provision are not limited to the heirs or original distributees of the estate properties, but shall affect any transferee of the
properties. [Emphasis supplied.]
Indeed, in David v. Malay,
17
although the title of the property had already been registered in the name of the third party buyers,
we cancelled the sale and ordered the reconveyance of the property to the estate of the deceased for proper disposal among his
rightful heirs.
By the time Tans obligation to pay the balance of the purchase price arose on May 21, 1993 (on account of the extensions
granted by the respondents), a new certificate of title covering the property had already been issued on March 26, 1993, which
contained the encumbrance on the property; the encumbrance would remain so attached until the expiration of the two-year
period. Clearly, at this time, the vendors could no longer compel Tan to pay the balance of the purchase since considering they
themselves could not fulfill their obligation to transfer a clean title over the property to Tan.
Contract to sell is not rescinded but terminated
What then happens to the contract?
We have held in numerous cases
18
that the remedy of rescission under Article 1191 cannot apply to mere contracts to sell. We
explained the reason for this in Santos v. Court of Appeals,
19
where we said:
[I]n a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full.
Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition.Failure to pay the price agreed
upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title
from acquiring an obligatory force. This is entirely different from the situation in a contract of sale, where non-payment of the
price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of
the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the
vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the
vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. x x
x Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. As to
Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property. Neither provision
is applicable [to a contract to sell]. [Emphasis supplied.]
We, therefore, hold that the contract to sell was terminated when the vendors could no longer legally compel Tan to pay the
balance of the purchase price as a result of the legal encumbrance which attached to the title of the property. Since Tans refusal
to pay was due to the supervening event of a legal encumbrance on the property and not through his own fault or negligence,
we find and so hold that the forfeiture of Tans down payment was clearly unwarranted.
Award of Attorneys fees
As evident from our previous discussion, Tan had a valid reason for refusing to pay the balance of the purchase price for the
property. Consequently, there is no basis for the award of attorneys fees in favor of the respondents.
On the other hand, we award attorneys fees in favor of Tan, since he was compelled to litigate due to the respondents refusal to
return his down payment despite the fact that they could no longer comply with their obligation under the contract to sell, i.e., to
convey a clean title. Given the facts of this case, we find the award ofP50,000.00 as attorneys fees proper.
Monetary award is subject to legal interest
Undoubtedly, Tan made a clear and unequivocal demand on the vendors to return his down payment as early as May 28, 1993.
Pursuant to our definitive ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,
20
we hold that the vendors should return
the P200,000.00 down payment to Tan, subject to the legal interest of 6% per annum computed from May 28, 1993, the date of
the first demand letter.1avvphi1
Furthermore, after a judgment has become final and executory, the rate of legal interest, whether the obligation was in the form
of a loan or forbearance of money or otherwise, shall be 12% per annum from such finality until its satisfaction. Accordingly, the
principal obligation of P200,000.00 shall bear 6% interest from the date of first demand or from May 28, 1993. From the date the
liability for the principal obligation and attorneys fees has become final and executory, an annual interest of 12% shall be
imposed on these obligations until their final satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.
WHEREFORE, premises considered, we hereby GRANT the petition and, accordingly, ANNUL and SET ASIDE the May 30, 2002
decision of the Court of Appeals in CA-G.R. CV No. 52033. Another judgment is rendered declaring the Deed of Conditional Sale
terminated and ordering the respondents to return the P200,000.00 down payment to petitioner Delfin Tan, subject to legal
interest of 6% per annum, computed from May 28, 1993. The respondents are also ordered to pay, jointly and severally,
petitioner Delfin Tan the amount of P50,000.00 as and by way of attorneys fees. Once this decision becomes final and executory,
respondents are ordered to pay interest at 12% per annum on the principal obligation as well as the attorneys fees, until full
payment of these amounts. Costs against the respondents.
SO ORDERED.
ARTURO D. BRION
Associate Justice

HEIRS OF ARTURO REYES, represented by
Evelyn R. San Buenaventura,
Petitioners,




- versus -




ELENA SOCCO-BELTRAN,
Respondent.
G. R. No. 176474


Present:

YNARES-
SANTIAGO,J., Chai
rperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:

November 27, 2008
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


CHICO-NAZARIO, J.:


This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision
[1]
dated 31 January
2006 rendered by the Court of Appeals in CA-G.R. SP No. 87066, which affirmed the Decision
[2]
dated 30 June 2003 of the Office
of the President, in O.P. Case No. 02-A-007, approving the application of respondent ElenaSocco-Beltran to purchase the subject
property.

The subject property in this case is a parcel of land originally identified as Lot No. 6-B, situated in Zamora
Street, Dinalupihan, Bataan, with a total area of 360 square meters. It was originally part of a larger parcel of land, measuring
1,022 square meters, allocated to the Spouses Marcelo Laquian and Constancia Socco (Spouses Laquian), who paid for the same
with Japanese money. When Marcelo died, the property was left to his wife Constancia. Upon Constancias subsequent death,
she left the original parcel of land, along with her other property, with her heirs her siblings, namely: Filomena Eliza Socco,
Isabel Socco de Hipolito, Miguel R. Socco, and Elena Socco-Beltran.
[3]
Pursuant to anunnotarized document entitled
Extrajudicial Settlement of the Estate of the Deceased Constancia R. Socco, executed by Constancias heirs sometime in 1965,
the parcel of land was partitioned into three lotsLot No. 6-A, Lot No. 6-B, and Lot No. 6-C.
[4]
The subject property, Lot No. 6-B,
was adjudicated to respondent, but no title had been issued in her name.

On 25 June 1998, respondent Elena Socco-Beltran filed an application for the purchase of Lot No. 6-B before the
Department of Agrarian Reform (DAR), alleging that it was adjudicated in her favor in the extra-judicial settlement
of Constancia Soccos estate.
[5]


Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to respondents petition before the DAR on the
ground that the subject property was sold by respondents brother, Miguel R. Socco, in favor of their father, Arturo Reyes, as
evidenced by the Contract to Sell, dated 5 September 1954, stipulating that:
[6]


That I am one of the co-heirs of the Estate of the deceased Constancia Socco; and that I am to
inherit as such a portion of her lot consisting of Four Hundred Square Meters (400) more or less located on the
(sic) Zamora St., Municipality of Dinalupihan, Province of Bataan, bounded as follows:

x x x x

That for or in consideration of the sum of FIVE PESOS (P5.00) per square meter, hereby sell, convey and
transfer by way of this conditional sale the said 400 sq.m. more or less unto Atty. Arturo C. Reyes, his heirs,
administrator and assigns x x x. (Emphasis supplied.)


Petitioners averred that they took physical possession of the subject property in 1954 and had been uninterrupted in their
possession of the said property since then.

Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office conducted an investigation, the results
of which were contained in her Report/ Recommendation dated 15 April 1999. Other than recounting the afore-mentioned facts,
Legal Officer Pinlac also made the following findings in her Report/Recommendation:
[7]


Further investigation was conducted by the undersigned and based on the documentary evidence
presented by both parties, the following facts were gathered: that the house of [the] Reyes family is adjacent to
the landholding in question and portion of the subject property consisting of about 15 meters [were] occupied
by the heirs of Arturo Reyes were a kitchen and bathroom [were] constructed therein; on the remaining portion
a skeletal form made of hollow block[s] is erected and according to the heirs of late Arturo Reyes, this was
constructed since the year (sic) 70s at their expense; that construction of the said skeletal building was not
continued and left unfinished which according to the affidavit of Patricia Hipolito the Reyes family where (sic)
prevented by Elena Socco in their attempt of occupancy of the subject landholding; (affidavit of
Patricia Hipolito is hereto attached as Annex F); that Elena Socco cannot physically and personally occupy the
subject property because of the skeletal building made by the Reyes family who have been requesting that they
be paid for the cost of the construction and the same be demolished at the expense of Elena Socco; that
according to Elena Socco, [she] is willing to waive her right on the portion where [the] kitchen and bathroom is
(sic) constructed but not the whole of Lot [No.] 6-B adjudicated to her; that the Reyes family included the subject
property to the sworn statement of value of real properties filed before the municipality of Dinalupihan, Bataan,
copies of the documents are hereto attached as Annexes G and H; that likewise ElenaSocco has been
continuously and religiously paying the realty tax due on the said property.


In the end, Legal Officer Pinlac recommended the approval of respondents petition for issuance of title over the subject
property, ruling that respondent was qualified to own the subject property pursuant to Article 1091 of the New Civil
Code.
[8]
Provincial Agrarian Reform Officer (PARO) Raynor Taroy concurred in the said recommendation in
his Indorsement dated 22 April 1999.
[9]


In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta, however, dismissed respondents
petition for issuance of title over the subject property on the ground that respondent was not an actual tiller and had abandoned
the said property for 40 years; hence, she had already renounced her right to recover the same.
[10]
Thedispositive part of the
Order reads:

1. DISMISSING the claims of Elena Socco-Beltran, duly represented by Myrna Socco for lack of merit;

2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360 square meters, more or less,
situated Zamora Street, Dinalupihan, Bataan, in favor of the heirs of Arturo Reyes.

3. ORDERING the complainant to refrain from any act tending to disturb the peaceful possession of
herein respondents.

4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent documents for the issuance of
CLOA in favor of the heirs of Arturo Reyes.
[11]



Respondent filed a Motion for Reconsideration of the foregoing Order, which was denied by DAR Regional Director
Acosta in another Order dated 15 September 1999.
[12]


Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9 November 2001, the DAR Secretary
reversed the Decision of DAR Regional Director Acosta after finding that neither petitioners predecessor-in-interest, Arturo
Reyes, nor respondent was an actual occupant of the subject property. However, since it was respondent who applied to
purchase the subject property, she was better qualified to own said property as opposed to petitioners, who did not at all apply
to purchase the same. Petitioners were further disqualified from purchasing the subject property because they were not
landless. Finally, during the investigation of Legal Officer Pinlac, petitioners requested that respondent pay them the cost of the
construction of the skeletal house they built on the subject property. This was construed by the DAR Secretary as a waiver by
petitioners of their right over the subject property.
[13]
In the said Order, the DAR Secretary ordered that:

WHEREFORE, premises considered, the September 15, 1999 Order is hereby SET ASIDE and a new Order
is hereby issued APPROVING the application to purchase Lot [No.] 6-B of ElenaSocco-Beltran.
[14]



Petitioners sought remedy from the Office of the President by appealing the 9 November 2001 Decision of the DAR
Secretary. Their appeal was docketed as O.P. Case No. 02-A-007. On 30 June 2003, the Office of the President rendered its
Decision denying petitioners appeal and affirming the DAR Secretarys Decision.
[15]
The fallo of the Decision reads:

WHEREFORE, premises considered, judgment appealed from is AFFIRMED and the instant
appeal DISMISSED.
[16]



Petitioners Motion for Reconsideration was likewise denied by the Office of the President in a Resolution dated 30
September 2004.
[17]
In the said Resolution, the Office of the President noted that petitioners failed to allege in their motion the
date when they received the Decision dated 30 June 2003. Such date was material considering that the petitioners Motion for
Reconsideration was filed only on 14 April 2004, or almost nine months after the promulgation of the decision sought to be
reconsidered. Thus, it ruled that petitioners Motion for Reconsideration, filed beyond fifteen days from receipt of the decision to
be reconsidered, rendered the said decision final and executory.

Consequently, petitioners filed an appeal before the Court of Appeals, docketed as CA-G.R. SP No. 87066. Pending the
resolution of this case, the DAR already issued on8 July 2005 a Certificate of Land Ownership Award (CLOA) over the subject
property in favor of the respondents niece and representative, Myrna Socco-Beltran.
[18]
Respondent passed away on 21 March
2001,
[19]
but the records do not ascertain the identity of her legal heirs and her legatees.

Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its Decision, dated 31 January 2006,
affirming the Decision dated 30 June 2003 of the Office of the President. It held that petitioners could not have been actual
occupants of the subject property, since actual occupancy requires the positive act of occupying and tilling the land, not just the
introduction of an unfinished skeletal structure thereon. The Contract to Sell on which petitioners based their claim over the
subject property was executed by Miguel Socco, who was not the owner of the said property and, therefore, had no right to
transfer the same. Accordingly, the Court of Appeals affirmed respondents right over the subject property, which
was derived form the original allocatees thereof.
[20]
The fallo of the said Decision reads:

WHEREFORE, premises considered, the instant PETITION FOR REVIEW is DISMISSED. Accordingly, the
Decision dated 30 June 2003 and the Resolution dated 30 December 2004 both issued by the Office of the
President are hereby AFFIRMED in toto.
[21]



The Court of Appeals denied petitioners Motion for Reconsideration of its Decision in a Resolution dated 16 August
2006.
[22]


Hence, the present Petition, wherein petitioners raise the following issues:

I

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE OFFICE
OF THE PRESIDENT THAT THE SUBJECT LOT IS VACANT AND THAT PETITIONERS ARE NOT ACTUAL OCCUPANTS
THEREOF BY DENYING THE LATTERS CLAIM THAT THEY HAVE BEEN IN OPEN, CONTINUOUS,
EXCLUSIVE,NOTORIOUS AND AVDERSE POSSESSION THEREOF SINCE 1954 OR FOR MORE THAN THIRTY (30)
YEARS.


II

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT PETITIONERS CANNOT LEGALLY
ACQUIRE THE SUBJECT PROPERTY AS THEY ARE NOT CONSIDERED LANDLESS AS EVIDENCED BY A TAX
DECLARATION.

III

WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT WHATEVER RESERVATION WE HAVE
OVER THE RIGHT OF MYRNA SOCCO TO SUCCEED WAS ALREADY SETTLED WHEN NO LESS THAN MIGUEL
SOCCO (PREDECESSOR-IN INTEREST OF HEREIN PETITIONERS) EXECUTED HIS WAIVER OF RIGHT DATED APRIL
19, 2005 OVER THE SUBJECT PROPERTY IN FAVOR OF MYRNA SOCCO.

IV

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONERS MOTION FOR NEW TRIAL
THEREBY BRUSHING ASIDE THE FACT THAT MYRNA V. SOCCO-ARIZO GROSSLY MISREPRESENTED IN HER
INFORMATION SHEET OF BENEFICIARIES AND APPLICATION TO PURCHASE LOT IN LANDED ESTATES THAT SHE
IS A FILIPINO CITIZEN, WHEN IN TRUTH AND IN FACT, SHE IS ALREADY AN AMERICAN NATIONAL.
[23]



The main issue in this case is whether or not petitioners have a better right to the subject property over the
respondent. Petitioners claim over the subject property is anchored on the Contract to Sell executed between Miguel Socco and
Arturo Reyes on 5 September 1954. Petitioners additionally allege that they and their predecessor-in-interest, Arturo Reyes, have
been in possession of the subject lot since 1954 for an uninterrupted period of more than 40 years.

The Court is unconvinced.

Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was unmistakably stated in the
Contract and made clear to both parties thereto that the vendor, Miguel R. Socco, was not yet the owner of the subject property
and was merely expecting to inherit the same as his share as a co-heir of Constancias estate.
[24]
It was also declared in the
Contract itself that Miguel R. Soccos conveyance of the subject to the buyer, Arturo Reyes, was a conditional sale. It is, therefore,
apparent that the sale of the subject property in favor of Arturo Reyes was conditioned upon the event that Miguel Socco would
actually inherit and become the owner of the said property. Absent such occurrence, Miguel R. Socco never acquired ownership
of the subject property which he could validly transfer to Arturo Reyes.

Under Article 1459 of the Civil Code on contracts of sale, The thing must be licit and the vendor must have a right to
transfer ownership thereof at the time it is delivered. The law specifically requires that the vendor must have ownership of the
property at the time it is delivered. Petitioners claim that the property was constructively delivered to them in 1954 by virtue of
the Contract to Sell. However, as already pointed out by this Court, it was explicit in the Contract itself that, at the time it was
executed, Miguel R. Socco was not yet the owner of the property and was only expecting to inherit it. Hence, there was no valid
sale from which ownership of the subject property could have transferred from Miguel Socco to Arturo Reyes. Without acquiring
ownership of the subject property, Arturo Reyes also could not have conveyed the same to his heirs, herein petitioners.

Petitioners, nevertheless, insist that they physically occupied the subject lot for more than 30 years and, thus, they gained
ownership of the property through acquisitive prescription, citing Sandoval v. Insular Government
[25]
and San Miguel
Corporation v. Court of Appeals.
[26]


In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of Act No. 926, otherwise known as
the Land Registration Act, which required -- for the issuance of a certificate of title to agricultural public lands -- the open,
continuous, exclusive, and notorious possession and occupation of the same in good faith and under claim of ownership for
more than ten years. After evaluating the evidence presented, consisting of the testimonies of several witnesses and proof that
fences were constructed around the property, the Court in the afore-stated case denied the petition on the ground that
petitioners failed to prove that they exercised acts of ownership or were in open, continuous, and peaceful possession of the
whole land, and had caused it to be enclosed to the exclusion of other persons. It further decreed that whoever claims such
possession shall exercise acts of dominion and ownership which cannot be mistaken for the momentary and accidental
enjoyment of the property.
[27]


In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and undisputed possession of alienable
public land for the period prescribed by law creates the legal fiction whereby land ceases to be public land and is, therefore,
private property. It stressed, however, that the occupation of the land for 30 years must beconclusively established. Thus, the
evidence offered by petitioner therein tax declarations, receipts, and the sole testimony of the applicant for
registration, petitioners predecessor-in-interest who claimed to have occupied the land before selling it to the petitioner were
considered insufficient to satisfy the quantum of proof required to establish the claim of possession required for acquiring
alienable public land.
[28]


As in the two aforecited cases, petitioners herein were unable to prove actual possession of the subject property for the
period required by law. It was underscored in San Miguel Corporation that the open, continuous, exclusive, and notorious
occupation of property for more than 30 years must be no less than conclusive, such quantum of proof being necessary to avoid
the erroneous validation of actual fictitious claims of possession over the property that is being claimed.
[29]


In the present case, the evidence presented by the petitioners falls short of being conclusive. Apart from their self-
serving statement that they took possession of the subject property, the only proof offered to support their claim was a general
statement made in the letter
[30]
dated 4 February 2002 of Barangay Captain Carlos Gapero, certifying that Arturo Reyes was the
occupant of the subject property since peace time and at present. The statement is rendered doubtful by the fact that as early
as 1997, when respondent filed her petition for issuance of title before the DAR, Arturo Reyes had already died and was already
represented by his heirs, petitioners herein.

Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes occupied the premises for an
unspecified period of time, i.e., since peace time until the present, cannot prevail over Legal Officer Pinlacs more particular
findings in her Report/Recommendation. Legal Officer Pinlac reported that petitioners admitted that it was only in the 1970s
that they built the skeletal structure found on the subject property. She also referred to the averments made by
Patricia Hipolito in an Affidavit,
[31]
dated 26 February 1999, that the structure was left unfinished because respondent prevented
petitioners from occupying the subject property. Such findings disprove petitioners claims that their predecessor-in-interest,
Arturo Reyes, had been in open, exclusive, and continuous possession of the property since 1954. The adverted findings were
the result of Legal OfficerPinlacs investigation in the course of her official duties, of matters within her expertise which were later
affirmed by the DAR Secretary, the Office of the President, and the Court of Appeals. The factual findings of such administrative
officer, if supported by evidence, are entitled to great respect.
[32]


In contrast, respondents claim over the subject property is backed by sufficient evidence. Her predecessors-in-interest,
the spouses Laquian, have been identified as the original allocatees who have fully paid for the subject property. The subject
property was allocated to respondent in the extrajudicial settlement by the heirs of Constancias estate. The document entitled
Extra-judicial Settlement of the Estate of the Deceased Constancia Socco was not notarized and, as a private document, can
only bind the parties thereto. However, its authenticity was never put into question, nor was its legality impugned. Moreover,
executed in 1965 by the heirs of Constancia Socco, or more than 30 years ago, it is an ancient document which appears to be
genuine on its face and therefore its authenticity must be upheld.
[33]
Respondent has continuously paid for the realty tax due on
the subject property, a fact which, though not conclusive, served to strengthen her claim over the property.
[34]


From the foregoing, it is only proper that respondents claim over the subject property be upheld. This Court must,
however, note that the Order of the DAR Secretary, dated 9 November 2001, which granted the petitioners right to purchase the
property, is flawed and may be assailed in the proper proceedings. Records show that the DAR affirmed that respondents
predecessors-in-interest, Marcelo Laquian and Constancia Socco, having been identified as the original allocatee, have fully paid
for the subject property as provided under an agreement to sell. By the nature of a contract or agreement to sell, the title over
the subject property is transferred to the vendee upon the full payment of the stipulated consideration. Upon the full payment
of the purchase price, and absent any showing that the allocatee violated the conditions of the agreement, ownership of the
subject land should be conferred upon the allocatee.
[35]
Since the extrajudicial partition transferring Constancia Soccos interest
in the subject land to the respondent is valid, there is clearly no need for the respondent to purchase the subject property,
despite the application for the purchase of the property erroneously filed by respondent. The only act which remains to be
performed is the issuance of a title in the name of her legal heirs, now that she is deceased.

Moreover, the Court notes that the records have not clearly established the right of respondents representative,
Myrna Socco-Arizo, over the subject property. Thus, it is not clear to this Court why the DAR issued on 8 July 2005 a
CLOA
[36]
over the subject property in favor of Myrna Socco-Arizo. Respondents death does not automatically transmit her rights
to the property to Myrna Socco-Beltran. Respondent only authorized Myrna Socco-Arizo, through a Special Power of
Attorney
[37]
dated 10 March 1999, to represent her in the present case and to administer the subject property for her
benefit. There is nothing in the Special Power of Attorney to the effect that Myrna Socco-Arizo can take over the subject
property as owner thereof upon respondents death. That Miguel V. Socco, respondents only nephew, the son of the late Miguel
R. Socco, and MyrnaSocco-Arizos brother, executed a waiver of his right to inherit from respondent, does not automatically
mean that the subject property will go to Myrna Socco-Arizo, absent any proof that there is no other qualified heir to
respondents estate. Thus, this Decision does not in any way confirm the issuance of the CLOA in favor of Myrna Socco-Arizo,
which may be assailed in appropriate proceedings.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R.
SP No. 87066, promulgated on 31 January 2006, is AFFIRMED with MODIFICATION. This Court withholds the confirmation of
the validity of title over the subject property in the name of Myrna Socco-Arizopending determination of respondents legal heirs
in appropriate proceedings. No costs.

SO ORDERED.


G.R. No. 159578 February 18, 2009
ROGELIA DACLAG and ADELINO DACLAG (deceased), substituted by RODEL M. DACLAG, and ADRIAN M.
DACLAG, Petitioners,
vs.
ELINO MACAHILIG, ADELA MACAHILIG, CONRADO MACAHILIG, LORENZA HABER and BENITA DEL
ROSARIO, Respondents.
R E S O L U T I O N
AUSTRIA-MARTINEZ, J.:
Before us is petitioners' Motion for Reconsideration of our Decision dated July 28, 2008 where we affirmed the Decision dated
October 17, 2001 and the Resolution dated August 7, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 48498.
Records show that while the land was registered in the name of petitioner Rogelia in 1984, respondents complaint for
reconveyance was filed in 1991, which was within the 10-year prescriptive period.
We ruled that since petitioners bought the property when it was still an unregistered land, the defense of having purchased the
property in good faith is unavailing. We affirmed the Regional Trial Court (RTC) in finding that petitioners should pay
respondents their corresponding share in the produce of the subject land from the time they were deprived thereof until the
possession is restored to them.
In their Motion for Reconsideration, petitioners contend that the 10-year period for reconveyance is applicable if the action is
based on an implied or a constructive trust; that since respondents' action for reconveyance was based on fraud, the action must
be filed within four years from the discovery of the fraud, citing Gerona v. De Guzman,
1
which was reiterated in Balbin v.
Medalla.
2

We do not agree.
In Caro v. Court of Appeals,
3
we have explicitly held that "the prescriptive period for the reconveyance of fraudulently
registered real property is 10 years reckoned from the date of the issuance of the certificate of title x x x."
4

However, notwithstanding petitioners' unmeritorious argument, the Court deems it necessary to make certain clarifications. We
have earlier ruled that respondents' action for reconveyance had not prescribed, since it was filed within the 10-year prescriptive
period.
However, a review of the factual antecedents of the case shows that respondents' action for reconveyance was not even subject
to prescription.
The deed of sale executed by Maxima in favor of petitioners was null and void, since Maxima was not the owner of the land she
sold to petitioners, and the one-half northern portion of such land was owned by respondents. Being an absolute nullity, the
deed is subject to attack anytime, in accordance with Article 1410 of the Civil Code that an action to declare the inexistence of a
void contract does not prescribe. Likewise, we have consistently ruled that when there is a showing of such illegality, the property
registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the former
then has the right to sue for the reconveyance of the property.
5
An action for reconveyance based on a void contract is
imprescriptible.
6
As long as the land wrongfully registered under the Torrens system is still in the name of the person who caused
such registration, an action in personam will lie to compel him to reconvey the property to the real owner.
7
In this case, title to
the property is in the name of petitioner Rogelia; thus, the trial court correctly ordered the reconveyance of the subject land to
respondents.
Petitioners next contend that they are possessors in good faith, thus, the award of damages should not have been imposed. They
further contend that under Article 544, a possessor in good faith is entitled to the fruits received before the possession is legally
interrupted; thus, if indeed petitioners are jointly and severally liable to respondents for the produce of the subject land, the
liability should be reckoned only for 1991 and not 1984.
We find partial merit in this argument.
Article 528 of the Civil Code provides that possession acquired in good faith does not lose this character, except in a case and
from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.
Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence
or by suit for recovery of the
property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the possessor has
knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show bad faith.
8
Such interruption
takes place upon service of summons.
9
lawphil.net
Article 544 of the same Code provides that a possessor in good faith is entitled to the fruits only so long as his possession is not
legally interrupted. Records show that petitioners received a summons together with respondents' complaint on August 5,
1991;
10
thus, petitioners' good faith ceased on the day they received the summons. Consequently, petitioners should pay
respondents 10 cavans of palay per annum beginning August 5, 1991 instead of 1984.
Finally, petitioner would like this Court to look into the finding of the RTC that "since Maxima died in October 1993, whatever
charges and claims petitioners may recover from her expired with her"; and that the proper person to be held liable for damages
to be awarded to respondents should be Maxima Divison or her estate, since she misrepresented herself to be the true owner of
the subject land.
We are not persuaded.
Notably, petitioners never raised this issue in their appellants' brief or in their motion for reconsideration filed before the CA. In
fact, they never raised this matter before us when they filed their petition for review. Thus, petitioners cannot raise the same in
this motion for reconsideration without offending the basic rules of fair play, justice and due process, specially since Maxima was
not substituted at all by her heirs after the promulgation of the RTC Decision.
WHEREFORE, petitioners Motion for Reconsideration is PARTLY GRANTED. The Decision of the Court of Appeals dated July 28,
2008 is MODIFIED only with respect to prescription as discussed in the text of herein Resolution, and the dispositive portion of
the Decision is MODIFIED to the effect that petitioners are ordered to pay respondents 10 cavans of palay per annum beginning
August 5, 1991 instead of 1984.
SO ORDERED.

G.R. No. L-46892 September 30, 1981
HEIRS OF AMPARO DEL ROSARIO, plaintiffs-appellees,
vs.
AURORA O. SANTOS, JOVITA SANTOS GONZALES, ARNULFO O. SANTOS, ARCHIMEDES O. SANTOS, ERMELINA SANTOS
RAVIDA, and ANDRES O. SANTOS, JR., defendants-appellants.

GUERRERO, J.:
The Court of Appeals,
1
in accordance with Section 31 of the Judiciary Act of 1948, as amended, certified to Us the appeal
docketed as CA-G.R. No. 56674-R entitled "Amparo del Rosario, plaintiff-appellee, vs. Spouses Andres Santos and Aurora Santos,
defendants-appellants," as only questions of law are involved.
On January 14, 1974, Amparo del Rosario filed a complaint against the spouses Andres F. Santos and Aurora O. Santos, for
specific performance and damages allegedly for failure of the latter to execute the Deed of Confirmation of Sale of an undivided
20,000 square meters of land, part of Lot 1, Psu-206650, located at Barrio Sampaloc, Tanay, Rizal, in malicious breach of a Deed
of Sale (Exhibit A or 1) dated September 28, 1964.
Amparo del Rosario died on Sept. 21, 1980 so that she is now substituted by the heirs named in her will still undergoing probate
proceedings. Andres F. Santos also died, on Sept. 5, 1980, and he is substituted by the following heirs: Jovita Santos Gonzales,
Arnulfo O. Santos, Archimedes O. Santos, Germelina Santos Ravida, and Andres O. Santos, Jr.
The Deed of Sale (Exh. A or 1) is herein reproduced below:
DEED OF SALE
KNOW ALL MEN BY THESE PRESENTS:
I, ANDRES F. SANTOS, of legal age, married to Aurora 0. Santos, Filipino and resident cf San Dionisio, Paranaque,
Rizal, Philippines, for and in consideration of the sum of TWO THOUSAND (P 2,000.00) PESOS, Philippine
Currency, the receipt whereof is hereby acknowledged, do hereby SELLS, CONVEYS, and TRANSFERS (sic) unto
Amparo del Rosario, of legal age, married to Fidel del Rosario but with legal separation, Filipino and resident of
San Dionisio, Paranaque, Rizal, Philippines that certain 20,000 square meters to be segregated from Lot 1 of plan
Psu-206650 along the southeastern portion of said lot, which property is more particularly described as follows:
A parcel of land (Lot 1 as shown on plan Psu-206650, situated in the Barrio of Sampaloc,
Municipality of Tanay, Province of Rizal. Bounded on the SW., along lines 1-2-3, by Lot 80 of
Tanay Public Land Subdivision, Pls-39; on the NW., along lines 3-4-5, by Lot 2; and along lines 5-
6-7-8-9-10-11, by Lot 6; on the NE., along lines 11-12-13, by Lot 3: and along lines 13-1415, by
Lot 4, all of plan Psu-206650; and on the SE., along line 15-1, by Lot 5 of plan Psu- 206650 ... ;
containing an area of ONE HUNDRED EIGHTY ONE THOUSAND FOUR HUNDRED TWENTY
(181,420) SQUARE METERS. All points referred to are indicated on the plan and are marked on
the ground as follows: ...
of which above-described property, I own one-half (1/2) interest thereof being my attorney's fee, and the said
20,000 square meters will be transferred unto the VENDEE as soon as the title thereof has been released by the
proper authority or authorities concerned:
That the parties hereto hereby agree that the VENDOR shall execute a Deed of Confirmation of Deed of Sale in
favor of the herein VENDEE as soon as the title has been released and the subdivision plan of said Lot 1 has
been approved by the Land Registration Commissioner.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of September, 1964, in the City of Manila,
Philippines.
s/ ANDRES F. SANTOS t/ ANDRES F. SANTOS
With My Marital Consent:
s/ Aurora O. Santos (Wife) t/ Aurora O. Santos (Wife)
SIGNED IN THE PRESENCE OF: s/ Felicitas C. Moro s/ Corona C. Venal
REPUBLIC OF THE PHILIPPINES) ) SS.
BEFORE ME, a Notary Public for and in Rizal, Philippines, personally appeared Andres F. Santos, with Res. Cert.
No. 4500027 issued at Paranaque, Rizal, on Jan. 9, 1964, B-0935184 issued at Paranaque, Rizal on April 15, 1964,
and Aurora 0. Santos, with Res. Cert. No. A-4500028 issued at Paranaque, Rizal, on Jan. 9, 1964, giving her
marital consent to this instrument, both of whom are known to me and to me known to be the same persons
who executed the foregoing instruments and they acknowledged to me that the same is their free act and
voluntary deed.
IN WITNESS WHEREOF, I have hereunto signed this instrument and affixed my notarial seal this lst day of
October, 1964, in Pasig, Rizal, Philippines.
Doc. No. 1792; Page No. 85; Book No. 19; Series of 1964.
s/ FLORENCIO LANDRITO t/ FLORENCIO LANDRITO
NOTARY PUBLIC Until December 31, 1965
2

Plaintiff claimed fulfillment of the conditions for the execution of the Deed of Confirmation of Sale, namely: the release of the
title of the lot and the approval of the subdivision plan of said lot by the Land Registration Commission. She even enumerated
the titles with their corresponding land areas derived by defendants from the aforesaid lot, to wit:
(a) TCT 203580 30,205 sq. meters
(b) TCT 203581 19, 790 sq. meters
(c) TCT 167568 40,775 sq. meters
In a motion to dismiss, defendants pleaded, inter alia, the defenses of lack of jurisdiction of the court a quo over the subject of
the action and lack of cause of action allegedly because there was no allegation as to the date of the approval of the subdivision
plan, no specific statement that the titles therein mentioned were curved out of Lot I and no clear showing when the demands
were made on the defendants. They likewise set up the defense of prescription allegedly because the deed of sale was dated
September 28, 1964 and supposedly ratified October 1, 1964 but the complaint was filed only on January 14, 1974, a lapse of
more than nine years when it should have been filed within five years from 1964 in accordance with Article 1149, New Civil Code.
Defendant also claimed that the demand set forth in the complaint has been waived, abandoned or otherwise extinguished. It is
alleged that the deed of sale was "only an accommodation graciously extended, out of close friendship between the defendants
and the plaintiff and her casual business partner in the buy and sell of real estate, one Erlinda Cortez;"
3
that in order to allay the
fears of plaintiff over the non-collection of the debt of Erlinda Cortez to plaintiff in various sums exceeding P 2,000.00,
defendants, who were in turn indebted to Erlinda Cortez in the amount of P 2,000.00, voluntarily offered to transfer to plaintiff
their inexistent but expectant right over the lot in question, the same to be considered as part payment of Erlinda Cortez'
indebtedness; that as Erlinda Cortez later on paid her creditor what was then due, the deed of sale had in effect been
extinguished. Defendants thereby characterized the said deed of sale as a mere tentative agreement which was never intended
nor meant to be ratified by and acknowledged before a notary public. In fact, they claimed that they never appeared before
Notary Public Florencio Landrito.
Finally, defendants alleged that the claim on which the action or suit is founded is unenforceable under the statute of frauds and
that the cause or object of the contract did not exist at the time of the transaction.
After an opposition and a reply were filed by the respective parties, the Court a quo resolved to deny the motion to dismiss of
defendants. Defendants filed their answer with counterclaim interposing more or less the same defenses but expounding on
them further. In addition, they claimed that the titles allegedly derived by them from Lot 1 of Annex A or I were cancelled and/or
different from said Lot I and that the deed of sale was simulated and fictitious, plaintiff having paid no amount to defendants;
and that the deed was entrusted to plaintiff's care and custody on the condition that the latter; (a) would secure the written
consent of Erlinda Cortez to Annex A or I as part payment of what she owed to plaintiff; (b) would render to defendants true
accounting of collections made from Erlinda showing in particular the consideration of 2,000.00 of Annex A or I duly credited to
Erlinda's account.
4

Plaintiff filed a reply and answer to counterclaim and thereafter a motion for summary judgment and/or judgment on the
pleadings on the ground that the defenses of defendants fail to tender an issue or the same do not present issues that are
serious enough to deserve a trial on the merits,
5
submitting on a later date the affidavit of merits. Defendants filed their
corresponding opposition to the motion for summary judgment and/or judgment on the pleadings. Not content with the
pleadings already submitted to the Court, plaintiff filed a reply while defendants filed a supplemental opposition.
With all these pleadings filed by the parties in support of their respective positions, the Court a quo still held in abeyance
plaintiff's motion for summary judgment or judgment on the pleadings pending the pre-trial of the case. At the pre-trial,
defendants offered by way of compromise to pay plaintiff the sum of P2,000.00, the consideration stated in the deed of sale. But
the latter rejected the bid and insisted on the delivery of the land to her. Thus, the pre-trial proceeded with the presentation by
plaintiff of Exhibits A to Q which defendants practically admitted, adopted as their own and marked as Exhibits 1 to 17. In
addition, the latter offered Exhibit 18, which was their reply to plaintiff's letter of demand dated December 21, 1973.
From the various pleadings filed in this case by plaintiff, together with the annexes and affidavits as well as the exhibits offered in
evidence at the pre-trial, the Court a quo found the following facts as having been duly established since defendant failed to
meet them with countervailing evidence:
In February, 1964, Teofilo Custodia owner of a parcel of unregistered land with an area of approximately 220,000
square meters in Barrio Sampaloc, Tanay, Rizal, hired Attorney Andres F. Santos "to cause the survey of the
above-mentioned property, to file registration proceedings in court, to appear and represent him in all
government office relative thereto, to advance all expenses for surveys, taxes to the government, court fees,
registration fees ... up to the issuance of title in the name" of Custodia. They agreed that after the registration of
the title in Custodio's name, and "after deducting all expenses from the total area of the property," Custodio
would assign and deliver to Santos "one-half (1/2) share of the whole property as appearing in the certificate of
title so issued." Exh. B or 2).
On March 22, 1964, Custodio's land was surveyed under plan Psu-226650 (Exh. D or 4). It was divided into six (6)
lots, one of which was a road lot. The total area of the property as surveyed was 211,083 square meters. The
respective areas of the lots were as follows:
Lot 1 181,420
square
meters
Lot 2 7,238 square
meters
Lot 3 7,305 square
meters
Lot 4 5,655 square
meters
Lot 5 5,235 square
meters
Road Lot 6 4,230 square
meters
TOTAL 211,083
square
meters
xxx xxx xxx
On December 27, 1965, a decree of registration No. N-108022 was issued in Land Registration Case No. N-5023,
of the Court of First Instance of Rizal, LRC Record No. N-27513, in favor of Teofilo Custodia married to Miguela
Perrando resident of Tanay, Rizal. On March 23, 1966, Original Certificate of Title No. 5134 (Exh. Q or 17) was
issued to Custodio for Lots 1, 2, 3, 4 and 5, Psu- 206650, with a total area of 206,853 square meters. The areas of
the five (5) lots were as follows:
Lot 1 181,420
square
meters
Lot 2 7,238 square
meters
Lot 3 7,305 square
meters
Lot 4 5,655 square
meters
Lot 5 5,235 square
meters
In April to May, 1966, a consolidation-subdivision survey (LRC) Pcs-5273 (Exh. E or 5) was made on the above
lots converting them into six (6) new lots as follows:
xxx xxx xxx
Lot 1 20,000
square
meters
Lot 2 40,775
square
meters
Lot 3 50,000
square
meters
Lot 4 40,775
square
meters
Lot 5 50,000
square
meters
Road Lot 6 5,303 square
meters
TOTAL 206,853
square
meters
On June 22, 1966, the consolidation-subdivision plan (LRC) Pcs-5273 (Exh. E or 5) was approved by the Land
Registration Commission and by the Court of First Instance of Rizal in an order dated July 2, 1966 (Entry No.
61037 T-167561, Exh. Q). Upon its registration, Custodio's O.C.T. No. 5134 (Exh. Q) was cancelled and TCT Nos.
167561, 167562, 167563, 167564 (Exh. G), 167565 (Exh. H and 167566 were issued for the six lots in the name of
Custodio (Entry No. 61035, Exh. Q).
On June 23, 1966, Custodio conveyed to Santos Lots 4 and 5, Pcs-5273 with a total area of 90,775 square meters
(Exh. B or 2) described in Custodio's TCT No. 167564 (Exh. G or 7) and TCT No. 167565 (Exh. H or 8), plus a one-
half interest in the Road Lot No. 6, as payment of Santos' attorney's fees and advances for the registration of
Custodio's land.
Upon registration of the deed of conveyance on July 5, 1966, Custodio's TCT Nos. 167564 and 167565 (Exhs. G
and H) were cancelled. TCT No. 167568 (Exh. I or 9) for Lot 4 and TCT No. 167585 (Exh. J or 10) for Lot 5 were
issued to Santos.
On September 2, 1967, Santos' Lot 5, with an area of 50,000 square meters was subdivided into two (2) lots,
designated as Lots 5-A and 5-B in the plan Psd-78008 (Exh. F or 6), with the following areas:
Lot 5-
A
30,205
square
meters
Lot 5-
B
19,795square
meters
TOTAL 50,000
square
meters
Upon registration of Psd-78008 on October 3, 1967, Santos' TCT No. 167585 (Exh. J) was cancelled and TCT No.
203578 for Lot 5- A and TCT No. 203579 for Lot 5-B were supposed to have been issued to Santos (See Entry
6311 in Exh. J or 10). Actually, TCT No. 203580 was issued for Lot 5-A (Exh. K or 1 1), and TCT No. 203581 for Lot
5-B (Exh. L or 12), both in the name of Andres F. Santos.
Out of Custodio's original Lot 1, Psu-206650, with an area of 181,420 square meters, Santos was given a total of
90,775 square meters, registered in his name as of October 3, 1967 under three (3) titles, namely:

TCT No.
167585 for

Lot 4 Pcs-5273 40,775 sq. m.
(Exh. J or 10)
TCT No.
203580 for

Lot 5-A Psd-
78008
30,205 sq. m.
(Exh. K or 11)
TCT No.
203581 for

Lot 5-B Psd-
78008
19,795 sq. m.
(Exh. L or 12)
90,775 sq.m.
plus one-half of the road lot, Lot 6, PCS-5273, with an area of 5,303 square meters, which is registered jointly in
the name of Santos and Custodio (Exh. B & E)
6

The court a quo thereupon concluded that there are no serious factual issues involved so the motion for summary judgment may
be properly granted. Thereafter, it proceeded to dispose of the legal issues raised by defendants and rendered judgment in favor
of plaintiff. The dispositive portion of the decision states as follows:
WHEREFORE, defendants Andres F. Santos and Aurora Santos are ordered to execute and convey to plaintiff
Amparo del Rosario, within ten (10) days from the finality of this decision, 20,000 square meters of land to be
taken from the southeastern portion of either Lot 4, Pcs-5273, which has an area of 40,775 square meters,
described in TCT No. 167568 (Exh. I or 9) of from their LOL 5-A. with an area of 30,205 square meters, described
in TCI No. 203; O (Exh. K or 11). The expenses of segregating the 20,000 square meters portion shall be borne
fqually by the parties. rhe expenses for the execution and registration of the sale shall be borne by the
defendants (Art. 1487, Civil Code). Since the defendants compelled the plaintiff to litigate and they failed to heed
plainliff's just demand, they are further ordered to pay the plaintiff the sum of P2,000.00 as attorney's fees and
the costs of this action.
SO ORDERED.
7

Aggrieved by the aforesaid decision, the defendant's filed all appeal to the Court of Appeals submitting for resolution seven
assignments of errors, to wit:
I. The lower court erred in depriving the appellants of their right to the procedural due process.
II. The lower court erred in holding that the appellee's claim has not been extinguished.
III. The lower court erred in sustaining appellee's contention that there are no other unwritten conditions
between the appellants and the appellee except those express in Exh. "1" or "A", and that Erlinda Cortez'
conformity is not required to validate the appellants' obligation.
IV. The lower court erred in holding that Exh. "l" or "A" is not infirmed and expressed the true intent of the
parties.
V. The lower court erred in declaring that the appellants are co-owners of the lone registered owner Teofilo
Custodia.
VI. The lower court erred in ordering the appellants to execute and convey to the appellee 20,000 sq. m. of land
to be taken from the southeastern portion of either their lot 4, Pcs-5273, which has an area of 40,775 sq.m.,
described in T.C.T. No. 167568 (Exh. 9 or 1), or from their lot No. 5-A, with an area of 30,205 sq.m. described in
T.C.T. No. 203580 (Exh. 11 or K), the expenses of segregation to be borne equally by the appellants and the
appellee and the expenses of execution and registration to be borne by the appellants.
VII. Thelowercourterredinorderingtheappellantstopayto the appellee the sum of P2,000. 00 as attorney's fee and
costs.
8

The first four revolve on the issue of the propriety of the rendition of summary judgment by the court a quo, which concededly is
a question of law. The last three assail the summary judgment itself. Accordingly, the Court of Appeals, with whom the appeal
was filed, certified the records of the case to this Court for final determination.
For appellants herein, the rendition of summary judgment has deprived them of their right to procedural due process. They claim
that a trial on the merits is indispensable in this case inasmuch as they have denied under oath all the material allegations in
appellee's complaint which is based on a written instrument entitled "Deed of Sale", thereby putting in issue the due execution
of said deed.
Appellants in their opposition to the motion for summary judgment and/or judgment on the pleadings, however, do not deny
the genuineness of their signatures on the deed of sale.
(Par. 3 of said Motion, p. 101, Record on Appeal). They do not contest the words and figures in said deed except in the
acknowledgment portion thereof where certain words were allegedly cancelled and changed without their knowledge and
consent and where, apparently, they appeared before Notary Public Florencio Landrito when, in fact, they claimed that they did
not. In effect, there is an admission of the due execution and genuineness of the document because by the admission of the due
execution of a document is meant that the party whose signature it bears admits that voluntarily he signed it or that it was
signed by another for him and with his authority; and the admission of the genuineness of the document is meant that the party
whose signature it bears admits that at the time it was signed it was in the words and figures exactly as set out in the pleading of
the party relying upon it; and that any formal requisites required by law, such as swearing and acknowledgment or revenue
stamps which it requires, are waived by him.
9

As correctly pointed out by the court a quo, the alleged false notarization of the deed of sale is of no consequence. For a sale of
real property or of an interest therein to be enforceable under the Statute of Frauds, it is enough that it be in writing.
10
It need
not be notarized. But the vendee may avail of the right under Article 1357 of the New Civil Code to compel the vendor to
observe the form required by law in order that the instrument may be registered in the Registry of Deeds.
11
Hence, the due
execution and genuineness of the deed of sale are not really in issue in this case. Accordingly, assigned error I is without merit.
What appellants really intended to prove through the alleged false notarization of the deed of sale is the true import of the
matter, which according to them, is a mere tentative agreement with appellee. As such, it was not intended to be notarized and
was merely entrusted to appellee's care and custody in order that: first, the latter may secure the approval of one Erlinda Cortez
to their (appellants') offer to pay a debt owing to her in the amount of P2,000.00 to appellee instead of paying directly to her as
she was indebted to appellee in various amounts exceeding P2,000.00; and second once the approval is secured, appellee would
render an accounting of collections made from Erlinda showing in particular the consideration of P2,000.00 of the deed of sale
duly credited to Erlinda's account.
According to appellants, they intended to prove at a full dress trial the material facts: (1) that the aforesaid conditions were not
fulfilled; (2) that Erlinda Cortez paid her total indebtedness to appellee in the amount of P14,160.00, the P2,000.00 intended to be
paid by appellant included; and (3) that said Erlinda decided to forego, renounce and refrain from collecting the P2,000.00 the
appellants owed her as a countervance reciprocity of the countless favors she also owes them.
Being conditions which alter and vary the terms of the deed of sale, such conditions cannot, however, be proved by parol
evidence in view of the provision of Section 7, Rule 130 of the Rules of Court which states as follows:
Sec. 7. Evidence of written agreements when the terms of an agreement have been reduced to writing, it is to be
considered as containing all such terms, and, therefore, there can be, between the parties and their successors in
interest, no evidence of the terms of the agreement other than the contents of the writing, except in the
following cases:
(a) Where a mistake or imperfection of the writing, or its failure to express the true intent and agreement of the
parties, or the validity of the agreement is put in issue by the pleadings;
(b) When there is an intrinsic ambiguity in the writing. The term "agreement" includes wills."
The parol evidence rule forbids any addition to or contradiction of the terms of a written instrument by testimony purporting to
show that, at or before the signing of the document, other or different terms were orally agreed upon by the parties.
12

While it is true, as appellants argue, that Article 1306 of the New Civil Code provides that "the contracting parties may establish
such stipulations, clauses, terms and conditions as they may deem convenient, provided that they are not contrary to law, morals,
good customs, public order, or public policy" and that consequently, appellants and appellee could freely enter into an
agreement imposing as conditions thereof the following: that appellee secure the written conformity of Erlinda Cortez and that
she render an accounting of all collections from her, said conditions may not be proved as they are not embodied in the deed of
sale.
The only conditions imposed for the execution of the Deed of Confirmation of Sale by appellants in favor of appellee are the
release of the title and the approval of the subdivision plan. Thus, appellants may not now introduce other conditions allegedly
agreed upon by them because when they reduced their agreement to writing, it is presumed that "they have made the writing
the only repository and memorial of truth, and whatever is not found in the writing must be understood to have been waived
and abandoned."
13

Neither can appellants invoke any of the exceptions to the parol evidence rule, more particularly, the alleged failure of the
writing to express the true intent and agreement of the parties. Such an exception obtains where the written contract is so
ambiguous or obscure in terms that the contractual intention of the parties cannot be understood from a mere reading of the
instrument. In such a case, extrinsic evidence of the subject matter of the contract, of the relations of the parties to each other,
and of the facts and circumstances surrounding them when they entered into the. contract may be received to enable the court
to make a proper interpretation of the instrumental.
14
In the case at bar, the Deed of Sale (Exh. A or 1) is clear, without any
ambiguity, mistake or imperfection, much less obscurity or doubt in the terms thereof. We, therefore, hold and rule that assigned
errors III and IV are untenable.
According to the court a quo, "(s)ince Santos, in his Opposition to the Motion for Summary Judgment failed to meet the
plaintiff's evidence with countervailing evidence, a circumstance indicating that there are no serious factual issues involved, the
motion for summary judgment may properly be granted." We affirm and sustain the action of the trial court.
Indeed, where a motion for summary judgment and/or judgment on the pleadings has been filed, as in this case, supporting and
opposing affidavits shall be made on personal knowledge, shall set forth such facts as may be admissible in evidence, and shall
show affirmatively that the affiant is competent to testify as to the matters stated therein. Sworn or certified copies of all papers
or parts thereof referred to in the affidavitshalibeattachedtheretoorservedtherewith.
15

Examining the pleadings, affidavits and exhibits in the records, We find that appellants have not submitted any categorical proof
that Erlinda Cortez had paid the P2,000.00 to appellee, hence, appellants failed to substantiate the claim that the cause of action
of appellee has been extinguished. And while it is true that appellants submitted a receipt for P14,160.00 signed by appellee,
appellants, however, have stated in their answer with counterclaim that the P2,000.00 value of the property covered by the Deed
of Sale, instead of being credited to Erlinda Cortez, was conspicuously excluded from the accounting or receipt signed by
appellee totalling P14,160.00. The aforesaid receipt is no proof that Erlinda Cortez subsequently paid her P2,000.00 debt to
appellee. As correctly observed by the court a quo, it is improbable that Cortez would still pay her debt to appellee since Santos
had already paid it.
Appellants' claim that their P2,000.00 debt to Erlinda Cortez had been waived or abandoned is not also supported by any
affidavit, document or writing submitted to the court. As to their allegation that the appellee's claim is barred by prescription, the
ruling of the trial court that only seven years and six months of the ten-year prescription period provided under Arts. 1144 and
155 in cases of actions for specific performance of the written contract of sale had elapsed and that the action had not yet
prescribed, is in accordance with law and, therefore, We affirm the same.
The action of the court a quo in rendering a summary judgment has been taken in faithful compliance and conformity with Rule
34, Section 3, Rules of Court, which provides that "the judgment sought shall be rendered forthwith if the pleadings, depositions,
and admissions on file together with the affidavits, show that, except as to the amount of damages, there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law. "
Resolving assignments of errors, V, VI, and VII which directly assail the summary judgment, not the propriety of the rendition
thereof which We have already resolved to be proper and correct, it is Our considered opinion that the judgment of the court a
quo is but a logical consequence of the failure of appellants to present any bona fidedefense to appellee's claim. Said judgment
is simply the application of the law to the undisputed facts of the case, one of which is the finding of the court a quo, to which
We agree, that appellants are owners of one-half (1/2) interest of Lot I and, therefore, the fifth assignment of error of appellants
is without merit.
By the terms of the Deed of Sale itself, which We find genuine and not infirmed, appellants declared themselves to be owners of
one-half (1/2) interest thereof. But in order to avoid appellee's claim, they now contend that Plan Psu-206650 where said Lot I
appears is in the exclusive name of Teofilo Custodio as the sole and exclusive owner thereof and that the deed of assignment of
one-half (1/2) interest thereof executed by said Teofilo Custodio in their favor is strictly personal between them. Notwithstandi ng
the lack of any title to the said lot by appellants at the time of the execution of the deed of sale in favor of appellee, the said sale
may be valid as there can be a sale of an expected thing, in accordance with Art. 1461, New Civil Code, which states:
Art. 1461. Things having a potential existence may be the object of the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will
come into existence.
The sale of a vain hope or expectancy is void.
In the case at bar, the expectant right came into existence or materialized for the appellants actually derived titles from Lot I .
We further reject the contention of the appellants that the lower court erred in ordering the appellants to execute and convey to
the appellee 20,000 sq.m. of land to be taken from the southeastern portion of either their Lot 4, Pcs-5273, which has an area of
40,775 sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or from their Lot No. 5-A, with an area of 30,205 sq.m. described in
T.C.T. No. 203580 (Exh. 11 or K), the expenses of segregation to be borne equally by the appellants and the appellee and the
expenses of execution and registration to be borne by the appellants. Their argument that the southeastern portion of Lot 4 or
Lot 5-A is no longer the southeastern portion of the bigger Lot 1, the latter portion belonging to the lone registered owner,
Teofilo Custodia is not impressed with merit. The subdivision of Lot I between the appellants and Teofilo Custodio was made
between themselves alone, without the intervention, knowledge and consent of the appellee, and therefore, not binding upon
the latter. Appellants may not violate nor escape their obligation under the Deed of Sale they have agreed and signed with the
appellee b3 simply subdividing Lot 1, bisecting the same and segregating portions to change their sides in relation to the
original Lot 1.
Finally, considering the trial court's finding that the appellants compelled the appellee to litigate and they failed to heed
appellee's just demand, the order of the court awarding the sum of P2,000.00 as attorney's fees is just and lawful, and We affirm
the same.
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby AFFIRMED in toto, with costs against the
appellants.
SO ORDERED.
Makasiar, (Actg. Chairman), Fernandez, De Castro and Melencio-Herrera, JJ., concur.

G.R. No. L-48194 March 15, 1990
JOSE M. JAVIER and ESTRELLA F. JAVIER, petitioners,
vs.
COURT OF APPEALS and LEONARDO TIRO, respondents.
Eddie Tamondong for petitioners.
Lope Adriano and Emmanuel Pelaez, Jr. for private respondent.

REGALADO, J.:
Petitioners pray for the reversal of the decision of respondent Court of Appeals in CA-G.R. No. 52296-R, dated March 6,
1978,
1
the dispositive portion whereof decrees:
WHEREFORE, the judgment appealed from is hereby set aside and another one entered ordering the
defendants-appellees, jointly and solidarily, to pay plaintiff-appellant the sum of P79,338.15 with legal interest
thereon from the filing of the complaint, plus attorney's fees in the amount of P8,000.00. Costs against
defendants-appellees.
2

As found by respondent court or disclosed by the records,
3
this case was generated by the following antecedent facts.
Private respondent is a holder of an ordinary timber license issued by the Bureau of Forestry covering 2,535 hectares in the town
of Medina, Misamis Oriental. On February 15, 1966 he executed a "Deed of Assignment"
4
in favor of herein petitioners the
material parts of which read as follows:
xxx xxx xxx
I, LEONARDO A. TIRO, of legal age, married and a resident of Medina, Misamis Oriental, for and in consideration
of the sum of ONE HUNDRED TWENTY THOUSAND PESOS (P120,000.00), Philippine Currency, do by these
presents, ASSIGN, TRANSFER AND CONVEY, absolutely and forever unto JOSE M. JAVIER and ESTRELLA F.
JAVIER, spouses, of legal age and a resident (sic) of 2897 F.B. Harrison, Pasay City, my shares of stocks in the
TIMBERWEALTH CORPORATION in the total amount of P120,000.00, payment of which shall be made in the
following manner:
1. Twenty thousand (P20,000.00) Pesos upon signing of this contract;
2. The balance of P100,000.00 shall be paid P10,000.00 every shipment of export logs actually
produced from the forest concession of Timberwealth Corporation.
That I hereby agree to sign and endorse the stock certificate in favor of Mr. & Mrs. Jose M. Javier, as soon as
stock certificates are issued.
xxx xxx xxx
At the time the said deed of assignment was executed, private respondent had a pending application, dated October 21, 1965,
for an additional forest concession covering an area of 2,000 hectares southwest of and adjoining the area of the concession
subject of the deed of assignment. Hence, on February 28, 1966, private respondent and petitioners entered into another
"Agreement"
5
with the following stipulations:
xxx xxx xxx
1. That LEONARDO TIRO hereby agrees and binds himself to transfer, cede and convey whatever rights he may
acquire, absolutely and forever, to TIMBERWEALTH CORPORATION, a corporation duly organized and existing
under the laws of the Philippines, over a forest concession which is now pending application and approval as
additional area to his existing licensed area under O.T. License No. 391-103166, situated at Medina, Misamis
Oriental;
2. That for and in consideration of the aforementioned transfer of rights over said additional area to
TIMBERWEALTH CORPORATION, ESTRELLA F. JAVIER and JOSE M. JAVIER, both directors and stockholders of
said corporation, do hereby undertake to pay LEONARDO TIRO, as soon as said additional area is approved and
transferred to TIMBERWEALTH CORPORATION the sum of THIRTY THOUSAND PESOS (P30,000.00), which
amount of money shall form part of their paid up capital stock in TIMBERWEALTH CORPORATION;
3. That this Agreement is subject to the approval of the members of the Board of Directors of the
TIMBERWEALTH CORPORATION.
xxx xxx xxx
On November 18, 1966, the Acting Director of Forestry wrote private respondent that his forest concession was renewed up to
May 12, 1967 under O.T.L. No. 391-51267, but since the concession consisted of only 2,535 hectares, he was therein informed
that:
In pursuance of the Presidential directive of May 13, 1966, you are hereby given until May 12, 1967 to form an
organization such as a cooperative, partnership or corporation with other adjoining licensees so as to have a
total holding area of not less than 20,000 hectares of contiguous and compact territory and an aggregate
allowable annual cut of not less than 25,000 cubic meters, otherwise, your license will not be further renewed.
6

Consequently, petitioners, now acting as timber license holders by virtue of the deed of assignment executed by private
respondent in their favor, entered into a Forest Consolidation Agreement
7
on April 10, 1967 with other ordinary timber license
holders in Misamis Oriental, namely, Vicente L. De Lara, Jr., Salustiano R. Oca and Sanggaya Logging Company. Under this
consolidation agreement, they all agreed to pool together and merge their respective forest concessions into a working unit, as
envisioned by the aforementioned directives. This consolidation agreement was approved by the Director of Forestry on May 10,
1967.
8
The working unit was subsequently incorporated as the North Mindanao Timber Corporation, with the petitioners and the
other signatories of the aforesaid Forest Consolidation Agreement as incorporators.
9

On July 16, 1968, for failure of petitioners to pay the balance due under the two deeds of assignment, private respondent filed an
action against petitioners, based on the said contracts, for the payment of the amount of P83,138.15 with interest at 6% per
annum from April 10, 1967 until full payment, plus P12,000.00 for attorney's fees and costs.
On September 23, 1968, petitioners filed their answer admitting the due execution of the contracts but interposing the special
defense of nullity thereof since private respondent failed to comply with his contractual obligations and, further, that the
conditions for the enforceability of the obligations of the parties failed to materialize. As a counterclaim, petitioners sought the
return of P55,586.00 which private respondent had received from them pursuant to an alleged management agreement, plus
attorney's fees and costs.
On October 7, 1968, private respondent filed his reply refuting the defense of nullity of the contracts in this wise:
What were actually transferred and assigned to the defendants were plaintiff's rights and interest in a logging
concession described in the deed of assignment, attached to the complaint and marked as Annex A, and
agreement Annex E; that the "shares of stocks" referred to in paragraph II of the complaint are terms used
therein merely to designate or identify those rights and interests in said logging concession. The defendants
actually made use of or enjoyed not the "shares of stocks" but the logging concession itself; that since the
proposed Timberwealth Corporation was owned solely and entirely by defendants, the personalities of the
former and the latter are one and the same. Besides, before the logging concession of the plaintiff or the latter's
rights and interests therein were assigned or transferred to defendants, they never became the property or
assets of the Timberwealth Corporation which is at most only an association of persons composed of the
defendants.
10

and contending that the counterclaim of petitioners in the amount of P55,586.39 is actually only a part of the sum of P69,661.85
paid by the latter to the former in partial satisfaction of the latter's claim.
11

After trial, the lower court rendered judgment dismissing private respondent's complaint and ordering him to pay petitioners the
sum of P33,161.85 with legal interest at six percent per annum from the date of the filing of the answer until complete
payment.
12

As earlier stated, an appeal was interposed by private respondent to the Court of Appeals which reversed the decision of the
court of a quo.
On March 28, 1978, petitioners filed a motion in respondent court for extension of time to file a motion for reconsideration, for
the reason that they needed to change counsel.
13
Respondent court, in its resolution dated March 31, 1978, gave petitioners
fifteen (15) days from March 28, 1978 within which to file said motion for reconsideration, provided that the subject motion for
extension was filed on time.
14
On April 11, 1978, petitioners filed their motion for reconsideration in the Court of Appeals.
15
On
April 21, 1978, private respondent filed a consolidated opposition to said motion for reconsideration on the ground that the
decision of respondent court had become final on March 27, 1978, hence the motion for extension filed on March 28, 1978 was
filed out of time and there was no more period to extend. However, this was not acted upon by the Court of Appeals for the
reason that on April 20, 1978, prior to its receipt of said opposition, a resolution was issued denying petitioners' motion for
reconsideration, thus:
The motion for reconsideration filed on April 11, 1978 by counsel for defendants-appellees is denied. They did
not file any brief in this case. As a matter of fact this case was submitted for decision without appellees' brief. In
their said motion, they merely tried to refute the rationale of the Court in deciding to reverse the appealed
judgment.
16

Petitioners then sought relief in this Court in the present petition for review on certiorari. Private respondent filed his comment,
reiterating his stand that the decision of the Court of Appeals under review is already final and executory.
Petitioners countered in their reply that their petition for review presents substantive and fundamental questions of law that fully
merit judicial determination, instead of being suppressed on technical and insubstantial reasons. Moreover, the aforesaid one (1)
day delay in the filing of their motion for extension is excusable, considering that petitioners had to change their former counsel
who failed to file their brief in the appellate court, which substitution of counsel took place at a time when there were many
successive intervening holidays.
On July 26, 1978, we resolved to give due course to the petition.
The one (1) day delay in the filing of the said motion for extension can justifiably be excused, considering that aside from the
change of counsel, the last day for filing the said motion fell on a holiday following another holiday, hence, under such
circumstances, an outright dismissal of the petition would be too harsh. Litigations should, as much as possible, be decided on
their merits and not on technicalities. In a number of cases, this Court, in the exercise of equity jurisdiction, has relaxed the
stringent application of technical rules in order to resolve the case on its merits.
17
Rules of procedure are intended to promote,
not to defeat, substantial justice and, therefore, they should not be applied in a very rigid and technical sense.
We now proceed to the resolution of this case on the merits.
The assignment of errors of petitioners hinges on the central issue of whether the deed of assignment dated February 15, 1966
and the agreement of February 28, 1966 are null and void, the former for total absence of consideration and the latter for non-
fulfillment of the conditions stated therein.
Petitioners contend that the deed of assignment conveyed to them the shares of stocks of private respondent in Timberwealth
Corporation, as stated in the deed itself. Since said corporation never came into existence, no share of stocks was ever
transferred to them, hence the said deed is null and void for lack of cause or consideration.
We do not agree. As found by the Court of Appeals, the true cause or consideration of said deed was the transfer of the forest
concession of private respondent to petitioners for P120,000.00. This finding is supported by the following considerations, viz:
1. Both parties, at the time of the execution of the deed of assignment knew that the Timberwealth Corporation stated therein
was non-existent.
18

2. In their subsequent agreement, private respondent conveyed to petitioners his inchoate right over a forest concession
covering an additional area for his existing forest concession, which area he had applied for, and his application was then
pending in the Bureau of Forestry for approval.
3. Petitioners, after the execution of the deed of assignment, assumed the operation of the logging concessions of private
respondent.
19

4. The statement of advances to respondent prepared by petitioners stated: "P55,186.39 advances to L.A. Tiro be applied to
succeeding shipments. Based on the agreement, we pay P10,000.00 every after (sic) shipment. We had only 2 shipments"
20

5. Petitioners entered into a Forest Consolidation Agreement with other holders of forest concessions on the strength of the
questioned deed of assignment.
21

The aforesaid contemporaneous and subsequent acts of petitioners and private respondent reveal that the cause stated in the
questioned deed of assignment is false. It is settled that the previous and simultaneous and subsequent acts of the parties are
properly cognizable indica of their true intention.
22
Where the parties to a contract have given it a practical construction by their
conduct as by acts in partial performance, such construction may be considered by the court in construing the contract,
determining its meaning and ascertaining the mutual intention of the parties at the time of contracting.
23
The parties' practical
construction of their contract has been characterized as a clue or index to, or as evidence of, their intention or meaning and as
an important, significant, convincing, persuasive, or influential factor in determining the proper construction of the agreement.
24

The deed of assignment of February 15, 1966 is a relatively simulated contract which states a false cause or consideration, or one
where the parties conceal their true agreement.
25
A contract with a false consideration is not null and void per se.
26
Under
Article 1346 of the Civil Code, a relatively simulated contract, when it does not prejudice a third person and is not intended for
any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement.
The Court of Appeals, therefore, did not err in holding petitioners liable under the said deed and in ruling that
. . . In view of the analysis of the first and second assignment of errors, the defendants-appellees are liable to the
plaintiff-appellant for the sale and transfer in their favor of the latter's forest concessions. Under the terms of the
contract, the parties agreed on a consideration of P120,000.00. P20,000.00 of which was paid, upon the signing
of the contract and the balance of P100,000.00 to be paid at the rate of P10,000.00 for every shipment of export
logs actually produced from the forest concessions of the appellant sold to the appellees. Since plaintiff-
appellant's forest concessions were consolidated or merged with those of the other timber license holders by
appellees' voluntary act under the Forest Consolidation Agreement (Exhibit D), approved by the Bureau of
Forestry (Exhibit D-3), then the unpaid balance of P49,338.15 (the amount of P70,661.85 having been received by
the plaintiff-appellant from the defendants-appellees) became due and demandable.
27

As to the alleged nullity of the agreement dated February 28, 1966, we agree with petitioners that they cannot be held liable
thereon. The efficacy of said deed of assignment is subject to the condition that the application of private respondent for an
additional area for forest concession be approved by the Bureau of Forestry. Since private respondent did not obtain that
approval, said deed produces no effect. When a contract is subject to a suspensive condition, its birth or effectivity can take place
only if and when the event which constitutes the condition happens or is fulfilled.
28
If the suspensive condition does not take
place, the parties would stand as if the conditional obligation had never existed.
29

The said agreement is a bilateral contract which gave rise to reciprocal obligations, that is, the obligation of private respondent
to transfer his rights in the forest concession over the additional area and, on the other hand, the obligation of petitioners to pay
P30,000.00. The demandability of the obligation of one party depends upon the fulfillment of the obligation of the other. In this
case, the failure of private respondent to comply with his obligation negates his right to demand performance from petitioners.
Delivery and payment in a contract of sale, are so interrelated and intertwined with each other that without delivery of the goods
there is no corresponding obligation to pay. The two complement each other.
30

Moreover, under the second paragraph of Article 1461 of the Civil Code, the efficacy of the sale of a mere hope or expectancy is
deemed subject to the condition that the thing will come into existence. In this case, since private respondent never acquired any
right over the additional area for failure to secure the approval of the Bureau of Forestry, the agreement executed therefor, which
had for its object the transfer of said right to petitioners, never became effective or enforceable.
WHEREFORE, the decision of respondent Court of Appeals is hereby MODIFIED. The agreement of the parties dated February 28,
1966 is declared without force and effect and the amount of P30,000.00 is hereby ordered to be deducted from the sum awarded
by respondent court to private respondent. In all other respects, said decision of respondent court is affirmed.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento JJ., concur.

G.R. No. L-69970 November 28, 1988
FELIX DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by her husband, JOSE TAGACAY,respondents.
Pedro R. Perez, Jr. for petitioner.
Teodoro B. Mallonga for private respondent.

CRUZ, J.:
The subject of this dispute is the two lots owned by Domingo Melad which is claimed by both the petitioner and the respondent.
The trial court believed the petitioner but the respondent court, on appeal, upheld the respondent. The case is now before us for
a resolution of the issues once and for all.
On January 29, 1962, the respondent filed a complaint against the petitioner in the then Court of First Instance of Cagayan for
recovery of a farm lot and a residential lot which she claimed she had purchased from Domingo Melad in 1943 and were now
being unlawfully withheld by the defendant.
1
In his answer, the petitioner denied the allegation and averred that he was the
owner of the said lots of which he had been in open, continuous and adverse possession, having acquired them from Domingo
Melad in 1941 and 1943.
2
The case was dismissed for failure to prosecute but was refiled in 1967.
3

At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly signed by Domingo Melad and duly
notarized, which conveyed the said properties to her for the sum of P80.00.
4
She said the amount was earned by her mother as a
worker at the Tabacalera factory. She claimed to be the illegitimate daughter of Domingo Melad, with whom she and her mother
were living when he died in 1945. She moved out of the farm only when in 1946 Felix Danguilan approached her and asked
permission to cultivate the land and to stay therein. She had agreed on condition that he would deliver part of the harvest from
the farm to her, which he did from that year to 1958. The deliveries having stopped, she then consulted the municipal judge who
advised her to file the complaint against Danguilan. The plaintiff 's mother, her only other witness, corroborated this testimony.
5

For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's niece, whom he and his wife Juana
Malupang had taken into their home as their ward as they had no children of their own. He and his wife lived with the couple in
their house on the residential lot and helped Domingo with the cultivation of the farm. Domingo Melad signed in 1941 a private
instrument in which he gave the defendant the farm and in 1943 another private instrument in which he also gave him the
residential lot, on the understanding that the latter would take care of the grantor and would bury him upon his
death.
6
Danguilan presented three other witnesses
7
to corroborate his statements and to prove that he had been living in the
land since his marriage to Isidra and had remained in possession thereof after Domingo Melad's death in 1945. Two of said
witnesses declared that neither the plaintiff nor her mother lived in the land with Domingo Melad.
8

The decision of the trial court was based mainly on the issue of possession. Weighing the evidence presented by the parties, the
judge
9
held that the defendant was more believable and that the plaintiff's evidence was "unpersuasive and unconvincing." It
was held that the plaintiff's own declaration that she moved out of the property in 1946 and left it in the possession of the
defendant was contradictory to her claim of ownership. She was also inconsistent when she testified first that the defendant was
her tenant and later in rebuttal that he was her administrator. The decision concluded that where there was doubt as to the
ownership of the property, the presumption was in favor of the one actually occupying the same, which in this case was the
defendant.
10

The review by the respondent court
11
of this decision was manifestly less than thorough. For the most part it merely affirmed the
factual findings of the trial court except for an irrelevant modification, and it was only toward the end that it went to and
resolved what it considered the lone decisive issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad had conveyed the two parcels of land to
the petitioner, were null and void. The reason was that they were donations of real property and as such should have been
effected through a public instrument. It then set aside the appealed decision and declared the respondents the true and lawful
owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows:
12

I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt the truth of my giving to Felix
Danguilan, my agricultural land located at Barrio Fugu-Macusi, Penablanca, Province of Cagayan, Philippine
Islands; that this land is registered under my name; that I hereby declare and bind myself that there is no one to
whom I will deliver this land except to him as he will be the one responsible for me in the event that I will die
and also for all other things needed and necessary for me, he will be responsible because of this land I am giving
to him; that it is true that I have nieces and nephews but they are not living with us and there is no one to whom
I will give my land except to Felix Danguilan for he lives with me and this is the length175 m. and the width is
150 m.
IN WITNESS WHEREOF, I hereby sign my name below and also those present in the execution of this receipt this
14th day of September 1941.
Penablanca Cagayan, September 14, 1941.
(SGD.) DOMINGO MELAD
WITNESSES:
1. (T.M.) ISIDRO MELAD
2. (SGD.) FELIX DANGUILAN
3. (T.M.) ILLEGIBLE
EXHIBIT 3-a is quoted as follows:
13

I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of Cagayan, do hereby swear and declare the
truth that I have delivered my residential lot at Centro, Penablanca, Cagayan, to Felix Danguilan, my son-in-law
because I have no child; that I have thought of giving him my land because he will be the one to take care of
SHELTERING me or bury me when I die and this is why I have thought of executing this document; that the
boundaries of this lot ison the east, Cresencio Danguilan; on the north, Arellano Street; on the south by Pastor
Lagundi and on the west, Pablo Pelagio and the area of this lot is 35 meters going south; width and length
beginning west to east is 40 meters.
IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December 1943.
(SGD.) DOMINGO MELAD
WITNESSES:
(SGD.) ILLEGIBLE
(SGD.) DANIEL ARAO
It is our view, considering the language of the two instruments, that Domingo Melad did intend to donate the properties to the
petitioner, as the private respondent contends. We do not think, however, that the donee was moved by pure liberality. While
truly donations, the conveyances were onerous donations as the properties were given to the petitioner in exchange for his
obligation to take care of the donee for the rest of his life and provide for his burial. Hence, it was not covered by the rule in
Article 749 of the Civil Code requiring donations of real properties to be effected through a public instrument. The case at bar
comes squarely under the doctrine laid down in Manalo v. De Mesa,
14
where the Court held:
There can be no doubt that the donation in question was made for a valuable consideration, since the donors
made it conditional upon the donees' bearing the expenses that might be occasioned by the death and burial of
the donor Placida Manalo, a condition and obligation which the donee Gregorio de Mesa carried out in his own
behalf and for his wife Leoncia Manalo; therefore, in order to determine whether or not said donation is valid
and effective it should be sufficient to demonstrate that, as a contract, it embraces the conditions the law
requires and is valid and effective, although not recorded in a public instrument.
The private respondent argues that as there was no equivalence between the value of the lands donated and the services for
which they were being exchanged, the two transactions should be considered pure or gratuitous donations of real rights, hence,
they should have been effected through a public instrument and not mere private writings. However, no evidence has been
adduced to support her contention that the values exchanged were disproportionate or unequal.
On the other hand, both the trial court and the respondent court have affirmed the factual allegation that the petitioner did take
care of Domingo Melad and later arranged for his burial in accordance with the condition imposed by the donor. It is alleged
and not denied that he died when he was almost one hundred years old,
15
which would mean that the petitioner farmed the land
practically by himself and so provided for the donee (and his wife) during the latter part of Domingo Melad's life. We may
assume that there was a fair exchange between the donor and the donee that made the transaction an onerous donation.
Regarding the private respondent's claim that she had purchased the properties by virtue of a deed of sale, the respondent court
had only the following to say: "Exhibit 'E' taken together with the documentary and oral evidence shows that the preponderance
of evidence is in favor of the appellants." This was, we think, a rather superficial way of resolving such a basic and important
issue.
The deed of sale was allegedly executed when the respondent was only three years old and the consideration was supposedly
paid by her mother, Maria Yedan from her earnings as a wage worker in a factory.
16
This was itself a suspicious circumstance,
one may well wonder why the transfer was not made to the mother herself, who was after all the one paying for the lands. The
sale was made out in favor of Apolonia Melad although she had been using the surname Yedan her mother's surname, before
that instrument was signed and in fact even after she got married.
17
The averment was also made that the contract was
simulated and prepared after Domingo Melad's death in 1945.
18
It was also alleged that even after the supposed execution of
the said contract, the respondent considered Domingo Melad the owner of the properties and that she had never occupied the
same.
19

Considering these serious challenges, the appellate court could have devoted a little more time to examining Exhibit "E" and the
circumstances surrounding its execution before pronouncing its validity in the manner described above. While it is true that the
due execution of a public instrument is presumed, the presumption is disputable and will yield to contradictory evidence, which
in this case was not refuted.
At any rate, even assuming the validity of the deed of sale, the record shows that the private respondent did not take possession
of the disputed properties and indeed waited until 1962 to file this action for recovery of the lands from the petitioner. If she did
have possession, she transferred the same to the petitioner in 1946, by her own sworn admission, and moved out to another lot
belonging to her step-brother.
20
Her claim that the petitioner was her tenant (later changed to administrator) was disbelieved by
the trial court, and properly so, for its inconsistency. In short, she failed to show that she consummated the contract of sale by
actual delivery of the properties to her and her actual possession thereof in concept of purchaser-owner.
As was held in Garchitorena v. Almeda:
21

Since in this jurisdiction it is a fundamental and elementary principle that ownership does not pass by mere
stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the
execution of a public document does not constitute sufficient delivery where the property involved is in the
actual and adverse possession of third persons (Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it
becomes incontestable that even if included in the contract, the ownership of the property in dispute did not
pass thereby to Mariano Garchitorena. Not having become the owner for lack of delivery, Mariano Garchitorena
cannot presume to recover the property from its present possessors. His action, therefore, is not one of
revindicacion, but one against his vendor for specific performance of the sale to him.
In the aforecited case of Fidelity and Deposit Co. v. Wilson,
22
Justice Mapa declared for the Court:
Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a well- known doctrine of
law that "non mudis pactis sed traditione dominia rerum transferuntur". In conformity with said doctrine as
established in paragraph 2 of article 609 of said code, that "the ownership and other property rights are
acquired and transmitted by law, by gift, by testate or intestate succession, and, in consequence of certain
contracts, by tradition". And as the logical application of this disposition article 1095 prescribes the following: "A
creditor has the rights to the fruits of a thing from the time the obligation to deliver it arises. However, he shall
not acquire a real right" (and the ownership is surely such) "until the property has been delivered to him."
In accordance with such disposition and provisions the delivery of a thing constitutes a necessary and
indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract. As
Manresa states in his Commentaries on the Civil Code, volume 10, pages 339 and 340: "Our law does not admit
the doctrine of the transfer of property by mere consent but limits the effect of the agreement to the due
execution of the contract. ... The ownership, the property right, is only derived from the delivery of a thing ... "
As for the argument that symbolic delivery was effected through the deed of sale, which was a public instrument, the Court has
held:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be
delivered when it is placed "in the hands and possession of the vendee." (Civil Code, art. 1462). It is true that the
same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is
the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough to confer upon the purchaser the ownership and
the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it
himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition
of another will, then fiction yields to realitythe delivery has not been effected.
23

There is no dispute that it is the petitioner and not the private respondent who is in actual possession of the litigated properties.
Even if the respective claims of the parties were both to be discarded as being inherently weak, the decision should still incline in
favor of the petitioner pursuant to the doctrine announced in Santos & Espinosa v. Estejada
24
where the Court announced:
If the claim of both the plaintiff and the defendant are weak, judgment must be for the defendant, for the latter
being in possession is presumed to be the owner, and cannot be obliged to show or prove a better right.
WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court REINSTATED, with costs against the
private respondent. It is so ordered.
Narvasa (Chairman), Gancayco, Grio-Aquino and Medialdea, JJ., concur.

FELIX TING HO, JR., G.R. No. 130115
MERLA TING HO BRADEN,
JUANA TING HO & LYDIA
TING HO BELENZO, Present:

Petitioners, PUNO, C.J., Chairperson,
CARPIO,
CORONA,
- versus - AZCUNA, and
LEONARDO-DE CASTRO, JJ.


Promulgated:
VICENTE TENG GUI,
Respondent. July 16, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

PUNO, C.J.:

This is a Petition for Review on Certiorari
[1]
assailing the Decision
[2]
of the Court of Appeals (CA) in CA-G.R. CV No. 42993
which reversed and set aside the Decision of the Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 558-0-
88.

The instant case traces its origin to an action for partition filed by petitioners Felix Ting Ho, Jr., Merla Ting Ho Braden,
Juana Ting Ho and Lydia Ting Ho Belenzo against their brother, respondent Vicente Teng Gui, before the RTC, Branch 74 of
Olongapo City. The controversy revolves around a parcel of land, and the improvements established thereon, which, according
to petitioners, should form part of the estate of their deceased father, Felix Ting Ho, and should be partitioned equally among
each of the siblings.

In their complaint before the RTC, petitioners alleged that their father Felix Ting Ho died intestate on June 26, 1970, and
left upon his death an estate consisting of the following:
a) A commercial land consisting of 774 square meters, more or less, located at Nos. 16 and 18 Afable St., East Bajac-
Bajac, Olongapo City, covered by Original Certificate of Title No. P-1064 and Tax Declaration No. 002-2451;
b) A two-storey residential house on the aforesaid lot;
c) A two-storey commercial building, the first floor rented to different persons and the second floor, Bonanza Hotel,
operated by the defendant also located on the above described lot; and
d) A sari-sari store (formerly a bakery) also located on the above described lot.
[3]


According to petitioners, the said lot and properties were titled and tax declared under trust in the name of respondent Vicente
Teng Gui for the benefit of the deceased Felix Ting Ho who, being a Chinese citizen, was then disqualified to own public lands in
the Philippines; and that upon the death of Felix Ting Ho, the respondent took possession of the same for his own exclusive use
and benefit to their exclusion and prejudice.
[4]


In his answer, the respondent countered that on October 11, 1958, Felix Ting Ho sold the commercial and residential
buildings to his sister-in-law, Victoria Cabasal, and the bakery to his brother-in-law, Gregorio Fontela.
[5]
He alleged that he
acquired said properties from the respective buyers on October 28, 1961 and has since then been in possession of subject
properties in the concept of an owner; and that on January 24, 1978, Original Certificate of Title No. P-1064 covering the subject
lot was issued to him pursuant to a miscellaneous sales patent granted to him on January 3, 1978.
[6]


The undisputed facts as found by the trial court (RTC), and affirmed by the appellate court (CA), are as follows:

[T]he plaintiffs and the defendant are all brothers and sisters, the defendant being the oldest. They are
the only legitimate children of the deceased Spouses Felix Ting Ho and Leonila Cabasal. Felix Ting Ho died
on June 26, 1970 while the wife Leonila Cabasal died on December 7, 1978. The defendant Vicente Teng Gui is
the oldest among the children as he was born on April 5, 1943. The father of the plaintiffs and the defendant
was a Chinese citizen although their mother was Filipino. That sometime in 1947, the father of the plaintiffs and
defendant, Felix Ting Ho, who was already then married to their mother Leonila Cabasal, occupied a parcel of
land identified to (sic) as Lot No. 18 Brill which was thereafter identified as Lot No. 16 situated at Afable Street,
East Bajac-Bajac, Olongapo City, by virtue of the permission granted him by the then U.S. Naval Reservation
Office, Olongapo, Zambales. The couple thereafter introduced improvements on the land. They built a house of
strong material at 16 Afable Street which is a commercial and residential house and another building of strong
material at 18 Afable Street which was a residential house and a bakery. The couple, as well as their children,
lived and resided in the said properties until their death. The father, Felix Ting Ho had managed the bakery
while the mother managed the sari-sari store. Long before the death of Felix Ting Ho, who died onJune 26,
1970, he executed on October 11, 1958 a Deed of Absolute Sale of a house of strong material located
at 16 Afable Street, Olongapo, Zambales, specifically described in Tax Dec. No. 5432, in favor of Victoria
Cabasal his sister-in-law (Exh. C). This Deed of Sale cancelled the Tax Dec. of Felix Ting Ho over the said
building (Exh. C-1) and the building was registered in the name of the buyer Victoria Cabasal, as per Tax Dec. No.
7579 (Exh. C-2). On the same date, October 11, 1958 the said Felix Ting Ho also sold a building of strong
material located at 18 Afable Street, described in Tax Dec. No. 5982, in favor of Gregorio Fontela, of legal
age, an American citizen, married (Exh. D). This Deed of Sale, in effect, cancelled Tax Dec. No. 5982 and the
same was registered in the name of the buyer Gregorio Fontela, as per Tax Dec. No. 7580 (Exh. D-2). In turn
Victoria Cabasal and her husband Gregorio Fontela sold to Vicente Teng Gui on October 28, 1961 the
buildings which were bought by them from Felix Ting Ho and their tax declarations for the building they
bought (Exhs. C-2 and D-2) were accordingly cancelled and the said buildings were registered in the
name of the defendant Vicente Teng Gui (Exhs. C-3 and D-3). On October 25, 1966 the father of the parties
Felix Ting Ho executed an Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interest
including Improvements on Land in favor of his eldest son the defendant Vicente Teng Gui. On the basis of the
said document the defendant who then chose Filipino citizenship filed a miscellaneous sales application with the
Bureau of Lands. Miscellaneous Sales Patent No. 7457 of the land which was then identified to be Lot No.
418, Ts-308 consisting of 774 square meters was issued to the applicant Vicente Teng Gui and
accordingly on the 24
th
of January, 1978 Original Certificate of Title No. P-1064 covering the lot in
question was issued to the defendant Vicente Teng Gui. Although the buildings and improvements on the
land in question were sold by Felix Ting Ho to Victoria Cabasal and Gregorio Fontela in 1958 and who in turn
sold the buildings to the defendant in 1961 the said Felix Ting Ho and his wife remained in possession of the
properties as Felix Ting Ho continued to manage the bakery while the wife Leonila Cabasal continued to manage
the sari-sari store. During all the time that the alleged buildings were sold to the spouses Victoria Cabasal and
Gregorio Fontela in 1958 and the subsequent sale of the same to the defendant Vicente Teng Gui in October of
1961 the plaintiffs and the defendant continued to live and were under the custody of their parents until their
father Felix Ting Ho died in 1970 and their mother Leonila Cabasal died in 1978.
[7]
(Emphasis supplied)

In light of these factual findings, the RTC found that Felix Ting Ho, being a Chinese citizen and the father of the
petitioners and respondent, resorted to a series of simulated transactions in order to preserve the right to the lot and the
properties thereon in the hands of the family. As stated by the trial court:

After a serious consideration of the testimonies given by both one of the plaintiffs and the defendant as
well as the documentary exhibits presented in the case, the Court is inclined to believe that Felix Ting Ho, the
father of the plaintiffs and the defendant, and the husband of Leonila Cabasal thought of preserving the
properties in question by transferring the said properties to his eldest son as he thought that he cannot acquire
the properties as he was a Chinese citizen. To transfer the improvements on the land to his eldest son the
defendant Vicente Teng Gui, he first executed simulated Deeds of Sales in favor of the sister and brother-in-law
of his wife in 1958 and after three (3) years it was made to appear that these vendees had sold the
improvements to the defendant Vicente Teng Gui who was then 18 years old. The Court finds that these
transaction (sic) were simulated and that no consideration was ever paid by the vendees.

x x x x x x x x x

With regards (sic) to the transfer and relinquishment of Felix Ting Hos right to the land in question in
favor of the defendant, the Court believes, that although from the face of the document it is stated in absolute
terms that without any consideration Felix Ting Ho was transferring and renouncing his right in favor of his son,
the defendant Vicente Teng Gui, still the Court believes that the transaction was one of implied trust executed by
Felix Ting Ho for the benefit of his family
[8]


Notwithstanding such findings, the RTC considered the Affidavit of Transfer, Relinquishment and Renouncement of
Rights and Interests over the land as a donation which was accepted by the donee, the herein respondent. With respect to the
properties in the lot, the trial court held that although the sales were simulated, pursuant to Article 1471 of the New Civil
Code
[9]
it can be assumed that the intention of Felix Ting Ho in such transaction was to give and donate such properties to the
respondent. As a result, it awarded the entire conjugal share of Felix Ting Ho in the subject lot and properties to the respondent
and divided only the conjugal share of his wife among the siblings. The dispositive portion of the RTC decision decreed:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant as the
Court orders the partition and the adjudication of the subject properties, Lot 418, Ts-308, specifically described
in original Certificate of Title No. P-1064 and the residential and commercial houses standing on the lot
specifically described in Tax Decs. Nos. 9179 and 9180 in the name of Vicente Teng Gui in the following manner,
to wit: To the defendant Vicente Teng Gui is adjudicated an undivided six-tenth (6/10) of the aforementioned
properties and to each of the plaintiffs Felix Ting Ho, Jr., Merla Ting-Ho Braden, Juana Ting and Lydia Ting Ho-
Belenzo each an undivided one-tenth (1/10) of the properties
[10]


From this decision, both parties interposed their respective appeals. The petitioners claimed that the RTC erred in
awarding respondent the entire conjugal share of their deceased father in the lot and properties in question contrary to its own
finding that an implied trust existed between the parties. The respondent, on the other hand, asserted that the RTC erred in not
ruling that the lot and properties do not form part of the estate of Felix Ting Ho and are owned entirely by him.

On appeal, the CA reversed and set aside the decision of the RTC. The appellate court held that the deceased Felix Ting
Ho was never the owner and never claimed ownership of the subject lot since he is disqualified under Philippine laws from
owning public lands, and that respondent Vicente Teng Gui was the rightful owner over said lot by virtue of Miscellaneous Sales
Patent No. 7457 issued in his favor, viz:

The deceased Felix Ting Ho, plaintiffs and defendants late father, was never the owner of the
subject lot, now identified as Lot No. 418, Ts-308 covered by OCT No. P-1064 (Exh. A; Record, p. 104). As
stated by Felix Ting Ho no less in the Affidavit of Transfer, Relinquishment and Renouncement of Rights
and Interest etc. (Exh. B: Record, p. 107), executed on October 25, 1966 he, the late Felix Ting Ho, was
merely a possessor or occupant of the subject lot by virtue of a permission granted by the
then U.S. Naval Reservation Office, Olongapo, Zambales. The late Felix Ting Ho was never the owner and
never claimed ownership of the land. (Emphasis supplied)

The affidavit, Exhibit B, was subscribed and sworn to before a Land Investigator of the Bureau of Lands
and in the said affidavit, the late Felix Ting Ho expressly acknowledged that because he is a Chinese citizen he is
not qualified to purchase public lands under Philippine laws for which reason he thereby transfers, relinquishes
and renounces all his rights and interests in the subject land, including all the improvements thereon to his son,
the defendant Vicente Teng Gui, who is of legal age, single, Filipino citizen and qualified under the public land
law to acquire lands.

x x x x x x x x x

Defendant Vicente Teng Gui acquired the subject land by sales patent or purchase from the
government and not from his father, the late Felix Ting Ho. It cannot be said that he acquired or bought the
land in trust for his father because on December 5, 1977 when the subject land was sold to him by the
government and on January 3, 1978 when Miscellaneous Sales Patent No. 7457 was issued, the late Felix Ting Ho
was already dead, having died on June 6, 1970 (TSN, January 10, 1990, p. 4).
[11]


Regarding the properties erected over the said lot, the CA held that the finding that the sales of the two-storey
commercial and residential buildings and sari-sari store to Victoria Cabasal and Gregorio Fontela and subsequently to
respondent were without consideration and simulated is supported by evidence, which clearly establishes that these properties
should form part of the estate of the late spouses Felix Ting Ho and Leonila Cabasal.

Thus, while the appellate court dismissed the complaint for partition with respect to the lot in question, it awarded the
petitioners a four-fifths (4/5) share of the subject properties erected on the said lot. The dispositive portion of the CA ruling
reads as follows:

WHEREFORE, premises considered, the decision appealed from is REVERSED and SET ASIDE and NEW
JUDGMENT rendered:

1. DISMISSING plaintiff-appellants complaint with respect to the subject parcel of land, identified as Lot
No. 418, Ts-308, covered by OCT No. P-1064, in the name of plaintiff-appellants [should be defendant-
appellant];

2. DECLARING that the two-storey commercial building, the two-storey residential building and sari-sari
store (formerly a bakery), all erected on the subject lot No. 418, Ts-308, form part of the estate of the deceased
spouses Felix Ting Ho and Leonila Cabasal, and that plaintiff-appellants are entitled to four-fifths (4/5) thereof,
the remaining one-fifth (1/5) being the share of the defendant-appellant;

3. DIRECTING the court a quo to partition the said two-storey commercial building, two-storey
residential building and sari-sari store (formerly a bakery) in accordance with Rule 69 of the Revised Rules of
Court and pertinent provisions of the Civil Code;

4. Let the records of this case be remanded to the court of origin for further proceedings;

5. Let a copy of this decision be furnished the Office of the Solicitor General; and

6. There is no pronouncement as to costs.

SO ORDERED.
[12]


Both petitioners and respondent filed their respective motions for reconsideration from this ruling, which were
summarily denied by the CA in its Resolution
[13]
dated August 5, 1997. Hence, this petition.

According to the petitioners, the CA erred in declaring that Lot No. 418, Ts-308 does not form part of the estate of the
deceased Felix Ting Ho and is owned alone by respondent. Respondent, on the other hand, contends that he should be declared
the sole owner not only of Lot No. 418, Ts-308 but also of the properties erected thereon and that the CA erred in not dismissing
the complaint for partition with respect to the said properties.

The primary issue for consideration is whether both Lot No. 418, Ts-308 and the properties erected thereon should be
included in the estate of the deceased Felix Ting Ho.

We affirm the CA ruling.

With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of the 1935 Constitution states:

Section 1. All agricultural timber, and mineral lands of the public domain, waters, minerals, coal,
petroleum, and other mineral oils, all forces of potential energy and other natural resources of the
Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be
limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the
capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time
of the inauguration of the Government established under this Constitution (Emphasis supplied)

Our fundamental law cannot be any clearer. The right to acquire lands of the public domain is reserved for Filipino
citizens or corporations at least sixty percent of the capital of which is owned by Filipinos. Thus, in Krivenko v. Register of
Deeds,
[14]
the Court enunciated that:

Perhaps the effect of our construction is to preclude aliens, admitted freely into
the Philippines from owning sites where they may build their homes. But if this is the solemn mandate of
the Constitution, we will not attempt to compromise it even in the name of amity or equity. We are
satisfied, however, that aliens are not completely excluded by the Constitution from the use of lands for
residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights
such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever
and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire.
[15]


In the present case, the father of petitioners and respondent was a Chinese citizen; therefore, he was disqualified from
acquiring and owning real property in the Philippines. In fact, he was only occupying the subject lot by virtue of the permission
granted him by the then U.S. Naval Reservation Office of Olongapo, Zambales. As correctly found by the CA, the deceased Felix
Ting Ho was never the owner of the subject lot in light of the constitutional proscription and the respondent did not at any
instance act as the dummy of his father.

On the other hand, the respondent became the owner of Lot No. 418, Ts-308 when he was granted Miscellaneous Sales
Patent No. 7457 on January 3, 1978, by the Secretary of Natural Resources By Authority of the President of the Philippines, and
when Original Certificate of Title No. P-1064 was correspondingly issued in his name. The grant of the miscellaneous sales
patent by the Secretary of Natural Resources, and the corresponding issuance of the original certificate of title in his name, show
that the respondent possesses all the qualifications and none of the disqualifications to acquire alienable and disposable lands of
the public domain. These issuances bear the presumption of regularity in their performance in the absence of evidence to the
contrary.

Registration of grants and patents involving public lands is governed by Section 122 of Act No. 496, which was
subsequently amended by Section 103 of Presidential Decree No. 1529, viz:

Sec. 103. Certificate of title pursuant to patents.Whenever public land is by the Government
alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this
Decree. It shall be the duty of the official issuing the instrument of alienation, grant, patent or conveyance in
behalf of the Government to cause such instrument to be filed with the Register of Deeds of the province or city
where the land lies, and to be there registered like other deeds and conveyance, whereupon a certificate of title
shall be entered as in other cases of registered land, and an owners duplicate issued to the grantee. The deeds,
grant, patent or instrument of conveyance from the Government to the grantee shall not take effect as a
conveyance or bind the land, but shall operate only as a contract between the Government and the grantee and
as evidence of authority to the Register of Deeds to make registration. It is the act of registration that shall be
the operative act to affect and convey the land, and in all cases under this Decree registration shall be made in
the office of the Register of Deeds of the province or city where the land lies. The fees for registration shall be
paid by the grantee. After due registration and issuance of the certificate of title, such land shall be
deemed to be registered land to all intents and purposes under this Decree.
[16]
(Emphasis supplied)


Under the law, a certificate of title issued pursuant to any grant or patent involving public land is as conclusive and
indefeasible as any other certificate of title issued to private lands in the ordinary or cadastral registration proceeding. The effect
of the registration of a patent and the issuance of a certificate of title to the patentee is to vest in him an incontestable title to
the land, in the same manner as if ownership had been determined by final decree of the court, and the title so issued is
absolutely conclusive and indisputable, and is not subject to collateral attack.
[17]


Nonetheless, petitioners invoke equity considerations and claim that the ruling of the RTC that an implied trust was
created between respondent and their father with respect to the subject lot should be upheld.

This contention must fail because the prohibition against an alien from owning lands of the public domain is absolute and
not even an implied trust can be permitted to arise on equity considerations.

In the case of Muller v. Muller,
[18]
wherein the respondent, a German national, was seeking reimbursement of funds
claimed by him to be given in trust to his petitioner wife, a Philippine citizen, for the purchase of a property in Antipolo, the
Court, in rejecting the claim, ruled that:

Respondent was aware of the constitutional prohibition and expressly admitted his knowledge thereof
to this Court. He declared that he had the Antipolo property titled in the name of the petitioner because of the
said prohibition. His attempt at subsequently asserting or claiming a right on the said property cannot be
sustained.

The Court of Appeals erred in holding that an implied trust was created and resulted by operation
of law in view of petitioner's marriage to respondent. Save for the exception provided in cases of
hereditary succession, respondent's disqualification from owning lands in the Philippines is absolute. Not
even an ownership in trust is allowed. Besides, where the purchase is made in violation of an existing statute
and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud. To hold
otherwise would allow circumvention of the constitutional prohibition.

Invoking the principle that a court is not only a court of law but also a court of equity, is likewise
misplaced. It has been held that equity as a rule will follow the law and will not permit that to be done indirectly
which, because of public policy, cannot be done directly...
[19]


Coming now to the issue of ownership of the properties erected on the subject lot, the Court agrees with the finding of
the trial court, as affirmed by the appellate court, that the series of transactions resorted to by the deceased were simulated in
order to preserve the properties in the hands of the family. The records show that during all the time that the properties were
allegedly sold to the spouses Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent sale of the same to respondent
in 1961, the petitioners and respondent, along with their parents, remained in possession and continued to live in said
properties.

However, the trial court concluded that:

In fairness to the defendant, although the Deeds of Sale executed by Felix Ting Ho regarding the
improvements in favor of Victoria Cabasal and Gregorio Fontela and the subsequent transfer of the same by
Gregorio Fontela and Victoria Cabasal to the defendant are all simulated, yet, pursuant to Article 1471 of the
New Civil Code it can be assumed that the intention of Felix Ting Ho in such transaction was to give and
donate the improvements to his eldest son the defendant Vicente Teng Gui
[20]


Its finding was based on Article 1471 of the Civil Code, which provides that:

Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a
donation, or some other act or contract.
[21]


The Court holds that the reliance of the trial court on the provisions of Article 1471 of the Civil Code to conclude that the
simulated sales were a valid donation to the respondent is misplaced because its finding was based on a mere
assumption when the law requires positive proof.

The respondent was unable to show, and the records are bereft of any evidence, that the simulated sales of the
properties were intended by the deceased to be a donation to him. Thus, the Court holds that the two-storey residential house,
two-storey residential building and sari-sari store form part of the estate of the late spouses Felix Ting Ho and Leonila Cabasal,
entitling the petitioners to a four-fifths (4/5) share thereof.

IN VIEW WHEREOF, the petition is DENIED. The assailed Decision dated December 27, 1996 of the Court of Appeals in
CA-G.R. CV No. 42993 is herebyAFFIRMED.

SO ORDERED.

IDA C. LABAGALA, petitioner, vs. NICOLASA T. SANTIAGO, AMANDA T. SANTIAGO and HON. COURT OF
APPEALS, respondents.
D E C I S I O N
QUISUMBING, J.:
This petition for review on certiorari seeks to annul the decision dated March 4, 1997,
[1]
of the Court of Appeals in CA-G.R.
CV No. 32817, which reversed and set aside the judgment dated October 17, 1990,
[2]
of the Regional Trial Court of Manila, Branch
54, in Civil Case No. 87-41515, finding herein petitioner to be the owner of 1/3 pro indiviso share in a parcel of land.
The pertinent facts of the case, as borne by the records, are as follows:
Jose T. Santiago owned a parcel of land covered by TCT No. 64729, located in Rizal Avenue Extension, Sta. Cruz,
Manila. Alleging that Jose had fraudulently registered it in his name alone, his sisters Nicolasa and Amanda (now respondents
herein), sued Jose for recovery of 2/3 share of the property.
[3]
On April 20, 1981, the trial court in that case decided in favor of the
sisters, recognizing their right of ownership over portions of the property covered by TCT No. 64729. The Register of Deeds of
Manila was required to include the names of Nicolasa and Amanda in the certificate of title to said property.
[4]

Jose died intestate on February 6, 1984. On August 5, 1987, respondents filed a complaint for recovery of title, ownership,
and possession against herein petitioner, Ida C. Labagala, before the Regional Trial Court of Manila, to recover from her the 1/3
portion of said property pertaining to Jose but which came into petitioners sole possession upon Joses death.
Respondents alleged that Joses share in the property belongs to them by operation of law, because they are the only legal
heirs of their brother, who died intestate and without issue. They claimed that the purported sale of the property made by their
brother to petitioner sometime in March 1979
[5]
was executed through petitioners machinations and with malicious intent, to
enable her to secure the corresponding transfer certificate of title (TCT No. 172334
[6]
) in petitioners name alone.
[7]

Respondents insisted that the deed of sale was a forgery. The deed showed that Jose affixed his thumbmark thereon but
respondents averred that, having been able to graduate from college, Jose never put his thumbmark on documents he executed
but always signed his name in full. They claimed that Jose could not have sold the property belonging to his poor and
unschooled sisters who sacrificed for his studies and personal welfare.
[8]
Respondents also pointed out that it is highly
improbable for petitioner to have paid the supposed consideration of P150,000 for the sale of the subject property because
petitioner was unemployed and without any visible means of livelihood at the time of the alleged sale. They also stressed that it
was quite unusual and questionable that petitioner registered the deed of sale only on January 26, 1987, or almost eight years
after the execution of the sale.
[9]

On the other hand, petitioner claimed that her true name is not Ida C. Labagala as claimed by respondent but Ida C.
Santiago. She claimed not to know any person by the name of Ida C. Labagala. She claimed to be the daughter of Jose and thus
entitled to his share in the subject property. She maintained that she had always stayed on the property, ever since she was a
child. She argued that the purported sale of the property was in fact a donation to her, and that nothing could have precluded
Jose from putting his thumbmark on the deed of sale instead of his signature. She pointed out that during his lifetime, Jose
never acknowledged respondents claim over the property such that respondents had to sue to claim portions thereof. She
lamented that respondents had to disclaim her in their desire to obtain ownership of the whole property.
Petitioner revealed that respondents had in 1985 filed two ejectment cases against her and other occupants of the
property. The first was decided in her and the other defendants favor, while the second was dismissed. Yet respondents
persisted and resorted to the present action.
Petitioner recognized respondents ownership of 2/3 of the property as decreed by the RTC. But she averred that she
caused the issuance of a title in her name alone, allegedly after respondents refused to take steps that would prevent the
property from being sold by public auction for their failure to pay realty taxes thereon. She added that with a title issued in her
name she could avail of a realty tax amnesty.
On October 17, 1990, the trial court ruled in favor of petitioner, decreeing thus:
WHEREFORE, judgment is hereby rendered recognizing the plaintiffs [herein respondents] as being entitled to the ownership and
possession each of one-third (1/3) pro indiviso share of the property originally covered by Transfer Certificate of Title No. 64729,
in the name of Jose T. Santiago and presently covered by Transfer Certificate of Title No. 172334, in the name of herein
defendant [herein petitioner] and which is located at No. 3075-A Rizal Avenue Extension, Sta. Cruz, Manila, as per complaint, and
the adjudication to plaintiffs per decision in Civil Case No. 56226 of this Court, Branch VI, and the remaining one-third (1/3) pro
indiviso share adjudicated in said decision to defendant Jose T. Santiago in said case, is hereby adjudged and adjudicated to
herein defendant as owner and entitled to possession of said share. The Court does not see fit to adjudge damages, attorneys
fees and costs. Upon finality of this judgment, Transfer Certificate of Title No. 172334 is ordered cancelled and a new title issued
in the names of the two (2) plaintiffs and the defendant as owners in equal shares, and the Register of Deeds of Manila is so
directed to effect the same upon payment of the proper fees by the parties herein.
SO ORDERED.
[10]

According to the trial court, while there was indeed no consideration for the deed of sale executed by Jose in favor of
petitioner, said deed constitutes a valid donation. Even if it were not, petitioner would still be entitled to Joses 1/3 portion of
the property as Joses daughter. The trial court ruled that the following evidence shows petitioner to be the daughter of
Jose: (1) the decisions in the two ejectment cases filed by respondents which stated that petitioner is Joses daughter, and (2)
Joses income tax return which listed petitioner as his daughter. It further said that respondents knew of petitioners existence
and her being the daughter of Jose, per records of the earlier ejectment cases they filed against petitioner. According to the
court, respondents were not candid with the court in refusing to recognize petitioner as Ida C. Santiago and insisting that she
was Ida C. Labagala, thus affecting their credibility.
Respondents appealed to the Court of Appeals, which reversed the decision of the trial court.
WHEREFORE, the appealed decision is REVERSED and one is entered declaring the appellants Nicolasa and Amanda Santiago the
co-owners in equal shares of the one-third (1/3) pro indiviso share of the late Jose Santiago in the land and building covered by
TCT No. 172334. Accordingly, the Register of Deeds of Manila is directed to cancel said title and issue in its place a new one
reflecting this decision.
SO ORDERED.
Apart from respondents testimonies, the appellate court noted that the birth certificate of Ida Labagala presented by
respondents showed that Ida was born of different parents, not Jose and his wife. It also took into account the statement made
by Jose in Civil Case No. 56226 that he did not have any child.
Hence, the present petition wherein the following issues are raised for consideration:
1. Whether or not petitioner has adduced preponderant evidence to prove that she is the daughter of the late Jose T.
Santiago, and
2. Whether or not respondents could still impugn the filiation of the petitioner as the daughter of the late Jose T. Santiago.
Petitioner contends that the trial court was correct in ruling that she had adduced sufficient evidence to prove her filiation
by Jose Santiago, making her his sole heir and thus entitled to inherit his 1/3 portion. She points out that respondents had,
before the filing of the instant case, previously considered
[11]
her as the daughter of Jose who, during his lifetime, openly
regarded her as his legitimate daughter. She asserts that her identification as Joses daughter in his ITR outweighs the strange
answers he gave when he testified in Civil Case No. 56226.
Petitioner asserts further that respondents cannot impugn her filiation collaterally, citing the case of Sayson v. Court of
Appeals
[12]
in which we held that (t)he legitimacy of (a) child can be impugned only in a direct action brought for that purpose,
by the proper parties and within the period limited by law.
[13]
Petitioner also cites Article 263 of the Civil Code in support of this
contention.
[14]

For their part, respondents contend that petitioner is not the daughter of Jose, per her birth certificate that indicate her
parents as Leo Labagala and Cornelia Cabrigas, instead of Jose Santiago and Esperanza Cabrigas.
[15]
They argue that the
provisions of Article 263 of the Civil Code do not apply to the present case since this is not an action impugning a childs
legitimacy but one for recovery of title, ownership, and possession of property.
The issues for resolution in this case, to our mind, are (1) whether or not respondents may impugn petitioners filiation in
this action for recovery of title and possession; and (2) whether or not petitioner is entitled to Joses 1/3 portion of the property
he co-owned with respondents, through succession, sale, or donation.
On the first issue, we find petitioners reliance on Article 263 of the Civil Code to be misplaced. Said article provides:
Art. 263. The action to impugn the legitimacy of the child shall be brought within one year from the recording of the birth in the
Civil Register, if the husband should be in the same place, or in a proper case, any of his heirs.
If he or his heirs are absent, the period shall be eighteen months if they should reside in the Philippines; and two years if
abroad. If the birth of the child has been concealed, the term shall be counted from the discovery of the fraud.
This article should be read in conjunction with the other articles in the same chapter on paternity and filiation in the Civil
Code. A careful reading of said chapter would reveal that it contemplates situations where a doubt exists that a child is indeed a
mans child by his wife, and the husband (or, in proper cases, his heirs) denies the childs filiation. It does not refer to situations
where a child is alleged not to be the child at all of a particular couple.
[16]

Article 263 refers to an action to impugn the legitimacy of a child, to assert and prove that a person is not a mans child by
his wife. However, the present case is not one impugning petitioners legitimacy. Respondents are asserting not merely that
petitioner is not a legitimate child of Jose, but that she is not a child of Jose at all.
[17]
Moreover, the present action is one for
recovery of title and possession, and thus outside the scope of Article 263 on prescriptive periods.
Petitioners reliance on Sayson is likewise improper. The factual milieu present in Sayson does not obtain in the instant
case. What was being challenged by petitioners in Sayson was (1) the validity of the adoption of Delia and Edmundo by the
deceased Teodoro and Isabel Sayson, and (2) the legitimate status of Doribel Sayson. While asserting that Delia and Edmundo
could not have been validly adopted since Doribel had already been born to the Sayson couple at the time, petitioners at the
same time made the conflicting claim that Doribel was not the child of the couple. The Court ruled in that case that it was too
late to question the decree of adoption that became final years before. Besides, such a challenge to the validity of the adoption
cannot be made collaterally but in a direct proceeding.
[18]

In this case, respondents are not assailing petitioners legitimate status but are, instead, asserting that she is not at all their
brothers child. The birth certificate presented by respondents support this allegation.
We agree with the Court of Appeals that::
The Certificate of Record of Birth (Exhibit H)
[19]
plainly states that Ida was the child of the spouses Leon Labagala and *Cornelia+
Cabrigas. This document states that it was Leon Labagala who made the report to the Local Civil Registrar and therefore the
supplier of the entries in said Certificate. Therefore, this certificate is proof of the filiation of Ida. Appellee however denies that
Exhibit H is her Birth Certificate. She insists that she is not Ida Labagala but Ida Santiago. If Exhibit H is not her birth certificate,
then where is hers? She did not present any though it would have been the easiest thing to do considering that according to her
baptismal certificate she was born in Manila in 1969. This court rejects such denials and holds that Exhibit H is the certificate of
the record of birth of appellee Ida
Against such evidence, the appellee Ida could only present her testimony and a baptismal certificate (Exhibit 12) stating that
appellees parents were Jose Santiago and Esperanza Cabrigas. But then, a decisional rule in evidence states that a baptismal
certificate is not a proof of the parentage of the baptized person. This document can only prove the identity of the baptized, the
date and place of her baptism, the identities of the baptismal sponsors and the priest who administered the sacrament --
nothing more.
[20]
(Citations omitted.)
At the pre-trial conducted on August 11, 1988, petitioners counsel admitted that petitioner did not have a birth certificate
indicating that she is Ida Santiago, though she had been using this name all her life.
[21]

Petitioner opted not to present her birth certificate to prove her relationship with Jose and instead offered in evidence her
baptismal certificate.
[22]
However, as we held in Heirs of Pedro Cabais v. Court of Appeals:
a baptismal certificate is evidence only to prove the administration of the sacrament on the dates therein specified, but
not the veracity of the declarations therein stated with respect to *a persons+ kinsfolk. The same is conclusive only of the
baptism administered, according to the rites of the Catholic Church, by the priest who baptized subject child, but it does
not prove the veracity of the declarations and statements contained in the certificate concerning the relationship of the
person baptized.
[23]

A baptismal certificate, a private document, is not conclusive proof of filiation.
[24]
More so are the entries made in an income
tax return, which only shows that income tax has been paid and the amount thereof.
[25]

We note that the trial court had asked petitioner to secure a copy of her birth certificate but petitioner, without advancing
any reason therefor, failed to do so. Neither did petitioner obtain a certification that no record of her birth could be found in
the civil registry, if such were the case. We find petitioners silence concerning the absence of her birth certificate telling. It
raises doubt as to the existence of a birth certificate that would show petitioner to be the daughter of Jose Santiago and
Esperanza Cabrigas. Her failure to show her birth certificate would raise the presumption that if such evidence were presented, it
would be adverse to her claim. Petitioners counsel argued that petitioner had been using Santiago all her life. However, use of a
family name certainly does not establish pedigree.
Further, we note that petitioner, who claims to be Ida Santiago, has the same birthdate as Ida Labagala.
[26]
The similarity is
too uncanny to be a mere coincidence.
During her testimony before the trial court, petitioner denied knowing Cornelia Cabrigas, who was listed as the mother in
the birth certificate of Ida Labagala. In her petition before this Court, however, she stated that Cornelia is the sister of her
mother, Esperanza. It appears that petitioner made conflicting statements that affect her credibility and could cast a long
shadow of doubt on her claims of filiation.
Thus, we are constrained to agree with the factual finding of the Court of Appeals that petitioner is in reality the child of
Leon Labagala and Cornelia Cabrigas, and contrary to her averment, not of Jose Santiago and Esperanza Cabrigas. Not being a
child of Jose, it follows that petitioner can not inherit from him through intestate succession. It now remains to be seen whether
the property in dispute was validly transferred to petitioner through sale or donation.
On the validity of the purported deed of sale, however, we agree with the Court of Appeals that:
This deed is shot through and through with so many intrinsic defects that a reasonable mind is inevitably led to the
conclusion that it is fake. The intrinsic defects are extractable from the following questions: a) If Jose Santiago intended to
donate the properties in question to Ida, what was the big idea of hiding the nature of the contract in the faade of the
sale? b) If the deed is a genuine document, how could it have happened that Jose Santiago who was of course fully aware
that he owned only 1/3 pro indiviso of the properties covered by his title sold or donated the whole properties to Ida? c)
Why in heavens name did Jose Santiago, a college graduate, who always signed his name in documents requiring his
signature (citation omitted) [affix] his thumbmark on this deed of sale? d) If Ida was [the] child of Jose Santiago, what was
the sense of the latter donating his properties to her when she would inherit them anyway upon his death? e) Why did Jose
Santiago affix his thumbmark to a deed which falsely stated that: he was single (for he was earlier married to Esperanza
Cabrigas); Ida was of legal age (for [s]he was then just 15 years old); and the subject properties were free from liens and
encumbrances (for Entry No. 27261, Notice of Adverse Claim and Entry No. 6388, Notice of Lis Pendens were already
annotated in the title of said properties). If the deed was executed in 1979, how come it surfaced only in 1984 after the
death of Jose Santiago and of all people, the one in possession was the baptismal sponsor of Ida?
[27]

Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of the entire property to
petitioner since 2/3 thereof belonged to his sisters.
[28]
Petitioner could not have given her consent to the contract, being a minor
at the time.
[29]
Consent of the contracting parties is among the essential requisites of a contract,
[30]
including one of sale, absent
which there can be no valid contract. Moreover, petitioner admittedly did not pay any centavo for the property,
[31]
which makes
the sale void. Article 1471 of the Civil Code provides:
Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other
act or contract.
Neither may the purported deed of sale be a valid deed of donation. Again, as explained by the Court of Appeals:
Even assuming that the deed is genuine, it cannot be a valid donation. It lacks the acceptance of the donee required by Art.
725 of the Civil Code. Being a minor in 1979, the acceptance of the donation should have been made by her father, Leon
Labagala or [her] mother Cornelia Cabrigas or her legal representative pursuant to Art. 741 of the same Code. No one of those
mentioned in the law - in fact no one at all - accepted the donation for Ida.
[32]

In sum, we find no reversible error attributable to the assailed decision of the Court of Appeals, hence it must be upheld.
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals in CA-G.R. CV No. 32817 is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.
Buena J., on official leave.

G.R. No. 173881 December 1, 2010
HYATT ELEVATORS and ESCALATORS CORPORATION, Petitioner,
vs.
CATHEDRAL HEIGHTS BUILDING COMPLEX ASSOCIATION, INC., Respondent.
D E C I S I O N
PERALTA, J.:
Before this Court is a petition for review on certiorari,
1
under Rule 45 of the Rules of Court, seeking to set aside the April 20, 2006
Decision
2
and July 31, 2006 Resolution
3
of the Court of Appeals (CA), in CA-G.R. CV No. 80427.
The facts of the case are as follows:
On October 1, 1994, petitioner Hyatt Elevators and Escalators Corporation entered into an "Agreement to Service Elevators"
(Service Agreement)
4
with respondent Cathedral Heights Building Complex Association, Inc., where petitioner was contracted to
maintain four passenger elevators installed in respondent's building. Under the Service Agreement, the duties and obligations of
petitioner included monthly inspection, adjustment and lubrication of machinery, motors, control parts and accessory
equipments, including switches and electrical wirings.
5
Section D (2) of the Service Agreement provides that respondent shall pay
for the additional charges incurred in connection with the repair and supply of parts.
Petitioner claims that during the period of April 1997 to July 1998 it had incurred expenses amounting to Php 1,161,933.47 in the
maintenance and repair of the four elevators as itemized in a statement of account.
6
Petitioner demanded from respondent the
payment of the aforesaid amount allegedly through a series of demand letters, the last one sent on July 18, 2000.
7
Respondent,
however, refused to pay the amount.
Petitioner filed with the Regional Trial Court (RTC), Branch 100, Quezon City, a Complaint for sum of money against respondent.
Said complaint was docketed as Civil Case No. Q-01-43055.
On March 5, 2003, the RTC rendered Judgment
8
ruling in favor of petitioner, the dispositive portion of which reads:
WHEREFORE, premises considered, JUDGMENT IS HEREBY RENDERED IN FAVOR OF THE PLAINTIFF AND AGAINST THE
DEFENDANT ordering the latter to pay Plaintiff as follows:
1. The sum of P1,161,933.27 representing the costs of the elevator parts used, and for services and maintenance, with
legal rate of interest from the filing of the complaint;
2. The sum of P50,000.00 as attorney's fees;
3. The costs of suit.
SO ORDERED.
9

The RTC held that based on the sales invoices presented by petitioner, a contract of sale of goods was entered into between the
parties. Since petitioner was able to fulfill its obligation, the RTC ruled that it was incumbent on respondent to pay for the
services rendered. The RTC did not give credence to respondent's claim that the elevator parts were never delivered and that the
repairs were questionable, holding that such defense was a mere afterthought and was never raised by respondent against
petitioner at an earlier time.
Respondent filed a Motion for Reconsideration.
10
On August 17, 2003, the RTC issued a Resolution
11
denying respondent's
motion. Respondent then filed a Notice of Appeal.
12

On April 20, 2006, the CA rendered a Decision finding merit in respondent's appeal, the dispositive portion of which reads:
WHEREFORE, premises considered, the instant appeal is GRANTED. The Judgment of the Regional Trial Court, Branch 100,
Quezon City, dated March 5, 2003, is hereby REVERSED and SET ASIDE. The complaint below is dismissed.
SO ORDERED.
13

In reversing the RTC, the CA ruled that respondent did not give its consent to the purchase of the spare parts allegedly installed
in the defective elevators. Aside from the absence of consent, the CA also held that there was no perfected contract of sale
because there was no meeting of minds upon the price. On this note, the CA ruled that the Service Agreement did not give
petitioner the unbridled license to purchase and install any spare parts and demand, after the lapse of a considerable length of
time, payment of these prices from respondent according to its own dictated price.
Aggrieved, petitioner filed a Motion for Reconsideration,
14
which was, however, denied by the CA in a Resolution dated July 31,
2006.
Hence, herein petition, with petitioner raising a lone issue for this Court's resolution, to wit:
WHETHER OR NOT THERE IS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND RESPONDENT WITH REGARDS TO
THE SPARE PARTS DELIVERED AND INSTALLED BY PETITIONER ON THE FOUR ELEVATORS OF RESPONDENT AT ITS HOSPITAL
UNDER THE AGREEMENT TO SERVICE ELEVATORS AS TO RENDER RESPONDENT LIABLE FOR THEIR PRICES?
15

Before anything else, this Court shall address a procedural issue raised by respondent in its Comment
16
that the petition should
be denied due course for raising questions of fact.
The determination of whether there exists a perfected contract of sale is essentially a question of fact. It is already a well-settled
rule that the jurisdiction of this Court in cases brought before it from the CA by virtue of Rule 45 of the Revised Rules of Court is
limited to reviewing errors of law. Findings of fact of the CA are conclusive upon this Court. There are, however, recognized
exceptions to the foregoing rule, namely: (1) when the findings are grounded entirely on speculation, surmises, or conjectures;
(2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when
the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when, in making its
findings, the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the
appellant and the 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
petitioners 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.
17

The present case falls under the 7th exception, as the RTC and the CA arrived at conflicting findings of fact.
Having resolved the procedural aspect, this Court shall now address the substantive issue raised by petitioner. Petitioner
contends that the CA erred when it ruled that there was no perfected contract of sale between petitioner and respondent with
regard to the spare parts delivered and installed.
It is undisputed that a Service Agreement was entered into by petitioner and respondent where petitioner was commissioned to
maintain respondent's four elevators. Embodied in the Service Agreement is a stipulation relating to expenses incurred on top of
regular maintenance of the elevators, to wit:
SERVICE AND INSPECTION FEE:
x x x x
(2) In addition to the service fee mentioned in the preceding paragraph under this article, the Customer shall pay whatever
additional charges in connection with the repair, supply of parts other than those specifically mentioned in ARTICLE A.2., or
servicing of the elevator/s subject of this contract.
18

Petitioner claims that during the period of April 1997 to July 1998, it had used parts in the maintenance and repair of the four
elevators in the total amount of P1,161,933.47 as itemized in a statement of account
19
and supported by sales invoices, delivery
receipts, trouble call reports and maintenance and checking reports. Respondent, however, refuses to pay the said amount
arguing that petitioner had not complied with the Standard Operating Procedure (SOP) following a breakdown of an elevator.
As testified to by respondent's witness Celestino Aguilar, the SOP following an elevator breakdown is as follows: (a) they
(respondent) will notify petitioner's technician; (b) the technician will evaluate the problem and if the problem is manageable the
repair was done right there and then; (c) if some parts have to be replaced, petitioner will present the defective parts to the
building administrator and a quotation is made; (d) the quotation is then indorsed to respondent's Finance Department; and (e) a
purchase order is then prepared and submitted to the Board of Directors for approval.
20

Based on the foregoing procedure, respondent contends that petitioner had failed to follow the SOP since no purchase orders
from respondent's Finance Manager, or Board of Directors relating to the supposed parts used were secured prior to the repairs.
Consequently, since the repairs were not authorized, respondent claims that it has no way of verifying whether the parts were
actually delivered and installed as alleged by petitioner.
At the outset, this Court observes that the SOP is not embodied in the Service Agreement nor was a document evidencing the
same presented in the RTC. The SOP appears, however, to be the industry practice and as such was not contested by petitioner.
Nevertheless, petitioner offers an excuse for non-compliance with the SOP on its claim that the SOP was not followed upon the
behest and request of respondent.
A perusal of petitioner's petition and evidence in the RTC shows that the main thrust of its case is premised on the following
claims: first, that the nature and operations of a hospital necessarily dictate that the elevators are in good running condition at all
times; and, second, that there was a verbal agreement between petitioner's service manager and respondent's building engineer
that the elevators should be running in good condition at all times and breakdowns should only last one day.
In order to prove its allegations, petitioner presented Wilson Sua, its finance manager, as its sole witness. Sua testified to the
procedure followed by petitioner in servicing respondent's elevators, to wit:
Q: Can you tell us Mr. witness, what is the procedure actually followed whenever there is a need for trouble call
maintenance or repair?
A: The St. Lukes Cathedrals personnel, which includes the administrative officers, the guard on duty, or the receptionist,
will call us through the phone if their elevators brake (sic) down.
Q: Then, what happened?
A: Immediately, we dispatched our technicians to check the trouble.
Q: And who were these technicians whom you normally or regularly dispatched to attend to the trouble of the elevators
of the defendant?
A: With regard to this St. Lukes, we dispatched Sunny Jones and Gilbert Cinamin.
Q: And what happened after dispatching these technicians?
A: They come back immediately to the office to request the parts needed for the troubleshooting of the elevators.
Q: Then what happened?
A: A part will be brought to the project cite and they will install it and note it in the trouble call report and have it
received properly by the building guard or the receptionist or by the building engineers, and they will test it for a couple
of weeks to determine if the parts are the correct part needed for that elevator and we will secure their approval,
thereafter we will issue our invoices and delivery receipts.
Q: This trouble call reports, are these in writing?
A: Yes, sir. These are in writing and these are being written within that day.
Q: Within the day of?
A: Of the trouble. And have it received by the duly personnel of St. Lukes Cathedral.
Q: And who prepared this trouble call reports?
A: The technician who actually checked the elevator.
Q: When do the parts being installed?
A: On the same date they brought the parts on the project cite.
Q: You mentioned sales invoice and delivery receipts. Who prepared these invoice?
A: Those were prepared by our inventory clerk under my supervision?
Q: How about the delivery receipts?
A: Just the same.
Q: When would the sales invoice be prepared?
A: After the approval of the building engineer.
Q: But at the time that the sales invoice and delivery receipts were being prepared after the approval of the building
engineer, what happened to the parts? Were they already installed or what?
A: They were already installed.
Q: Now, why would the parts be installed before the preparation of the sales invoice and the delivery receipts?
A: There was an agreement between the building engineer and our service manager that the elevator should be
running in good condition at all times, breakdown should be at least one day only. It cannot stop for more than a
day.
21

On cross examination, Sua testified that the procedure was followed on the authority of a verbal agreement between petitioner's
service manager and respondent's engineer, thus:
Q: So, you mean to say that despite the fact that material are expensive you immediately installed these equipments
without the prior approval of the board?
A: There is no need for the approval of the board since there is a verbal agreement between the building engineer and
the Hyatt service manager to have the elevator run.
Q: Aside from the building engineer, there is a building administrator?
A: No, ma'am. He is already the building administrator and the building engineer. That is engineer Tisor.
Q: And with regard to the fact that the delivery receipts were acknowledged by the engineer, is that true?
A: Yes, ma'am.
Q: You also mentioned earlier that aside from the building engineer, the receptionist and guards are also authorized. Are
you sure that they are authorized to receive the delivery receipts?
A: Yes, ma'am. It was an instruction given by Engineer Tisor, the building engineer and also the building administrator to
have it received.
Q: So, all these agreements are only verbally, it is not in writing?
A: Yes, ma'am.
22

In its petition, petitioner claims that because of the special circumstances of the building being a hospital, the procedure actually
followed since October 1, 1994 was as follows:
1. Whenever any of the four elevators broke down, the administrative officers, security guard or the receptionist of
respondent called petitioner by telephone;
2. Petitioner dispatched immediately a technician to the St. Lukes Cathedral Heights Building to check the trouble;
3. If the breakdown could be repaired without installation of parts, repair was done on the spot;
4. If the repair needed replacement of damaged parts, the technician went back to petitioners office to get the
necessary replacement parts;
5. The technician then returned to the St. Lukes Cathedral Heights Building and installed the replacement parts and
finished the repair;
6. The placement parts, which were installed in the presence of the security guard, building engineers or receptionist of
respondents whoever was available, were indicated in the trouble call report or sometimes in the delivery receipt and
copy of the said trouble call report or delivery receipt was then given to the blue security guard, building engineers or
receptionist, who duly acknowledged the same;
7. Based on the trouble call report or the delivery receipts, which already indicated the replacement parts installed and
the services rendered, respondent should prepare the purchase order, but this step was never followed by respondent
for whatever reason;
8. In the meantime, the elevator was tested for a couple of weeks to see if the replacement parts were correct and the
approval of the building engineers was secured;
9. After the building engineers gave their approval that the replacement parts were correct or after the lapse of two
weeks and nothing was heard or no complaint was lodged, then the corresponding sales invoices and delivery receipts, if
nothing had been issued yet, were prepared by petitioner and given to respondent, thru its receptionists or security
guards;
10. For its purposes, respondent should compare the trouble call reports or delivery receipts which indicated the
replacement parts installed or with the sales invoices and delivery receipts to confirm the correctness of the transaction;
11. If respondent had any complaint that the parts were not actually installed or delivered or did not agree with the price
of the parts indicated in the sales invoices, then it should bring its complaint or disagreement to the attention of
petitioner. In this regard, no complaint or disagreement as to the prices of the spare parts has been lodged by
respondent.
23

In varying language, our Rules of Court, in speaking of burden of proof in civil cases, states that each party must prove his own
affirmative allegations and that the burden of proof lies on the party who would be defeated if no evidence were given on either
side.1avvphi1 Thus, in civil cases, the burden of proof is generally on the plaintiff, with respect to his complaint.
24
In the case at
bar, it is petitioner's burden to prove that it is entitled to its claims during the period in dispute.
After an extensive review of the records and evidence on hand, this Court rules that petitioner has failed to discharge its burden.
This Court finds that the testimony of Sua alone is insufficient to prove the existence of the verbal agreement, especially in view
of the fact that respondent insists that the SOP should have been followed. It is an age-old rule in civil cases that one who
alleges a fact has the burden of proving it and a mere allegation is not evidence.
25

The testimony of Sua, at best, only alleges but does not prove the existence of the verbal agreement. It may even be hearsay. It
bears stressing, that the agreement was supposedly entered into by petitioner's service manager and respondent's building
engineer. It behooves this Court as to why petitioner did not present their service manager and Engineer Tisor, respondent's
building engineer, the two individuals who were privy to the transactions and who could ultimately lay the basis for the existence
of the alleged verbal agreement. It should have occurred to petitioner during the course of the trial that said testimonies would
have proved vital and crucial to its cause. Therefore, absent such testimonies, the existence of the verbal agreement cannot be
sustained by this Court.
Moreover, even assuming arguendo, that this Court were to believe the procedure outlined by Sua, his testimony
26
clearly
mentions that prior to the preparation of the sales invoices and delivery receipts, the parts delivered and installed must have
been accepted by respondent's engineer or building administrator. However, again, petitioner offered no evidence of such
acceptance by respondents engineer prior to the preparation of the sales invoices and delivery receipts.
This Court is not unmindful of the fact that petitioner also alleges in its petition that the non-observance of the SOP was the
practice way back in 1994 when petitioner started servicing respondent's elevators. On this note, petitioner argued in the
following manner:
And most importantly, the Court of Appeals failed to appreciate that the parts being sought to be paid by petitioner in the
Complaint were delivered and installed during the period from April 1997 to July 1998, which followed the same actual
procedure adopted since October 1, 1994. Based on the same procedure adopted because of the special circumstances of St.
Luke's Cathedral Heights Building being a hospital, respondent has paid the replacement parts installed from October 1994 to
March 1997. Never did respondent question the adopted actual procedure from October 1994 to March 1997. x x x
27

Was the procedure claimed by petitioner the adopted practice since 1994? This Court rules that other than the foregoing
allegation, petitioner has failed to prove the same. A perusal of petitioner's Formal Offer of Evidence
28
would show that the only
documents presented by it are sales invoices, trouble call reports and delivery receipts, all relating to the alleged transactions
between 1997 to 1998. It is unfortunate that petitioner had failed to present in the RTC the documents from 1994 to 1996 for it
may have proven that the non-observance of the SOP was the practice since 1994. Such documents could have shown that
respondent had paid petitioner in the past without objection on similar transactions under similar billing procedures. The same
would have also validated petitioner's claim that the secretary and security guards were all authorized to sign the documents.
Unfortunately, for petitioner's cause, this Court has no basis to validate its claim, because other than its bare allegation in the
petition, petitioner offers no proof to substantiate the same.
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate
thing, and the other to pay therefor a price certain in money or its equivalent.
29
The absence of any of the essential elements will
negate the existence of a perfected contract of sale. In the case at bar, the CA ruled that there was no perfected contract of sale
between petitioner and respondent, to wit:
Aside from the absence of consent, there was no perfected contract of sale because there was no meeting of minds upon the
price. As the law provides, the fixing of the price can never be left to the discretion of one of the contracting parties. In this case,
the absence of agreement as to the price is evidenced by the lack of purchase orders issued by CHBCAI where the quantity,
quality and price of the spare parts needed for the repair of the elevators are stated. In these purchase orders, it would show that
the quotation of the cost of the spare parts earlier informed by Hyatt is acceptable to CHBCAI. However, as revealed by the
records, it was only Hyatt who determined the price, without the acceptance or conformity of CHBCAI. From the moment the
determination of the price is left to the judgment of one of the contracting parties, it cannot be said that there has been an
arrangement on the price since it is not possible for the other contracting party to agree on something of which he does not
know beforehand.
30

Based on the evidence presented in the RTC, it is clear to this Court that petitioner had failed to secure the necessary purchase
orders from respondent's Board of Directors, or Finance Manager, to signify their assent to the price of the parts to be used in
the repair of the elevators. In Boston Bank of the Philippines v. Manalo,
31
this Court explained that the fixing of the price can
never be left to the decision of one of the contracting parties, to wit:
A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it
seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and
enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But
a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.
32

There would have been a perfected contract of sale had respondent accepted the price dictated by petitioner even if such assent
was given after the services were rendered. There is, however, no proof of such acceptance on the part of respondent.
This Court shares the observation of the CA that the signatures of receipt by the information clerk or the guard on duty on the
sales invoices and delivery receipts merely pertain to the physical receipt of the papers. It does not indicate that the parts stated
were actually delivered and installed. Moreover, because petitioner failed to prove the existence of the verbal agreement which
allegedly authorized the aforementioned individuals to sign in respondents behalf, such signatures cannot be tantamount to an
approval or acceptance by respondent of the parts allegedly used and the price quoted by petitioner. Furthermore, what makes
the claims doubtful and questionable is that the date of the sales invoice and the date stated in the corresponding delivery
receipt are too far apart as aptly found by the CA, to wit:
Further, We note that the date stated in the sales invoice vis-a-vis the date stated in the corresponding delivery receipt is too far
apart. For instance, Delivery Receipt No. 3492 dated February 13, 1998 has a corresponding Sales Invoice No. 7147 dated June
30, 1998. What puts doubt to this transaction is the fact that the sales invoice was prepared only after four (4) months from the
delivery. The considerable length of time that has lapsed from the delivery to the issuance of the sales invoice is questionable.
Further the delivery receipts were received months after its preparation. In the case of Delivery Receipt No. 3850 dated
November 26, 1997, Gumisad received this only on July 20, 1998, or after a lapse of eight (8) months. Such kind of procedure
followed by Hyatt is certainly contrary to usual business practice, especially since in this case, it involves considerable amount of
money.
33

Based on the foregoing, the CA was thus correct when it concluded that "the Service Agreement did not give petitioner the
unbridled license to purchase and install any spare parts and demand, after the lapse of a considerable length of time, payment
of these prices from respondent according to its own dictated price."
34

Withal, this Court rules that petitioner's claim must fail for the following reasons: first, petitioner failed to prove the existence of
the verbal agreement that would authorize non-observance of the SOP; second, petitioner failed to prove that such procedure
was the practice since 1994; and, third, there was no perfected contract of sale between the parties as there was no meeting of
minds upon the price.
To stress, the burden of proof is on the plaintiff. He must rely on the strength of his case and not on the weakness of
respondent's defense. Based on the manner by which petitioner had presented its claim, this Court is of the opinion that
petitioner's case leaves too much to be desired.
WHERFORE, premises considered, the petition is DENIED. The April 20, 2006 Decision and July 31, 2006 Resolution of the Court
of Appeals, in CA-G.R. CV No. 80427, are AFFIRMED.
SO ORDERED.
DIOSDADO M. PERALTA
Associate Justice

BOSTON BANK OF THE G. R. No. 158149
PHILIPPINES, (formerly BANK
OF COMMERCE),
Petitioner, Present:

PANGANIBAN, J., Chairperson,
YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR., and
CHICO-NAZARIO, JJ.


PERLA P. MANALO and CARLOS
MANALO, JR.,
Promulgated:

Respondents. February 9, 2006

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


CALLEJO, SR., J.:


Before us is a Petition for Review on Certiorari of the Decision
[1]
of the Court of Appeals (CA) in CA-G.R. CV No. 47458
affirming, on appeal, the Decision
[2]
of the Regional Trial Court (RTC) of Quezon City, Branch 98, in Civil Case No. Q-89-3905.
The Antecedents

The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the Xavierville Estate
Subdivision, with an area of 42 hectares. XEI caused the subdivision of the property into residential lots, which was then offered
for sale to individual lot buyers.
[3]


On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor, and The Overseas Bank of Manila
(OBM), as vendee, executed a Deed of Sale of Real Estate over some residential lots in the subdivision, including Lot 1, Block 2,
with an area of 907.5 square meters, and Lot 2, Block 2, with an area of 832.80 square meters. The transaction was subject to the
approval of the Board of Directors of OBM, and was covered by real estate mortgages in favor of the Philippine National Bank as
security for its account amounting to P5,187,000.00, and the Central Bank of the Philippines as security for advances amounting
to P22,185,193.74.
[4]
Nevertheless, XEI continued selling the residential lots in the subdivision as agent of OBM.
[5]


Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of Engr. Carlos Manalo, Jr. who was in
business of drilling deep water wells and installing pumps under the business name Hurricane Commercial, Inc. For P34,887.66,
Manalo, Jr. installed a water pump at Ramos residence at the corner of Aurora Boulevard andKatipunan Avenue, Quezon City.
Manalo, Jr. then proposed to XEI, through Ramos, to purchase a lot in the Xavierville subdivision, and offered as part of the
downpayment theP34,887.66 Ramos owed him. XEI, through Ramos, agreed. In a letter dated February 8, 1972, Ramos
requested Manalo, Jr. to choose which lots he wanted to buy so that the price of the lots and the terms of payment could be
fixed and incorporated in the conditional sale.
[6]
Manalo, Jr. met with Ramos and informed him that he and his wife Perla had
chosen Lots 1 and 2 of Block 2 with a total area of 1,740.3 square meters.

In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of the lots. He also pegged the price
of the lots at P200.00 per square meter, or a total ofP348,060.00, with a 20% down payment of the purchase price amounting
to P69,612.00 less the P34,887.66 owing from Ramos, payable on or before December 31, 1972; the corresponding Contract of
Conditional Sale would then be signed on or before the same date, but if the selling operations of XEI resumed after December
31, 1972, the balance of the downpayment would fall due then, and the spouses would sign the aforesaid contract within five (5)
days from receipt of the notice of resumption of such selling operations. It was also stated in the letter that, in the meantime, the
spouses may introduce improvements thereon subject to the rules and regulations imposed by XEI in the subdivision. Perla
Manalo conformed to the letter agreement.
[7]


The spouses Manalo took possession of the property on September 2, 1972, constructed a house thereon, and installed
a fence around the perimeter of the lots.

In the meantime, many of the lot buyers refused to pay their monthly installments until they were assured that they
would be issued Torrens titles over the lots they had purchased.
[8]
The spouses Manalo were notified of the resumption of the
selling operations of XEI.
[9]
However, they did not pay the balance of the downpayment on the lots because Ramos failed to
prepare a contract of conditional sale and transmit the same to Manalo for their signature. On August 14, 1973, Perla Manalo
went to the XEI office and requested that the payment of the amount representing the balance of the downpayment be deferred,
which, however, XEI rejected. On August 10,
1973, XEI furnished her with a statement of their account as of July 31, 1973, showing that they had a balance of P34,724.34 on
the downpayment of the two lots after deducting the account of Ramos, plus P3,819.68
[10]
interest thereon from September 1,
1972 to July 31, 1973, and that the interests on the unpaid balance of the purchase price ofP278,448.00 from September 1, 1972
to July 31, 1973 amounted to P30,629.28.
[11]
The spouses were informed that they were being billed for said unpaid interests.
[12]


On January 25, 1974, the spouses Manalo received another statement of account from XEI, inclusive of interests on the
purchase price of the lots.
[13]
In a letter dated April 6, 1974 to XEI, Manalo, Jr. stated they had not yet received the notice of
resumption of Leis selling operations, and that there had been no arrangement on the payment of interests; hence, they should
not be charged with interest on the balance of the downpayment on the property.
[14]
Further, they demanded that a deed of
conditional sale over the two lots be transmitted to them for their signatures. However, XEI ignored the
demands. Consequently, the spouses refused to pay the balance of the downpayment of the purchase price.
[15]


Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his house. In a letter dated June 17,
1976, XEI informed Manalo, Jr. that business signs were not allowed along the sidewalk. It demanded that he remove the same,
on the ground, among others, that the sidewalk was not part of the land which he had purchased on installment basis from
XEI.
[16]
Manalo, Jr. did not respond. XEI reiterated its demand on September 15, 1977.
[17]


Subsequently, XEI turned over its selling operations to OBM, including the receivables for lots already contracted and
those yet to be sold.
[18]
On December 8, 1977, OBM warned Manalo, Jr., that putting up of a business sign is specifically
prohibited by their contract of conditional sale and that his failure to comply with its demand would impel it to avail of the
remedies as provided in their contract of conditional sale.
[19]


Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of Title (TCT) No. T-265822
over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor of the OBM.
[20]
The lien in favor of the Central Bank of
the Philippines was annotated at the dorsal portion of said title, which was later cancelled on August 4, 1980.
[21]


Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from OBM. CBM wrote Edilberto Ng,
the president of Xavierville Homeowners Association that, as of January 31, 1983, Manalo, Jr. was one of the lot buyers in the
subdivision.
[22]
CBM reiterated in its letter to Ng that, as of January 24, 1984, Manalo was a homeowner in the subdivision.
[23]


In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going construction on the property
since it (CBM) was the owner of the lot and she had no permission for such construction.
[24]
She agreed to have a conference
meeting with CBM officers where she informed them that her husband had a contract with OBM, through XEI, to purchase the
property. When asked to prove her claim, she promised to send the documents to CBM. However, she failed to do
so.
[25]
On September 5, 1986, CBM reiterated its demand that it be furnished with the documents promised,
[26]
but Perla Manalo
did not respond.

On July 27, 1987, CBM filed a complaint
[27]
for unlawful detainer against the spouses with the Metropolitan Trial Court of
Quezon City. The case was docketed as Civil Case No. 51618. CBM claimed that the spouses had been unlawfully occupying the
property without its consent and that despite its demands, they refused to vacate the property. The latter alleged that they, as
vendors, and XEI, as vendee, had a contract of sale over the lots which had not yet been rescinded.
[28]


While the case was pending, the spouses Manalo wrote CBM to offer an amicable settlement, promising to abide by the
purchase price of the property (P313,172.34), per agreement with XEI, through Ramos. However, on July 28, 1988, CBM wrote the
spouses, through counsel, proposing that the price of P1,500.00 per square meter of the property was a reasonable starting
point for negotiation of the settlement.
[29]
The spouses rejected the counter proposal,
[30]
emphasizing that they would abide by
their original agreement with XEI. CBM moved to withdraw its complaint
[31]
because of the issues raised.
[32]


In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM filed its complaint against the
spouses Manalo, the latter filed a complaint for specific performance and damages against the bank before the Regional Trial
Court (RTC) of Quezon City on October 31, 1989.

The plaintiffs alleged therein that they had always been ready, able and willing to pay the installments on the lots sold to
them by the defendants remote predecessor-in-interest, as might be or stipulated in the contract of sale, but no contract was
forthcoming; they constructed their house worth P2,000,000.00 on the property in good faith; Manalo, Jr., informed the
defendant, through its counsel, on October 15, 1988 that he would abide by the terms and conditions of his original agreement
with the defendants predecessor-in-interest; during the hearing of the ejectment case on October 16, 1988, they offered to
pay P313,172.34 representing the balance on the purchase price of said lots; such tender of payment was rejected, so that the
subject lots could be sold at considerably higher prices to third parties.

Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled to the execution and delivery of a
Deed of Absolute Sale covering the subject lots, sufficient in form and substance to transfer title thereto free and clear of any
and all liens and encumbrances of whatever kind and nature.
[33]
The plaintiffs prayed that, after due hearing, judgment be
rendered in their favor, to wit:

WHEREFORE, it is respectfully prayed that after due hearing:

(a) The defendant should be ordered to execute and deliver a Deed of Absolute Sale over subject lots in
favor of the plaintiffs after payment of the sum of P313,172.34, sufficient in form and substance to transfer to
them titles thereto free and clear of any and all liens and encumbrances of whatever kind or nature;

(b) The defendant should be held liable for moral and exemplary damages in the amounts
of P300,000.00 and P30,000.00, respectively, for not promptly executing and delivering to plaintiff the necessary
Contract of Sale, notwithstanding repeated demands therefor and for having been constrained to engage the
services of undersigned counsel for which they agreed to pay attorneys fees in the sum of P50,000.00 to enforce
their rights in the premises and appearance fee of P500.00;

(c) And for such other and further relief as may be just and equitable in the premises.
[34]



In its Answer to the complaint, the defendant interposed the following affirmative defenses: (a) plaintiffs had no cause of
action against it because the August 22, 1972 letter agreement between XEI and the plaintiffs was not binding on it; and (b) it
had no record of any contract to sell executed by it or its predecessor, or of any statement of accounts from its predecessors, or
records of payments of the plaintiffs or of any documents which entitled them to the possession of the lots.
[35]
The defendant,
likewise, interposed counterclaims for damages and attorneys fees and prayed for the eviction of the plaintiffs from the
property.
[36]


Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an amicable settlement of the case
by paying P942,648.70, representing the balance of the purchase price of the two lots based on the current market
value.
[37]
However, the defendant rejected the same and insisted that for the smaller lot, they pay P4,500,000.00, the current
market value of the property.
[38]
The defendant insisted that it owned the property since there was no contract or agreement
between it and the plaintiffs relative thereto.

During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional Sale executed between XEI and
Alberto Soller;
[39]
Alfredo Aguila,
[40]
and Dra. Elena Santos-Roque
[41]
to prove that XEI continued selling residential lots in the
subdivision as agent of OBM after the latter had acquired the said lots.

For its part, defendant presented in evidence the letter dated August 22, 1972, where XEI proposed to sell the two lots
subject to two suspensive conditions: the payment of the balance of the downpayment of the property, and the execution of the
corresponding contract of conditional sale. Since plaintiffs failed to pay, OBM consequently refused to execute the
corresponding contract of conditional sale and forfeited the P34,877.66 downpayment for the two lots, but did not notify them
of said forfeiture.
[42]
It alleged that OBM considered the lots unsold because the titles thereto bore no annotation that they had
been sold under a contract of conditional sale, and the plaintiffs were not notified of XEIs resumption of its selling operations.

On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the defendant. The fallo of the
decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant

(a) Ordering the latter to execute and deliver a Deed of Absolute Sale over Lot 1 and 2, Block 2 of the
Xavierville Estate Subdivision after payment of the sum of P942,978.70 sufficient in form and substance to
transfer to them titles thereto free from any and all liens and encumbrances of whatever kind and nature.

(b) Ordering the defendant to pay moral and exemplary damages in the amount of P150,000.00; and

(c) To pay attorneys fees in the sum of P50,000.00 and to pay the costs.

SO ORDERED.
[43]



The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs, the parties had a complete
contract to sell over the lots, and that they had already partially consummated the same. It declared that the failure of the
defendant to notify the plaintiffs of the resumption of its selling operations and to execute a deed of conditional sale did not
prevent the defendants obligation to convey titles to the lots from acquiring binding effect. Consequently, the plaintiffs had a
cause of action to compel the defendant to execute a deed of sale over the lots in their favor.

Boston Bank appealed the decision to the CA, alleging that the lower court erred in (a) not concluding that the letter of
XEI to the spouses Manalo, was at most a mere contract to sell subject to suspensive conditions, i.e., the payment of the balance
of the downpayment on the property and the execution of a deed of conditional sale (which were not complied with); and (b) in
awarding moral and exemplary damages to the spouses Manalo despite the absence of testimony providing facts to justify such
awards.
[44]


On September 30, 2002, the CA rendered a decision affirming that of the RTC with modification. The fallo reads:

WHEREFORE, the appealed decision is AFFIRMED with MODIFICATIONS that (a) the figure P942,978.70
appearing *in+ par. (a) of the dispositive portion thereof is changed to P313,172.34 plus interest thereon at the
rate of 12% per annum from September 1, 1972 until fully paid and (b) the award of moral and exemplary
damages and attorneys fees in favor of plaintiffs-appellees is DELETED.

SO ORDERED.
[45]



The appellate court sustained the ruling of the RTC that the appellant and the appellees had executed a Contract to Sell
over the two lots but declared that the balance of the purchase price of the property amounting to P278,448.00 was payable in
fixed amounts, inclusive of pre-computed interests, from delivery of the possession of the property to the appellees on a
monthly basis for 120 months, based on the deeds of conditional sale executed by XEI in favor of other lot buyers.
[46]
The CA
also declared that, while XEI must have resumed its selling operations before the end of 1972 and the downpayment on the
property remained unpaid as of December 31, 1972, absent a written notice of cancellation of the contract to sell from the bank
or notarial demand therefor as required by Republic Act No. 6552, the spouses had, at the very least, a 60-day grace period from
January 1, 1973 within which to pay the same.

Boston Bank filed a motion for the reconsideration of the decision alleging that there was no perfected contract to sell
the two lots, as there was no agreement between XEI and the respondents on the manner of payment as well as the other terms
and conditions of the sale. It further averred that its claim for recovery of possession of the aforesaid lots in its Memorandum
dated February 28, 1994 filed before the trial court constituted a judicial demand for rescission that satisfied the requirements of
the New Civil Code. However, the appellate court denied the motion.

Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the CA rulings. It maintains that,
as held by the CA, the records do not reflect any schedule of payment of the 80% balance of the purchase price, or P278,448.00.
Petitioner insists that unless the parties had agreed on the manner of payment of the principal amount, including the other terms
and conditions of the contract, there would be no existing contract of sale or contract to sell.
[47]
Petitioner avers that the letter
agreement to respondent spouses dated August 22, 1972 merely confirmed their reservation for the purchase of Lot Nos. 1 and
2, consisting of 1,740.3 square meters, more or less, at the price of P200.00 per square meter (or P348,060.00), the amount of the
downpayment thereon and the application of the P34,887.00 due from Ramos as part of such downpayment.

Petitioner asserts that there is no factual basis for the CA ruling that the terms and conditions relating to the payment of
the balance of the purchase price of the property (as agreed upon by XEI and other lot buyers in the same subdivision) were also
applicable to the contract entered into between the petitioner and the respondents. It insists that such a ruling is contrary to
law, as it is tantamount to compelling the parties to agree to something that was not even discussed, thus, violating their
freedom to contract. Besides, the situation of the respondents cannot be equated with those of the other lot buyers, as, for one
thing, the respondents made a partial payment on the downpayment for the two lots even before the execution of any contract
of conditional sale.

Petitioner posits that, even on the assumption that there was a perfected contract to sell between the parties,
nevertheless, it cannot be compelled to convey the property to the respondents because the latter failed to pay the balance of
the downpayment of the property, as well as the balance of 80% of the purchase price, thus resulting in the extinction of its
obligation to convey title to the lots to the respondents.

Another egregious error of the CA, petitioner avers, is the application of Republic Act No. 6552. It insists that such law
applies only to a perfected agreement or perfected contract to sell, not in this case where the downpayment on the purchase
price of the property was not completely paid, and no installment payments were made by the buyers.

Petitioner also faults the CA for declaring that petitioner failed to serve a notice on the respondents of cancellation or
rescission of the contract to sell, or notarial demand therefor. Petitioner insists that its August 5, 1986 letter requiring
respondents to vacate the property and its complaint for ejectment in Civil Case No. 51618 filed in the Metropolitan Trial Court
amounted to the requisite demand for a rescission of the contract to sell. Moreover, the action of the respondents below was
barred by laches because despite demands, they failed to pay the balance of the purchase price of the lots (let alone the
downpayment) for a considerable number of years.

For their part, respondents assert that as long as there is a meeting of the minds of the parties to a contract of sale as to
the price, the contract is valid despite the parties failure to agree on the manner of payment. In such a situation, the balance of
the purchase price would be payable on demand, conformably to Article 1169 of the New Civil Code. They insist that the law
does not require a party to agree on the manner of payment of the purchase price as a prerequisite to a valid contract to sell.
The respondents cite the ruling of this Court in Buenaventura v. Court of Appeals
[48]
to support their submission.

They argue that even if the manner and timeline for the payment of the balance of the purchase price of the property is
an essential requisite of a contract to sell, nevertheless, as shown by their letter agreement of August 22, 1972 with the OBM,
through XEI and the other letters to them, an agreement was reached as to the manner of payment of the balance of the
purchase price. They point out that such letters referred to the terms of the
terms of the deeds of conditional sale executed by XEI in favor of the other lot buyers in the subdivision, which contained
uniform terms of 120 equal monthly installments (excluding the downpayment, but inclusive of pre-computed interests). The
respondents assert that XEI was a real estate broker and knew that the contracts involving residential lots in the subdivision
contained uniform terms as to the manner and timeline of the payment of the purchase price of said lots.

Respondents further posit that the terms and conditions to be incorporated in the corresponding contract of
conditional sale to be executed by the parties would be the same as those contained in the contracts of conditional sale
executed by lot buyers in the subdivision. After all, they maintain, the contents of the corresponding contract of conditional sale
referred to in the August 22, 1972 letter agreement envisaged those contained in the contracts of conditional sale that XEI and
other lot buyers executed. Respondents cite the ruling of this Court in Mitsui Bussan Kaisha v. Manila E.R.R. & L. Co.
[49]


The respondents aver that the issues raised by the petitioner are factual, inappropriate in a petition for review
on certiorari under Rule 45 of the Rules of Court. They assert that petitioner adopted a theory in litigating the case in the trial
court, but changed the same on appeal before the CA, and again in this Court. They argue that the petitioner is estopped from
adopting a new theory contrary to those it had adopted in the trial and appellate courts. Moreover, the existence of a contract
of conditional sale was admitted in the letters of XEI and OBM. They aver that they became owners of the lots upon delivery to
them by XEI.

The issues for resolution are the following: (1) whether the factual issues raised by the petitioner are proper; (2) whether
petitioner or its predecessors-in-interest, the XEI or the OBM, as seller, and the respondents, as buyers, forged a perfect contract
to sell over the property; (3) whether
petitioner is estopped from contending that no such contract was forged by the parties; and (4) whether respondents has a
cause of action against the petitioner for specific performance.

The rule is that before this Court, only legal issues may be raised in a petition for review on certiorari. The reason is that
this Court is not a trier of facts, and is not to review and calibrate the evidence on record. Moreover, the findings of facts of the
trial court, as affirmed on appeal by the Court of Appeals, are conclusive on this Court unless the case falls under any of the
following exceptions:

(1) when the conclusion is a finding grounded entirely on speculations, surmises and conjectures; (2)
when the inference made is manifestly mistaken, absurd or impossible; (3) where 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; (6) when the Court of Appeals, in making its findings went beyond the issues of the case and the
same is 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 of fact 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 petitioners main and reply briefs are not
disputed by the respondents; and (10) when the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on record.
[50]


We have reviewed the records and we find that, indeed, the ruling of the appellate court dismissing petitioners appeal is
contrary to law and is not supported by evidence. A careful examination of the factual backdrop of the case, as well as the
antecedental proceedings constrains us to hold that petitioner is not barred from asserting that XEI or OBM, on one hand, and
the respondents, on the other, failed to forge a perfected contract to sell the subject lots.

It must be stressed that the Court may consider an issue not raised during the trial when there is plain error.
[51]
Although
a factual issue was not raised in the trial court, such issue may still be considered and resolved by the Court in the interest of
substantial justice, if it finds that to do so is necessary to arrive at a just decision,
[52]
or when an issue is closely related to an issue
raised in the trial court and the Court of Appeals and is necessary for a just and complete resolution of the case.
[53]
When the trial
court decides a case in favor of a party on certain grounds, the Court may base its decision upon some other points, which the
trial court or appellate court ignored or erroneously decided in favor of a party.
[54]


In this case, the issue of whether XEI had agreed to allow the respondents to pay the purchase price of the property was
raised by the parties. The trial court ruled that the parties had perfected a contract to sell, as against petitioners claim that no
such contract existed. However, in resolving the issue of whether the petitioner was obliged to sell the property to the
respondents, while the CA declared that XEI or OBM and the respondents failed to agree on the schedule of payment of the
balance of the purchase price of the property, it ruled that XEI and the respondents had forged a contract to sell; hence,
petitioner is entitled to ventilate the issue before this Court.

We agree with petitioners contention that, for a perfected contract of sale or contract to sell to exist in law, there must
be an agreement of the parties, not only on the price of the property sold, but also on the manner the price is to be paid by the
vendee.

Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or conditional, one of the contracting
parties obliges himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain
in money or its equivalent. A contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is
the object of the contract and the price. From the averment of perfection, the parties are bound, not only to the fulfillment of
what has been
expressly stipulated, but also to all the consequences which, according to their nature, may be in keeping with good faith, usage
and law.
[55]
On the other hand, when the contract of sale or to sell is not perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation between the parties.
[56]


A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property
because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding
and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a
price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.
[57]


It is not enough for the parties to agree on the price of the property. The parties must also agree on the manner of
payment of the price of the property to give rise to a binding and enforceable contract of sale or contract to sell. This is so
because the agreement as to the manner of payment goes into the price, such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.
[58]


In a contract to sell property by installments, it is not enough that the parties agree on the price as well as the amount of
downpayment. The parties must, likewise, agree on the manner of payment of the balance of the purchase price and on the
other terms and conditions relative to the sale. Even if the buyer makes a downpayment or portion thereof, such payment
cannot be considered as sufficient proof of the perfection of any purchase and sale between the parties. Indeed, this Court ruled
in Velasco v. Court of Appeals
[59]
that:

It is not difficult to glean from the aforequoted averments that the petitioners themselves admit that
they and the respondent still had to meet and agree on how and when the down-payment and the installment
payments were to be paid. Such being the situation, it cannot, therefore, be said that a definite and firm sales
agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled
before that a definite agreement on the manner of payment of the purchase price is an essential element in the
formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the
respondent the sum of P10,000.00 as part of the downpayment that they had to pay cannot be considered as
sufficient proof of the perfection of any purchase and sale agreement between the parties herein under article
1482 of the New Civil Code, as the petitioners themselves admit that some essential matter the terms of
payment still had to be mutually covenanted.
[60]



We agree with the contention of the petitioner that, as held by the CA, there is no showing, in the records, of the
schedule of payment of the balance of the purchase price on the property amounting to P278,448.00. We have meticulously
reviewed the records, including Ramos February 8, 1972 and August 22, 1972 letters to respondents,
[61]
and find that said parties
confined themselves to agreeing on the price of the property (P348,060.00), the 20% downpayment of the purchase price
(P69,612.00), and credited respondents for the P34,887.00 owing from Ramos as part of the 20% downpayment. The timeline for
the payment of the balance of the downpayment (P34,724.34) was also agreed upon, that is, on or before XEI resumed its selling
operations, on or before December 31, 1972, or within five (5) days from written notice of such resumption of selling operations.
The parties had also agreed to incorporate all the terms and conditions relating to the sale, inclusive of the terms of payment of
the balance of the purchase price and the other substantial terms and conditions in the corresponding contract of conditional
sale, to be later signed by the parties, simultaneously with respondents settlement of the balance of the downpayment.

The February 8, 1972 letter of XEI reads:
Mr. Carlos T. Manalo, Jr.
Hurricane Rotary Well Drilling
Rizal Avenue Ext.,Caloocan City

Dear Mr. Manalo:

We agree with your verbal offer to exchange the proceeds of your contract with us to form as a down
payment for a lot in our Xavierville Estate Subdivision.

Please let us know your choice lot so that we can fix the price and terms of payment in our conditional
sale.
Sincerely yours,

XAVIERVILLE ESTATE, INC.

(Signed)
EMERITO B. RAMOS, JR.
President

CONFORME:

(Signed)
CARLOS T. MANALO, JR.
Hurricane Rotary Well Drilling
[62]



The August 22, 1972 letter agreement of XEI and the respondents reads:

Mrs. Perla P. Manalo
1548 Rizal Avenue Extension
Caloocan City

Dear Mrs. Manalo:

This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our consolidation-subdivision plan as
amended, consisting of 1,740.3 square meters more or less, at the price of P200.00 per square meter or a total
price of P348,060.00.

It is agreed that as soon as we resume selling operations, you must pay a down payment of 20% of the purchase
price of the said lots and sign the corresponding Contract of Conditional Sale, on or before December 31, 1972,
provided, however, that if we resume selling after December 31, 1972, then you must pay the aforementioned
down payment and sign the aforesaid contract within five (5) days from your receipt of our notice of resumption
of selling operations.

In the meanwhile, you may introduce such improvements on the said lots as you may desire, subject to the rules
and regulations of the subdivision.

If the above terms and conditions are acceptable to you, please signify your conformity by signing on the space
herein below provided.

Thank you.


Very truly yours,

XAVIERVILLE ESTATE, INC. CONFORME:
By:

(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO
President Buyer
[63]


Based on these two letters, the determination of the terms of payment of the P278,448.00 had yet to be agreed upon on
or before December 31, 1972, or even afterwards, when the parties sign the corresponding contract of conditional sale.

Jurisprudence is that if a material element of a contemplated contract is left for future negotiations, the same is too
indefinite to be enforceable.
[64]
And when an essential element of a contract is reserved for future agreement of the parties, no
legal obligation arises until such future agreement is concluded.
[65]


So long as an essential element entering into the proposed obligation of either of the parties remains to be determined
by an agreement which they are to make, the contract is incomplete and unenforceable.
[66]
The reason is that such a contract is
lacking in the necessary qualities of definiteness, certainty and mutuality.
[67]


There is no evidence on record to prove that XEI or OBM and the respondents had agreed, after December 31, 1972, on
the terms of payment of the balance of the purchase price of the property and the other substantial terms and conditions
relative to the sale. Indeed, the parties are in agreement that there had been no contract of conditional sale ever executed by XEI,
OBM or petitioner, as vendor, and the respondents, as vendees.
[68]


The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case because the issue of the manner
of payment of the purchase price of the property was not raised therein.

We reject the submission of respondents that they and Ramos had intended to incorporate the terms of payment
contained in the three contracts of conditional sale executed by XEI and other lot buyers in the corresponding contract of
conditional sale, which would later be signed by them.
[69]
We have meticulously reviewed the respondents complaint and find
no such allegation therein.
[70]
Indeed, respondents merely alleged in their complaint that they were bound to pay the balance of
the purchase price of the property in installments. When respondent Manalo, Jr. testified, he was never asked, on direct
examination or even on cross-examination, whether the terms of payment of the balance of the purchase price of the lots under
the contracts of conditional sale executed by XEI and other lot buyers would form part of the corresponding contract of
conditional sale to be signed by them simultaneously with the payment of the balance of the downpayment on the purchase
price.

We note that, in its letter to the respondents dated June 17, 1976, or almost three years from the execution by the
parties of their August 22, 1972 letter agreement, XEI stated, in part, that respondents had purchased the property on
installment basis.
[71]
However, in the said letter, XEI failed to state a specific amount for each installment, and whether such
payments were to be made monthly, semi-annually, or annually. Also, respondents, as plaintiffs below, failed to adduce a shred
of evidence to prove that they were obliged to pay the P278,448.00 monthly, semi-annually or annually. The allegation that the
payment of the P278,448.00 was to be paid in installments is, thus, vague and indefinite. Case law is that, for a contract to be
enforceable, its terms must be certain and explicit, not vague or indefinite.
[72]


There is no factual and legal basis for the CA ruling that, based on the terms of payment of the balance of the purchase
price of the lots under the contracts of conditional sale executed by XEI and the other lot buyers, respondents were obliged to
pay the P278,448.00 with pre-computed interest of 12% per annum in 120-month installments. As gleaned from the ruling of
the appellate court, it failed to justify its use of the terms of payment under the three contracts of conditional sale as basis for
such ruling, to wit:

On the other hand, the records do not disclose the schedule of payment of the purchase price, net of
the downpayment. Considering, however, the Contracts of Conditional Sale (Exhs. N, O and P) entered into
by XEI with other lot buyers, it would appear that the subdivision lots sold by XEI, under contracts to sell, were
payable in 120 equal monthly installments (exclusive of the downpayment but including pre-computed interests)
commencing on delivery of the lot to the buyer.
[73]



By its ruling, the CA unilaterally supplied an essential element to the letter agreement of XEI and the respondents. Courts
should not undertake to make a contract for the parties, nor can it enforce one, the terms of which are in doubt.
[74]
Indeed, the
Court emphasized in Chua v. Court of Appeals
[75]
that it is not the province of a court to alter a contract by construction or to
make a new contract for the parties; its duty is confined to the interpretation of the one which they have made for themselves,
without regard to its wisdom or folly, as the court cannot supply material stipulations or read into contract words which it does
not contain.

Respondents, as plaintiffs below, failed to allege in their complaint that the terms of payment of the P278,448.00 to be
incorporated in the corresponding contract of conditional sale were those contained in the contracts of conditional sale
executed by XEI and Soller, Aguila and Roque.
[76]
They likewise failed to prove such allegation in this Court.

The bare fact that other lot buyers were allowed to pay the balance of the purchase price of lots purchased by them in
120 or 180 monthly installments does not constitute evidence that XEI also agreed to give the respondents the same mode and
timeline of payment of the P278,448.00.

Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain thing at one time is not
admissible to prove that he did the same or similar thing at another time, although such evidence may be received to prove
habit, usage, pattern of conduct or the intent of the parties.

Similar acts as evidence. Evidence that one did or did not do a certain thing at one time is not
admissible to prove that he did or did not do the same or a similar thing at another time; but it may be received
to prove a specific intent or knowledge, identity, plan, system, scheme, habit, custom or usage, and the like.

However, respondents failed to allege and prove, in the trial court, that, as a matter of business usage, habit or pattern of
conduct, XEI granted all lot buyers the right to pay the balance of the purchase price in installments of 120 months of fixed
amounts with pre-computed interests, and that XEI and the respondents had intended to adopt such terms of payment relative
to the sale of the two lots in question. Indeed, respondents adduced in evidence the three contracts of conditional sale executed
by XEI and other lot buyersmerely to prove that XEI continued to sell lots in the subdivision as sales agent of OBM after it
acquired said lots, not to prove usage, habit or pattern of conduct on the part of XEI to require all lot buyers in the subdivision
to pay the balance of the purchase price of said lots in 120 months. It further failed to prive that the trial court admitted the said
deeds
[77]
as part of the testimony of respondent Manalo, Jr.
[78]

Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must contend with the caveat
that, before they admit evidence of usage, of habit or pattern of conduct, the offering party must establish the degree of
specificity and frequency of uniform response that ensures more than a mere tendency to act in a given manner but rather,
conduct that is semi-automatic in nature. The offering party must allege and prove specific, repetitive conduct that might
constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of evidence must be numerous enough
to base on inference of systematic conduct. Mere similarity of contracts does not present the kind of sufficiently similar
circumstances to outweigh the danger of prejudice and confusion.

In determining whether the examples are numerous enough, and sufficiently regular, the key criteria are adequacy of
sampling and uniformity of response. After all, habit means a course of behavior of a person regularly represented in like
circumstances.
[79]
It is only when examples offered to establish pattern of conduct or habit are numerous enough to lose an
inference of systematic conduct that examples are admissible. The key criteria are adequacy of sampling and uniformity of
response or ratio of reaction to situations.
[80]


There are cases where the course of dealings to be followed is defined by the usage of a particular trade or market or
profession. As expostulated by Justice Benjamin Cardozo of the United States Supreme Court: Life casts the moulds of conduct,
which will someday become fixed as law. Law preserves the moulds which have taken form and shape from life.
[81]
Usage
furnishes a standard for the measurement of many of the rights and acts of men.
[82]
It is also well-settled that parties who
contract on a subject matter concerning which known usage prevail, incorporate such usage by implication into their agreement,
if nothing is said to be contrary.
[83]


However, the respondents inexplicably failed to adduce sufficient competent evidence to prove usage, habit or pattern
of conduct of XEI to justify the use of the terms of payment in the contracts of the other lot buyers, and thus grant respondents
the right to pay the P278,448.00 in 120 months, presumably because of respondents belief that the manner of payment of the
said amount is not an essential element of a contract to sell. There is no evidence that XEI or OBM and all the lot buyers in the
subdivision, including lot buyers who pay part of the downpayment of the property purchased by them in the form of service,
had executed contracts of conditional sale containing uniform terms and conditions. Moreover, under the terms of the contracts
of conditional sale executed by XEI and three lot buyers in the subdivision, XEI agreed to grant 120 months within which to pay
the balance of the purchase price to two of them, but granted one 180 months to do so.
[84]
There is no evidence on record that
XEI granted the same right to buyers of two or more lots.

Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be considered certain if it be so
with reference to another thing certain. It is sufficient if it can be determined by the stipulations of the contract made by the
parties thereto
[85]
or by reference to an agreement incorporated in the contract of sale or contract to sell or if it is capable of
being ascertained with certainty in said contract;
[86]
or if the contract contains express or implied provisions by which it may be
rendered certain;
[87]
or if it provides some method or criterion by which it can be definitely ascertained.
[88]
As this Court held
in Villaraza v. Court of Appeals,
[89]
the price is considered certain if, by its terms, the contract furnishes a basis or measure for
ascertaining the amount agreed upon.

We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no direct or implied reference
to the manner and schedule of payment of the balance of the purchase price of the lots covered by the deeds of conditional sale
executed by XEI and that of the other lot buyers
[90]
as basis for or mode of determination of the schedule of the payment by the
respondents of the P278,448.00.

The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light Company
[91]
is not applicable in this
case because the basic price fixed in the contract was P9.45 per long ton, but it was stipulated that the price was subject to
modification in proportion to variations in calories and ash content, and not otherwise. In this case, the parties did not fix in
their letters-agreement, any method or mode of determining the terms of payment of the balance of the purchase price of the
property amounting toP278,448.00.

It bears stressing that the respondents failed and refused to pay the balance of the downpayment and of the purchase
price of the property amounting to P278,448.00 despite notice to them of the resumption by XEI of its selling operations. The
respondents enjoyed possession of the property without paying a centavo. On the other hand, XEI and OBM failed and refused
to transmit a contract of conditional sale to the respondents. The respondents could have at least consigned the balance of the
downpayment after notice of the resumption of the selling operations of XEI and filed an action to compel XEI or OBM to
transmit to them the said contract; however, they failed to do so.

As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected contract to sell the two lots;
hence, respondents have no cause of action for specific performance against petitioner. Republic Act No. 6552 applies only to a
perfected contract to sell and not to a contract with no binding and enforceable effect.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No.
47458 is REVERSED and SET ASIDE. The Regional Trial Court of Quezon City, Branch 98 is ordered to dismiss the
complaint. Costs against the respondents.

SO ORDERED.


G.R. No. 135634 May 31, 2000
HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners,
vs.
VICENTE RODRIGUEZ, respondent.

MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals
1
reversing the decision of the Regional Trial
Court, Naga City, Branch 19, in Civil Case No. 87-1335, as well as the appellate court's resolution denying reconsideration.
The antecedent facts are as follows:
Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton, Naga City. On September 28, 1964, he sold a
portion thereof, consisting of 345 square meters, to respondent Vicente S. Rodriguez for P2,415.00. The sale is evidenced by a
Deed of Sale.
2

Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed judicial administrator of the decedent's
estate in Special Proceedings No. R-21, RTC, Branch 19, Naga City. Ramon San Andres engaged the services of a geodetic
engineer, Jose Peero, to prepare a consolidated plan (Exh. A) of the estate. Engineer Peero also prepared a sketch plan of the
345-square meter lot sold to respondent. From the result of the survey, it was found that respondent had enlarged the area
which he purchased from the late Juan San Andres by 509 square meters.
3

Accordingly, the judicial administrator sent a letter,
4
dated July 27, 1987, to respondent demanding that the latter vacate the
portion allegedly encroached by him. However, respondent refused to do so, claiming he had purchased the same from the late
Juan San Andres. Thereafter, on November 24, 1987, the judicial administrator brought an action, in behalf of the estate of Juan
San Andres, for recovery of possession of the 509-square meter lot.
In his Re-amended Answer filed on February 6, 1989, respondent alleged that apart from the 345-square meter lot which had
been sold to him by Juan San Andres on September 28, 1964, the latter likewise sold to him the following day the remaining
portion of the lot consisting of 509 square meters, with both parties treating the two lots as one whole parcel with a total area of
854 square meters. Respondent alleged that the full payment of the 509-square meter lot would be effected within five (5) years
from the execution of a formal deed of sale after a survey is conducted over said property. He further alleged that with the
consent of the former owner, Juan San Andres, he took possession of the same and introduced improvements thereon as early
as 1964.
As proof of the sale to him of 509 square meters, respondent attached to his answer a receipt (Exh. 2)
5
signed by the late Juan
San Andres, which reads in full as follows:
Received from Vicente Rodriguez the sum of Five Hundred (P500.00) Pesos representing an advance payment
for a residential lot adjoining his previously paid lot on three sides excepting on the frontage with the agreed
price of Fifteen (15.00) Pesos per square meter and the payment of the full consideration based on a survey shall
be due and payable in five (5) years period from the execution of the formal deed of sale; and it is agreed that
the expenses of survey and its approval by the Bureau of Lands shall be borne by Mr. Rodriguez.
Naga City, September 29, 1964.
(Sgd.)
JUAN R. SAN ANDRES
Vendor
Noted:
(Sgd.)
VICENTE RODRIGUEZ
Vendee
Respondent also attached to his answer a letter of judicial administrator Ramon San Andres (Exh. 3),
6
asking payment of
the balance of the purchase price. The letter reads:
Dear Inting,
Please accommodate my request for Three Hundred (P300.00) Pesos as I am in need of funds as I intimated to
you the other day.
We will just adjust it with whatever balance you have payable to the subdivision.
Thanks.
Sincerely,
(Sgd.)
RAMON SAN
ANDRES
Vicente Rodriguez
Penafrancia Subdivision, Naga City
P.S.
You can let bearer Enrique del Castillo sign for the amount.
Received One Hundred Only
(Sgd.)
RAMON SAN ANDRES
3/30/66
Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot.
While the proceedings were pending, judicial administrator Ramon San Andres died and was substituted by his son Ricardo San
Andres. On the other band, respondent Vicente Rodriguez died on August 15, 1989 and was substituted by his heirs.
7

Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peero,
8
testified that based on his survey
conducted sometime between 1982 and 1985, respondent had enlarged the area which he purchased from the late Juan San
Andres by 509 square meters belonging to the latter's estate. According to Peero, the titled property (Exh. A-5) of respondent
was enclosed with a fence with metal holes and barbed wire, while the expanded area was fenced with barbed wire and bamboo
and light materials.
The second witness, Ricardo San Andres,
9
administrator of the estate, testified that respondent had not filed any claim before
Special Proceedings No. R-21 and denied knowledge of Exhibits 2 and 3. However, he recognized the signature in Exhibit 3 as
similar to that of the former administrator, Ramon San Andres. Finally, he declared that the expanded portion occupied by the
family of respondent is now enclosed with barbed wire fence unlike before where it was found without fence.
On the other hand, Bibiana B. Rodriguez,
10
widow of respondent Vicente Rodriguez, testified that they had purchased the
subject lot from Juan San Andres, who was their compadre, on September 29, 1964, at P15.00 per square meter. According to
her, they gave P500.00 to the late Juan San Andres who later affixed his signature to Exhibit 2. She added that on March 30,
1966; Ramon San Andres wrote them a letter asking for P300.00 as partial payment for the subject lot, but they were able to give
him only P100.00. She added that they had paid the total purchase price of P7,035.00 on November 21, 1988 by depositing it in
court. Bibiana B. Rodriquez stated that they had been in possession of the 509-square meter lot since 1964 when the late Juan
San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did not know at that time the exact area sold to them
because they were told that the same would be known after the survey of the subject lot.
On September 20, 1994, the trial court
11
rendered judgment in favor of petitioner. It ruled that there was no contract of sale to
speak of for lack of a valid object because there was no sufficient indication in Exhibit 2 to identify the property subject of the
sale, hence, the need to execute a new contract.
Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial
court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the
balance of the purchase price payable within five years from the execution of the deed of sale. The dispositive portion of its
decision's reads:
IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby REVERSED and SET ASIDE and a new
one entered DISMISSING the complaint and rendering judgment against the plaintiff-appellee:
1. to accept the P7,035.00 representing the balance of the purchase price of the portion and which is deposited
in court under Official Receipt No. 105754 (page 122, Records);
2. to execute the formal deed of sale over the said 509 square meter portion of Lot 1914-B-2 in favor of
appellant Vicente Rodriguez;
3. to pay the defendant-appellant the amount of P50,000.00 as damages and P10,000.00 attorney's fees as
stipulated by them during the trial of this case; and
4. to pay the costs of the suit.
SO ORDERED.
Hence, this petition. Petitioner assigns the following errors as having been allegedly committed by the trial court:
I. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE DOCUMENT (EXHIBIT "2") IS A
CONTRACT TO SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL ELEMENTS OF A CONTRACT,
NAMELY, OBJECT CERTAIN AND SUFFICIENTLY DESCRIBED.
II. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS OBLIGED TO
HONOR THE PURPORTED CONTRACT TO SELL DESPITE NON-FULFILLMENT BY RESPONDENT
OF THE CONDITION THEREIN OF PAYMENT OF THE BALANCE OF THE PURCHASE PRICE.
III. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT CONSIGNATION WAS VALID
DESPITE NON-COMPLIANCE WITH THE MANDATORY REQUIREMENTS THEREOF.
IV. THE HON. COURT OF APPEALS ERRED IN HOLDING THAT LACHES AND PRESCRIPTION DO
NOT APPLY TO RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE THE PURPORTED
CONTRACT AFTER THE LAPSE OF 24 YEARS.
The petition has no merit.
First. Art. 1458 of the Civil Code provides:
By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
As thus defined, the essential elements of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and,
c) Price certain in money or its equivalent.
12

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as "advance
payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage; the agreed purchase
price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and
would be due and payable in five (5) years from the execution of a deed of sale.
Petitioner contends, however, that the "property subject of the sale was not described with sufficient certainty such that there is a
necessity of another agreement between the parties to finally ascertain the identity; size and purchase price of the property
which is the object of the alleged sale."
1
He argues that the "quantity of the object is not determinate as in fact a survey is
needed to determine its exact size and the full purchase price therefor"
14
In support of his contention, petitioner cites the
following provisions of the Civil Code:
Art. 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not
determinable shall not be an obstacle to the existence of a contract, provided it is possible to determine the
same without the need of a new contract between the parties.
Art. 1460. . . . The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the
thing is capable of being made determinate without the necessity of a new and further agreement between the
parties.
Petitioner's contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914-B-2 consisting of
345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is
clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to
adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any
new contract. The fact that the exact area of these adjoining residential lots is subject to the result of a survey does not detract
from the fact that they are determinate or determinable. As the Court of Appeals explained:
15

Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a
thing sold is determinate if at the time the contract is entered into, the thing is capable of being determinate
without necessity of a new or further agreement between the parties. Here, this definition finds realization.
Appellee's Exhibit "A" (page 4, Records) affirmingly shows that the original 345 sq. m. portion earlier sold lies at
the middle of Lot 1914-B-2 surrounded by the remaining portion of the said Lot 1914-B-2 on three (3) sides, in
the east, in the west and in the north. The northern boundary is a 12 meter road. Conclusively, therefore, this is
the only remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially purchased by
Rodriguez. It is quite difined, determinate and certain. Withal, this is the same portion adjunctively occupied and
possessed by Rodriguez since September 29, 1964, unperturbed by anyone for over twenty (20) years until
appellee instituted this suit.
Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the minds between the
parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a
price certain in money. As Art. 1475 of the Civil Code provides:
The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object
of the contract and upon the price. . . .
That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a
letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of Appeals
observed:
Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and Rodriguez
for the sale of the property adjoining the 345 square meter portion previously sold to Rodriguez on its three (3)
sides excepting the frontage. The price is certain, which is P15.00 per square meter. Evidently, this is a perfected
contract of sale on a deferred payment of the purchase price. All the pre-requisite elements for a valid purchase
transaction are present. Sale does not require any formal document for its existence and validity. And delivery of
possession of land sold is a consummation of the sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed of
sale is a valid contract between the parties (Carbonell v. CA, 69 SCRA 99 [1976]).
In the same vein, after the late Juan R. San Andres received the P500.00 downpayment on March 30, 1966,
Ramon R. San Andres wrote a letter to Rodriguez and received from Rodriguez the amount of P100.00 (although
P300.00 was being requested) deductible from the purchase price of the subject portion. Enrique del Castillo,
Ramon's authorized agent, correspondingly signed the receipt for the P100.00. Surely, this is explicitly a veritable
proof of he sale over the remaining portion of Lot 1914-B-2 and a confirmation by Ramon San Andres of the
existence thereof.
16

There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the appellate
court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of the lot, would be
due and payable within five (5) years from the execution of a formal deed of sale. It is evident from the stipulations in the receipt
that the vendor Juan San Andres sold the residential lot in question to respondent and undertook to transfer the ownership
thereof to respondent without any qualification, reservation or condition. In Ang Yu Asuncion v. Court of Appeals,
17
we held:
In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional
Sale," a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to
unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the
buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold.
Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would
prevent such perfection. If the condition is imposed on the obligation of a party which is not fulfilled, the other
party may either waive the condition or refuse to proceed with the sale. (Art. 1545, Civil Code).
Thus, in. one case, when the sellers declared in a "Receipt of Down Payment" that they received an amount as purchase price for
a house and lot without any reservation of title until full payment of the entire purchase price, the implication was that they sold
their property.
18
In People's Industrial Commercial Corporation v. Court of Appeals,
19
it was stated:
A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the
property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to
unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.
Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not
conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the
sale was consummated upon the delivery of the lot to respondent.
20
Thus, Art. 1477 provides that the ownership of the thing
sold shall be transferred to the vendee upon the actual or constructive delivery thereof.
The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years from the
execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely provides the
manner by which the full consideration is to be computed and the time within which the same is to be paid. But it does not affect
in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in
the receipt prevents the happening of a sale has no merit.
Second. With respect to the contention that the Court of Appeals erred in upholding the validity of a consignation of P7,035.00
representing the balance of the purchase price of the lot, nowhere in the decision of the appellate court is there any mention of
consignation. Under Art. 1257 of this Civil Code, consignation is proper only in cases where an existing obligation is due. In this
case, however, the contracting parties agreed that full payment of purchase price shall be due and payable within five (5) years
from the execution of a formal deed of sale. At the time respondent deposited the amount of P7,035.00 in the court, no formal
deed of sale had yet been executed by the parties, and, therefore, the five-year period during which the purchase price should be
paid had not commenced. In short, the purchase price was not yet due and payable.
This is not to say, however, that the deposit of the purchase price in the court is erroneous. The Court of Appeals correctly
ordered the execution of a deed of sale and petitioners to accept the amount deposited by respondent.
Third. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the agreement of
the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract is the law between the
parties, and courts have no choice but to enforce such contract so long as they are not contrary to law, morals, good customs or
public policy. Otherwise, court would be interfering with the freedom of contract of the parties. Simply put, courts cannot
stipulate for the parties nor amend the latter's agreement, for to do so would be to alter the real intentions of the contracting
parties when the contrary function of courts is to give force and effect to the intentions of the parties.
Fourth. Finally, petitioners argue that respondent is barred by prescription and laches from enforcing the contract. This
contention is likewise untenable. The contract of sale in this case is perfected, and the delivery of the subject lot to respondent
effectively transferred ownership to him. For this reason, respondent seeks to comply with his obligation to pay the full purchase
price, but because the deed of sale is yet to be executed, he deemed it appropriate to deposit the balance of the purchase price
in court. Accordingly, Art. 1144 of the Civil Code has no application to the instant case.
21
Considering that a survey of the lot has
already been conducted and approved by the Bureau of Lands, respondent's heirs, assign or successors-in-interest should
reimburse the expenses incurred by herein petitioners, pursuant to the provisions of the contract.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse
petitioners for the expenses of the survey.
SO ORDERED.
Bellosillo and Buena, JJ., concur.
Quisumbing and De Leon, Jr., JJ., are on leave.

G.R. No. 122544 January 28, 2003
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON,
RAYMUND A. DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.
x---------------------------------------------------------x
G.R. No. 124741 January 28, 2003
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON,
RAYMUND A. DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS HON. MAXIMIANO C. ASUNCION and OVERLAND EXPRESS LINES, INC., respondents.
R E S O L U T I O N
YNARES-SANTIAGO, J.:
On January 28, 1999, this Court rendered judgment in these consolidated cases as follows:
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the
resolution dated October 19, 1995 in CA-G.R. CV Nos. 25153-54, as well as the decision dated December 11, 1995 and
the resolution dated April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET
ASIDE.
Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22,
1982 in Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch III as
affirmed in the decision dated September 26, 1984 of the then Intermediate Appellate Court (now Court of Appeals) and
in the resolution dated June 19, 1985 of this Court.
However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received
through Alice A. Dizon on June 20, 1975.
SO ORDERED.
Private respondent filed a Motion for Reconsideration, Second Motion for Reconsideration, and Motion to Suspend Procedural
Rules in the Higher Interest of Substantial Justice, all of which have been denied by this Court. This notwithstanding, the cases
were set for oral argument on March 21, 2001, on the following issues:
1. WHETHER THERE ARE CIRCUMSTANCES THAT WOULD JUSTIFY SUSPENSION OF THE RULES OF COURT;
2. WHETHER THE SUM OF P300,000.00 RECEIVED BY ALICE DIZON FROM PRIVATE RESPONDENT WAS INTENDED AS
PARTIAL PAYMENT OF THE PURCHASE PRICE OF THE PROPERTY, OR AS PAYMENT OF BACK RENTALS ON THE
PROPERTY;
3. WHETHER ALICE DIZON WAS AUTHORIZED TO RECEIVE THE SUM OF P300,000.00 ON BEHALF OF PETITIONERS;
4. (A) IF SO, WHETHER PETITIONERS ARE ESTOPPED FROM QUESTIONING THE BELATED EXERCISE BY PRIVATE
RESPONDENT OF ITS OPTION TO BUY WHEN THEY ACCEPTED THE SAID PARTIAL PAYMENT;
(B) IF SO, WHETHER ALICE DIZON CAN VALIDLY BIND PETITIONERS IN THE ABSENCE OF A WRITTEN POWER OF
ATTORNEY;
5. (A) WHETHER THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES;
(B) WHETHER THERE WAS A CONTRACT OF SALE AT LEAST WITH RESPECT TO THE SHARES OF FIDELA AND ALICE
DIZON; AND
6. WHETHER PRIVATE RESPONDENT'S ACTION FOR SPECIFIC PERFORMANCE HAS PRESCRIBED.
In order to resolve the first issue, it is necessary to pass upon the other questions which relate to the merits of the case. It is only
where there exist strong compelling reasons, such as serving the ends of justice and preventing a miscarriage thereof, that this
Court can suspend the rules.
1

After reviewing the records, we find that, despite all of private respondent's protestations, there is absolutely no written proof of
Alice Dizon's authority to bind petitioners. First of all, she was not even a co-owner of the property. Neither was she empowered
by the co-owners to act on their behalf.
The acceptance of the amount of P300,000.00, purportedly as partial payment of the purchase price of the land, was an act
integral to the sale of the land. As a matter of fact, private respondent invokes such receipt of payment as giving rise to a
perfected contract of sale. In this connection, Article 1874 of the Civil Code is explicit that: "When a sale of a piece of land or any
interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void."
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate
must be conferred in writing and must give him specific authority, either to conduct the general business of the principal
or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special
power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an
appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a
sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate,
a power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such power, no such construction shall be given the document.
2

It necessarily follows, therefore, that petitioners cannot be deemed to have received partial payment of the supposed purchase
price for the land through Alice Dizon. It cannot even be said that Alice Dizon's acceptance of the money bound at least the
share of Fidela Dizon, in the absence of a written power of attorney from the latter. It should be borne in mind that the Receipt
dated June 20, 1975, while made out in the name of Fidela Dizon, was signed by Alice Dizon alone.
Moreover, there could not have been a perfected contract of sale. As we held in our Decision dated January 28, 1999, the implied
renewal of the contract of lease between the parties affected only those terms and conditions which are germane to the lessee's
right of continued enjoyment of the property. The option to purchase afforded private respondent expired after the one-year
period granted in the contract. Otherwise stated, the implied renewal of the lease did not include the option to purchase. We see
no reason to disturb our ruling on this point,viz:
In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without
the private respondent, as lessee, purchasing the property but remained in possession thereof. Hence, there was an
implicit renewal of the contract of lease on a monthly basis. The other terms of the original contract of lease which are
revived in the implied new lease under Article 1670 of the New Civil Code are only those terms which are germane to the
lessee's right of continued enjoyment of the property leased. Therefore, an implied new lease does not ipso facto carry
with it any implied revival of private respondent's option to purchase (as lessee thereof) the leased premises. The
provision entitling the lessee the option to purchase the leased premises is not deemed incorporated in the impliedly
renewed contract because it is alien to the possession of the lessee. Private respondent's right to exercise the option to
purchase expired with the termination of the original contract of lease for one year. The rationale of this Court is that:
"This is a reasonable construction of the provision, which is based on the presumption that when the lessor
allows the lessee to continue enjoying possession of the property for fifteen days after the expiration of the
contract he is willing that such enjoyment shall be for the entire period corresponding to the rent which is
customarily paid in this case up to the end of the month because the rent was paid monthly. Necessarily, if
the presumed will of the parties refers to the enjoyment of possession the presumption covers the other terms
of the contract related to such possession, such as the amount of rental, the date when it must be paid, the care
of the property, the responsibility for repairs, etc. But no such presumption may be indulged in with respect to
special agreements which by nature are foreign to the right of occupancy or enjoyment inherent in a contract of
lease."
3

There being no merit in the arguments advanced by private respondent, there is no need to suspend the Rules of Court and to
admit the motion for reconsideration. While it is within the power of the Court to suspend its own rules, or to except a particular
case from its operation, whenever the interest of justice require it, however, the movant must show strong compelling reasons
such as serving the ends of justice and preventing a grave miscarriage thereof,
4
none of which obtains in this case.
Litigation must end sometime and somewhere. An effective and efficient administration of justice requires that, once a judgment
has become final, the winning party be not, through a mere subterfuge, deprived of the fruits of the verdict. Courts must,
therefore, guard against any scheme calculated to bring about that result. Constituted as they are to put an end to controversies,
courts should frown upon any attempt to prolong them.
5

ACCORDINGLY, the Motion to Suspend Procedural Rules in the Higher Interest of Substantial Justice filed by private respondent
is DENIED WITH FINALITY. No further pleadings will be entertained in these cases.
SO ORDERED.
Davide, Jr., C .J ., see separate opinion.
Puno, J., concur.


Separate Opinions
DAVIDE, JR., C.J., concurring:
After a meticulous evaluation of the antecedent facts in these cases I respectfully submit that private respondent's submission
that the sum of P3,000 was intended as partial payment of the purchase price; it was received by Alice Dizon for and in behalf of
Fidela Dizon, mother of petitioners; and that Fidela Dizon ratified the at of Alice by accepting the cashier's check representing
that consideration drawn in favor of Fidela Dizon, and in encashing it. Neither Alice nor Fidela returned the money.
Therefore, there was indeed, a perfected sale in favor of private respondent of, at the very least, the rights, shares and
participation in the property in question to private respondent. Hence, private respondent became a co-owner of the property as
regards Fidela's co-owner.
That private respondent exercised its option to buy beyond the term of the original terms of the lease contract is then rendered
academic. For, by accepting the P300,000 as partial payment of the land in question and using it for her own benefit and
advantages Fidela effectively estopped herself from insisting or a technicality.
I therefore vote to grant, pro hac vice, the second motion for reconsideration and to modify the decision by now declaring that
Fidela Dizon is bound by the perfected sale to private respondent of, at least, her rights, participation, or share in the property in
question.

LEON CO, petitioner, vs. COURT OF APPEALS and BENITO NGO, respondents.
D E C I S I O N
BELLOSILLO, J.:
This is a petition for review on certiorari of the Resolution of 18 August 1995 of respondent Court of Appeals
[1]
in CA-G.R.
CV No. 38012 reversing its previous Decision of 14 September 1994 which affirmed the finding of the trial court that there was a
contract of sale between petitioner and private respondent.
On 3 September 1976 private respondent Benito Ngo purchased from Nazario Gonzales a parcel of land known as Lots
Nos. 7-A and 7-B, Psd-05-000239, with an area of 155 square meters, which forms part of a bigger area covered by OCT No. RO-
16 (1355) situated in Iriga City. As Benito Ngo had earlier acquired the adjacent portions known as Lots
Nos. 7-C, 7-D and 7-E also from Gonzales, the entire Lot No. 7 was subsequently segregated from OCT No. RO-16
(1355). On 15 September 1976 TCT No. 91 was issued over Lot No. 7 in the name of private respondent Benito Ngo.
On 3 November 1976 Antonio Ong, claiming to have purchased Lots Nos. 7-A and 7-B from Nazario Gonzales through his
attorney-in-fact Rustica Gonzales Rivera, filed an action against Benito Ngo with the then Court of First Instance of Camarines Sur
for annulment of sale, reconveyance and damages.
On 11 March 1979 the Filipino-Chinese Chambers of Commerce of Naga City and of Iriga City held a joint meeting to
amicably settle certain controversies among their members. However, only the dispute between Antonio Ong and Benito Ngo
was taken up in that meeting. A consensus was reached that the litigated area should be divided between Ong and respondent
Ngo so that Lot No. 7-A would go to Ong and Lot No. 7-B to Ngo. Antonio Ong was not satisfied with the proposal as he
claimed to have bought the whole property for P60,000.00. To appease Ong, his uncle Jorge Ong agreed to give him P30,000.00
to compensate for half of the purchase price he had paid for the property. With regard to Lot No. 7-B, which was leased by a
certain Ong To, the Chambers jointly issued a resolution to the effect that Ong To should give up his occupancy for a
compensation of P40,000.00; that Buenaventura and Melecio Ngo, brothers of Benito Ngo, should each give Ong To P15,000.00,
while petitioner Leon Co, brother-in-law of Benito Ngo, would pay P10,000.00 to Ong To who would vacate Lot No. 7-B and
deliver it to Benito Ngo.
Thereafter, on 23 April 1979 Antonio Ong and Benito Ngo assisted by their respective counsel executed an amicable
settlement which provided that Lot No. 7-A would belong to Antonio Ong and Lot No. 7-B to Benito Ngo. The amicable
settlement was submitted to the trial court for approval. However, before the same could be approved, a complaint-in-
intervention was filed by petitioner Leon Co alleging that in the joint conference between the Filipino-Chinese Chamber of
Commerce of Naga City and the Filipino-Chinese Chamber of Commerce of Iriga City it was agreed that Lot No. 7-B would go to
him after paying respondent Benito Ngo P49,500.00 for the lot. Respondent Ngo vehemently denied having entered into such
agreement, much less having received any amount therefor.
On the basis of the memorandum and affidavits submitted by petitioner Leon Co, over the objection of respondent Benito
Ngo, the trial court rendered a decision ordering Benito Ngo to reconvey Lot No. 7-B to Leon Co, plus damages.
On appeal, the Intermediate Appellate Court

declared the decision of the trial court null and void for being violative of
procedural due process and remanded the case to the lower court for trial on the merits.
After the remand of the case to the court a quo, respondent Benito Ngo sought inhibition of Judge Ulysses Salvador of the
Regional Trial Court of Iriga City alleging bias in favor of petitioner Leon Co. The motion to inhibit was denied by the presiding
judge who eventually, after a protracted trial, sustained the claim of Leon Co that Benito Ngo had verbally sold to him Lot No.
7-B sometime in August 1976 for P49,500.00 thus -
x x x judgment is hereby rendered declaring the intervenor, Leon Co, the true and lawful owner of Lot 7-B which is the eastern
half of the land described in the Deed of Sale (Exhibit 9) now covered by TCT No. 91 in the name of Benito Ngo (Exhibit 11)
ordering defendant Benito Ngo to execute the appropriate Deed of Sale of said property in favor of Leon Co and to vacate the
same and peacefully deliver the possession thereof to Leon Co, and further ordering defendant to pay Leon Co the following
sums: (a) P1,000,000.00 for moral damages; (b) P50,000.00 for attorney's fees; (c) P1,000.00 a month by way of rental for the use
of the land from June 15, 1979 until the same is actually delivered to the intervenor; and, (d) costs.
On appeal by respondent Ngo, the Court of Appeals rendered its Decision modifying the judgment of the Regional Trial
Court by reducing the moral damages from P1,000,000.00 toP100,000.00 and affirming the rest of the decision in toto.
Upon motion for reconsideration by respondent Ngo, the Court of Appeals reversed itself by ordering the dismissal of the
complaint-in-intervention of petitioner.
Petitioner moved to reconsider the above resolution but his motion was denied. Hence, this petition alleging that the
Court of Appeals erred: (a) in reversing its prior decision of 14 September 1994 and concluding that there was bias on the part
of the trial court in the assessment of the evidence; (b) in ignoring the glaring inconsistencies in the testimony of respondent
Ngo; and, (c) in declaring that there was no evidence of sale of the subject property between petitioner and private respondent.
[2]

Petitioner argues that respondent appellate court deviated from its duty by intruding into the province of the trial court
which is in a much better position to assess the credibility of witnesses. Petitioner contends that the appellate court failed to
appreciate the credible testimonies of his witnesses which jibe with the documentary evidence showing that a contract of sale
existed between the parties. Petitioner also faults the appellate court for not considering the glaring inconsistencies and
contradictions in the pleadings and testimony of private respondent Ngo who failed to overcome the evidence presented by
petitioner that there was an agreement to sell the property.
We cannot sustain petitioner. The rule that the factual findings of the trial court are entitled to great weight and respect on
appeal is neither absolute nor inflexible. One of the exceptions to the rule is where substantial facts and circumstances have
been overlooked which, if properly considered, would justify a different conclusion or alter the result of the case.
Notwithstanding the affirmance by respondent appellate court in its earlier decision of the factual findings of the trial court,
it reversed itself after a reexamination of the record independent of the assessment of the evidence by the trial
court. Respondent court ruled that certain facts have been overlooked resulting in a misappreciation of the documentary and
testimonial evidence.
[3]

In claiming that respondent Ngo sold the property to petitioner, the latter alleged in his complaint-in-intervention -
5. With the combined efforts of all the above-mentioned parties, an amicable settlement was finally reached by the litigants
under the following terms and conditions:
(a) The land in question between Antonio Ong and Benito Ngo in Civil Case No. IR 545 shall be divided into two (2)
equal parts; one-half thereof to be given to plaintiff Antonio Ong and the other half to defendant Benito Ngo.
(b) The portion adjudicated to Benito Ngo shall be given by the latter to intervenor Leon Co who had already paid the
amount of P49,500.00. This arrangement was made in order that said Leon Co shall have a lot wherein to run his
business in lieu of the parcel of land he is presently occupying as lessee which is the subject matter of the litigation in
Civil Case No. IR-317 between him and Segundina Nacario;
(c) Leon Co, in turn, shall deliver to Segundina Nacario the said parcel of land he now occupies as lessee thereof first
from the original owner, Nazario Gonzales and lastly from Rustica Gonzales who inherited the said property from
Nazario Gonzales;
x x x x
6. The foregoing agreement was formally reduced in writing and signed by the interested parties in the presence of the officers
of the Chinese Chambers of Commerce who also signed the same in attestation thereof;
x x x
Petitioner presented as sole documentary basis of the alleged sale of the property the Minutes of the special meeting of the
Filipino- Chinese Chambers of Commerce held on 11 March 1979 -
Minutes of the special meeting of the Rinconada-Iriga City, Filipino-Chinese Chamber of Commerce, with the invited
participation of the Naga City Filipino-Chinese Chamber of Commerce, held in the assembly place of the former located in the
Rinconada Allied Cultural School on March 11, 1979 at 12:00 noon with the attendance of Benito Dy Chio, Luis Recato, Ramon Dy
Prieto, Dy Eng Chiong, Antonio Ong, Lau Siu, Leon Co, members of the executive committee of the Naga City FCCC and Benito S.
Ngo, Lao Siu, Ong To, members from the Rinconada, Iriga City, FCCC.
Chairman: Vicente Kho Shim
Chairman Vicente Kho Shim indicated the importance of the meeting, and confirmed the invitation extended to the Naga City
FCCC to attend in an active capacity.
Joint Meeting of the Rinconada, Iriga City, FCCC and the Naga City FCCC.
x x x x
Chairman Vicente Kho Shim gave an account of the dispute involving three factions and the events so far transpired. Luis Recato
gave his view of the controversy and its possible settlement. Chairman Benito Dy Chio also gave his view of the controversy and
its possible settlement.
In conclusion, the three factions: Antonio Ong, Leon S. Co, Ong To, Benito S. Ngo, and others, have agreed to submit to the
arbitration and decision of the joint assembly of the Rinconada, Iriga City, FCCC, and the Naga City, FCCC, as follows: Both
Antonio Ong and Benito S. Ngo had brought their dispute to the jurisdiction of this countrys judiciary. It is now enjoined that
they should both withdraw their cases from the judiciary and transfer them to the arbitration of this assembly and observe its
final decision.
Resolutions: In connection with the two stores which were burnt down, the occupants, the proprietor, and the prospective buyer:
Antonio Ong, Leon S. Co, Ong To, Benito S. Ngo, have agreed to accept the following resolutions for settlement: Ong To has
agreed to give up his occupancy for the compensation of P40,000.00; Leon S. Co has agreed to pay P10,000.00; Buenaventura S.
Ngo has agreed to pay P15,000.00; and, Nemesio S. Ngo has agreed to pay P15,000.00. This sum of P40,000.00 will compensate
Ong To for damage. In addition, George L. Ong will payP30,000.00 to Antonio Ong for damage.
These resolutions were passed by the assembly and consented to by the four contending parties.
(SGD) ONG TO (SGD) LEON S. CO (SGD) GEORGE L. ONG
Pursuant to this settlement, the disputing parties must withdraw their cases from the courts, be on good terms again, and
hereafter keep intact the store locations.
Arbitration Board:
(SGD) BENITO DY CHIO (SGD) LUIS RECATO
(SGD) RAMON DY PRIETO (SGD) VICENTE KHO SHIM
(SGD) LAO SIU
Witness:
(SGD) BENITO S. NGO Secretary: (SGD) DY ENG CHIONG
March 11, 1979.
Nothing in the above document speaks of any agreement between petitioner and private respondent wherein petitioner
shall buy the property and private respondent to sell the same to petitioner. What transpired during
the meeting, as indicated in the Minutes, was that the relatives of Antonio Ong and respondent Benito Ngo agreed to
participate in the amicable settlement by contributing their own funds for the purpose. The appellate court was correct in
ruling that the document clearly negated the existence of petitioners cause. In fact, records show that petitioner on
cross-examination admitted that neither such agreement of sale nor facts from which such agreement could be inferred were
actually set forth in the Minutes of the said meeting.
[4]

In the absence of any other document showing the alleged sale, petitioner tried to prove his claim through testimonial
evidence. The appellate court however found several inconsistencies and contradictions in the testimonies of petitioners
witnesses in connection with the identity of the land claimed by petitioner and the circumstances surrounding the alleged sale
and payment of the purchase price. Petitioner and his wife Ester Co testified that respondent Ngo had offered to sell to them
Lot No. 7-B in August or about two (2) weeks before 6 September 1976. On the other hand, Antonio Ong stated that respondent
Ngo bought Lot No. 7-A which should pertain to Leon Co and Lot No. 7-B to Ong To. Buenaventura Ngo, another witness
presented by petitioner, narrated a different version of the transaction and asserted that the subject property was actually
purchased by petitioner but in the name of respondent Benito Ngo.
[5]

Petitioner claimed to have made the following payments to respondent Ngo of
the purchase price of the property amounting to P49,500.00, to wit: (a) P20,000.00 in cash in 1976; (b)P10,000.00 by Feati
Bank and Trust Company (FBTC) Check No. 033180 dated 5 April 1979 payable to
respondent Benito Ngo; (c) P10,000.00 by FBTC Check No. 003181 dated 15 May 1979; and, (d) P9,500.00 by FBTC Check
No. 033182 dated 15 June 1979 payable to respondent Benito Ngo. While alleging that respondent Ngo encashed the check
dated 15 April 1979 for P10,000.00, petitioner affirmed that respondent Ngo returned the two (2) other checks amounting
to P10,000.00 and P9,500.00 which were refused acceptance by petitioner, hence, respondent Ngo crossed out the checks which
destroyed their efficacy.
[6]
Thereafter, petitioner withdrew the amounts covered by the two (2) checks which were destroyed by
respondent Ngo
[7]
thereby resulting in actual payment of only P20,000.00 in favor of respondent Ngo as of 11 March 1979. These
admissions contradict petitioners own statement that his payment of P49,500.00 caused the execution of the agreement on 11
March 1979 during the arbitration meeting of the Filipino-Chinese Chambers of Commerce. Against the claim of petitioner,
respondent Ngo contends that the payment by petitioner in his favor was not for the purchase price of the property but for
another purpose, i.e., for the liquidation of their 1978 accounts.
In fine, the evidence of petitioner does not indicate a perfection of the purported contract of sale which, under Art. 1458 of
the Civil Code, is a contract by which "one of the contracting parties obligates himself to transfer the ownership and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent." Under Art. 1475 of
the Code, "the contract of sale is perfected at the moment there is meeting of the minds upon the thing
which is the object of the contract and upon the price. From that moment the parties may reciprocally demand
performance subject to the provisions of the law governing the form of contracts."
A definite agreement on the manner of payment of the price is an essential element in the formation of a binding and
enforceable contract of sale.
[8]
Petitioners testimonial and documentary evidence did not establish any definitive agreement or
meeting of the minds between the parties concerning the price or term of payment. The contention of petitioner that the
agreement of sale between him and private respondent was forged during the arbitration meeting of 11 March 1979 is
contradicted by the Minutes of such meeting. Based thereon, there was nothing whatsoever that transpired to indicate that the
sale occurred between the parties. The admission of petitioner himself that when he issued the checks amounting to P19,500.00
in favor of respondent Benito Ngo,

supposedly as partial payment of the purchase price, the latter destroyed the checks, thereby
negating the existence of the meeting of the minds of the parties on the sale. The non-encashment of the checks by
respondent Ngo is indicative more of his non-acceptance of the offer of petitioner to buy the property. There was also no
showing that petitioner complied with the terms and conditions of the alleged sale, including the payment of the alleged
complete purchase price of P49,500.00 for the property.
WHEREFORE, the Petition is DENIED, and the Resolution of the Court of Appeals dated 18 August 1995 reversing itself as
well as the Decision of the trial court, and dismissing the Complaint-in-Intervention of petitioner, is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Davide, Jr., (Chairman), Vitug, Panganiban, and Quisumbing JJ., concur.


ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C. GONZALES (for herself and on
behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and CATALINA
BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA
ALCARAZ, assisted by GLORIA F. NOEL as attorney-in-fact, respondents.
D E C I S I O N
MELO, J.:
The petition before us has its roots in a complaint for specific performance to compel herein petitioners (except the last
named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its improvements located along Roosevelt
Avenue in Quezon City entered into by the parties sometime in January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels) executed a document
entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia Alcaraz (hereinafter referred to as Ramona)
which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
------------------------------------------
P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the transfer certificate of
title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale of said property and
Miss Ramona Patricia Alcaraz shall immediately pay the balance of theP1,190,000.00.
Clearly, the conditions appurtenant to the sale are the following:
1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the name of their deceased
father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute sale in favor of
Ramona and the latter will pay the former the whole balance of One Million One Hundred Ninety Thousand (P1,190,000.00)
Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as Concepcion), mother of
Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B, Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels father was transferred in their names under
TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant Catalina B. Mabanag
(hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00) Pesos after the latter has paid
Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3; Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the down payment paid
by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the Coronels and caused the
annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh. 5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property with the Registry of
Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of Catalina (Exh. G; Exh.
7).
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No. 351582 (Exh. H; Exh.
8).
(Rollo, pp. 134-136)
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) the parties agreed to submit the case
for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein (now private respondents) proffered their
documentary evidence accordingly marked as Exhibits A through J, inclusive of their corresponding submarkings. Adopting
these same exhibits as their own, then defendants (now petitioners) accordingly offered and marked them as Exhibits 1
through 10, likewise inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty
(30) days within which to simultaneously submit their respective memoranda, and an additional 15 days within which to submit
their corresponding comment or reply thereto, after which, the case would be deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then temporarily detailed
to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment was handed down by Judge Roura from his
regular bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in favor of plaintiffs a deed of
absolute sale covering that parcel of land embraced in and covered by Transfer Certificate of Title No. 327403 (now TCT No.
331582) of the Registry of Deeds for Quezon City, together with all the improvements existing thereon free from all liens and
encumbrances, and once accomplished, to immediately deliver the said document of sale to plaintiffs and upon receipt thereof,
the plaintiffs are ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in
cash. Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of intervenor is hereby
canceled and declared to be without force and effect. Defendants and intervenor and all other persons claiming under them are
hereby ordered to vacate the subject property and deliver possession thereof to plaintiffs. Plaintiffs claim for damages and
attorneys fees, as well as the counterclaims of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon City RTC but the same
was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the undersigned Presiding
Judge should be denied for the following reasons: (1) The instant case became submitted for decision as of April 14, 1988 when
the parties terminated the presentation of their respective documentary evidence and when the Presiding Judge at that time was
Judge Reynaldo Roura. The fact that they were allowed to file memoranda at some future date did not change the fact that the
hearing of the case was terminated before Judge Roura and therefore the same should be submitted to him for decision; (2)
When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura to decide the case prior to the
rendition of the decision, when they met for the first time before the undersigned Presiding Judge at the hearing of a pending
incident in Civil Case No. Q-46145 on November 11, 1988, they were deemed to have acquiesced thereto and they are now
estopped from questioning said authority of Judge Roura after they received the decision in question which happens to be
adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the Court, he was
in all respects the Presiding Judge with full authority to act on any pending incident submitted before this Court during his
incumbency. When he returned to his Official Station at Macabebe, Pampanga, he did not lose his authority to decide or resolve
cases submitted to him for decision or resolution because he continued as Judge of the Regional Trial Court and is of co-equal
rank with the undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a case is
submitted for decision has the authority to decide the case notwithstanding his transfer to another branch or region of the same
court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the instant case, resolution
of which now pertains to the undersigned Presiding Judge, after a meticulous examination of the documentary evidence
presented by the parties, she is convinced that the Decision of March 1, 1989 is supported by evidence and, therefore, should not
be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render Anew Decision by the
Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena, Gonzaga-Reyes,
Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents Reply Memorandum,
was filed on September 15, 1993. The case was, however, re-raffled to undersigned ponente only on August 28, 1996, due to the
voluntary inhibition of the Justice to whom the case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court in the affirmance of the
trial courts decision, we definitely find the instant petition bereft of merit.
The heart of the controversy which is the ultimate key in the resolution of the other issues in the case at bar is the precise
determination of the legal significance of the document entitled Receipt of Down Payment which was offered in evidence by
both parties. There is no dispute as to the fact that the said document embodied the binding contract between Ramona Patricia
Alcaraz on the one hand, and the heirs of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by
TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give
something or to render some service.
While, it is the position of private respondents that the Receipt of Down Payment embodied a perfected contract of sale,
which perforce, they seek to enforce by means of an action for specific performance, petitioners on their part insist that what the
document signified was a mere executory contract to sell, subject to certain suspensive conditions, and because of the absence
of Ramona P. Alcaraz, who left for the United States of America, said contract could not possibly ripen into a contract of absolute
sale.
Plainly, such variance in the contending parties contention is brought about by the way each interprets the terms and/or
conditions set forth in said private instrument. Withal, based on whatever relevant and admissible evidence may be available on
record, this Court, as were the courts below, is now called upon to adjudge what the real intent of the parties was at the time the
said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a
contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is
lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the
prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller
agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price
is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment
of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further
remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title
is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition
and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey
title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the
prospective 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 which states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor of the
promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional
contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event
which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely
abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of
the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having
to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,
ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.
It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject
property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a
contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the
prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the
property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of
course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and
this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers
ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to
transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property subject of the sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of the contract entered
into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners
declared in the said Receipt of Down Payment that they --
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our
inherited house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the total amount
of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea conveyed is that they
sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there was a clear intent
on the part of petitioners to transfer title to the buyer, but since the transfer certificate of title was still in the name of petitioners
father, they could not fully effect such transfer although the buyer was then willing and able to immediately pay the purchase
price. Therefore, petitioners-sellers undertook upon receipt of the down payment from private respondent Ramona P. Alcaraz, to
cause the issuance of a new certificate of title in their names from that of their father, after which, they promised to present said
title, now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in turn, pay the entire
balance of the purchase price.
The agreement could not have been a contract to sell because the sellers herein made no express reservation of ownership
or title to the subject parcel of land. Furthermore, the circumstance which prevented the parties from entering into an absolute
contract of sale pertained to the sellers themselves (the certificate of title was not in their names) and not the full payment of the
purchase price. Under the established facts and circumstances of the case, the Court may safely presume that, had the certificate
of title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute contract of sale
could not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the property to private
respondent upon the fulfillment of the suspensive condition. On the contrary, having already agreed to sell the subject property,
they undertook to have the certificate of title change to their names and immediately thereafter, to execute the written deed of
absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the buyer with certain
terms and conditions, promised to sell the property to the latter. What may be perceived from the respective undertakings of
the parties to the contract is that petitioners had already agreed to sell the house and lot they inherited from their father,
completely willing to transfer ownership of the subject house and lot to the buyer if the documents were then in order. It just so
happened, however, that the transfer certificate of title was then still in the name of their father. It was more expedient to first
effect the change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance of a new
transfer of the certificate of title in their names upon receipt of the down payment in the amount of P50,000.00. As soon as the
new certificate of title is issued in their names, petitioners were committed to immediately execute the deed of absolute
sale. Only then will the obligation of the buyer to pay the remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect the seller against a
buyer who intends to buy the property in installment by withholding ownership over the property until the buyer effects full
payment therefor, in the contract entered into in the case at bar, the sellers were the ones who were unable to enter into a
contract of absolute sale by reason of the fact that the certificate of title to the property was still in the name of their father. It
was the sellers in this case who, as it were, had the impediment which prevented, so to speak, the execution of an contract of
absolute sale.
What is clearly established by the plain language of the subject document is that when the said Receipt of Down Payment
was prepared and signed by petitioners Romulo A. Coronel, et. al.,the parties had agreed to a conditional contract of sale,
consummation of which is subject only to the successful transfer of the certificate of title from the name of petitioners father,
Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985 (Exh. D; Exh.
4). Thus, on said date, the conditional contract of sale between petitioners and private respondent Ramona P. Alcaraz became
obligatory, the only act required for the consummation thereof being the delivery of the property by means of the execution of
the deed of absolute sale in a public instrument, which petitioners unequivocally committed themselves to do as evidenced by
the Receipt of Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of
contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of title in petitioners names was
fulfilled on February 6, 1985, the respective obligations of the parties under the contract of sale became mutually demandable,
that is, petitioners, as sellers, were obliged to present the transfer certificate of title already in their names to private respondent
Ramona P. Alcaraz, the buyer, and to immediately execute the deed of absolute sale, while the buyer on her part, was obliged to
forthwith pay the balance of the purchase price amounting toP1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from our deceased father
Constancio P. Coronel, the transfer certificate of title immediately upon receipt of the downpayment above-
stated". The sale was still subject to this suspensive condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive condition. Only, they
contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property under their names, there
could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly provides that:
Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these mere hypothetical arguments is the
fact that the condition herein referred to was actually and indisputably fulfilled on February 6, 1985, when a new title was
issued in the names of petitioners as evidenced by TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as Receipt of Down
Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the suspensive condition that the sellers shall
effect the issuance of new certificate title from that of their fathers name to their names and that, on February 6, 1985, this
condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides -
Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the
constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the condition that has been
complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became mutually due and demandable as
of the time of fulfillment or occurrence of the suspensive condition on February 6, 1985. As of that point in time, reciprocal
obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they were then not yet the
absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the extent and value of
the inheritance of a person are transmitted through his death to another or others by his will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P. Coronel are compulsory
heirs who were called to succession by operation of law. Thus, at the point their father drew his last breath, petitioners stepped
into his shoes insofar as the subject property is concerned, such that any rights or obligations pertaining thereto became bi nding
and enforceable upon them. It is expressly provided that rights to the succession are transmitted from the moment of death of
the decedent (Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
Be it also noted that petitioners claim that succession may not be declared unless the creditors have been paid is rendered
moot by the fact that they were able to effect the transfer of the title to the property from the decedents name to their names
on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an agreement at that
time and they cannot be allowed to now take a posture contrary to that which they took when they entered into the agreement
with private respondent Ramona P. Alcaraz. The Civil Code expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale, petitioners cannot claim now that
they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of sale between them and Ramona P. Alcaraz,
the latter breach her reciprocal obligation when she rendered impossible the consummation thereof by going to the United
States of America, without leaving her address, telephone number, and Special Power of Attorney (Paragraphs 14 and 15, Answer
with Compulsory Counterclaim to the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they
were correct in unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant case. We note that
these supposed grounds for petitioners rescission, are mere allegations found only in their responsive pleadings, which by
express provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of
Court). The records are absolutely bereft of any supporting evidence to substantiate petitioners allegations. We have stressed
time and again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro vs.
Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6, 1985, we cannot justify
petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of sale, there being no express stipulation
authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De
Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because although the evidence
on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion
D. Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter, if not also in her own behalf. Indeed, the down
payment was made by Concepcion D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P.
Alcaraz. There is no evidence showing that petitioners ever questioned Concepcions authority to represent Ramona P. Alcaraz
when they accepted her personal check. Neither did they raise any objection as regards payment being effected by a third
person. Accordingly, as far as petitioners are concerned, the physical absence of Ramona P. Alcaraz is not a ground to rescind
the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to pay the full purchase
price is concerned. Petitioners who are precluded from setting up the defense of the physical absence of Ramona P. Alcaraz as
above-explained offered no proof whatsoever to show that they actually presented the new transfer certificate of title in their
names and signified their willingness and readiness to execute the deed of absolute sale in accordance with their
agreement. Ramonas corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may be considered in
default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
x x x
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. From the moment one of the parties fulfill his obligation, delay by the other
begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a case of double sale
where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in
the absence thereof to the person who presents the oldest title, provided there is good faith.
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the second contract of sale
was registered with the Registry of Deeds of Quezon City giving rise to the issuance of a new certificate of title in the name of
Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the buyer, the exceptions being: (a) when
the second buyer, in good faith, registers the sale ahead of the first buyer, and (b) should there be no inscription by either of the
two buyers, when the second buyer, in good faith, acquires possession of the property ahead of the first buyer. Unless, the
second buyer satisfies these requirements, title or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished member of the Court,
Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right). Knowledge by the first buyer of the second
sale cannot defeat the first buyers rights except when the second buyer first registers in good faith the second sale (Olivares vs.
Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second buyer of the first sale defeats his rights even if he is first
to register, since knowledge taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26
December 1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the
protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his deed of sale
(citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the subject property only
on February 22, 1985, whereas, the second sale between petitioners Coronels and petitioner Mabanag was supposedly perfected
prior thereto or on February 18, 1985. The idea conveyed is that at the time petitioner Mabanag, the second buyer, bought the
property under a clean title, she was unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer in good faith but
whether or not said second buyer registers such second sale in good faith, that is, without knowledge of any defect in the title of
the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith, registered the sale
entered into on February 18, 1985 because as early as February 22, 1985, a notice of lis pendens had been annotated on the
transfer certificate of title in the names of petitioners, whereas petitioner Mabanag registered the said sale sometime in April,
1985. At the time of registration, therefore, petitioner Mabanag knew that the same property had already been previously sold
to private respondents, or, at least, she was charged with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the property at the time of the
registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale of the same
property to a third party or that another person claims said property in a previous sale, the registration will constitute a
registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs.
Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on February 6, 1985, prior
to that between petitioners and Catalina B. Mabanag on February 18, 1985, was correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as principal and Concepcion,
her mother, as agent insofar as the subject contract of sale is concerned, the issue of whether or not Concepcion was also acting
in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such assumption disputed between mother
and daughter. Thus, We will not touch this issue and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed judgment AFFIRMED.
SO ORDERED.

LIMKETKAI SONS MILLING INC., petitioner, vs. COURT OF APPEALS, ET AL., respondents.
R E S O L U T I O N
FRANCISCO, J.:
In this motion for reconsideration, the Court
*
is called upon to take a second hard look on its December 1, 1995 decision
reversing and setting aside respondent Court of Appeals judgment of August 12, 1994 that dismissed petitioner Limketkai Sons
Milling Inc.s complaint for specific performance and damages against private respondents Bank of the Philippine Islands (BPI)
and National Book Store (NBS). Petitioner Limketkai Sons Milling, Inc., opposed the motion and filed its Consolidated Comment,
to which private respondent NBS filed a Reply. Thereafter, petitioner filed its Manifestation and Motion for the voluntary
inhibition of Chief Justice Andres R. Narvasa from taking part in any subsequent deliberations in this case. The Honorable Chief
Justice declined.
[1]

The Court is swayed to reconsider.
The bottomline issue is whether or not a contract of sale of the subject parcel of land existed between the petitioner and
respondent BPI. A re-evaluation of the attendant facts and the evidence on record, specifically petitioners Exhibits A to I,
yields the negative. To elaborate:
Exhibit A
[2]
is a Deed of Trust dated May 14, 1976, entered into between Philippine Remnants Co. Inc., as grantor, and
respondent BPI, as trustee, stating that subject property covered by TCT 493122 (formerly TCT No. 27324)
[3]
has *been+ assigned,
transferred, conveyed and set over unto the Trustee
[4]
expressly authorizing and empowering the same in its own name to sell
and dispose of said trust property or any lot or parcel thereof
[5]
and to facilitate *the+ sale of the trust property, the Trustee may
engage the services of real estate broker or brokers, under such terms and conditions which the Trustee may deem proper, to
sell the Trust property or any lot or parcel thereof.
[6]

Exhibit B is a Letter of Authority for the petitioner issued by respondent BPI to Pedro A. Revilla, Jr., a real estate broker, to
sell the property pursuant to the Deed of Trust. The full text of Exhibit B is hereby quoted:
Trust Account No. 75-09
23 June 1988
ASSETRADE CO.
70 San Francisco St.
Capitol Subdivision
Pasig, Metro Manila
Attention: Mr. Pedro P. Revilla, Jr.
Managing Partner .
Gentlemen:
This will serve as your authority to sell on an as is where is basis the property located at Pasig Blvd., Bagong Ilog, Pasig, Metro
Manila, under the following details and basic terms and conditions:
TCT No. : 493122 in the name of BPI as trustee of Philippine Remnants Co., Inc.
Area : 33,056.0 square meters (net of 890 sq. m. sold to the Republic of the Philippines due to the widening
of Pasig Blvd.)
Price : P1,100.00 per sq. m. or P36,361,600.000.
Terms : Cash
Brokers Commission : 2%
Others : a) Docuemntary (sic) stamps to be affixed to Deed of Absolute Sale, transfer tax, registration expenses, and
other titling expenses for account of the Buyer.
b) Capital gains tax, if payable, and real estate taxes up to 30 June 1988 shall be for the account of the
Seller.
This authority which is good for thirty (30) days only from date hereof is non-exclusive and on a first come first-serve basis.
Very truly yours,
BANK OF THE PHILIPPINE ISLANDS
as trustee of
Philippine Remnants Co., Inc.
(Sgd.) (Sgd.)
FERNANDO J. SISON, III ALFONSO R. ZAMORA
Assistant Vice-President Vice President
[Note: Italics supplied]
security guard on duty at subject property to allow him (Revilla, Jr.) and his companion to conduct an ocular inspection of the
premises.
[7]

Exhibit D is a letter addressed by Pedro Revilla, Jr. to respondent BPI informing the latter that he has procured a
prospective buyer.
[8]

Exhibit E is the written proposal submitted by Alfonso Y. Lim in behalf of petitioner Limketkai Sons Milling, Inc., offering
to buy the subject property at P1,000.00/sq. m.
[9]

Exhibit F is respondent BPIs letter addressed to petitioner pointing out that petitioners proposal embodied in its Letter
(Exhibit E) has been rejected by the respondent BPIs Trust Committee.
[10]

Exhibit G is petitioners letter dated July 22, 1988 reiterating its offer to buy the subject property at P1,000/sq. m. but
now on cash basis.
[11]

Exhibit H refers to respondent BPIs another rejection of petitioners offer to buy the property at P1,000/sq. m.
[12]

And finally, Exhibit I is a letter by petitioner addressed to respondent BPI claiming the existence of a perfected contract
of sale of the subject property between them.
[13]

These exhibits, either scrutinized singly or collectively, do not reveal a perfection of the purported contract of sale. Article
1458 of the Civil Code defines a contract of sale as follows:
ART. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.
A contract of sale may be absolute or conditional.
Article 1475 of the same code specifically provides when a contract of sale is deemed perfected, to wit:
ART. 1475. The contract of sale is perfected at the moment there is meeting of minds upon the thing which is the object of the
contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of
contracts.
The Court in Toyota Shaw, Inc. v. Court of Appeals
[14]
had already ruled that a definite agreement on the manner of payment of
the price is an essential element in the formation of a binding and enforceable contract of sale. Petitioners exhibits did not
establish any definitive agreement or meeting of the minds between the concerned parties as regards the price or term of
payment. Instead, what merely appears therefrom is respondent BPIs repeated rejection of the petitioners proposal to buy the
property at P1,000/ sq.m.
[15]
In addition, even on the assumption that Exhibit E reflects that respondent BPI offered to sell the
disputed property for P1,000/sq. m., petitioners acceptance of the offer is conditioned upon or qualified by its proposed
terms
[16]
to which respondent BPI must first agree with.
On the subject of consent as an essential element of contracts, Article 1319 of the Civil Code has this to say:
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-
offer.
xxx xxx xxx.
The acceptance of an offer must therefor be unqualified and absolute. In other words, it must be identical in all respects with that
of the offer so as to produce consent or meeting of the minds. This was not the case herein considering that petitioners
acceptance of the offer was qualified, which amounts to a rejection of the original offer.
[17]
And contrary to petitioners assertion
that its offer was accepted by respondent BPI, there was no showing that petitioner complied with the terms and conditions
explicitly laid down by respondent BPI for prospective buyers.
[18]
Neither was the petitioner able to prove that its offer to buy the
subject property was formally approved by the beneficial owner of the property and the Trust Committee of the Bank, an
essential requirement for the acceptance of the offer which was clearly specified in Exhibits F and H. Even more telling is
petitioners unexplained failure to reduce in writing the alleged acceptance of its offer to buy the property at P1,000/sq. m.
The Court also finds as unconvincing petitioners representation under Exhibits E, G, and I that its proposal to buy the
subject property for P 1,000/ sq. m. has been accepted by respondent BPI, considering that none of the said Exhibits contained
the signature of any responsible official of respondent bank.
It is therefore evident from the foregoing that petitioners documentary evidence floundered in establishing its claim of a
perfected contract of sale.
Moreover, petitioners case failed to hurdle the strict requirements of the Statute of Frauds. Article 1403 of the Civil Code
states:
ART. 1403. - The following contracts are unenforceable, unless they are ratified:
(1) xxx xxx xxx
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing,
or a secondary evidence of its contents:
xxx xxx xxx
(e) An agreement for the leasing for a long period than one year, or for the sale of real property or of an interest therein.
xxx xxx xxx.
In this case there is a patent absence of any deed of sale categorically conveying the subject property from respondent BPI to
petitioner. Exhibits E, G, I which petitioner claims as proof of perfected contract of sale between it and respondent BPI were
not subscribed by the party charged, i.e., BPI, and did not constitute the memoranda or notes that the law speaks of.
[19]
To
consider them sufficient compliance with the Statute of Frauds is to betray the avowed purpose of the law to prevent fraud and
perjury in the enforcement of obligations. We share, in this connection, respondent Court of Appeals observation when it said:
xxx. The requirement that the notes or memoranda be subscribed by BPI or its agents, as the party charged, is very vital for the
strict compliance with the avowed purpose of the Statute of Frauds which is to prevent fraud and perjury in the enforcement of
obligations depending for their evidence on the unassisted memory of witnesses by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the party to be charged (Asia Production Co., Inc. vs. Pano, 205 SCRA 458). It
cannot be gainsaid that a shrewd person could easily concoct a story in his letters addressed to the other party and present the
letters to the court as notes to prove the existence of a perfected oral contract of sale when in truth there is none.
In adherence to the provisions of the Statute of Frauds, the examination and evaluation of the notes or memoranda adduced by
the appellee was confined and limited to within the four corners of the documents. To go beyond what appears on the face of
the documents constituting the notes or memoranda, stretching their import beyond what is written in black and white, would
certainly be uncalled for, if not violative of the Statute of Frauds and opening the doors to fraud, the very evil sought to be
avoided by the statute. In fine, considering that the documents adduced by the appellee do not embody the essentials of the
contract of sale aside from not having been subscribed by the party charged or its agent, the transaction involved definitely falls
within the ambit of the Statute of Frauds.
[20]

[Note: Italics added]
Corrolarily, as the petitioners exhibits failed to establish the perfection of the contract of sale, oral testimony cannot take
their place without violating the parol evidence rule.
[21]
It was therefore irregular for the trial court to have admitted in evidence
testimony to prove the existence of a contract of sale of a real property between the parties despite de persistent objection
made by private respondents counsels as early as the first scheduled hearing. While said counsels cross-examined the
witnesses, this, to our view, did not constitute a waiver of the parol evidence rule. TheTalosig v. Vda. de Nieba,
[22]
and Abrenica v.
Gonda and de Gracia
[23]
cases cited by the Court in its initial decision, which ruled to the effect that an objection against the
admission of any evidence must be made at the proper time, i.e., x x x at the time question is asked,
[24]
and that if not so made
it will be understood to have been waived, do not apply as these two cases involved facts
[25]
different from the case at
bench. More importantly, here, the direct testimonies of the witnesses were presented in affidavit-form where prompt
objection to inadmissible evidence is hardly possible, whereas the direct testimonies in these cited cases were delivered orally in
open court. The best that counsels could have done, and which they did, under the circumstances was to preface the cross-
examination with objection. Thus:
ATTY. VARGAS:
Before I proceed with the cross-examination of the witness, your Honor, may we object to the particular portion of the affidavit
which attempt to prove the existence of a verbal contract to sell more specifically the answers contained in page 3, Par. 1, the
whole of the answer.
x x x x x x x x x.
COURT:
Objection overruled.
Atty. VARGAS.
Your Honor, what has been denied by the Court was the motion for preliminary hearing on affirmative defenses. The statement
made by the witness to prove that there was a verbal contract to sell is inadmissible in evidence in this case because an
agreement must be in writing.
COURT:
Go ahead, that has been already overruled.
ATTY. VARGAS:
So may we reiterate our objection with regards to all other portions of the affidavit which deal on the verbal contract. (TSN, Feb.
28, 1989, pp. 3-5; Italics supplied.)
[26]

xxx xxx xxx
ATTY. CORNAGO:
Before we proceed, we would like to make of record our continuing objection insofar as questions and answers propounded to
Pedro Revilla dated February 27, 1989, in so far as questions would illicit (sic) answers which would be violative of the best
evidence rule in relation to Art. 1403. I refer to questions Nos. 8, 13, 16 and 19 of the affidavit of this witness which is considered
as his direct testimony. (T.S.N., June 29, 1990, p. 2)
ATTY. CORNAGO:
May we make of record our continued objection on the testimony which is violative of the best evidence rule in relation to Art.
1403 as contained in the affidavit particularly questions Nos. 12, 14, 19 and 20 of the affidavit of Alfonso Lim executed on
February 24, 1989 x x x. (T.S.N., June 28, 1990, p. 8).
[27]

Counsels should not be blamed and, worst, penalized for taking the path of prudence by choosing to cross-examine the
witnesses instead of keeping mum and letting the inadmissible testimony in affidavit form pass without challenge. We thus
quote with approval the observation of public respondent Court of Appeals on this point:
As a logical consequence of the above findings, it follows that the court a quo erred in allowing the appellee to introduce parol
evidence to prove the existence of a perfected contract of sale over and above the objection of the counsel for the defendant-
appellant. The records show that the court a quo allowed the direct testimony of the witnesses to be in affidavit form subject to
cross-examination by the opposing counsel. If the purpose thereof was to prevent the opposing counsel from objecting timely
to the direct testimony, the scheme failed for as early as the first hearing of the case on February 28, 1989 during the
presentation of the testimony in affidavit form of Pedro Revilla, Jr., plaintiff-appellees first witness, the presentation of such
testimony was already objected to as inadmissible.
[28]

[Italics supplied.]
WHEREFORE, in view of the foregoing premises, the Court hereby GRANTS the motion for reconsideration, and SETS ASIDE
its December 1, 1995 decision. Accordingly, the petition is DENIED and the Court of Appeals decision dated August 12, 1994,
appealed from is AFFIRMED in toto.
SO ORDERED.
Narvasa, C.J. (Chairman) and Davide, Jr., J., concur.
Panganiban, J., joins Justice Melos dissent.


LAGRIMAS A. BOY, petitioner, vs. COURT OF APPEALS, ISAGANI P. RAMOS and ERLINDA GASINGAN
RAMOS, respondents.
D E C I S I O N
AZCUNA, J.:
Before us is a petition for review on certiorari of the decision of the Court of Appeals in an ejectment case, docketed as CA-
G.R. SP No. 38716, which reversed and set aside the decision
[1]
of the Regional Trial Court of Manila, Branch 54,
[2]
and reinstated
the decision
[3]
of the Metropolitan Trial Court of Manila, Branch 14,
[4]
ordering petitioner to vacate the disputed premises and to
pay rent until the premises are vacated and possession is turned over to private respondents.
The facts, as stated by the Court of Appeals, are as follows:
On September 24, 1993, the spouses Isagani P. Ramos and Erlinda Gasingan Ramos, private respondents herein, filed an
action for ejectment against Lagrimas A. Boy (Lagrimas), petitioner herein, with the Metropolitan Trial Court of Manila. In their
Complaint, the spouses Ramos alleged that they are the owners of a parcel of land with an area of 55.75 square meters, and the
house existing thereon, situated at 1151 Florentino Torres St., Singalong, Manila. They acquired the said properties from
Lagrimas who sold the same to them by virtue of a Deed of Absolute Sale,
[5]
which was executed on June 4, 1986. However,
Lagrimas requested for time to vacate the premises, and they agreed thereto, because they were not in immediate need of the
premises. Time came when they needed the said house as they were only renting their own residence. They then demanded that
Lagrimas vacate the subject premises, but she refused to do so. Hence, they initiated this action for ejectment against
Lagrimas.
[6]

In her Answer, Lagrimas alleged that sometime in September 1984, in order to accommodate her brothers need for a
placement fee to work abroad, she borrowed P15,000 from the spouses Ramos, who asked for the subject property as
collateral. On June 4, 1986, the spouses Ramos caused her to sign a Deed of Absolute Sale purporting to show that she sold the
property in question to them for the sum of P31,000. The balance of P16,000 was promised to be paid on that date, but the
promise was never fulfilled. Sometime in May 1988, Erlinda Ramos and Lagrimas executed an agreement
(Kasunduan)
[7]
acknowledging that the subject parcel of land, together with the upper portion of the house thereon, had been
sold by Lagrimas to the spouses Ramos for P31,000; that of the said price, the sum of P22,500 (representing P15,000 cash loan
plus P7,500 as interest from September 1984 to May 1988) had been paid; that the balance ofP8,500 would be paid on the last
week of August 1988; and that possession of the property would be transferred to the spouses Ramos only upon full payment of
the purchase price.
[8]

Lagrimas admitted that the counsel of the spouses Ramos sent her a letter demanding that she vacate the
premises. Lagrimas alleged that the demand for her to pay the sum of P6,000 per month has no legal basis. Lagrimas was
summoned by the Punong Barangay for conciliation, but no settlement was reached.
[9]

The Metropolitan Trial Court (MeTC) noted the existence of a Deed of Absolute Sale executed by the spouses Ramos and
Lagrimas on June 4, 1986. The Deed was duly acknowledged before a Notary Public and the parties therein did not deny its due
execution. The MeTC observed that Lagrimas defense that the spouses Ramos still had to pay the amount of P16,000 to
complete the full consideration of P31,000 was nowhere to be found in the Deed of Absolute Sale.
[10]

The MeTC held that the Kasunduan, which Lagrimas attached to her Answer, cannot be given binding effect. The MeTC
stated that while Erlinda Ramos admitted the existence of said document, she thought that Lagrimas was only asking for an
additional amount. Erlinda Ramos claimed that after signing and reading the document, she realized that it did not contain the
true facts of the situation since they had already purchased the subject property and were, therefore, the owners thereof. Erlinda
Ramos, thereafter, refused to give her residence certificate and asked the notary public not to notarize the document. Said
incident was attested to by way of affidavit by Lutgarda Reyes, the friend and companion of Lagrimas.
[11]

Moreover, the MeTC ruled that the continued occupation by Lagrimas of said property after the sale, without payment of
rent, was by mere tolerance. It held that since the spouses Ramos, who were staying in a rented place, were asked to vacate the
same, they were in need to take possession of their own property.
[12]

The MeTC thus rendered judgment in favor of private respondents, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs [herein private respondents] and against the defendant
[herein petitioner], ordering the latter and the persons claiming rights under her to vacate the premises known as 1151
Florentino [Torres] Street, Singalong, Manila. The defendant is likewise ordered to pay plaintiffs the sum of P1,000.00 per month
as reasonable compensation for the use and occupation of the premises from the filing of this complaint until the premises is
vacated and possession is turned over to the plaintiffs; the further sum of P5,000.00 as attorneys fees plus the costs of the suit.
Defendants counterclaim is hereby dismissed for lack of merit.
SO ORDERED.
[13]

Petitioner appealed said decision to the Regional Trial Court, which rendered judgment in her favor, thus:
In view of the foregoing, this Court hereby reverses the assailed Decision and dismisses the complaint. Costs against the
appellee.
The order previously issued granting execution pending appeal is accordingly recalled.
SO ORDERED.
[14]

The Regional Trial Court (RTC) held that the Kasunduan was binding between the parties and was the true agreement
between them. It ruled that pending the determination of the question of ownership, it cannot deprive the party in actual
possession of the right to continue peacefully with said possession. Since the question of ownership was inextricably woven with
that of possession, the RTC held that the MeTC should have dismissed the case because jurisdiction pertains to another
tribunal.
[15]

Private respondents filed a petition for review of the decision of the RTC with the Court of Appeals. They faulted the
respondent Judge for giving credence to the Kasunduan and holding that it prevailed over the Deed of Absolute Sale. The Court
of Appeals ruled in favor of private respondents, thus:
WHEREFORE, the decision of the respondent Judge herein appealed from is hereby REVERSED and SET ASIDE, and the decision
of the Metropolitan Trial Court is hereby REINSTATED.
SO ORDERED.
[16]

The Court of Appeals found, thus:
A review of the records discloses that the private respondent [herein petitioner Lagrimas] acquired the subject property from one
Marianita C. Valera by virtue of two instruments. The first one is a Deed of Sale datedSeptember 27, 1984, in which the vendor
Marianita C. Valera sold a house of light wooden materials and her rights as a bonafide tenant of the land on which it stands, to
the vendee Lagrimas A. Boy for P31,000.00 (Annex 1 to the Affidavit of Lagrimas A. Boy, p. 67, Record). The second one is a
deed of absolute sale and assignment of rights dated March 18, 1985, in which the vendor Ma. Nita C. Valera sold a residential
house and her rights and interests over a parcel of land in which it is located, to vendee Lagrimas A. Boy, for the price
of P31,000.00 (Annex 2, Affidavit of Lagrimas A. Boy, pp. 68-69, Record).
It appears from the foregoing that Marianita C. Valera was originally one of the tenants/residents of 669 square meters of land
owned by the PNB. She constructed a house on a 55.75 square meter portion of the said land. In 1984, she sold the house and
only her rights as tenant of the land to private respondent, because the PNB had not yet sold the land to the residents. In 1985,
the sale of the land to the residents had already been accomplished. Hence, she sold the house and her rights and interests to
the land to the private respondent.
Significantly, these contracts coincide with certain events in the relationship between the petitioners [herein private respondents
spouses Ramos] and private respondent. According to the Answer of private respondent, sometime in September, 1984, she
borrowed the sum of P15,000.00 from the petitioners to accommodate her brothers placement fee to work abroad (par. 7,
Answer, p. 19, Record). And on March 19, 1985, the private respondent executed a deed of real estate mortgage (Annex a to the
Affidavit of Erlinda C. Ramos, pp. 54-55, Record), in which she mortgaged the properties she has acquired from Marianita C.
Valera to the petitioners, to secure a loan in the amount of P26,200.00, payable within three months.
One year later, on June 4, 1986, the private respondent executed a deed of absolute sale in which she sold the same property
acquired from Marianita C. Valera to the petitioners, for the price of P31,000.00.
[17]

Considering that petitioner borrowed P26,200 from private respondents, which loan was covered by a real estate mortgage
of the subject house and lot, and the subsequent sale of the property to private respondents for P31,000 after non-payment of
the loan, the Court of Appeals did not give credence to the statement in the Kasunduan that private respondents paid
onlyP22,500 to petitioner since her indebtedness already reached P26,200. The Court of Appeals gave weight to the argument of
private respondents that Erlinda Ramos was merely tricked into signing the Kasunduan. It gave credence to the version of
private respondents on how the Kasunduan came to be executed but not notarized, thus:
x x x Erlinda G. Ramos alleged in her affidavit that sometime in May, 1988, the exact date of which she cannot recall, Lagrimas
Boy went to their residence and pleaded that even if they have already fully paid the subject house and lot, she was asking for an
additional amount because she needed the money and there was no one for her to approach (walang ibang matatakbuhan). She
[Erlinda Ramos] claimed she committed a mistake because she agreed to give an additional amount and went with [Lagrimas] to
Atty. Estacio at the City Hall. [Lagrimas] arrive[d] ahead [of] Atty. Estacio in company with her friend Lutgarda Bayas. Atty.
Estacio told her [Erlinda Ramos] that she will give an additional amount and she agreed without the knowledge of her
husband. Atty. Estacio handed to her a piece of paper and she was made to sign and she acceded and signed it without
reading. After [Lagrimas] and her witnesses including her companion Lutgarda Bayas signed the paper, she [Erlinda Ramos] go[t]
it and read it. It was at that point that she discovered that what were written thereon were not in accordance with the true and
real fact and situation that the subject house and lot already belongs to them because they have purchased it already and
{Lagrimas} only requested for an addition. She [Erlinda Ramos] told Atty. Estacio to change (baguhin) the statement because she
was not agreeable and she did not give her residence certificate (Cedula). Notary Public Estacio said that he cannot notarize the
document (purportedKasunduan) because she [Erlinda Ramos] refused saying she was Pumapalag. He said that Erlinda Ramos
and [Lagrimas] should talk to each other again. She [Erlinda Ramos] committed another mistake because she left the place
leaving the piece of paper -- purported Kasunduan without knowing that [Lagrimas] kept it. Erlinda Ramos innocently failed to
demand the said piece of paper which [Lagrimas] is now using. She returned to Atty. Estacio to get the piece of paper but he
answered her saying naibasura na and she trusted him but this time, it turned out that [Lagrimas] kept it which she is using now
in this case.
[18]

The Court of Appeals stated that the fact that petitioner has remained in possession of the property sold, and paid its real
estate taxes, would have made out a case for equitable mortgage. However, it noted that petitioner did not raise this defense,
but admitted having sold the property to private respondents, alleging only that they have not paid the purchase price in full. It,
therefore, ruled that the preponderance of evidence is against petitioner.
Hence, this petition, with the following assigned errors:
I
THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT INTERPRETING THAT THE KASUNDUAN
EXECUTED BY AND BETWEEN PETITIONER (DEFENDANT) AND PRIVATE RESPONDENT (PLAINTIFF) SUPERSEDES THE DEED OF
SALE WHICH HAS NOT BEEN CONSUMMATED.
II
THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS DISCRETION IN MISINTERPRETING AND DISREGARDING THE
KASUNDUAN AS NOT APPLICABLE IN THE CASE AT BAR.
III
THE RESPONDENT COURT ERRED AND ABUSED ITS DISCRETION IN REVERSING AND DISMISSING THE DECISION OF THE
REGIONAL TRIAL COURT AND [IN REINSTATING] THE DECISION OF THE COURT A QUO.
[19]

Petitioner contends that, as ruled by the RTC, since the question of ownership in this case is interwoven with that of
possession, the MeTC should have dismissed the case because jurisdiction pertains to another tribunal.
The contention is without merit.
The only issue for resolution in an unlawful detainer case is physical or material possession of the property involved,
independent of any claim of ownership by any of the party litigants.
[20]

Prior to the effectivity of Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980), the jurisdiction of inferior
courts was confined to receiving evidence of ownership in order to determine only the nature and extent of possession, by
reason of which such jurisdiction was lost the moment it became apparent that the issue of possession was interwoven with that
of ownership.
[21]

With the enactment of Batas Pambansa Blg. 129, inferior courts were granted jurisdiction to resolve questions of ownership
provisionally in order to determine the issue of possession, thus:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases.-
Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise:
x x x
(2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided, That when in
such cases, the defendant raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be
resolved only to determine the issue of possession.
Section 16, Rule 70 (Forcible Entry and Unlawful Detainer) of the Rules of Court, as amended, similarly provides:
Sec.16. Resolving defense of ownership.- When the defendant raises the defense of ownership in his pleadings and the question
of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to
determine the issue of possession.
Thus, in forcible entry and unlawful detainer cases, if the defendant raises the question of ownership in his pleadings and
the question of possession cannot be resolved without deciding the issue of ownership, the inferior courts have the undoubted
competence provisionally to resolve the issue of ownership for the sole purpose of determining the issue of possession.
[22]
The
MeTC, therefore, did not err in taking cognizance of the instant case.
Petitioner also contends that the Court of Appeals erred by misinterpreting and disregarding the Kasunduan, which is
binding between the parties and expressed their true intent. Petitioner asserts that the Kasunduan supersedes the Deed of
Absolute Sale, which is actually a contract to sell. In effect, petitioner is asking this Court to review the factual finding of Court of
Appeals on the true nature of the Kasunduan.
As a rule, the findings of the fact of the Court of Appeals are final and cannot be reviewed on appeal by this Court, provided
they are borne out by the record or are based on substantial evidence.
[23]
After reviewing the records herein, this Court finds no
ground to change the factual finding of the Court of Appeals on the Kasunduan, with the resulting holding that it is not binding
on the parties.
The remaining issue is whether the Court of Appeals correctly ruled that private respondents have a right of material
possession over the disputed property.
It has been established that petitioner sold the subject property to private respondents for the price of P31,000, as
evidenced by the Deed of Absolute Sale,
[24]
the due execution of which was not controverted by petitioner. The contract is
absolute in nature, without any provision that title to the property is reserved in the vendor until full payment of the purchase
price.
[25]
By the contract of sale,
[26]
petitioner (as vendor), obligated herself to transfer the ownership of, and to deliver, the
subject property to private respondents (as vendees) after they paid the price of P31,000. Under Article 1477 of the Civil Code,
the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. In addition,
Article 1498 of the Civil Code provides that when the sale is made through a public instrument, as in this case, 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 clearly be inferred. In this case, the Deed of Absolute Sale does not contain any stipulation against the
constructive delivery of the property to private respondents. In the absence of stipulation to the contrary, the ownership of the
property sold passes to the vendee upon the actual or constructive delivery thereof.
[27]
The Deed of Absolute Sale, therefore,
supports private respondents right of material possession over the subject property.
The finding of the MeTC, sustained by the Court of Appeals, is that the continued occupation by petitioner of said property
after the sale, without payment of rent, was by mere tolerance. Private respondents claimed that petitioner requested for time to
vacate the premises and they agreed thereto because they did not need the property at that time. However, when private
respondents were asked to vacate their rented residence, they demanded that petitioner vacate the subject property, but
petitioner refused to do so. A person who occupies the land of another at the latters tolerance or permission, without any
contract between them, is bound by an implied promise that he will vacate the same upon demand, failing which a summary
action for ejectment is the proper remedy against him.
[28]

WHEREFORE, the assailed decision of the Court of Appeals, in CA-G.R. SP No. 38716, which reversed and set aside the
decision of the Regional Trial Court, and reinstated the decision of the Metropolitan Trial Court, is hereby AFFIRMED. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Carpio, JJ., concur.


SPOUSES EMMA H. VER REYES and RAMON
REYES,
Petitioners,


- versus -


DOMINADOR SALVADOR, SR., EMILIO
FUERTE, FELIZA LOZADA, ROSALINA
PADLAN, AURORA TOLENTINO, TRINIDAD L.
CASTILLO, ROSARIO BONDOC, MARIA Q.
CRISTOBAL and DULOS REALTY &
DEVELOPMENT CORPORATION, TRINIDAD
LOZADA, JOHN DOE and RICHARD DOE,
Respondents.

x- - - - - - - - - - - - - - - - - - - - - - x

MARIA Q. CRISTOBAL and DULOS REALTY &
DEVELOPMENT CORPORATION,
Petitioners,


- versus -


DOMINADOR SALVADOR, SR., EMILIO
G.R. No. 139047






















G.R. No. 139365


Present:

TINGA,
*
J.,
CHICO-NAZARIO,
Acting Chairperson,
VELASCO,
*

FUERTE, FELIZA LOZADA, TRINIDAD LOZADA,
ROSALINA PADLAN, AURORA TOLENTINO,
TRINIDAD L. CASTILLO, ROSARIO BONDOC,
SPOUSES EMMA H. VER REYES and RAMON
REYES,
Respondents.
NACHURA, and
REYES, JJ.




Promulgated:


September 11, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x


D E C I S I O N


CHICO-NAZARIO, J.:


The two Petitions for Review on Certiorari
[1]
now before this Court seek to challenge, under Rule 45 of the Rules of Court,
the Decision
[2]
dated 17 June 1999 of the Court of Appeals in CA-G.R. CV No. 35688, which reversed and set aside the
Decision
[3]
dated 25 November 1991 of the Regional Trial Court (RTC) of Pasay City, Branch 119, in the consolidated cases of LRC
Case No. LP-553-P (an application for registration of title to real property) and Civil Case No. 6914-P (an action to declare
ownership over real property, formerly numbered Pq-8557-P). The Court of Appeals upheld the title of Rosario Bondoc to the
disputed property, thus, overturning the finding of the RTC of Pasay City that Maria Q. Cristobal and Dulos Realty &
Development Corporation have a registrable title to the same property.

The Contracts

At the core of the controversy in the Petitions at bar is a parcel of unregistered land located in Tungtong, Las Pias,
formerly of the Province of Rizal, now a part of Metro Manila, designated as Lot 1 of Plan Psu-205035, with an area of 19,545
square meters (subject property). It previously formed part of a bigger parcel of agricultural land
[4]
first declared in the name of
Domingo Lozada (Domingo) in the year 1916 under Tax Declaration No. 2932.
[5]


During the lifetime of Domingo, he was married twice. From his first marriage to Hisberta Guevarra in the year
1873,
[6]
he fathered two children, namely Bernardo and Anatalia. After the death of Hisberta, Domingo married Graciana San
Jose in the year 1887
[7]
and their marriage produced two children, namely Nicomedes and Pablo.

Domingo and Graciana died on 27 February 1930 and 12 August 1941, respectively. On 18 March 1965, Nicomedes and
the heirs of his brother Pablo entered into anExtrajudicial Settlement of the Estate
[8]
of their parents Domingo and
Graciana. According to the settlement, the entire parcel of agricultural land declared in the name of Domingo
[9]
was divided into
two, Lot 1 and Lot 2, in accordance with the approved subdivision plan Psu-205035. The subject property, i.e., Lot 1, was
adjudicated to Nicomedes; while Lot 2 was given to the heirs of Pablo. Nicomedes then declared the subject property in his
name in 1965 under Tax Declaration No. 2050.
[10]


On 23 June 1965, Nicomedes executed a Deed of Conditional Sale
[11]
over the subject property in favor of Emma Ver
Reyes (Emma), which provided:

That the Vendor [Nicomedes] is the true and lawful owner of a parcel of land situated at Tungtong, Las
Pinas, Rizal, more particularly described as follows:

A parcel of land (Lot 1 of plan Psu-205035), x x x; containing an area of NINETEEN
THOUSAND FIVE HUNDRED FOURTY FIVE (19,545) SQUARE METERS, more or less, and still a
portion of the land covered by Tax Declaration No. 2304 of Las Pinas, Rizal, in the name of
Domingo Lozada, and with a total assessed value of P1,860.00.

That the [subject property] is a paraphernal property of the Vendor [Nicomedes], the same having
been inherited by him from his deceased mother, Graciana San Jose, but was declared for taxation in the name
of his deceased father, Domingo Lozada;

That for and in consideration of the sum of FOUR PESOS AND FIFTY CENTAVOS (P4.50), Philippine
Currency, per square meter to be paid by the Vendee to the Vendor, the said Vendor by these presents
hereby SELLS, CEDES, TRANSFERS and CONVEYS by way of CONDITIONAL SALE the above-described parcel
of land together with all the improvements thereon to the said Vendee [Emma], her heirs, assigns and
successors, free from all liens and encumbrances, under the following terms and conditions, to wit:

1. That the Vendee [Emma] will pay the Vendor [Nicomedes] as follows:

(a). TWENTY FIVE PERCENT (25%) of the total price on the date of the signing
of this contract;

(b). The next TWENTY FIVE PERCENT (25%) of the total price upon the issuance
of the title for the land described above; and

(c). The balance of FIFTY PERCENT (50%) of the total price within one (1) year from the
issuance of the said title;

2. That if the Vendee [Emma] fails to pay the Vendor [Nicomedes] the sums stated in
paragraphs 1(b) and 1(c) above within the period stipulated and after the grace period of one (1)
month for each payment, this contract shall automatically be null and void and of no
effect without the necessity of any demand, notice or filing the necessary action in court, andthe
Vendor [Nicomedes] shall have the full and exclusive right to sell, transfer and convey absolutely
the above-described property to any person, but the said Vendor [Nicomedes] shall return to the
Vendee [Emma] all the amount paid to him by reason of this contract without any interest upon
the sale of the said property to another person;

3. That the total price shall be subject to adjustment in accordance with the total area of the
above-described property that will be finally decreed by the court in favor of the herein Vendor
[Nicomedes]; and

4. That the Vendor [Nicomedes] will execute a final deed of absolute sale covering the
said property in favor of the Vendee [Emma] upon the full payment of the total consideration in
accordance with the stipulations above. (Emphases ours.)


The Deed of Conditional Sale was registered in the Registry of Property for Unregistered Lands in August 1965.
[12]


It would appear from the records of the case that Emma was only able to pay the first installment of the total purchase
price agreed upon by the parties. Furthermore, as will be discussed later on, Nicomedes did not succeed in his attempt to have
any title to the subject property issued in his name.

On 14 June 1968, Nicomedes entered into another contract involving the subject property with Rosario D. Bondoc
(Rosario). Designated as an Agreement of Purchase and Sale,
[13]
the significant portions thereof states:

NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of ONE
HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00) Philippine Currency, which the
BUYER [Rosario] shall pay to the SELLER [Nicomedes] in the manner and form hereinafter specified, the SELLER
[Nicomedes] by these presents hereby agreed and contracted to sell all his rights, interests, title and
ownership over the parcel of land x x x unto the BUYER [Rosario], who hereby agrees and binds herself
to purchase from the former, the aforesaid parcel of land, subject to the following terms and conditions:

1. Upon the execution of this Agreement, the BUYER [Rosario] shall pay the SELLER [Nicomedes], the
sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency.

2. [That] upon the delivery by the SELLER [Nicomedes] to the BUYER [Rosario] of a valid title of the
aforesaid parcel of land, free from any and all liens and encumbrances, and the execution of the final Deed of
Sale, the BUYER [Rosario] shall pay to the SELLER [Nicomedes], the sum of THIRTY SEVEN THOUSAND SEVEN
HUNDRED FIVE PESOS (P37,705.00) Philippine Currency, and the final balance of ONE HUNDRED TWENTY
THREE THOUSAND AND TWO HUNDRED PESOS (P123,200.00) Philippine Currency, one year from the date of
execution of the final deed of sale, all without interest.

3. That in the event the BUYER [Rosario] fails to pay any amount as specified in Section 2,
Paragraph II, then this contract, shall, by the mere fact of non-payment expire itself and shall be
considered automatically cancelled, of no value and effect, and immediately thereafter the SELLER
[Nicomedes] shall return to the BUYER [Rosario] the sums of money he had received from the BUYER [Rosario]
without any interests and whatever improvement or improvements made or introduced by the BUYER
[Rosario] on the lot being sold shall accrue to the ownership and possession of the SELLER [Nicomedes].

x x x x

6. The SELLER [Nicomedes] hereby warrants the useful and peaceful possession and occupation of
the lot subject matter of this agreement by the BUYER [Rosario]. (Emphasis ours.)


On 7 March 1969, Nicomedes and Rosario executed a Joint Affidavit,
[14]
whereby they confirmed the sale of the
subject property by Nicomedes to Rosario through the Agreement of Purchase and Sale dated 14 June 1968. They likewise
agreed to have the said Agreement registered with the Registry of Deeds in accordance with the provisions of Section 194 of
the Revised Administrative Code, as amended by Act No. 3344. The Agreement of Purchase and Sale was thus registered on
10 March 1969.
[15]


The records of this case show that, of the entire consideration stipulated upon in the Agreement, only the first
installment was paid by Rosario. No title to the subject property was ever delivered to her since, at the time of the execution
of the above contract, Nicomedess application for the registration of the subject property was still pending.

Five months thereafter, Nicomedes executed on 10 August 1969 a third contract, a Deed of Absolute Sale of
Unregistered Land,
[16]
involving a portion of the subject property measuring 2,000 square meters, in favor of Maria Q.
Cristobal (Maria).
[17]
The relevant terms of the Deed recite:

THAT I, NICOMEDES J. LOZADA, of legal age, Filipino citizen, married and a resident of Las Pias, Rizal,
Philippines, for and in consideration of the sum of TWENTY FIVE THOUSAND (P25,000.00) PESOS, Philippine
currency, receipt of which is hereby acknowledged to my full and entire satisfaction, do hereby sell, transfer
and convey to MARIA Q. CRISTOBAL, likewise of legal age, Filipino citizen, married to Juan [Dulos], and a
resident of 114 Real Street, Las Pias, Rizal, Philippines, her heirs, executors, administrators and assigns, TWO
THOUSAND SQUARE METERS (2,000) for an easement of way of a parcel of unregistered land situated in
the Barrio of Tungtong, Municipality of Las Pias, Province of Rizal, Philippines, exclusively belonging to and
possessed by me, and more particularly described as follows:

A parcel of land described under Tax Declaration No. 9575 (Lot No. 1, Psu
205035), situated in the Barrio of Tuntong, Municipality of Las Pias, Province of Rizal,
Philippines. xxx [C]ontaining an area of 1.9545 hectares, more or less. (Emphasis ours.)


Nicomedes passed away on 29 June 1972. The Deed of Absolute Sale of Unregistered Land between Nicomedes and
Maria was registered only on 8 February 1973,
[18]
or more than seven months after the formers death.
On 10 August 1979, Nicomedess heirs, namely, the four children from his first marriage,
[19]
the six children from his second
marriage,
[20]
and his surviving second spouse Genoveva Pallera Vda. De Lozada, executed a Deed of Extrajudicial Settlement of
the Estate of the Late Nicomedes J. Lozada with Ratification of a Certain Deed of Absolute Sale of Unregistered
Land.
[21]
The heirs declared in said Deed of Extrajudicial Settlement that the only property left by Nicomedes upon his death was
the subject property. They also ratified therein the prior sale of a portion of the subject property made by Nicomedes in favor of
Maria, but they clarified that the actual area of the portion sold as presented in the plan was 2,287 square meters, not 2,000
square meters. After excluding the portion sold to Maria, the heirs claimed equal pro indiviso shares in the remaining 17,258
square meters of the subject property.

On 30 July 1980, Nicomedess heirs
[22]
collectively sold, for the sum of P414,192.00, their shares in the subject property in
favor of Dulos Realty and Development Corporation (Dulos Realty), as represented by its President Juan B. Dulos, via a Deed of
Absolute Sale of an Unregistered Land.
[23]
The said Deed of Absolute Sale dated 30 July 1980, however, was not registered.

The Cases

On 11 April 1966, after executing the Deed of Conditional Sale in favor of Emma on 23 June 1965, Nicomedes filed an
application for the registration of the subject property with the then Court of First Instance (CFI) of Pasig, docketed as LRC Case
No. N-6577. The grandchildren of Domingo by his former marriage
[24]
opposed the application for registration and Emma and
her husband Ramon filed their intervention.

Sometime in 1973, following the execution in her favor of the Agreement of Purchase and Sale dated 14 June 1968 and
Joint Affidavit dated 7 March 1969, Rosario filed a motion to intervene in LRC Case No. N-6577 then pending before the CFI of
Pasig; however, her motion was denied by the CFI of Pasig, in an Order dated 2 June 1973.
[25]
Rosario no longer appealed from
the order denying her motion to intervene in said case.

In view of the conflicting claims over the subject property, the CFI of Pasig dismissed without prejudice LRC Case No. N-
6577 on 21 November 1975 and ordered the parties therein, namely, the applicant Nicomedes and the oppositors/intervenors, to
litigate first the issues of ownership and possession.
[26]


Five years later, on 27 June 1980, Domingos grandchildren from his first marriage, Dominador, et al.,
[27]
filed an
Application for Registration
[28]
of title to the subject property with the CFI of Rizal, docketed as LRC Case No. LP-553-P. In their
Application, Dominador, et al., alleged, inter alia, that they were the owners of the subject property by virtue of inheritance; they
were the actual occupants of the said property; and, other than Emma, they had no knowledge of any encumbrance or claim of
title affecting the same.

On 6 November 1980, Rosario, assisted by her husband Mariano Bondoc, invoking the Agreement of Purchase and Sale
executed in her favor by Nicomedes on 14 June 1968, filed a Complaint
[29]
before the CFI of Rizal for the declaration in her favor
of ownership over the subject property, with an application for a temporary restraining order or preliminary injunction, against
Trinidad Lozada (one of Domingos heirs from his first marriage who applied for registration of the subject property in LRC Case
No. LP-553-P)and two other persons, who allegedly trespassed into the subject property. Rosarios complaint was docketed
as Civil Case No. Pq-8557-P.

On 4 August 1981, the parties agreed to have LRC Case No. LP-553-P (the application for land registration of
Dominador, et al.) consolidated with Civil Case No. Pq-8557-P (the action for declaration of ownership of Rosario).
[30]


By subsequent events,
[31]
and in consideration of the location of the subject property in Las Pias, LRC Case No. LP-553-P
and Civil Case No. Pq-8557-P, reinstated asCivil Case No. 6914-P, were finally transferred to and decided by the RTC of Pasay
City.

In its Decision dated 25 November 1991, the RTC of Pasay City, Branch 119, disposed of the cases thus:

WHEREFORE, considering all the foregoing, the court denies the application of Dominador Salvador, Sr.
et al, having no more right over the land applied for, dismisses Civil Case No. Pq-8557-P now 6914 for lack of
merit, and hereby declares Maria Cristobal Dulos and Dulos Realty and Development Corporation to have a
registrable title, confirming title and decreeing the registration of Lot 1 PSU-205035 containing a total area of
19,545 square meters, 2,287 square meters of which appertains to Maria Cristobal Dulos married to Juan Dulos
and the remaining portion, in favor of Dulos Realty and Development Corporation, without pronouncement as
to costs.
[32]
(Emphasis ours.)


In so ruling, the RTC rationalized that the subject property constituted Domingos share in the conjugal properties of his
second marriage to Graciana San Jose and, therefore, properly pertained to Nicomedes as one of his sons in said
marriage. Being Domingos heirs from his first marriage, Dominador, et al., were not entitled to the subject property.

The lower court also found that neither Emma nor Rosario acquired a better title to the subject property as against Maria
and Dulos Realty. No final deed of sale over the subject property was executed in favor of Emma or Rosario, while the sales of
portions of the same property in favor of Maria and of the rest to Dulos Realty were fully consummated as evidenced by the
absolute deeds of sale dated 10 August 1969 and 30 July 1980, respectively.

Dominador, et al., Emma and her spouse Ramon Reyes (Ramon), and Rosario separately appealed to the Court of Appeals
the foregoing Decision dated 25 November 1991 of the RTC of Pasay City.
[33]
Their consolidated appeals were docketed as CA-
G.R. CV No. 35688.

Dominador, et al., however, moved to withdraw their appeal in light of the amicable settlement they entered into with
Maria and Dulos Realty.
[34]
In a Resolution dated 24 September 1992,
[35]
the Court of Appeals granted their Motion to Withdraw
Appeal. Dominador, et al., later filed a motion to withdraw their earlier Motion to Withdraw Appeal, but this was denied by the
Court of Appeals in a Resolution dated 15 January 1993.
[36]


In their respective Briefs before the appellate court,
[37]
Emma and Rosario both faulted the RTC of Pasay City for awarding
the subject property to Maria and Dulos Realty. They each claimed entitlement to the subject property and asserted the
superiority of their respective contracts as against those of the others.

On 17 June 1999, the Court of Appeals rendered its assailed Decision, ruling as follows:

As gathered above, both contracts [entered into with Emma and Rosario] gave Nicomedes, as vendor,
the right to unilaterally rescind the contract the moment the buyer failed to pay within a fixed period (Pingol v.
CA, 226 SCRA 118), after which he, as vendor, was obliged to return without interest the sums of money he had
received from the buyer (under the Deed of Conditional Sale [to Emma], upon the sale of the property to
another). Additionally, under the Agreement of Purchase and Sale [with Rosario], the vendor, in case of
rescission, would become the owner and entitled to the possession of whatever improvements introduced by
the buyer.

Under the Deed of Conditional Sale [to Emma], there was no provision that possession would be, in case
of rescission, returned to the vendor, thereby implying that possession remained with him (vendor). Such being
the case, it appears to be a contract to sell. Whereas under the Agreement of Purchase and Sale [with Rosario],
the provision that in case of rescission, any improvements introduced by the vendee would become the
vendors implies that possession was transferred to the vendee and, therefore, it appears to be a contract of
sale.

That the Agreement of Purchase and Sale [with Rosario] was a contract of sale gains light from the Joint
Affidavit subsequently executed by Rosario and Nicomedes stating that an Agreement of Purchase and Sale
wherein the former (Nicomedes J. Lozada) sold to the latter (Rosario D. Bondoc) a parcel of land had been
executed but that the lot not having been registered under Act No. 496 nor under the Spanish Mortgage Law,
the parties hereto have agreed to register the Agreement of Purchase and Sale ... under the provision of Section
194 of the Revised Administrative Code, as amended by Act No. 3344.

Rosario registered the Agreement of Purchase and Sale alright on March 10, 1969. She paid taxes on
the lot from 1980 1985. She fenced the lot with concrete and hollow blocks. And apart from opposing the
land registration case, she filed a complaint against Trinidad, et al., for declaration ownership.

Article 1371 of the Civil Code provides:

Art. 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.


From the provisions of the Agreement of Purchase and Sale [to Rosario] and the subsequent acts of the
parties then including the execution of the Joint Affidavit by Rosario and Nicomedes stating that an
Agreement of Purchase and Sale wherein the former (Nicomedes...) sold to the latter (Rosario...) a parcel of
land, had been executed, there is no mistaking that the lot was sold to Rosario xxx.

Anent the effect of Rosarios registration of the Agreement of Purchase and Sale on Emmas contract
involving the same lot, Act No. 3344 (Amending Sec. 194 of the Administrative Code [Recording of instruments
or deeds relating to real estate not registered under Act No. 496 or under the Spanish Mortgage Law]) provides
that any registration made under Sec. 194 of the Administrative Code shall be understood to be without
prejudice to a third party who has a better right.

Better right, however, was not defined by law.

But author Narciso Pea is inclined to concur that better right should refer to a right which must have
been acquired by a third party independently of the unregistered deed, such as, for instance, title by
prescription, and that it has no reference to rights acquired under that unregistered deed itself, he citing Nisce
v. Milo, G.R. No. 425016, January 17, 1936 Unrep. 62 Phil. 976 x x x.

Given the fact that the contract in Emmas favor is a mere contract to sell, as against Rosarios contract
which, as demonstrated above is one of sale and, in any event, independently of Emmas contract to sell, she
has no claim of a better right unlike Rosario who has, not to mention the fact that she (Rosario) registered her
contract earlier than Emmas, Rosario must prevail.

The lot having been previously sold to Rosario, there was no lot or portion thereof to be later sold to
Maria and to Dulos Realty in 1979 and 1980, respectively.

WHEREFORE, the appealed Joint Decision is hereby REVERSED and SET ASIDE and another is rendered
confirming the title of Rosario D. Bondoc over subject lot, Lot 1, PSU-205035 containing an area of 19,545
sq.m., ordering its registration in her name, and dismissing the claims of ownership of all other
claimants. Appellees Maria Cristobal and Dulos Realty and Development Corporation and all other claimants to
subject land including all persons claiming under them are hereby ordered to vacate and restore possession to
appellant Rosario D. Bondoc.

Upon issuance of title to subject lot, appellant Rosario D. Bondoc is ordered to pay the balance of the
purchase price to the heirs of Nicomedes Lozada in accordance with the Agreement of Purchase and Sale
executed by the latter in her favor. This judgment is without prejudice to the rights which Emma Ver Reyes and
Maria Cristobal and Dulos Realty and Development Corporation might have against the estate or surviving heirs
of Nicomedes Lozada to the extent that the latter was/were benefited.
[38]
(Emphasis ours.)


Aggrieved, Emma and her husband Ramon,
[39]
as well as Maria and Dulos Realty,
[40]
without seeking reconsideration of
the appellate courts decision, filed directly before this Court separate Petitions for Review on Certiorari under Rule 45 of the
Rules of Court, docketed as G.R. No. 139047 and G.R. No. 139365, respectively, assailing the17 June 1999 Decision of the
appellate court. Upon the manifestation and motion of Maria and Dulos Realty,
[41]
the two Petitions were ordered consolidated
by this Court in a Resolution
[42]
dated 13 December 1999.

In their Petition, Emma and her husband Ramon raise the following issues:

I.

WHETHER OR NOT OWNERSHIP OF THE DISPUTED LOT WAS VALIDLY AND LEGALLY TRANSFERRED TO EMMA
VER REYES.

II.

WHETHER OR NOT MARIA CRISTOBAL DULOS AND DULOS REALTY AND DEVELOPMENT CORPORATION ARE
PURCHASERS IN BAD FAITH.

III.

WHETHER OR NOT EMMA VER REYES AND RAMON REYES ARE BARRED BY PRESCRIPTION OR LACHES.

IV.

WHETHER OR NOT THE COURT OF APPEALS PATENTLY AND GRAVELY ERRED IN CONFIRMING THE TITLE OF
ROSARIO BONDOC OVER THE DISPUTED LOT, ORDERING ITS REGISTRATION IN HER NAME AND DISMISSING
THE CLAIM OF EMMA VER REYES AND RAMON REYES.
[43]



Maria and Dulos Realty, on the other hand, submitted in their Petition the following issues for consideration of this Court:



I.

WHETHER OR NOT BONDOCS AGREEMENT OF PURCHASE AND SALE AND SPOUSES REYES DEED OF
CONDITIONAL SALE ARE REGISTRABLE ABSOLUTE CONVEYANCES IN FEE SIMPLE TO SERVE AS BASIS FOR AN
AWARD AND REGISTRATION OF THE SUBJECT LOT IN THEIR FAVOR.

II.

WHETHER OR NOT RESPONDENTS BONDOC AND THE REYESES ARE BARRED BY LACHES AND/OR
PRESCRIPTION.

III.

WHETHER OR NOT RESPONDENT BONDOC IS BARRED BY RES JUDICATA.
[44]



The fundamental issue that the Court is called upon to resolve is, in consideration of all the contracts executed by
Nicomedes and/or his heirs involving the subject property, which party acquired valid and registrable title to the same.

Emma and Ramon contend that although the subject property was conditionally sold to them by Nicomedes, the
conditionality of the sale did not suspend the transfer of ownership over the subject property from Nicomedes to Emma. Even
though Nicomedes may automatically rescind the contract in case of non-payment by Emma of the balance of the purchase
price, it did not bar the transfer of title to the subject property to Emma in the meantime. Emma and Reyes likewise claim that
there was constructive delivery of the subject property to Emma, inasmuch as the Deed of Conditional Sale in her favor was a
public instrument. Furthermore, Emma was in possession of the subject property in the concept of owner since she had been
paying realty taxes for the same, albeit in the name of Nicomedes (in whose name it was declared), from the time of the sale in
1965 until 1972. Emma and Ramon also assert that Maria and Dulos Realty were in bad faith as the sales of the subject property
in their favor, on 10 August 1969 and 30 July 1980, respectively, occurred only after the filing of the cases involving the
property
[45]
and the registration of the sale to Emma. Finally, Emma and Ramon maintain that the Court of Appeals erred in
ruling that the contract in favor of Rosario was a contract of sale for the sole reason that actual possession of the property was
already transferred to the latter.

For their part, Maria and Dulos Realty point out that Emma and Rosario are not holders of absolute deeds of conveyances
over the subject property, which would have entitled them to register the same in their respective names. They further buttress
their alleged superior right to the subject property based on the execution of two notarized documents of sale in their favor,
which constituted symbolic and constructive delivery of the subject property to them. Maria and Dulos Realty likewise assert that
the claims of Emma and Rosario are already barred by laches and prescription because they only decided to enforce their
respective rights over the subject property after Domingos heirs filed with the CFI of Rizal on 27 June 1980 an appli cation for
registration of the subject property, docketed as LRC Case No. LP-553-P, notwithstanding their knowledge of Nicomedess death
on 29 June 1972. Lastly, Maria and Dulos Realty aver that Rosario is already barred by res judicata since her motion to intervene
in LRC Case No. 6577, the case instituted by Nicomedes to register the subject property, was denied by the CFI of Pasig. The
dismissal of Rosarios motion to intervene in the case for registration of the subject property already became final and executory,
thus, barring Rosario from pursuing her claim over the same.



This Courts Ruling

After a conscientious review of the arguments and evidence presented by the parties, the Court finds that the Deed of
Conditional Sale between Nicomedes and Emma and the Agreement of Purchase and Sale between Nicomedes and Rosario were
both mere contracts to sell and did not transfer ownership or title to either of the buyers in light of their failure to fully pay for
the purchase price of the subject property.

In Coronel v. Court of Appeals,
[46]
this Court effectively provided the guidelines for differentiating between a contract to
sell and a contract of sale, to wit:

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a
price certain in money or its equivalent.

Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
essential elements of a contract of sale are the following:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.

Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first
essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to
the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of
the property subject of the contract to sell until the happening of an event, which for present purposes we shall
take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his
promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other
words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without
further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to
rule:

Hence, We hold that the contract between the petitioner and the respondent was a
contract to sell where the ownership or title is retained by the seller and is not to pass until the
full payment of the price, such payment being a positive suspensive condition and failure of
which is not a breach, casual or serious, but simply an event that prevented the obligation of the
vendor to convey title from acquiring binding force.

Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, the prospective 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 which states:

Art. 1479. A promise to buy and sell a determinate thing for a price certain is
reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain
is binding upon the promissor if the promise is supported by a consideration distinct from the
price.

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of
sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of consent is present, although
it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive
condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing
Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous delivery of the property
subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of
law without any further act having to be performed by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale. (Emphases ours.)


Also in Coronel v. Court of Appeals, the Court highlighted the importance of making the distinction between a contract
to sell and a contract of sale:

It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases
where the subject property is sold by the owner not to the party the seller contracted with, but to a third person,
as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying
such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price,
for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of
reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the
buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may
be sued for damages by the intending buyer.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous
delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the
buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of
the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such
defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a
registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the
second buyer, the first buyer may seek reconveyance of the property subject of the sale.
[47]


Even in the absence of an express stipulation to such effect, the intention of the parties to execute a contract to sell may
be implied from the provisions of the contract. While Article 1478
[48]
of the Civil Code recognizes the right of the parties to agree
that the ownership of the thing shall not pass to the purchaser until he has fully paid the price therefore, the same statutory
provision does not require that such be expressly stipulated in the contract.

In Adelfa Properties, Inc. v. Court of Appeals,
[49]
the Court ruled that since the contract between the parties therein did
not contain a stipulation on reversion or reconveyance of the property to the seller in the event that the buyer did not comply
with its obligation, it may legally be inferred that the parties never intended to transfer ownership to the buyer prior to the
completion of the payment of the purchase price. Consequently, the contract involved in the aforementioned case was a mere
contract to sell.

An agreement is also considered a contract to sell if there is a stipulation therein giving the vendor the rights to
unilaterally rescind the contract the moment the vendee fails to pay within a fixed period and to consequently open the subject
property anew to purchase offers.
[50]
In the same vein, where the seller promises to execute a deed of absolute sale upon the
completion by the buyer of the payment of the price, the contract is only a contract to sell.
[51]


Viewed in light of the foregoing pronouncements, the Deed of Conditional Sale executed by Nicomedes in favor of Emma
on 23 June 1965 is unmistakably a mere contract to sell. The Court looks beyond the title of said document, since the
denomination or title given by the parties in their contract is not conclusive of the nature of its contents.
[52]
In the construction or
interpretation of an instrument, the intention of the parties is primordial and is to be pursued.
[53]
If the terms of the contract are
clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the
words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.
[54]


A simple reading of the terms of the 23 June 1965 Deed of Conditional Sale readily discloses that it contains stipulations
characteristic of a contract to sell. It provides for the automatic cancellation of the contract should Emma fail to pay the
purchase price as required therein; and, in such an event, it grants Nicomedes the exclusive right to thereafter sell the subject
property to a third person. As in Adelfa Properties, the contract between Nicomedes and Emma does not provide for reversion
or reconveyance of the subject property to Nicomedes in the event of nonpayment by Emma of the purchase price. More
importantly, the Deed in question clearly states that Nicomedes will issue a final deed of absolute sale only upon the full
payment of the purchase price for the subject property. Taken together, the terms of the Deeds reveal the evident intention of
the parties to reserve ownership over the subject property to Nicomedes pending payment by Emma of the full purchase price
for the same.

While the Deed of Conditional Sale dated 23 June 1965 was indeed contained in a public instrument, it did not constitute
constructive delivery of the subject property to Emma in view of the contrary inference in the Deed itself that the ownership over
the subject property was reserved by Nicomedes.
[55]
Moreover, other than her claim that she paid the realty taxes on the subject
property, Emma did not present any evidence that she took actual and physical possession of the subject property at any given
time.

This Court also finds that, contrary to the ruling of the Court of Appeals, the Agreement of Purchase and Sale executed by
Nicomedes in favor of Rosario on 14 June 1968 is likewise a mere contract to sell.

The Agreement itself categorically states that Nicomedes only undertakes to sell the subject property to Rosario upon
the payment of the stipulated purchase price and that an absolute deed of sale is yet to be executed between the parties. Thus:

NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of ONE
HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00) Philippine Currency, which the
BUYER shall pay to the SELLER in the manner and form hereinafter specified, the SELLER by these presents
hereby agreed and contracted to sell all his rights, interests, title and ownership over the parcel of land
xxx unto the BUYER, who hereby agrees and binds herself to purchase from the former, the aforesaid
parcel of land, subject to the following terms and conditions:

1. Upon the execution of this Agreement, the BUYER shall pay the SELLER, the sum of FIFTEEN
THOUSAND PESOS (P15,000.00), Philippine Currency.

2. That upon the delivery by the SELLER to the BUYER of a valid title of the aforesaid parcel of land,
free from any and all liens and encumbrances, and the execution of the final Deed of Sale, the BUYER shall
pay to the SELLER, the sum of THIRTY SEVEN THOUSAND SEVEN HUNDRED FIVE PESOS (P37,705.00) Philippine
Currency, and the final balance of ONE HUNDRED TWENTY THREE THOUSAND AND TWO HUNDRED PESOS
(P123,200.00) Philippine Currency, one year from the date of the execution of the final deed of sale, all without
interest.
[56]
(Emphases ours.)


The Agreement additionally grants Nicomedes the right to automatically cancel the same in the event of nonpayment
by Rosario of any of the specified sums therein and any improvement introduced in the subject property shall thereby accrue to
Nicomedes, viz:

3. That in the event the BUYER fails to pay any amount as specified in Section 2, Paragraph II, then
this contract, shall, by the mere fact of non-payment expire itself and shall be considered automatically
cancelled, of no value and effect, and immediately thereafter the SELLER shall return to the buyer the sums of
money he had received from the BUYER without any interests and whatever improvement or improvements
made or introduced by the BUYER on the lot being sold shall accrue to the ownership and possession of
the SELLER.
[57]



As can be clearly read above, only the rights to possess the property and construct improvements thereon have been
evidently given to Rosario. The provisions of the Agreement do not in any way indicate that the ownership of the subject
property has likewise been transferred to Rosario. That Nicomedes shall appropriate the improvements as his own should
Rosario default in her payment of the purchase price only further supports the conclusion that title to the subject property itself
still remained with Nicomedes.

The Court concludes that the Deed of Conditional Sale in favor of Emma and the Agreement of Purchase and Sale in favor
of Rosario were mere contracts to sell. As both contracts remained unperfected by reason of the non-compliance with
conditions thereof by all of the parties thereto, Nicomedes can still validly convey the subject property to another buyer. This
fact, however, is without prejudice to the rights of Emma and Rosario to seek relief by way of damages against the estate and
heirs of Nicomedes to the extent that the latter were benefited by the sale to succeeding buyers.
[58]


Thus, the Deeds of Absolute Sale in favor of Maria and Dulos Realty were the only conveyances of the subject property in
this case that can be the source of a valid and registrable title. Both contracts were designated as absolute sales and the
provisions thereof leave no doubt that the same were true contracts of sale. The total considerations for the respective portions
of the subject property were fully paid by the buyers and no conditions whatsoever were stipulated upon by the parties as
regards the transmission of the ownership of the said property to the said buyers.

The fact that Rosario was the first among the parties to register her contract in the Registry of Property for Unregistered
Lands on 10 March 1969 is of no moment.

Act No. 3344,
[59]
which amended Section 194 of the Administrative Code, enunciates that any registration made under
Section 194 of the Administrative Code shall be understood to be without prejudice to a third party who has a better right.

In this case, Maria and Dulos Realty acquired their title to the property in separate deeds of absolute sale executed in their
favor by Nicomedes and his heirs. Upon the execution of these deeds, the ownership of the subject property was vested unto
the said buyers instantly, unlike the contracts to sell executed in favor of Emma and Rosario. Consequently, the rights to the
subject property of Maria and Dulos Realty, acquired through the contracts of sale in their favor, are undeniably better or
superior to those of Emma or Rosario, and can thus be confirmed by registration.

In sum, this Court recognizes the valid and registrable rights of Maria and Dulos Realty to the subject property, but without
prejudice to the rights of Emma and Rosario to seek damages against the estate and heirs of Nicomedes.

WHEREFORE, premises considered, the Petition in G.R. No. 139047 is DENIED, while the Petition in G.R. No. 139365
is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 35688 dated 17 June 1999 is SET ASIDE and the
Decision dated 25 November 1991 of the Regional Trial Court of Pasay City, Branch 119, is REINSTATED. No costs.

SO ORDERED.

G.R. No. 168325 December 8, 2010
ROBERTO D. TUAZON, Petitioner,
vs.
LOURDES Q. DEL ROSARIO-SUAREZ, CATALINA R. SUAREZ-DE LEON, WILFREDO DE LEON, MIGUEL LUIS S. DE LEON,
ROMMEL LEE S. DE LEON, and GUILLERMA L. SANDICO-SILVA, as attorney-in-fact of the defendants, except Lourdes Q.
Del Rosario-Suarez, Respondents.
D E C I S I O N
DEL CASTILLO, J.:
In a situation where the lessor makes an offer to sell to the lessee a certain property at a fixed price within a certain period, and
the lessee fails to accept the offer or to purchase on time, then the lessee loses his right to buy the property and the owner can
validly offer it to another.
This Petition for Review on Certiorari
1
assails the Decision
2
dated May 30, 2005 of the Court of Appeals (CA) in CA-G.R. CV No.
78870, which affirmed the Decision
3
dated November 18, 2002 of the Regional Trial Court (RTC), Branch 101, Quezon City in Civil
Case No. Q-00-42338.
Factual Antecedents
Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a parcel of land, containing more or less an area of 1,211
square meters located along Tandang Sora Street, Barangay Old Balara, Quezon City and previously covered by Transfer
Certificate of Title (TCT) No. RT-56118
4
issued by the Registry of Deeds of Quezon City.
On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes executed a Contract of Lease
5
over the abovementioned
parcel of land for a period of three years. The lease commenced in March 1994 and ended in February 1997. During the
effectivity of the lease, Lourdes sent a letter
6
dated January 2, 1995 to Roberto where she offered to sell to the latter subject
parcel of land. She pegged the price at P37,541,000.00 and gave him two years from January 2, 1995 to decide on the said offer.
On June 19, 1997, or more than four months after the expiration of the Contract of Lease, Lourdes sold subject parcel of land to
her only child, Catalina Suarez-De Leon, her son-in-law Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and
Rommel S. De Leon (the De Leons), for a total consideration of onlyP2,750,000.00 as evidenced by a Deed of Absolute
Sale
7
executed by the parties. TCT No. 177986
8
was then issued by the Registry of Deeds of Quezon City in the name of the De
Leons.
The new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the premises. Roberto refused
hence, the De Leons filed a complaint for Unlawful Detainer before the Metropolitan Trial Court (MeTC) of Quezon City against
him. On August 30, 2000, the MeTC rendered a Decision
9
ordering Roberto to vacate the property for non-payment of rentals
and expiration of the contract.
Ruling of the Regional Trial Court
On November 8, 2000, while the ejectment case was on appeal, Roberto filed with the RTC of Quezon City a Complaint
10
for
Annulment of Deed of Absolute Sale, Reconveyance, Damages and Application for Preliminary Injunction against Lourdes and
the De Leons. On November 13, 2000, Roberto filed a Notice of Lis Pendens
11
with the Registry of Deeds of Quezon City.
On January 8, 2001, respondents filed An Answer with Counterclaim
12
praying that the Complaint be dismissed for lack of cause
of action. They claimed that the filing of such case was a mere leverage of Roberto against them because of the favorable
Decision issued by the MeTC in the ejectment case.
On September 17, 2001, the RTC issued an Order
13
declaring Lourdes and the De Leons in default for their failure to appear
before the court for the second time despite notice. Upon a Motion for Reconsideration,
14
the trial court in an Order
15
dated
October 19, 2001 set aside its Order of default.
After trial, the court a quo rendered a Decision declaring the Deed of Absolute Sale made by Lourdes in favor of the De Leons as
valid and binding. The offer made by Lourdes to Roberto did not ripen into a contract to sell because the price offered by the
former was not acceptable to the latter. The offer made by Lourdes is no longer binding and effective at the time she decided to
sell the subject lot to the De Leons because the same was not accepted by Roberto. Thus, in a Decision dated November 18,
2002, the trial court dismissed the complaint. Its dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled Complaint for lack of merit, and
ordering the Plaintiff to pay the Defendants, the following:
1. the amount of P30,000.00 as moral damages;
2. the amount of P30,000.00 as exemplary damages;
3. the amount of P30,000.00 as attorneys fees; and
4. cost of the litigation.
SO ORDERED.
16

Ruling of the Court of Appeals
On May 30, 2005, the CA issued its Decision dismissing Robertos appeal and affirming the Decision of the RTC.
Hence, this Petition for Review on Certiorari filed by Roberto advancing the following arguments:
I.
The Trial Court and the Court of Appeals had decided that the "Right of First Refusal" exists only within the parameters of an
"Option to Buy", and did not exist when the property was sold later to a third person, under favorable terms and conditions
which the former buyer can meet.
II.
What is the status or sanctions of an appellee in the Court of Appeals who has not filed or failed to file an appellees brief?
17

Petitioners Arguments
Roberto claims that Lourdes violated his right to buy subject property under
the principle of "right of first refusal" by not giving him "notice" and the opportunity to buy the property under the same terms
and conditions or specifically based on the much lower price paid by the De Leons.
Roberto further contends that he is enforcing his "right of first refusal" based on Equatorial Realty Development, Inc. v. Mayfair
Theater, Inc.
18
which is the leading case on the "right of first refusal."
Respondents Arguments
On the other hand, respondents posit that this case is not covered by the principle of "right of first refusal" but an unaccepted
unilateral promise to sell or, at best, a contract of option which was not perfected. The letter of Lourdes to Roberto clearly
embodies an option contract as it grants the latter only two years to exercise the option to buy the subject property at a price
certain of P37,541,000.00. As an option contract, the said letter would have been binding upon Lourdes without need of any
consideration, had Roberto accepted the offer. But in this case there was no acceptance made neither was there a distinct
consideration for the option contract.
Our Ruling
The petition is without merit.
This case involves an option contract and not a contract of a right of first refusal
In Beaumont v. Prieto,
19
the nature of an option contract is explained thus:
In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:
A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from, or
selling to, B certain securities or properties within a limited time at a specified price. (Story vs. Salamon, 71 N. Y., 420.)
From Vol. 6, page 5001, of the work "Words and Phrases," citing the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St.
Rep., 17) the following quotation has been taken:
An agreement in writing to give a person the option to purchase lands within a given time at a named price is neither a sale nor
an agreement to sell. It is simply a contract by which the owner of property agrees with another person that he shall have
the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it;
but he does sell something; that is, the right or privilege to buy at the election or option of the other party. The second party
gets in praesenti, not lands, nor an agreement that he shall have lands, but he does get something of value; that is, the right to
call for and receive lands if he elects. The owner parts with his right to sell his lands, except to the second party, for a limited
period. The second party receives this right, or rather, from his point of view, he receives the right to elect to buy.
But the two definitions above cited refer to the contract of option, or, what amounts to the same thing, to the case where there
was cause or consideration for the obligation x x x. (Emphasis supplied.)
On the other hand, in Ang Yu Asuncion v. Court of Appeals,
20
an elucidation on the "right of first refusal" was made thus:
In the law on sales, the so-called right of first refusal is an innovative juridical relation. Needless to point out, it cannot be
deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its
normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or
possibly of an offer under Article 1319 of the same Code. An option or an offer would require, among other things,

a clear
certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the
object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's
eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of
preparatory juridical relations governed not by contracts (since the essential elements to establish thevinculum juris would still
be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil
Code on human conduct.
Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction
an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of
contracts. It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above,
an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 of the Civil Code, can warrant a
recovery for damages. (Emphasis supplied.)
From the foregoing, it is thus clear that an option contract is entirely different and distinct from a right of first refusal in that in
the former, the option granted to the offeree is for a fixed period and at a determined price. Lacking these two essential
requisites, what is involved is only a right of first refusal.
In this case, the controversy is whether the letter of Lourdes to Roberto dated January 2, 1995 involved an option contract or a
contract of a right of first refusal. In its entirety, the said letter-offer reads:
206 Valdes Street
Josefa Subd. Balibago
Angeles City 2009
January 2, 1995
Tuazon Const. Co.
986 Tandang Sora Quezon City
Dear Mr. Tuazon,
I received with great joy and happiness the big box of sweet grapes and ham, fit for a kings party. Thanks very much.
I am getting very old (79 going 80 yrs. old) and wish to live in the U.S.A. with my only family. I need money to buy a house and
lot and a farm with a little cash to start.
I am offering you to buy my 1211 square meter at P37,541,000.00 you can pay me in dollars in the name of my daughter. I
never offered it to anyone. Please shoulder the expenses for the transfer. I wish the Lord God will help you buy my lot easily and
you will be very lucky forever in this place. You have all the time to decide when you can, but not for 2 years or more.
I wish you long life, happiness, health, wealth and great fortune always!
I hope the Lord God will help you be the recipient of multi-billion projects aid from other countries.
Thank you,
Lourdes Q. del Rosario vda de Suarez
It is clear that the above letter embodies an option contract as it grants Roberto a fixed period of only two years to buy the
subject property at a price certain of P37,541,000.00. It being an option contract, the rules applicable are found in Articles 1324
and 1479 of the Civil Code which provide:
Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before
acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or
promised.
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
It is clear from the provision of Article 1324 that there is a great difference between the effect of an option which is without a
consideration from one which is founded upon a consideration. If the option is without any consideration, the offeror may
withdraw his offer by communicating such withdrawal to the offeree at anytime before acceptance; if it is founded upon a
consideration, the offeror cannot withdraw his offer before the lapse of the period agreed upon.
The second paragraph of Article 1479 declares that "an accepted unilateral promise to buy or to sell a determinate thing for a
price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price." Sanchez v.
Rigos
21
provided an interpretation of the said second paragraph of Article 1479 in relation to Article 1324. Thus:
There is no question that under Article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in
said article, to be valid must be "supported by a consideration distinct from the price." This is clearly inferred from the context of
said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other
words, "an accepted unilateral promise can only have a binding effect if supported by a consideration, which means that the
option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Hence, it is not disputed that
the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee.
It is true that under Article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer
gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the
option is founded upon consideration, but this general rule must be interpreted asmodified by the provision of Article 1479
above referred to, which applies to "a promise to buy and sell"specifically. As already stated, this rule requires that a promise to
sell to be valid must be supported by a consideration distinct from the price.
In Diamante v. Court of Appeals,
22
this Court further declared that:
A unilateral promise to buy or sell is a mere offer, which is not converted into a contract except at the moment it is
accepted. Acceptance is the act that gives life to a juridical obligation, because, before the promise is accepted, the
promissor may withdraw it at any time. Upon acceptance, however, a bilateral contract to sell and to buy is created, and the
offeree ipso facto assumes the obligations of a purchaser; the offeror, on the other hand, would be liable for damages if he fails
to deliver the thing he had offered for sale.
x x x x
Even if the promise was accepted, private respondent was not bound thereby in the absence of a distinct consideration.
(Emphasis ours.)
In this case, it is undisputed that Roberto did not accept the terms stated in the letter of Lourdes as he negotiated for a much
lower price. Robertos act of negotiating for a much lower price was a counter-offer and is therefore not an acceptance of the
offer of Lourdes. Article 1319 of the Civil Code provides:
Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. A qualified acceptanceconstitutes a counter-offer. (Emphasis
supplied.)
The counter-offer of Roberto for a much lower price was not accepted by Lourdes. There is therefore no contract that was
perfected between them with regard to the sale of subject property. Roberto, thus, does not have any right to demand that the
property be sold to him at the price for which it was sold to the De Leons neither does he have the right to demand that said
sale to the De Leons be annulled.
Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is not applicable here
It is the position of Roberto that the facts of this case and that of Equatorial are similar in nearly all aspects. Roberto is a lessee of
the property like Mayfair Theater in Equatorial. There was an offer made to Roberto by Lourdes during the effectivity of the
contract of lease which was also the case in Equatorial. There were negotiations as to the price which did not bear fruit because
Lourdes sold the property to the De Leons which was also the case in Equatorial wherein Carmelo and Bauermann sold the
property to Equatorial. The existence of the lease of the property is known to the De Leons as they are related to Lourdes while
in Equatorial, the lawyers of Equatorial studied the lease contract of Mayfair over the property. The property in this case was sold
by Lourdes to the De Leons at a much lower price which is also the case in Equatorial where Carmelo and Bauerman sold to
Equatorial at a lesser price. It is Robertos conclusion that as in the case of Equatorial, there was a violation of his right of first
refusal and hence annulment or rescission of the Deed of Absolute Sale is the proper remedy.
Robertos reliance in Equatorial is misplaced. Despite his claims, the facts in Equatorial radically differ from the facts of this case.
Roberto overlooked the fact that in Equatorial, there was an express provision in the Contract of Lease that
(i)f the LESSOR should desire to sell the leased properties, the LESSEE shall be given 30-days exclusive option to purchase the
same.
There is no such similar provision in the Contract of Lease between Roberto and Lourdes. What is involved here is a separate and
distinct offer made by Lourdes through a letter dated January 2, 1995 wherein she is selling the leased property to Roberto for a
definite price and which gave the latter a definite period for acceptance. Roberto was not given a right of first refusal. The letter-
offer of Lourdes did not form part of the Lease Contract because it was made more than six months after the commencement of
the lease.
It is also very clear that in Equatorial, the property was sold within the lease period. In this case, the subject property was sold not
only after the expiration of the period provided in the letter-offer of Lourdes but also after the effectivity of the Contract of
Lease.
Moreover, even if the offer of Lourdes was accepted by Roberto, still the former is not bound thereby because of the absence of
a consideration distinct and separate from the price. The argument of Roberto that the separate consideration was the liberality
on the part of Lourdes cannot stand. A perusal of the letter-offer of Lourdes would show that what drove her to offer the
property to Roberto was her immediate need for funds as she was already very old. Offering the property to Roberto was not an
act of liberality on the part of Lourdes but was a simple matter of convenience and practicality as he was the one most likely to
buy the property at that time as he was then leasing the same.
All told, the facts of the case, as found by the RTC and the CA, do not support Robertos claims that the letter of Lourdes gave
him a right of first refusal which is similar to the one given to Mayfair Theater in the case ofEquatorial. Therefore, there is no
justification to annul the deed of sale validly entered into by Lourdes with the De Leons.
What is the effect of the failure of Lourdes to file her appellees brief at the CA?
Lastly, Roberto argues that Lourdes should be sanctioned for her failure to file her appellees brief before the CA.
Certainly, the appellees failure to file her brief would not mean that the case would be automatically decided against her. Under
the circumstances, the prudent action on the part of the CA would be to deem Lourdes to have waived her right to file her
appellees brief. De Leon v. Court of Appeals,
23
is instructive when this Court decreed:
On the second issue, we hold that the Court of Appeals did not commit grave abuse of discretion in considering the appeal
submitted for decision. The proper remedy in case of denial of the motion to dismiss is to file the appellees brief and proceed
with the appeal. Instead, petitioner opted to file a motion for reconsideration which, unfortunately, was pro forma. All the
grounds raised therein have been discussed in the first resolution of the respondent Court of Appeals. There is no new ground
raised that might warrant reversal of the resolution. A cursory perusal of the motion would readily show that it was a
near verbatim repetition of the grounds stated in the motion to dismiss; hence, the filing of the motion for reconsideration did
not suspend the period for filing the appellees brief. Petitioner was therefore properly deemed to have waived his right to
file appellees brief. (Emphasis supplied.)lawphi1
In the above cited case, De Leon was the plaintiff in a Complaint for a sum of money in the RTC. He obtained a favorable
judgment and so defendant went to the CA. The appeal of defendant-appellant was taken cognizance of by the CA but De Leon
filed a Motion to Dismiss the Appeal with Motion to Suspend Period to file Appellees Brief. The CA denied the Motion to
Dismiss. De Leon filed a Motion for Reconsideration which actually did not suspend the period to file the appellees brief. De
Leon therefore failed to file his brief within the period specified by the rules and hence he was deemed by the CA to have waived
his right to file appellees brief.
The failure of the appellee to file his brief would not result to the rendition of a decision favorable to the appellant. The former is
considered only to have waived his right to file the Appellees Brief. The CA has the jurisdiction to resolve the case based on the
Appellants Brief and the records of the case forwarded by the RTC. The appeal is therefore considered submitted for decision
and the CA properly acted on it.
WHEREFORE, the instant petition for review on certiorari is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CV
No. 78870, which affirmed the Decision dated November 18, 2002 of the Regional Trial Court, Branch 101, Quezon City in Civil
Case No. Q-00-42338 is AFFIRMED.
SO ORDERED.

POUSES ONNIE SERRANO AND
AMPARO HERRERA,
Petitioners,

G.R. No. 139173


Present:




- versus -



GODOFREDO CAGUIAT,
Respondent.


PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,

*
AZCUNA, and
GARCIA, JJ.


Promulgated:

February 28, 2007
x------------------------------------------------------------------------------------------------------x

D E C I S I O N


SANDOVAL-GUTIERREZ, J.:


Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing
the Decision
[1]
of the Court of Appeals datedJanuary 29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824.

Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias, Metro Manila
covered by Transfer Certificate of Title No. T-9905.

Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it
at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn, petitioners gave
respondent the corresponding receipt stating that respondent promised to pay the balance of the purchase price on or
before March 23, 1990, thus:
Las Pias, Metro Manila
March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIAS,
METRO MANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS
(P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905
AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23,
1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.
SIGNED THIS 19
TH
DAY OF MARCH, 1990 AT LAS PIAS, M.M.
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO
[2]


On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of his
readiness to pay the balance of the contract price and requesting them to prepare the final deed of sale.
[3]


On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter
[4]
to respondent stating that petitioner Amparo
Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction. Petitioners also informed
respondent that he can recover the earnest money of P100,000.00 anytime.

Again, on April 6, 1990,
[5]
petitioners wrote respondent stating that they delivered to his counsel Philippine National
Bank Managers Check No. 790537 dated April 6, 1990 in the amount of P100,000.00 payable to him.

In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch
63, Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067.
[6]


On June 27, 1994, after hearing, the trial court rendered its Decision
[7]
finding there was a perfected contract of sale
between the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court held:
x x x
In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply
with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiffs position deserves
more weight and credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or earnest
money showed that there was already a perfected contract. Art. 1482 of the Civil Code of the Philippines, reads
as follows, to wit:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part
of the price and as proof of the perfection of the contract.
Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending
defendants the letter dated March 25, 1990. (Exh. D) and reiterated the same intent to pursue the sale in a letter
dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh.
C). Defendants mere allegation that it was plaintiff who did not appear onMarch 23, 1990 is
unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere afterthought.


On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial courts judgment.

Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its
Resolution
[8]
dated July 14, 1999.

Hence, the present recourse.

The basic issue to be resolved is whether the document entitled Receipt for Partial Payment signed by both parties
earlier mentioned is a contract to sell or a contract of sale.

Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 1458
[9]
in relation to
Article 1475
[10]
of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of the
perfection of a contract of sale under Article 1482
[11]
of the same Code since there was no clear agreement between the
parties as to the amount of consideration.

Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed except for
cogent reasons.
14
Indeed, they should not be changed on appeal in the absence of a clear showing that the trial court
overlooked, disregarded, or misinterpreted some facts of weight and significance, which if considered would have
altered the result of the case.
[12]
In the present case, we find that both the trial court and the Court of Appeals interpreted
some significant facts resulting in an erroneous resolution of the issue involved.

In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by
respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that "Whenever earnest money is given in
a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract."

We are not convinced.

In San Miguel Properties Philippines, Inc. v. Spouses Huang,
[13]
we held that the stages of a contract of sale are:
(1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time
the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale, which is
the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins
when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.
With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered into by
the parties.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary
meaning unless a technical meaning was intended.
[14]
Thus, when petitioners declared in the said Receipt for Partial Payment
that they


RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS
(P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905
AND WITH AN AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23,
1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.


there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject
only to the full payment of the purchase price.

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer
title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place,
the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full
payment of the purchase price.
[15]


The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951,
in Sing Yee v. Santos,
[16]
we held that:

x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of
the thing sold and a contract to sell x x x where by agreement the ownership is reserved in the seller and is not
to pass until the full payment, of the purchase price is made. In the first case, non-payment of the price is a
negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being
contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the
ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second
case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of
making payment at the time specified in the contract.

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment
of the price.
[17]


In this case, the Receipt for Partial Payment shows that the true agreement between the parties is a contract to sell.

First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of
the purchase price. Thus, petitioners need not push through with the sale should respondent fail to remit the balance of the
purchase price before the deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract the
moment respondent fails to pay within the fixed period.
[18]


Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of
conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full
payment of the purchase price.
[19]


Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication that the
agreement did not transfer to respondent, either by actual or constructive delivery, ownership of the property.
[20]


It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in a contract of sale, it shall
be considered as part of the price and proof of the perfection of the contract. However, this article speaks of earnest
money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms
part of the consideration only if the sale is consummated upon full payment of the purchase price.
[21]
Now, since the earnest
money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.

As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place. Clearly,
respondent cannot compel petitioners to transfer ownership of the property to him.

WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of
Appeals is REVERSED and respondents complaint is DISMISSED.

SAN MIGUEL PROPERTIES PHILIPPINES, INC., petitioner, vs. SPOUSES ALFREDO HUANG and GRACE
HUANG, respondents.
D E C I S I O N
MENDOZA, J.:
This is a petition for review of the decision,
[1]
dated April 8, 1997, of the Court of Appeals which reversed the decision of the
Regional Trial Court, Branch 153, Pasig City dismissing the complaint brought by respondents against petitioner for enforcement
of a contract of sale.
The facts are not in dispute.
Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties.
Part of its inventory are two parcels of land totalling 1, 738 square meters at the corner of Meralco Avenue and General Capinpin
Street, Barrio Oranbo, Pasig City, which are covered by TCT Nos. PT-82395 and PT-82396 of the Register of Deeds of Pasig City.
On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M.
Dauz who was acting for respondent spouses as undisclosed principals. In a letter
[2]
dated March 24, 1994, Atty. Dauz signified
her clients interest in purchasing the properties for the amount for which they were offered by petitioner, under the following
terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly
installments from May to December, 1994. However, petitioner refused the counter-offer.
On March 29, 1994, Atty. Dauz wrote another letter
[3]
proposing the following terms for the purchase of the properties, viz:
This is to express our interest to buy your-above-mentioned property with an area of 1, 738 sq. meters. For this
purpose, we are enclosing herewith the sum of P1,000,000.00 representing earnest-deposit money, subject to
the following conditions.
1. We will be given the exclusive option to purchase the property within the 30 days from date of your
acceptance of this offer.
2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI will secure the
necessary Management and Board approvals; and we initiate the documentation if there is mutual agreement
between us.
3. In the event that we do not come to an agreement on this transaction, the said amount of P1,000,000.00 shall
be refundable to us in full upon demand. . . .
Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate real estate, indicated his conformity to the
offer by affixing his signature to the letter and accepted the "earnest-deposit" of P1 million. Upon request of respondent
spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the properties.
Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April 8, 1994, Sobrecarey informed Atty. Dauz
that petitioner was willing to sell the subject properties on a 90-day term. Atty. Dauz countered with an offer of six months within
which to pay.
On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner had not yet acted on her
counter-offer. This prompted Atty. Dauz to propose a four-month period of amortization.
On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within which to exercise her
option to purchase the property, adding that within that period, "[we] hope to finalize [our] agreement on the matter."
[4]
Her
request was granted.
On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her
that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the
latter was returning the amount of P1 million given as "earnest-deposit."
[5]

On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within five days of a deed of
sale covering the properties. Respondents attempted to return the "earnest-deposit" but petitioner refused on the ground that
respondents option to purchase had already expired.
On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before the Regional Trial
Court, Branch 133, Pasig City where it was docketed as Civil Case No. 64660.
Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the complaint alleging that (1) the alleged
"exclusive option" of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus
unenforceable and (2) the complaint did not allege a cause of action because there was no "meeting of the minds" between the
parties and, therefore, no perfected contract of sale. The motion was opposed by respondents.
On December 12, 1994, the trial court granted petitioners motion and dismissed the action. Respondents filed a motion for
reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals which, on April 8, 1997,
rendered a decision
[6]
reversing the judgment of the trial court. The appellate court held that all the requisites of a perfected
contract of sale had been complied with as the offer made on March 29, 1994, in connection with which the earnest money in
the amount of P1 million was tendered by respondents, had already been accepted by petitioner. The court cited Art. 1482 of the
Civil Code which provides that "[w]henever earnest money is given in a contract of sale, it shall be considered as part of the price
and as proof of the perfection of the contract." The fact the parties had not agreed on the mode of payment did not affect the
contract as such is not an essential element for its validity. In addition, the court found that Sobrecarey had authority to act in
behalf of petitioner for the sale of the properties.
[7]

Petitioner moved for reconsideration of the trial courts decision, but its motion was denied. Hence, this petition.
Petitioner contends that the Court of Appeals erred in finding that there was a perfected contract of sale between the parties
because the March 29, 1994 letter of respondents, which petitioner accepted, merely resulted in an option contract, albeit it was
unenforceable for lack of a distinct consideration. Petitioner argues that the absence of agreement as to the mode of payment
was fatal to the perfection of the contract of sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey
had authority to sell the subject real properties.
[8]

Respondents were required to comment within ten (10) days from notice. However, despite 13 extensions totalling 142 days
which the Court had given to them, respondents failed to file their comment. They were thus considered to have waived the
filing of a comment.
The petition is meritorious.
In holding that there is a perfected contract of sale, the Court of Appeals relied on the following findings: (1) earnest money was
allegedly given by respondents and accepted by petitioner through its vice-president and operations manager, Isidro A.
Sobrecarey; and (2) the documentary evidence in the records show that there was a perfected contract of sale.
With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did not give the P1
million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what
would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus
given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that
respondents would not back out of the sale. Respondents in fact described the amount as an "earnest-deposit." In Spouses
Doromal, Sr. v. Court of Appeals,
[9]
it was held:
. . . While the P5,000 might have indeed been paid to Carlos in October, 1967, there is nothing to show that the
same was in the concept of the earnest money contemplated in Art. 1482 of the Civil Code, invoked by
petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant in the
record, We are more inclined to believe that the said P5,000.00 were paid in the concept of earnest money as the
term was understood under the Old Civil Code, that is, as a guarantee that the buyer would not back out,
considering that it is not clear that there was already a definite agreement as to the price then and that
petitioners were decided to buy 6/7 only of the property should respondent Javellana refuse to agree to part
with her 1/7 share.
[10]

In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as contemplated in Art. 1482
because, at the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been
perfected. This is evident from the following conditions attached by respondents to their letter, to wit: (1) that they be given the
exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the
parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while
respondents would handle the documentation.
The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner correctly
points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral
promise on the part of respondents to buy the subject properties within 30 days from the date of acceptance of the offer. Such
option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from
the contract of sale which the parties may enter.
[11]
All that respondents had was just the option to buy the properties which
privilege was not, however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale
may thus be enforced by respondents.
Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art.
1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if
the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale
where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option.
Lacking any proof of such consideration, the option is unenforceable.
Equally compelling as proof of the absence of a perfected sale is the second condition that, during the option period, the parties
would negotiate the terms and conditions of the purchase. The stages of a contract of sale are as follows: (1) negotiation,
covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is
perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of
the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the
parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.
[12]
In the
present case, the parties never got past the negotiation stage. The alleged "indubitable evidence"
[13]
of a perfected sale cited by
the appellate court was nothing more than offers and counter-offers which did not amount to any final arrangement containing
the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the
sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the
45-day extension given by petitioner.
The appellate court opined that the failure to agree on the terms of payment was no bar to the perfection of the sale because
Art. 1475 only requires agreement by the parties as to the price of the object. This is error. In Navarro v. Sugar Producers
Cooperative Marketing Association, Inc.,
[14]
we laid down the rule that the manner of payment of the purchase price is an
essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the
minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no
sale. As held in Toyota Shaw, Inc. v. Court of Appeals,
[15]
agreement on the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to agree on the price.
[16]
In Velasco v. Court of Appeals,
[17]
the
parties to a proposed sale had already agreed on the object of sale and on the purchase price. By the buyers own admission,
however, the parties still had to agree on how and when the downpayment and the installments were to be paid. It was held:
. . . Such being the situation, it can not, therefore, be said that a definite and firm sales agreement between the
parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite
agreement on the manner of payment of the purchase price is an essential element in the formation of a binding
and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent the sum of
P10,000 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the
perfection of any purchase and sale agreement between the parties herein under Art. 1482 of the new Civil
Code, as the petitioners themselves admit that some essential matter - the terms of the payment - still had to be
mutually covenanted.
[18]

Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale
which establishes the existence of a perfected sale.
In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority to enter into a
contract of sale in behalf of petitioner. This issue, therefore, needs no further discussion.
WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents complaint is DISMISSED.
SO ORDERED.
Quisumbing, Buena, and De Leon, Jr., JJ., concur.
Bellosillo, (Chairman), J., on leave.

GOLDENROD, INC., petitioner vs. COURT OF APPEALS, PIO BARRETTO & SONS, INC., PIO BARRETTO REALTY
DEVELOPMENT, INC., and ANTHONY QUE, respondents.
D E C I S I O N
BELLOSILLO, J.:
In the absence of a specific stipulation, may the seller of real estate keep the earnest money to answer for damages in the
event the sale fails due to the fault of the prospective buyer?
Pio Barretto and Sons, Inc. (BARRETTO & SONS) owned forty-three (43) parcels of registered land with a total area of 18,500
square meters located at Carlos Palanca St., Quiapo, Manila, which were mortgaged with the United Coconut Planters Bank
(UCPB). In 1988, the obligation of the corporation with UCPB remained unpaid making foreclosure of the mortgage imminent.
Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETTO & SONS. On 25 May 1988, through its
president Sonya G. Mathay, petitioner wrote respondent Anthony Que, President of respondent BARRETTO & SONS, as follows:
Thank you for your reply to our letter offering to buy your property in Echague (C. Palanca) Quiapo.
We are happy that you have accepted our offer except the two amendments concerning the payment of interest which should be
monthly instead of semi-annually and the period to remove the trusses, steel frames etc. which shall be 180 days instead of 90
days only. Please be advised that we agree to your amendments.
As to your other query, we prefer that the lots be reconsolidated back to its (sic) mother titles.
Enclosed is the earnest money of P1 million which shall form part of the purchase price.
Payment of the agreed total consideration shall be effected in accordance with our offer as you have accepted and upon
execution of the necessary documents of sale to be implemented after the said reconsolidation of the lots.
Kindly acknowledge receipt of the earnest money.
When the term of existence of BARRETTO & SONS expired, all its assets and liabilities including the property located in
Quiapo were transferred to respondent Pio Barretto Realty Development, Inc. (BARRETTO REALTY). Petitioners offer to buy the
property resulted in its agreement with respondent BARRETTO REALTY that petitioner would pay the following
amounts: (a) P24.5 million representing the outstanding obligations of BARRETTO REALTY with UCPB on 30 June 1988, the
deadline set by the bank for payment; and, (b) P20 million which was the balance of the purchase price of the property to be
paid in installments within a 3-year period with interest at 18% per annum.
Petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTO REALTY on the deadline set for payment;
instead, it asked for an extension of one (1) month or up to 31 July 1988 to settle the obligation, which the bank granted. On
31 July 1988, petitioner requested another extension of sixty (60) days to pay the loan. This time the bank demurred.
In the meantime BARRETTO REALTY was able to cause the reconsolidation of the forty-three (43) titles covering the property
subject of the purchase into two (2) titles covering Lots 1 and 2, which were issued on 4 August 1988. The reconsolidation of
the titles was made pursuant to the request of petitioner in its letter to private respondents on 25 May 1988. Respondent
BARRETTO REALTY allegedly incurred expenses for the reconsolidation amounting to P250,000.00.
On 25 August 1988 petitioner sought reconsideration of the denial by the bank of its request for extension of sixty (60) days
by asking for a shorter period of thirty (30) days. This was again denied by UCPB.
On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and Development Corporation (LOGARTA REALTY), which
acted as agent and broker of petitioner, wrote private respondent Anthony Que informing him on behalf of petitioner that it
could not go through with the purchase of the property due to circumstances beyond its fault, i.e., the denial by UCPB of its
request for extension of time to pay the obligation. In the same letter, Logarta also demanded the refund of the earnest money
of P1 million which petitioner gave to respondent BARRETTO REALTY.
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld Trade Center Phils., Inc. (ASIAWORLD), Lot 2, one of
the two (2) consolidated lots, for the price of P23 million. On 13 October 1988 respondent BARRETTO REALTY executed a deed
transferring by way of dacion the property reconsolidated as Lot 1 in favor of UCPB, which in turn sold the property to
ASIAWORLD for P24 million.
On 12 December 1988 Logarta again wrote respondent Que demanding the return of the earnest money to
GOLDENROD. On 7 February 1989 petitioner through its lawyer reiterated its demand, but the same remained unheeded by
private respondents. This prompted petitioner to file a complaint with the Regional Trial Court of Manila against private
respondents for the return of the amount of P1 million and the payment of damages including lost interests or profits. In their
answer, private respondents contended that it was the agreement of the parties that the earnest money of P1 million would be
forfeited to answer for losses and damages that might be suffered by private respondents in case of failure by petitioner to
comply with the terms of their purchase agreement.
On 15 March 1991 the trial court rendered a decision
[1]
ordering private respondents jointly and severally to pay
petitioner P1,000,000.00 with legal interest from 9 February 1989 until fully paid, P50,000.00 representing unrealized profits
and P10,000.00 as attorneys fees. The trial court found that there was no written agreement between the parties concerning
forfeiture of the earnest money if the sale did not push through. It further declared that the
earnest money given by petitioner to respondent BARRETTO REALTY was intended to form part of the purchase price;
thus, the refusal of the latter to return the money when the sale was not consummated violated Arts. 22 and 23 of the Civil Code
against unjust enrichment.
Obviously dissatisfied with the decision of the trial court, private respondents appealed to the Court of Appeals which
reversed the trial court and ordered the dismissal of the complaint; hence, this petition.
Petitioner alleges that the Court of Appeals erred in disregarding the finding of the trial court that the earnest money given
by petitioner to respondent BARRETTO REALTY should be returned to the former. The absence of an express stipulation that the
same shall be forfeited in favor of the seller in case the buyer fails to comply with his obligation is compelling. It argues that the
forfeiture of the money in favor of respondent BARRETTO REALTY would amount to unjust enrichment at the expense of
petitioner.
We sustain petitioner. Under Art. 1482 of the Civil Code, whenever earnest money is given in a contract of sale, it shall be
considered as part of the purchase price and as proof of the perfection of the contract. Petitioner clearly stated without any
objection from private respondents that the earnest money was intended to form part of the purchase price. It was an advance
payment which must be deducted from the total price. Hence, the parties could not have intended that the earnest money or
advance payment would be forfeited when the buyer should fail to pay the balance of the price, especially in the absence of a
clear and express agreement thereon. By reason of its failure to make payment petitioner, through its agent, informed private
respondents that it would no longer push through with the sale. In other words, petitioner resorted to extrajudicial rescission of
its agreement with private respondents.
In University of the Philippines v. de los Angeles,
[2]
the right to rescind contracts is not absolute and is subject to scrutiny
and review by the proper court. We held further, in the more recent case of Adelfa Properties, Inc. v. Court of Appeals,
[3]
that
rescission of reciprocal contracts may be extrajudicially rescinded unless successfully impugned in court. If the party does not
oppose the declaration of rescission of the other party, specifying the grounds therefor, and it fails to reply or protest against it,
its silence thereon suggests an admission of the veracity and validity of the rescinding party's claim.
Private respondents did not interpose any objection to the rescission by petitioner of the agreement. As found by the
Court of Appeals, private respondent BARRETTO REALTY even sold Lot 2 of the subject consolidated lots to another buyer,
ASIAWORLD, one day after its President Anthony Que received the broker's letter rescinding the sale. Subsequently, on 13
October 1988 respondent BARRETTO REALTY also conveyed ownership over Lot 1 to UCPB which, in turn, sold the same to
ASIAWORLD.
Article 1385 of the Civil Code provides that rescission creates the obligation to return the things which were the object of
the contract together with their fruits and interest. The vendor is therefore obliged to return the purchase price paid to
him by the buyer if the latter rescinds the sale,
[4]
or when the transaction was called off and the subject property had already
been sold to a third person, as what obtained in this case.
[5]
Therefore, by virtue of the extrajudicial rescission of the contract to
sell by petitioner without opposition from private respondents who, in turn, sold the property to other persons, private
respondent BARRETTO REALTY, as the vendor, had the obligation to return the earnest money of P1,000,000.00 plus legal
interest from the date it received notice of rescission from petitioner, i.e., 30 August 1988, up to the date of the return or
payment. It would be most inequitable if respondent BARRETTO REALTY would be allowed to retain petitioners payment
of P1,000,000.00 and at the same time appropriate the proceeds of the second sale made to another.
[6]

WHEREFORE, the Petition is GRANTED. The decision of the Court of Appeals is REVERSED and SET ASIDE. Private
respondent Pio Barretto Realty Development, Inc. (BARRETTO REALTY), its successors and assigns are ordered to return
to petitioner Goldenrod, Inc. (GOLDENROD), the amount of P1,000,000.00 with legal interest thereon from 30 August
1988, the date of notice of extrajudicial rescission, until the amount is fully paid, with costs against private respondents.
SO ORDERED.
Davide Jr. (Chairman), Vitug, Panganiban, and Quisumbing JJ., concur


G.R. No. 142618 July 12, 2007
PCI LEASING AND FINANCE, INC., Petitioner,
vs.
GIRAFFE-X CREATIVE IMAGING, INC., Respondent.
D E C I S I O N
GARCIA, J.:
On a pure question of law involving the application of Republic Act (R.A.) No. 5980, as amended by R.A. No. 8556 in relation to
Articles 1484 and 1485 of the Civil Code, petitioner PCI Leasing and Finance, Inc. (PCI LEASING, for short) has directly come to
this Court via this petition for review under Rule 45 of the Rules of Court to nullify and set aside the Decision and Resolution
dated December 28, 1998 and February 15, 2000, respectively, of the Regional Trial Court (RTC) of Quezon City, Branch 227, in its
Civil Case No. Q-98-34266, a suit for a sum of money and/or personal property with prayer for a writ of replevin, thereat
instituted by the petitioner against the herein respondent, Giraffe-X Creative Imaging, Inc. (GIRAFFE, for brevity).
The facts:
On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement,
1
whereby the former
leased out to the latter one (1) set of Silicon High Impact Graphics and accessories worthP3,900,00.00 and one (1) unit of Oxberry
Cinescan 6400-10 worth P6,500,000.00. In connection with this agreement, the parties subsequently signed two (2) separate
documents, each denominated as Lease Schedule.
2
Likewise forming parts of the basic lease agreement were two (2) separate
documents denominated Disclosure Statements of Loan/Credit Transaction (Single Payment or Installment Plan)
3
that GIRAFFE
also executed for each of the leased equipment. These disclosure statements inter alia described GIRAFFE, vis--vis the two
aforementioned equipment, as the "borrower" who acknowledged the "net proceeds of the loan," the "net amount to be
financed," the "financial charges," the "total installment payments" that it must pay monthly for thirty-six (36) months, exclusive
of the 36% per annum "late payment charges." Thus, for the Silicon High Impact Graphics, GIRAFFE agreed to pay P116,878.21
monthly, and for Oxberry Cinescan, P181.362.00 monthly. Hence, the total amount GIRAFFE has to pay PCI LEASING for 36
months of the lease, exclusive of monetary penalties imposable, if proper, is as indicated below:
P116,878.21 @ month (for the Silicon High
Impact Graphics) x 36 months = P 4,207,615.56
-- PLUS--
P181,362.00 @ month (for the Oxberry
Cinescan) x 36 months = P 6,529,032.00
Total Amount to be paid by GIRAFFE
(or the NET CONTRACT AMOUNT)


P 10,736,647.56

By the terms, too, of the Lease Agreement, GIRAFFE undertook to remit the amount of P3,120,000.00 by way of "guaranty
deposit," a sort of performance and compliance bond for the two equipment. Furthermore, the same agreement embodied a
standard acceleration clause, operative in the event GIRAFFE fails to pay any rental and/or other accounts due.
A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment obligations. And following a three-
month default, PCI LEASING, through one Atty. Florecita R. Gonzales, addressed a formal pay-or-surrender-equipment type of
demand letter
4
dated February 24, 1998 to GIRAFFE.
The demand went unheeded.
Hence, on May 4, 1998, in the RTC of Quezon City, PCI LEASING instituted the instant case against GIRAFFE. In its
complaint,
5
docketed in said court as Civil Case No. 98-34266 and raffled to Branch 227
6
thereof, PCI LEASING prayed for the
issuance of a writ of replevin for the recovery of the leased property, in addition to the following relief:
2. After trial, judgment be rendered in favor of plaintiff [PCI LEASING] and against the defendant [GIRAFFE], as follows:
a. Declaring the plaintiff entitled to the possession of the subject properties;
b. Ordering the defendant to pay the balance of rental/obligation in the total amount of P8,248,657.47 inclusive of
interest and charges thereon;
c. Ordering defendant to pay plaintiff the expenses of litigation and cost of suit. (Words in bracket added.)
Upon PCI LEASINGs posting of a replevin bond, the trial court issued a writ of replevin, paving the way for PCI LEASING to secure
the seizure and delivery of the equipment covered by the basic lease agreement.
Instead of an answer, GIRAFFE, as defendant a quo, filed a Motion to Dismiss, therein arguing that the seizure of the two (2)
leased equipment stripped PCI LEASING of its cause of action. Expounding on the point, GIRAFFE argues that, pursuant to Article
1484 of the Civil Code on installment sales of personal property, PCI LEASING is barred from further pursuing any claim arising
from the lease agreement and the companion contract documents, adding that the agreement between the parties is in reality a
lease of movables with option to buy. The given situation, GIRAFFE continues, squarely brings into applicable play Articles 1484
and 1485 of the Civil Code, commonly referred to as the Recto Law. The cited articles respectively provide:
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of
the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay
cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void. (Emphasis added.)
ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy,
when the lessor has deprived the lessee of the possession or enjoyment of the thing.
It is thus GIRAFFEs posture that the aforequoted Article 1484 of the Civil Code applies to its contractual relation with PCI
LEASING because the lease agreement in question, as supplemented by the schedules documents, is really a lease with option to
buy under the companion article, Article 1485. Consequently, so GIRAFFE argues, upon the seizure of the leased equipment
pursuant to the writ of replevin, which seizure is equivalent to foreclosure, PCI LEASING has no further recourse against it. In
brief, GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is proscribed by the application to the
case of Articles 1484 and 1485, supra, of the Civil Code.
In its Opposition to the motion to dismiss, PCI LEASING maintains that its contract with GIRAFFE is a straight lease without an
option to buy. Prescinding therefrom, PCI LEASING rejects the applicability to the suit of Article 1484 in relation to Article 1485 of
the Civil Code, claiming that, under the terms and conditions of the basic agreement, the relationship between the parties is one
between an ordinary lessor and an ordinary lessee.
In a decision
7
dated December 28, 1998, the trial court granted GIRAFFEs motion to dismiss mainly on the interplay of the
following premises: 1) the lease agreement package, as memorialized in the contract documents, is akin to the contract
contemplated in Article 1485 of the Civil Code, and 2) GIRAFFEs loss of possession of the leased equipment consequent to the
enforcement of the writ of replevin is "akin to foreclosure, the condition precedent for application of Articles 1484 and 1485
[of the Civil Code]." Accordingly, the trial court dismissed Civil Case No. Q-98-34266, disposing as follows:
WHEREFORE, premises considered, the defendant [GIRAFFE] having relinquished any claim to the personal properties subject of
replevin which are now in the possession of the plaintiff [PCI LEASING], plaintiff is DEEMED fully satisfied pursuant to the
provisions of Articles 1484 and 1485 of the New Civil Code. By virtue of said provisions, plaintiff is DEEMED estopped from
further action against the defendant, the plaintiff having recovered thru (replevin) the personal property sought to be
payable/leased on installments, defendants being under protection of said RECTO LAW. In view thereof, this case is hereby
DISMISSED.
With its motion for reconsideration having been denied by the trial court in its resolution of February 15, 2000,
8
petitioner has
directly come to this Court via this petition for review raising the sole legal issue of whether or not the underlying Lease
Agreement, Lease Schedules and the Disclosure Statements that embody the financial leasing arrangement between the parties
are covered by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code.
As in the court below, petitioner contends that the financial leasing arrangement it concluded with the respondent represents a
straight lease covered by R.A. No. 5980, the Financing Company Act, as last amended by R.A. No. 8556, otherwise known as
Financing Company Act of 1998, and is outside the application and coverage of the Recto Law. To the petitioner, R.A. No. 5980
defines and authorizes its existence and business.
The recourse is without merit.
R.A. No. 5980, in its original shape and as amended, partakes of a supervisory or regulatory legislation, merely providing a
regulatory framework for the organization, registration, and regulation of the operations of financing companies. As couched, it
does not specifically define the rights and obligations of parties to a financial leasing arrangement. In fact, it does not go beyond
defining commercial or transactional financial leasing and other financial leasing concepts. Thus, the relevancy of Article 18 of the
Civil Code which reads:
Article 18. - In matters which are governed by special laws, their deficiency shall be supplied by the provisions of this [Civil]
Code.
Petitioner foists the argument that the Recto Law, i.e., the Civil Code provisions on installment sales of movable property, does
not apply to a financial leasing agreement because such agreement, by definition, does not confer on the lessee the option to
buy the property subject of the financial lease. To the petitioner, the absence of an option-to-buy stipulation in a financial
leasing agreement, as understood under R.A. No. 8556, prevents the application thereto of Articles 1484 and 1485 of the Civil
Code.
We are not persuaded.
The Court can allow that the underlying lease agreement has the earmarks or made to appear as a financial leasing,
9
a term
defined in Section 3(d) of R.A. No. 8556 as -
a mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the
instance of the lessee, machinery, equipment, office machines, and other movable or immovable property in consideration of
the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase
price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two
(2) years during which the lessee has the right to hold and use the leased property but with no obligation or option on his part
to purchase the leased property from the owner-lessor at the end of the lease contract.
In its previous holdings, however, the Court, taking into account the following mix: the imperatives of equity, the contractual
stipulations in question and the actuations of parties vis--vis their contract, treated disguised transactions technically tagged as
financing lease, like here, as creating a different contractual relationship. Notable among the Courts decisions because of its
parallelism with this case is BA Finance Corporation v. Court of Appeals
10
which involved a motor vehicle. Thereat, the Court has
treated a purported financial lease as actually a sale of a movable property on installments and prevented recovery beyond the
buyers arrearages. Wrote the Court in BA Finance:
The transaction involved is one of a "financial lease" or "financial leasing," where a financing company would, in effect, initially
purchase a mobile equipment and turn around to lease it to a client who gets, in addition, an option to purchase the property at
the expiry of the lease period. xxx.
x x x x x x x x x
The pertinent provisions of [RA] 5980, thus implemented, read:
"'Financing companies,' are primarily organized for the purpose of extending credit facilities to consumers either by
leasing of motor vehicles, and office machines and equipment, and other movable property."
"'Credit' shall mean any loan, any contract to sell, or sale or contract of sale of property or service, under which part or all of
the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; .;"
The foregoing provisions indicate no less than a mere financing scheme extended by a financing company to a client in acquiring
a motor vehicle and allowing the latter to obtain the immediate possession and use thereof pending full payment of the financial
accommodation that is given.
In the case at bench, xxx. [T]he term of the contract [over a motor vehicle] was for thirty six (36) months at a "monthly rental"
(P1,689.40), or for a total amount of P60,821.28. The contract also contained [a] clause [requiring the Lessee to give a guaranty
deposit in the amount of P20,800.00] xxx
After the private respondent had paid the sum of P41,670.59, excluding the guaranty deposit of P20,800.00, he stopped further
payments. Putting the two sums together, the financing company had in its hands the amount of P62,470.59 as against the total
agreed "rentals" of P60,821.28 or an excess of P1,649.31.
The respondent appellate court considered it only just and equitable for the guaranty deposit made by the private respondent to
be applied to his arrearages and thereafter to hold the contract terminated. Adopting the ratiocination of the court a quo, the
appellate court said:
xxx In view thereof, the guaranty deposit of P20,800.00 made by the defendant should and must be credited in his favor, in the
interest of fairness, justice and equity. The plaintiff should not be allowed to unduly enrich itself at the expense of the defendant.
xxx This is even more compelling in this case where although the transaction, on its face, appear ostensibly, to be a contract of
lease, it is actually a financing agreement, with the plaintiff financing the purchase of defendant's automobile . The Court is
constrained, in the interest of truth and justice, to go into this aspect of the transaction between the plaintiff and the defendant
with all the facts and circumstances existing in this case, and which the court must consider in deciding the case, if it is to
decide the case according to all the facts. xxx.
x x x x x x x x x
Considering the factual findings of both the court a quo and the appellate court, the only logical conclusion is that the private
respondent did opt, as he has claimed, to acquire the motor vehicle, justifying then the application of the guarantee deposit to
the balance still due and obligating the petitioner to recognize it as an exercise of the option by the private respondent. The
result would thereby entitle said respondent to the ownership and possession of the vehicle as the buyer thereof. We, therefore,
see no reversible error in the ultimate judgment of the appellate court.
11
(Italics in the original; underscoring supplied and words
in bracket added.)
In Cebu Contractors Consortium Co. v. Court of Appeals,
12
the Court viewed and thus declared a financial lease agreement as
having been simulated to disguise a simple loan with security, it appearing that the financing company purchased equipment
already owned by a capital-strapped client, with the intention of leasing it back to the latter.
In the present case, petitioner acquired the office equipment in question for their subsequent lease to the respondent, with the
latter undertaking to pay a monthly fixed rental therefor in the total amount of P292,531.00, or a total of P10,531,116.00 for the
whole 36 months. As a measure of good faith, respondent made an up-front guarantee deposit in the amount of P3,120,000.00.
The basic agreement provides that in the event the respondent fails to pay any rental due or is in a default situation, then the
petitioner shall have cumulative remedies, such as, but not limited to, the following:
13

1. Obtain possession of the property/equipment;
2. Retain all amounts paid to it. In addition, the guaranty deposit may be applied towards the payment of "liquidated
damages";
3. Recover all accrued and unpaid rentals;
4. Recover all rentals for the remaining term of the lease had it not been cancelled, as additional penalty;
5. Recovery of any and all amounts advanced by PCI LEASING for GIRAFFEs account xxx;
6. Recover all expenses incurred in repossessing, removing, repairing and storing the property; and,
7. Recover all damages suffered by PCI LEASING by reason of the default.
In addition, Sec. 6.1 of the Lease Agreement states that the guaranty deposit shall be forfeited in the event the respondent, for
any reason, returns the equipment before the expiration of the lease.
At bottom, respondent had paid the equivalent of about a years lease rentals, or a total of P3,510,372.00, more or less. Throw in
the guaranty deposit (P3,120,000.00) and the respondent had made a total cash outlay ofP6,630,372.00 in favor of the petitioner.
The replevin-seized leased equipment had, as alleged in the complaint, an estimated residual value of P6,900.000.00 at the time
Civil Case No. Q-98-34266 was instituted on May 4, 1998. Adding all cash advances thus made to the residual value of the
equipment, the total value which the petitioner had actually obtained by virtue of its lease agreement with the respondent
amounts to P13,530,372.00 (P3,510,372.00 + P3,120,000.00 + P6,900.000.00 = P13,530,372.00).
The acquisition cost for both the Silicon High Impact Graphics equipment and the Oxberry Cinescan was, as stated in no less
than the petitioners letter to the respondent dated November 11, 1996
14
approving in the latters favor a lease facility,
was P8,100,000.00. Subtracting the acquisition cost of P8,100,000.00 from the total amount, i.e.,P13,530,372.00, creditable to the
respondent, it would clearly appear that petitioner realized a gross income ofP5,430,372.00 from its lease transaction with the
respondent. The amount of P5,430,372.00 is not yet a final figure as it does not include the rentals in arrears, penalties thereon,
and interest earned by the guaranty deposit.
As may be noted, petitioners demand letter
15
fixed the amount of P8,248,657.47 as representing the respondents "rental"
balance which became due and demandable consequent to the application of the acceleration and other clauses of the lease
agreement. Assuming, then, that the respondent may be compelled to pay P8,248,657.47, then it would end up paying a total
of P21,779,029.47 (P13,530,372.00 + P8,248,657.47 =P21,779,029.47) for its use - for a year and two months at the most - of the
equipment. All in all, for an investment of P8,100,000.00, the petitioner stands to make in a years time, out of the transaction, a
total of P21,779,029.47, or a net of P13,679,029.47, if we are to believe its outlandish legal submission that the PCI LEASING-
GIRAFFE Lease Agreement was an honest-to-goodness straight lease.
A financing arrangement has a purpose which is at once practical and salutary. R.A. No. 8556 was, in fact, precisely enacted to
regulate financing companies operations with the end in view of strengthening their critical role in providing credit and services
to small and medium enterprises and to curtail acts and practices prejudicial to the public interest, in general, and to their
clienteles, in particular.
16
As a regulated activity, financing arrangements are not meant to quench only the thirst for profit. They
serve a higher purpose, and R.A. No. 8556 has made that abundantly clear.
We stress, however, that there is nothing in R.A. No. 8556 which defines the rights and obligations, as between each other, of the
financial lessor and the lessee. In determining the respective responsibilities of the parties to the agreement, courts, therefore,
must train a keen eye on the attendant facts and circumstances of the case in order to ascertain the intention of the parties, in
relation to the law and the written agreement. Likewise, the public interest and policy involved should be considered. It may not
be amiss to state that, normally, financing contracts come in a standard prepared form, unilaterally thought up and written by
the financing companies requiring only the personal circumstances and signature of the borrower or lessee; the rates and other
important covenants in these agreements are still largely imposed unilaterally by the financing companies. In other words, these
agreements are usually one-sided in favor of such companies. A perusal of the lease agreement in question exposes the many
remedies available to the petitioner, while there are only the standard contractual prohibitions against the respondent. This is
characteristic of standard printed form contracts.
There is more. In the adverted February 24, 1998 demand letter
17
sent to the respondent, petitioner fashioned its claim in the
alternative: payment of the full amount of P8,248,657.47, representing the unpaid balance for the entire 36-month lease period
or the surrender of the financed asset under pain of legal action. To quote the letter:
Demand is hereby made upon you to pay in full your outstanding balance in the amount of P8,248,657.47 on or before March
04, 1998 OR to surrender to us the one (1) set Silicon High Impact Graphics and one (1) unit Oxberry Cinescan 6400-10
We trust you will give this matter your serious and preferential attention. (Emphasis added).
Evidently, the letter did not make a demand for the payment of the P8,248,657.47 AND the return of the equipment; only either
one of the two was required. The demand letter was prepared and signed by Atty. Florecita R. Gonzales, presumably petitioners
counsel. As such, the use of "or" instead of "and" in the letter could hardly be treated as a simple typographical error, bearing in
mind the nature of the demand, the amount involved, and the fact that it was made by a lawyer. Certainly Atty. Gonzales would
have known that a world of difference exists between "and" and "or" in the manner that the word was employed in the letter.
A rule in statutory construction is that the word "or" is a disjunctive term signifying dissociation and independence of one thing
from other things enumerated unless the context requires a different interpretation.
18

In its elementary sense, "or", as used in a statute, is a disjunctive article indicating an alternative. It often connects a series of
words or propositions indicating a choice of either. When "or" is used, the various members of the enumeration are to be taken
separately.
19

The word "or" is a disjunctive term signifying disassociation and independence of one thing from each of the other things
enumerated.
20

The demand could only be that the respondent need not return the equipment if it paid the P8,248,657.47 outstanding balance,
ineluctably suggesting that the respondent can keep possession of the equipment if it exercises its option to acquire the same by
paying the unpaid balance of the purchase price. Stated otherwise, if the respondent was not minded to exercise its option of
acquiring the equipment by returning them, then it need not pay the outstanding balance. This is the logical import of the letter:
that the transaction in this case is a lease in name only. The so-called monthly rentals are in truth monthly amortizations of the
price of the leased office equipment.
On the whole, then, we rule, as did the trial court, that the PCI LEASING- GIRAFFE lease agreement is in reality a lease with an
option to purchase the equipment. This has been made manifest by the actions of the petitioner itself, foremost of which is the
declarations made in its demand letter to the respondent. There could be no other explanation than that if the respondent paid
the balance, then it could keep the equipment for its own; if not, then it should return them. This is clearly an option to purchase
given to the respondent. Being so, Article 1485 of the Civil Code should apply.
The present case reflects a situation where the financing company can withhold and conceal - up to the last moment - its
intention to sell the property subject of the finance lease, in order that the provisions of the Recto Law may be circumvented. It
may be, as petitioner pointed out, that the basic "lease agreement" does not contain a "purchase option" clause. The absence,
however, does not necessarily argue against the idea that what the parties are into is not a straight lease, but a lease with option
to purchase. This Court has, to be sure, long been aware of the practice of vendors of personal property of denominating a
contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until
and unless the price is fully paid. As this Court noted in Vda. de Jose v. Barrueco:
21

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one
reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the
buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments
since the due payment of the agreed amount results, by the terms of the bargain, in the transfer of title to the lessee.
In another old but still relevant case of U.S. Commercial v. Halili,
22
a lease agreement was declared to be in fact a sale of personal
property by installments. Said the Court:
. . . There can hardly be any question that the so-called contracts of lease on which the present action is based were veritable
leases of personal property with option to purchase, and as such come within the purview of the above article [Art. 1454-A of the
old Civil Code on sale of personal property by installment]. xxx
Being leases of personal property with option to purchase as contemplated in the above article, the contracts in question are
subject to the provision that when the lessor in such case "has chosen to deprive the lessee of the enjoyment of such personal
property," "he shall have no further action" against the lessee "for the recovery of any unpaid balance" owing by the latter,
"agreement to the contrary being null and void."
In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the petitioner waived its right
to bring an action to recover unpaid rentals on the said leased items. Paragraph (3), Article 1484 in relation to Article 1485 of the
Civil Code, which we are hereunder re-reproducing, cannot be any clearer.
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of
the following remedies:
x x x x x x x x x
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or
more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price.
Any agreement to the contrary shall be void.
ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy,
when the lessor has deprived the lessee of the possession or enjoyment of the thing.
As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals,
23
the remedies provided for in Article 1484 of the Civil
Code are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies to contracts
purporting to be leases of personal property with option to buy by virtue of the same Article 1485. The condition that the lessor
has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485 was fulfilled in this case
by the filing by petitioner of the complaint for a sum of money with prayer for replevin to recover possession of the office
equipment.
24
By virtue of the writ of seizure issued by the trial court, the petitioner has effectively deprived respondent of their
use, a situation which, by force of the Recto Law, in turn precludes the former from maintaining an action for recovery of
"accrued rentals" or the recovery of the balance of the purchase price plus interest.
25

The imperatives of honest dealings given prominence in the Civil Code under the heading: Human Relations, provide another
reason why we must hold the petitioner to its word as embodied in its demand letter. Else, we would witness a situation where
even if the respondent surrendered the equipment voluntarily, the petitioner can still sue upon its claim. This would be most
unfair for the respondent. We cannot allow the petitioner to renege on its word. Yet more than that, the very word "or" as used
in the letter conveys distinctly its intention not to claim both the unpaid balance and the equipment. It is not difficult to discern
why: if we add up the amounts paid by the respondent, the residual value of the property recovered, and the amount claimed by
the petitioner as sued upon herein (for a total of P21,779,029.47), then it would end up making an instant killing out of the
transaction at the expense of its client, the respondent. The Recto Law was precisely enacted to prevent this kind of aberration.
Moreover, due to considerations of equity, public policy and justice, we cannot allow this to happen.1avvphil.zw+ Not only to the
respondent, but those similarly situated who may fall prey to a similar scheme.
WHEREFORE, the instant petition is DENIED and the trial courts decision is AFFIRMED.
Costs against petitioner.
SO ORDERED.
CANCIO C. GARCIA
Associate Justice
ELISCO TOOL MANUFACTURING CORPORATION, petitioner, vs. COURT OF APPEALS, ROLANDO LANTAN, and RINA
LANTAN, respondents
D E C I S I O N
MENDOZA, J.:
This is a petition for review of the decision
[1]
of the Court of Appeals which affirmed in toto the decision of the Regional Trial
Court of Pasig, Branch 51, declaring respondent spouses Rolando Lantan and Rina Lantan owners of a 1979 model 2-door Colt
Lancer car which they had acquired under a car plan for top employees of the Elizalde group of companies.
The facts are as follows:
Private respondent Rolando Lantan was employed at the Elisco Tool Manufacturing Corporation as head of its cash
department. On January 9, 1980, he entered into an agreement with the company which provided as follows:
[2]

That, EMPLOYER is the owner of a car Colt Lancer 2 door, Model 1979, with Serial No. 3403 under LTC Registration Certificate No.
0526558;
That, for and in consideration of a monthly rental of ONE THOUSAND TEN & 65/100 ONLY (P1,010.65) Philippine Currency,
EMPLOYER desire to lease and EMPLOYEE accept in lease the motor vehicle aforementioned for a period of FIVE (5) years;
That, the EMPLOYEE agree as he hereby agreed to pay the lease rental thru salary deduction from his monthly remuneration in
the amount as above specified for a period of FIVE (5) years;
That, for the duration of the lease contract, all expenses and costs of registration, insurance, repair and maintenance, gasoline,
oil, part replacement inclusive of all expenses necessary to maintain the vehicle in top condition shall be for the account of the
EMPLOYEE;
That, at the end of FIVE (5) year period or upon payment of the 60
th
monthly rental, EMPLOYEE may exercise the option to
purchase the motor vehicle from the EMPLOYER and all monthly rentals shall be applied to the payment of the full purchase
price of the car and further, should EMPLOYEE desire to exercise this option before the 5-year period lapse, he may do so upon
payment of the remaining balance on the five year rental unto the EMPLOYER, it being understood however that the option is
limited to the EMPLOYEE;
That, upon failure of the EMPLOYEE to pay THREE (3) accumulated monthly rentals will vest upon the EMPLOYER the full right to
lease the vehicle to another EMPLOYEE;
That, in the event of resignation and or dismissal from the service, the EMPLOYEE shall return the subject motor vehicle to the
EMPLOYER in its compound at Kalawaan Sur, Pasig, Metro Manila in good working and body condition.
On the same day, January 9, 1980, private respondent executed a promissory note reading as follows:
[3]

PROMISSORY NOTE
P60,639.00
FOR VALUE RECEIVED, we promise to pay [to] the order of ELISCO TOOL MFG. CORP. SPECIAL PROJECT, at its office at
Napindan, Taguig, Metro Manila, Philippines, the sum of ONE THOUSAND TEN & 65/100 PESOS (P1,010.65), Philippine Currency,
beginning January 9, 1980, without the necessity of notice or demand in accordance with the schedule of payment hereto
attached as an integral part hereof.
In case of default in the payment of any installment on the stipulated due date, we agree to pay as liquidated damages 2% of the
amount due and unpaid for every thirty (30) days of default or fraction thereof. Where the default covers two successive
installments, the entire unpaid balance shall automatically become due and payable.
It is further agreed that if upon such default attorneys services are availed of, an additional sum equal to TWENTY (20%) percent
of the total amount due thereon, but in no case be less than P1,000.00 shall be paid to holder(s) hereof as attorneys fees in
addition to the legal costs provided for by law. We agree to submit to the jurisdiction of the proper courts of Makati, Metro
Manila or the Province of Rizal, at the option of the holder(s) waiving for this purpose any other venue.
In case extraordinary inflation or deflation of the currency stipulated should occur before this obligation is paid in full, the value
of the currency at the time of the establishment of the obligation will be the basis of payment.
Holder(s) may accept partial payment reserving his right of recourse against each and all endorsers who hereby waive DEMAND
PRESENTMENT and NOTICE.
Acceptance by the holder(s) of payment or any part thereof after due date shall not be considered as extending the time for the
payment of the aforesaid obligation or as a modification of any of the condition hereof.
After taking possession of the car, private respondent installed accessories therein worth P15,000.00.
In 1981, Elisco Tool ceased operations, as a result of which private respondent Rolando Lantan was laid off. Nonetheless, as
of December 4, 1984, private respondent was able to make payments for the car in the total amount of P61,070.94.
On June 6, 1986, petitioner filed a complaint, entitled replevin plus sum of money, against private respondent Rolando
Lantan, his wife Rina, and two other persons, identified only as John and Susan Doe, before the Regional Trial Court of Pasig,
Metro Manila. Petitioner alleged that private respondents failed to pay the monthly rentals which, as of May 1986,
totalled P39,054.86; that despite demands, private respondents failed to settle their obligation thereby entitling petitioner to the
possession of the car; that petitioner was ready to post a bond in an amount double the value of the car, which was P60,000; and
that in case private respondents could not return the car, they should be held liable for the amount of P60,000 plus the accrued
monthly rentals thereof, with interest at the rate of 14% per annum, until fully paid. Petitioners complaint contained the
following prayer:
WHEREFORE, plaintiffs prays that judgment be rendered as follows:
ON THE FIRST CAUSE OF ACTION
Ordering defendant Rolando Lantan to pay the plaintiff the sum of P39,054.86 plus legal interest from the date of demand until
the whole obligation is fully paid;
ON THE SECOND CAUSE OF ACTION
To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly described in paragraph 3 of the
Complaint, from defendant Rolando Lantan and/or defendants Rina Lantan, John Doe, Susan Doe and other person or persons in
whose possession the said motor vehicle may be found, complete with accessories and equipment, and direct deliver thereof to
plaintiff in accordance with law, and after due hearing to confirm said seizure and plaintiffs possession over the same;
ON THE ALTERNATIVE CAUSE OF ACTION
In the event that manual delivery of the subject motor vehicle cannot be effected for any reason, to render judgment in favor of
plaintiff and against defendant Rolando Lantan ordering the latter to pay the sum of SIXTY THOUSAND PESOS (P60,000.00)
which is the estimated actual value of the above-described motor vehicle, plus the accrued monthly rentals thereof with interests
at the rate of fourteen percent (14%) per annum until fully paid;
PRAYER COMMON TO ALL CAUSES OF ACTION
1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to twenty-five percent (25%) of his
outstanding obligation, for and as attorneys fees;
2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees and other incidental expenses to
be proved during the trial; and
3. Ordering defendants to pay the costs of suit.
Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable under the premises.
Upon petitioners posting a bond in the amount of P120,000, the sheriff took possession of the car in question and after five
(5) days turned it over to petitioner.
[4]

In due time, private respondents filed their answer. They claimed that the agreement on which the complaint was based
had not been signed by petitioners representative, Jose Ma. S. del Gallego, although it had been signed by private respondent
Rolando Lantan; that their true agreement was to buy and sell and not lease with option to buy the car in question at a
monthly amortization of P1,000; and that petitioner accepted the installment payments made by them and, in January 1986,
agreed that the balance of the purchase price would be paid on or before December 31, 1986. Private respondents cited the
provision of the agreement making respondent Rolando Lantan liable for the expenses for registration, insurance, repair and
maintenance, gasoline, oil and part replacements, inclusive of all necessary expenses, as evidence that the transaction was one of
sale. Private respondents further alleged that, in any event, petitioner had waived its rights under the agreement because of the
following circumstances: (a) while the parties agreed that payment was to be made through salary deduction, petitioner accepted
payments in cash or checks; (b) although they agreed that upon the employees resignation, the car should be returned to the
employer, private respondent Rolando Lantan was not required to do so when he resigned in September 1982; (c) petitioner did
not lease the vehicle to another employee after private respondent Rolando Lantan had allegedly failed to pay three monthly
rentals; and (d) petitioner failed to enforce the manner of payment under the agreement by its acceptance of payments in
various amounts and on different dates.
In its reply, petitioner maintained that the contract between the parties was one of lease with option to purchase and that
the promissory note was merely a nominal security for the agreement. It contended that the mere acceptance of the amounts
paid by private respondents and for indefinite periods of time was not evidence that the parties agreement was one of purchase
and sale. Neither was it guilty of laches because, under the law, an action based on a written contract can be brought within ten
(10) years from the time the action accrues. On August 31, 1987, the trial court
[5]
rendered its decision.
The trial court sustained private respondents claim that the agreement in question was one of sale and held that the latter
had fully paid the price of the car having paid the total amount of P61,070.94 aside from installing accessories in the car worth
P15,000.00. Said the trial court:
Plaintiff now comes claiming ownership of the car in question and has succeeded in repossessing the same by virtue of the writ
of seizure issued in this case on July 29, 1986. Not content with recovering possession of the said car, plaintiff still asks that
defendants should pay it the sum of P39,054.86, allegedly representing the rentals due on the car from the time of the last
payment made by defendants to its repossession thereof. This is indeed a classic case of one having his cake and eating it
too! Under the Recto law (Arts. 1484 & 1485, Civil Code), the vendor who repossesses the goods sold on installments, has no
right to sue the vendee for the unpaid balance thereof.
The Court can take judicial notice of the practice wherein executives enjoy car plans in progressive companies. The agreement of
January 9, 1980 between the parties is one such car plan. If defendant Rolando Lantan failed to keep up with his amortizations
on the car in question, it was not because of his own liking but rather he was pushed to it by circumstances when his employer
folded up and sent him to the streets. That plaintiff was giving all the chance to defendants to pay the value of the car and
acquire full ownership thereof is shown by the delay in instituting the instant case. . . .
The court likewise found that the amount of P61,070.94 included a 2% penalty for late payments for which there was no
stipulation in the agreement:
. . . The agreement and defendant Rolando Lantans promissory note of January 9, 1980 do not provide even for interest on the
remaining balance of the purchase price of the car. This privilege extended by corporations to their top executives is considered
additional emolument to them. And so the reason for the lack of provision for interest, much less penalty charges. Therefore, all
payments made by defendant should be applied to the principal account. Since the principal was only P60,639.00, the
defendants have made an overpayment of P431.94 which should be returned to defendant by plaintiff.
For this reason, it ordered petitioner to pay private respondents the amount of P431.94 as excess payment, as well as rentals at
the rate of P1,000 a month for depriving private respondents of the use of their car, and moral damages for the worry,
embarrassment, and mental torture suffered by them on account of the repossession of the car.
The dispositive portion of the trial courts decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of defendants and against plaintiff, dismissing plaintiffs complaint; declaring
defendants the lawful owners of that Colt Lancer 2-door, Model 1979 with Serial No. 3403 under Registration Certificate No.
0526558; ordering plaintiff to deliver to defendants the aforesaid motor vehicle complete with all the accessories installed therein
by defendants; should for any reason plaintiff is unable to deliver the said car to defendants, plaintiff is ordered to pay to
defendants the value of said car in the sum of P60,639.00 plus P15,000.00, the value of the accessories, plus interest of 12% on
the said sums from August 6, 1986; and sentencing plaintiff to pay defendants the following sums:
a) P12,431.94 as actual damages broken down as follows:
1) P431.94 overpayment made by defendants to plaintiff; and
2) P12,000.00 rental on the car in question from August 6, 1986 to August 5, 1987, plus the sum of P1,000.00 a month beginning
August 6, 1987 until the car is returned by plaintiff to, and is received by, defendant;
b) the sum of P20,000.00 as moral damages;
c) the sum of P5,000.00 as exemplary damages; and
d) the sum of P5,000.00 as attorneys fees.
Costs against the plaintiff.
SO ORDERED.
Petitioner appealed to the Court of Appeals. On the other hand, private respondents filed a motion for execution pending
appeal. In its resolution of March 9, 1989, the Court of Appeals granted private respondents motion and, upon the filing of a
bond, in the amount of P70,000.00, it issued a writ of execution, pursuant to which the car was delivered to private respondents
on April 16, 1989.
[6]

On August 26, 1992, the Court of Appeals rendered its decision, affirming in toto the decision of the trial court. Hence, the
instant petition for review on certiorari.
Petitioner contends that the Court of Appeals erred -
(a) in disregarding the admission in the pleadings as to what documents contain the terms of the parties agreement.
(b) in holding that the interest stipulation in respondents Promissory Note was not valid and binding.
(c) in holding that respondents had fully paid their obligations.
It further argues that -
On the assumption that the Lease Agreement with option to buy in this case may be treated as a sale on installments, the
respondent Court of Appeals nonetheless erred in not finding that the parties have validly agreed that the petitioner as seller
may [i] cancel the contract upon the respondents default on three or more installments, *ii+ retake possession of the personalty,
and [iii] keep the rents already paid.
First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in question under a car plan for
executives of the Elizalde group of companies. Under a typical car plan, the company advances the purchase price of a car to be
paid back by the employee through monthly deductions from his salary. The company retains ownership of the motor vehicle
until it shall have been fully paid for.
[7]
However, retention of registration of the car in the companys name is only a form of a
lien on the vehicle in the event that the employee would abscond before he has fully paid for it. There are also stipulations in car
plan agreements to the effect that should the employment of the employee concerned be terminated before all installments are
fully paid, the vehicle will be taken by the employer and all installments paid shall be considered rentals per agreement.
[8]

This Court has long been aware of the practice of vendors of personal property of denominating a contract of sale on
installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the
price is fully paid. As this Court noted in Vda. de Jose v. Barrueco:
[9]

Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one
reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the
buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments
since the due payment of the agreed amount results, by the terms of the bargain, in the transfer of title to the lessee.
In an earlier case, Manila Gas Corporation v. Calupitan,
[10]
which involved a lease agreement of a stove and a water heater,
the Court said:
. . . [W]e are of the opinion, and so hold, that when in a so-called contract of lease of personal property it is stipulated that the
alleged lessee shall pay a certain amount upon signing the contract, and on or before the 5
th
of every month, another specific
amount, by way of rental, giving the alleged lessee the right of option to buy the said personal property before the expiration of
the period of lease, which is the period necessary for the payment of the said amount at the rate of so much a month, deducting
the payments made by way of advance and alleged monthly rentals, and the said alleged lessee makes the advance payment and
other monthly installments, noting in his account and in the receipts issued to him that said payments are on account of the
price of the personal property allegedly leased, said contract is one of sale on installment and not of lease.
[11]

In U.S. Commercial v. Halili,
[12]
a lease agreement was declared to be in fact a sale of personal property by installment. Said
the Court:
[13]

. . . There can hardly be any question that the so-called contracts of lease on which the present action is based were veritable
leases of personal property with option to purchase, and as such come within the purview of the above article [Art. 1454-A of the
old Civil Code on sale of personal property by installment+. In fact the instruments (exhibits `A and `B) embodying the contracts
bear the heading or title `Lease-Sale (Lease-Sale of Transportation and/or Mechanical Equipment). The contracts fix the value of
the vehicles conveyed to the lessee and expressly refer to the remainder of said value after deduction of the down payment
made by the lessee as `the unpaid balance of the purchase price of the leased equipment. The contracts also provide that upon
the full value (plus stipulated interest) being paid, the lease would terminate and title to the leased property would be
transferred to the lessee. Indeed, as the defendant-appellant points out, the inclusion of a clause waiving benefit of article 1454-
A of the old Civil Code is conclusive proof of the parties understanding that they were entering into a lease contract with option
to purchase which come within the purview of said article.
Being leases of personal property with option to purchase as contemplated in the above article, the contracts in question are
subject to the provision that when the lessor in such case has chosen to deprive the lessee of the enjoyment of such personal
property, he shall have no further action against the lessee for the recovery of any unpaid balance owing by the latter,
agreement to the contrary being null and void.
It was held that in choosing to deprive the defendant of possession of the leased vehicles, the plaintiff waived its right to bring
an action to recover unpaid rentals on the said vehicles.
In the case at bar, although the agreement provides for the payment by private respondents of monthly rentals, the fifth
paragraph thereof gives them the option to purchase the motor vehicle at the end of the 5
th
year or upon payment of the
60
th
monthly rental when all monthly rentals shall be applied to the payment of the full purchase price of the car. It is clear that
the transaction in this case is a lease in name only. The so-called monthly rentals are in truth monthly amortizations on the price
of the car.
Second. The contract being one of sale on installment, the Court of Appeals correctly applied to it the following provisions
of the Civil Code:
ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of
the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendees failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendees failure to pay
cover two or more installments. In this case, he shall have no further action against the purchaser to recover any
unpaid balance of the price. Any agreement to the contrary shall be void.
ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy,
when the lessor has deprived the lessee of the possession or enjoyment of the thing.
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the
others.
[14]
This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of Art.
1485.
[15]
The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of
applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover possession of
movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the vehicle on August 6,
1986 and thereby deprived private respondents of its use.
[16]
The car was not returned to private respondent until April 16, 1989,
after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ of execution.
[17]

Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that they were supposed to
pay as of May 1986, plus interest at the legal rate.
[18]
At the same time, it prayed for the issuance of a writ of replevin or the
delivery to it of the motor vehicle complete with accessories and equipment.
[19]
In the event the car could not be delivered to
petitioner, it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount of P60,000.00, the
estimated actual value of the car, plus accrued monthly rentals thereof with interests at the rate of fourteen percent (14%) per
annum until fully paid.
[20]
This prayer of course cannot be granted, even assuming that private respondents have defaulted in
the payment of their obligation. This led the trial court to say that petitioner wanted to eat its cake and have it too.
Notwithstanding this impossibility in petitioners choice of remedy, this case should be considered as one for specific
performance, pursuant to Art. 1484(1), consistent with its prayer with respect to the unpaid installments as of May 1986. In this
view, the prayer for the issuance of a writ of replevin is only for the purpose of insuring specific performance by private
respondents.
Both the trial court and the Court of Appeals correctly ruled that private respondents could no longer be held liable for the
amounts of P39,054.86 or P60,000.00 because private respondents had fulfilled their part of the obligation. The agreement does
not provide for the payment of interest on unpaid monthly rentals or installments because it was entered into in pursuance of a
car plan adopted by the company for the benefit of its deserving employees. As the trial court correctly noted, the car plan was
intended to give additional benefits to executives of the Elizalde group of companies.
Petitioner contends that the promissory note provides for such interest payment. However, as the Court of Appeals held:
The promissory note in which the 2% monthly interest on delayed payments appears does not form part of the contract. There is
no consideration for the promissory note. There is nothing to show that plaintiff advanced the purchase price of the vehicle for
Lantan so as to make the latter indebted to the former for the amount stated in the promissory note. Thus, as stated in the
complaint: That sometime in January, 1980, defendant Rolando Lantan entered into an agreement with the plaintiff for the
lease of a motor vehicle supplied by the latter, with the option to purchase at the end of the period of lease . . . . In other words,
plaintiff did not buy the vehicle for Rolando Lantan, advancing the purchase price for that purpose. There is nothing in the
complaint or in the evidence to show such arrangement. Therefore, there was no indebtedness secured by a promissory note to
speak of. There being no consideration for the promissory note, the same, including the penalty clause contained thereon, has
no binding effect.
[21]

There is no evidence that private respondents received the amount of P60,639.00 indicated in the promissory note as its
value. What was proven below is the fact that private respondents received from petitioner the 2-door Colt Lancer car which was
valued at P60,000 and for which private respondent Rolando Lantan paid monthly amortizations of P1,010.65 through salary
deductions.
Indeed, as already stated, private respondents default in paying installments was due to the cessation of operations
of Elizalde Steel Corporation, petitioners sister company. Petitioners acceptance of payments made by private respondents
through cash and checks could have been impelled solely by petitioners inability to deduct the amortizations from private
respondent Rolando Lantans salary which he stopped receiving when his employment was terminated in September 1982.
Apparently, to minimize the adverse consequences of the termination of private respondents employment, petitioner accepted
even late payments. That petitioner accepted payments from private respondent Rolando Lantan more than two (2) years after
the latters employment had been terminated constitutes a waiver of petitioners right to collect interest upon the delayed
payments. The 2% surcharge is not provided for in the agreement. Its collection by the company would in fact run counter to
the purpose of providing added emoluments to its deserving employees. Consequently, the total amount of P61,070.94
already paid to petitioner should be considered payment of the full purchase price of the car or the total installments paid.
Third. Private respondents presented evidence that they felt bad, were worried, embarrassed and mentally tortured by the
repossession of the car.
[22]
This has not been rebutted by petitioner. There is thus a factual basis for the award of moral
damages. In addition, petitioner acted in a wanton, fraudulent, reckless and oppressive manner in filing the instant case, hence,
the award of exemplary damages is justified.
[23]
The award of attorneys fees is likewise proper considering that private
respondents were compelled to incur expenses to protect their rights.
[24]

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with costs against petitioner.
SO ORDERED.
Bellosillo (Chairman), Puno, Quisumbing and Buena, JJ., concur.
PEOPLES INDUSTRIAL AND COMMERCIAL CORPORATION, petitioner, vs. COURT OF APPEALS AND MAR-ICK
INVESTMENT CORPORATION,respondents.
D E C I S I O N
ROMERO, J.:
This petition for review on certiorari of the Decision
[1]
of the Court of Appeals arose from the complaint for accion
publiacana de posesion over several subdivision lots that was premised on the automatic cancellation of the contracts to sell
those lots.
Private respondents Mar-ick Investment Corporation is the exclusive and registered owner of Mar-ick Subdivision in Barrio
Buli, Cainta, Rizal. On May 29, 1961, private respondents entered into six (6) agreements with petitioner Peoples Industrial and
Commercial Corporation whereby it agreed to sell to petitioner six (6) subdivision lots.
[2]
Except for Lot No. 8 that has an area of
253 square meters, all the lots measure 240 square meters each. Five of the agreements, involving Lots. Nos. 3, 4, 5, 6 and 7,
similarly stipulate that the petitioner agreed to pay private respondents for each lot, the amount of P 7,333.20 with a down
payment of P 480.00. The balance of P 6,853.20 shall be payable in 120 equal monthly installments of P 57.11 every 30
th
of the
month, for a period of ten years. With respect to Lot No. 8, the parties agreed to the purchase price of P7,730.00. With a down
payment of P506.00 and equal monthly installments of P60.20.
All the agreements have the following provisions:
9. Should the PURCHASER fail to make the payment of any of the monthly installments as agreed herein, within One Hundred
Twenty (120) days from its due date, this contract shall, by the mere fact of nonpayment, expire by it self and become null and
void without necessity of notice to the PURCHASER or of any judicial declaration to the effect, and any and all sums of money
paid under this contract shall be considered and become rentals on the property, and in this event, the PURCHASER should
he/she be in possession of the property shall become a mere intruder or unlawful detainer of the same and may be ejected
therefrom by means provided by law for trespassers or unlawful detainers. Immediately after the expiration of the 120 days
provided for in this clause, the OWNER shall be at liberty to dispose of and sell said parcel of land to any other person in the
same manner as if this contract had never been executed or entered into.
The breach by the PURCHASER of any of the conditions considered herein shall have the same effect as non-payment of the
installments of the purchase price.
In any of the above cases the PURCHASER authorizes the OWNER or her representative to enter into the property to take
possession of the same and take whatever action is necessary or advisable to protect its rights and interest in the property , and
nothing that may be done or made by the PURCHASER shall be considered as revoking this authority or a denial thereof.
[3]

After the lapse of ten years, however, petitioner still had not fully paid for the six lots; It had paid only the down payment
and eight (8) installments, even after private respondents had given petitioner a grace period of four months to pay the
arrears.
[4]
As of May 1, 1980, the total amount due to private respondents under the contract was P214,418.00.
[5]

In this letter of March 30, 1980 to Mr. Tomas Siatianum (Siatianun) who signed the agreements for petitioner, private
respondents counsel protested petitioners encroachment upon a portion of its subdivision particularly Lots Nos. 2, 3, 4, 5, 6, 7,
and 8. A portion of the letter reads:
Examinations conducted on the records of said lots revealed that you once contracted to purchase said lots but your contracts
were cancelled for non-payment of the stipulated installments.
Desirous of maintaining good and neighborly relations with you, we caused to send you this formal demand for you to remove
your said wall within fifteen (15) days from your receipt hereof, otherwise, much to our regret, we shall be constrained to seek
redress before the courts and at the same time charge you with reasonable rentals for the use said lots at the rate of One (P1.00)
Peso per square meter per month until you shall have finally removed said wall.
[6]

Private respondent reiterated its protest against the encroachment in a letter dated February 16, 1981.
[7]
It added that
petitioner had failed to abide by its promise to remove the encroachment, or to purchase the lots involved at the current price
or pay the rentals on the basis of the total area occupied, all within a short period of time. It also demanded the removal of the
illegal constructions on the property that had prejudiced the subdivision and its neighbors.
After a series of negotiations between the parties, they agreed to enter into a new contract to sell
[8]
involving seven (7) lots,
namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8, with a total area of 1,693 square meters. The contract stipulates that the previous
contracts involving the same lots (actually minus Lot No.2) have been cancelled due to the failure of the PURCHASER to pay the
stipulated installments. It states further that the new contract was entered into to avoid litigation, considering that the
PURCHASER has already made use of the premises since 1981 to the present without paying the stipulated installments. The
parties agreed that the contract price would be P423,250.00 with a down payment of P42,325.00 payable upon the signing of the
contract and the balance of P380,925.00 payable in forty-eight (48) equal monthly amortization payments of P7,935.94.
The new contract bears the date of October 11, 1983 but neither of the parties signed it. Thereafter, Tomas Siatianum
issued the following checks in the total amount of P37,642.72 to private respondent: (a) dated March 4, 1984 for P10,000.00; (b)
dated March 31, 1984 for P10,000.00; (c) dated April 30, 1984 for P 10,000.00 ; (d) dated May 31, 1984 for P 7,079.00, and (e)
dated May 31, 1984 for P563.72.
[9]

Private respondent received but did not encash those checks. Instead, on July 12, 1984 it filed in the Regional Trial Court of
Antipolo, Rizal, a complaint for accion publicianan de posesionagainst petitioner and Tomas Siatianum, as president and majority
stockholder of petitioner.
[10]
It prayed that petitioner be ordered to removed the wall on the premises and to surrender in
possession of lots Nos. 2 to 8 of Block 11 of the Mar-ick subdivision, and that petitioner and Tomas Siatianum be ordered to pay:
(a) P259,074.00 as reasonable rentals for the use of the lots from 1961, plus P1,680,074.00 per month from July 1, 1984 up to
and until the premises shall have been vacated and the wall demolished; (b) P10,000.00 as attorneys fees; (c) moral and
exemplary damages, and (d)costs of suit. In the alternative , the complaint prayed that should the agreements be deemed not
automatically cancelled, the same agreements should be declared null and void.
In due course, the lower court
[11]
rendered a decision finding that the original agreements of the parties were validly
cancelled in accordance with provision No.9 of each agreement. The parties did not enter into a new contract in accordance with
Art. 1403 (2) of the Civil Code as the parties did not sign the draft contract. Receipt by private respondent of the five checks
could not amount to perfection of the contract because private respondent never encash and benefited from those
checks. Furthermore, there was no meeting of the minds between the parties because Art 1475 of the Civil Code should be read
with the Statute of Frauds that requires the embodiment of the contract in a note or memorandum.
The lower court opined that the checks represented the deposit under the new contract because petitioner failed to prove
that those were monthly installments that private respondent refused to accept. What petitioner prove instead was the fact that
it was not able to pay the rest of the installments because of a strike, fire and storm that affected its operations. Be that is as it
may, what was clearly proven was that both parties negotiated a new contract after the termination of the first. Thus, the fact
that the parties tried to negotiate a new contract indicated that they considered that first contract as already cancelled.
With respect to petitioners allegation on a "free right-of-way constituted on Lot No. 2, the lower court found that the
agreement thereon was oral and not in writing. As such, it was not in accordance with Art. 749 of the Civil Code requiring that,
to be valid, a donation must be in a public document. Consequently, because of the principle against unjust enrichment,
petitioner must pay rentals for the occupancy of the property. The lower court disposed of the case as follows:
IN VIEW OF ALL THE FOREGOING, Defendant Corporation is hereby directed to return subjects Nos. 2, 3, 4, 5, 6, 7, and 8 to
Plaintiff Corporation, and to pay the latter the following amounts:
1. reasonable rental of P1.00 per square meter per month from May 29,1961, for Lots Nos. 3, 4, 5, 6, 7, and 8, and from
July 21, 1984, for lot No. 2, up to the date they will vacate said lots. The amount ofP4,735.21 (Exhibit R) already
paid by defendant corporation to plaintiff corporation for the six (6) lots under the original contracts shall be
deducted from the said rental;
2. attorneys fees in the amount of P10,000.00; and
3. costs of the suit.
SO ORDERED."
Petitioner elevated the case to the Court of Appeals. However, or October 16, 1992, the Court of Appeals
affirmed in toto the lower courts decision. Petitioners motion for reconsideration having been denied, it instituted the instant
petition for review on certiorari raising the following issues for resolution:
(1) whether or not the lower court had jurisdiction over the subject matter of the case in view of the provisions of
Republic Act No. 6552 and Presidential Decree No. 1344;
(2) whether or not there was a perfected and enforceable contract of sale (sic) on October 11, 1983 which modified the
earlier contracts to sell which had not been validly rescinded;
(3) whether or not there was a valid grant of right of way involving Lot No. 2 in favor of petitioner; and
(4) whether or not there was justification for the grant of rentals and the award of attorneys fees in favor of private
respondent.
[12]

The issue of jurisdiction has been precluded by the principle of estoppel. It is settled that lack of jurisdiction may be
assailed at any stage of the proceedings. However, a partys participation therein the issue.
[13]
Petitioner undoubtedly has
actively participated in the proceedings from its inception to date. In its answer to the complaint, petitioner did not assail the
lower court jurisdiction ; instead, it prayed for affirmative relief.
[14]
Even after the lower court had decided against it, petitioner
continued to affirm the lower courts jurisdiction by elevating the decision to the appellate court,
[15]
hoping to obtain a favorable
decision but the Court Of Appeals affirmed the court a quos ruling. Then and only then did petitioner raise the issue of
jurisdiction-in its motion for reconsideration of the appellate courts decision. Such a practice, according to
Tijam v. Sibonghanoy,
[16]
cannot be countenanced for reasons of public policy.
Granting, however, that the issue was raised seasonably at the first opportunity, still, petitioner has incorrectly considered as
legal bases for its position on the issue of jurisdiction the provisions of P.D. Nos. 957 and 1344 and Republic Act No. 6552 P.D.
No. 957, the Subdivision and Condominium Buyers Protective Decree which took effect upon its approval on July 12, 1976, vest
upon the National Housing Authority (NHA) exclusive jurisdiction to regulate the real estate trade and business in accordance
with the provisions of the same decree.
[17]
P.D. No. 1344, issued on April 2, 1978, empowered the National Housing Authority to
issue a writ of execution in the enforcement of its decisions under P.D. No. 957.
These decrees, however, were not yet in existence when private respondents invoked provision No. 9 of the agreements of
contracts to sell and cancelled these in October 1971.
[18]
Article 4 of the Civil Code provides that laws shall have no retroactive
effect unless the contrary is provided. Thus, it is necessary that an express provision for its retroactive application must be made
in law.
[19]
There being no such provision in both P.D. Nos. 957 and 1344, these decrees cannot be applied to a situation that
occurred years before their promulgation. Moreover, granting that said decreed indeed provide for a retroactive application,
still, these may not applied in this case.
The contracts to sell of 1961 were cancelled in virtue of provision No. 9 thereof to which the parties voluntarily bound
themselves. In Manila Bay Club Corp. v. Court of Appeals,
[20]
this Court interpreted as requiring mandatory compliance by the
parties, a provision in a lease contract that failure or neglect to perform or comply with any of the covenants, conditions,
agreements or restrictions stipulated shall result in the automatic termination and cancellation of the lease. The Court added:
x x x . Certainly, there is nothing wrong if the parties to the lease contract agreed on certain mandatory provisions concerning
their respective rights and obligations, such as the procurement of insurance and the rescission clause. For it is well to recall that
contracts are respected as thelaw between the contracting parties, and they may establish such stipulations, clauses, terms and
conditions as they may want to include. As long as such agreements are not contrary to law, moral, good customs, public policy
or public order they shall have the force of law between them.
Consequently, when petitioner failed to abide by its obligation to pay the installments in accordance with the contracts to
sell, provision No. 9 automatically took effect. That private respondent failed to observe Section 4 of Republic Act No. 6552,
the Realty installment Buyer Protection Act, is if no moment. That section provides that (I)f the buyers fails to pay the
installment due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. Private respondents
cancellation of the agreements without a duly notarized demand for rescission did not mean that it violated said provision of
law. Republic Act No. 6552 was approved on August 26, 1972, long after provision No.9 of the contracts to sell had become
automatically operational. As with P.D. Nos. 957 and 1344, Republic act No. 6552 does not expressly provide for its retroactive
application and, therefore, it could not have encompassed the cancellation of the contracts to sell in this case.
At this juncture, it is apropos to stress that the 1961 agreements are contracts to sell and not contracts of sale. The
distinction between these contracts is graphically depicted in Adelfa Properties, Inc. v. Court of Appeals,
[21]
as follows:
x x x . The distinction between the two is important for in a contract of sale, the title passes to the vendee upon the delivery of
the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor is not to pass until the full payment of the price. In a contract of sale, the
vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas, in a contract to
sell, title is retained by the vendor until the full payment of the price , such payment being a positive suspensive condition and
failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming
effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the
property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally
resolve the contract the moment the buyer fails to pay within a fixed period.
That the agreements of 1961 are contracts to sell is clear from the following provisions thereof:
3. Title to said parcel of land shall remain in the name of the OWNER until complete payment by the PURCHASER of all
obligations herein stipulated, at which time the OWNER agrees to execute a final deed of sale in favor of the PURCHASER and
cause the issuance of a certificate of title in the name of the latter, free from liens and encumbrances except those provided in
the Land Registration Act, those imposed by the authorities, and those contained in Clauses Nos. Five (5) and Six (6) of this
agreement.
x x x x x x x x x.
4. The PURCHASER shall be deemed for all purpose to take possession of the parcel of land upon payment of the down or first
payment; provided, however, that his/her possession under this section shall be only of the that of a tenant or lessee and subject
to ejectment proceeding during all the period of this agreement.
5.The parcel of land subject of this agreement shall be used by the PURCHASER exclusively for legal purposes, and he shall not
be entitled to take or remove soil, stones, or gravel from it or any other lots belonging to the owner.
Hence, being contracts to sell, article 592 of the Civil Code which requires rescission either by judicial action or notarial act is not
applicable.
[22]

Neither may petitioner claim ignorance of the cancellation of the contracts. Aside from his letters of March 30, 1980 and
February 16, 1981, private respondents counsel. Atty. Manuel Villamor, had sent petitioner other formal protest and
demands.
[23]
These letters adequately satisfied the notice requirement stipulated in provision No.9 of the contracts to sell. If
petitioner had not agreed to the automatic and extrajudicial cancellation of the contracts, it could have gone to court to impugn
the same but it did not. Instead, it sought to enter into a new contract to sell, thereby confirming its veracity and validity of the
extrajudicial rescission.
[24]
Had not private respondent filed the accion publiciana de posesion, petitioner would have remained
silent about the whole situation. It is now estopped from questioning the validity of the cancellation of the contracts. An
unopposed rescission of a contract has a legal effects.
[25]

Petitioners reliance on the portion of the Court of Appeals Decision stating that private respondent had not made known
to petitioner its supposed rescission of the contract,
[26]
is misplaced. Moreover, it quoted only the portion that appears favorable
to its case. To be sure, the Court of Appeals quoted provision No. 9 which requires that actual cancellation shall take place
thirty days from receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act and
upon full payment of the cash surrender value, and added that R.A. 6552 even more underscored the indispensability of such
notice to the defaulting buyer. However, the same appellate court continued:
The absence of the aforesaid notice in the case at bar in the forms respectively deemed efficacious before and after the passage
of R.A. 6552 does not, however, necessarily impress merit in the appellants position. Extrajudicial rescission, after all, has legal
effect where the other party does not oppose it (Zulueta vs. Mariano, 111 SCRA 206; Nera vs. Vacante, 3 SCRA 505; Magdalena
Estate vs. Myrick, 71 Phil.344). Where it is objected to, a judicial determination of the issue is still necessary. In other words
resolutions of reciprocal contracts maybe made extrajudicially unlesssuccess fully impugned in court. If the debtor impugns the
declaration it shall be subject to judicial determination (Jison vs. court of Appeals,164 SCRA 339, citing Palay Inc. vs. Clave, supra;
Univ. of the Philippines vs. Angeles , supra). In its July 5, 1984 complaint, the appellee had, in fact, significantly prayed for the
cancellation of the said sales agreement in the alternative (p. 4, orig. rec.)
[27]
(Italics supplied.)
Moreover, private respondents act of cancelling the contracts to sell was not done arbitrarily. The record shows that private
respondent dealt with petitioner with admirable patience, probably in view of the strike, the fire in 1968 that burned petitioners
factory, and the typhoon in 1970.
[28]
It exercised its contractual authority to cancel the agreements only after petitioner had
reneged in its obligation after paying only eight (8) installments. When the contracts matured, it still gave petitioner a grace
period of four (4) months within which to comply with its obligations. It considered the contracts cancelled only as of October
1971 or several years after petitioners last installment payment
[29]
and definitely more than ten years after the agreements were
entered into.
Because the contracts to sell had long been cancelled when private respondents filed the accion publiciana de posesion on
July 12, 1984, it was the proper Regional Trial Court that had jurisdiction over the case. By then, there was no more installment
buyer and seller relationship to speak of. It had been recuded to a mere case of an owner claiming possession of its property
that had long been illegally withheld from it by another.
Petitioner alleges that there was a new perfected and enforceable contract of sale" between the parties in October 1983 for
two reasons. First, it paid private respondent the down payment or deposit of Contract
[30]
through the five checks. Second, the
receipt signed by private respondents representatives satisfies the requirement of a note or memorandum under Article 1403
(2) of the Civil Code because it states the object of the contract (six lots of Mar-Ick Subdivision measuring 1,453 square meters),
the price (P250.00 per square meter with a down payment of 10% or P 37,542.72), and the receipt itself opens with a statement
referring to the purchase of the six lots of Mar-Ick Subdivision.
[31]

The contract of October 1983 which respondents offered in evidence as Exhibit S, is entitled CONTRACT TO SELL. While
the title of a contract is not controlling, its stipulations confirm the nature of that contract. Thus, it provides:
5. Title to said parcels of land shall remain in the name of the OWNER until complete payment by the PURCHASER of all
obligations herein stipulated, at which time, the OWNER agrees to execute a final deed of sale in favor of the PURCHASER and
cause the issuance of certificates of title in the name of the latter, free from all liens and encumbrances except those provided in
the Land Registration Act, those imposed by the authorities, and those contained in the stipulation that follow.
Under the law, there is a binding contract between the parties whose minds met on a certain matter notwithstanding that
they did not affix their signature to its written form.
In the case at the bar, it was private respondents company lawyer and sole witness, Atty. Manuel Villamayor, who
volunteered that after the cancellation of the 1961 agreements, the parties should negotiate and enter into a new agreement
based on the current price or at P400.00 per square meter. However, there was a hitch in the negotiations because after he had
drafted the contract and sent it to the petitioner, the latter deposited a check for down payment but its representative refused
to sign the prepared contract.
[32]
Private respondent even offered the contract to sell as its Exhibit S.
[33]
In the absence of proof to
the contrary, this draft contract may be deemed to embody the agreement of the parties. Moreover, when Tomas Siatianun,
petitioner president, testified, private respondent cross-examined him as regards to the October 1983 contract.
[34]
Private
respondents did not and has not denied the existence of that contract.
Under these facts, therefore, the parties may ideally be considered as having perfected the contract of October 1983. Again
in Adelfa Properties, Inc. v. Court of Appeals, the Court said that
x x x a contract, like a contract to sell, involves a meeting of the minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service. Contracts, in general, are perfected by mere consent, which is
manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute.
[35]

Moreover, private respondents offer to sell and petitioners acceptance thereof are manifest in the documentary evidence
presented the (5) checks
[36]
that, through Atty. Villamayor, it admitted as the down payment under the October 1983
contract. Private respondents intentional non- encashment of the check cannot serve to belie the fact of its tender as down
payment. For its part, petitioner presented Exhibit 10, a receipt dated February 28, 1984, showing that private respondents
authorized representative received the total amount of P37,642.72 represented by said five checks as deposit of Contract
(sic). As this Court also held in the Adelfa Properties case, acceptance may be evidenced by some acts or conduct
communicated to the offeror, either in a formal or an informal manner, that clearly manifest the intention of determination to
accept the offer to buy or sell.
[37]

Justice and equity, however, will not be served by a positive ruling on the perfection and performance of the contract to
sell. There are facts on record proving that, after all, the parties had not arrived at a definite agreement. By Atty. Villamayors
admission, the checks were not encashed because Tomas Siatianun did not sign the draft contract that he had prepared.
[38]
On
his part, Tomac Siatianun explained that he did not sign the contract because it covered seven (7) lots while their agreement was
only for six (6) lots. According to him, private respondent had conceded that Lot No. 2 was meant for petitioners right of
way
[39]
and, therefore, it could not have been part of the properties it wanted to buy. It is on record, moreover, that the only
agreement that the parties arrived at in a conference at the Silahis Hotel was the price indicated in the draft contract.
[40]

The number of lots to be sold is a material component of the contract to sell. Without an agreement on the matter, the
parties may not in any way be considered as having arrived at a contract under the law. The parties failure to agree on a
fundamental provision of the contract was aggravated by petitioners failure to deposit the installments agreed upon. Neither
did it attempt to make a consignation of installments. This Courts disquisition on the matter in the Adelfa Properties case is
relevant. Thus:
The mere sending of a letter by the vendee expressing the intention to pay, without the accompanying payment, is not
considered a valid tender of payment. Besides, a mere tender of payment is not sufficient to compel private respondents to
deliver the property and execute the deed of absolute sale. It is consignation which is essential in order to extinguish petitioners
obligation to pay the balance of the purchase price. The rule is different in case of an option contract or in legal redemption or
in a sale with right to repurchase, wherein consignation is not necessary because this cases involves an exercise of a right
privilege (to buy, redeem, or repurchase) rather than the discharge of the obligation, hence tender of payment would be
sufficient to preserve the right or privilege. This is because the provision on consignation are not applicable when there is no
obligation to pay. A contract to sell, as in the case before us, involves the performance of an obligation, not merely the exercise
of the privilege or a right. Consequently, performance or payment may be effected not by tender of payment alone but by both
tender and consignation.
[41]
(Underscoring supplied.)
As earlier noted, petitioner did not lift a finger towards the performance of the contract other than the tender of down
payment. There is no record that it even bothered to tender payment of the installments or to amend the contract to reflect the
true intention of the parties as regards the number of lots to be sold. Indeed, by petitioners inaction, private respondents may
not be judicially enjoined to validate a contract that the former appeared to have taken for granted. As in the earlier
agreements, petitioner ignored opportunities to resuscitate a contract to sell that was rendered moribund and inoperative by its
inaction.
In view of the foregoing, there is no need to discuss the issue of whether or not there was a valid grant of right of way in
favor of the petitioners. Suffice it to say that the documentary evidence offered by the petitioner on the matter manifest that the
right of way on an unidentified property was granted in April 1961 by private respondents board of directors to W. Ick & Sons,
Inc. and Julian Martinez.
[42]
On May 12, 1961, Fritz Ick, the president of W. Ick & Sons, Inc., in turn indorsed the unidentified
property to petitioner.
[43]

What needs stressing is that the installment paid by the petitioner on the land should be deemed rentals in accordance with
provision No.9, as well as by law. Article 1486 of the Civil Code provides that a stipulation that the installments or rents paid
shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the
circumstances.
[44]
The down payment and the eight (8) installments paid by the petitioner on the six lots under the 1961
agreements amount to P5,672.00. The lots, including Lot No. 2, adjoins petitioners Vetsin and oil factories constructed on a
20,111-square-meter land that petitioner likewise bought from private respondent. Obviously, petitioner made use of the lots
not only the construction of the factories but also during its operations as an oil factory. Petitioner enclosed the area with a
fence and made construction thereon. It is, therefore, not unconscionable to allow respondents rentals on the lots are correctly
decreed by the lower court.
As to attorneys fees, Article 2208 of the Civil Code allows the award of such fees when its claimants is compelled to litigate
with third persons or to incur expenses to protect its just and valid claim. In view of petitioners rejection of private respondents
demands for rentals
[45]
and its unjustified refusal to settle private respondents claims,
[46]
the award of attorneys fees
of P10,000.00 is more than just and reasonable.
[47]

WHEREFORE, the instant petition for review on certiorari is hereby denied and the questioned Decision of the Court of
Appeals is AFFIRMED. This Decision is immediately executory. Cost against petitioner.
SO ORDERED.
Melo, Francisco, and Panganiban, JJ., concur.
Narvasa, C.J., (Chairman), on leave.