G.R. No.

124242 January 21, 2005

SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and
PACITA ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J.:
From a coaptation of the records of this case, it appears that
respondents Miguel Lu and Pacita Zavalla, (hereinafter, the Spouses
Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna
covered by TCT No. T-39022 and TCT No. T-39023 both measuring
15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels
of land to respondent Pablo Babasanta, (hereinafter, Babasanta) for
the price of fifteen pesos (P15.00) per square meter. Babasanta
made a downpayment of fifty thousand pesos (P50,000.00) as
evidenced by a memorandum receipt issued by Pacita Lu of the
same date. Several other payments totaling two hundred thousand
pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to
demand the execution of a final deed of sale in his favor so that he
could effect full payment of the purchase price. In the same letter,
Babasanta notified the spouses about having received information
that the spouses sold the same property to another without his
knowledge and consent. He demanded that the second sale be
cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she
acknowledged having agreed to sell the property to him at fifteen
pesos (P15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became due,
he requested for a reduction of the price and when she refused,
Babasanta backed out of the sale. Pacita added that she returned
the sum of fifty thousand pesos (P50,000.00) to Babasanta through
Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the
Regional Trial Court (RTC), Branch 31, of San Pedro, Laguna,
a Complaint for Specific Performance and Damages
1
against his co-
respondents herein, the Spouses Lu. Babasanta alleged that the
lands covered by TCT No. T- 39022 and T-39023 had been sold to
him by the spouses at fifteen pesos (P15.00) per square meter.
Despite his repeated demands for the execution of a final deed of
sale in his favor, respondents allegedly refused.
In their Answer,
2
the Spouses Lu alleged that Pacita Lu obtained
loans from Babasanta and when the total advances of Pacita
reached fifty thousand pesos (P50,000.00), the latter and Babasanta,
without the knowledge and consent of Miguel Lu, had verbally
agreed to transform the transaction into a contract to sell the two
parcels of land to Babasanta with the fifty thousand pesos
(P50,000.00) to be considered as the downpayment for the property
and the balance to be paid on or before 31 December 1987.
Respondents Lu added that as of November 1987, total payments
made by Babasanta amounted to only two hundred thousand pesos
(P200,000.00) and the latter allegedly failed to pay the balance of
two hundred sixty thousand pesos (P260,000.00) despite repeated
demands. Babasanta had purportedly asked Pacita for a reduction of
the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per
square meter and when the Spouses Lu refused to grant Babasantas
request, the latter rescinded the contract to sell and declared that
the original loan transaction just be carried out in that the spouses
would be indebted to him in the amount of two hundred thousand
pesos (P200,000.00). Accordingly, on 6 July 1989, they purchased
Interbank Managers Check No. 05020269 in the amount of two
hundred thousand pesos (P200,000.00) in the name of Babasanta to
show that she was able and willing to pay the balance of her loan
obligation.
Babasanta later filed an Amended Complaint dated 17 January
1990
3
wherein he prayed for the issuance of a writ of preliminary
injunction with temporary restraining order and the inclusion of the
Register of Deeds of Calamba, Laguna as party defendant. He
contended that the issuance of a preliminary injunction was
necessary to restrain the transfer or conveyance by the Spouses Lu
of the subject property to other persons.
The Spouses Lu filed their Opposition
4
to the amended complaint
contending that it raised new matters which seriously affect their
substantive rights under the original complaint. However, the trial
court in its Order dated 17 January 1990
5
admitted the amended
complaint.
On 19 January 1990, herein petitioner San Lorenzo Development
Corporation (SLDC) filed a Motion for Intervention
6
before the trial
court. SLDC alleged that it had legal interest in the subject matter
under litigation because on 3 May 1989, the two parcels of land
involved, namely Lot 1764-A and 1764-B, had been sold to it in a
Deed of Absolute Sale with Mortgage.
7
It alleged that it was a buyer
in good faith and for value and therefore it had a better right over
the property in litigation.
In his Opposition to SLDCs motion for intervention,
8
respondent
Babasanta demurred and argued that the latter had no legal interest
in the case because the two parcels of land involved herein had
already been conveyed to him by the Spouses Lu and hence, the
vendors were without legal capacity to transfer or dispose of the
two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed
SLDC to intervene. SLDC filed its Complaint-in-Intervention on 19
April 1990.
9
Respondent Babasantas motion for the issuance of a
preliminary injunction was likewise granted by the trial court in
its Order dated 11 January 1991
10
conditioned upon his filing of a
bond in the amount of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February
1989, the Spouses Lu executed in its favor anOption to Buy the lots
subject of the complaint. Accordingly, it paid an option money in the
amount of three hundred sixteen thousand one hundred sixty pesos
(P316,160.00) out of the total consideration for the purchase of the
two lots of one million two hundred sixty-four thousand six hundred
forty pesos (P1,264,640.00). After the Spouses Lu received a total
amount of six hundred thirty-two thousand three hundred twenty
pesos (P632,320.00) they executed on 3 May 1989
a Deed of Absolute Sale with Mortgage in its favor. SLDC added that
the certificates of title over the property were delivered to it by the
spouses clean and free from any adverse claims and/or notice of lis
pendens. SLDC further alleged that it only learned of the filing of the
complaint sometime in the early part of January 1990 which
prompted it to file the motion to intervene without delay. Claiming
that it was a buyer in good faith, SLDC argued that it had no
obligation to look beyond the titles submitted to it by the Spouses
Lu particularly because Babasantas claims were not annotated on
the certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July
1993 upholding the sale of the property to SLDC. It ordered the
Spouses Lu to pay Babasanta the sum of two hundred thousand
pesos (P200,000.00) with legal interest plus the further sum of fifty
thousand pesos (P50,000.00) as and for attorneys fees. On the
complaint-in-intervention, the trial court ordered the Register of
Deeds of Laguna, Calamba Branch to cancel the notice of lis
pendens annotated on the original of the TCT No. T-39022 (T-7218)
and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that
since both Babasanta and SLDC did not register the respective sales
in their favor, ownership of the property should pertain to the buyer
who first acquired possession of the property. The trial court
equated the execution of a public instrument in favor of SLDC as
sufficient delivery of the property to the latter. It concluded that
symbolic possession could be considered to have been first
transferred to SLDC and consequently ownership of the property
pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the
Court of Appeals alleging in the main that the trial court erred in
concluding that SLDC is a purchaser in good faith and in upholding
the validity of the sale made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals.
They contended that the trial court erred in failing to consider that
the contract to sell between them and Babasanta had been novated
when the latter abandoned the verbal contract of sale and declared
that the original loan transaction just be carried out. The Spouses Lu
argued that since the properties involved were conjugal, the trial
court should have declared the verbal contract to sell between
Pacita Lu and Pablo Babasanta null and void ab initio for lack of
knowledge and consent of Miguel Lu. They further averred that the
trial court erred in not dismissing the complaint filed by Babasanta;
in awarding damages in his favor and in refusing to grant the reliefs
prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered
its Decision
11
which set aside the judgment of the trial court. It
declared that the sale between Babasanta and the Spouses Lu was
valid and subsisting and ordered the spouses to execute the
necessary deed of conveyance in favor of Babasanta, and the latter
to pay the balance of the purchase price in the amount of two
hundred sixty thousand pesos (P260,000.00). The appellate court
ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC
was null and void on the ground that SLDC was a purchaser in bad
faith. The Spouses Lu were further ordered to return all payments
made by SLDC with legal interest and to pay attorneys fees to
Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration
with the appellate court.
12
However, in aManifestation dated 20
December 1995,
13
the Spouses Lu informed the appellate court that
they are no longer contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,
14
the appellate court
considered as withdrawn the motion for reconsideration filed by the
Spouses Lu in view of their manifestation of 20 December 1995. The
appellate court denied SLDCs motion for reconsideration on the
ground that no new or substantial arguments were raised therein
which would warrant modification or reversal of the courts decision
dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the
appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO
WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER
PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE
OF P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR
TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT
BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY
WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE
PROPERTY AND NO ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS
PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE
FACT THAT RESPONDENT BABASANTA HAS SUBMITTED NO
EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS
RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT
NOTWITHSTANDING ITS FULL CONCURRENCE ON THE FINDINGS OF
FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE
DECISION OF THE TRIAL COURT UPHOLDING THE TITLE OF SAN
LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD FAITH.
15

SLDC contended that the appellate court erred in concluding that it
had prior notice of Babasantas claim over the property merely on
the basis of its having advanced the amount of two hundred
thousand pesos (P200,000.00) to Pacita Lu upon the latters
representation that she needed the money to pay her obligation to
Babasanta. It argued that it had no reason to suspect that Pacita was
not telling the truth that the money would be used to pay her
indebtedness to Babasanta. At any rate, SLDC averred that the
amount of two hundred thousand pesos (P200,000.00) which it
advanced to Pacita Lu would be deducted from the balance of the
purchase price still due from it and should not be construed as
notice of the prior sale of the land to Babasanta. It added that at no
instance did Pacita Lu inform it that the lands had been previously
sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its
favor it immediately took possession of the property and asserted its
rights as new owner as opposed to Babasanta who has never
exercised acts of ownership. Since the titles bore no adverse claim,
encumbrance, or lien at the time it was sold to it, SLDC argued that it
had every reason to rely on the correctness of the certificate of title
and it was not obliged to go beyond the certificate to determine the
condition of the property. Invoking the presumption of good faith, it
added that the burden rests on Babasanta to prove that it was
aware of the prior sale to him but the latter failed to do so. SLDC
pointed out that the notice of lis pendens was annotated only on 2
June 1989 long after the sale of the property to it was consummated
on 3 May 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August
1999, the Spouses Lu informed the Court that due to financial
constraints they have no more interest to pursue their rights in the
instant case and submit themselves to the decision of the Court of
Appeals.
16

On the other hand, respondent Babasanta argued that SLDC could
not have acquired ownership of the property because it failed to
comply with the requirement of registration of the sale in good
faith. He emphasized that at the time SLDC registered the sale in its
favor on 30 June 1990, there was already a notice of lis
pendens annotated on the titles of the property made as early as 2
June 1989. Hence, petitioners registration of the sale did not confer
upon it any right. Babasanta further asserted that petitioners bad
faith in the acquisition of the property is evident from the fact that it
failed to make necessary inquiry regarding the purpose of the
issuance of the two hundred thousand pesos (P200,000.00)
managers check in his favor.
The core issue presented for resolution in the instant petition is who
between SLDC and Babasanta has a better right over the two parcels
of land subject of the instant case in view of the successive
transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor,
Babasanta presented a document signed by Pacita Lu acknowledging
receipt of the sum of fifty thousand pesos (P50,000.00) as partial
payment for 3.6 hectares of farm lot situated at Barangay Pulong,
Sta. Cruz, Sta. Rosa, Laguna.
17
While the receipt signed by Pacita did
not mention the price for which the property was being sold, this
deficiency was supplied by Pacita Lus letter dated 29 May
1989
18
wherein she admitted that she agreed to sell the 3.6 hectares
of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence
presented by the parties, irresistibly leads to the conclusion that the
agreement between Babasanta and the Spouses Lu is a contract to
sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,
19
which is
manifested by the meeting of the offer and the acceptance upon the
thing which are to constitute the contract. The offer must be certain
and the acceptance absolute.
20
Moreover, contracts shall be
obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.
21

The receipt signed by Pacita Lu merely states that she accepted the
sum of fifty thousand pesos (P50,000.00) from Babasanta as partial
payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna.
While there is no stipulation that the seller reserves the ownership
of the property until full payment of the price which is a
distinguishing feature of a contract to sell, the subsequent acts of
the parties convince us that the Spouses Lu never intended to
transfer ownership to Babasanta except upon full payment of the
purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated
therein that despite his repeated requests for the execution of the
final deed of sale in his favor so that he could effect full payment of
the price, Pacita Lu allegedly refused to do so. In effect, Babasanta
himself recognized that ownership of the property would not be
transferred to him until such time as he shall have effected full
payment of the price. Moreover, had the sellers intended to transfer
title, they could have easily executed the document of sale in its
required form simultaneously with their acceptance of the partial
payment, but they did not. Doubtlessly, the receipt signed by Pacita
Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is
quite germane. In a contract of sale, 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.
22
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.
23

The perfected contract to sell imposed upon Babasanta the
obligation to pay the balance of the purchase price. There being an
obligation to pay the price, Babasanta should have made the proper
tender of payment and consignation of the price in court as required
by law. 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.
24
Consignation of the
amounts due in court is essential in order to extinguish Babasantas
obligation to pay the balance of the purchase price. Glaringly absent
from the records is any indication that Babasanta even attempted to
make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired
obligatory force.
On the assumption that the transaction between the parties is a
contract of sale and not a contract to sell, Babasantas claim of
ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere
consent
25
and from that moment, the parties may reciprocally
demand performance.
26
The essential elements of a contract of sale,
to wit: (1) consent or meeting of the minds, that is, to transfer
ownership in exchange for the price; (2) object certain which is the
subject matter of the contract; (3) cause of the obligation which is
established.
27

The perfection of a contract of sale should not, however, be
confused with its consummation. In relation to the acquisition and
transfer of ownership, it should be noted that sale is not a mode,
but merely a title. A mode is the legal means by which dominion or
ownership is created, transferred or destroyed, but title is only the
legal basis by which to affect dominion or ownership.
28
Under Article
712 of the Civil Code, "ownership and other real rights over property
are acquired and transmitted by law, by donation, by testate and
intestate succession, and in consequence of certain contracts, by
tradition." Contracts only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same.
29
Therefore, sale by itself does not transfer
or affect ownership; the most that sale does is to create the
obligation to transfer ownership. It is tradition or delivery, as a
consequence of sale, that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in
any of the ways specified in Article 1497 to 1501.
30
The word
"delivered" should not be taken restrictively to mean transfer of
actual physical possession of the property. The law recognizes two
principal modes of delivery, to wit: (1) actual delivery; and (2) legal
or constructive delivery.
Actual delivery consists in placing the thing sold in the control and
possession of the vendee.
31
Legal or constructive delivery, on the
other hand, may be had through any of the following ways: the
execution of a public instrument evidencing the sale;
32
symbolical
tradition such as the delivery of the keys of the place where the
movable sold is being kept;
33
traditio longa manu or by mere
consent or agreement if the movable sold cannot yet be transferred
to the possession of the buyer at the time of the sale;
34
traditio brevi
manu if the buyer already had possession of the object even before
the sale;
35
and traditio constitutum possessorium, where the seller
remains in possession of the property in a different capacity.
36

Following the above disquisition, respondent Babasanta did not
acquire ownership by the mere execution of the receipt by Pacita Lu
acknowledging receipt of partial payment for the property. For one,
the agreement between Babasanta and the Spouses Lu, though
valid, was not embodied in a public instrument. Hence, no
constructive delivery of the lands could have been effected. For
another, Babasanta had not taken possession of the property at any
time after the perfection of the sale in his favor or exercised acts of
dominion over it despite his assertions that he was the rightful
owner of the lands. Simply stated, there was no delivery to
Babasanta, whether actual or constructive, which is essential to
transfer ownership of the property. Thus, even on the assumption
that the perfected contract between the parties was a sale,
ownership could not have passed to Babasanta in the absence of
delivery, since in a contract of sale ownership is transferred to the
vendee only upon the delivery of the thing sold.
37

However, it must be stressed that the juridical relationship between
the parties in a double sale is primarily governed by Article 1544
which lays down the rules of preference between the two
purchasers of the same property. It provides:
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 principle of primus tempore, potior jure (first in time, stronger in
right) gains greater significance in case of double sale of immovable
property. When the thing sold twice is an immovable, the one who
acquires it and first records it in the Registry of Property, both made
in good faith, shall be deemed the owner.
38
Verily, the act of
registration must be coupled with good faith that is, the registrant
must have no knowledge of the defect or lack of title of his vendor
or must not have been aware of facts which should have put him
upon such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.
39

Admittedly, SLDC registered the sale with the Registry of Deeds after
it had acquired knowledge of Babasantas claim. Babasanta,
however, strongly argues that the registration of the sale by SLDC
was not sufficient to confer upon the latter any title to the property
since the registration was attended by bad faith. Specifically, he
points out that at the time SLDC registered the sale on 30 June 1990,
there was already a notice of lis pendens on the file with the Register
of Deeds, the same having been filed one year before on 2 June
1989.
Did the registration of the sale after the annotation of the notice
of lis pendens obliterate the effects of delivery and possession in
good faith which admittedly had occurred prior to SLDCs knowledge
of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu
executed the Option to Buy in favor of SLDC upon
receiving P316,160.00 as option money from SLDC. After SLDC had
paid more than one half of the agreed purchase price
of P1,264,640.00, the Spouses Lu subsequently executed on 3 May
1989 a Deed of Absolute Sale in favor or SLDC. At the time both
deeds were executed, SLDC had no knowledge of the prior
transaction of the Spouses Lu with Babasanta. Simply stated, from
the time of execution of the first deed up to the moment of transfer
and delivery of possession of the lands to SLDC, it had acted in good
faith and the subsequent annotation of lis pendens has no effect at
all on the consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of
another without notice that some other person has a right to, or
interest in, such property and pays a full and fair price for the same
at the time of such purchase, or beforehe has notice of the claim or
interest of some other person in the property.
40
Following the
foregoing definition, we rule that SLDC qualifies as a buyer in good
faith since there is no evidence extant in the records that it had
knowledge of the prior transaction in favor of Babasanta. At the
time of the sale of the property to SLDC, the vendors were still the
registered owners of the property and were in fact in possession of
the lands.l^vvphi1.net Time and again, this Court has ruled that a
person dealing with the owner of registered land is not bound to go
beyond the certificate of title as he is charged with notice of burdens
on the property which are noted on the face of the register or on
the certificate of title.
41
In assailing knowledge of the transaction
between him and the Spouses Lu, Babasanta apparently relies on
the principle of constructive notice incorporated in Section 52 of the
Property Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance,
mortgage, lease, lien, attachment, order, judgment, instrument or
entry affecting registered land shall, if registered, filed, or entered in
the office of the Register of Deeds for the province or city where the
land to which it relates lies, be constructive notice to all persons
from the time of such registering, filing, or entering.
However, the constructive notice operates as suchby the express
wording of Section 52from the time of the registration of the
notice of lis pendens which in this case was effected only on 2 June
1989, at which time the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses Lu to transfer
ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the
claim of Babasanta the annotation of the notice of lis
pendens cannot help Babasantas position a bit and it is irrelevant to
the good or bad faith characterization of SLDC as a purchaser. A
notice of lis pendens, as the Court held in Natao v. Esteban,
42
serves
as a warning to a prospective purchaser or incumbrancer that the
particular property is in litigation; and that he should keep his hands
off the same, unless he intends to gamble on the results of the
litigation." Precisely, in this case SLDC has intervened in the pending
litigation to protect its rights. Obviously, SLDCs faith in the merit of
its cause has been vindicated with the Courts present decision
which is the ultimate denouement on the controversy.
The Court of Appeals has made capital
43
of SLDCs averment in
its Complaint-in-Intervention
44
that at the instance of Pacita Lu it
issued a check for P200,000.00 payable to Babasanta and the
confirmatory testimony of Pacita Lu herself on cross-
examination.
45
However, there is nothing in the said pleading and
the testimony which explicitly relates the amount to the transaction
between the Spouses Lu and Babasanta for what they attest to is
that the amount was supposed to pay off the advances made by
Babasanta to Pacita Lu. In any event, the incident took place after
the Spouses Lu had already executed the Deed of Absolute Sale with
Mortgage in favor of SLDC and therefore, as previously explained, it
has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale
had been tainted by the prior notice of lis pendens and assuming
further for the same nonce that this is a case of double sale, still
Babasantas claim could not prevail over that of SLDCs. In Abarquez
v. Court of Appeals,
46
this Court had the occasion to rule that if a
vendee in a double sale registers the sale after he has acquired
knowledge of a previous sale, the registration constitutes a
registration in bad faith and does not confer upon him any right. If
the registration is done in bad faith, it is as if there is no registration
at all, and the buyer who has taken possession first of the property
in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and
registered only after the second vendee, Abarquez, registered their
deed of sale with the Registry of Deeds, but the Israels were first in
possession. This Court awarded the property to the Israels because
registration of the property by Abarquez lacked the element of good
faith. While the facts in the instant case substantially differ from that
in Abarquez, we would not hesitate to rule in favor of SLDC on the
basis of its prior possession of the property in good faith. Be it noted
that delivery of the property to SLDC was immediately effected after
the execution of the deed in its favor, at which time SLDC had no
knowledge at all of the prior transaction by the Spouses Lu in favor
of Babasanta.1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is priority
of entry in the registry of property; there being no priority of such
entry, the second is priority of possession; and, in the absence of the
two priorities, the third priority is of the date of title, with good faith
as the common critical element. Since SLDC acquired possession of
the property in good faith in contrast to Babasanta, who neither
registered nor possessed the property at any time, SLDCs right is
definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would
be purely academic for as earlier stated in this decision, the contract
between Babasanta and the Spouses Lu is not a contract of sale but
merely a contract to sell. In Dichoso v. Roxas,
47
we had the occasion
to rule that Article 1544 does not apply to a case where there was a
sale to one party of the land itself while the other contract was a
mere promise to sell the land or at most an actual assignment of the
right to repurchase the same land. Accordingly, there was no double
sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision
of the Court of Appeals appealed from is REVERSED and SET ASIDE
and the decision of the Regional Trial Court, Branch 31, of San
Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.


ASSET PRIVATIZATION TRUST, G.R. No. 167195
Petitioner,
Present:

CARPIO MORALES, J.,*
- versus - Acting Chairperson,
TINGA,
VELASCO, JR.,
LEONARDO-DE CASTRO,** and

D E C I S I O N

TINGA, J.::

This is a Rule 45 petition
[1]
which seeks the reversal of the
Court of Appeals decision
[2]
and resolution
[3]
affirming the RTCs
decision
[4]
holding petitioner liable for actual damages for breach of
contract.

Petitioner Asset Privatization Trust
[5]
(petitioner) was a
government entity created for the purpose to conserve, to
provisionally manage and to dispose assets of government
institutions.
[6]
Petitioner had acquired from the Development Bank
of the Philippines (DBP) assets consisting of machinery and
refrigeration equipment which were then stored
atGolden City compound, Pasay City. The compound was then
leased to and in the physical possession of Creative Lines, Inc.,
(Creative Lines). These assets were being sold on an as-is-where-
is basis.

On 7 November 1990, petitioner and respondent entered
into an absolute deed of sale over certain machinery and
refrigeration equipment identified as Lots Nos. 2, 3 and 5.
Respondent paid the full amount of P84,000.00 as evidenced by
petitioners Receipt No. 12844. After two (2) days, respondent
demanded the delivery of the machinery it had purchased.
Sometime in March 1991, petitioner issued Gate Pass No.
4955. Respondent was able to pull out from the compound the
properties designated as Lots Nos. 3 and 5. However, during the
hauling of Lot No. 2 consisting of sixteen (16) items, only nine (9)
items were pulled out by respondent. The seven (7) items that were
left behind consisted of the following: (1) one (1) Reefer Unit 1; (2)
one (1) Reefer Unit 2; (3) one (1) Reefer Unit 3; (4) one (1) unit blast
freezer with all accessories; (5) one (1) unit chest freezer; (6) one (1)
unit room air-conditioner; and (7) one (1) unit air compressor.
Creative Lines employees prevented respondent from hauling the
remaining machinery and equipment.

Respondent filed a complaint for specific performance and
damages against petitioner and Creative Lines.
[7]
During the
pendency of the case, respondent was able to pull out the remaining
machinery and equipment. However, upon inspection it was
discovered that the machinery and equipment were damaged and
had missing parts.

Petitioner argued that upon the execution of the deed of
sale it had complied with its obligation to deliver the object of the
sale since there was no stipulation to the contrary. It further argued
that being a sale on an as-is-where-is basis, it was the duty of
respondent to take possession of the property. Petitioner claimed
that there was already a constructive delivery of the machinery and
equipment.

The RTC ruled that the execution of the deed of absolute
sale did not result in constructive delivery of the machinery and
equipment. It found that at the time of the sale, petitioner did not
have control over the machinery and equipment and, thus, could
not have transferred ownership by constructive delivery. The RTC
ruled that petitioner is liable for breach of contract and should pay
for the actual damages suffered by respondent.



On petitioners appeal, the Court of Appeals affirmed in
toto the decision of the RTC.

Hence this petition.

Before this Court, petitioner raises issues by attributing
the following errors to the Court of Appeals, to wit:

I.

The Court of Appeals erred in not
finding that petitioner had complied
with its obligation to make delivery of
the properties subject of the contract
of sale.

II.

The Court of Appeals erred in not
considering that the sale was on an
as-is-where-is basis wherein the
properties were sold in the condition
and in the place where they were
located.

III.

The Court of Appeals erred in not
considering that respondents
acceptance of petitioners disclaimer
of warranty forecloses respondents
legal basis to enforce any right arising
from the contract.

IV.

The reason for the failure to make
actual delivery of the properties was
not attributable to the fault and was
beyond the control of petitioner. The
claim for damages against petitioner is
therefore bereft of legal basis.
[8]




The first issue hinges on the determination of whether
there was a constructive delivery of the machinery and equipment
upon the execution of the deed of absolute sale between petitioner
and respondent.

The ownership of a thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof.
[9]
The thing
sold shall be understood as delivered when it is placed in the control
and possession of the vendee.
[10]


As a general rule, when the sale is made through a public
instrument, 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. And with
regard to movable property, its delivery may also be made by the
delivery of the keys of the place or depository where it is stored or
kept.
[11]
In order for the execution of a public instrument to effect
tradition, the purchaser must be placed in control of the thing
sold.
[12]


However, the execution of a public instrument only gives
rise to a prima facie presumption of delivery. Such presumption is
destroyed when the delivery is not effected because of a legal
impediment.
[13]
It is necessary that the vendor shall have control
over the thing sold that, at the moment of sale, its material delivery
could have been made.
[14]
Thus, a person who does not have actual
possession of the thing sold cannot transfer constructive possession
by the execution and delivery of a public instrument.
[15]


In this case, there was no constructive delivery of the
machinery and equipment upon the execution of the deed of
absolute sale or upon the issuance of the gate pass since it was not
petitioner but Creative Lines which had actual possession of the
property. The presumption of constructive delivery is not applicable
as it has to yield to the reality that the purchaser was not placed in
possession and control of the property.

On the second issue, petitioner posits that the sale being
in an as-is-where-is basis, respondent agreed to take possession of
the things sold in the condition where they are found and from the
place
where they are located. The phrase as-is where-is basis pertains
solely to the physical condition of the thing sold, not to its legal
situation.
[16]
It is merely descriptive of the state of the thing sold.
Thus, the as-is where-is basis merely describes the actual state and
location of the machinery and equipment sold by petitioner to
respondent. The depiction does not alter petitioners responsibility
to deliver the property to respondent.

Anent the third issue, petitioner maintains that the
presence of the disclaimer of warranty in the deed of absolute sale
absolves it from all warranties, implied or otherwise. The position is
untenable.

The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the
sale.
[17]
Ownership of the thing sold is acquired by the vendee from
the moment it its delivered to him in any of the ways specified in
articles 1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the vendor to the
vendee.
[18]
A perusal of the deed of absolute sale shows that both
the vendor and the vendee represented and warranted to each
other that each had all the requisite power and
authority to enter into the deed of absolute sale and that they
shall perform each of their respective obligations under the deed of
absolute in accordance with the terms thereof.
[19]
As previously
shown, there was no actual or constructive delivery of the things
sold. Thus, petitioner has not performed its obligation to transfer
ownership and possession of the things sold to respondent.

As to the last issue, petitioner claims that its failure to
make actual delivery was beyond its control. It posits that the refusal
of Creative Lines to allow the hauling of the machinery and
equipment was unforeseen and constituted a fortuitous event.

The matter of fortuitous events is governed by Art. 1174 of
the Civil Code which provides that except in cases expressly
specified by the law, or when it is otherwise declared by stipulation,
or when the nature of the obligation requires assumption of risk, no
person shall be responsible for those events which could not be
foreseen, or which though foreseen, were inevitable. The elements
of a fortuitous event are: (a) the cause of the unforeseen and
unexpected occurrence, must have been independent of human will;
(b) the event that constituted the caso fortuito must have been
impossible to foresee or, if foreseeable, impossible to avoid; (c) the
occurrence must have been such as to render it impossible for the
debtors to fulfill their obligation in a normal manner, and; (d) the
obligor must have been free from any participation in the
aggravation of the resulting injury to the creditor.
[20]


A fortuitous event may either be an act of God, or natural
occurrences such as floods or typhoons, or an act of man such as
riots, strikes or wars.
[21]
However, when the loss is found to be partly
the result of a persons participationwhether by active
intervention, neglect or failure to actthe whole occurrence is
humanized and removed from the rules applicable to a fortuitous
event.
[22]


We quote with approval the following findings of the Court
of Appeals, to wit:

We find that Creative Lines refusal to
surrender the property to the vendee does not
constitute force majeure which exculpates APT
from the payment of damages. This event
cannot be considered unavoidable or
unforeseen. APT knew for a fact that the
properties to be sold were housed in the
premises leased by Creative Lines. It should have
made arrangements with Creative Lines
beforehand for the smooth and orderly removal
of the equipment. The principle embodied in the
act of God doctrine strictly requires that the act
must be one occasioned exclusively by the
violence of nature and all human agencies are to
be excluded from creating or entering into the
cause of the mischief. When the effect, the
cause of which is to be considered, is found to be
in part the result of the participation of man,
whether it be from active intervention or
neglect, or failure to act, the whole occurrence is
thereby humanized, as it were, and removed
from the rules applicable to the acts of God.
[23]


Moreover, Art. 1504 of the Civil Code provides that where
actual delivery has been delayed through the fault of either the
buyer or seller the goods are at the risk of the party in fault. The risk
of loss or deterioration of the goods sold does not pass to the buyer
until there is actual or constructive delivery thereof. As previously
discussed, there was no actual or constructive delivery of the
machinery and equipment. Thus, the risk of loss or deterioration of
property is borne by petitioner. Thus, it should be liable for the
damages that may arise from the delay.

Assuming arguendo that Creative Lines refusal to allow
the hauling of the machinery and equipment is a fortuitous event,
petitioner will still be liable for damages. This Court agrees with the
appellate courts findings on the matter of damages, thus:
Article 1170 of the Civil Code states:
Those who in the performance of their
obligations are guilty of fraud, negligence, or
delay and those who in any manner contravene
the tenor thereof are liable for damages. In
contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is
liable shall be those that are the natural and
probable consequences of the breach of the
obligation, and which the parties have foreseen
or could have reasonably foreseen at the time
the obligation was constituted.
[24]
The trial court
correctly awarded actual damages as pleaded
and proven during trial.
[25]


G.R. No. 158646 June 23, 2005
HEIRS OF JESUS M. MASCUANA, represented by JOSE MA. R.
MASCUANA, petitioners,
vs.
COURT OF APPEALS, AQUILINO BARTE, and SPOUSES RODOLFO and
CORAZON LAYUMAS, respondents.
D E C I S I O N
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision
1
of the
Court of Appeals (CA) in CA-G.R. CV No. 53117 affirming the
Decision
2
of the Regional Trial Court (RTC) of San Carlos City, Negros
Occidental, which ordered the dismissal of the petitioners
complaint for recovery of possession and damages.
The Antecedents
Gertrudis Wuthrich and her six other siblings were the co-owners of
a parcel of land identified as Lot No. 124 of the San Carlos City,
Negros Occidental Cadastre, with an area of 1,729 square meters
and covered by Transfer Certificate of Title (TCT) No. 1453-R (T-
29937)-38.
3
Over time, Gertrudis and two other co-owners sold each
of their one-seventh (1/7) shares, or a total area of 741 square
meters, to Jesus Mascuana. The latter then sold a portion of his
140-square-meter undivided share of the property to Diosdado
Sumilhig. Mascuana later sold an additional 160-square-meter
portion to Sumilhig on April 7, 1961. However, the parties agreed to
revoke the said deed of sale and, in lieu thereof, executed a Deed of
Absolute Sale on August 12, 1961. In the said deed, Mascuana, as
vendor, sold an undivided 469-square-meter portion of the property
for P4,690.00, with P3,690.00 as down payment, and under the
following terms of payment:
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid
by the VENDEE unto the VENDOR as soon as the above-portions of
Lot 124 shall have been surveyed in the name of the VENDEE and all
papers pertinent and necessary to the issuance of a separate
Certificate of Title in the name of the VENDEE shall have been
prepared.
4

On December 31, 1961, Mascuana and Jose G. Estabillo executed a
Deed of Exchange and Absolute Sale of Real Estate,
5
in which
Estabillo deeded to Mascuana a portion of his property abutting
that of Sumilhig on the southeast.
In the meantime, a survey was conducted for the co-owners of Lot
No. 124 on July 9, 1962. The subdivision plan of the said lot was
approved by the Director of Lands on August 2, 1962. The portion of
the property deeded to Sumilhig was identified in the said plan as
Lot No. 124-B.
6

Meanwhile, Mascuana died intestate on April 20, 1965 and was
survived by his heirs, Eva M. Ellisin, Renee Hewlett, Carmen Vda. de
Opea, Marilou Dy and Jose Ma. R. Mascuana.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real
Property
7
on a portion of Lot No. 124-B with an area of 469 square
meters and the improvements thereon, in favor of Corazon
Layumas, the wife of Judge Rodolfo Layumas, for the price
of P11,000.00. The spouses Layumas then had the property
subdivided into two lots: Lot No. 124-B-2 with an area of 71 square
meters under the name of Jesus Mascuana, and Lot No. 124-B-1,
with an area of 469 square meters under their names.
8
The spouses
Layumas took possession of the property and caused the cutting of
tall grasses thereon. Upon the plea of a religious organization, they
allowed a chapel to be constructed on a portion of the property.
9
In
January 1985, the spouses Layumas allowed Aquilino Barte to stay
on a portion of the property to ward off squatters.
10
Barte and his
kin, Rostom Barte, then had their houses constructed on the
property.
On October 1, 1985, the spouses Layumas received a Letter
11
from
the counsel of Renee Tedrew, offering to buy their share of the
property for US$1,000.00. For her part, Corazon Layumas wrote
Pepito Mascuana, offering to pay the amount of P1,000.00, the
balance of the purchase price of the property under the deed of
absolute sale executed by Mascuana and Sumilhig on August 12,
1961.
12
However, the addressee refused to receive the mail
matter.
13

Unknown to the spouses Layumas, TCT No. 8986
14
was issued over
Lot No. 124-B in the name of Jesus Mascuana on March 17, 1986.
On November 17, 1986, the heirs of Mascuana filed a
Complaint
15
for recovery of possession of Lot No. 124-B and
damages with a writ of preliminary injunction, alleging that they
owned the subject lot by virtue of successional rights from their
deceased father. They averred that Barte surreptitiously entered the
premises, fenced the area and constructed a house thereon without
their consent. Attached as annexes to the complaint were TCT No.
8986 and a certification
16
from the Office of the City Treasurer, Land
Tax Division, vouching that the property in question was owned by
the petitioners and that they had paid the taxes thereon until 1992.
In his answer to the complaint, Barte admitted having occupied a
portion of Lot No. 124-B, but claimed that he secured the permission
of Rodolfo Layumas, the owner of the subject property. He added
that he did not fence the property, and that the petitioners did not
use the same as a passageway in going to Broce Street from their
house. Barte raised the following special defenses: (a) the
petitioners were estopped from asserting ownership over the lot in
question because they did not object when he occupied the said
portion of the lot; (b) neither did the petitioners protest when a
church was built on the property, or when residential houses were
constructed thereon; (c) the petitioners still asked Barte and the
other occupants whether they had notified Rodolfo Layumas of the
constructions on the property; and (d) the heirs of Mascuana,
through the lawyer of Mrs. Renee M. Tedrew, even wrote a
letter
17
to Rodolfo Layumas on October 1, 1985, expressing her
willingness to buy the subject property for US$1,000.00.
On April 8, 1991, the spouses Layumas filed a Motion for Leave to
Intervene,
18
alleging therein that they had a legal interest in Lot No.
124-B-1 as its buyers from Sumilhig, who in turn purchased the same
from Mascuana. In their answer in intervention,
19
the spouses
Layumas alleged that they were the true owners of the subject
property and that they had wanted to pay the taxes thereon, but the
Land Tax clerk refused to receive their payments on account that the
petitioners had already made such payment. The spouses Layumas
further maintained that the petitioners had no cause of action
against Barte, as they had authorized him to occupy a portion of Lot
No. 124-B-1. The spouses Layumas also averred that the petitioners
were estopped from denying their right of ownership and
possession of the subject lot, as one of them had even offered to
repurchase a portion of Lot No. 124-B via letter. The said spouses
interposed a counterclaim for damages, claiming ownership over the
property, and prayed, thus:
WHEREFORE, it is most respectfully prayed that this HONORABLE
COURT render judgment in favor of the Intervenors and the
defendant Aquilino Barte, ordering:
1. That the complaint against Aquilino Barte be dismissed
with costs against the plaintiff;
2. That the Intervenors spouses Judge Rodolfo S. Layumas
and Corazon A. Layumas be declared as the legal and true
owners of Lot 124-B;
3. That the plaintiffs should deliver immediately to the
Intervenors, TCT No. 8986 which is in their possession;
4. That the plaintiffs be made to pay to the Intervenors the
sum of THIRTY THOUSAND (P30,000.00) PESOS moral
damages; TEN THOUSAND (P10,000.00) PESOS attorneys
fees plus THREE HUNDRED (P300.00) PESOS as appearance
fee per hearing.
Intervenors pray for such other relief and remedies as may be
deemed by this Honorable Court as just and equitable in the
premises.
At the trial, intervenor Rodolfo Layumas testified that he and his
wife bought the subject property in 1968, and that nobody objected
to their possession of the land, including the petitioners. In 1970, a
religious organization asked his permission to construct a chapel on
the disputed lot; he allowed the construction since the same would
be used for the fiesta. He further declared that part of the chapel
still stood on the property. In 1985, a fire razed the towns public
market, thereby dislocating numerous people. Barte was one of the
fire victims, who also happened to be a good friend and political
supporter of Rodolfo. Out of goodwill, Barte was allowed to occupy
a portion of the said lot, along with some other fire victims. Rodolfo
clarified that the others were to stay there only on a temporary
basis, but admitted that Bartes children also stayed in the subject
property.
20

Rodolfo Layumas further narrated that in 1987, Corazon wrote one
of the petitioners-heirs, Pepito Mascuana, requesting that the title
of the lot be transferred in Sumilhigs name so that they could
likewise arrange for the conveyance of the title in their names.
Pepito failed to claim the letter, and thereafter, filed a case of
ejectment against Barte and Rodolfo Layumas brother-in-law,
Pepito Antonio. The case, the witness added, was dismissed as
against the two parties. Offered in evidence were the following: a
Sworn Statement on the Current and Fair Market Value of the Real
Property issued in 1973 as required by Presidential Decree No. 76,
and tax receipts.
21

Rodolfo Layumas admitted on cross-examination that at the time
they bought the property from Sumilhig, the title was still in the
possession of the Wuthrich family. He added that he filed an adverse
claim before the Register of Deeds of San Carlos City, Negros
Occidental, on Lot No. 124-B in January 1986, or after the case had
already been filed in court. Lastly, the witness deposed that he did
not fence the property after buying the same, but that his brother-
in-law constructed a coco-lumber yard thereon upon his authority.
22

On January 30, 1996, the trial court rendered judgment in favor of
Barte and the spouses Layumas. The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of Intervenors-counterclaimants and defendant and against
plaintiffs-counterclaim defendants ordering as follows:
1. The dismissal of the plaintiffs complaint with costs
against them;
2. The plaintiffs to jointly pay Intervenors-
counterclaimants now RTC Judge Rodolfo S. Layumas and
Corazon A. Layumas:
(a) P10,000.00 for attorneys fees; and
(b) P30,000.00 as moral damages;
3. The plaintiffs, as counterclaim defendants, to comply
with the above-stated obligation of their late father, Mr.
Jesus Mascuana, under the Deed of Absolute Sale, Exh.
"3", pp. 92-93, Exp., thru plaintiff Mr. Jose Mascuana,
including the desegragation (sic) survey to desegregate the
469-square-meter portion of said Lot No. 124-B, San Carlos
Cadastre, this province, sold to the late Diosdado Sumilhig,
if the same has not yet been done despite what has been
said herein earlier to said effect, and the execution of the
Final Deed of Sale in their capacity as the heirs and
successors-in-interest of the late Mr. Jesus Mascuana,
thru Mr. Jose Mascuana, covering the 469-square-meter
desegregated portion of said Lot No. 124-B, within sixty
(60) days counted from the finality of this Decision, in
favor of the Intervenors-spouses, after which the said
Intervenors-spouses shall pay them, thru Mr. Jose
Mascuana, the P1,000.00 balance due to them as
successors-in-interest of the late Mr. Jesus Mascuana;
4. In case plaintiffs fail to comply with what are herein
ordered for them to do, the Clerk of Court V of this Court
to do all that they were to do as herein ordered in the text
and dispositive portion hereof, at the expense of
Intervenors spouses to be later reimbursed by plaintiffs,
including the desegragation (sic) survey of said 469-
square-meter portion of said Lot [No.] 124-B, San Carlos
Cadastre, Negros Occidental, if the same has not yet been
done and the execution of the Final Deed of Sale on behalf
of all the plaintiffs as heirs and successors-in-interest of
the late Mr. Jesus Mascuana covering the said
desegregated portion of 469 square meters of the
aforesaid lot, in favor of Intervenors spouses, to the end
that separate title therefor may be issued in their names,
after they shall have paid the P1,000.00 balance due
plaintiffs under said Deed of Absolute Sale, Exh. "3."
SO ORDERED.
23

Forthwith, the petitioners appealed the case to the CA, raising the
following issues of fact and law:
a. Whether or not the contract of alienation of Lot No.
124-B in favor of Diosdado Sumilhig in 1961 was a contract
to sell or a contract of sale;
b. Whether or not Diosdado Sumilhig had any right to sell
Lot No. 124-B in favor of intervenor Corazon Layumas in
1968.
24

On May 5, 2003, the CA affirmed the decision of the trial court. It
ruled that the contract between the petitioners father and Sumilhig
was one of sale. Foremost, the CA explained, the contract was
denominated as a "Deed of Absolute Sale." The stipulations in the
contract likewise revealed the clear intention on the part of the
vendor (Mascuana) to alienate the property in favor of the vendee
(Sumilhig). In three various documents, the late Mascuana even
made declarations that Sumilhig was already the owner of the
disputed land. The CA added that the admission may be given in
evidence against Mascuana and his predecessors-in-interest under
Section 26, Rule 130 of the Revised Rules on Evidence. As to the
argument that the contract between Mascuana and Sumilhig was
not effective because it was subject to a suspensive condition that
did not occur, the CA ruled that the condition referred to by the
petitioners refers only to the payment of the balance of the
purchase price and not to the effectivity of the
contract.1avvphi1.zw+
As to the petitioners contention that even if the contract were one
of sale, ownership cannot be transferred to Sumilhig because
Mascuana was not yet the owner of the lot at the time of the
alleged sale, the appellate court ruled that the registration of the
land to be sold is not a prerequisite to a contract of sale.
The Present Petition
Aggrieved, the petitioners filed the instant petition for review
on certiorari with this Court, where the following lone legal issue
was raised:
WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUANA
IN FAVOR OF DIOSDADO SUMILHIG A CONTRACT TO SELL OR
CONTRACT OF SALE?
25

We note that the original action of the petitioners against Aquilino
Barte was one for recovery of possession of Lot No. 124-B. With the
intervention of the respondents Rodolfo and Corazon Layumas who
claimed ownership over the property, and the acquiescence of the
parties, evidence was adduced to prove who, between the
petitioners (as plaintiffs) and the respondents (as defendants-
intervenors) were the lawful owners of the subject property and
entitled to its possession.
The petitioners resolutely contend that the Deed of Absolute Sale
dated August 12, 1961 between their father and Sumilhig was a
mere contract to sell because at the time of the said sale, the late
Mascuana was not yet the registered owner of Lot No. 124 or any
of its portions. They assert that Sumilhig could not have acquired
any rights over the lot due to the fact that a person can only sell
what he owns or is authorized to sell, and the buyer can acquire no
more than what the seller can transfer legally. Finally, the
petitioners insist that the document in controversy was subject to a
suspensive condition, not a resolutory condition, which is a typical
attribute of a contract of sale.
The petition is denied for lack of merit.
The issues raised by the petitioners in this case are factual, and
under Rule 45 of the Rules of Court, only questions of law may be
raised in this Court, the reason being that this Court is not a trier of
facts. It is not to re-examine the evidence on record and to calibrate
the same. Moreover, the findings and conclusions of the trial court
as affirmed by the CA are conclusive on the Court, absent of any
evidence that the trial court, as well as the CA ignored,
misinterpreted and misconstrued facts and circumstances of
substance which, if considered, would alter or reverse the outcome
of the case.
26

We have reviewed the records and find no justification for a reversal
or even a modification of the assailed decision of the CA.
Even on the merits of the petition, the Court finds that the decision
of the trial court as well as the ruling of the CA are based on the
evidence on record and the applicable law.
The petitioners reiterated their pose that the deed of absolute sale
over the property executed by their father, Jesus Mascuana, as
vendor, and Diosdado Sumilhig as vendee, was a contract to sell and
not a contract of sale. They assert that on its face, the contract
appears to be a contract to sell, because the payment of
the P1,000.00 balance of the purchase price was subject to a
suspensive condition: the survey of the property, the segregation of
the portion thereof subject of the sale, and the completion of the
documents necessary for the issuance of a Torrens title over the
property to and in the name of Sumilhig who was the vendee. The
petitioners assert that Sumilhig never paid the aforesaid amount to
the vendor; hence, the obligation of the latter and his predecessors-
in-interest (herein petitioners) to execute a final deed of sale never
arose. As such, they aver, title to the property remained reserved in
the vendor and his heirs even after his death. There was no need for
the vendor to rescind the deed or collect the said amount
of P1,000.00 under Article 1191 of the New Civil Code because such
a remedy applies only to contracts of sale. The petitioners insist that
Sumilhig never acquired title over the property; he could not have
transferred any title to the respondents. Sumilhig could not have
transferred that which he did not own.
The petitioners contention has no factual and legal bases.
The deed of absolute sale executed by Jesus Mascuana and
Sumilhig, provides, thus:
That the VENDOR is the true and absolute owner of a parcel of land
known as Lot No. 124 of the Cadastral Survey of San Carlos, situated
at Broce Street and is free from liens and encumbrances, and
covered by O.C.T. No. T-299[3]7 (R-1453) of Reg. of Deeds, Negros
Occ.
That for and in consideration of the sum of FOUR THOUSAND SIX
HUNDRED NINETY PESOS (P4,690.00), Philippine Currency, to be
paid by the VENDEE in the manner hereinafter stated, the VENDOR
does hereby sell, transfer, cede and convey, a portion of the above-
described property containing an area of 469 square meters, the
sketch of which can be found at the back of this document and
having a frontage at Broce Street of around 14 meters, and from the
Broce Street to the interior on its Southwest side with a length of
30.9 meters, with a length of 24.8 meters on its Northeast side
where it turned to the right with a length of 2.8 meters and
continuing to Northwest with a length of 6.72 meters, the backyard
dimension is 17.5 meters to the Northwest, unto the VENDEE, his
heirs and assigns, by way of Absolute Sale, upon the receipt of the
down payment of THREE THOUSAND SIX HUNDRED NINETY PESOS
(P3,690.00), which is hereby acknowledged by the VENDOR as
received by him.lawphil.net
That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid
by the VENDEE unto the VENDOR as soon as the above-portions of
Lot 124 shall have been surveyed in the name of the VENDEE and all
papers pertinent and necessary to the issuance of a separate
Certificate of Title in the name of the VENDEE shall have been
prepared.
The evidence on record shows that during the lifetime of vendor
Jesus Mascuana, and even after his death, his heirs, the petitioners
herein, unequivocably declared that Diosdado Sumilhig was the
owner of the property subject of this case, and that the respondents
acquired title over the property, having purchased the same via a
deed of absolute sale from Diosdado Sumilhig. Thus, on December
31, 1961, Jesus Mascuana and Jose Estabillo executed a Deed of
Exchange and Absolute Sale of Real Estate, in which both parties
declared that they were co-owners of portions of Lot No. 124
abutted by the property owned by Diosdado Sumilhig.
27

In the subdivision plan of Lot No. 124, signed by Ricardo Quilop,
Private Land Surveyor, following his survey of Lot No. 124 on July 9,
1962 for and in behalf of Jesus Mascuana, et al., it appears that Lot
No. 124-B with an area of 540 square meters belonged to Diosdado
Sumilhig,
28
which is abutted by Lot No. 124-C, owned by Jesus
Mascuana.
On October 1, 1985, long after the death of Jesus Mascuana, one of
his heirs, petitioner Renee Tedrew, through counsel, wrote
respondent Rodolfo Layumas offering to buy the property occupied
by his overseer Aquilino Barte for US$1,000.00:
ATTY. RODOLFO S. LAYUMAS
San Carlos City
Negros Occidental
Dear Atty. Layumas:
This has reference to the lot located at Broce Street, portions of
which are presently occupied by Mr. Barte.
Mrs. Renee Tedrew (nee Agapuyan), who is now in the United
States, would like to offer the amount of $1,000.00 to buy your
share of the said lot.
If you are amenable, kindly inform the undersigned for him to
communicate [with] Mrs. Tedrew in California.
Very truly yours,
(Sgd.)
SAMUEL SM LEZAMA
29

It was only after the respondents rejected the proposal of petitioner
Renee Tedrew that the petitioners secured title over the property on
March 17, 1986 in the name of Jesus Mascuana (already deceased
at the time), canceling TCT No. 967 issued on July 6, 1962 under the
name of Jesus Mascuana, who appears to be a co-owner of Lot No.
124 with an undivided two-seventh (2/7) portion thereof.
30

While it is true that Jesus Mascuana executed the deed of absolute
sale over the property on August 12, 1961 in favor of Diosdado
Sumilhig for P4,690.00, and that it was only on July 6, 1962 that TCT
No. 967 was issued in his name as one of the co-owners of Lot No.
124, Diosdado Sumilhig and the respondents nevertheless acquired
ownership over the property. The deed of sale executed by Jesus
Mascuana in favor of Diosdado Sumilhig on August 12, 1961 was a
perfected contract of sale over the property. It is settled that a
perfected contract of sale cannot be challenged on the ground of
the non-transfer of ownership of the property sold at that time of
the perfection of the contract, since it is consummated upon
delivery of the property to the vendee. It is through tradition or
delivery that the buyer acquires ownership of the property sold. As
provided in Article 1458 of the New Civil Code, when the sale is
made through a public instrument, the execution thereof is
equivalent to the delivery of the thing which is the object of the
contract, unless the contrary appears or can be inferred. The record
of the sale with the Register of Deeds and the issuance of the
certificate of title in the name of the buyer over the property merely
bind third parties to the sale. As between the seller and the buyer,
the transfer of ownership takes effect upon the execution of a public
instrument covering the real property.
31
Long before the petitioners
secured a Torrens title over the property, the respondents had been
in actual possession of the property and had designated Barte as
their overseer.
Article 1458 of the New Civil Code provides:
By the contract of sale, one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or conditional.
Thus, there are three essential elements of sale, to wit:
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.
32

In this case, there was a meeting of the minds between the vendor
and the vendee, when the vendor undertook to deliver and transfer
ownership over the property covered by the deed of absolute sale to
the vendee for the price of P4,690.00 of which P3,690.00 was paid
by the vendee to the vendor as down payment. The vendor
undertook to have the property sold, surveyed and segregated and a
separate title therefor issued in the name of the vendee, upon which
the latter would be obliged to pay the balance of P1,000.00. There
was no stipulation in the deed that the title to the property
remained with the vendor, or that the right to unilaterally resolve
the contract upon the buyers failure to pay within a fixed period
was given to such vendor. Patently, the contract executed by the
parties is a deed of sale and not a contract to sell. As the Court ruled
in a recent case:
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. In Peoples Industrial and Commercial Corporation v. Court
of Appeals, 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. Thus, Art.
1477 provides that the ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery
thereof.
33

The condition in the deed that the balance of P1,000.00 shall be paid
to the vendor by the vendee as soon as the property sold shall have
been surveyed in the name of the vendee and all papers pertinent
and necessary to the issuance of a separate certificate of title in the
name of the vendee shall have been prepared is not a condition
which prevented the efficacy of the contract of sale. It merely
provides the manner by which the total purchase price of the
property is to be paid. The condition did not prevent the contract
from being in full force and effect:
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.
34

In a contract to sell, ownership is retained by a seller and is not to be
transferred to the vendee until full payment of the price. Such
payment is a positive suspensive condition, the failure of which is
not a breach of contract but simply an event that prevented the
obligation from acquiring binding force.
35

It bears stressing that in a contract of sale, the non-payment of the
price is a resolutory condition which extinguishes the transaction
that, for a time, existed and discharges the obligation created under
the transaction.
36
A seller cannot unilaterally and extrajudicially
rescind a contract of sale unless there is an express stipulation
authorizing it. In such case, the vendor may file an action for specific
performance or judicial rescission.
37

Article 1169 of the New Civil Code provides that 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 fulfills his
obligation, delay by the other begins. In this case, the vendor (Jesus
Mascuana) failed to comply with his obligation of segregating Lot
No. 124-B and the issuance of a Torrens title over the property in
favor of the vendee, or the latters successors-in-interest, the
respondents herein. Worse, petitioner Jose Mascuana was able to
secure title over the property under the name of his deceased
father.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of
merit. Costs against the petitioner


G.R. No. L-20601 February 28, 1966
BUTUAN SAWMILL, INC., petitioner,
vs.
HON. COURT OF TAX APPEALS, ET AL., respondents.
David G. Nitafan for the petitioner.
Office of the Solicitor General for the respondents.
REYES, J.B.L., J.:
Appeal from a decision of the Court of Tax Appeals, in its CTA Case
No. 965, ordering petitioner herein, Butuan Sawmill, Inc., to pay
respondent Commissioner of Internal Revenue the sum of
P36,107.74 as deficiency sales tax and surcharge due on its sales of
logs to buyers in Japan from January 31, 1951 to June 8, 1953.
The facts, as found and stated by the lower court in its decision, are
in full accord with the evidences presented therein; hence, we quote
them hereunder:
. . . that during the period from January 31, 1951 to June 8,
1953, it sold logs to Japanese firms at prices FOB Vessel
Magallanes, Agusan (in some cases FOB Vessel, Nasipit,
also in Agusan); that the FOB prices included costs of
loading, wharfage stevedoring and other costs in the
Philippines; that the quality, quantity and measurement
specifications of the logs were certified by the Bureau of
Forestry; that the freight was paid by the Japanese buyers;
and the payments of the logs were effected by means of
irrevocable letters of credit in favor of petitioner and
payable through the Philippine National Bank or any other
bank named by it.
Upon investigation by the Bureau of Internal Revenue, it
was ascertained that no sales tax return was filed by the
petitioner and neither did it pay the corresponding tax on
the sales. On the basis of agent Antonio Mole's report
dated September 17, 1957, respondent, on August 27,
1958, determined against petitioner the sum of
P40,004.01 representing sales tax, surcharge and
compromise penalty on its sales [tax, surcharge and
compromise penalty on its sales] of logs from January
1951 to June 1953 pursuant to Sections 183, 186 and 209
of the National Internal Revenue Code (Exhibit "E", p. 14,
CTA rec. & p. 14, BIR rec.). And in consequence of a
reinvestigation, respondent, on November 6, 1958,
amended the amount of the previous assessment to
P38,917.74 (Exh. "F", p. 52, BIR rec.). Subsequent requests
for reconsideration of the amended assessment having
been denied (Exh. "G", p. 55, BIR rec.; Exh. "H", pp. 75-76,
BIR rec.: Exh. "I", pp. 79-80, BIR rec.; Exh. "J", p. 81, BIR
rec.), petitioner filed the instant petition for review on
November 7, 1960.
On the bases of the above-quoted findings and circumstances, the
lower court upheld the legality and correctness of the amended
assessment of the sales tax and surcharge, ruling that the sales in
question, in the light of our previous decisions
1
, were domestic or
"local" sales, and, therefore, subject to sales tax under the provision
of section 186 of the Tax Code, as amended by Republic Acts Nos.
558 and 594; and that the assessment thereof was made well within
the ten-year period prescribed by Section 332(a) of the same Code,
since petitioner herein omitted to file its sales tax returns for the
years 1951, 1952 and 1953, and this omission was discovered only
on September 17, 1957. The imposition of the compromise penalty
was, however, eliminated therefrom for want of agreement
between the taxpayer and the Collector (now Commissioner) of
Internal Revenue. A motion to reconsider said decision having been
denied, petitioner herein interposed the present appeal before this
Court.
The issues presented in this appeal are: whether or not petitioner
herein is liable to pay the 5% sales tax as then prescribed by Section
186 of the Tax Code on its sales of logs to the Japanese buyers; and
whether or not the assessment thereof was made within the
prescriptive period provided by law therefor.1wph1.t
On the first issue, petitioner herein insists that the circumstances
enumerated in the above finding, which this Court had, in previous
decisions (Cf. footnote [1]), considered as determinative of the place
of transfer of ownership of the logs sold, for purposes of taxation,
are not in themselves evidentiary indications to show that the
parties intended the title of the logs to pass to the Japanese buyers
in Japan. Thus, it points out that the "FOB" feature of the sales
contract was made only to fix its price and not to fix the place of
delivery; that the requirement of certification of quality, quantity,
and measurement specifications of the logs by local authorities was
done to comply with local laws, rules, and regulations, and was not a
part of the sales arrangement; that the payment of freight by the
Japanese buyers is not an uncommon feature of "FOB" shipments;
and that the payment of prices by means of irrevocable letters of
credit is but a common established business practice to secure
payment of the price to the seller. It also insists that, even assuming
that the "FOB" feature of the disputed sales determines thesitus of
transfer of ownership, the same is merely a prima facie presumption
which yields to contrary proof such as that the logs were made
deliverable to the "order of the shipper" and the logs were shipped
at the risk of the shipper, which circumstances, if considered, would
negate the above implications. Hence, petitioner herein contends
that the disputed sales were consummated in Japan, and, therefore,
not subject to the taxing jurisdiction of our Government.
The above contentions of petitioner are devoid of merit. In a
decided case with practically identical set of facts obtaining in the
case at bar, this Court declared:
. . . it is admitted that the agreed price was "F.O.B.
Agusan", thus indicating, although prima facie, that the
parties intended the title to pass to the buyer upon
delivery of the logs in Agusan; on board the vessels that
took the goods to Japan. Moreover, said prima facie proof
was bolstered up by the following circumstances, namely:
1. Irrevocable letters of credit were opened by the
Japanese buyers in favor of the petitioners.
2. Payment of freight charges of every shipment by the
Japanese buyers.
3. The Japanese buyers chartered the ships that carried
the logs they purchased from the Philippines to Japan.
4. The Japanese buyers insured the shipment of logs and
collected the insurance coverage in case of loss in transit.
5. The petitioner collected the purchase price of every
shipment of logs by surrendering the covering letter of
credit, bill of lading, which was indorsed in blank, tally
sheet, invoice and export entry, to the corresponding bank
in Manila of the Japanese agent bank with whom the
Japanese buyers opened letters of credit.
6. In case of natural defects in logs shipped to the buyers
discovered in Japan, instead of returning such defective
logs, accepted them, but were granted a corresponding
credit based on the contract price.
7. The logs purchased by the Japanese buyers were
measured by a representative of the Director of Forestry
and such measurement was final, thereby making the
Government of the Philippines a sort of agent of the
Japanese buyers.
Upon the foregoing facts and authority of Bislig (Bay) Lumber Co.,
Inc. vs. Collector of Internal Revenue, G.R. No. L-13186 (January 28,
1961), Misamis Lumber Co., Inc. vs. Collector of Internal Revenue (56
Off. Gaz. 517) andWestern Mindanao Lumber Development Co., Inc.
vs. Court of Tax Appeals, et al. (G.R. No. L-11710, June 30, 1958), it is
clear that said export sales had been consummated in the
Philippines and were, accordingly, subject to sales tax therein."
(Taligaman Lumber Co., Inc. vs. Collector of Internal Revenue, G.R.
No. L-15716, March 31, 1962).
With respect to petitioner's contention that there are proofs to
rebut the prima facie finding and circumstances that the disputed
sales were consummated here in the Philippines, we find that the
allegation is not borne out by the law or the evidence.
That the specification in the bill of lading to the effect that the goods
are deliverable to the order of the seller or his agent does not
necessarily negate the passing of title to the goods upon delivery to
the carrier is clear from the second part of paragraph 2 of Article
1503 of the Civil Code of the Philippines (which appellant's counsel
improperly omits from his citation):
Where goods are shipped, and by the bill of lading the
goods are deliverable to the seller or his agent, or to the
order of the seller or of his agent, the seller thereby
reserves the ownership in the goods. But, if except for the
form of the bill of lading, the ownership would have
passed to the buyer on shipment of the goods, the sellers's
property in the goods shall be deemed to be only for the
purpose of securing performance by the buyer of his
obligations under the contract.
Moreover, it has been "a settled rule that in petitions to review
decisions of the Court of Tax Appeals, only questions of law may be
raised and may be passed upon by this Court" (Gutierrez vs. Court of
Tax Appeals & Collector of Internal Revenue vs. Gutierrez, G.R. Nos.
L-7938 & L-9771, May 21, 1957, cited in Sanchez vs. Commissioner
of Customs, G.R. No. L-8556, September 30, 1957); and it having
been found that there is no proof to substantiate the foregoing
contention of petitioner, the same should also be ruled as devoid of
merit.
On the second issue, petitioner avers that the filing of its income tax
returns, wherein the proceeds of the disputed sales were declared,
is substantial compliance with the requirement of filing a sales tax
return, and, if there should be deemed a return filed, Section 331,
and not Section 332(a), of the Tax Code providing for a five-year
prescriptive period within which to make an assessment and
collection of the tax in question from the time the return was
deemed filed, should be applied to the case at bar. Since petitioner
filed its income tax returns for the years 1951, 1952 and 1953, and
the assessment was made in 1957 only, it further contends that the
assessment of the sales tax corresponding to the years 1951 and
1952 has already prescribed for having been made outside the five-
year period prescribed in Section 331 of the Tax Code and should,
therefore, be deducted from the assessment of the deficiency sales
tax made by respondent.
The above contention has already been raised and rejected as not
meritorious in a previous case decided by this Court. Thus, we held
that an income tax return cannot be considered as a return for
compensating tax for purposes of computing the period of
prescription under Section 331 of the Tax Code, and that the
taxpayer must file a return for the particular tax required by law in
order to avail himself of the benefits of Section 331 of the Tax Code;
otherwise, if he does not file a return, an assessment may be made
within the time stated in Section 332(a) of the same Code (Bisaya
Land Transportation Co., Inc. vs. Collector of Internal Revenue &
Collector of Internal Revenue vs. Bisaya Land Transportation Co.,
Inc., G.R. Nos. L-12100 & L-11812, May 29, 1959). The principle
enunciated in this last cited case is applicable by analogy to the case
at bar.
It being undisputed that petitioner failed to file a return for the
disputed sales corresponding to the years 1951, 1952 and 1953, and
this omission was discovered only on September 17, 1957, and that
under Section 332(a) of the Tax Code assessment thereof may be
made within ten (10) years from and after the discovery of the
omission to file the return, it is evident that the lower court correctly
held that the assessment and collection of the sales tax in question
has not yet prescribed.
Wherefore, the decision appealed from should be, as it is hereby
affirmed, with costs against petitioner.

Smith, Bell & Co. v Sotelo Matti (1992
)FACTS
Plaintiff Smith, Bell & Co and the defendant Mr. Vicente Sotel
entered into a contract. Plaintiff has to deliver
(1) two steel tanks shipped from New York to Manila within three
or four months
,(2)two expellers shipped from SanFrancisco in the month of
September 1918 or as soon as possible, and
(3) two electric motors with approximate delivery within ninety
days. This isnot guaranteed.
The tanks arrived at Manila on 27 April 1919; the expellers on 26
October 1918; and the motor son 27 February 1919. Upon
notification from plaintiff, defendant refused to receive any of the
goods or to pay for their price. Plaintiff alleged that the expellers
and motors were in good condition. Plaintiff filed a complaint
against the defendant. The defendant, Mr Sotelo and intervenor,
ManilaOil Refining and By-Products Co., Inc., denied the plaintiffs
allegations. They allege that due to plaintiffs delay in the delivery
of goods, the intervenor suffered damages.T he lower court
absolved the defendants from the complaint insofar as the tanks
and the electric motors were concerned, but rendered judgment
against them ordering them to receive expellers and pay the sum of
P50,000, with legal interest and cost. Both parties appealed to the
Court.
ISSUE: What period was fixed for the delivery of the goods? Did the plaintiff incur
delay in the delivery of goods?
HELD:
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays cause by fires, riots on
land or on the sea, strikes or other causes known as force majeure
entirely beyond the control of the sellers or their representatives.
Under these stipulations, it cannot be said that any definite date was
fixed for the delivery of the goods. xxx. From the record it appears
that the contracts were executed at the time of the world war when
there existed rigid restrictions on the export from the united States
xxx; hence clauses were inserted in the contracts, regarding
Government regulations, railroading embargoes, lack of vessel
space, the exigencies of the requirements of the United States
Government xxx. At the time of the execution of the contracts, the
parties were not unmindful of the contingency of the United States
Government not allowing the export of the goods xxx. We cannot
but conclude that the term which parties attempted to fix is so
uncertain that once cannot tell just whether, as a matter of fact,
those articles could be brought to manila or not.
The obligation must be regarded as conditional.
The delivery was subject to a condition the fulfillment of which
depended not only upon the effort of the plaintiff, but upon the will
of third persons who could in no way be compelled to fulfill the
condition. It is sufficiently proven in the record that the plaintiff has
made all the efforts it could possibly be expected to make under the
circumstances, to bring the goods in question to Manila, as soon as
possible. Xxx
it is obvious that the plaintiff has complied with its obligation.
When the time of delivery is not fixed in the contract, time is
regarded unessential. In such cases, the delivery must be made
within a reasonable time. Xxx Reasonable time for the delivery of
the goods by the seller is to be determined by circumstances
attending the particular transactions.
Whether or not the delivery of the machinery in litigation was
offered to the defendant within a reasonable time, is a question to
be determined by the court. The plaintiff has not been guilty of any
delay in the fulfillment of its obligation.


LORENZO SHIPPING CORP. vs. BJ MARTHEL INTERNATIONAL, INC.,G.R. No.
145483November 19, 2004CHICO-NAZARIO, J.

FACTS: Petitioner Lorenzo Shipping Corporation is a domestic corpor
ation engaged incoastwise shipping. It used to own the cargo vessel
M/V Dadiangas Express. Upon the other hand, respondent BJ
Marthel International, Inc. is a business entity engaged in trading,
marketing, and selling of various industrial commodities. It is
also an importer and distributor of different brands of engines and
spare parts. From 1987 up to the institution of this case, respondent
supplied petitioner with spare parts for the latter's marine engines.
Sometime in 1989, petitioner asked respondent for a quotation for
various machine parts. (TERMS: 25% upon delivery, balance payable
in 5 bi-monthly equal Installment[s] not to exceed 90days.)
Petitioner thereafter issued to respondent Purchase Order No.
13839, dated02 November 1989, for the procurement of one set of
cylinder liner, valued atP477,000, to be used for M/V Dadiangas
Express. The purchase order was co-signed by Jose Go, Jr.,
petitioner's vice-president, and Henry Pajarillo. Instead
of paying the 25% down payment for the first cylinder liner, petition
er issued infavor of respondent ten postdated checks to be drawn
against the former's account with Allied Banking Corporation. The
checks were supposed to represent the full payment of the
aforementioned cylinder liner. Subsequently, petitioner issued
Purchase Order No. 14011, dated 15 January 1990, for yet another
unit of cylinder liner. This purchase order stated the term of
payment to be "25% upon delivery, balance payable in 5 bi-monthly
equal installment[s]." Like the purchase order of 02 November 1989,
the second purchase order did not state the date of the cylinder
liner's delivery. On 26 January 1990, respondent
deposited petitioner's check that was postdated 18 January 1990, ho
wever, the same wasdishonored by the drawee bank due to
insufficiency of funds. The remaining
nine postdated checks were eventually returned by respondent to p
etitioner.Respondent thereafter placed the order for the two
cylinder liners with
its principal in Japan, Daiei Sangyo Co. Ltd., by opening a letter of cre
dit on 23February 1990 under its own name with the First Interstate
Bank of Tokyo. On 20April 1990, Pajarillo delivered the two cylinder
liners at petitioner's warehouse in North Harbor, Manila. The sales
invoices evidencing the delivery of the cylinderliners both contain
the notation "subject to verification" under which the signature of
Eric Go, petitioner's warehouseman, appeared. Respondent
thereafter sent a Statement of Account dated 15 November 1990 to
petitioner. While the other items listed in said statement of account
were fully paid by petitioner, the two cylinder liners delivered to
petitioner on 20 April 1990 remained unsettled. Consequently, Mr.
Alejandro Kanaan, Jr., respondent's vice-president, sent a demand
letter dated 02 January 1991 to petitioner requiring the latter to pay
the value of the cylinder liners subjects of this case. Instead of
heeding the demand of respondent for the full payment of the value
of the cylinder liners, petitioner sent the former a letter dated 12
March 1991 offering to pay only P150,000 for the cylinder liners. In
said letter, petitioner claimed that as the cylinder liners were
delivered late and due to the scrapping of the M/V Dadiangas
Express, it(petitioner) would have to sell the cylinder liners in
Singapore and pay
the balance from the proceeds of said sale. Shortly thereafter, anoth
er demand letterdated 27 March 1991 was furnished petitioner by
respondent's counsel requiring the former to settle its obligation to
respondent together with accrued interest and attorney's fees. Due
to the failure of the parties to settle the matter, respondent filed an
action for sum of money and damages before the Regional Trial
Court(RTC) of Makati City. In its complaint, respondent (plaintiff
below) alleged that
despite its repeated oral and written demands, petitioner
obstinately refused to settle its obligations. Respondent prayed that
petitioner be ordered to pay for the value of the cylinder liners plus
accrued interest of P111,300 as of May 1991 and additional interest
of 14% per annum to be reckoned from June 1991 until the
full payment of the principal; attorney's fees; costs of suits; exempla
ry damages;actual damages; and compensatory damages. Prior to
the commencement of trial, petitioner filed a Motion (For Leave
To Sell Cylinder Liners) alleging therein that"[w]ith the passage of
time and with no definite end in sight to the present litigation, the
cylinder liners run the risk of obsolescence and deterioration" to
the prejudice of the parties to this case. Thus, petitioner prayed that
it be allowed tosell the cylinder liners at the best possible price and
to place the proceeds of said sale in escrow. The trial court held
respondent bound to the quotation it submitted to petitioner
particularly with respect to the terms of payment and delivery of the
cylinder liners. It also declared that respondent had agreed to the
cancellation of the contract of sale when it returned the postdated
checks issued by petitioner. Respondent's counterclaims for moral,
exemplary, and compensatory damages were dismissed for
insufficiency of evidence. Aggrieved by the findings of the trial court,
respondent filed an appeal with the Court of
Appeals.ISSUE/S: Whether or not respondent incurred delay in perfo
rming its obligation under thecontract of sale and whether or not
said contract was validly rescinded
by petitioner.HELD: NO. The Court of Appeals held that respondent c
ould not have incurred delay inthe delivery of cylinder liners as no
demand, judicial or extrajudicial, was made by respondent upon
petitioner in contravention of the express provision of Article1169 of
the Civil Code which provides:
Those obliged to deliver or to do something incur in delay from the
timethe obligee judicially or extrajudicially demands from them the
fulfillmentof their obligation.
Likewise, the appellate court concluded that there was no evidence
of the alleged cancellation of orders by petitioner and that the
delivery of the cylinder liners on20 April 1990 was reasonable under
the circumstances. There is no showing
that petitioner notified respondent of its intention to rescind the co
ntract of sale between them. Quite the contrary, respondent's act of
proceeding with the opening of an irrevocable letter of credit on 23
February 1990 belies petitioner's claim that it notified respondent
of the cancellation of the contract of sale. Truly, no
prudent businessman would pursue such action knowing that the co
ntract of sale, forwhich the letter of credit was opened, was already
rescinded by the other party. WHEREFORE, premises considered, the
instant Petition for Review on Certiorari is DENIED. The Decision of
the Court of Appeals, dated 28 April





G.R. No. 13203 September 18, 1918
BEHN, MEYER & CO. (LTD.), plaintiff-appellant,
vs.
TEODORO R. YANCO, defendant-appellee.
Crossfield & O'Brien for appellant.
Charles C. Cohn for appellee.
MALCOLM, J.:
The first inquiry to be determined is what was the contract between
the parties.
The memorandum agreement executed by the duly authorized
representatives of the parties to this action reads:
Contract No. 37.
MANILA, 7 de marzo, de 1916.
Confirmanos haber vendido a Bazar Siglo XX, 80 drums
Caustic Soda 76 per cent "Carabao" brand al precio de
Dollar Gold Nine and 75/100 per 100-lbs., c.i.f. Manila,
pagadero against delivery of documents. Embarque
March, 1916.
Comprador Bazar Siglo XX
de Teodoro R. Yangco
J. Siquia
Vendores
BEHN, MEYER & CO. (Ltd.)
O. LOMBECK.
This contract of sale can be analyzed into three component parts.
1. SUBJECT MATTER AND CONSIDERATION.
Facts. The contract provided for "80 drums Caustic Soda 76 per
cent "Carabao" brand al precio de Dollar Gold Nine and 75/100 1-
lbs."
Resorting to the circumstances surrounding the agreement are we
are permitted to do, in pursuance of this provision, the merchandise
was shipped from New York on the steamship Chinese Prince. The
steamship was detained by the British authorities at Penang, and
part of the cargo, including seventy-one drums of caustic soda, was
removed. Defendant refused to accept delivery of the remaining
nine drums of soda on the ground that the goods were in bad order.
Defendant also refused the optional offer of the plaintiff, of waiting
for the remainder of the shipment until its arrival, or of accepting
the substitution of seventy-one drums of caustic soda of similar
grade from plaintiff's stock. The plaintiff thereupon sold, for the
account of the defendant, eighty drums of caustic soda from which
there was realized the sum of P6,352.89. Deducting this sum from
the selling price of P10,063.86, we have the amount claimed as
damages for alleged breach of the contract.
Law. It is sufficient to note that the specific merchandise was
never tendered. The soda which the plaintiff offered to defendant
was not of the "Carabao" brand, and the offer of drums of soda of
another kind was not made within the time that a March shipment,
according to another provision the contract, would normally have
been available.
2. PLACE OF DELIVERY.
Facts. The contract provided for "c.i.f. Manila, pagadero against
delivery of documents."
Law. Determination of the place of delivery always resolves itself
into a question of act. If the contract be silent as to the person or
mode by which the goods are to be sent, delivery by the vendor to a
common carrier, in the usual and ordinary course of business,
transfers the property to the vendee. A specification in a contact
relative to the payment of freight can be taken to indicate the
intention of the parties in regard to the place of delivery. If the
buyer is to pay the freight, it is reasonable to suppose that he does
so because the goods become his at the point of shipment. On the
other hand, if the seller is to pay the freight, the inference is equally
so strong that the duty of the seller is to have the goods transported
to their ultimate destination and that title to property does not pass
until the goods have reached their destination. (See Williston on
Sales, PP. 406-408.)
The letters "c.i.f." found in British contracts stand for cost,
insurance, and freight. They signify that the price fixed covers not
only the cost of the goods, but the expense of freight and insurance
to be paid by the seller. (Irelandvs. Livingston, L. R., 5 H. L., 395.) Our
instant contract, in addition to the letters "c.i.f.," has the word
following, "Manila." Under such a contract, an Australian case is
authority for the proposition that no inference is permissible that a
seller was bound to deliver at the point of destination.
(Bowden vs. Little, 4 Comm. [Australia], 1364.)
In mercantile contracts of American origin the letters "F.O.B."
standing for the words "Free on Board," are frequently used. The
meaning is that the seller shall bear all expenses until the goods are
delivered where they are to be "F.O.B." According as to whether the
goods are to be delivered "F.O.B." at the point of shipment or at the
point of destination determines the time when property passes.
Both the terms "c.i.f." and "F.O.B." merely make rules of
presumption which yield to proof of contrary intention. As
Benjamin, in his work on Sales, well says: "The question, at last, is
one of intent, to be ascertained by a consideration of all the
circumstances." For instance, in a case of Philippine origin, appealed
to the United States Supreme Court, it was held that the sale was
complete on shipment, though the contract was for goods, "F.O.B.
Manila," the place of destination the other terms of the contract
showing the intention to transfer the property. (United States vs. R.
P. Andrews & Co. [1907], 207 U.S., 229.)
With all due deference to the decision of the High Court of Australia,
we believe that the word Manila in conjunction with the letters
"c.i.f." must mean that the contract price, covering costs, insurance,
and freight, signifies that delivery was to made at Manila. If the
plaintiff company has seriously thought that the place of delivery
was New York and Not Manila, it would not have gone to the trouble
of making fruitless attempts to substitute goods for the merchandise
named in the contract, but would have permitted the entire loss of
the shipment to fall upon the defendant. Under plaintiffs hypothesis,
the defendant would have been the absolute owner of the specific
soda confiscated at Penang and would have been indebted for the
contract price of the same.
This view is corroborated by the facts. The goods were not shipped
nor consigned from New York to plaintiff. The bill of lading was for
goods received from Neuss Hesslein & Co. the documents
evidencing said shipment and symbolizing the property were sent by
Neuss Hesslein & Co. to the Bank of the Philippine Islands with a
draft upon Behn, Meyer & Co. and with instructions to deliver the
same, and thus transfer the property to Behn, Meyer & Co. when
and if Behn, Meyer & Co. should pay the draft.
The place of delivery was Manila and plaintiff has not legally excused
default in delivery of the specified merchandise at that place.
3. TIME OF DELIVERY.
Facts. The contract provided for: "Embarque: March 1916," the
merchandise was in fact shipped from New York on the
Steamship Chinese Prince on April 12, 1916.
Law. The previous discussion makes a resolution of this point
unprofitable, although the decision of the United States Supreme
Court in Norrington vs. Wright (([1885], 115 U.S., 188) can be read
with profit. Appellant's second and third assignments of error could,
if necessary, be admitted, and still could not recover.
THE CONTRACT.
To answer the inquiry with which we begun this decision, the
contract between the parties was for 80 drums of caustic soda, 76
per cent "Carabao" brand, at the price of $9.75 per one hundred
pounds, cost, insurance, and freight included, to be shipped during
March, 1916, to be delivered to Manila and paid for on delivery of
the documents.
PERFORMANCE.
In resume, we find that the plaintiff has not proved the performance
on its part of the conditions precedent in the contract. The warranty
the material promise of the seller to the buyer has not been
complied with. The buyer may therefore rescind the contract of sale
because of a breach in substantial particulars going to the essence of
the contract. As contemplated by article 1451 of the Civil Code, the
vendee can demand fulfillment of the contract, and this being
shown to be impossible, is relieved of his obligation. There thus
being sufficient ground for rescission, the defendant is not liable.
The judgment of the trial court ordering that the plaintiff take
nothing by its action, without special finding as to costs, is affirmed,
with the costs of this instance. Against the appellant. So ordered.