SECOND DIVISION

[G.R. No. 127540. October 17, 2001]

EUGENIO DOMINGO, CRISPIN MANGABAT and SAMUEL CAPALUNGAN, petitioners, vs.
HON. COURT OF APPEALS, FELIPE C. RIGONAN and CONCEPCION R.
RIGONAN, respondents.
EUGENIO
DOMINGO,
CRISPIN
MANGABAT
and
SAMUEL
CAPALUNGAN, petitioners, vs. HON. COURT OF APPEALS, THE DIRECTOR OF
LANDS, and FELIPE C. RIGONAN and CONCEPCION R. RIGONAN,respondents.
DECISION
QUISUMBING, J.:
This petition[1] seeks to annul the decision of the Court of Appeals dated August 29, 1996,
which set aside the decision of the Regional Trial Court of Batac, Ilocos Norte, Branch 17, in Civil
Case No. 582-17 for reinvindicacion consolidated with Cadastral Case No. 1.[2] The petition
likewise seeks to annul the resolution dated December 11, 1996, denying petitioners motion for
reconsideration.
The facts of this case, culled from the records, are as follows:
Paulina Rigonan owned three (3) parcels of land, located at Batac and Espiritu, Ilocos Norte,
including the house and warehouse on one parcel. She allegedly sold them to private
respondents, the spouses Felipe and Concepcion Rigonan, who claim to be her relatives. In 1966,
herein petitioners Eugenio Domingo, Crispin Mangabat and Samuel Capalungan, who claim to be
her closest surviving relatives, allegedly took possession of the properties by means of stealth,
force and intimidation, and refused to vacate the same. Consequently, on February 2, 1976,
herein respondent Felipe Rigonan filed a complaint for reinvindicacion against petitioners in the
Regional Trial Court of Batac, Ilocos Norte. On July 3, 1977, he amended the complaint and
included his wife as co-plaintiff. They alleged that they were the owners of the three parcels of
land through the deed of sale executed by Paulina Rigonan on January 28, 1965; that since then,
they had been in continuous possession of the subject properties and had introduced permanent
improvements thereon; and that defendants (now petitioners) entered the properties illegally,
and they refused to leave them when asked to do so.
Herein petitioners, as defendants below, contested plaintiffs claims. According to defendants,
the alleged deed of absolute sale was void for being spurious as well as lacking
consideration. They said that Paulina Rigonan did not sell her properties to anyone. As her
nearest surviving kin within the fifth degree of consanguinity, they inherited the three lots and
the permanent improvements thereon when Paulina died in 1966. They said they had been in
possession of the contested properties for more than 10 years. Defendants asked for damages
against plaintiffs.
During trial, Juan Franco, Notary Public Evaristo P. Tagatag [3] and plaintiff Felipe Rigonan
testified for plaintiffs (private respondents now).
Franco testified that he was a witness to the execution of the questioned deed of absolute
sale. However, when cross-examined and shown the deed he stated that the deed was not the
document he signed as a witness, but rather it was the will and testament made by Paulina
Rigonan.
Atty. Tagatag testified that he personally prepared the deed, he saw Paulina Rigonan affix her
thumbprint on it and he signed it both as witness and notary public. He further testified that he
also notarized Paulinas last will and testament dated February 19, 1965. The will mentioned the
same lots sold to private respondents. When asked why the subject lots were still included in the
last will and testament, he could not explain. Atty. Tagatag also mentioned that he registered the
original deed of absolute sale with the Register of Deeds.

Plaintiff Felipe Rigonan claimed that he was Paulinas close relative. Their fathers were first
cousins. However, he could not recall the name of Paulinas grandfather. His claim was disputed
by defendants, who lived with Paulina as their close kin. He admitted the discrepancies between
the Register of Deeds copy of the deed and the copy in his possession. But he attributed them to
the representative from the Office of the Register of Deeds who went to plaintiffs house after that
Office received a subpoena duces tecum. According to him, the representative showed him
blanks in the deed and then the representative filled in the blanks by copying from his (plaintiffs)
copy.
Counsel for defendants (petitioners herein) presented as witnesses Jose Flores, the owner of
the adjacent lot; Ruben Blanco, then acting Registrar of Deeds in Ilocos Norte; and Zosima
Domingo, wife of defendant Eugenio Domingo.
Jose Flores testified that he knew defendants, herein petitioners, who had lived on the land
with Paulina Rigonan since he could remember and continued to live there even after Paulinas
death. He said he did not receive any notice nor any offer to sell the lots from Paulina, contrary
to what was indicated in the deed of sale that the vendor had notified all the adjacent owners of
the sale. He averred he had no knowledge of any sale between Paulina and private respondents.
Ruben Blanco, the acting Registrar of Deeds, testified that only the carbon copy, also called a
duplicate original, of the deed of sale was filed in his office, but he could not explain why this was
so.
Zosima Domingo testified that her husband, Eugenio Domingo, was Paulinas nephew. Paulina
was a first cousin of Eugenios father. She also said that they lived with Paulina and her husband,
Jose Guerson, since 1956. They took care of her, spent for her daily needs and medical expenses,
especially when she was hospitalized prior to her death. She stated that Paulina was never badly
in need of money during her lifetime.
On March 23, 1994, the trial court rendered judgment in favor of defendants (now the
petitioners). It disposed:
WHEREFORE, premises considered, judgment is hereby rendered in favor of defendants and
against the plaintiffs, and as prayed for, the Amended Complaint is hereby DISMISSED.
Defendants are hereby declared, by virtue of intestate succession, the lawful owners and
possessors of the house including the bodega and the three (3) parcels of land in suit and a
Decree of Registration adjudicating the ownership of the said properties to defendants is hereby
issued.
The alleged deed of sale (Exhs. A, A-1, 1 and 1-a) is hereby declared null and void and fake and
the prayer for the issuance of a writ of preliminary injunction is hereby denied.
Plaintiffs are hereby ordered to pay defendants:
a) P20,000.00 as moral damages;
b) P10,000.00 as exemplary damages;
c) P10,000.00 attorneys fees and other litigation expenses.
No pronouncement as to costs.[4]
Private respondents herein appealed to the Court of Appeals.
On August 29, 1996, the CA reversed the trial courts decision, thus:
WHEREFORE, the decision dated March 23, 1994 is hereby SET ASIDE. The plaintiffs-appellants
Felipe Rigonan and Concepcion Rigonan are declared the owners of the properties under
litigation and the defendants-appellees are hereby ordered to VACATE the subject properties and
SURRENDER the possession thereof to the heirs of the plaintiffs-appellants.

Costs against the defendants-appellees. [5]

Hence, this petition assigning the following as errors:
I
THE RESPONDENT COURT OF APPEALS HAS DECIDED QUESTIONS OF LEGAL
SUBSTANCE AND SIGNIFICANCE NOT IN ACCORDANCE WITH THE EVIDENCE, LAW AND
WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT.
II
THAT THE FINDINGS OF RESPONDENT COURT OF APPEALS ARE CONTRARY TO THOSE
OF THE TRIAL COURT AND CLEARLY VIOLATES THE RULE THAT THE FACTUAL FINDINGS
OF TRIAL COURTS ARE ENTITLED TO GREAT WEIGHT AND RESPECT ON APPEAL,
ESPECIALLY WHEN SAID FINDINGS ARE ESTABLISHED BY UNREBUTTED TESTIMONIAL
AND DOCUMENTARY EVIDENCE.
III
THAT THE FINDINGS AND CONCLUSIONS OF RESPONDENT COURT OF APPEALS ARE
GROUNDED ENTIRELY ON SPECULATIONS, SURMISES, CONJECTURES, OR ON
INFERENCES MANIFESTLY MISTAKEN.
IV
THAT THE RESPONDENT COURT OF APPEALS MANIFESTLY OVERLOOKED CERTAIN
RELEVANT FACTS NOT DISPUTED BY THE PARTIES AND WHICH, IF PROPERLY
CONSIDERED, WOULD JUSTIFY A DIFFERENT CONCLUSION.
V
THAT THE FINDINGS OF FACT OF RESPONDENT COURT OF APPEALS ARE PREMISED ON
SUPPOSED ABSENCE OF EVIDENCE BUT IS CONTRADICTED BY THE EVIDENCE ON
RECORD THUS CONSTITUTES GRAVE ABUSE OF DISCRETION. [6]
The basic issue for our consideration is, did private respondents sufficiently establish the
existence and due execution of the Deed of Absolute and Irrevocable Sale of Real
Property? Marked as Exhibits A, A-1, 1 and 1-a, this deed purportedly involved nine (9) parcels of
land, inclusive of the three (3) parcels in dispute, sold at the price of P850 by Paulina Rigonan to
private respondents on January 28, 1965, at Batac, Ilocos Norte. [7] The trial court found the deed
fake, being a carbon copy with no typewritten original presented; and the court concluded that
the documents execution was tainted with alterations, defects, tamperings, and irregularities
which render it null and void ab initio.[8]
Petitioners argue that the Court of Appeals erred in not applying the doctrine that factual
findings of trial courts are entitled to great weight and respect on appeal, especially when said
findings are established by unrebutted testimonial and documentary evidence. They add that the
Court of Appeals, in reaching a different conclusion, had decided the case contrary to the
evidence presented and the law applicable to the case. Petitioners maintain that the due
execution of the deed of sale was not sufficiently established by private respondents, who as
plaintiffs had the burden of proving it. First, the testimonies of the two alleged instrumental
witnesses of the sale, namely, Juan Franco and Efren Sibucao, were dispensed with and discarded
when Franco retracted his oral and written testimony that he was a witness to the execution of
the subject deed. As a consequence, the appellate court merely relied on Atty. Tagatags (the
notary public) testimony, which was incredible because aside from taking the double role of a
witness and notary public, he was a paid witness. Further his testimony, that the subject deed
was executed in the house of Paulina Rigonan, was rebutted by Zosima Domingo, Paulinas
housekeeper, who said that she did not see Atty. Tagatag, Juan Franco and Efren Sibucao in
Paulinas house on the alleged date of the deeds execution.
Secondly, petitioners said that private respondents failed to account for the typewritten
original of the deed of sale and that the carbon copy filed with the Register of Deeds was only a

duplicate which contained insertions and erasures. Further, the carbon copy was without an
affidavit of explanation, in violation of the Administrative Code as amended, which requires that
if the original deed of sale is not presented or available upon registration of the deed, the carbon
copy or so-called duplicate original must be accompanied by an affidavit of explanation,
otherwise, registration must be denied.[9]
Thirdly, petitioners aver that the consideration of only P850 for the parcels of land sold,
together with a house and a warehouse, was another indication that the sale was fictitious
because no person who was financially stable would sell said property at such a grossly
inadequate consideration.
Lastly, petitioners assert that there was abundant evidence that at the time of the execution
of the deed of sale, Paulina Rigonan was already senile.She could not have consented to the sale
by merely imprinting her thumbmark on the deed.
In their comment, private respondents counter that at the outset the petition must be
dismissed for it lacks a certification against forum-shopping.Nonetheless, even disregarding this
requirement, the petition must still be denied in due course for it does not present any
substantial legal issue, but factual or evidentiary ones which were already firmly resolved by the
Court of Appeals based on records and the evidence presented by the parties.Private
respondents claim that the factual determination by the trial court lacks credibility for it was
made by the trial judge who presided only in one hearing of the case. The trial judge could not
validly say that the deed of absolute sale was fake because no signature was forged, according
to private respondents; and indeed a thumbmark, said to be the sellers own, appears thereon.
In their reply, petitioners said that the copy of the petition filed with this Court was
accompanied with a certification against forum shopping. If private respondents copy did not
contain same certification, this was only due to inadvertence. Petitioners ask for the Courts
indulgence for anyway there was substantial compliance with Revised Circular No. 28-91.
On the contention that here only factual issues had been raised, hence not the proper
subject for review by this Court, petitioners reply that this general rule admits of exceptions, as
when the factual findings of the Court of Appeals and the trial court are contradictory; when the
findings are grounded entirely on speculations, surmises or conjectures; and when the Court of
Appeals overlooked certain relevant facts not disputed by the parties which if properly
considered would justify a different conclusion. All these, according to petitioners, are present in
this case.
Before proceeding to the main issue, we shall first settle procedural issues raised by private
respondents.
While the trial judge deciding the case presided over the hearings of the case only once, this
circumstance could not have an adverse effect on his decision. The continuity of a court and the
efficacy of its proceedings are not affected by the death, resignation or cessation from the
service of the presiding judge. A judge may validly render a decision although he has only partly
heard the testimony of the witnesses. [10] After all, he could utilize and rely on the records of the
case, including the transcripts of testimonies heard by the former presiding judge.
On the matter of the certification against forum-shopping, petitioners aver that they attached
one in the copy intended for this Court. This is substantial compliance. A deviation from a rigid
enforcement of the rules may be allowed to attain their prime objective for, after all, the
dispensation of justice is the core reason for the courts existence. [11]
While the issues raised in this petition might appear to be mainly factual, this petition is
properly given due course because of the contradictory findings of the trial court and the Court
of Appeals. Further, the latter court apparently overlooked certain relevant facts which justify a
different conclusion.[12] Moreover, a compelling sense to make sure that justice is done, and done
rightly in the light of the issues raised herein, constrains us from relying on technicalities alone to
resolve this petition.
Now, on the main issue. Did private respondents establish the existence and due execution
of the deed of sale? Our finding is in the negative. First, note that private respondents as
plaintiffs below presented only a carbon copy of this deed. When the Register of Deeds was

subpoenaed to produce the deed, no original typewritten deed but only a carbon copy was
presented to the trial court. Although the Court of Appeals calls it a duplicate original, the deed
contained filled in blanks and alterations. None of the witnesses directly testified to prove
positively and convincingly Paulinas execution of the original deed of sale. The carbon copy did
not bear her signature, but only her alleged thumbprint. Juan Franco testified during the direct
examination that he was an instrumental witness to the deed. However, when cross-examined
and shown a copy of the subject deed, he retracted and said that said deed of sale was not the
document he signed as witness.[13] He declared categorically he knew nothing about it. [14]
We note that another witness, Efren Sibucao, whose testimony should have corroborated
Atty. Tagatags, was not presented and his affidavit was withdrawn from the court, [15] leaving only
Atty. Tagatags testimony, which aside from being uncorroborated, was self-serving.
Secondly, we agree with the trial court that irregularities abound regarding the execution and
registration of the alleged deed of sale. On record, Atty. Tagatag testified that he himself
registered the original deed with the Register of Deeds. [16] Yet, the original was nowhere to be
found and none could be presented at the trial. Also, the carbon copy on file, which is allegedly a
duplicate original, shows intercalations and discrepancies when compared to purported copies in
existence. The intercalations were allegedly due to blanks left unfilled by Atty. Tagatag at the
time of the deeds registration. The blanks were allegedly filled in much later by a representative
of the Register of Deeds. In addition, the alleged other copies of the document bore different
dates of entry: May 16, 1966, 10:20 A.M. [17] and June 10, 1966, 3:16 P.M., [18] and different entry
numbers: 66246, 74389[19] and 64369.[20] The deed was apparently registered long after its
alleged date of execution and after Paulinas death on March 20, 1966. [21] Admittedly, the alleged
vendor Paulina Rigonan was not given a copy. [22]
Furthermore, it appears that the alleged vendor was never asked to vacate the premises she
had purportedly sold. Felipe testified that he had agreed to let Paulina stay in the house until her
death.[23] In Alcos v. IAC, 162 SCRA 823 (1988), the buyers immediate possession and occupation
of the property was deemed corroborative of the truthfulness and authenticity of the deed of
sale. The alleged vendors continued possession of the property in this case throws an inverse
implication, a serious doubt on the due execution of the deed of sale. Noteworthy, the same
parcels of land involved in the alleged sale were still included in the will subsequently executed
by Paulina and notarized by the same notary public, Atty. Tagatag. [24] These circumstances, taken
together, militate against unguarded acceptance of the due execution and genuineness of the
alleged deed of sale.
Thirdly, we have to take into account the element of consideration for the sale. The price
allegedly paid by private respondents for nine (9) parcels, including the three parcels in dispute,
a house and a warehouse, raises further questions. Consideration is the why of a contract, the
essential reason which moves the contracting parties to enter into the contract. [25] On record,
there is unrebutted testimony that Paulina as landowner was financially well off. She loaned
money to several people.[26] We see no apparent and compelling reason for her to sell the subject
parcels of land with a house and warehouse at a meager price of P850 only.
In Rongavilla vs. CA, 294 SCRA 289 (1998), private respondents were in their advanced
years, and were not in dire need of money, except for a small amount of P2,000 which they said
were loaned by petitioners for the repair of their houses roof. We ruled against petitioners, and
declared that there was no valid sale because of lack of consideration.
In the present case, at the time of the execution of the alleged contract, Paulina Rigonan was
already of advanced age and senile. She died an octogenarian on March 20, 1966, barely over a
year when the deed was allegedly executed on January 28, 1965, but before copies of the deed
were entered in the registry allegedly on May 16 and June 10, 1966. The general rule is that a
person is not incompetent to contract merely because of advanced years or by reason of physical
infirmities.[27] However, when such age or infirmities have impaired the mental faculties so as to
prevent the person from properly, intelligently, and firmly protecting her property rights then she
is undeniably incapacitated. The unrebutted testimony of Zosima Domingo shows that at the
time of the alleged execution of the deed, Paulina was already incapacitated physically and
mentally. She narrated that Paulina played with her waste and urinated in bed. Given these
circumstances, there is in our view sufficient reason to seriously doubt that she consented to the
sale of and the price for her parcels of land. Moreover, there is no receipt to show that said price

was paid to and received by her. Thus, we are in agreement with the trial courts finding and
conclusion on the matter:
The whole evidence on record does not show clearly that the fictitious P850.00 consideration was
ever delivered to the vendor. Undisputably, the P850.00 consideration for the nine (9) parcels of
land including the house and bodega is grossly and shockingly inadequate, and the sale is null
and void ab initio.[28]
WHEREFORE, the petition is GRANTED. The decision and resolution of the Court of Appeals
dated August 29, 1996 and December 11, 1996, respectively, are REVERSED and SET ASIDE. The
decision of the Regional Trial Court of Batac, Ilocos Norte, Branch 17, dated March 23, 1994, is
REINSTATED.
Costs against private respondents.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-46658

May 13, 1991

PHILIPPINE NATIONAL BANK, petitioner,

vs.
HON. GREGORIO G. PINEDA, in his capacity as Presiding Judge of the Court of First
Instance of Rizal, Branch XXI and TAYABAS CEMENT COMPANY, INC., respondents.
The Chief Legal Counsel for petitioner.
Ortille Law Office for private respondent.
FERNAN, C.J.:
In this petition for certiorari, petitioner Philippine National Bank (PNB) seeks to annul and set
aside the orders dated March 4, 1977 and May 31, 1977 rendered in Civil Case No. 24422 1 of the
Court of First Instance of Rizal, Branch XXI, respectively granting private respondent Tayabas
Cement Company, Inc.'s application for a writ of preliminary injunction to enjoin the foreclosure
sale of certain properties in Quezon City and Negros Occidental and denying petitioner's motion
for reconsideration thereof.
In 1963, Ignacio Arroyo, married to Lourdes Tuason Arroyo (the Arroyo Spouses), obtained a loan
of P580,000.00 from petitioner bank to purchase 60% of the subscribed capital stock, and
thereby acquire the controlling interest of private respondent Tayabas Cement Company, Inc.
(TCC). 2 As security for said loan, the spouses Arroyo executed a real estate mortgage over a
parcel of land covered by Transfer Certificate of Title No. 55323 of the Register of Deeds of
Quezon City known as the La Vista property.
Thereafter, TCC filed with petitioner bank an application and agreement for the establishment of
an eight (8) year deferred letter of credit (L/C) for $7,000,000.00 in favor of Toyo Menka Kaisha,
Ltd. of Tokyo, Japan, to cover the importation of a cement plant machinery and equipment.
Upon approval of said application and opening of an L/C by PNB in favor of Toyo Menka Kaisha,
Ltd. for the account of TCC, the Arroyo spouses executed the following documents to secure this
loan accommodation: Surety Agreement dated August 5, 1964 3 and Covenant dated August 6,
1964. 4
The imported cement plant machinery and equipment arrived from Japan and were released to
TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha, Ltd. made the
corresponding drawings against the L/C as scheduled. TCC, however, failed to remit and/or pay
the corresponding amount covered by the drawings. Thus, on May 19, 1968, pursuant to the
trust receipt agreement, PNB notified TCC of its intention to repossess, as it later did, the
imported machinery and equipment for failure of TCC to settle its obligations under the L/C. 5
In the meantime, the personal accounts of the spouses Arroyo, which included another loan of
P160,000.00 secured by a real estate mortgage over parcels of agricultural land known as
Hacienda Bacon located in Isabela, Negros Occidental, had likewise become due. The spouses
Arroyo having failed to satisfy their obligations with PNB, the latter decided to foreclose the real
estate mortgages executed by the spouses Arroyo in its favor.
On July 18, 1975, PNB filed with the City Sheriff of Quezon City a petition for extra-judicial
foreclosure under Act 3138, as amended by Act 4118 and under Presidential Decree No. 385 of
the real estate mortgage over the properties known as the La Vista property covered by TCT No.
55323. 6 PNB likewise filed a similar petition with the City Sheriff of Bacolod, Negros Occidental
with respect to the mortgaged properties located at Isabela, Negros Occidental and covered by
OCT No. RT 1615.
The foreclosure sale of the La Vista property was scheduled on August 11, 1975. At the auction
sale, PNB was the highest bidder with a bid price of P1,000,001.00. However, when said property
was about to be awarded to PNB, the representative of the mortgagor-spouses objected and
demanded from the PNB the difference between the bid price of P1,000,001.00 and the
indebtedness of P499,060.25 of the Arroyo spouses on their personal account. It was the
contention of the spouses Arroyo's representative that the foreclosure proceedings referred only
to the personal account of the mortgagor spouses without reference to the account of TCC.

To remedy the situation, PNB filed a supplemental petition on August 13, 1975 requesting the
Sheriff's Office to proceed with the sale of the subject real properties to satisfy not only the
amount of P499,060.25 owed by the spouses Arroyos on their personal account but also the
amount of P35,019,901.49 exclusive of interest, commission charges and other expenses owed
by said spouses as sureties of TCC. 7 Said petition was opposed by the spouses Arroyo and the
other bidder, Jose L. Araneta.
On September 12, 1975, Acting Clerk of Court and Ex-Officio Sheriff Diana L. Dungca issued a
resolution finding that the questions raised by the parties required the reception and evaluation
of evidence, hence, proper for adjudication by the courts of law. Since said questions were
prejudicial to the holding of the foreclosure sale, she ruled that her "Office, therefore, cannot
properly proceed with the foreclosure sale unless and until there be a court ruling on the
aforementioned issues." 8
Thus, in May, 1976, PNB filed with the Court of First Instance of Quezon City, Branch V a petition
for mandamus 9against said Diana Dungca in her capacity as City Sheriff of Quezon City to
compel her to proceed with the foreclosure sale of the mortgaged properties covered by TCT No.
55323 in order to satisfy both the personal obligation of the spouses Arroyo as well as their
liabilities as sureties of TCC. 10
On September 6, 1976, the petition was granted and Dungca was directed to proceed with the
foreclosure sale of the mortgaged properties covered by TCT No. 55323 pursuant to Act No. 3135
and to issue the corresponding Sheriff's Certificate of Sale. 11
Before the decision could attain finality, TCC filed on September 14, 1976 before the Court of
First Instance of Rizal, Pasig, Branch XXI a complaint 12 against PNB, Dungca, and the Provincial
Sheriff of Negros Occidental and Ex-Officio Sheriff of Bacolod City seeking, inter alia, the issuance
of a writ of preliminary injunction to restrain the foreclosure of the mortgages over the La Vista
property and Hacienda Bacon as well as a declaration that its obligation with PNB had been fully
paid by reason of the latter's repossession of the imported machinery and equipment. 13
On October 5, 1976, the CFI, thru respondent Judge Gregorio Pineda, issued a restraining
order 14 and on March 4, 1977, granted a writ of preliminary injunction. 15 PNB's motion for
reconsideration was denied, hence this petition.
Petitioner PNB advances four grounds for the setting aside of the writ of preliminary injunction,
namely: a) that it contravenes P.D. No. 385 which prohibits the issuance of a restraining order
against a government financial institution in any action taken by such institution in compliance
with the mandatory foreclosure provided in Section 1 thereof; b) that the writ countermands a
final decision of a co-equal and coordinate court; c) that the writ seeks to prohibit the
performance of acts beyond the court's territorial jurisdiction; and, d) private respondent TCC has
not shown any clear legal right or necessity to the relief of preliminary injunction.
Private respondent TCC counters with the argument that P.D. No. 385 does not apply to the case
at bar, firstly because no foreclosure proceedings have been instituted against it by PNB and
secondly, because its account under the L/C has been fully satisfied with the repossession of the
imported machinery and equipment by PNB.
The resolution of the instant controversy lies primarily on the question of whether or not TCC's
liability has been extinguished by the repossession of PNB of the imported cement plant
machinery and equipment.
We rule for the petitioner PNB. It must be remembered that PNB took possession of the imported
cement plant machinery and equipment pursuant to the trust receipt agreement executed by
and between PNB and TCC giving the former the unqualified right to the possession and disposal
of all property shipped under the Letter of Credit until such time as all the liabilities and
obligations under said letter had been discharged. 16 In the case of Vintola vs. Insular Bank of
Asia and America 17 wherein the same argument was advanced by the Vintolas as entrustees of
imported seashells under a trust receipt transaction, we said:
Further, the VINTOLAS take the position that their obligation to IBAA has been
extinguished inasmuch as, through no fault of their own, they were unable to dispose of
the seashells, and that they have relinquished possession thereof to the IBAA, as owner of
the goods, by depositing them with the Court.
The foregoing submission overlooks the nature and mercantile usage of the transaction
involved. A letter of credit-trust receipt arrangement is endowed with its own distinctive
features and characteristics. Under that set-up, a bank extends a loan covered by the

Letter of Credit, with the trust receipt as a security for the loan. In other words, the
transaction involves a loan feature represented by the letter of credit, and a security
feature which is in the covering trust receipt.
xxx
xxx
xxx
A trust receipt, therefore, is a security agreement, pursuant to which a bank acquires a
"security interest" in the goods. It secures an indebtedness and there can be no such thing
as security interest that secures no obligation. As defined in our laws:
(h) "Security interest" means a property interest in goods, documents or
instruments to secure performance of some obligations of the entrustee or of some
third persons to the entruster and includes title, whether or not expressed to be
absolute, whenever such title is in substance taken or retained for security only.
xxx
xxx
xxx
Contrary to the allegation of the VINTOLAS, IBAA did not become the real owner of the
goods. It was merely the holder of a security title for the advances it had made to the
VINTOLAS. The goods the VINTOLAS had purchased through IBAA financing remain their
own property and they hold it at their own risk. The trust receipt arrangement did not
convert the IBAA into an investor; the latter remained a lender and creditor.
xxx
xxx
xxx
Since the IBAA is not the factual owner of the goods, the VINTOLAS cannot justifiably claim
that because they have surrendered the goods to IBAA and subsequently deposited them
in the custody of the court, they are absolutely relieved of their obligation to pay their loan
because of their inability to dispose of the goods. The fact that they were unable to sell
the seashells in question does not affect IBAA's right to recover the advances it had made
under the Letter of Credit.
PNB's possession of the subject machinery and equipment being precisely as a form of security for the
advances given to TCC under the Letter of Credit, said possession by itself cannot be considered
payment of the loan secured thereby. Payment would legally result only after PNB had foreclosed on
said securities, sold the same and applied the proceeds thereof to TCC's loan obligation. Mere
possession does not amount to foreclosure for foreclosure denotes the procedure adopted by the
mortgagee to terminate the rights of the mortgagor on the property and includes the sale itself. 18
Neither can said repossession amount to dacion en pago. Dation in payment takes place when
property is alienated to the creditor in satisfaction of a debt in money and the same is governed by
sales. 19 Dation in payment is the delivery and transmission of ownership of a thing by the debtor to
the creditor as an accepted equivalent of the performance of the obligation. 20 As aforesaid, the
repossession of the machinery and equipment in question was merely to secure the payment of TCC's
loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said
loan. Thus, no dacion en pago was ever accomplished.
Proceeding from this finding, PNB has the right to foreclose the mortgages executed by the spouses
Arroyo as sureties of TCC. A surety is considered in law as being the same party as the debtor in
relation to whatever is adjudged touching the obligation of the latter, and their liabilities are
interwoven as to be inseparable. 21 As sureties, the Arroyo spouses are primarily liable as original
promissors and are bound immediately to pay the creditor the amount outstanding. 22
Under Presidential Decree No. 385 which took effect on January 31, 1974, government financial
institutions like herein petitioner PNB are required to foreclose on the collaterals and/or securities for
any loan, credit or accommodation whenever the arrearages on such account amount to at least
twenty percent (20%) of the total outstanding obligations, including interests and charges, as
appearing in the books of account of the financial institution concerned. 23 It is further provided therein
that "no restraining order, temporary or permanent injunction shall be issued by the court against any
government financial institution in any action taken by such institution in compliance with the
mandatory foreclosure provided in Section 1 hereof, whether such restraining order, temporary or
permanent injunction is sought by the borrower(s) or any third party or parties . . ." 24
It is not disputed that the foreclosure proceedings instituted by PNB against the Arroyo spouses were
in compliance with the mandate of P.D. 385. This being the case, the respondent judge acted in excess
of his jurisdiction in issuing the injunction specifically proscribed under said decree.
Another reason for striking down the writ of preliminary injunction complained of is that it interfered
with the order of a co-equal and coordinate court. Since Branch V of the CFI of Rizal had already
acquired jurisdiction over the question of foreclosure of mortgage over the La Vista property and
rendered judgment in relation thereto, then it retained jurisdiction to the exclusion of all other

coordinate courts over its judgment, including all incidents relative to the control and conduct of its
ministerial officers, namely the sheriff thereof. 25 The foreclosure sale having been ordered by Branch V
of the CFI of Rizal, TCC should not have filed injunction proceedings with Branch XXI of the same CFI,
but instead should have first sought relief by proper motion and application from the former court
which had exclusive jurisdiction over the foreclosure proceeding. 26
This doctrine of non-interference is premised on the principle that a judgment of a court of competent
jurisdiction may not be opened, modified or vacated by any court of concurrent jurisdiction. 27
Furthermore, we find the issuance of the preliminary injunction directed against the Provincial Sheriff
of Negros Occidental and ex-officio Sheriff of Bacolod City a jurisdictional faux pas as the Courts of
First Instance, now Regional Trial Courts, can only enforce their writs of injunction within their
respective designated territories. 28
WHEREFORE, the instant petition is hereby granted. The assailed orders are hereby set aside. Costs
against private respondent.
Gutierrez, Jr., Feliciano, Bidin and Davide, Jr., JJ., concur.

SECOND DIVISION
[G.R. No. 117356. June 19, 2000]
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and
CONSOLIDATED SUGAR CORPORATION, respondents.
DECISION
QUISUMBING, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the decision of the Court of Appeals dated February 24, 1994, in CA-G.R. CV No. 31717, as
well as the respondent court's resolution of September 30, 1994 modifying said decision.
Both decision and resolution amended the judgment dated February 13, 1991, of the
Regional Trial Court of Makati City, Branch 147, in Civil Case No. 90-118.
The facts of this case as found by both the trial and appellate courts are as follows:
St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias
Milling Co., Inc., (VMC). In the course of their dealings, petitioner issued several Shipping
List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these was SLDR No.
1214M, which gave rise to the instant case. Dated October 16, 1989, SLDR No. 1214M
covers 25,000 bags of sugar. Each bag contained 50 kilograms and priced at P638.00 per
bag as "per sales order VMC Marketing No. 042 dated October 16, 1989." [1] The transaction
it covered was a "direct sale."[2] The SLDR also contains an additional note which reads:
"subject for (sic) availability of a (sic) stock at NAWACO (warehouse)." [3]
On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation
(CSC) its rights in SLDR No. 1214M for P 14,750,000.00. CSC issued one check dated
October 25, 1989 and three checks postdated November 13, 1989 in payment. That same
day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar
covered by SLDR No. 1214M. Enclosed in the letter were a copy of SLDR No. 1214M and a
letter of authority from STM authorizing CSC "to withdraw for and in our behalf the refined
sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214 dated
October 16, 1989 in the total quantity of 25,000 bags." [4]
On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with
petitioner as payee. The latter, in turn, issued Official Receipt No. 33743 dated October 27,
1989 acknowledging receipt of the said checks in payment of 50,000 bags. Aside from
SLDR No. 1214M, said checks also covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO
warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been
released, petitioner refused to allow further withdrawals of sugar against SLDR No. 1214M.
CSC then sent petitioner a letter dated January 23, 1990 informing it that SLDR No. 1214M
had been "sold and endorsed" to it but that it had been refused further withdrawals of
sugar from petitioner's warehouse despite the fact that only 2,000 bags had been
withdrawn.[5] CSC thus inquired when it would be allowed to withdraw the remaining
23,000 bags.
On January 31, 1990, petitioner replied that it could not allow any further withdrawals of
sugar against SLDR No. 1214M because STM had already dwithdrawn all the sugar covered
by the cleared checks.[6]
On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of
23,000 bags.
Seven days later, petitioner reiterated that all the sugar corresponding to the amount of
STM's cleared checks had been fully withdrawn and hence, there would be no more
deliveries of the commodity to STM's account. Petitioner also noted that CSC had
represented itself to be STM's agent as it had withdrawn the 2,000 bags against SLDR No.
1214M "for and in behalf" of STM.

On April 27, 1990, CSC filed a complaint for specific performance, docketed as Civil Case
No. 90-1118. Defendants were Teresita Ng Sy (doing business under the name of St.
Therese Merchandising) and herein petitioner. Since the former could not be served with
summons, the case proceeded only against the latter. During the trial, it was discovered
that Teresita Ng Go who testified for CSC was the same Teresita Ng Sy who could not be
reached through summons.[7] CSC, however, did not bother to pursue its case against her,
but instead used her as its witness.
CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by SLDR
No. 1214M. Therefore, the latter had no justification for refusing delivery of the sugar. CSC
prayed that petitioner be ordered to deliver the 23,000 bags covered by SLDR No. 1214M
and sought the award of P1,104,000.00 in unrealized profits, P3,000,000.00 as exemplary
damages, P2,200,000.00 as attorney's fees and litigation expenses.
Petitioner's primary defense a quo was that it was an unpaid seller for the 23,000 bags.
[8]
Since STM had already drawn in full all the sugar corresponding to the amount of its
cleared checks, it could no longer authorize further delivery of sugar to CSC. Petitioner
also contended that it had no privity of contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were not documents of title, but
mere delivery receipts issued pursuant to a series of transactions entered into between it
and STM. The SLDRs prescribed delivery of the sugar to the party specified therein and did
not authorize the transfer of said party's rights and interests.
Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's coconspirator to defraud it through a misrepresentation that CSC was an innocent purchaser
for value and in good faith. Petitioner then prayed that CSC be ordered to pay it the
following sums: P10,000,000.00 as moral damages; P10,000,000.00 as exemplary
damages; and P1,500,000.00 as attorney's fees. Petitioner also prayed that crossdefendant STM be ordered to pay it P10,000,000.00 in exemplary damages, and
P1,500,000.00 as attorney's fees.
Since no settlement was reached at pre-trial, the trial court heard the case on the merits.
As earlier stated, the trial court rendered its judgment favoring private respondent CSC, as
follows:
"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor
of the plaintiff and against defendant Victorias Milling Company:
"1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23,000
bags of refined sugar due under SLDR No. 1214;
"2) Ordering defendant Victorias Milling Company to pay the amount of P920,000.00
as unrealized profits, the amount of P800,000.00 as exemplary damages and the
amount of P1,357,000.00, which is 10% of the acquisition value of the undelivered
bags of refined sugar in the amount of P13,570,000.00, as attorney's fees, plus the
costs.
"SO ORDERED."[9]
It made the following observations:
"[T]he testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the
purchase price of P15,950,000.00 of the 25,000 bags of sugar bought by her
covered by SLDR No. 1214 as well as the purchase price of P15,950,000.00 for the
25,000 bags of sugar bought by her covered by SLDR No. 1213 on the same date,
October 16, 1989 (date of the two SLDRs) is duly supported by Exhibits C to C-15
inclusive which are post-dated checks dated October 27, 1989 issued by St. Therese
Merchandising in favor of Victorias Milling Company at the time it purchased the
50,000 bags of sugar covered by SLDR No. 1213 and 1214. Said checks appear to
have been honored and duly credited to the account of Victorias Milling Company
because on October 27, 1989 Victorias Milling Company issued official receipt no.

34734 in favor of St. Therese Merchandising for the amount of P31,900,000.00

(Exhibits B and B-1). The testimony of Teresita Ng Go is further supported by Exhibit
F, which is a computer printout of defendant Victorias Milling Company showing the
quantity and value of the purchases made by St. Therese Merchandising, the SLDR
no. issued to cover the purchase, the official reciept no. and the status of payment.
It is clear in Exhibit 'F' that with respect to the sugar covered by SLDR No. 1214 the
same has been fully paid as indicated by the word 'cleared' appearing under the
column of 'status of payment.'
"On the other hand, the claim of defendant Victorias Milling Company that the
purchase price of the 25,000 bags of sugar purchased by St. Therese Merchandising
covered by SLDR No. 1214 has not been fully paid is supported only by the
testimony of Arnulfo Caintic, witness for defendant Victorias Milling Company. The
Court notes that the testimony of Arnulfo Caintic is merely a sweeping barren
assertion that the purchase price has not been fully paid and is not corroborated by
any positive evidence. There is an insinuation by Arnulfo Caintic in his testimony
that the postdated checks issued by the buyer in payment of the purchased price
were dishonored. However, said witness failed to present in Court any dishonored
check or any replacement check. Said witness likewise failed to present any bank
record showing that the checks issued by the buyer, Teresita Ng Go, in payment of
the purchase price of the sugar covered by SLDR No. 1214 were dishonored." [10]
Petitioner appealed the trial courts decision to the Court of Appeals.
On appeal, petitioner averred that the dealings between it and STM were part of a series of
transactions involving only one account or one general contract of sale. Pursuant to this
contract, STM or any of its authorized agents could withdraw bags of sugar only against
cleared checks of STM. SLDR No. 21214M was only one of 22 SLDRs issued to STM
and since the latter had already withdrawn its full quota of sugar under the said SLDR,
CSC was already precluded from seeking delivery of the 23,000 bags of sugar.
Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M
were separate and independent transactions and that the details of the series of
purchases were contained in a single statement with a consolidated summary of cleared
check payments and sugar stock withdrawals because this a more convenient system than
issuing separate statements for each purchase.
The appellate court considered the following issues: (a) Whether or not the transaction
between petitioner and STM involving SLDR No. 1214M was a separate, independent, and
single transaction; (b) Whether or not CSC had the capacity to sue on its own on SLDR No.
1214M; and (c) Whether or not CSC as buyer from STM of the rights to 25,000 bags of
sugar covered by SLDR No. 1214M could compel petitioner to deliver 23,000
bags allegedly unwithdrawn.
On February 24, 1994, the Court of Appeals rendered its decision modifying the trial
court's judgment, to wit:
"WHEREFORE, the Court hereby MODIFIES the assailed judgment and orders
defendant-appellant to:
"1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No. 1214M;
" 2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the
undelivered bags of refined sugar, as attorneys fees;
"3) Pay the costs of suit.
"SO ORDERED."[11]
Both parties then seasonably filed separate motions for reconsideration.
In its resolution dated September 30, 1994, the appellate court modified its decision to
read:

"WHEREFORE, the Court hereby modifies the assailed judgment and orders
defendant-appellant to:
"(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No.
1214M;
"(2) Pay costs of suit.
"SO ORDERED."[12]
The appellate court explained the rationale for the modification as follows:
"There is merit in plaintiff-appellee's position.
"Exhibit F' We relied upon in fixing the number of bags of sugar which remained
undelivered as 12,586 cannot be made the basis for such a finding. The rule is
explicit that courts should consider the evidence only for the purpose for which it
was offered. (People v. Abalos, et al, 1 CA Rep 783). The rationale for this is to afford
the party against whom the evidence is presented to object thereto if he deems it
necessary. Plaintiff-appellee is, therefore, correct in its argument that Exhibit F'
which was offered to prove that checks in the total amount of P15,950,000.00 had
been cleared. (Formal Offer of Evidence for Plaintiff, Records p. 58) cannot be used
to prove the proposition that 12,586 bags of sugar remained undelivered.
"Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and
Marianito L. Santos [TSN, 17 October 1990, pp. 16, 18, and 36]) presented by
plaintiff-appellee was to the effect that it had withdrawn only 2,000 bags of sugar
from SLDR after which it was not allowed to withdraw anymore. Documentary
evidence (Exhibit I, Id., p. 78, Exhibit K, Id., p. 80)show that plaintiff-appellee had
sent demand letters to defendant-appellant asking the latter to allow it to withdraw
the remaining 23,000 bags of sugar from SLDR 1214M. Defendant-appellant, on the
other hand, alleged that sugar delivery to the STM corresponded only to the value of
cleared checks; and that all sugar corresponded to cleared checks had been
withdrawn. Defendant-appellant did not rebut plaintiff-appellee's assertions. It did
not present evidence to show how many bags of sugar had been withdrawn against
SLDR No. 1214M, precisely because of its theory that all sales in question were a
series of one single transaction and withdrawal of sugar depended on the clearing
of checks paid therefor.
"After a second look at the evidence, We see no reason to overturn the findings of
the trial court on this point."[13]
Hence, the instant petition, positing the following errors as grounds for review:
"1. The Court of Appeals erred in not holding that STM's and private respondent's
specially informing petitioner that respondent was authorized by buyer STM to
withdraw sugar against SLDR No. 1214M "for and in our (STM) behalf," (emphasis in
the original) private respondent's withdrawing 2,000 bags of sugar for STM, and
STM's empowering other persons as its agents to withdraw sugar against the same
SLDR No. 1214M, rendered respondent like the other persons, an agent of STM as
held in Rallos v. Felix Go Chan & Realty Corp., 81 SCRA 252, and precluded it from
subsequently claiming and proving being an assignee of SLDR No. 1214M and from
suing by itself for its enforcement because it was conclusively presumed to be an
agent (Sec. 2, Rule 131, Rules of Court) and estopped from doing so. (Art. 1431,
Civil Code).
" 2. The Court of Appeals erred in manifestly and arbitrarily ignoring and
disregarding certain relevant and undisputed facts which, had they been
considered, would have shown that petitioner was not liable, except for 69 bags of
sugar, and which would justify review of its conclusion of facts by this Honorable
Court.

" 3. The Court of Appeals misapplied the law on compensation under Arts. 1279,
1285 and 1626 of the Civil Code when it ruled that compensation applied only to
credits from one SLDR or contract and not to those from two or more distinct
contractsbetween the same parties; and erred in denying petitioner's right to setoff
all its credits arising prior to notice of assignment from other sales or SLDRs against
private respondent's claim as assignee under SLDR No. 1214M, so as to extinguish
or reduce its liability to 69 bags, because the law on compensation applies precisely
to two or more distinct contracts betweenthe same parties (emphasis in the
original).
"4. The Court of Appeals erred in concluding that the settlement or liquidation of
accounts in Exh. F between petitioner and STM, respondent's admission of its
balance, and STM's acquiescence thereto by silence for almost one year did not
render Exh. `F' an account stated and its balance binding.
"5. The Court of Appeals erred in not holding that the conditions of the assigned
SLDR No. 1214, namely, (a) its subject matter being generic, and (b) the sale of
sugar being subject to its availability at the Nawaco warehouse, made the sale
conditional and prevented STM or private respondent from acquiring title to the
sugar; and the non-availability of sugar freed petitioner from further obligation.
"6. The Court of Appeals erred in not holding that the "clean hands" doctrine
precluded respondent from seeking judicial reliefs (sic) from petitioner, its only
remedy being against its assignor."[14]
Simply stated, the issues now to be resolved are:
(1)....Whether or not the Court of Appeals erred in not ruling that CSC was an agent
of STM and hence, estopped to sue upon SLDR No. 1214M as an assignee.
(2)....Whether or not the Court of Appeals erred in applying the law on
compensation to the transaction under SLDR No. 1214M so as to preclude petitioner
from offsetting its credits on the other SLDRs.
(3)....Whether or not the Court of Appeals erred in not ruling that the sale of sugar
under SLDR No. 1214M was a conditional sale or a contract to sell and hence freed
petitioner from further obligations.
(4)....Whether or not the Court of Appeals committed an error of law in not applying
the "clean hands doctrine" to preclude CSC from seeking judicial relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that petitioner raised this issue for the first
time on appeal. It is settled that an issue which was not raised during the trial in the court
below could not be raised for the first time on appeal as to do so would be offensive to the
basic rules of fair play, justice, and due process. [15] Nonetheless, the Court of Appeals
opted to address this issue, hence, now a matter for our consideration.
Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar
against SLDR No. 1214M to show that the latter was STM's agent. The pertinent portion of
said letter reads:
"This is to authorize Consolidated Sugar Corporation or its representative to
withdraw for and in our behalf (stress supplied) the refined sugar covered by
Shipping List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated October 16,
1989 in the total quantity of 25, 000 bags." [16]
The Civil Code defines a contract of agency as follows:
"Art. 1868. By the contract of agency a person binds himself to render some service
or to do something in representation or on behalf of another, with the consent or
authority of the latter."

It is clear from Article 1868 that the basis of agency is representation. [17] On the part of the
principal, there must be an actual intention to appoint [18] or an intention naturally inferable
from his words or actions;[19] and on the part of the agent, there must be an intention to
accept the appointment and act on it,[20] and in the absence of such intent, there is
generally no agency.[21] One factor which most clearly distinguishes agency from other
legal concepts is control; one person - the agent - agrees to act under the control or
direction of another - the principal. Indeed, the very word "agency" has come to connote
control by the principal.[22] The control factor, more than any other, has caused the courts
to put contracts between principal and agent in a separate category. [23] The Court of
Appeals, in finding that CSC, was not an agent of STM, opined:
"This Court has ruled that where the relation of agency is dependent upon the acts
of the parties, the law makes no presumption of agency, and it is always a fact to be
proved, with the burden of proof resting upon the persons alleging the agency, to
show not only the fact of its existence, but also its nature and extent (Antonio vs.
Enriquez [CA], 51 O.G. 3536]. Here, defendant-appellant failed to sufficiently
establish the existence of an agency relation between plaintiff-appellee and STM.
The fact alone that it (STM) had authorized withdrawal of sugar by plaintiff-appellee
"for and in our (STM's) behalf" should not be eyed as pointing to the existence of an
agency relation ...It should be viewed in the context of all the circumstances
obtaining. Although it would seem STM represented plaintiff-appellee as being its
agent by the use of the phrase "for and in our (STM's) behalf" the matter was
cleared when on 23 January 1990, plaintiff-appellee informed defendant-appellant
that SLDFR No. 1214M had been "sold and endorsed" to it by STM (Exhibit I,
Records, p. 78). Further, plaintiff-appellee has shown that the 25, 000 bags of sugar
covered by the SLDR No. 1214M were sold and transferred by STM to it...A
conclusion that there was a valid sale and transfer to plaintiff-appellee may,
therefore, be made thus capacitating plaintiff-appellee to sue in its own name,
without need of joining its imputed principal STM as co-plaintiff." [24]
In the instant case, it appears plain to us that private respondent CSC was a buyer of the
SLDFR form, and not an agent of STM. Private respondent CSC was not subject to STM's
control. The question of whether a contract is one of sale or agency depends on the
intention of the parties as gathered from the whole scope and effect of the language
employed.[25] That the authorization given to CSC contained the phrase "for and in our
(STM's) behalf" did not establish an agency. Ultimately, what is decisive is the intention of
the parties.[26] That no agency was meant to be established by the CSC and STM is clearly
shown by CSC's communication to petitioner that SLDR No. 1214M had been "sold and
endorsed" to it.[27] The use of the words "sold and endorsed" means that STM and CSC
intended a contract of sale, and not an agency. Hence, on this score, no error was
committed by the respondent appellate court when it held that CSC was not STM's agent
and could independently sue petitioner.
On the second issue, proceeding from the theory that the transactions entered into
between petitioner and STM are but serial parts of one account, petitioner insists that its
debt has been offset by its claim for STM's unpaid purchases, pursuant to Article 1279 of
the Civil Code.[28] However, the trial court found, and the Court of Appeals concurred, that
the purchase of sugar covered by SLDR No. 1214M was a separate and independent
transaction; it was not a serial part of a single transaction or of one account contrary to
petitioner's insistence. Evidence on record shows, without being rebutted, that petitioner
had been paid for the sugar purchased under SLDR No. 1214M. Petitioner clearly had the
obligation to deliver said commodity to STM or its assignee. Since said sugar had been
fully paid for, petitioner and CSC, as assignee of STM, were not mutually creditors and
debtors of each other. No reversible error could thereby be imputed to respondent
appellate court when, it refused to apply Article 1279 of the Civil Code to the present case.
Regarding the third issue, petitioner contends that the sale of sugar under SLDR No.
1214M is a conditional sale or a contract to sell, with title to the sugar still remaining with
the vendor. Noteworthy, SLDR No. 1214M contains the following terms and conditions:
"It is understood and agreed that by payment by buyer/trader of refined sugar
and/or receipt of this document by the buyer/trader personally or through a
representative, title to refined sugar is transferred to buyer/trader and delivery to

him/it is deemed effected and completed (stress supplied) and buyer/trader

assumes full responsibility therefore"[29]
The aforequoted terms and conditions clearly show that petitioner transferred title to the
sugar to the buyer or his assignee upon payment of the purchase price. Said terms clearly
establish a contract of sale, not a contract to sell. Petitioner is now estopped from alleging
the contrary. The contract is the law between the contracting parties. [30] And where the
terms and conditions so stipulated are not contrary to law, morals, good customs, public
policy or public order, the contract is valid and must be upheld.[31] Having transferred title
to the sugar in question, petitioner is now obliged to deliver it to the purchaser or its
assignee.
As to the fourth issue, petitioner submits that STM and private respondent CSC have
entered into a conspiracy to defraud it of its sugar. This conspiracy is allegedly evidenced
by: (a) the fact that STM's selling price to CSC was below its purchasing price; (b) CSC's
refusal to pursue its case against Teresita Ng Go; and (c) the authority given by the latter
to other persons to withdraw sugar against SLDR No. 1214M after she had sold her rights
under said SLDR to CSC. Petitioner prays that the doctrine of "clean hands" should be
applied to preclude CSC from seeking judicial relief. However, despite careful scrutiny, we
find here the records bare of convincing evidence whatsoever to support the petitioner's
allegations of fraud. We are now constrained to deem this matter purely speculative,
bereft of concrete proof.
WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

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

respondent was effected. On the other hand, the appellate court considered the RMOA executed
by Arturo in favor of respondent valid to effect the sale of Arturos conjugal share in the property.
Dissatisfied with the appellate courts disposition of the case, petitioner seeks a reversal of its
decision alleging that:
I.
The Court of Appeals committed serious and manifest error when it decided on the appeal
without affording petitioner his right to due process.
II.
The Court of Appeals committed serious and manifest error in reversing and setting aside the
findings of fact by the trial court.
III.
The Court of Appeals erred in ruling that a contract to sell is a contract of sale, and in ordering
petitioner to execute a registrable form of deed of sale over the property in favor of respondent.
[1]

Petitioner contends that he was not personally served with copies of summons, pleadings,
and processes in the appeal proceedings nor was he given an opportunity to submit an appellees
brief. He alleges that his counsel was in the United States from 1994 to June 2000, and he never
received any news or communication from him after the proceedings in the trial court were
terminated. Petitioner submits that he was denied due process because he was not informed of
the appeal proceedings, nor given the chance to have legal representation before the appellate
court.
We are not convinced. The essence of due process is an opportunity to be heard. Petitioners
failure to participate in the appeal proceedings is not due to a cause imputable to the appellate
court but because of petitioners own neglect in ascertaining the status of his case. Petitioners
counsel is equally negligent in failing to inform his client about the recent developments in the
appeal proceedings. Settled is the rule that a party is bound by the conduct, negligence and
mistakes of his counsel.[2] Thus, petitioners plea of denial of due process is downright baseless.
Petitioner also blames the appellate court for setting aside the factual findings of the trial
court and argues that factual findings of the trial court are given much weight and respect when
supported by substantial evidence. He asserts that the sale between him and respondent is void
for lack of consent because the SPA purportedly executed by his wife Esther is a forgery and
therefore, he could not have validly sold the subject property to respondent.
Next, petitioner theorizes that the RMOA he executed in favor of respondent was not
perfected because the check representing the earnest money was dishonored. He adds that
there is no evidence on record that the second check issued by respondent was intended to
replace the first check representing payment of earnest money.
Respondent admits that the subject property is co-owned by petitioner and his wife, but he
objects to the allegations in the petition bearing a relation to the supposed date of the marriage
of the vendors. He contends that the alleged date of marriage between petitioner and his wife is
a new factual issue which was not raised nor established in the court a quo. Respondent claims
that there is no basis to annul the sale freely and voluntarily entered into by the husband and the
wife.
The focal issue in the instant petition is whether petitioner may be compelled to convey the
property to respondent under the terms of the RMOA and the Contract to Sell. At bottom, the
resolution of the issue entails the ascertainment of the contractual nature of the two documents
and the status of the contracts contained therein.
Contracts, in general, require the presence of three essential elements: (1) consent of the
contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause
of the obligation which is established.[3]
Until the contract is perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation.[4] In a contract of sale, the seller must consent to transfer ownership in
exchange for the price, the subject matter must be determinate, and the price must be certain in
money or its equivalent.[5] Being essentially consensual, a contract of sale is perfected at the
moment there is a meeting of the minds upon the thing which is the object of the contract and
upon the price.[6] However, ownership of the thing sold shall not be transferred to the vendee
until actual or constructive delivery of the property. [7]

On the other hand, an accepted unilateral promise which specifies the thing to be sold and
the price to be paid, when coupled with a valuable consideration distinct
and separate from the price, is what may properly be termed a perfected contract of option. [8] An
option merely grants a privilege to buy or sell within an agreed time and at a determined price. It
is separate and distinct from that which the parties may enter into upon the consummation of
the option.[9] A perfected contract of option does not result in the perfection or consummation of
the sale; only when the option is exercised may a sale be perfected. [10] The option must,
however, be supported by a consideration distinct from the price. [11]
Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the property to respondent
for a price certain within a period of thirty days. The RMOA does not impose upon respondent an
obligation to buy petitioners property, as in fact it does not even bear his signature thereon. It is
quite clear that after the lapse of the thirty-day period, without respondent having exercised his
option, Arturo is free to sell the property to another. This shows that the intent of Arturo is merely
to grant respondent the privilege to buy the property within the period therein stated. There is
nothing in the RMOA which indicates that Arturo agreed therein to transfer ownership of the land
which is an essential element in a contract of sale. Unfortunately, the option is not binding upon
the promissory since it is not supported by a consideration distinct from the price. [12]
As a rule, the holder of the option, after accepting the promise and before he exercises his
option, is not bound to buy. He is free either to buy or not to buy later. In Sanchez v. Rigos[13] we
ruled that in an accepted unilateral promise to sell, the promissor is not bound by his promise
and may, accordingly, withdraw it, since there may be no valid contract without a cause or
consideration. Pending notice of its withdrawal, his accepted promise partakes of the nature of
an offer to sell which, if acceded or consented to, results in a perfected contract of sale.
Even conceding for the nonce that respondent had accepted the offer within the period
stated and, as a consequence, a bilateral contract of purchase and sale was perfected, the
outcome would be the same. To benefit from such situation, respondent would have to pay or at
least make a valid tender of payment of the price for only then could he exact compliance with
the undertaking of the other party. [14]This respondent failed to do. By his own admission, he
merely informed respondent spouses of his readiness and willingness to pay. The fact that he had
set aside a check in the amount of One Million Two Hundred Ninety Thousand Pesos
(P1,290,000.00) representing the balance of the purchase price could not help his cause. Settled
is the rule that tender of payment must be made in legal tender. A check is not legal tender, and
therefore cannot constitute a valid tender of payment. [15] Not having made a valid tender of
payment, respondents action for specific performance must fail.
With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the view that
the amount is not earnest money as the term is understood in Article 1482 which signifies proof
of the perfection of the contract of sale, but merely a guarantee that respondent is really
interested to buy the property. It is not the giving of earnest money, but the proof of the
concurrence of all the essential elements of the contract of sale which establishes the existence
of a perfected sale.[16] No reservation of ownership on the part of Arturo is necessary since, as
previously stated, he has never agreed to transfer ownership of the property to respondent.
Granting for the sake of argument that the RMOA is a contract of sale, the same would still
be void not only for want of consideration and absence of respondents signature thereon, but
also for lack of Esthers conformity thereto. Quite glaring is the absence of the signature of Esther
in the RMOA, which proves that she did not give her consent to the transaction initiated by
Arturo. The husband cannot alienate any real property of the conjugal partnership without the
wifes consent.[17]
However, it was the Contract to Sell executed by Esther through her attorney-in-fact which
the Court of Appeals made full use of.Holding that the contract is valid, the appellate court
explained that while Esther did not authorize Arturo to sell the property, her execution of the SPA
authorizing her sister to sell the land to respondent clearly shows her intention to convey her
interest in favor of respondent. In effect, the court declared that the lack of Esthers consent to
the sale made by Arturo was cured by her subsequent conveyance of her interest in the property
through her attorney-in-fact.
We do not share the ruling.
The nullity of the RMOA as a contract of sale emanates not only from lack of Esthers consent
thereto but also from want of consideration and absence of respondents signature thereon. Such
nullity cannot be obliterated by Esthers subsequent confirmation of the putative transaction as
expressed in the Contract to Sell. Under the law, a void contract cannot be ratified [18] and the
action or defense for the declaration of the inexistence of a contract does not prescribe. [19] A void

contract produces no effect either against or in favor of anyoneit cannot create, modify or
extinguish the juridical relation to which it refers. [20]
True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by Arturo in
favor of respondent. However, the RMOA which Arturo signed is different from the deed which
Esther executed through her attorney-in-fact. For one, the first is sought to be enforced as a
contract of sale while the second is purportedly a contract to sell only. For another, the terms and
conditions as to the issuance of title and delivery of possession are divergent.
The congruence of the wills of the spouses is essential for the valid disposition of conjugal
property. Where the conveyance is contained in the same document which bears the conformity
of both husband and wife, there could be no question on the validity of the transaction. But when
there are two documents on which the signatures of the spouses separately appear, textual
concordance of the documents is indispensable. Hence, in this case where the wifes putative
consent to the sale of conjugal property appears in a separate document which does not,
however, contain the same terms and conditions as in the first document signed by the husband,
a valid transaction could not have arisen.
Quite a bit of elucidation on the conjugal partnership of gains is in order.
Arturo and Esther appear to have been married before the effectivity of the Family
Code. There being no indication that they have adopted a different property regime, their
property relations would automatically be governed by the regime of conjugal partnership of
gains.[21]
The subject land which had been admittedly acquired during the marriage of the spouses
forms part of their conjugal partnership.[22]
Under the Civil Code, the husband is the administrator of the conjugal partnership. This right
is clearly granted to him by law. [23] More, the husband is the sole administrator. The wife is not
entitled as of right to joint administration.[24]
The husband, even if he is statutorily designated as administrator of the conjugal
partnership, cannot validly alienate or encumber any real property of the conjugal partnership
without the wifes consent.[25] Similarly, the wife cannot dispose of any property belonging to the
conjugal partnership without the conformity of the husband. The law is explicit that the wife
cannot bind the conjugal partnership without the husbands consent, except in cases provided by
law.[26]
More significantly, it has been held that prior to the liquidation of the conjugal partnership,
the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which
constitutes neither a legal nor an equitable estate, and does not ripen into title until it appears
that there are assets in the community as a result of the liquidation and settlement. The interest
of each spouse is limited to the net remainder or remanente liquido (haber ganancial) resulting
from the liquidation of the affairs of the partnership after its dissolution. [27] Thus, the right of the
husband or wife to one-half of the conjugal assets does not vest until the dissolution and
liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally
determined that, after settlement of conjugal obligations, there are net assets left which can be
divided between the spouses or their respective heirs. [28]
In not a few cases, we ruled that the sale by the husband of property belonging to the
conjugal partnership without the consent of the wife when there is no showing that the latter is
incapacitated is void ab initio because it is in contravention of the mandatory requirements of
Article 166 of the Civil Code.[29] Since Article 166 of the Civil Code requires the consent of the
wife before the husband may alienate or encumber any real property of the conjugal partnership,
it follows that acts or transactions executed against this mandatory provision are void except
when the law itself authorizes their validity. [30]
Quite recently, in San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,[31] we
ruled that neither spouse could alienate in favor of another, his or her interest in the partnership
or in any property belonging to it, or ask for partition of the properties before the partnership
itself had been legally dissolved. Nonetheless, alienation of the share of each spouse in the
conjugal partnership could be had after separation of property of the spouses during the
marriage had been judicially decreed, upon their petition for any of the causes specified in Article
191[32] of the Civil Code in relation to Article 214[33] thereof.
As an exception, the husband may dispose of conjugal property without the wifes consent if
such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162 of the

Civil Code.[34] In Tinitigan v. Tinitigan, Sr.,[35] the Court ruled that the husband may sell property
belonging to the conjugal partnership even without the consent of the wife if the sale is
necessary to answer for a big conjugal liability which might endanger the familys economic
standing. This is one instance where the wifes consent is not required and, impliedly, no judicial
intervention is necessary.
Significantly, the Family Code has introduced some changes particularly on the aspect of the
administration of the conjugal partnership. The new law provides that the administration of the
conjugal partnership is now a joint undertaking of the husband and the wife. In the event that
one spouse is incapacitated or otherwise unable to participate in the administration of the
conjugal partnership, the other spouse may assume sole powers of administration. However, the
power of administration does not include the power to dispose or encumber property belonging
to the conjugal partnership.[36] In all instances, the present law specifically requires the written
consent of the other spouse, or authority of the court for the disposition or encumbrance of
conjugal partnership property without which, the disposition or encumbrance shall be void. [37]
Inescapably, herein petitioners action for specific performance must fail. Even on the
supposition that the parties only disposed of their respective shares in the property, the sale,
assuming that it exists, is still void for as previously stated, the right of the husband or the wife
to one-half of the conjugal assets does not vest until the liquidation of the conjugal
partnership. Nemo dat qui non habet. No one can give what he has not.
WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. The complaint in
Civil Case No. 90-106 of the Regional Trial Court of Makati is ordered DISMISSED. No
pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, and Callejo, Sr., JJ., concur.
Chico-Nazario, J., on leave.

THIRD DIVISION
G.R. No. 158907

February 12, 2007

EDUARDO B. OLAGUER, Petitioner,

vs.
EMILIO PURUGGANAN, JR. AND RAUL LOCSIN, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision,1 dated 30 June 2003, promulgated by the Court of Appeals, affirming the Decision of
the Regional Trial Court, dated 26 July 1995, dismissing the petitioners suit.
The parties presented conflicting accounts of the facts.
EDUARDO B. OLAGUERS VERSION
Petitioner Eduardo B. Olaguer alleges that he was the owner of 60,000 shares of stock of
Businessday Corporation (Businessday) with a total par value of P600,000.00, with Certificates of
Stock No. 005, No. 028, No. 034, No. 070, and No. 100. 2 At the time he was employed with the
corporation as Executive Vice-President of Businessday, and President of Businessday
Information Systems and Services and of Businessday Marketing Corporation, petitioner,
together with respondent Raul Locsin (Locsin) and Enrique Joaquin (Joaquin), was active in the
political opposition against the Marcos dictatorship. 3 Anticipating the possibility that petitioner
would be arrested and detained by the Marcos military, Locsin, Joaquin, and Hector Holifea had
an unwritten agreement that, in the event that petitioner was arrested, they would support the
petitioners family by the continued payment of his salary. 4 Petitioner also executed a Special
Power of Attorney (SPA), on 26 May 1979, appointing as his attorneys-in-fact Locsin, Joaquin and
Hofilea for the purpose of selling or transferring petitioners shares of stock with Businessday.
During the trial, petitioner testified that he agreed to execute the SPA in order to cancel his
shares of stock, even before they are sold, for the purpose of concealing that he was a
stockholder of Businessday, in the event of a military crackdown against the opposition. 5 The
parties acknowledged the SPA before respondent Emilio Purugganan, Jr., who was then the
Corporate Secretary of Businessday, and at the same time, a notary public for Quezon City. 6
On 24 December 1979, petitioner was arrested by the Marcos military by virtue of an Arrest,
Search and Seizure Order and detained for allegedly committing arson. During the petitioners
detention, respondent Locsin ordered fellow respondent Purugganan to cancel the petitioners
shares in the books of the corporation and to transfer them to respondent Locsins name. 7
As part of his scheme to defraud the petitioner, respondent Locsin sent Rebecca Fernando, an
employee of Businessday, to Camp Crame where the petitioner was detained, to pretend to
borrow Certificate of Stock No. 100 for the purpose of using it as additional collateral for
Businessdays then outstanding loan with the National Investment and Development
Corporation. When Fernando returned the borrowed stock certificate, the word "cancelled" was
already written therein. When the petitioner became upset, Fernando explained that this was
merely a mistake committed by respondent Locsins secretary. 8
During the trial, petitioner also agreed to stipulate that from 1980 to 1982, Businessday made
regular deposits, each amounting to P10,000.00, to the Metropolitan Bank and Trust Company
accounts of Manuel and Genaro Pantig, petitioners in-laws. The deposits were made on every
15th and 30th of the month.9 Petitioner alleged that these funds consisted of his monthly salary,
which Businessday agreed to continue paying after his arrest for the financial support of his
family.10 After receiving a total of P600,000.00, the payments stopped. Thereafter, respondent
Locsin and Fernando went to ask petitioner to endorse and deliver the rest of his stock
certificates to respondent Locsin, but petitioner refused. 11
On 16 January 1986, petitioner was finally released from detention. He then discovered that he
was no longer registered as stockholder of Businessday in its corporate books. He also learned
that Purugganan, as the Corporate Secretary of Businessday, had already recorded the transfer
of shares in favor of respondent Locsin, while petitioner was detained. When petitioner
demanded that respondents restore to him full ownership of his shares of stock, they refused to
do so. On 29 July 1986, petitioner filed a Complaint before the trial court against respondents
Purugganan and Locsin to declare as illegal the sale of the shares of stock, to restore to the
petitioner full ownership of the shares, and payment of damages. 12

RESPONDENT RAUL LOCSINS VERSION

In his version of the facts, respondent Locsin contended that petitioner approached him and
requested him to sell, and, if necessary, buy petitioners shares of stock in Businessday, to
assure support for petitioners family in the event that something should happen to him,
particularly if he was jailed, exiled or forced to go underground. 13 At the time petitioner was
employed with Businessday, respondent Locsin was unaware that petitioner was part of a group,
Light-a-Fire Movement, which actively sought the overthrow of the Marcos government through
an armed struggle.14 He denied that he made any arrangements to continue paying the
petitioners salary in the event of the latters imprisonment. 15
When petitioner was detained, respondent Locsin tried to sell petitioners shares, but nobody
wanted to buy them. Petitioners reputation as an oppositionist resulted in the poor financial
condition of Businessday and discouraged any buyers for the shares of stock. 16 In view of
petitioners previous instructions, respondent Locsin decided to buy the shares
himself.1awphi1.net Although the capital deficiency suffered by Businessday caused the book
value of the shares to plummet below par value, respondent Locsin, nevertheless, bought the
shares at par value.17 However, he had to borrow from Businessday the funds he used in
purchasing the shares from petitioner, and had to pay the petitioner in installments
of P10,000.00 every 15th and 30th of each month. 18
The trial court in its Decision, dated 26 July 1995, dismissed the Complaint filed by the petitioner.
It ruled that the sale of shares between petitioner and respondent Locsin was valid. The trial
court concluded that petitioner had intended to sell the shares of stock to anyone, including
respondent Locsin, in order to provide for the needs of his family should he be jailed or forced to
go underground; and that the SPA drafted by the petitioner empowered respondent Locsin, and
two other agents, to sell the shares for such price and under such terms and conditions that the
agents may deem proper. It further found that petitioner consented to have respondent Locsin
buy the shares himself. It also ruled that petitioner, through his wife, received from respondent
Locsin the amount ofP600,000.00 as payment for the shares of stock.19 The dispositive part of
the trial courts Decision reads:
WHEREFORE, for failure of the [herein petitioner] to prove by preponderance of evidence, his
causes of action and of the facts alleged in his complaint, the instant suit is hereby ordered
DISMISSED, without pronouncement as to costs.
[Herein respondents] counterclaims, however, are hereby DISMISSED, likewise, for dearth of
substantial evidentiary support.20
On appeal, the Court of Appeals affirmed the Decision of the trial court that there was a
perfected contract of sale.21 It further ruled that granting that there was no perfected contract of
sale, petitioner, nevertheless, ratified the sale to respondent Locsin by his receipt of the
purchase price, and his failure to raise any protest over the said sale. 22 The Court of Appeals
refused to credit the petitioners allegation that the money his wife received constituted his
salary from Businessday since the amount he received as his salary, P24,000.00 per month, did
not correspond to the amount he received during his detention, P20,000.00 per month (deposits
of P10,000.00 on every 15th and 30th of each month in the accounts of the petitioners in-laws).
On the other hand, the total amount received, P600,000.00, corresponds to the aggregate par
value of petitioners shares in Businessday. Moreover, the financial condition of Businessday
prevented it from granting any form of financial assistance in favor of the petitioner, who was
placed in an indefinite leave of absence, and, therefore, not entitled to any salary. 23
The Court of Appeals also ruled that although the manner of the cancellation of the petitioners
certificates of stock and the subsequent issuance of the new certificate of stock in favor of
respondent Locsin was irregular, this irregularity will not relieve petitioner of the consequences of
a consummated sale.24
Finally, the Court of Appeals affirmed the Decision of the trial court disallowing respondent
Locsins claims for moral and exemplary damages due to lack of supporting evidence. 25
Hence, the present petition, where the following issues were raised:
I.
THE APPELLATE COURT ERRED IN RULING THAT THERE WAS A PERFECTED CONTRACT OF SALE
BETWEEN PETITIONER AND MR. LOCSIN OVER THE SHARES;
II.
THE APPELLATE COURT ERRED IN RULING THAT PETITIONER CONSENTED TO THE ALLEGED SALE
OF THE SHARES TO MR. LOCSIN;
III.

THE APPELLATE COURT ERRED IN RULING THAT THE AMOUNTS RECEIVED BY PETITIONERS IN
LAWS WERE NOT PETITIONERS SALARY FROM THE CORPORATION BUT INSTALLMENT PAYMENTS
FOR THE SHARES;
IV.
THE APPELLATE COURT ERRED IN RULING THAT MR. LOCSIN WAS THE PARTY TO THE ALLEGED
SALE OF THE SHARES AND NOT THE CORPORATION; AND
V.
THE APPELLATE COURT ERRED IN RULING THAT THE ALLEGED SALE OF THE SHARES WAS VALID
ALTHOUGH THE CANCELLATION OF THE SHARES WAS IRREGULAR. 26
The petition is without merit.
The first issue that the petitioner raised is that there was no valid sale since respondent Locsin
exceeded his authority under the SPA 27 issued in his, Joaquin and Holifenas favor. He alleged that
the authority of the afore-named agents to sell the shares of stock was limited to the following
conditions: (1) in the event of the petitioners absence and incapacity; and (2) for the limited
purpose of applying the proceeds of the sale to the satisfaction of petitioners subsisting
obligations with the companies adverted to in the SPA. 28
Petitioner sought to impose a strict construction of the SPA by limiting the definition of the word
"absence" to a condition wherein "a person disappears from his domicile, his whereabouts being
unknown, without leaving an agent to administer his property," 29 citing Article 381 of the Civil
Code, the entire provision hereunder quoted:
ART 381. When a person disappears from his domicile, his whereabouts being unknown, and
without leaving an agent to administer his property, the judge, at the instance of an interested
party, a relative, or a friend, may appoint a person to represent him in all that may be necessary.
This same rule shall be observed when under similar circumstances the power conferred by the
absentee has expired.
Petitioner also puts forward that the word "incapacity" would be limited to mean "minority,
insanity, imbecility, the state of being deaf-mute, prodigality and civil interdiction." 30 He cites
Article 38 of the Civil Code, in support of this definition, which is hereunder quoted:
ART. 38 Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil
interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person,
from certain obligations, as when the latter arise from his acts or from property relations, such as
easements.
Petitioner, thus, claims that his arrest and subsequent detention are not among the instances
covered by the terms "absence or incapacity," as provided under the SPA he executed in favor of
respondent Locsin.
Petitioners arguments are unpersuasive. It is a general rule that a power of attorney must be
strictly construed; the instrument will be held to grant only those powers that are specified, and
the agent may neither go beyond nor deviate from the power of attorney. However, the rule is
not absolute and should not be applied to the extent of destroying the very purpose of the
power. If the language will permit, the construction that should be adopted is that which will
carry out instead of defeat the purpose of the appointment. Clauses in a power of attorney that
are repugnant to each other should be reconciled so as to give effect to the instrument in
accordance with its general intent or predominant purpose. Furthermore, the instrument should
always be deemed to give such powers as essential or usual in effectuating the express powers. 31
In the present case, limiting the definitions of "absence" to that provided under Article 381 of the
Civil Code and of "incapacity" under Article 38 of the same Code negates the effect of the power
of attorney by creating absurd, if not impossible, legal situations. Article 381 provides the
necessarily stringent standards that would justify the appointment of a representative by a
judge. Among the standards the said article enumerates is that no agent has been appointed to
administer the property. In the present case, petitioner himself had already authorized agents to
do specific acts of administration and thus, no longer necessitated the appointment of one by the
court. Likewise, limiting the construction of "incapacity" to "minority, insanity, imbecility, the
state of being a deaf-mute, prodigality and civil interdiction," as provided under Article 38, would
render the SPA ineffective. Article 1919(3) of the Civil Code provides that the death, civil
interdiction, insanity or insolvency of the principal or of the agent extinguishes the agency. It
would be equally incongruous, if not outright impossible, for the petitioner to require himself to
qualify as a minor, an imbecile, a deaf-mute, or a prodigal before the SPA becomes operative. In

such cases, not only would he be prevented from appointing an agent, he himself would be
unable to administer his property.
On the other hand, defining the terms "absence" and "incapacity" by their everyday usage
makes for a reasonable construction, that is, "the state of not being present" and the "inability to
act," given the context that the SPA authorizes the agents to attend stockholders meetings and
vote in behalf of petitioner, to sell the shares of stock, and other related acts. This construction
covers the situation wherein petitioner was arrested and detained. This much is admitted by
petitioner in his testimony.32
Petitioners contention that the shares may only be sold for the sole purpose of applying the
proceeds of the sale to the satisfaction of petitioners subsisting obligations to the company is
far-fetched. The construction, which will carry out the purpose, is that which should be applied.
Petitioner had not submitted evidence that he was in debt with Businessday at the time he had
executed the SPA. Nor could he have considered incurring any debts since he admitted that, at
the time of its execution, he was concerned about his possible arrest, death and disappearance.
The language of the SPA clearly enumerates, as among those acts that the agents were
authorized to do, the act of applying the proceeds of the sale of the shares to any obligations
petitioner might have against the Businessday group of companies. This interpretation is
supported by the use of the word "and" in enumerating the authorized acts, instead of phrases
such as "only for," "for the purpose of," "in order to" or any similar terms to indicate that the
petitioner intended that the SPA be used only for a limited purpose, that of paying any liabilities
with the Businessday group of companies.
Secondly, petitioner argued that the records failed to show that he gave his consent to the sale
of the shares to respondent Locsin for the price of P600,000.00. This argument is unsustainable.
Petitioner received from respondent Locsin, through his wife and in-laws, the installment
payments for a total of P600,000.00 from 1980 to 1982, without any protest or complaint. It was
only four years after 1982 when petitioner demanded the return of the shares. The petitioners
claim that he did not instruct respondent Locsin to deposit the money to the bank accounts of his
in-laws fails to prove that petitioner did not give his consent to the sale since respondent Locsin
was authorized, under the SPA, to negotiate the terms and conditions of the sale including the
manner of payment. Moreover, had respondent Locsin given the proceeds directly to the
petitioner, as the latter suggested in this petition, the proceeds were likely to have been included
among petitioners properties which were confiscated by the military. Instead, respondent Locsin
deposited the money in the bank accounts of petitioners in-laws, and consequently, assured that
the petitioners wife received these amounts. Article 1882 of the Civil Code provides that the
limits of an agents authority shall not be considered exceeded should it have been performed in
a manner more advantageous to the principal than that specified by him.
In addition, petitioner made two inconsistent statements when he alleged that (1) respondent
Locsin had not asked the petitioner to endorse and deliver the shares of stock, and (2) when
Rebecca Fernando asked the petitioner to endorse and deliver the certificates of stock, but
petitioner refused and even became upset. 33 In either case, both statements only prove that
petitioner refused to honor his part as seller of the shares, even after receiving payments from
the buyer. Had the petitioner not known of or given his consent to the sale, he would have given
back the payments as soon as Fernando asked him to endorse and deliver the certificates of
stock, an incident which unequivocally confirmed that the funds he received, through his wife
and his in-laws, were intended as payment for his shares of stocks. Instead, petitioner held on to
the proceeds of the sale after it had been made clear to him that respondent Locsin had
considered the P600,000.00 as payment for the shares, and asked petitioner, through Fernando,
to endorse and deliver the stock certificates for cancellation.
As regards the third issue, petitioners allegation that the installment payments he was adjudged
to have received for the shares were actually salaries which Businessday promised to pay him
during his detention is unsupported and implausible. Petitioner received P20,000.00 per month
through his in-laws; this amount does not correspond to his monthly salary at P24,000.00.34 Nor
does the amount received correspond to the amount which Businessday was supposed to be
obliged to pay petitioner, which was only P45,000.00 to P60,000.00 per annum.35 Secondly, the
petitioners wife did not receive funds from respondent Locsin or Businessday for the entire
duration of petitioners detention. Instead, when the total amount received by the petitioner
reached the aggregate amount of his shares at par value -- P600,000.00 -- the payments
stopped. Petitioner even testified that when respondent Locsin denied knowing the petitioner
soon after his arrest, he believed respondent Locsins commitment to pay his salaries during his
detention to be nothing more than lip-service. 36

Granting that petitioner was able to prove his allegations, such an act of gratuity, on the part of
Businessday in favor of petitioner, would be void. An arrangement whereby petitioner will receive
"salaries" for work he will not perform, which is not a demandable debt since petitioner was on
an extended leave of absence, constitutes a donation under Article 726 37 of the Civil Code. Under
Article 748 of the Civil Code, if the value of the personal property donated exceeds P5,000.00,
the donation and the acceptance shall have to be made in writing. Otherwise, the donation will
be void. In the present case, petitioner admitted in his testimony 38 that such arrangement was
not made in writing and, hence, is void.
The fact that some of the deposit slips and communications made to petitioners wife contain the
phrase "household expenses" does not disprove the sale of the shares. The money was being
deposited to the bank accounts of the petitioners in-laws, and not to the account of the
petitioner or his wife, precisely because some of his property had already been confiscated by
the military. Had they used the phrase "sale of shares," it would have defeated the purpose of
not using their own bank accounts, which was to conceal from the military any transaction
involving the petitioners property.
Petitioner raised as his fourth issue that granting that there was a sale, Businessday, and not
respondent Locsin, was the party to the transaction. The curious facts that the payments were
received on the 15th and 30th of each month and that the payor named in the checks was
Businessday, were adequately explained by respondent Locsin. Respondent Locsin had obtained
cash advances from the company, paid to him on the 15th and 30th of the month, so that he can
pay petitioner for the shares. To support his claim, he presented Businessdays financial records
and the testimony of Leo Atienza, the Companys Accounting Manager. When asked why the term
"shares of stock" was used for the entries, instead of "cash advances," Atienza explained that the
term "shares of stock" was more specific rather than the broader phrase "cash advances." 39 More
to the point, had the entries been for "shares of stock," the issuance of shares should have been
reflected in the stock and transfer books of Businessday, which the petitioner presented as
evidence. Instead the stock and transfer books reveal that the increase in respondent Locsins
shares was a result of the cancellation and transfer of petitioners shares in favor of respondent
Locsin.
Petitioner alleges that the purported sale between himself and respondent Locsin of the disputed
shares of stock is void since it contravenes Article 1491 of the Civil Code, which provides that:
ART. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction,
either in person or through the mediation of another:
xxxx
(2) Agents, the property whose administration or sale may have been entrusted to them, unless
the consent of the principal has been given; x x x.
It is, indeed, a familiar and universally recognized doctrine that a person who undertakes to act
as agent for another cannot be permitted to deal in the agency matter on his own account and
for his own benefit without the consent of his principal, freely given, with full knowledge of every
detail known to the agent which might affect the transaction. 40 The prohibition against agents
purchasing property in their hands for sale or management is, however, clearly, not absolute. It
does not apply where the principal consents to the sale of the property in the hands of the agent
or administrator.>41
In the present case, the parties have conflicting allegations. While respondent Locsin averred
that petitioner had permitted him to purchase petitioners shares, petitioner vehemently denies
having known of the transaction. However, records show that petitioners position is less credible
than that taken by respondent Locsin given petitioners contemporaneous and subsequent
acts.42 In 1980, when Fernando returned a stock certificate she borrowed from the petitioner, it
was marked "cancelled." Although the petitioner alleged that he was furious when he saw the
word cancelled, he had not demanded the issuance of a new certificate in his name. Instead of
having been put on his guard, petitioner remained silent over this obvious red flag and continued
receiving, through his wife, payments which totalled to the aggregate amount of the shares of
stock valued at par. When the payments stopped, no demand was made by either petitioner or
his wife for further payments.
From the foregoing, it is clear that petitioner knew of the transaction, agreed to the purchase
price of P600,000.00 for the shares of stock, and had in fact facilitated the implementation of the
terms of the payment by providing respondent Locsin, through petitioners wife, with the
information on the bank accounts of his in-laws. Petitioners wife and his son even provided

receipts for the payments that were made to them by respondent Locsin, 43 a practice that
bespeaks of an onerous transaction and not an act of gratuity.
Lastly, petitioner claims that the cancellation of the shares and the subsequent transfer thereof
were fraudulent, and, therefore, illegal. In the present case, the shares were transferred in the
name of the buyer, respondent Locsin, without the petitioner delivering to the buyer his
certificates of stock. Section 63 of the Corporation Code provides that:
Sec.63. Certificate of stock and transfer of shares. xxx Shares of stock so issued are personal
property and may be transferred by delivery of the certificate or certificates indorsed by the
owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer,
however, shall be valid, except as between the parties, until the transfer is recorded in the books
of the corporation showing the names of the parties to the transaction, the date of the transfer,
the number of the certificate or certificates and the number of shares transferred. (Emphasis
provided.)
The aforequoted provision furnishes the procedure for the transfer of shares the delivery of the
endorsed certificates, in order to prevent the fraudulent transfer of shares of stock. However, this
rule cannot be applied in the present case without causing the injustice sought to be avoided. As
had been amply demonstrated, there was a valid sale of stocks. Petitioners failure to deliver the
shares to their rightful buyer is a breach of his duty as a seller, which he cannot use to unjustly
profit himself by denying the validity of such sale. Thus, while the manner of the cancellation of
petitioners certificates of stock and the issuance of the new certificates in favor of respondent
Locsin was highly irregular, we must, nonetheless, declare the validity of the sale between the
parties. Neither does this irregularity prove that the transfer was fraudulent. In his testimony,
petitioner admitted that they had intended to conceal his being a stockholder of
Businessday.44 The cancellation of his name from the stock and transfer book, even before the
shares were actually sold, had been done with his consent. As earlier explained, even the
subsequent sale of the shares in favor of Locsin had been done with his consent.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed
Decision of the Court of Appeals, promulgated on 30 June 2003, affirming the validity of the sale
of the shares of stock in favor of respondent Locsin. No costs.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

EN BANC
[G.R. No. L-8477. May 31, 1956.]
THE PHILIPPINE TRUST COMPANY, as Guardian of the Property of the minor, MARIANO
L. BERNARDO, Petitioner, vs. SOCORRO ROLDAN, FRANCISCO HERMOSO, FIDEL C.
RAMOS and EMILIO CRUZ, Respondents.
DECISION
BENGZON, J.:
As guardian of the property of the minor Mariano L. Bernardo, the Philippine Trust Company filed
in the Manila court of first instance a complaint to annul two contracts regarding 17 parcels of
land:chanroblesvirtuallawlibrary (a) sale thereof by Socorro Roldan, as guardian of said minor, to
Fidel C. Ramos; chan roblesvirtualawlibraryand (b) sale thereof by Fidel C. Ramos to Socorro
Roldan personally. The complaint likewise sought to annul a conveyance of four out of the said
seventeen parcels by Socorro Roldan to Emilio Cruz.
The action rests on the proposition that the first two sales were in reality a sale by the guardian
to herself therefore, null and void under Article 1459 of the Civil Code. As to the third
conveyance, it is also ineffective, because Socorro Roldan had acquired no valid title to convey to
Cruz.
The material facts of the case are not complicated. These 17 parcels located in Guiguinto,
Bulacan, were part of the properties inherited by Mariano L. Bernardo from his father, Marcelo
Bernardo, deceased. In view of his minority, guardianship proceedings were instituted, wherein

Socorro Roldan was appointed his guardian. She was the surviving spouse of Marcelo Bernardo,
and the stepmother of said Mariano L. Bernardo.
On July 27, 1947, Socorro Roldan filed in said guardianship proceedings (Special Proceeding
2485, Manila), a motion asking for authority to sell as guardian the 17 parcels for the sum of
P14,700 to Dr. Fidel C. Ramos, the purpose of the sale being allegedly to invest the money in a
residential house, which the minor desired to have on Tindalo Street, Manila. The motion was
granted.
On August 5, 1947 Socorro Roldan, as guardian, executed the proper deed of sale in favor of her
brother-in-law Dr. Fidel C. Ramos (Exhibit A-1), and on August 12, 1947 she asked for, and
obtained, judicial confirmation of the sale. On August 13, 1947, Dr. Fidel C. Ramos executed in
favor of Socorro Roldan, personally, a deed of conveyance covering the same seventeen parcels,
for the sum of P15,000 (Exhibit A-2). And on October 21, 1947 Socorro Roldan sold four parcels
out of the seventeen to Emilio Cruz for P3,000, reserving to herself the right to repurchase
(Exhibit A-3).
The Philippine Trust Company replaced Socorro Roldan as guardian, on August 10, 1948. And this
litigation, started two months later, seeks to undo what the previous guardian had done. The
step-mother in effect, sold to herself, the properties of her ward, contends the Plaintiff, and the
sale should be annulled because it violates Article 1459 of the Civil Code prohibiting the guardian
from purchasing either in person or through the mediation of another the property of her ward.
The court of first instance, following our decision in Rodriguez vs. Mactal, 60 Phil. 13 held the
article was not controlling, because there was no proof that Fidel C. Ramos was a mere
intermediary or that the latter had previously agreed with Socorro Roldan to buy the parcels for
her benefit.
However, taking the former guardian at her word - she swore she had repurchased the lands
from Dr. Fidel C. Ramos to preserve it and to give her protege opportunity to redeem the court
rendered judgment upholding the contracts but allowing the minor to repurchase all the parcels
by paying P15,000, within one year.
The Court of Appeals affirmed the judgment, adding that the minor knew the particulars of, and
approved the transaction, and that only clear and positive evidence of fraud or bad faith, and
not mere insinuations and inferences will overcome the presumptions that a sale was concluded
in all good faith for value.
At
first
glance
the
resolutions
of
both
courts
accomplished
substantial
justice:chanroblesvirtuallawlibrary the minor recovers his properties. But if the conveyances are
annulled as prayed for, the minor will obtain a better deal:chanroblesvirtuallawlibrary he receives
all the fruits of the lands from the year 1947 (Article 1303 Civil Code) and will return P14,700, not
P15,000.
To our minds the first two transactions herein described couldnt be in a better juridical situation
than if this guardian had purchased the seventeen parcels on the day following the sale to Dr.
Ramos. Now, if she was willing to pay P15,000 why did she sell the parcels for less? In one day
(or actually one week) the price could not have risen so suddenly. Obviously when, seeking
approval of the sale she represented the price to be the best obtainable in the market, she was
not entirely truthful. This is one phase to consider.
Again,
supposing
she
knew
the
parcels
were
actually
worth
P17,000; chan
roblesvirtualawlibrarythen she agreed to sell them to Dr. Ramos at P14,700; chan
roblesvirtualawlibraryand knowing the realtys value she offered him the next day P15,000 or
P15,500, and got it. Will there be any doubt that she was recreant to her guardianship, and that
her acquisition should be nullified? Even without proof that she had connived with Dr. Ramos.
Remembering the general doctrine that guardianship is a trust of the highest order, and the
trustee cannot be allowed to have any inducement to neglect his wards interest and in line with
the courts suspicion whenever the guardian acquires the wards property 1 we have no
hesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchase
her wards parcels thru Dr. Ramos, and that Article 1459 of the Civil Code applies.
She acted it may be true without malice; chan roblesvirtualawlibrarythere may have been no
previous agreement between her and Dr. Ramos to the effect that the latter would buy the lands
for her. But the stubborn fact remains that she acquired her proteges properties, through her
brother-in-law. That she planned to get them for herself at the time of selling them to Dr. Ramos,
may be deduced from the very short time between the two sales (one week). The temptation
which naturally besets a guardian so circumstanced, necessitates the annulment of the

transaction, even if no actual collusion is proved (so hard to prove) between such guardian and
the intermediate purchaser. This would uphold a sound principle of equity and justice. 2
We are aware of course that in Rodriguez vs. Mactal, 60 Phil. p. 13 wherein the guardian Mactal
sold in January 1926 the property of her ward to Silverio Chioco, and in March 1928 she bought it
from Chioco, this Court said:chanroblesvirtuallawlibrary
In order to bring the sale in this case within the part of Article 1459, quoted above, it is essential
that the proof submitted establish some agreement between Silverio Chioco and Trinidad Mactal
to the effect that Chioco should buy the property for the benefit of Mactal. If there was no such
agreement, either express or implied, then the sale cannot be set aside cralaw . (Page 16; chan
roblesvirtualawlibraryItalics supplied.)
However, the underlined portion was not intended to establish a general principle of law
applicable to all subsequent litigations. It merely meant that the subsequent purchase by Mactal
could not be annulled in that particular case because there was no proof of a previous agreement
between Chioco and her. The court then considered such proof necessary to establish that the
two sales were actually part of one scheme guardian getting the wards property through
another person because two years had elapsed between the sales. Such period of time was
sufficient to dispel the natural suspicion of the guardians motives or actions. In the case at bar,
however, only one week had elapsed. And if we were technical, we could say, only one day had
elapsed from the judicial approval of the sale (August 12), to the purchase by the guardian (Aug.
13).
Attempting to prove that the transaction was beneficial to the minor, Appellees attorney alleges
that the money (P14,700) invested in the house on Tindalo Street produced for him rentals of
P2,400 yearly; chan roblesvirtualawlibrarywhereas the parcels of land yielded to his step-mother
only an average of P1,522 per year. 3 The argument would carry some weight if that house had
been
built
out
of
the
purchase
price
of
P14,700
only. 4
One
thing
is
certain:chanroblesvirtuallawlibrary the calculation does not include the price of the lot on which
the house was erected. Estimating such lot at P14,700 only, (ordinarily the city lot is more
valuable than the building) the result is that the price paid for the seventeen parcels gave the
minor an income of only P1,200 a year, whereas the harvest from the seventeen parcels netted
his step-mother a yearly profit of P1,522.00. The minor was thus on the losing end.
Hence, from both the legal and equitable standpoints these three sales should not be
sustained:chanroblesvirtuallawlibrary the first two for violation of article 1459 of the Civil
Code; chan roblesvirtualawlibraryand the third because Socorro Roldan could pass no title to
Emilio Cruz. The annulment carries with is (Article 1303 Civil Code) the obligation of Socorro
Roldan to return the 17 parcels together with their fruits and the duty of the minor, through his
guardian to repay P14,700 with legal interest.
Judgment is therefore rendered:chanroblesvirtuallawlibrary
a. Annulling the three contracts of sale in question; chan roblesvirtualawlibraryb. declaring the
minor as the owner of the seventeen parcels of land, with the obligation to return to Socorro
Roldan the price of P14,700 with legal interest from August 12, 1947; chan
roblesvirtualawlibraryc. Ordering Socorro Roldan and Emilio Cruz to deliver said parcels of land to
the minor; chan roblesvirtualawlibraryd. Requiring Socorro Roldan to pay him beginning with
1947 the fruits, which her attorney admits, amounted to P1,522 a year; chan
roblesvirtualawlibrarye. Authorizing the minor to deliver directly to Emilio Cruz, out of the price of
P14,700 above mentioned, the sum of P3,000; chan roblesvirtualawlibraryand f.
charging Appellees with the costs. SO ORDERED.
Paras, C.J., Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Reyes, J.B.L.,
and Endencia, JJ., concur.

FIRST DIVISION
[G.R. No. L-30786. February 20, 1984.]
OLEGARIO B. CLARIN, Petitioner, v. ALBERTO L. RULONA and THE HONORABLE COURT
OF APPEALS, Respondents.
Bengzon, Villegas & Zarraga Law Office for Petitioner.
Tirol, Tirol and Bernaldez & Tirol for Respondents.
SYLLABUS
1. CIVIL LAW; CONTRACTS; SALES; PERFECTION THEREOF, CASE AT BAR. A contract of sale is
perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price. Such contract is binding in whatever form it may have been entered
into. Construing Exhibits A and B together, it can be seen that the petitioner agreed to sell and
the respondent agreed to buy a definite object, that is, ten hectares of land which is part and
parcel of Lot 20 PLD No. 4, owned in common by the petitioner and his sisters although the
boundaries of the ten hectares would be delineated at a later date. The parties also agreed on a
definite price which is P2,500.00. Exhibit B further shows that the petitioner has received from
the respondent as initial payment, the amount of P800.00. Hence, it cannot be denied that there
was a perfected contract of sale between the parties and that such contract was already partially
executed when the petitioner received the initial payment of P800.00. The latters acceptance of
the payment clearly showed his consent to the contract thereby precluding him from rejecting its
binding effect.
2. ID.; ID.; ID.; ID.; PARTIAL EXECUTION; EFFECTS. With the contract being partially executed,
the same is no longer covered by the requirements of the Statute of Frauds in order to be
enforceable. Therefore, with the contract being valid and enforceable, the petitioner cannot avoid
his obligation by interposing that Exhibit A is not a public document. On the contrary, under
Article 1357 of the Civil Code, the petitioner can even be compelled by the respondent to
execute a public document to embody their valid and enforceable contract.
3. ID.; PROPERTY; CO-OWNERSHIP; CO-OWNER CANNOT BIND PROPERTY OWNED IN COMMON.
Although as a co-owner, the petitioner cannot dispose of a specific portion of the land, his share
shall be bound by the effect of the sale. This is anchored in Article 493 of the Civil Code.
DECISION
GUTIERREZ, JR., J.:
This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed
the finding of the trial court that there was a perfected contract of sale between the petitioner
and the respondent with regard to the ten (10) hectares of land constituting the petitioners
share of Lot 20 PLD No. 4, Carmen Cadastre in Carmen, Bohol.cha
On May 31, 1959 the petitioner executed two documents, namely, Exhibits "A" and "B" which
respectively provide:jgc:chanrobles.com.ph
"TO WHOM THIS MAY CONCERN:jgc:chanrobles.com.ph
"This is to authorize Mr. Gustavo Decasa, surveyor from Batuan, Bohol to survey on behalf of Mr.
& Mrs. Alberto L. Rulona of Suba, Katipunan, Carmen, Bohol, a portion of the share of the
undersigned of Lot 20 PLD No. 4 (Carmen Cadastre) from the CLARIN HERMANOS of which the
undersigned is one of the heirs in a decision rendered in Cad. Case No. 20, Reg. Rec. No. 200
promulgated by Judge Hipolito Alo of the Court of First Instance of this province dated January 6,
1956; of the ten hectares (10) awarded to Mr. & Mrs. Alberto L. Rulona which the couple
purchased from the undersigned for TWO THOUSAND FIVE HUNDRED PESOS (P2,500.00). The
portion of land to be surveyed is situated where the house and vicinity of Mr. & Mrs. A. Rulona are
located in said lot.
(SGD.) OLEGARIO B. CLARIN
(SGD.) ZOILA L. CLARIN
"Received from Mr. Alberto Rulona of Carmen, Bohol, the sum of Eight Hundred (P800.00) Pesos
as an initial payment for the ten hectares of land in Carmen, Bohol which he is going to purchase
from the undersigned. The value of the land in question is P2,500.00."cralaw virtua1aw library
Respondent Rulona filed a complaint for specific performance and recovery of improvements on

the ground that the petitioner and his wife violated the terms of the agreement of sale "by
returning by their own volition and without the consent of plaintiff, the amount of P1,100.00 in
six postal money orders, covering the downpayment of P1,000.00 and first installment of
P100.00."cralaw virtua1aw library
In his complaint, the respondent alleged that the petitioner sold ten hectares of his share of the
disputed lot to him for P2,500.00. The conditions of the sale were that a downpayment of
P1,000.00 was to be made and then the balance of P1,500.00 was to be paid in monthly
installment of P100.00. As shown by Exhibit B, the respondent delivered to the petitioner a
downpayment of P800.00 and on the first week of June the amount of P200.00 was also delivered
thereby completing the downpayment of P1,000.00. On the first week of August, another
delivery was made by the respondent in the amount of P100.00 as payment for the first
installment. Respondent further alleged that despite repeated demands to let the sale continue
and for the petitioner to take back the six postal money orders, the latter refused to
comply.cralawnad
In his answer, the petitioner alleged that while it is true that he had a projected contract of sale
of a portion of land with the respondent, such was subject to the following conditions: (1) that the
contract would be realized only if his co-heirs would give their consent to the sale of a specific
portion of their common inheritance from the late Aniceto Clarin before partition of the said
common property and (2) that should his co-heirs refuse to give their consent, the projected
contract would be discontinued or would not be realized. Petitioner further contended that the
respondent knew fully well the above terms and accepted them as conditions precedent to the
perfection or consummation of the contract; that respondent delivered the amount of P1,000.00
as earnest money, subject to the above conditions and that the amount was returned by the
petitioner upon his learning definitely that his co-heirs and co-owners refused to give their
consent to the projected sale.
The trial court rendered judgment in favor of the respondent on the ground that the contract of
sale, Exhibit A, is a pure sale of a portion of Lot No. 20, containing an area of ten hectares for the
sum of P2,500.00, and that the sale is not subject to any condition nor is it vitiated by any flaw.
Therefore, it declared the same binding upon the parties under Articles 1356 and 1458 of the
Civil Code. The trial court also ruled that the fact that petitioner returned the sum of P1,100.00
paid by the respondent indicated an intention to rescind the contract. The court stated, however,
that rescission under Article 1191 of the Civil Code can be authorized by the court only if either
party violates his obligation. Since there had been no violation, the court ruled that the petitioner
could not rescind the contract. Lastly, the court held that although as co-owner the petitioner
could not dispose of a specific portion of the land, nevertheless, his share was bound by the
effect of the sale.chanrobles lawlibrary : rednad
On appeal, the Court of Appeals sustained the findings of the trial court, stating that:chanrob1es
virtual 1aw library
x

". . . We believe that the trial court did not incur any error when it arrived at the conclusion that
there was a perfected contract of sale between the plaintiff and the defendant, for indeed the
terms of the agreement (Exh. A) were clearly drafted in an equivocal manner that leaves no room
for interpretation other than those terms contained therein, the real substance of which satisfied
all the elements and requisites of a contract. Appellant, however, argues that Exhibit A was a
mere authority to survey. It is not addressed to any definite party, it does not contain the proper
heading, there is no statement of the manner of paying the purchase price, no personal
circumstances of the parties, and it is not notarized. All these grounds relied upon to suit the
theory of appellant, anchored as it were on a weak foundation, deserve scant consideration.
Suffice it to state that a contract to be binding upon the contracting parties need not be
notarized. Neither should it specify the manner of payment of the consideration nor should it
specify the manner of payment of the consideration nor should it contain the proper heading."
(sic)
It is maintained in this petition that the appellate court erred in holding there was a perfected
contract of sale between the petitioner and the respondent, principally relying on Exhibit A and
that even assuming that the latter were a perfected contract of sale, such was subject to a
condition precedent with which there was no compliance. The petitioner alleges that the two
documents introduced in evidence could not effectively convey title to the land because they
were not public documents. Lastly, the petitioner contends that he could not have validly
disposed of a definite portion of the community property and therefore, there arose a legal
impossibility for him and the respondent to agree on a definite object.chanrobles.com.ph : virtual

law library
The petitioners contentions are without merit.
While it is true that Exhibits A and B are, in themselves, not contracts of sale, they are, however,
clear evidence that a contract of sale was perfected between the petitioner and the respondent
and that such contract had already been partially fulfilled and executed. A contract of sale is
perfected at the moment there is a meeting of minds upon the thing which is the object of the
contract and upon the price. (Article 1475, Civil Code; Phil. Virginia Tobacco Administration v. De
los Angeles, 87 SCRA 210). Such contract is binding in whatever form it may have been entered
into. (Lopez v. Auditor General, 20 SCRA 655).
Construing Exhibits A and B together, it can be seen that the petitioner agreed to sell and the
respondent agreed to buy a definite object, that is, ten hectares of land which is part and parcel
of Lot 20 PLD No. 4, owned in common by the petitioner and his sisters although the boundaries
of the ten hectares would be delineated at a later date. The parties also agreed on a definite
price which is P2,500.00. Exhibit B further shows that the petitioner has received from the
respondent as initial payment, the amount of P800.00. Hence, it cannot be denied that there was
a perfected contract of sale between the parties and that such contract was already partially
executed when the petitioner received the initial payment of P800.00. The latters acceptance of
the payment clearly showed his consent to the contract thereby precluding him from rejecting its
binding effect. (See Federation of United Namarco Distributors, Inc. v. National Marketing
Corporation, 4 SCRA 884). With the contract being partially executed, the same is no longer
covered by the requirements of the Statute of Frauds in order to be enforceable. (See Khan v.
Asuncion, 19 SCRA 996). Therefore, with the contract being valid and enforceable, the petitioner
cannot avoid his obligation by interposing that Exhibit A is not a public document. On the
contrary, under Article 1357 of the Civil Code, the petitioner can even be compelled by the
respondent to execute a public document to embody their valid and enforceable contract.
The petitioners contention that he was only forced to receive money from the respondent due to
the insistence of the latter merits little consideration. It is highly improbable that the respondent
would give different sums on separate dates to the petitioner with no apparent reason, without a
binding assurance from the latter that the disputed lot would be sold to him. We agree with the
trial court and the appellate court that the payments were made in fulfillment of the conditions of
the sale, namely, a downpayment of P1,000.00 and the balance of P1,500.00, to be paid in
monthly installments of P100.00 each.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
We, therefore, find no error in the lower courts holding that a contract of sale was perfected
between the petitioner and the respondent and that the sale did not depend on a condition that
the petitioners co-owners would have to agree to the sale. The latter finding is strengthened by
the fact that although the petitioner has been stressing that he made it clear to the respondent
that the consent of his sisters as co-owners was necessary in order for the sale to push through,
his letter to respondent marked Exhibit C stated another reason, to wit:jgc:chanrobles.com.ph
"My dear Mr. Rulona:chanrob1es virtual 1aw library
Replying to your letter of recent date, I deeply regret to inform you that my daughter, Alice, who
is now in Manila, could not be convinced by me to sell the land in question, that is, the ten (10)
hectares of land referred to in our tentative agreement. It is for this reason that I hereby
authorize the bearer, Mr. Paciano Parmisano, to return to you in person the sum of One Thousand
and One Hundred (P1,100.00) Pesos which you have paid in advance for the proposed sale of the
land in question."cralaw virtua1aw library
x

The reasons given by the petitioner cannot operate against the validity of the contract in
question. A contract is valid even though one of the parties entered into it against his better
judgment. (See Lagunzad v. Vda. de Gonzales, 92 SCRA 476; citing Martinez v. Hongkong and
Shanghai Bank, 15 Phil. 252).
Finally, we agree with the lower courts holding that although as a co-owner, the petitioner
cannot dispose of a specific portion of the land, his share shall be bound by the effect of the sale.
This is anchored in Article 493 of the Civil Code which provides:chanrob1es virtual 1aw library
Art. 493. Each co-owner shall have the full ownership of his part and the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute

another person in its enjoyment, except when personal rights are involved. But the effect of the
alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which
may be alloted to him in the division upon the termination of the co-ownership.
WHEREFORE, the petition is hereby DISMISSED for lack of merit. Costs against the petitioner.
SO ORDERED.
Melencio-Herrera Plana and Relova, JJ., concur.
Teehankee, J., concurs in the result.

SECOND DIVISION
G.R. No. 104892 November 14, 1994
BONIFACIO OLEGARIO and ADELAIDA VICTORINO, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, MANUEL RIVERA, PAZ OLEGARIO, and SOCORRO
OLEGARIO-TEVES, respondents.
Tranquilino F. Meris for petitioners.
Eufracio T. Layag for private respondents.

PUNO, J.:
Spouses Marciliano Olegario and Aurelia Rivera-Olegario owned a parcel of land measuring 91
square meters at 198 J.P. Rizal corner Antipolo Streets, Caloocan City as evidenced by Transfer
Certificate of Title (TCT)
No. 124222 of the Register of Deeds of Caloocan City. 1
The Olegario couples were childless but reared and educated private respondents Manuel Rivera,
Paz Olegario, and Socorro Olegario-Teves. Petitioner Bonifacio Olegario is the brother of
Marciliano while petitioner Adelaida Victorino is the niece of Aurelia.
On March 19, 1986, Aurelia Rivera-Olegario died at the age of eighty-three (83). To preclude her
heirs from inheriting and to avoid payment of taxes, Marciliano, then eighty (80) years old,
executed on April 15, 1986 a Deed of Absolute Sale of the subject property in favor of private
respondents. 2 The purported consideration was FIFTY THOUSAND PESOS (P50,000.00). The
contract of sale was not registered.
On March 10, 1988, Marciliano died intestate. Petitioners Bonifacio Olegario and Adelaida
Victorino were the sole heirs of spouses Olegario. On May 23, 1989, they executed a Deed of
Extra-judicial Settlement of Estate 3covering the subject lot which was published in the
Metropolitan Newsweek for three (3) consecutive weeks. On July 13, 1989, the said Extra-judicial
Settlement was recorded in the Register of Deeds of Caloocan City. TCT
No. C-124222 was then cancelled and TCT No. 190363 was issued in their names. 4
On August 1, 1989, petitioners sold the subject lot for TWO HUNDRED THOUSAND PESOS
(P200,000.00) to Elena Adaon and Nestor Tejon. 5 TCT No. 190132 was then issued in vendees'
names.
Private respondents alleged that the Extra-judicial Settlement came to their knowledge only on
August 21, 1989. On that same day, they tried to register their contract of sale three (3) years
from its execution. The registration was denied as the subject property has been transferred to
Elena Adaon and Nestor Tejon.
The fight for ownership of the subject lot ensued. Private respondents filed Civil Case No. C13973 for Annulment of Extra-judicial Settlement of Estate and Damages against petitioners. 6 As
special and affirmative defense, petitioners assailed the Deed of Absolute Sale between
Marciliano Olegario and private respondents. On the other hand, cross-claimants Elena Adaon
and Nestor Tejon maintained they were buyers in good faith and for value.
In due course, the trial court ruled in favor of private respondents. It annulled the Extra-judicial
Settlement of the subject lot and its sale to Adaon and Tejon, viz.:
WHEREFORE, the judgment is rendered for the plaintiffs and against the herein
defendants, as follows:

a) The extra-judicial settlement of estate executed by defendants Bonifacio Olegario

and Adelaida Victorino on May 23, 1989 as well as Transfer Certificates of Title
issued subsequent thereto, namely TCT No. 190363 in the name of Bonifacio
Olegario and Adelaida Victorino and TCT No. 190132 in the name of Elena Adaon
and Nestor Tejon are hereby declared NULL and VOID and without legal force and
effect;
b) The Register of Deeds of Kaloocan City is hereby ordered to issue unto the herein
plaintiffs new title in lieu of the aforesaid cancelled titles in the name of the
deceased Marciliano Olegario married to Aurelia R. Olegario containing the same
entry and/or inscription before said Title No. 124222 was cancelled;
c) Defendants Bonifacio Olegario and Aurelia Victorino Rivera are hereby ordered to
pay the herein plaintiffs, jointly and severally, the amount of P30,000.00 as nominal
damages and the further sum of P10,000.00 for and/as attorney's fees; and
d) To pay costs of suit.
With regards to the cross-claim of defendants Elena Adaon and Nestor Tejon,
judgment is hereby rendered against Bonifacio Olegario and Adelaida Victorino who
are hereby ordered as follows:
a) Defendant Bonifacio Olegario is hereby ordered to pay cross-claimants Elena
Adaon and Nestor Tejon in the amount of P60,000.00 with legal interest from August
1, 1989;
b) Defendant Adelaida Victorino is hereby ordered to pay cross-claimants Elena
Adaon and Nestor Tejon in the amount of P30,000.00 with legal interest from August
1, 1989;
c) Defendants Bonifacio Olegario and Adelaida Victorino, jointly and severally, to
pay cross-claimants the amount of P5,000.00 for and/as attorney's fees;
Counter-claim interposed by herein defendants and cross-claimants are hereby
DISMISSED for lack of evidence to support the same.
SO ORDERED. 7
Petitioners elevated the case to respondent Court of Appeals. On January 7, 1992, the Sixteenth
Division of respondent court affirmed the impugned Decision with modifications, viz.:
WHEREFORE, except for the following modifications, to wit:
a) The extra-judicial settlement of estate executed by defendants-appellants
Bonifacio Olegario and Adelaida Victorino on May 23, 1989 as well as Transfer
Certificates of Title issued subsequent thereto, namely TCT No. 190363 in the name
of Bonifacio Olegario and Adelaida Victorino and TCT No. 190132 in the name of
cross-appellants Elena Adaon and Nestor Tejon are hereby declared NULL and VOID
and without legal force and effect with respect to 3/4 portion of the subject lot
pertaining to the plaintiffs-appellees;
b) The Register of Deeds of Caloocan City is hereby ordered to issue unto the herein
plaintiffs-appellees new title corresponding to the 3/4 part of the disputed lot; and
to cancel TCT No. 190363 in the name of defendants-appellants Bonifacio Olegario
and Adelaida Victorino and TCT No. 190132 in the name of cross-claimantsappellants Elena Adaon and Nestor Tejon, and issue in lieu thereof new title
corresponding only to 1/4 portion of the subject property; and
c) Defendants-appellants Bonifacio Olegario and Adelaida Victorino are hereby
ordered to pay the herein plaintiffs-appellees, jointly and severally, the amount of
P10,000.00 as nominal damages and the further sum of P5,000.00 for and/as
attorney's fees, the appealed decision is hereby AFFIRMED in all other respects. No
costs.

SO ORDERED. 8
Petitioners now claim that respondent court erred in the following wise:
I
THAT THE RESPONDENT COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION
WHEN IT FAILED TO RESOLVE PETITIONERS' SECOND ASSIGNMENT OF ERROR
BEFORE IT AND CLOSING ITS EYES ON THE EVIDENCE ON RECORD PATENTLY ERRED
IN NOT DECLARING THAT THE PURPORTED DEED OF ABSOLUTE SALE BETWEEN
MARCILIANO OLEGARIO AND THE PRIVATE RESPONDENTS IS NULL AND VOID FOR
BEING ABSOLUTELY SIMULATED AND FICTITIOUS AND FOR BEING VIOLATIVE OF
ARTICLE 130 OF THE FAMILY CODE.
II
THAT THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN SUSTAINING THE
EFFICACY OF THE UNRECORDED DEED OF ABSOLUTE SALE OVER THAT OF THE
EXTRA-JUDICIAL SETTLEMENT OF ESTATE WHICH WAS EXECUTED AND RECORDED IN
GOOD FAITH, CONTRARY TO THE EXPRESS PROVISIONS OF ARTICLE 1544 OF THE
CIVIL CODE.
III
THAT THE RESPONDENT COURT OF APPEALS PATENTLY ERRED IN HOLDING THAT
CROSS-CLAIMANTS ELENA ADAON AND NESTOR TEJON ARE NOT BUYERS IN GOOD
FAITH OF THE SUBJECT PROPERTY.
IV
THAT THE RESPONDENT COURT OF APPEALS GRAVELY ERRED IN AWARDING
P30,000.00 NOMINAL DAMAGES AND P10,000.00 ATTORNEY'S FEES IN FAVOR OF
THE PRIVATE RESPONDENTS DESPITE THE PATENT ABSENCE OF FACTUAL AND LEGAL
BASIS THEREFORE.

We find merit in the petition.

There is no question that petitioners are the lawful heirs of spouses Olegario. Under Article 160
of the New Civil Code, the subject lot is presumed to be conjugal property. The death of Aurelia
Rivera-Olegario on March 19, 1986 dissolved the conjugal partnership. By virtue of such
dissolution, 1/2 of the property should appertain to Marciliano as his share from the conjugal
estate plus another 1/4 representing his share as surviving spouse of Aurelia. 9 Petitioner
Adelaida Victorino, as the sole surviving niece of Aurelia, is entitled to the other 1/4 of the
lot. 10 When Marciliano died intestate on March 10, 1986, petitioner Bonifacio Olegario, the only
surviving brother of Marciliano, stepped into his shoe.
We shall now determine whether the inheritance right of petitioners can be prejudiced by the
sale of the subject lot by the deceased Marciliano to private respondents. In a contract of sale,
consideration is, as a rule, different from the motive of the parties. Consideration is defined as
some right, interest, benefit, or advantage conferred upon the promissor, to which he is
otherwise not lawfully entitled, or any detriment, prejudice, loss, or disadvantage suffered or
undertaken by the promisee other than to such as he is at the time of consent bound to
suffer. 11 As contradistinguished, motive is the condition of mind which incites to action, but
includes also the inference as to the existence of such condition, from an external fact of a
nature to produce such a condition. 12 Under certain circumstances, however, the motive of the
parties may be regarded as the consideration when it predetermines the purpose of the
contract. 13 When they blend to that degree, and the motive is unlawful, then the contract
entered into is null and void. 14
In the case at bench, the primary motive of Marciliano is selling the controverted 91-square
meter lot to private respondents was to illegally frustrate petitioners' right of inheritance and to

avoid payment of estate tax. This was unabashedly admitted by witness Susan Rivera, wife of
private respondent Manuel Rivera, on cross-examination. She declared:
Atty. Meris: (p. 12, TSN, June 18, 1991 [sic])
xxx xxx xxx
Q You mean to say that despite of your claim that your husband is the
son of Marciliano Olegario and Aurelia Olegario, they still executed a
deed of absolute sale over the said lot owned by your parents in law in
favor of your husband and his two sisters?
A It was decided that way to avoid paying tax, sir.
Q In other words the sale was only fictitious or was only made in a way
of avoiding paying taxes?
A It was not that way but my parents in law were just avoiding distant
relatives who might claim it. 15
xxx xxx xxx
Atty. Buenaventura: (p. 15, TSN, June 18, 1990)
Q And as a husband (sic) of Manuel you are familiar of the reason why
this deed of sale was executed?
A I have stated earlier that my father in law sold it to them for the
reason that he would not want the said property to be given to another
party, sir.
Q In other words, it was not really intended as honest to goodness sale
between the former owner and Manuel Rivera, your husband and her
sister? (sic)
A Yes, sir.

16

xxx xxx xxx

We also note that in their comment, rejoinder, and memorandum private respondents did not
refute petitioners' charge that the said sale is fictitious. The conclusion is thus inescapable that
the purported sale of April 15, 1986 of the subject lot is null and void. Illegal motive
predetermined the purpose of the contract. 17
In addition, the trial court and respondent court failed to consider the lack of cause in the alleged
deed of sale of 1986. 18 The evidence does not show that private respondents had FIFTY
THOUSAND PESOS (P50,000.00) and paid
the same to Marciliano. Private respondents allegedly borrowed THIRTY THOUSAND PESOS
(P30,000.00) from the cooperative of Mary Help of Christian Parish to prove their financial
capacity. However, they floundered in their cross-examinations.
Atty. Meris: (Cross-examination of respondent Manuel Rivera) (p. 39, TSN, June 4,
1990)
xxx xxx xxx
Q And how much did you buy the said property?
A P50,000.00, sir.
Q And did you bring this money at the City Hall?

A No, sir.
Q Did you give your father the said amount?
A We spent it for the treatment of my father, for payment of the real
estate tax and burial of my mother Aurelia Olegario sir. (Emphasis
supplied). 19

xxx xxx xxx

Atty. Buenaventura on cross-examination of Paz Olegario (respondent),
pp. 22, TSN, June 23, 1990.
xxx xxx xxx
Q Do you know how much was paid?
A P50,000.00, sir
Q Was it paid in cash or in other form?

xxx xxx xxx

A No, sir.
Q What do you mean by "no sir."

Atty. Buenaventura:
May we make on record that the witness is having difficulty in
answering the question despite being repeatedly interpreted the
meaning of the question propounded on to.
xxx xxx xxx
Q When was the money given, after it (Deed of Sale) was executed on
April 15, 1986?
A Last week of April, sir.
Q Do you know where the money came from?

Atty. Buenaventura:
May we manifest to the Honorable Court that there are some signal
coming from the other witness that has been presented before the
Honorable Court and it seems that the witness is getting clue from the
other witness. (Emphasis supplied) 20
Applying Articles 1352 and 1409 21 of the Civil Code in relation to the indispensable requisite of a
valid cause, we hold that the alleged deed of sale is void.
It is also obvious to the eye that the contract of sale in 1986 is unregistered. Section 51 of
Presidential Decree No. 1529, otherwise known as the Property Registration Decree, provides

that "[T]he act of registration shall be the operative act to convey or affect the land insofar as
third persons are concerned." Thus, even if the contract of sale is valid, it cannot adversely affect
third persons because of its non-registration. More specifically, it cannot prejudice petitioners as
well as Elena Adaon and Nestor Tejon.
IN VIEW WHEREOF, the Decision of respondent court dated January 7, 1992 is REVERSED and SET
ASIDE; the Complaint in Civil Case
No. C-13973 is ordered DISMISSED. No costs.
SO ORDERED.
Narvasa, C.J., Regalado and Mendoza, JJ., concur

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

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

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

therefore, binding and enforceable between the parties. It should be noted that under the law
and jurisprudence, a contract which contains this kind of stipulation is considered a contract to
sell.
Moreover, that the parties really intended to execute a contract to sell, and not a contract of
sale, is bolstered by the fact that the deed of absolute sale would have been issued only upon
the payment of the balance of the purchase price, as may be gleaned from petitioner's letter
dated April 16, 1990 16 wherein it informed private respondents that it "is now ready and willing
to pay you simultaneously with the execution of the corresponding deed of absolute sale."
Secondly, it has not been shown there was delivery of the property, actual or constructive, made
to herein petitioner. The exclusive option to purchase is not contained in a public instrument the
execution of which would have been considered equivalent to delivery. 17 Neither did petitioner
take actual, physical possession of the property at any given time. It is true that after the
reconstitution of private respondents' certificate of title, it remained in the possession of
petitioner's counsel, Atty. Bayani L. Bernardo, who thereafter delivered the same to herein
petitioner. Normally, under the law, such possession by the vendee is to be understood as a
delivery. 18 However, private respondents explained that there was really no intention on their
part to deliver the title to herein petitioner with the purpose of transferring ownership to it. They
claim that Atty. Bernardo had possession of the title only because he was their counsel in the
petition for reconstitution. We have no reason not to believe this explanation of private
respondents, aside from the fact that such contention was never refuted or contradicted by
petitioner.
2. Irrefragably, the controverted document should legally be considered as a perfected contract
to sell. On this particular point, therefore, we reject the position and ratiocination of respondent
Court of Appeals which, while awarding the correct relief to private respondents, categorized the
instrument as "strictly an option contract."
The important task in contract interpretation is always the ascertainment of the intention of the
contracting parties and that task is, of course, to be discharged by looking to the words they
used to project that intention in their contract, all the words not just a particular word or two, and
words in context not words standing alone. 19Moreover, judging from the subsequent acts of the
parties which will hereinafter be discussed, it is undeniable that the intention of the parties was
to enter into a contract to sell. 20 In addition, the title of a contract does not necessarily
determine its true nature. 21 Hence, the fact that the document under discussion is entitled
"Exclusive Option to Purchase" is not controlling where the text thereof shows that it is a contract
to sell.
An option, as used in the law on sales, is a continuing offer or contract by which the owner
stipulates with another that the latter shall have the right to buy the property at a fixed price
within a certain time, or under, or in compliance with, certain terms and conditions, or which
gives to the owner of the property the right to sell or demand a sale. It is also sometimes called
an "unaccepted offer." An option is not of itself a purchase, but merely secures the privilege to
buy. 22 It is not a sale of property but a sale of property but a sale of the right to purchase. 23 It is
simply a contract by which the owner of property agrees with another person that he shall have
the right to buy his property at a fixed price within a certain time. He does not sell his land; he
does not then agree to sell it; but he does sell something, that it is, the right or privilege to buy
at the election or option of the other party. 24 Its distinguishing characteristic is that it imposes no
binding obligation on the person holding the option, aside from the consideration for the offer.
Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to
transfer, any title to, or any interest or right in the subject matter, but is merely a contract by
which the owner of property gives the optionee the right or privilege of accepting the offer and
buying the property on certain terms. 25
On the other hand, a contract, like a contract to sell, involves a meeting of minds two persons
whereby one binds himself, with respect to the other, to give something or to render some
service. 26 Contracts, in general, are perfected by mere consent, 27 which is manifested by the
meeting of the offer and the acceptance upon the thing and the cause which are to constitute
the contract. The offer must be certain and the acceptance absolute. 28
The distinction between an "option" and a contract of sale is that an option is an unaccepted
offer. It states the terms and conditions on which the owner is willing to sell the land, if the holder

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

petitioner was supposed to comply with the obligation incumbent upon it to perform, not merely
to exercise an option or a right to buy the property.
The obligation of petitioner on November 30, 1993 consisted of an obligation to give something,
that is, the payment of the purchase price. The contract did not simply give petitioner the
discretion to pay for the property. 32 It will be noted that there is nothing in the said contract to
show that petitioner was merely given a certain period within which to exercise its privilege to
buy. The agreed period was intended to give time to herein petitioner within which to fulfill and
comply with its obligation, that is, to pay the balance of the purchase price. No evidence was
presented by private respondents to prove otherwise.
The test in determining whether a contract is a "contract of sale or purchase" or a mere "option"
is whether or not the agreement could be specifically enforced. 33 There is no doubt that the
obligation of petitioner to pay the purchase price is specific, definite and certain, and
consequently binding and enforceable. Had private respondents chosen to enforce the contract,
they could have specifically compelled petitioner to pay the balance of P2,806,150.00. This is
distinctly made manifest in the contract itself as an integral stipulation, compliance with which
could legally and definitely be demanded from petitioner as a consequence.
This is not a case where no right is as yet created nor an obligation declared, as where
something further remains to be done before the buyer and seller obligate themselves. 34 An
agreement is only an "option" when no obligation rests on the party to make any payment
except such as may be agreed on between the parties as consideration to support the option
until he has made up his mind within the time specified. 35 An option, and not a contract to
purchase, is effected by an agreement to sell real estate for payments to be made within
specified time and providing forfeiture of money paid upon failure to make payment, where the
purchaser does not agree to purchase, to make payment, or to bind himself in any way other
than the forfeiture of the payments made. 36 As hereinbefore discussed, this is not the situation
obtaining in the case at bar.
While there is jurisprudence to the effect that a contract which provides that the initial payment
shall be totally forfeited in case of default in payment is to be considered as an option
contract, 37 still we are not inclined to conform with the findings of respondent court and the
court a quo that the contract executed between the parties is an option contract, for the reason
that the parties were already contemplating the payment of the balance of the purchase price,
and were not merely quoting an agreed value for the property. The term "balance," connotes a
remainder or something remaining from the original total sum already agreed upon.
In other words, the alleged option money of P50,000.00 was actually earnest money which was
intended to form part of the purchase price. The amount of P50,000.00 was not distinct from the
cause or consideration for the sale of the property, but was itself a part thereof. It is a statutory
rule that whenever earnest money is given in a contract of sale, it shall be considered as part of
the price and as proof of the perfection of the contract. 38 It constitutes an advance payment and
must, therefore, be deducted from the total price. Also, earnest money is given by the buyer to
the seller to bind the bargain.
There are clear distinctions between earnest money and option money, viz.: (a) earnest money is
part of the purchase price, while option money ids the money given as a distinct consideration
for an option contract; (b) earnest money is given only where there is already a sale, while option
money applies to a sale not yet perfected; and (c) when earnest money is given, the buyer is
bound to pay the balance, while when the would-be buyer gives option money, he is not required
to buy. 39
The aforequoted characteristics of earnest money are apparent in the so-called option contract
under review, even though it was called "option money" by the parties. In addition, private
respondents failed to show that the payment of the balance of the purchase price was only a
condition precedent to the acceptance of the offer or to the exercise of the right to buy. On the
contrary, it has been sufficiently established that such payment was but an element of the
performance of petitioner's obligation under the contract to sell. 40
II

1. This brings us to the second issue as to whether or not there was valid suspension of payment
of the purchase price by petitioner and the legal consequences thereof. To justify its failure to pay
the purchase price within the agreed period, petitioner invokes Article 1590 of the civil Code
which provides:
Art. 1590. Should the vendee be disturbed in the possession or ownership of the
thing acquired, or should he have reasonable grounds to fear such disturbance, by a
vindicatory action or a foreclosure of mortgage, he may suspend the payment of the
price until the vendor has caused the disturbance or danger to cease, unless the
latter gives security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee shall be bound
to make the payment. A mere act of trespass shall not authorize the suspension of
the payment of the price.
Respondent court refused to apply the aforequoted provision of law on the erroneous assumption
that the true agreement between the parties was a contract of option. As we have hereinbefore
discussed, it was not an option contract but a perfected contract to sell. Verily, therefore, Article
1590 would properly apply.
Both lower courts, however, are in accord that since Civil Case No. 89-5541 filed against the
parties herein involved only the eastern half of the land subject of the deed of sale between
petitioner and the Jimenez brothers, it did not, therefore, have any adverse effect on private
respondents' title and ownership over the western half of the land which is covered by the
contract subject of the present case. We have gone over the complaint for recovery of ownership
filed in said case 41 and we are not persuaded by the factual findings made by said courts. At a
glance, it is easily discernible that, although the complaint prayed for the annulment only of the
contract of sale executed between petitioner and the Jimenez brothers, the same likewise prayed
for the recovery of therein plaintiffs' share in that parcel of land specifically covered by TCT No.
309773. In other words, the plaintiffs therein were claiming to be co-owners of the entire parcel
of land described in TCT No. 309773, and not only of a portion thereof nor, as incorrectly
interpreted by the lower courts, did their claim pertain exclusively to the eastern half adjudicated
to the Jimenez brothers.
Such being the case, petitioner was justified in suspending payment of the balance of the
purchase price by reason of the aforesaid vindicatory action filed against it. The assurance made
by private respondents that petitioner did not have to worry about the case because it was pure
and simple harassment 42 is not the kind of guaranty contemplated under the exceptive clause in
Article 1590 wherein the vendor is bound to make payment even with the existence of a
vindicatory action if the vendee should give a security for the return of the price.
2. Be that as it may, and the validity of the suspension of payment notwithstanding, we find and
hold that private respondents may no longer be compelled to sell and deliver the subject
property to petitioner for two reasons, that is, petitioner's failure to duly effect the consignation
of the purchase price after the disturbance had ceased; and, secondarily, the fact that the
contract to sell had been validly rescinded by private respondents.
The records of this case reveal that as early as February 28, 1990 when petitioner caused its
exclusive option to be annotated anew on the certificate of title, it already knew of the dismissal
of civil Case No. 89-5541. However, it was only on April 16, 1990 that petitioner, through its
counsel, wrote private respondents expressing its willingness to pay the balance of the purchase
price upon the execution of the corresponding deed of absolute sale. At most, that was merely a
notice to pay. There was no proper tender of payment nor consignation in this case as required
by law.
The mere sending of a letter by the vendee expressing the intention to
pay, without the accompanying payment, is not considered a valid tender of payment. 43 Besides,
a mere tender of payment is not sufficient to compel private respondents to deliver the property
and execute the deed of absolute sale. It is consignation which is essential in order to extinguish
petitioner's obligation to pay the balance of the purchase price. 44 The rule is different in case of
an option contract 45 or in legal redemption or in a sale with right to repurchase, 46 wherein
consignation is not necessary because these cases involve an exercise of a right or privilege (to
buy, redeem or repurchase) rather than the discharge of an obligation, hence tender of payment
would be sufficient to preserve the right or privilege. This is because the provisions on

consignation are not applicable when there is no obligation to pay. 47 A contract to sell, as in the
case before us, involves the performance of an obligation, not merely the exercise of a privilege
of a right. consequently, performance or payment may be effected not by tender of payment
alone but by both tender and consignation.
Furthermore, petitioner no longer had the right to suspend payment after the disturbance ceased
with the dismissal of the civil case filed against it. Necessarily, therefore, its obligation to pay the
balance again arose and resumed after it received notice of such dismissal. Unfortunately,
petitioner failed to seasonably make payment, as in fact it has deposit the money with the trial
court when this case was originally filed therein.
By reason of petitioner's failure to comply with its obligation, private respondents elected to
resort to and did announce the rescission of the contract through its letter to petitioner dated
July 27, 1990. That written notice of rescission is deemed sufficient under the circumstances.
Article 1592 of the Civil Code which requires rescission either by judicial action or notarial act is
not applicable to a contract to sell. 48 Furthermore, judicial action for rescission of a contract is
not necessary where the contract provides for automatic rescission in case of breach, 49 as in the
contract involved in the present controversy.
We are not unaware of the ruling in University of the Philippines vs. De los Angeles, etc. 50 that
the right to rescind is not absolute, being ever subject to scrutiny and review by the proper court.
It is our considered view, however, that this rule applies to a situation where the extrajudicial
rescission is contested by the defaulting party. In other words, resolution of reciprocal contracts
may be made extrajudicially unless successfully impugned in court. If the debtor impugns the
declaration, it shall be subject to judicial determination 51 otherwise, if said party does not
oppose it, the extrajudicial rescission shall have legal effect. 52
In the case at bar, it has been shown that although petitioner was duly furnished and did receive
a written notice of rescission which specified the grounds therefore, it failed to reply thereto or
protest against it. Its silence thereon suggests an admission of the veracity and validity of private
respondents' claim. 53 Furthermore, the initiative of instituting suit was transferred from the
rescinder to the defaulter by virtue of the automatic rescission clause in the contract. 54 But then,
the records bear out the fact that aside from the lackadaisical manner with which petitioner
treated private respondents' latter of cancellation, it utterly failed to seriously seek redress from
the court for the enforcement of its alleged rights under the contract. If private respondents had
not taken the initiative of filing Civil Case No. 7532, evidently petitioner had no intention to take
any legal action to compel specific performance from the former. By such cavalier disregard, it
has been effectively estopped from seeking the affirmative relief it now desires but which it had
theretofore disdained.
WHEREFORE, on the foregoing modificatory premises, and considering that the same result has
been reached by respondent Court of Appeals with respect to the relief awarded to private
respondents by the court a quo which we find to be correct, its assailed judgment in CA-G.R. CV
No. 34767 is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., Puno and Mendoza, JJ., concur

FIRST DIVISION
G.R. No. 97332 October 10, 1991
SPOUSES JULIO D. VILLAMOR AND MARINA VILLAMOR, petitioners,
vs.
THE HON. COURT OF APPEALS AND SPOUSES MACARIA LABINGISA REYES AND
ROBERTO REYES,respondents.
Tranquilino F. Meris for petitioners.
Agripino G. Morga for private respondents.

MEDIALDEA, J.:p
This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No.
24176 entitled, "Spouses Julio Villamor and Marina Villamor, Plaintiffs-Appellees, versus Spouses
Macaria Labing-isa Reyes and Roberto Reyes, Defendants-Appellants," which reversed the
decision of the Regional Trial Court (Branch 121) at Caloocan City in Civil Case No. C-12942.
The facts of the case are as follows:
Macaria Labingisa Reyes was the owner of a 600-square meter lot located at Baesa, Caloocan
City, as evidenced by Transfer Certificate of Title No. (18431) 18938, of the Register of Deeds of
Rizal.
In July 1971, Macaria sold a portion of 300 square meters of the lot to the Spouses Julio and
Marina and Villamor for the total amount of P21,000.00. Earlier, Macaria borrowed P2,000.00
from the spouses which amount was deducted from the total purchase price of the 300 square
meter lot sold. The portion sold to the Villamor spouses is now covered by TCT No. 39935 while
the remaining portion which is still in the name of Macaria Labing-isa is covered by TCT No.
39934 (pars. 5 and 7, Complaint). On November 11, 1971, Macaria executed a "Deed of Option"
in favor of Villamor in which the remaining 300 square meter portion (TCT No. 39934) of the lot
would be sold to Villamor under the conditions stated therein. The document reads:
DEED OF OPTION
This Deed of Option, entered into in the City of Manila, Philippines, this 11th day of
November, 1971, by and between Macaria Labing-isa, of age, married to Roberto
Reyes, likewise of age, and both resideing on Reparo St., Baesa, Caloocan City, on
the one hand, and on the other hand the spouses Julio Villamor and Marina V.
Villamor, also of age and residing at No. 552 Reparo St., corner Baesa Road, Baesa,
Caloocan City.
WITNESSETH
That, I Macaria Labingisa, am the owner in fee simple of a parcel of land with an
area of 600 square meters, more or less, more particularly described in TCT No.
(18431) 18938 of the Office of the Register of Deeds for the province of Rizal, issued
in may name, I having inherited the same from my deceased parents, for which
reason it is my paraphernal property;
That I, with the conformity of my husband, Roberto Reyes, have sold one-half
thereof to the aforesaid spouses Julio Villamor and Marina V. Villamor at the price of
P70.00 per sq. meter, which was greatly higher than the actual reasonable
prevailing value of lands in that place at the time, which portion, after segregation,
is now covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan,
issued on August 17, 1971 in the name of the aforementioned spouses vendees;

That the only reason why the Spouses-vendees Julio Villamor and Marina V. Villamor,
agreed to buy the said one-half portion at the above-stated price of about P70.00
per square meter, is because I, and my husband Roberto Reyes, have agreed to sell
and convey to them the remaining one-half portion still owned by me and now
covered by TCT No. 39935 of the Register of Deeds for the City of Caloocan,
whenever the need of such sale arises, either on our part or on the part of the
spouses (Julio) Villamor and Marina V. Villamor, at the same price of P70.00 per
square meter, excluding whatever improvement may be found the thereon;
That I am willing to have this contract to sell inscribed on my aforesaid title as an
encumbrance upon the property covered thereby, upon payment of the
corresponding fees; and
That we, Julio Villamor and Marina V. Villamor, hereby agree to, and accept, the
above provisions of this Deed of Option.
IN WITNESS WHEREOF, this Deed of Option is signed in the City of Manila,
Philippines, by all the persons concerned, this 11th day of November, 1971.
JULIO VILLAMOR MACARIA LABINGISA
With My Conformity:
MARINA VILLAMOR ROBERTO REYES
Signed in the Presence Of:
MARIANO Z. SUNIGA
ROSALINDA S. EUGENIO
ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES)
CITY OF MANILA ) S.S.
At the City of Manila, on the 11th day of November, 1971, personally appeared
before me Roberto Reyes, Macaria Labingisa, Julio Villamor and Marina VenturaVillamor, known to me as the same persons who executed the foregoing Deed of
Option, which consists of two (2) pages including the page whereon this
acknowledgement is written, and signed at the left margin of the first page and at
the bottom of the instrument by the parties and their witnesses, and sealed with my
notarial seal, and said parties acknowledged to me that the same is their free act
and deed. The Residence Certificates of the parties were exhibited to me as follows:
Roberto Reyes, A-22494, issued at Manila on Jan. 27, 1971, and B-502025, issued at
Makati, Rizal on Feb. 18, 1971; Macaria Labingisa, A-3339130 and B-1266104, both
issued at Caloocan City on April 15, 1971, their joint Tax Acct. Number being 3028767-6; Julio Villamor, A-804, issued at Manila on Jan. 14, 1971, and B-138, issued at
Manila on March 1, 1971; and Marina Ventura-Villamor, A-803, issued at Manila on
Jan. 14, 1971, their joint Tax Acct. Number being 608-202-6.
ARTEMIO M. MALUBAY
Notary Public
Until December 31, 1972
PTR No. 338203, Manila
January 15, 1971
Doc. No. 1526;
Page No. 24;
Book No. 38;
Series of 1971. (pp. 25-29, Rollo)
According to Macaria, when her husband, Roberto Reyes, retired in 1984, they offered to
repurchase the lot sold by them to the Villamor spouses but Marina Villamor refused and

reminded them instead that the Deed of Option in fact gave them the option to purchase the
remaining portion of the lot.
The Villamors, on the other hand, claimed that they had expressed their desire to purchase the
remaining 300 square meter portion of the lot but the Reyeses had been ignoring them. Thus, on
July 13, 1987, after conciliation proceedings in the barangay level failed, they filed a complaint
for specific performance against the Reyeses.
On July 26, 1989, judgment was rendered by the trial court in favor of the Villamor spouses, the
dispositive portion of which states:
WHEREFORE, and (sic) in view of the foregoing, judgment is hereby rendered in
favor of the plaintiffs and against the defendants ordering the defendant MACARIA
LABING-ISA REYES and ROBERTO REYES, to sell unto the plaintiffs the land covered
by T.C.T No. 39934 of the Register of Deeds of Caloocan City, to pay the plaintiffs
the sum of P3,000.00 as and for attorney's fees and to pay the cost of suit.
The counterclaim is hereby DISMISSED, for LACK OF MERIT.
SO ORDERED. (pp. 24-25, Rollo)
Not satisfied with the decision of the trial court, the Reyes spouses appealed to the Court of
Appeals on the following assignment of errors:
1. HOLDING THAT THE DEED OF OPTION EXECUTED ON NOVEMBER 11, 1971
BETWEEN THE PLAINTIFF-APPELLEES AND DEFENDANT-APPELLANTS IS STILL VALID
AND BINDING DESPITE THE LAPSE OF MORE THAN THIRTEEN (13) YEARS FROM THE
EXECUTION OF THE CONTRACT;
2. FAILING TO CONSIDER THAT THE DEED OF OPTION CONTAINS OBSCURE WORDS
AND STIPULATIONS WHICH SHOULD BE RESOLVED AGAINST THE PLAINTIFFAPPELLEES WHO UNILATERALLY DRAFTED AND PREPARED THE SAME;
3. HOLDING THAT THE DEED OF OPTION EXPRESSED THE TRUE INTENTION AND
PURPOSE OF THE PARTIES DESPITE ADVERSE, CONTEMPORANEOUS AND
SUBSEQUENT ACTS OF THE PLAINTIFF-APPELLEES;
4. FAILING TO PROTECT THE DEFENDANT-APPELLANTS ON ACCOUNT OF THEIR
IGNORANCE PLACING THEM AT A DISADVANTAGE IN THE DEED OF OPTION;
5. FAILING TO CONSIDER THAT EQUITABLE CONSIDERATION TILT IN FAVOR OF THE
DEFENDANT-APPELLANTS; and
6. HOLDING DEFENDANT-APPELLANTS LIABLE TO PAY PLAINTIFF-APPELLEES THE
AMOUNT OF P3,000.00 FOR AND BY WAY OF ATTORNEY'S FEES. (pp. 31-32, Rollo)
On February 12, 1991, the Court of Appeals rendered a decision reversing the decision of the trial
court and dismissing the complaint. The reversal of the trial court's decision was premised on the
finding of respondent court that the Deed of Option is void for lack of consideration.
The Villamor spouses brought the instant petition for review on certiorari on the following
grounds:
I. THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE PHRASE
WHENEVER THE NEED FOR SUCH SALE ARISES ON OUR (PRIVATE RESPONDENT)
PART OR ON THE PART OF THE SPOUSES JULIO D. VILLAMOR AND MARINA V.
VILLAMOR' CONTAINED IN THE DEED OF OPTION DENOTES A SUSPENSIVE
CONDITION;
II. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE QUESTIONED PHRASE IS
INDEED A CONDITION, THE COURT OF APPEALS ERRED IN NOT FINDING, THAT THE
SAID CONDITION HAD ALREADY BEEN FULFILLED;

III. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE QUESTIONED PHRASE IS
INDEED A CONDITION, THE COURT OF APPEALS ERRED IN HOLDING THAT THE
IMPOSITION OF SAID CONDITION PREVENTED THE PERFECTION OF THE CONTRACT
OF SALE DESPITE THE EXPRESS OFFER AND ACCEPTANCE CONTAINED IN THE DEED
OF OPTION;
IV. THE COURT OF APPEALS ERRED IN FINDING THAT THE DEED OF OPTION IS VOID
FOR LACK OF CONSIDERATION;
V. THE COURT OF APPEALS ERRED IN HOLDING THAT A DISTINCT CONSIDERATION IS
NECESSARY TO SUPPORT THE DEED OF OPTION DESPITE THE EXPRESS OFFER AND
ACCEPTANCE CONTAINED THEREIN. (p. 12, Rollo)
The pivotal issue to be resolved in this case is the validity of the Deed of Option whereby the
private respondents agreed to sell their lot to petitioners "whenever the need of such sale arises,
either on our part (private respondents) or on the part of Julio Villamor and Marina Villamor
(petitioners)." The court a quo, rule that the Deed of Option was a valid written agreement
between the parties and made the following conclusions:
xxx xxx xxx
It is interesting to state that the agreement between the parties are evidence by a
writing, hence, the controverting oral testimonies of the herein defendants cannot
be any better than the documentary evidence, which, in this case, is the Deed of
Option (Exh. "A" and "A-a")
The law provides that when the terms of an agreement have been reduced to
writing it is to be considered as containing all such terms, and therefore, there can
be, between the parties and their successors in interest no evidence of their terms
of the agreement, other than the contents of the writing. ... (Section 7 Rule 130
Revised Rules of Court) Likewise, it is a general and most inflexible rule that
wherever written instruments are appointed either by the requirements of law, or by
the contract of the parties, to be the repositories and memorials of truth, any other
evidence is excluded from being used, either as a substitute for such instruments,
or to contradict or alter them. This is a matter both of principle and of policy; of
principle because such instruments are in their nature and origin entitled to a much
higher degree of credit than evidence of policy, because it would be attended with
great mischief if those instruments upon which man's rights depended were liable
to be impeached by loose collateral evidence. Where the terms of an agreement
are reduced to writing, the document itself, being constituted by the parties as the
expositor of their intentions, it is the only instrument of evidence in respect of that
agreement which the law will recognize so long as it exists for the purpose of
evidence. (Starkie, EV, pp. 648, 655 cited in Kasheenath vs. Chundy, W.R. 68, cited
in Francisco's Rules of Court, Vol. VII Part I p. 153) (Emphasis supplied, pp. 126-127,
Records).
The respondent appellate court, however, ruled that the said deed of option is void for lack of
consideration. The appellate court made the following disquisitions:
Plaintiff-appellees say they agreed to pay P70.00 per square meter for the portion
purchased by them although the prevailing price at that time was only P25.00 in
consideration of the option to buy the remainder of the land. This does not seem to
be the case. In the first place, the deed of sale was never produced by them to
prove their claim. Defendant-appellants testified that no copy of the deed of sale
had ever been given to them by the plaintiff-appellees. In the second place, if this
was really the condition of the prior sale, we see no reason why it should be
reiterated in the Deed of Option. On the contrary, the alleged overprice paid by the
plaintiff-appellees is given in the Deed as reason for the desire of the Villamors to
acquire the land rather than as a consideration for the option given to them,
although one might wonder why they took nearly 13 years to invoke their right if
they really were in due need of the lot.

At all events, the consideration needed to support a unilateral promise to sell is a

dinstinct one, not something that is as uncertain as P70.00 per square meter which
is allegedly 'greatly higher than the actual prevailing value of lands.' A sale must be
for a price certain (Art. 1458). For how much the portion conveyed to the plaintiffappellees was sold so that the balance could be considered the consideration for
the promise to sell has not been shown, beyond a mere allegation that it was very
much below P70.00 per square meter.
The fact that plaintiff-appellees might have paid P18.00 per square meter for
another land at the time of the sale to them of a portion of defendant-appellant's lot
does not necessarily prove that the prevailing market price at the time of the sale
was P18.00 per square meter. (In fact they claim it was P25.00). It is improbable
that plaintiff-appellees should pay P52.00 per square meter for the privilege of
buying when the value of the land itself was allegedly P18.00 per square meter. (pp.
34-35, Rollo)
As expressed in Gonzales v. Trinidad, 67 Phil. 682, consideration is "the why of the contracts, the
essential reason which moves the contracting parties to enter into the contract." The cause or
the impelling reason on the part of private respondent executing the deed of option as appearing
in the deed itself is the petitioner's having agreed to buy the 300 square meter portion of private
respondents' land at P70.00 per square meter "which was greatly higher than the actual
reasonable prevailing price." This cause or consideration is clear from the deed which stated:
That the only reason why the spouses-vendees Julio Villamor and Marina V. Villamor
agreed to buy the said one-half portion at the above stated price of about P70.00
per square meter, is because I, and my husband Roberto Reyes, have agreed to sell
and convey to them the remaining one-half portion still owned by me ... (p.
26, Rollo)
The respondent appellate court failed to give due consideration to petitioners' evidence which
shows that in 1969 the Villamor spouses bough an adjacent lot from the brother of Macaria
Labing-isa for only P18.00 per square meter which the private respondents did not rebut. Thus,
expressed in terms of money, the consideration for the deed of option is the difference between
the purchase price of the 300 square meter portion of the lot in 1971 (P70.00 per sq.m.) and the
prevailing reasonable price of the same lot in 1971. Whatever it is, (P25.00 or P18.00) though not
specifically stated in the deed of option, was ascertainable. Petitioner's allegedly paying P52.00
per square meter for the option may, as opined by the appellate court, be improbable but
improbabilities does not invalidate a contract freely entered into by the parties.
The "deed of option" entered into by the parties in this case had unique features. Ordinarily, an
optional contract is a privilege existing in one person, for which he had paid a consideration and
which gives him the right to buy, for example, certain merchandise or certain specified property,
from another person, if he chooses, at any time within the agreed period at a fixed price
(Enriquez de la Cavada v. Diaz, 37 Phil. 982). If We look closely at the "deed of option" signed by
the parties, We will notice that the first part covered the statement on the sale of the 300 square
meter portion of the lot to Spouses Villamor at the price of P70.00 per square meter "which was
higher than the actual reasonable prevailing value of the lands in that place at that time (of
sale)." The second part stated that the only reason why the Villamor spouses agreed to buy the
said lot at a much higher price is because the vendor (Reyeses) also agreed to sell to the
Villamors the other half-portion of 300 square meters of the land. Had the deed stopped there,
there would be no dispute that the deed is really an ordinary deed of option granting the
Villamors the option to buy the remaining 300 square meter-half portion of the lot in
consideration for their having agreed to buy the other half of the land for a much higher price.
But, the "deed of option" went on and stated that the sale of the other half would be made
"whenever the need of such sale arises, either on our (Reyeses) part or on the part of the
Spouses Julio Villamor and Marina V. Villamor. It appears that while the option to buy was granted
to the Villamors, the Reyeses were likewise granted an option to sell. In other words, it was not
only the Villamors who were granted an option to buy for which they paid a consideration. The
Reyeses as well were granted an option to sell should the need for such sale on their part arise.
In the instant case, the option offered by private respondents had been accepted by the
petitioner, the promise, in the same document. The acceptance of an offer to sell for a price
certain created a bilateral contract to sell and buy and upon acceptance, the offer, ipso

facto assumes obligations of a vendee (See Atkins, Kroll & Co. v. Cua Mian Tek, 102 Phil. 948).
Demandabilitiy may be exercised at any time after the execution of the deed. InSanchez v. Rigos,
No. L-25494, June 14, 1972, 45 SCRA 368, 376, We held:
In other words, since there may be no valid contract without a cause of
consideration, the promisory is not bound by his promise and may, accordingly
withdraw it. Pending notice of its withdrawal, his accepted promise partakes,
however, of the nature of an offer to sell which, if accepted, results in a perfected
contract of sale.
A contract of sale is, under Article 1475 of the Civil Code, "perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and upon the price. From
that moment, the parties may reciprocally demand perform of contracts." Since there was,
between the parties, a meeting of minds upon the object and the price, there was already a
perfected contract of sale. What was, however, left to be done was for either party to demand
from the other their respective undertakings under the contract. It may be demanded at any
time either by the private respondents, who may compel the petitioners to pay for the property
or the petitioners, who may compel the private respondents to deliver the property.
However, the Deed of Option did not provide for the period within which the parties may demand
the performance of their respective undertakings in the instrument. The parties could not have
contemplated that the delivery of the property and the payment thereof could be made
indefinitely and render uncertain the status of the land. The failure of either parties to demand
performance of the obligation of the other for an unreasonable length of time renders the
contract ineffective.
Under Article 1144 (1) of the Civil Code, actions upon written contract must be brought within
ten (10) years. The Deed of Option was executed on November 11, 1971. The acceptance, as
already mentioned, was also accepted in the same instrument. The complaint in this case was
filed by the petitioners on July 13, 1987, seventeen (17) years from the time of the execution of
the contract. Hence, the right of action had prescribed. There were allegations by the petitioners
that they demanded from the private respondents as early as 1984 the enforcement of their
rights under the contract. Still, it was beyond the ten (10) years period prescribed by the Civil
Code. In the case of Santos v. Ganayo,
L-31854, September 9, 1982, 116 SCRA 431, this Court affirming and subscribing to the
observations of the courta quo held, thus:
... Assuming that Rosa Ganayo, the oppositor herein, had the right based on the
Agreement to Convey and Transfer as contained in Exhibits '1' and '1-A', her failure
or the abandonment of her right to file an action against Pulmano Molintas when he
was still a co-owner of the on-half (1/2) portion of the 10,000 square meters is now
barred by laches and/or prescribed by law because she failed to bring such action
within ten (10) years from the date of the written agreement in 1941, pursuant to
Art. 1144 of the New Civil Code, so that when she filed the adverse claim through
her counsel in 1959 she had absolutely no more right whatsoever on the same,
having been barred by laches.
It is of judicial notice that the price of real estate in Metro Manila is continuously on the rise. To
allow the petitioner to demand the delivery of the property subject of this case thirteen (13)
years or seventeen (17) years after the execution of the deed at the price of only P70.00 per
square meter is inequitous. For reasons also of equity and in consideration of the fact that the
private respondents have no other decent place to live, this Court, in the exercise of its equity
jurisdiction is not inclined to grant petitioners' prayer.
ACCORDINGLY, the petition is DENIED. The decision of respondent appellate court is AFFIRMED
for reasons cited in this decision. Judgement is rendered dismissing the complaint in Civil Case
No. C-12942 on the ground of prescription and laches.
SO ORDERED.
Narvasa (Chairman) and Cruz, JJ., concur.
Grio-Aquino, J., took no part.

SECOND DIVISION
[G.R. No. 127695. December 3, 2001]
HEIRS OF LUIS BACUS, namely: CLARA RESMA BACUS, ROQUE R. BACUS, SR.,
SATURNINO R. BACUS, PRISCILA VDA. DE CABANERO, CARMELITA B. SUQUIB,
BERNARDITA B. CARDENAS, RAUL R. BACUS, MEDARDO R. BACUS, ANSELMA B.
ALBAN, RICARDO R. BACUS, FELICISIMA B. JUDICO, and DOMINICIANA B.
TANGAL, petitioners, vs. HON. COURT OF APPEALS and SPOUSES FAUSTINO
DURAY and VICTORIANA DURAY, respondents.
DECISION
QUISUMBING, J.:
This petition assails the decision dated November 29, 1996, of the Court of Appeals in CAG.R. CV No. 37566, affirming the decision dated August 3, 1991, of the Regional Trial Court of
Cebu City, Branch 6, in Civil Case No. CEB-8935.
The facts, as culled from the records, are as follows:
On June 1, 1984, Luis Bacus leased to private respondent Faustino Duray a parcel of
agricultural land in Bulacao, Talisay, Cebu. Designated as Lot No. 3661-A-3-B-2, it had an area of
3,002 square meters, covered by Transfer Certificate of Title No. 48866. The lease was for six
years, ending May 31, 1990. The contract contained an option to buy clause. Under said option,
the lessee had the exclusive and irrevocable right to buy 2,000 square meters of the property
within five years from a year after the effectivity of the contract, at P200 per square meter. That
rate shall be proportionately adjusted depending on the peso rate against the US dollar, which at
the time of the execution of the contract was fourteen pesos. [1]
Close to the expiration of the contract, Luis Bacus died on October 10, 1989. Thereafter, on
March 15, 1990, the Duray spouses informed Roque Bacus, one of the heirs of Luis Bacus, that
they were willing and ready to purchase the property under the option to buy clause. They
requested Roque Bacus to prepare the necessary documents, such as a Special Power of
Attorney authorizing him to enter into a contract of sale, [2] on behalf of his sisters who were then
abroad.
On March 30, 1990, due to the refusal of petitioners to sell the property, Faustino Durays
adverse claim was annotated by the Register of Deeds of Cebu, at the back of TCT No. 63269,
covering the segregated 2,000 square meter portion of Lot No. 3661-A-3-B-2-A. [3]
Subsequently, on April 5, 1990, Duray filed a complaint for specific performance against the
heirs of Luis Bacus with the Lupon Tagapamayapa of Barangay Bulacao, asking that he be
allowed to purchase the lot specifically referred to in the lease contract with option to buy. At the
hearing, Duray presented a certification [4] from the manager of Standard Chartered Bank, Cebu
City, addressed to Luis Bacus, stating that at the request of Mr. Lawrence Glauber, a bank client,
arrangements were being made to allow Faustino Duray to borrow funds of approximately
P700,000 to enable him to meet his obligations under the contract with Luis Bacus. [5]
Having failed to reach an agreement before the Lupon, on April 27, 1990, private
respondents filed a complaint for specific performance with damages against petitioners before
the Regional Trial Court, praying that the latter, (a) execute a deed of sale over the subject
property in favor of private respondents; (b) receive the payment of the purchase price; and (c)
pay the damages.
On the other hand, petitioners alleged that before Luis Bacus death, private respondents
conveyed to them the formers lack of interest to exercise their option because of insufficiency of
funds, but they were surprised to learn of private respondents demand. In turn, they requested
private respondents to pay the purchase price in full but the latter refused. They further alleged
that private respondents did not deposit the money as required by the Lupon and instead
presented a bank certification which cannot be deemed legal tender.

On October 30, 1990, private respondents manifested in court that they caused the issuance
of a cashiers check in the amount of P650,000 [6] payable to petitioners at anytime upon demand.
On August 3, 1991, the Regional Trial Court ruled in favor of private respondents, the
dispositive portion of which reads:
Premises considered, the court finds for the plaintiffs and orders the defendants to specifically
perform their obligation in the option to buy and to execute a document of sale over the property
covered by Transfer Certificate of Title # T-63269 upon payment by the plaintiffs to them in the
amount of Six Hundred Seventy-Five Thousand Six Hundred Seventy-Five (P675,675.00) Pesos
within a period of thirty (30) days from the date this decision becomes final.
SO ORDERED.[7]
Unsatisfied, petitioners appealed to the respondent Court of Appeals which denied the appeal
on November 29, 1996, on the ground that the private respondents exercised their option to buy
the leased property before the expiration of the contract of lease. It held:
... After a careful review of the entire records of this case, we are convinced that the plaintiffsappellees validly and effectively exercised their option to buy the subject property. As opined by
the lower court, the readiness and preparedness of the plaintiff on his part, is manifested by his
cautionary letters, the prepared bank certification long before the date of May 31, 1990, the final
day of the option, and his filing of this suit before said date. If the plaintiff-appellee Francisco
Duray had no intention to purchase the property, he would not have bothered to write those
letters to the defendant-appellants (which were all received by them) and neither would he be
interested in having his adverse claim annotated at the back of the T.C.T. of the subject property,
two (2) months before the expiration of the lease. Moreover, he even went to the extent of
seeking the help of the Lupon Tagapamayapa to compel the defendants-appellants to recognize
his right to purchase the property and for them to perform their corresponding obligation. [8]
xxx
We therefore find no merit in this appeal.
WHEREFORE, the decision appealed from is hereby AFFIRMED. [9]
Hence, this petition where petitioners aver that the Court of Appeals gravely erred and
abused its discretion in:
I. ...UPHOLDING THE TRIAL COURTS RULING IN THE SPECIFIC PERFORMANCE CASE BY
ORDERING PETITIONERS (DEFENDANTS THEREIN) TO EXECUTE A DOCUMENT OF SALE
OVER THE PROPERTY IN QUESTION (WITH TCT NO. T-63269) TO THEM IN THE AMOUNT
OF P675,675.00 WITHIN THIRTY (30) DAYS FROM THE DATE THE DECISION BECOMES
FINAL;
II. ...DISREGARDING LEGAL PRINCIPLES, SPECIFIC PROVISIONS OF LAW AND
JURISPRUDENCE IN UPHOLDING THE DECISION OF THE TRIAL COURT TO THE EFFECT
THAT PRIVATE RESPONDENTS HAD EXERCISED THEIR RIGHT OF OPTION TO BUY ON
TIME; THUS THE PRESENTATION OF THE CERTIFICATION OF THE BANK MANAGER OF A
BANK DEPOSIT IN THE NAME OF ANOTHER PERSON FOR LOAN TO RESPONDENTS WAS
EQUIVALENT TO A VALID TENDER OF PAYMENT AND A SUFFICIENT COMPLAINCE (SIC)
OF A CONDITION FOR THE EXERCISE OF THE OPTION TO BUY; AND
III UPHOLDING THE TRIAL COURTS RULING THAT THE PRESENTATION OF A CASHERS (SIC)
CHECK BY THE RESPONDENTS IN THE AMOUNT OF P625,000.00 EVEN AFTER THE
TERMINATION OF THE TRIAL ON THE MERITS WITH BOTH PARTIES ALREADY HAVING
RESTED THEIR CASE, WAS STILL VALID COMPLIANCE OF THE CONDITION FOR THE
PRIVATE RESPONDENTS (PLAINTIFFS THEREIN) EXERCISE OF RIGHT OF OPTION TO BUY
AND HAD A FORCE OF VALID AND FULL TENDER OF PAYMENT WITHIN THE AGREED
PERIOD.[10]
Petitioners insist that they cannot be compelled to sell the disputed property by virtue of the
nonfulfillment of the obligation under the option contract of the private respondents.

Private respondents first aver that petitioners are unclear if Rule 65 or Rule 45 of the Rules of
Court govern their petition, and that petitioners only raised questions of facts which this Court
cannot properly entertain in a petition for review. They claim that even assuming that the instant
petition is one under Rule 45, the same must be denied for the Court of Appeals has correctly
determined that they had validly exercised their option to buy the leased property before the
contract expired.
In response, petitioners state that private respondents erred in initially classifying the instant
petition as one under Rule 65 of the Rules of Court. They argue that the petition is one under
Rule 45 where errors of the Court of Appeals, whether evidentiary or legal in nature, may be
reviewed.
We agree with private respondents that in a petition for review under Rule 45, only questions
of law may be raised.[11] However, a close reading of petitioners arguments reveal the following
legal issues which may properly be entertained in the instant petition:
a) When private respondents opted to buy the property covered by the lease contract
with option to buy, were they already required to deliver the money or consign it in
court before petitioner executes a deed of transfer?
b) Did private respondents incur in delay when they did not deliver the purchase price or
consign it in court on or before the expiration of the contract?
On the first issue, petitioners contend that private respondents failed to comply with their
obligation because there was neither actual delivery to them nor consignation in court or with
the Municipal, City or Provincial Treasurer of the purchase price before the contract
expired. Private respondents bank certificate stating that arrangements were being made by the
bank to release P700,000 as a loan to private respondents cannot be considered as legal tender
that may substitute for delivery of payment to petitioners nor was it a consignation.
Obligations under an option to buy are reciprocal obligations. [12] The performance of one
obligation is conditioned on the simultaneous fulfillment of the other obligation. [13] In other words,
in an option to buy, the payment of the purchase price by the creditor is contingent upon the
execution and delivery of a deed of sale by the debtor. In this case, when private respondents
opted to buy the property, their obligation was to advise petitioners of their decision and their
readiness to pay the price. They were not yet obliged to make actual payment. Only upon
petitioners actual execution and delivery of the deed of sale were they required to pay. As earlier
stated, the latter was contingent upon the former. In Nietes vs. Court of Appeals, 46 SCRA 654
(1972), we held that notice of the creditors decision to exercise his option to buy need not be
coupled with actual payment of the price, so long as this is delivered to the owner of the property
upon performance of his part of the agreement. Consequently, since the obligation was not yet
due, consignation in court of the purchase price was not yet required.
Consignation is the act of depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or refuses to accept payment and it generally requires a
prior tender of payment. In instances, where no debt is due and owing, consignation is not
proper.[14] Therefore, petitioners contention that private respondents failed to comply with their
obligation under the option to buy because they failed to actually deliver the purchase price or
consign it in court before the contract expired and before they execute a deed, has no leg to
stand on.
Corollary, private respondents did not incur in delay when they did not yet deliver payment
nor make a consignation before the expiration of the contract. 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. Only from the moment one of the parties fulfills his obligation,
does delay by the other begin.[15]
In this case, private respondents, as early as March 15, 1990, communicated to petitioners
their intention to buy the property and they were at that time undertaking to meet their
obligation before the expiration of the contract on May 31, 1990. However, petitioners refused to
execute the deed of sale and it was their demand to private respondents to first deliver the
money before they would execute the same which prompted private respondents to institute a
case for specific performance in the Lupong Tagapamayapa and then in the RTC. On October 30,

1990, after the case had been submitted for decision but before the trial court rendered its
decision, private respondents issued a cashiers check in petitioners favor purportedly to bolster
their claim that they were ready to pay the purchase price. The trial court considered this in
private respondents favor and we believe that it rightly did so, because at the time the check
was issued, petitioners had not yet executed a deed of sale nor expressed readiness to do so.
Accordingly, as there was no compliance yet with what was incumbent upon petitioners under
the option to buy, private respondents had not incurred in delay when the cashiers check was
issued even after the contract expired.
WHEREFORE, the instant petition is DENIED. The decision dated November 29, 1996 of the
Court of Appeals is hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, and De Leon, Jr., JJ., concur.
Buena, J., on official leave.

EN BANC
G.R. No. L-34655

March 5, 1932

SIY CONG BIENG & CO., INC., plaintiff-appellee,

vs.
HONGKONG & SHANGHAI BANKING CORPORATION, defendant-appellant.
DeWitt, Perkins & Brandy for appellant.
Feria & La O for appellee.
OSTRAND, J.:
This action was brought in the Court of First Instance of Manila to recover the sum of P31,645,
the value of 464 bales of hemp deposited in certain bonded warehouses as evidenced by
the quedans (warehouse receipts) described in the complaint, said quedans having been
delivered as pledge by one Otto Ranft to the herein defendant, the Hongkong and Shanghai
Banking Corporation, for the guarantee of a preexisting debt of the former to the latter. The
record shows that both parties, through their respective counsel, subscriber and submitted to the
court below the following agreement of facts:
STIPULATION OF FACTS
(Translated into English)
Come now the parties, both the plaintiff and the defendant Hongkong & Shanghai
Banking Corporation, through their respective counsel in the above entitled case,
and respectfully submit to the court the following agreed statements of facts:
1. That both the plaintiff and the defendant Hongkong & Shanghai Banking
Corporation are corporations domicile in the City of Manila and duly authorized to
transact business in accordance with the laws of the Philippine Islands.
2. That the plaintiff is a corporation engaged in business generally, and that the
defendant Hongkong & Shanghai Banking Corporation is a foreign bank authorized
to engage in the banking business in the Philippines.
3. That on June 25, 1926, certain negotiable warehouse receipts described below
were pledge by Otto Ranft to the defendant Hongkong & Shanghai Banking
Corporation to secure the payment of his preexisting debts to the latter:
No.

Warehouseman

Depositor

Bales

1707

Public Warehouse Co

Siy Cong Bieng & Co., Inc.

27

133

W.F. Stevenson Co

do

67

1722

Public Warehouse Co

do

60

1723

do

do

1634

The Philippine Warehouse Company

do

99

1918

Public Warehouse Co

O. Ranft

166

Siy Cong Bieng & Co., Inc

do

1702

The Philippine Warehouse Company

Siy Cong Bieng & Co., Inc.

39

And that the baled hemp covered by these warehouse receipts was worth P31,635;
receipts number 1707,133,1722, 1723, 1634, and 1702 being endorsed in blank by the
plaintiff and Otto Ranft, and numbers 1918 and 2, by Otto Ranft alone.
4. That in the night of June 25, 1926, said Otto Ranft died suddenly at his house in
the City of Manila.
5. That both parties submit this agreed statement of facts, but reserve their right to
have in evidence upon other points not included herein, and upon which they
cannot come to an agreement.

Manila, August 7, 1929.

The evidence shows that on June 25, 1926, Ranft called at the office of the herein plaintiff to
purchase hemp (abaca), and he was offered the bales of hemp as described in the quedans
above mentioned. The parties agreed to the aforesaid price, and on the same date the quedans,
together with the covering invoice, were sent to Ranft by the plaintiff, without having been paid
for the hemp, but the plaintiff's understanding was that the payment would be made against the
same quedans, and it appear that in previous transaction of the same kind between the bank
and the plaintiff, quedans were paid one or two days after their delivery to them.
In the evening of the day upon which the quedans in question were delivered to the herein
defendant, Ranft died, and when the plaintiff found that such was the case, it immediately
demanded the return of the quedans, or the payment of the value, but was told that the quedans
had been sent to the herein defendant as soon as they were received by Ranft.
Shortly thereafter the plaintiff filed a claim for the aforesaid sum of P31,645 in the intestate
proceedings of the estate of the deceased Otto Ranft, which on an appeal form the decision of
the committee on claims, was allowed by the Court of First Instance in case No. 31372 (City of
Manila). In the meantime, demand had been made by the plaintiff on the defendant bank for the
return of the quedans, or their value, which demand was refused by the bank on the ground that
it was a holder of the quedans in due course. Thereupon the plaintiff filed its first complaint
against the defendant, wherein it alleged that it has "sold" the quedans in question to the
deceased O. Ranft for cash, but that the said O. Ranft had not fulfilled the conditions of the sale.
Later on, plaintiff filed an amended complaint, wherein they changed the word "sold" referred to
in the first complaint to the words "attempted to sell".
Upon trial the judge of the court below rendered judgment in favor of the plaintiff principally on
the ground that in the opinion of the court the defendant bank "could not have acted in good
faith for the reason that according to the statements of its own witness, Thiele, the quedans were
delivered to the bank in order to secure the debts of Ranft for the payment of their value and
from which it might be deduced that the said bank knew that the value of the said quedans was
not as yet paid when the same were endorsed to it, and its alleged belief that Ranft was the
owner of the said quedans was not in accordance with the facts proved at the time"; and that,
moreover, the circumstances were such that "the bank knew, or should have known, that Ranft
had not yet acquired the ownership of the said quedans and that it therefore could not invoke the
presumption that it was acting in good faith and without negligence on its part".
In our opinion the judgment of the court below is not tenable. It may be noted, first, that
the quedans in question were negotiable in form; second, that they were pledge by Otto Ranft to
the defendant bank to secure the payment of his preexisting debts to said bank (paragraph 3 of
the Stipulation of Facts); third, that such of thequedans as were issued in the name of the
plaintiff were duly endorsed in blank by the plaintiff and by Otto Ranft; and fourth, that the two
remaining quedans which were duly endorsed in blank by him.
When these quedans were thus negotiated, Otto Ranft was indebted to the Hongkong &
Shanghai Banking Corporation in the sum of P622,753.22, which indebtedness was partly
covered by quedans. He was also being pressed to deposit additional payments as a further
security to the bank, and there is no doubt that the quedanshere in question were received by
the bank to secure the payment of Ranft's preexisting debts; it is so stated in paragraph 3 of the
stipulation of the facts agreed on by the parties and hereinbefore quoted.
It further appears that it has been the practice of the bank in its transactions with Ranft that the
value of thequedans has been entered in the current accounts between Ranft and the bank, but
there is no evidence to the effect that the bank was at any time bound to pay back to Ranft the
amount of any of the quedans, and there is nothing in the record to show that the bank has
promised to pay the values of the quedans neither to Ranft nor to the herein plaintiff; on the
contrary, as stated in the stipulation of facts, the "negotiable warehouse receipts were
pledged by Otto Ranft to the defendant Hongkong & Shanghai Banking Corporation secure the
payment of his preexisting debts to the latter", and taking into consideration that
the quedans were negotiable in form and duly endorsed in blank by the plaintiff and by Otto
Ranft, it follows that on the delivery of the qeudans to the bank they were no longer the property
of the indorser unless he liquidated his debt with the bank.
In his brief the plaintiff insists that the defendant, before the delivery of the quedans, should
have ascertained whether Ranft had any authority to negotiate the quedans.
We are unable to find anything in the record which in any manner would have compelled the
bank to investigate the indorser. The bank had a perfect right to act as it did, and its action is in

accordance with sections 47, 38, and 40 of the Warehouse Receipts Act (Act No. 2137), which
read as follows:
SEC. 47. When negotiation not impaired by fraud, mistake, or duress. The validity of the
negotiation of a receipt is not impaired by the fact that such negotiation was a breach of
duty on the part of the person making the negotiation, or by the fact that the owner of the
receipt was induced by fraud, mistake, or duress to intrust the possession or custody of
the receipt was negotiated, or a person to whom the receipt was subsequent negotiated,
paid value therefor, without notice of the breach of duty, or fraud, mistake, or duress.
SEC. 38. Negotiation of negotiable receipts by indorsement. A negotiable receipt may
be negotiated by the indorsement of the person to whose order the goods are, by the
terms of the receipt, deliverable. Such indorsement may be in blank, to bearer or to a
specified person. . . . Subsequent negotiation may be made in like manner.
SEC. 40. Who may negotiate a receipt. A negotiable receipt may be negotiated:
(a) By the owner thereof, or
(b) By any person to whom the possession or custody of the receipt has been entrusted by
the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the
goods to the order of the person to whom the possession or custody of the receipt has
been entrusted, or if at the time of such entrusting the receipt is in such form that it may
be negotiated by delivery.
The question as to the rights the defendant bank acquired over the aforesaid quedans after
indorsement and delivery to it by Ranft, we find in section 41 of the Warehouse Receipts Act (Act
No. 2137):
SEC. 41. Rights of person to whom a receipt has been negotiated. A person to whom a
negotiable receipt has been duly negotiated acquires thereby:
(a) Such title to the goods as the person negotiating the receipt to him had or had ability
to convey to a purchaser in good faith for value, and also such title to the goods as the
depositor of person to whose order the goods were to be delivered by the terms of the
receipt had or had ability to convey to a purchaser in good faith for value, and. . . .
In the case of the Commercial National Bank of New Orleans vs. Canal-Louisiana Bank & Trust Co.
(239 U.S., 520), Chief Justice Hughes said in regard to negotiation of receipts:
It will be observed that "one who takes by trespass or a finder is not included within the
description of those who may negotiate." (Report of Commissioner on Uniform States
Laws, January 1, 1910, p. 204.) Aside from this, the intention is plain to facilitate the use of
warehouse receipts as documents of title. Under sec. 40, the person who may negotiate
the receipt is either the "owner thereof", or a "person to whom the possession or custody
of the receipt has been intrusted by the owner" if the receipt is in the form described. The
warehouse receipt represents the goods, but the intrustion of the receipt, as stated, is
more than the mere delivery of the goods; it is a representation that the one to whom the
possession of the receipt has been so intrusted has the title to the goods. By sec. 47, the
negotiation of the receipt to a purchaser for value without notice is not impaired by the
fact that it is a breach of duty, or that the owner of the receipt was induced "by fraud,
mistake, or duree" to intrust the receipt to the person who negotiated it. And, under sec.
41, one to whom the negotiable receipt has been duly negotiated acquires such title to the
goods as the person negotiating the receipt to him, or the depositor or person whose order
the goods were delivered by the terms of the receipt, either had or "had ability to convey
to a purchaser in good faith for value." The clear import of these provisions is that if the
owner of the goods permit another to have the possession or custody of negotiable
warehouse receipts running to the order of the latter, or to bearer, it is a representation of
title upon which bona fide purchasers for value are entitled to rely, despite breaches of
trust or violations of agreement on the part of the apparent owner.
In its second assignment of error, the defendant-appellant maintains that the plaintiff-appellee is
estopped to deny that the bank had a valid title to the quedans for the reason that the plaintiff
had voluntarily clothed Ranft with all the attributes of ownership and upon which the defendant
bank relied. In our opinion, the appellant's view is correct. In the National Safe Deposit vs. Hibbs
(229 U.S., 391), certain certificates of stock were pledged as collateral by the defendant in error
to the plaintiff bank, which certificates were converted by one of the trusted employees of the
bank to his own use and sold by him. The stock certificates were unqualified endorsed in blank

by the defendant when delivered to the bank. The Supreme Court of the United States through
Justice Day applied the familiar rule of equitable estoppel that where one of two innocent
persons must suffer a loss he who by his conduct made the loss possible must bear it, using the
following language:
We think this case correctly states the principle, and, applied to the case in hand, is
decisive of it. Here one of two innocent person must suffer and the question at last is,
Where shall the loss fall? It is undeniable that the broker obtained the stock certificates,
containing all the indicia of ownership and possible of ready transfer, from one who had
possession with the bank's consent, and who brought the certificates to him, apparently
clothed with the full ownership thereof by all the tests usually applied by business men to
gain knowledge upon the subject before making a purchase of such property. On the other
hand, the bank, for a legitimate purpose, with confidence in one of its own employees,
instrusted the certificates to him, with every evidence of title and transferability upon
them. The bank's trusted agent, in gross breach of his duty, whether with technical
criminality or not is unimportant, took such certificates, thus authenticated with evidence
of title, to one who, in the ordinary course of business, sold them to parties who paid full
value for them. In such case we think the principles which underlie equitable estoppel
place the loss upon him whose misplaced confidence has made the wrong possible. . . .
We regret that the plaintiff in this case has suffered the loss of the quedans, but as far as we can
see, there is now no remedy available to the plaintiff. The bank is not responsible for the loss; the
negotiable quedans were duly negotiated to the bank and as far as the record shows, there has
been no fraud on the part of the defendant.
The appealed judgment is reversed and the appellant is absolved from the plaintiff's complaint.
Without costs. So ordered.
Johnson, Street, Malcolm, Villamor, Villa-Real and Imperial, JJ., concur.
Separate Opinions
ROMUALDEZ, J., dissenting:
With due respect for the majority opinion, I dissent and vote for the confirmation of the appealed
judgment.

EN BANC
G.R. No. L-21005

December 20, 1924

In the matter of the involuntary insolvency of Umberto de Poli. THE AMERICAN

FOREIGN BANKING CORPORATION, claimant-appellee,
vs.
J. R. HERRIDGE, assignee of the insolvent estate of U. de Poli, BOWRING and CO., C. T.
BOWRING and CO., LTD., and T. R. YANGCO, creditors-appellants.
Crossfield and O'Brien for the appellant assignee.
J. A. Wolfson for the appellants Bowring and Co. and C. T. Bowring and Co., Ltd.
Camus and Delgado for the appellant Yangco.
Ross, Lawrence and Selph for appellee.
OSTRAND, J.:
This is an appeal from the following decision of the Court of First Instance of Manila, the
Honorable George R. Harvey presiding:
On or about April 28, 1920, the debtor, U. de Poli, a licensed public warehouseman in the
City of Manila, issued warehouse receipt No. A-48, commonly known as a "quedan," for
560 bales of tobacco, which tobacco was particularly described therein as "Cagayan
tabacco en rama" with specified marks thereon. Said U. de Poli certified over his signature
on the face of said quedan as follows: I certify that I am the sole owner of the merchandise
herein described." (Exhibit A of American Foreign Banking Corporation.) This quedan was
endorsed in bank by U. de Poli, who delivered it to the American Foreign Banking
Corporation as security upon his overdraft, then amounting to about P40,000.
The claimant bank, by its motion of April 23, 1921, asked that the assignee be ordered to
deliver to said bank the 560 bales of leaf tobacco called for in said quedan upon surrender
of the original of the warehouse receipt.
In answer to said motion the assignee denied that the 560 bales of Cagayan tobacco listed
in said Exhibit A are now in his possession as assignee of said insolvent estate, and denied
that said Exhibit A constitutes a negotiable warehouse receipt under the law, for the
reason that it does not comply with the provisions of sections 2, 4 or 5 of the Warehouse
Receipt Act; and that, even assuming that said 560 bales of leaf tobacco were now in his
possession, he denies that the claimant bank is the owner thereof, or has any lien thereon,
or any rights therein, by virtue of said receipt, Exhibit A; and by his amended answer
alleges that said Exhibit A was not delivered by the insolvent, U. de Poli, to the claimant
for the purpose of transferring the ownership of the property described therein to it, but
only as collateral security for a preexisting indebtedness by way of overdraft, for which
purpose it is under the law invalid and wholly ineffective as against the general creditors
of the said insolvent estate. Substantially the same answer was made by Wise & Co. as
general creditors."
There has been no question raised about the authenticity of the quedan. U. de Poli
testified that he issued it to said bank as security for his said overdraft; that the tobacco
was in the bodega on Calle Acarraga when he gave the quedan to the bank; that the
tobacco had to be stripped and booked, and, for this reason there might have been a slight
difference between the quantity given in the quedan and the quantity at present in
existence in the warehouse; that he knows that the tobacco was in the warehouse at the
time he became insolvent, because he had given an order to fill an order for stripped
tobacco, and that the tobacco was taken from the pile which he had given in guaranty to
the American Foreign Banking Corporation; that Vicente Molina was in charge of the
warehouse, and that he (De Poli) acted upon the data furnished to him by Mr. Molina.
The evidence shows that there were only 530 bales of this tobacco. The quedan (Exhibit A)
calls for "Cagayan tobacco," but it was stipulated in this case that the 530 bales of tobacco
claimed by the American Foreign Banking Corporation are Isabela tobacco. Mr. De Poli
explained this discrepancy in discrepancy in description by saying that he "had the

description of grade only and made the quedan without giving importance if it was
Cagayan or Isabela tobacco; that he asked only for grade, and did not ask whether it was
Cagayan or Isabela tobacco, because he had to deliver the security no matter whether it
was Isabela or Cagayan tobacco. The objection and motion of the opposition counsel that
this explanation be stricken out are hereby overruled.
The quedan in question was issued by J. Magpantay, who was "encargado" of all the U. de
Poli warehouse, but he did not have control of the warehouses, but he did not
have control of the warehouses, according to Mr. de Poli. Molina did not see the quedan
when it was issued, but said that he knew of the tobacco which Mr. De Poli transferred to
the claimant bank, because Mr. De Poli told him about it; that it was tobacco from Isabela
for the year 1919, was stored in the warehouse on Calle Azcarraga, and that there was no
other tobacco in the warehouse except the 1919 Isabela tobacco.
The evidence further shows that in December, 1920, Mr. Kaintzler, a sub accountant of the
claimant bank, went to the U. de Poli warehouse on Calle Azcarraga to have the tobacco
covered by this quedan, Exhibit A, pointed out to him; that the then assignee (Mr. Bayne)
and one of his accountants showed him (Kaintzler) the 530 bales of tobacco with the tag A.
F. B. C. on them, and these bales were pointed out to him by Mr. Bayne as the tobacco
which belonged to the American Foreign Banking Corporation.
The quedan (Exhibit A) is in the same form as quedan No. A-155, which, in the case of
Felisa Roman vs. Asia Banking Corporation, was declared by the Supreme Court of the
Philippine Islands to be a negotiable warehouse receipt conveying title to the said bank
superior to that of the vendor's lien of Felisa Roman (R. G. No. 17825). 1
The evidence shows that said quedan (Exhibit A) was taken by the American Foreign
Banking Corporation for value, believing it to be a negotiable warehouse receipt, and
without reasonable cause to believe that the debtor U. de Poli (who was operating a public
warehouse at the time) was insolvent.
In view of the decision of the Supreme Court in the Felisa Roman case, above-mentioned,
the only question raised by the attorneys for the consignee and for the common creditors
which will be considered by the court is that as to the sufficiency of the description of the
tobacco in said warehouse receipt. This lot of tobacco was the only tobacco in the
warehouse. The debtor said that it was the tobacco which he transferred to the claimant
bank. The tobacco was pointed out by the then assignee to the claimants representative
as the tobacco covered by said quedan, Exhibit A. Hence, there does not appear to be any
doubt about the identity of the tobacco.
The only question left for consideration is whether the use of the word "Cagayan" instead
of "Isabela" in describing the tobacco in the quedan rendered the quedan null and void as
a negotiable warehouse receipt for the tobacco intended to be covered by it. The
insolvent, U. de Poli, testified positively that this quedan referred to the tobacco in the
Azcarraga warehouse, and he explained the discrepancy in the description. The then
assignee (Mr. Bayne) was evidently convinced that this lot of tobacco belonged to the
claimant bank, because he pointed it out to one of the bank's employees, who noted the
tags thereon bearing the initials of the claimant bank.lawphi1.net
The court is of the opinion that the intention of the parties to the transaction must prevail
against such a technical objection as to the sufficiency of the description of the tobacco. It
might be different if there had been Cagayan tobacco in the warehouse at the time of the
issuance of the quedan, Exhibit A, or if there were any doubt whatever as to the identity of
the tobacco intended to be covered by the quedan. The assignee stands in the shoes of
the insolvent, and while it is his duty to protect the general creditors, he is not in the
position of a judgment creditor with an unsatisfied execution.
In view of the foregoing considerations, the court is of the opinion that the quedan, Exhibit
A, is a negotiable warehouse receipt which was duly issued and delivered by the debtor U.
de Poli to the American Foreign Banking Corporation, and that it divested U. de Poli of his
title to said tobacco and transferred the position and the title thereof to the American
Foreign Banking Corporation.

It is therefore ordered and adjudged that the consignee deliver the said five hundred and
thirty (530) bales of tobacco to the American Foreign banking Corporation, upon payment
by said bank of any liens or charges thereon, or, in the event of said tobacco having been
sold, the proceeds thereof, less the storage and insurance charges paid after the
declaration of insolvency; and thereafter due report will be made to this court of such
delivery to the claimant bank in order that the proceeds be deducted from the balance to
said claimant bank from the insolvent debtor.
We find no reversible error in the decision quoted and do not think it necessary to add anything
to the discussion therein contained.
The judgment appealed from is therefore affirmed, with the costs against the appellants. So
ordered.
Street, Malcolm, Avancea, Villamor and Romualdez, JJ., concur.
Footnotes
1 46 Phil., 705

THIRD DIVISION
G.R. No. 75111 November 21, 1991
MARGARITO ALMENDRA, DELIA ALMENDRA, BERNARDINA OJEDA and MELECIA
CENO, petitioners,
vs.
THE HON. INTERMEDIATE APPELLATE COURT, ANGELES ALMENDRA, ROMAN ALMENDRA
and MAGDALENO CENO, respondents.
Custodio P. Canete for petitioners.
Serafin P. Ramento and Leon T. Tumandao for private respondents.
FERNAN, C.J.:p
This is a petition for review on certiorari of the then Intermediate Appellate Court's decision and
resolution denying the motion for reconsideration of said decision which upheld the validity of
three (3) deeds of sale of real properties by a mother in favor of two of her children in total
reversal of the decision the lower court.
The mother, Aleja Ceno, was first married to Juanso Yu Book with whom she had three children
named Magdaleno, Melecia and Bernardina, all surnamed Ceno. Sometime in the 1920's, Juanso
Yu Book took his family to China where he eventually died. Aleja and her daughter Bernardina
later returned to the Philippines.
During said marriage, Aleja acquired a parcel of land which she declared in her name under Tax
Declaration No. 11500. 1 After Juanso Yu Book's death, Bernardina filed against her mother a
case for the partition of the said property in the then Court of First Instance of Leyte. 2 On
August 17, 1970, the lower court 3 rendered a "supplemental decision" 4 finding that the said
property had been subdivided into Lots Nos. 6354 (13,788 square meters), 6353 (16,604 square
meters), 6352 (23,868 square meters) and 6366 (71,656 square meters). The dispositive portion
of said decision reads:
IN VIEW OF THE FOREGOING, the Court hereby renders judgment:
1. Declaring plaintiff Bernardina C. Ojeda as owner and entitled to the possession of
Lot No. 6354 as described in the sketch found on page 44 of the record;
2. Declaring said plaintiff as owner and entitled to the possession of Lot 6353 as
described in the sketch, without prejudice to whatever may be the rights thereto of
her sister Melecia Ceno who is said to be presently in China;
3. Declaring defendant Aleja C. Almendra as owner and entitled to the possession of
Lot No. 6366 as described in the sketch found on page 44 of the record;
4. Declaring said defendant also as owner and entitled to the possession of Lot No.
6352 as described in the sketch, subject to whatever may be the rights thereto of
her son Magdaleno Ceno who is said to be presently in China.
No special pronouncement as to costs, except that the fees of the commissioner
shall be proportionately borne by the parties.
SO ORDERED.
Meanwhile, Aleja married Santiago Almendra with whom she had four children named Margarito,
Angeles, Roman and Delia. During said marriage Aleja and Santiago acquired a 59,196-squaremeter parcel of land in Cagbolo, Abuyog, Leyte. Original Certificate of Title No. 10094 was issued
therefor in the name of Santiago Almendra married to Aleja Ceno and it was declared for tax
purposes in his name. 5

In addition to said properties, Aleja inherited from her father, Juan Ceno, a 16,000-square-meter
parcel of land also in Cagbolo. 6 For his part, her husband Santiago inherited from his mother
Nicolasa Alvero, a 164-square-meter parcel of residential land located in Nalibunan, Abuyog,
Leyte. 7
While Santiago was alive, he apportioned all these properties among Aleja's children in the
Philippines, including Bernardina, who, in turn, shared the produce of the properties with their
parents. After Santiago's death, Aleja sold to her daughter, Angeles Almendra, for P2,000 two
parcels of land more particularly described in the deed of sale dated August 10, 1973, 8 as
follows:
1. Half-portion, which pertains to me as my conjugal share, with my late husband
Santiago Almendra of the land located at Bo. Cagbolo, under T/D No. 22234,
covered by OCT No. P-10094 in name of Santiago Almendra; having an area of
5.9196 hectares; with boundaries specifically designated at the technical
descriptions of the title thereof; and hence the half portion subject of sale shall have
an area of more or less 2.9598 hectares; specifically designated in the sketch below
marked as X: the hilly portion.
2. Half-portion of a parcel of land located at Bo. Cagbolo, Abuyog, Leyte under T/D
No. 27190 in the name of Aleja Ceno; having an area of 1.6000 hectares bounded as
follows to wit: N. Cagbolo creek; E. Leon Elmido; S. Magno Elmido and W., Higasan
River, which portion shall have an area of more or less 8000 hec. (sic), and
designated as X in the sketch below: 9
On December 26, 1973, Aleja sold to her son, Roman Almendra, also for P2,000 a parcel of land
described in the deed of sale as located in Cagbulo (sic), Abuyog, Leyte "under T/D No. 11500
which cancelled T/D No. 9635; having an area of 6.6181 hec., assessed at P1,580.00 . . ." 10
On the same day, Aleja sold to Angeles and Roman again for P2,000 yet another parcel of land
described in the deed of sale 11 as follows:
A parcel of land designated as Lot No. 6352 in the name of Melicia Ceno, under
Project PLS-645, Abuyog, Leyte, which had been treated in the CIVIL CASE No. 4387,
For PARTITION OF REAL PROPERTY, CFI-Leyte, Tacloban City, Branch 11; Bernardina
Ojeda, Plaintiff, -vs.- Aleja C. Almendra, defendant, wherein said SUPPLEMENTAL
DECISION, dated August 17th, 1970, in said case by Judge Jesus N. Borromeo:
PART OF THE DECISION, COMMISSIONER'S REPORT:
Par. 3) That the partition, plaintiff and defendant agreed to exchange
the names or owners of Lot No. 6353 which is in the name of
Magdaleno Ceno with Lot No. 6352 in the name of Melecia Ceno as
appearing in the sketch, copy of the Public Land Subdivision of Abuyog,
Leyte, under Project PLS-645 . . . .
DISPOSITIVE PORTION OF SAID DECISION:
Par. 4) Declaring said defendant (Aleja C. Almendra) also as owner and
entitled to the possession of Lot No. 6352 as described in the sketch,
subject to whatever may be the rights thereto of her son Magdaleno
Ceno who is said to be presently in China.
Aleja died on May 7, 1975. On January 21, 1977 Margarito, Delia and Bernardina filed a complaint
against Angeles and Roman for the annulment of the deeds of sale in their favor, partition of the
properties subjects therein and accounting of their produce. 12 From China, their sister Melecia
signed a special power of attorney in favor of Bernardina. Magdaleno, who was still in China, was
impleaded as a defendant in the case and summons by publication was made on him. Later, the
plaintiffs informed the court that they had received a document in Chinese characters which
purportedly showed that Magdaleno had died. Said document, however, was not produced in
court. Thereafter, Magdaleno was considered as in default without prejudice to the provisions of
Section 4, Rule 18 of the Rules of Court which allows the court to decide a case wherein there
several defendants upon the evidence submitted only by the answering defendants.

On April 30, 1981, the lower court rendered a decision 13 the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered declaring the deeds of sale herein
(Exhs."E", "F"and"H") to be simulated and therefore null and void; ordering the
partition of the estate of the deceased Aleja Ceno among her heirs and assigns;
appointing the Acting Clerk of Court, Atty. Cristina T. Pontejos, as commissioner, for
the purpose of said partition, who is expected to proceed accordingly upon receipt
of a copy of this decision; and to render her report on or before 30 days from said
receipt. The expenses of the commissioner shall be borne proportionately by the
parties herein.
SO ORDERED.
The defendants appealed to the then Intermediate Appellate Court which, on February 20, 1986
rendered a decision 14 finding that, in nullifying the deeds of sale in question, the lower court
totally disregarded the testimony of the notary public confirming the authenticity of the
signatures of Aleja on said deeds and the fact that Angeles and Roman actually paid their mother
the amounts stipulated in the contracts. The appellate court also stated that the uniformity in the
prices of the sale could not have nullified the sale because it had been duly proven that there
was consideration and that Angeles and Roman could afford to pay the same. Hence, it upheld
validity of the deeds of sale and ordered the partition of the "undisposed" properties left by Aleja
and Santiago Almendra and, if an extrajudicial partition can be had, that it be made within a
reasonable period of time after receipt of its decision.
The plaintiffs' motion for reconsideration having been denied, they filed the instant petition for
review on certioraricontending principally that the appellate court erred in having sanctioned the
sale of particular portions of yet undivided real properties.
While petitioners' contention is basically correct, we agree with the appellate court that there is
no valid, legal and convincing reason for nullifying the questioned deeds of sale. Petitioner had
not presented any strong, complete and conclusive proof to override the evidentiary value of the
duly notarized deeds of sale. 15 Moreover, the testimony of the lawyer who notarized the deeds
of sale that he saw not only Aleja signing and affixing her thumbmark on the questioned deeds
but also Angeles and Aleja "counting money between
them," 16 deserves more credence than the self-serving allegations of the petitioners. Such
testimony is admissible as evidence without further proof of the due execution of the deeds in
question and is conclusive as to the truthfulness of their contents in the absence of clear and
convincing evidence to the contrary. 17
The petitioners' allegations that the deeds of sale were "obtained through fraud, undue influence
and misrepresentation," and that there was a defect in the consent of Aleja in the execution of
the documents because she was then residing with Angeles, 18 had not been fully substantiated.
They failed to show that the uniform price of P2,000 in all the sales was grossly inadequate. It
should be emphasized that the sales were effected between a mother and two of her children in
which case filial love must be taken into account. 19
On the other hand, private respondents Angeles and Roman amply proved that they had the
means to purchase the properties. Petitioner Margarito Almendra himself admitted that Angeles
had a sari-sari store and was engaged in the business of buying and selling logs. 20 Roman was
a policeman before he became an auto mechanic and his wife was a school teacher 21
The unquestionability of the due execution of the deeds of sale notwithstanding, the Court may
not put an imprimatur on the intrinsic validity of all the sales. The August 10, 1973 sale to
Angeles of one-half portion of the conjugal property covered by OCT No. P-10094 may only be
considered valid as a sale of Aleja's one-half interesttherein. Aleja could not have sold particular
hilly portion specified in the deed of sale in absence of proof that the conjugal partnership
property had been partitioned after the death of Santiago. Before such partition, Aleja could not
claim title to any definite portion of the property for all she had was an ideal or abstract quota or
proportionate share in the entire property. 22
However, the sale of the one-half portion of the parcel of land covered by Tax Declaration No.
27190 is valid because the said property is paraphernal being Aleja's inheritance from her own
father. 23

As regards the sale of the property covered by Tax Declaration No. 11500, we hold that, since the
property had been found in Civil Case No. 4387 to have been subdivided, Aleja could not have
intended the sale of the whole property covered by said tax declaration. She could exercise her
right of ownership only over Lot No. 6366 which was unconditionally adjudicated to her in said
case.
Lot No. 6352 was given to Aleja in Civil Case No. 4387 "subject to whatever may be the rights
thereto of her son Magdaleno Ceno." A reading of the deed of Sale 24 covering parcel of land
would show that the sale is subject to the condition stated above; hence, the rights of Magdaleno
Ceno are amply protected. The rule on caveat emptor applies.
WHEREFORE, the decision of the then Intermediate Appellate Court is hereby affirmed subject to
the modifications herein stated. The lower court is directed to facilitate with dispatch the
preparation and approval of a project of partition of the properties considered unsold under this
decision. No costs.
SO ORDERED.
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

SECOND DIVISION
[G.R. No. 131679. February 1, 2000]
CAVITE DEVELOPMENT BANK and FAR EAST BANK AND TRUST COMPANY, petitioners,
vs. SPOUSES CYRUS LIM and LOLITA CHAN LIM and COURT OF APPEALS, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision[1] of the Court of Appeals in C.A. GR CV
No. 42315 and the order dated December 9, 1997 denying petitioners motion for
reconsideration.
The following facts are not in dispute.
Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are
banking institutions duly organized and existing under Philippine laws. On or about June 15,
1983, a certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to
secure which he mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon
City and covered by TCT No. 300809 registered in his name. As Guansing defaulted in the
payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale held on March 15,
1984, the mortgaged property was sold to CDB as the highest bidder. Guansing failed to redeem,
and on March 2, 1987, CDB consolidated title to the property in its name. TCT No. 300809 in the
name of Guansing was cancelled and, in lieu thereof, TCT No. 355588 was issued in the name of
CDB.
On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios
Gatpandan, offered to purchase the property from CDB. The written Offer to Purchase, signed by
Lim and Gatpandan, states in part:
We hereby offer to purchase your property at #63 Calavite and Retiro Sts., La Loma,
Quezon City for P300,000.00 under the following terms and conditions:
(1) 10% Option Money;
(2) Balance payable in cash;
(3) Provided that the property shall be cleared of illegal occupants or
tenants. Sc
juris
Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option
Money, for which she was issued Official Receipt No. 3160, dated June 17, 1988, by CDB.
However, after some time following up the sale, Lim discovered that the subject property was
originally registered in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing,
under TCT No. 91148. Rodolfo succeeded in having the property registered in his name under
TCT No. 300809, the same title he mortgaged to CDB and from which the latters title (TCT No.
355588) was derived. It appears, however, that the father, Perfecto, instituted Civil Case No. Q39732 in the Regional Trial Court, Branch 83, Quezon City, for the cancellation of his sons title.
On March 23, 1984, the trial court rendered a decision [2] restoring Perfectos previous title (TCT
No. 91148) and cancelling TCT No. 300809 on the ground that the latter was fraudulently secured
by Rodolfo. This decision has since become final and executory.
Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company,
FEBTC, on their ability to sell the subject property, Lim, joined by her husband, filed on August
29, 1989 an action for specific performance and damages against petitioners in the Regional Trial
Court, Branch 96, Quezon City, where it was docketed as Civil Case No. Q-89-2863. On April 20,

1990, the complaint was amended by impleading the Register of Deeds of Quezon City as an
additional defendant.
On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. It ruled that:
(1) there was a perfected contract of sale between Lim and CDB, contrary to the latters
contention that the written offer to purchase and the payment of P30,000.00 were merely preconditions to the sale and still subject to the approval of FEBTC; (2) performance by CDB of its
obligation under the perfected contract of sale had become impossible on account of the 1984
decision in Civil Case No. Q-39732 cancelling the title in the name of mortgagor Rodolfo
Guansing; (3) CDB and FEBTC were not exempt from liability despite the impossibility of
performance, because they could not credibly disclaim knowledge of the cancellation of Rodolfo
Guansings title without admitting their failure to discharge their duties to the public as reputable
banking institutions; and (4) CDB and FEBTC are liable for damages for the prejudice caused
against the Lims.[3] Based on the foregoing findings, the trial court ordered CDB and FEBTC to pay
private respondents, jointly and severally, the amount of P30,000.00 plus interest at the legal
rate computed from June 17, 1988 until full payment. It also ordered petitioners to pay private
respondents, jointly and severally, the amounts of P250,000.00 as moral damages, P50,000.00
as exemplary damages, P30,000.00 as attorneys fees, and the costs of the suit. [4]
Petitioners brought the matter to the Court of Appeals, which, on October 14, 1997, affirmed in
toto the decision of the Regional Trial Court. Petitioners moved for reconsideration, but their
motion was denied by the appellate court on December 9, 1997. Hence, this petition. Petitioners
contend that - Jjlex
1. The Honorable Court of Appeals erred when it held that petitioners CDB and
FEBTC were aware of the decision dated March 23, 1984 of the Regional Trial Court
of Quezon City in Civil Case No. Q-39732.
2. The Honorable Court of Appeals erred in ordering petitioners to pay interest on
the deposit of THIRTY THOUSAND PESOS (P30,000.00) by applying Article 2209 of
the New Civil Code.
3. The Honorable Court of Appeals erred in ordering petitioners to pay moral
damages, exemplary damages, attorneys fees and costs of suit.
I.
At the outset, it is necessary to determine the legal relation, if any, of the parties.
Petitioners deny that a contract of sale was ever perfected between them and private respondent
Lolita Chan Lim. They contend that Lims letter-offer clearly states that the sum of P30,000.00
was given as option money, not as earnest money. [5] They thus conclude that the contract
between CDB and Lim was merely an option contract, not a contract of sale.
The contention has no merit. Contracts are not defined by the parties thereto but by principles of
law.[6] In determining the nature of a contract, the courts are not bound by the name or title given
to it by the contracting parties. [7] In the case at bar, the sum of P30,000.00, although
denominated in the offer to purchase as "option money," is actually in the nature of earnest
money or down payment when considered with the other terms of the offer. In Carceler v. Court
of Appeals,[8] we explained the nature of an option contract, viz. An option contract is a preparatory contract in which one party grants to the other,
for a fixed period and under specified conditions, the power to decide, whether or
not to enter into a principal contract, it binds the party who has given the option not
to enter into the principal contract with any other person during the period
designated, and within that period, to enter into such contract with the one to
whom the option was granted, if the latter should decide to use the option. It is a
separate agreement distinct from the contract to which the parties may enter upon
the consummation of the option. Newmiso
An option contract is therefore a contract separate from and preparatory to a contract of sale
which, if perfected, does not result in the perfection or consummation of the sale. Only when the
option is exercised may a sale be perfected.

In this case, however, after the payment of the 10% option money, the Offer to Purchase
provides for the payment only of the balance of the purchase price, implying that the "option
money" forms part of the purchase price. This is precisely the result of paying earnest money
under Art. 1482 of the Civil Code. It is clear then that the parties in this case actually entered
into a contract of sale, partially consummated as to the payment of the price. Moreover, the
following findings of the trial court based on the testimony of the witnesses establish that CDB
accepted Lims offer to purchase:
It is further to be noted that CDB and FEBTC already considered plaintiffs offer as
good and no longer subject to a final approval. In his testimony for the defendants
on February 13, 1992, FEBTCs Leomar Guzman stated that he was then in the
Acquired Assets Department of FEBTC wherein plaintiffs offer to purchase was
endorsed thereto by Myoresco Abadilla, CDBs senior vice-president, with a
recommendation that the necessary petition for writ of possession be filed in the
proper court; that the recommendation was in accord with one of the conditions of
the offer, i.e., the clearing of the property of illegal occupants or tenants (tsn, p.
12); that, in compliance with the request, a petition for writ of possession was
thereafter filed on July 22, 1988 (Exhs. 1 and 1-A); that the offer met the
requirements of the banks; and that no rejection of the offer was thereafter relayed
to the plaintiffs (p. 17); which was not a normal procedure, and neither did the
banks return the amount of P30,000.00 to the plaintiffs. [9]
Given CDBs acceptance of Lims offer to purchase, it appears that a contract of sale was
perfected and, indeed, partially executed because of the partial payment of the purchase price.
There is, however, a serious legal obstacle to such sale, rendering it impossible for CDB to
perform its obligation as seller to deliver and transfer ownership of the property. Acctmis
Nemo dat quod non habet, as an ancient Latin maxim says. One cannot give what one does not
have. In applying this precept to a contract of sale, a distinction must be kept in mind between
the "perfection" and "consummation" stages of the contract.
A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is
the object of the contract and upon the price. [10] It is, therefore, not required that, at the
perfection stage, the seller be the owner of the thing sold or even that such subject matter of the
sale exists at that point in time.[11] Thus, under Art. 1434 of the Civil Code, when a person sells or
alienates a thing which, at that time, was not his, but later acquires title thereto, such title
passes by operation of law to the buyer or grantee. This is the same principle behind the sale of
"future goods" under Art. 1462 of the Civil Code. However, under Art. 1459, at the time of
delivery or consummation stage of the sale, it is required that the seller be the owner of the
thing sold. Otherwise, he will not be able to comply with his obligation to transfer ownership to
the buyer. It is at the consummation stage where the principle of nemo dat quod non
habet applies.
In Dignos v. Court of Appeals,[12] the subject contract of sale was held void as the sellers of the
subject land were no longer the owners of the same because of a prior sale. [13] Again, in Nool v.
Court of Appeals,[14] we ruled that a contract of repurchase, in which the seller does not have any
title to the property sold, is invalid:
We cannot sustain petitioners view. Article 1370 of the Civil Code is applicable only
to valid and enforceable contracts. The Regional Trial Court and the Court of Appeals
ruled that the principal contract of sale contained in Exhibit C and the auxiliary
contract of repurchase in Exhibit D are both void. This conclusion of the two lower
courts appears to find support in Dignos v. Court of Appeals, where the Court held:
"Be that as it may, it is evident that when petitioners sold said land to
the Cabigas spouses, they were no longer owners of the same and the
sale is null and void."
In the present case, it is clear that the sellers no longer had any title to the parcels
of land at the time of sale. Since Exhibit D, the alleged contract of repurchase, was
dependent on the validity of Exhibit C, it is itself void. A void contract cannot give
rise to a valid one. Verily, Article 1422 of the Civil Code provides that (a) contract
which is the direct result of a previous illegal contract, is also void and inexistent."

We should however add that Dignos did not cite its basis for ruling that a "sale is
null and void" where the sellers "were no longer the owners" of the property. Such a
situation (where the sellers were no longer owners) does not appear to be one of
the void contracts enumerated in Article 1409 of the Civil Code. Moreover, the Civil
Code itself recognizes a sale where the goods are to be acquired x x x by the seller
after the perfection of the contract of sale, clearly implying that a sale is possible
even if the seller was not the owner at the time of sale, provided he acquires title to
the property later on. Misact
In the present case, however, it is likewise clear that the sellers can no longer
deliver the object of the sale to the buyers, as the buyers themselves have already
acquired title and delivery thereof from the rightful owner, the DBP. Thus, such
contract may be deemed to be inoperative and may thus fall, by analogy, under
item No. 5 of Article 1409 of the Civil Code: Those which contemplate an impossible
service. Article 1459 of the Civil Code provides that "the vendor must have a right
to transfer the ownership thereof [subject of the sale] at the time it is delivered."
Here, delivery of ownership is no longer possible. It has become impossible. [15]
In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing
must, therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be
sure, CDB never acquired a valid title to the property because the foreclosure sale, by virtue of
which the property had been awarded to CDB as highest bidder, is likewise void since the
mortgagor was not the owner of the property foreclosed.
A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458
of the Civil Code, under which the mortgagor in default, the forced seller, becomes obliged to
transfer the ownership of the thing sold to the highest bidder who, in turn, is obliged to pay
therefor the bid price in money or its equivalent. Being a sale, the rule that the seller must be
the owner of the thing sold also applies in a foreclosure sale. This is the reason Art. 2085 [16] of the
Civil Code, in providing for the essential requisites of the contract of mortgage and pledge,
requires, among other things, that the mortgagor or pledgor be the absolute owner of the thing
pledged or mortgaged, in anticipation of a possible foreclosure sale should the mortgagor default
in the payment of the loan.
There is, however, a situation where, despite the fact that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale
arising therefrom are given effect by reason of public policy. This is the doctrine of "the
mortgagee in good faith" based on the rule that all persons dealing with property covered by a
Torrens Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears
on the face of the title.[17] The public interest in upholding the indefeasibility of a certificate of
title, as evidence of the lawful ownership of the land or of any encumbrance thereon, protects a
buyer or mortgagee who, in good faith, relied upon what appears on the face of the certificate of
title. Sdjad
This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to
make a detailed investigation of the history of the title of the property given as security before
accepting a mortgage.
We are not convinced, however, that under the circumstances of this case, CDB can be
considered a mortgagee in good faith. While petitioners are not expected to conduct an
exhaustive investigation on the history of the mortgagors title, they cannot be excused from the
duty of exercising the due diligence required of banking institutions. In Tomas v. Tomas,[18] we
noted that it is standard practice for banks, before approving a loan, to send representatives to
the premises of the land offered as collateral and to investigate who are the real owners thereof,
noting that banks are expected to exercise more care and prudence than private individuals in
their dealings, even those involving registered lands, for their business is affected with public
interest. We held thus:
We, indeed, find more weight and vigor in a doctrine which recognizes a better right
for the innocent original registered owner who obtained his certificate of title
through perfectly legal and regular proceedings, than one who obtains his
certificate from a totally void one, as to prevail over judicial pronouncements to the
effect that one dealing with a registered land, such as a purchaser, is under no

obligation to look beyond the certificate of title of the vendor, for in the latter case,
good faith has yet to be established by the vendee or transferee, being the most
essential condition, coupled with valuable consideration, to entitle him to respect
for his newly acquired title even as against the holder of an earlier and perfectly
valid title. There might be circumstances apparent on the face of the certificate of
title which could excite suspicion as to prompt inquiry, such as when the transfer is
not by virtue of a voluntary act of the original registered owner, as in the instant
case, where it was by means of a self-executed deed of extra-judicial settlement, a
fact which should be noted on the face of Eusebia Tomas certificate of title.Failing to
make such inquiry would hardly be consistent with any pretense of good faith, which
the appellant bank invokes to claim the right to be protected as a mortgagee, and
for the reversal of the judgment rendered against it by the lower court. [19]
In this case, there is no evidence that CDB observed its duty of diligence in ascertaining the
validity of Rodolfo Guansings title. It appears that Rodolfo Guansing obtained his fraudulent title
by executing an Extra-Judicial Settlement of the Estate With Waiver where he made it appear
that he and Perfecto Guansing were the only surviving heirs entitled to the property, and that
Perfecto had waived all his rights thereto. This self-executed deed should have placed CDB on
guard against any possible defect in or question as to the mortgagors title. Moreover, the alleged
ocular inspection report[20] by CDBs representative was never formally offered in evidence.
Indeed, petitioners admit that they are aware that the subject land was being occupied by
persons other than Rodolfo Guansing and that said persons, who are the heirs of Perfecto
Guansing, contest the title of Rodolfo.[21] Sppedsc
II.
The sale by CDB to Lim being void, the question now arises as to who, if any, among the parties
was at fault for the nullity of the contract. Both the trial court and the appellate court found
petitioners guilty of fraud, because on June 16, 1988, when Lim was asked by CDB to pay the
10% option money, CDB already knew that it was no longer the owner of the said property, its
title having been cancelled.[22] Petitioners contend that: (1) such finding of the appellate court is
founded entirely on speculation and conjecture; (2) neither CDB nor FEBTC was a party in the
case where the mortgagors title was cancelled; (3) CDB is not privy to any problem among the
Guansings; and (4) the final decision cancelling the mortgagors title was not annotated in the
latters title.
As a rule, only questions of law may be raised in a petition for review, except in circumstances
where questions of fact may be properly raised. [23] Here, while petitioners raise these factual
issues, they have not sufficiently shown that the instant case falls under any of the exceptions to
the above rule. We are thus bound by the findings of fact of the appellate court. In any case, we
are convinced of petitioners negligence in approving the mortgage application of Rodolfo
Guansing.
III.
We now come to the civil effects of the void contract of sale between the parties. Article 1412(2)
of the Civil Code provides:
If the act in which the unlawful or forbidden cause consists does not constitute a
criminal offense, the following rules shall be observed:
....
(2).......When only one of the contracting parties is at fault, he cannot
recover what he has given by reason of the contract, or ask for the
fulfillment of what has been promised him. The other, who is not at
fault, may demand the return of what he has given without any
obligation to comply with his promise.
Private respondents are thus entitled to recover the P30,000.00 option money paid by them.
Moreover, since the filing of the action for damages against petitioners amounted to a demand
by respondents for the return of their money, interest thereon at the legal rate should be
computed from August 29, 1989, the date of filing of Civil Case No. Q-89-2863, not June 17,

1988, when petitioners accepted the payment. This is in accord with our ruling in Castillo v.
Abalayan[24] that in case of a void sale, the seller has no right whatsoever to keep the money paid
by virtue thereof and should refund it, with interest at the legal rate, computed from the date of
filing of the complaint until fully paid. Indeed, Art. 1412(2) which provides that the non-guilty
party "may demand the return of what he has given" clearly implies that without such prior
demand, the obligation to return what was given does not become legally demandable. Sccalr
Considering CDBs negligence, we sustain the award of moral damages on the basis of Arts. 21
and 2219 of the Civil Code and our ruling inTan v. Court of Appeals[25] that moral damages may
be recovered even if a banks negligence is not attended with malice and bad faith. We find,
however, that the sum of P250,000.00 awarded by the trial court is excessive. Moral damages
are only intended to alleviate the moral suffering undergone by private respondents, not to
enrich them at the expense of the petitioners. [26] Accordingly, the award of moral damages must
be reduced to P50,000.00.
Likewise, the award of P50,000.00 as exemplary damages, although justified under Art. 2232 of
the Civil Code, is excessive and should be reduced to P30,000.00. The award of P30,000.00
attorneys fees based on Art. 2208, pars. 1, 2, 5 and 11 of the Civil Code should similarly be
reduced to P20,000.00.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION as to the
award of damages as above stated.
SO ORDERED.2/29/00 2:19 PM
Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur

THIRD DIVISION
G.R. No. 78178 April 15, 1988
DELIA BAILON-CASILAO, LUZ PAULINO-ANG, EMMA PAULINO-YBANEZ, NILDA PAULINOTOLENTINO, and SABINA BAILON, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and CELESTINO AFABLE, respondents.
Veronico E. Rubio for petitioners.
Mario G. Fortes for private-respondent.
CORTES, J.:
The fate of petitioners' claim over a parcel of land rests ultimately on a determination of whether
or not said petitioners are chargeable with such laches as may effectively bar their present
action.
The petitioners herein filed a case for recovery of property and damages with notice of lis
pendens on March 13, 1981 against the defendant and herein private respondent, Celestino
Afable. The parcel of land involved in this case, with an area of 48,849 square meters, is covered
by Original Certificate of Title No. 1771 issued on June 12, 1931, in the names of Rosalia,
Gaudencio, Sabina Bernabe, Nenita and Delia, all surnamed Bailon, as co-owners, each with a 1/6
share. Gaudencio and Nenita are now dead, the latter being represented in this case by her
children. Luz, Emma and Nilda. Bernabe went to China in 1931 and had not been heard from
since then [Decision of the Court of Appeals, Rollo, p. 39].
It appears that on August 23, 1948, Rosalia Bailon and Gaudencio Bailon sold a portion of the
said land consisting of 16,283 square meters to Donato Delgado. On May 13, 1949, Rosalia
Bailon alone sold the remainder of the land consisting of 32,566 square meters to Ponciana V.
Aresgado de Lanuza. On the same date, Lanuza acquired from Delgado the 16,283 square
meters of land which the latter had earlier acquired from Rosalia and Gaudencio. On December
3, 1975, John Lanuza, acting under a special power of attorney given by his wife, Ponciana V.
Aresgado de Lanuza, sold the two parcels of land to Celestino Afable, Sr.
In all these transfers, it was stated in the deeds of sale that the land was not registered under
the provisions of Act No. 496 when the fact is that it is. It appears that said land had been
successively declared for taxation first, in the name of Ciriaca Dellamas, mother of the registered
co-owners, then in the name of Rosalia Bailon in 1924, then in that of Donato Delgado in 1936,
then in Ponciana de Lanuza's name in 1962 and finally in the name of Celestino Afable, Sr. in
1983.
In his answer to the complaint filed by the herein petitioners, Afable claimed that he had
acquired the land in question through prescription and contended that the petitioners were guilty
of laches.He later filed a third-party complaint against Rosalia Bailon for damages allegedly
suffered as a result of the sale to him of the land.
After trial, the lower court rendered a decision:
1. Finding and declaring Celestino Afable, a co-owner of the land described in
paragraph III of the complaint having validly bought the two-sixth (2/6) respective
undivided shares of Rosalia Bailon and Gaudencio Bailon;
2. Finding and declaring the following as pro-indiviso co-owners, having 1/6 share
each, of the property described in paragraph III of the complaint, to wit:
a. Sabina Bailon
b. Bernabe Bailon

c. Heirs of Nenita Bailon-Paulino

d. Delia Bailon-Casilao;
3. Ordering the segregation of the undivided interests in the property in order to
terminate co-ownership to be conducted by any Geodetic Engineer selected by the
parties to delineate the specific part of each of the co-owners.
4. Ordering the defendant to restore the possession of the plaintiffs respective
shares as well as all attributes of absolute dominion;
5. Ordering the defendant to pay the following:
a. P5,000.00 as damages;
b. P2,000.00 as attorney's fees and;
c. to pay the costs.
[Decision of the Trial Court, Rollo, p. 37-38].
On appeal, the respondent Court of Appeals affirmed the decision of the lower court insofar as it
held that prescription does not he against plaintiffs-appellees because they are co-owners of the
original vendors. However, the appellate court declared that, although registered property
cannot be lost by prescription, nevertheless, an action to recover it may be barred by laches,
citing the ruling in Mejia de Lucaz v. Gamponia[100 Phil. 277 (1956)]. Accordingly, it held the
petitioners guilty of laches and dismissed their complaint. Hence, this petition for review on
certiorari of the decision of the Court of Appeals.
The principal issue to be resolved in this case concerns the applicability of the equitable doctrine
of laches. Initially though, a determination of the effect of a sale by one or more co-owners of the
entire property held in common without the consent of all the co-owners and of the appropriate
remedy of the aggrieved co-owners is required.
The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil
Code.Thus:
Art. 493. Each co-owner shall have the full ownership of his part and of the acts and
benefits pertaining thereto, and he may therefore alienate assign or mortgage it
and even substitute another person in its enjoyment, except when personal rights
are involved. But the effect of the alienation or mortgage, with respect to the coowners, shall be limited to the portion which may be allotted to him in the division
upon the termination of the co-ownership. [Emphasis supplied.]
As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the
sale will affect only his own share but not those of the other co-owners who did not consent to
the sale [Punsalan v. Boon Liat 44 Phil. 320 (1923)]. This is because under the aforementioned
codal provision, the sale or other disposition affects only his undivided share and the transferee
gets only what would correspond to his grantor in the partition of the thing owned in common.
[Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia
and Gaudencio Bailon which are valid with respect to their proportionate shares, and the
subsequent transfers which culminated in the sale to private respondent Celestino Afable, the
said Afable thereby became a co-owner of the disputed parcel of land as correctly held by the
lower court since the sales produced the effect of substituting the buyers in the enjoyment
thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].
From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided
share, a sale of the entire property by one co-owner without the consent of the other co-owners
is not null and void. However, only the rights of the co-owner-seller are transferred, thereby
making the buyer a co-owner of the property.

The proper action in cases like this is not for the nullification of the sale or for the recovery of
possession of the thing owned in common from the third person who substituted the co-owner or
co-owners who alienated their shares, but the DIVISION of the common property as if it
continued to remain in the possession of the co-owners who possessed and administered
it [Mainit v. Bandoy, supra.]
Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent
were not secured in a sale of the entire property as well as in a sale merely of the undivided
shares of some of the co-owners is an action. for PARTITION under Rule 69 of the Revised Rules of
Court. Neither recovery of possession nor restitution can be granted since the defendant buyers
are legitimate proprietors and possessors in joint ownership of the common property claimed
[Ramirez v. Bautista, supra].
As to the action for petition, neither prescription nor laches can be invoked.
In the light of the attendant circumstances, defendant-appellee's defense of prescription is a vain
proposition. Pursuant to Article 494 of the Civil Code, '(n)o co-owner shall be obliged to remain in
the co-ownership. Such co-owner may demand at anytime the partition of the thing owned in
common, insofar as his share is concerned.' [Emphasis supplied.] In Budiong v. Bondoc [G.R. No.
L-27702, September 9, 1977, 79 SCRA 241, this Court has interpreted said provision of law to
mean that the action for partition is imprescriptible or cannot be barred by prescription. For
Article 494 of the Civil Code explicitly declares: "No prescription shall lie in favor of a co-owner or
co- heir so long as he expressly or impliedly recognizes the co-ownership."
Furthermore, the disputed parcel of land being registered under the Torrens System, the express
provision of Act No. 496 that '(n)o title to registered land in derogation to that of the registered
owner shall be acquired by prescription or adverse possession' is squarely applicable.
Consequently, prescription will not lie in favor of Afable as against the petitioners who remain the
registered owners of the disputed parcel of land.
It is argued however, that as to the petitioners Emma, Luz and Nelda who are not the registered
co-owners but merely represented their deceased mother, the late Nenita Bailon, prescription
lies.Respondents bolster their argument by citing a decision of this Court in Pasion v.
Pasion [G.R.No. L-15757, May 31, 1961, 2 SCRA 486, 489] holding that "the imprescriptibility of a
Torrens title can only be invoked by the person in whose name the title is registered" and
that 'one who is not the registered owner of a parcel of land cannot invoke imprescriptibility of
action to claim the same.'
Reliance on the aforesaid Pasion case is futile. The ruling therein applies only against transferees
other than direct issues or heirs or to complete strangers. The rational is clear:
If prescription is unavailing against the registered owner, it must be equally
unavailing against the latter's hereditary successors, because they merely step into
the shoes of the decedent by operation of law (New Civil Code, Article 777; Old Civil
Code, Article 657), the title or right undergoing no change by its transmission mortis
causa [Atus, et al., v. Nunez, et al., 97 Phil. 762, 764].
The latest pronouncement of this Court in Umbay v. Alecha [G. R. No. 67284, March 18, 1985,
135 SCRA 427, 429], which was promulgated subsequent to the Pasion case reiterated
the Atus doctrine. Thus:
Prescription is unavailing not only against the registered owner but also against his
hereditary successors, because they merely step into the shoes of the decedent by
operation of law and are merely the continuation of the personality of their
predecessor-in-interest. [Barcelona v. Barcelona, 100 Phil. 251, 257].
Laches is likewise unavailing as a shield against the action of herein petitioners.
Well-stated in this jurisdiction are the four basic elements of laches, namely: (1) conduct on the
part of the defendant or of one under whom he claims, giving rise to the situation of which
complaint is made and for which the complainant seeks a remedy; (2) delay in asserting the
corporations complainant's rights, the complainant having had knowledge or notice of the
defendant's conduct and having been afforded an opportunity to institute suit; (3) lack of

knowledge or notice on the part of the defendant that the complainant would assert the right on
which he bases his suit; and, (4) injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held to be barred [Go China Gun, et al. v. Co Cho
et al., 96 Phil. 622 (1955)].
While the first and last elements are present in this case, the second and third elements are
missing.
The second element speaks of delay in asserting the complainant's rights. However, the mere
fact of delay is insufficient to constitute, laches. It is required that (1) complainant must have
had knowledge of the conduct of defendant or of one under whom he claims and (2) he must
have been afforded an opportunity to institute suit. This court has pointed out that laches is not
concerned with the mere lapse of time. Thus:
Laches has been defined as the failure or neglect, for an unreasonable length of
time to do that which by exercising due diligence could or should have been done
earlier; it is negligence or omission to assert a right within a reasonable time
warranting a presumption that the party entitled to assert it either has abandoned it
or declined to assert it. Tijam, et al., v. Sibonghanoy, G.R. No. L-21450, April 25,
1968, 23 SCRA 29,35; Tendo v. Zamacoma, G.R. No. L-63048, August 7, 1985, 138
SCRA 78, 90].
The doctrine of "laches" or of "stale demands" is based upon grounds of public
policy which requires for the peace of society, the discouragement of stale claims
and unlike the statute of limitations, isnot a mere question of time but is principally
a question of inequity or unfairness of permitting a right or claim to be enforced or
asserted," [Tijam v. Sibonghanoy, supra, p. 35]. [Emphasis supplied.]
It must be noted that while there was delay in asserting petitioners' rights, such delay was not
attended with any knowledge of the sale nor with any opportunity to bring suit. In the first place,
petitioners had no notice of the sale made by their eldest sister. It is undisputed that the
petitioner co-owners had entrusted the care and management of the parcel of land to Rosalia
Bailon who was the oldest among them [TSN, July 27, 1983, p. 14]. In fact, Nicanor Lee, a son of
Rosalia, who was presented as a witness by the plaintiffs-petitioners, testified on crossexamination that his mother was only the administrator of the land as she is the eldest and her
brothers and sisters were away [TSN, October 5, 1983, p. 15]. Indeed, when Delia Bailon-Casilao
left Sorsogon in 1942 after she got married, it was only in 1983 that she returned. Sabina on the
other hand, is said to be living in Zamboanga while Bernabe who left for China in 1931 has not
been heard from since then. Consequently, when Rosalia, from whom the private respondent
derived his title, made the disputed sales covering the entire property, the herein petitioners
were unaware thereof.
In the second place, they were not afforded an opportunity to bring suit inasmuch as until 1981,
they were kept in the dark about the transactions entered into by their sister. It was only when
Delia Bailon-Casilao returned to Sorsogon in 1981 that she found out about the sales and
immediately, she and her co-petitioners filed the present action for recovery of property. The
appellate court thus erred in holding that 'the petitioners did nothing to show interest in the
land." For the administration of the parcel of land was entrusted to the oldest co-owner who was
then in possession thereof precisely because the other co-owners cannot attend to such a task as
they reside outside of Sorsogon where the land is situated. Her co-owners also allowed her to
appropriate the entire produce for herself because it was not even enough for her daily
consumption [TSN, October 5, 1983, pp. 17-18]. And since petitioner was the one receiving the
produce, it is but natural that she was the one to take charge of paying the real estate taxes.
Now, if knowledge of the sale by Rosalia was conveyed to the petitioners only later, they cannot
be faulted for the acts of their co-owner who failed to live up to the trust and confidence
expected of her. In view of the lack of knowledge by the petitioners of the conduct of Rosalia in
selling the land without their consent in 1975 and the absence of any opportunity to institute the
proper action until 1981, laches may not be asserted against the petitioners.
The third element of laches is likewise absent. There was no lack of knowledge or notice on the
part of the defendant that the complainants would assert the right on which they base the suit.
On the contrary, private respondent is guilty of bad faith in purchasing the property as he knew
that the property was co-owned by six persons and yet, there were only two signatories to the

deeds of sale and no special authorization to self was granted to the two sellers by the other coowners.
Even as the land here was misrepresented in the deeds of sale as "unregistered," the truth was
that Afable already had notice that the land was titled in the name of six persons by virtue of the
Certificate of Title which was already in his possession even before the sale. Such fact is
apparent from his testimony before the court a quo:
COURT:
Q: From whom did you get the certificate of Title?
A: When it was mortgaged by Ponciana Aresgado.
Q: It was mortgaged to you before you bought it?
A: Yes, Your Honor. (TSN, March 5, 1984, p. 12) When cross-examined, he stated:
Q: Mr. Witness, the original Certificate of Title was given to you in the year 1974,
was it not?
A: 1975.
Q: In 1975, you already discovered that the title was in the name of several
persons, is it not?
A: Yes, sir.
Q: When you discovered that it is in the name of several persons, you filed a
case in court for authority to cancel the title to be transferred in your name, is it
not?
A: Yes, sir.
Q: And that was denied by the Court of First Instance of Sorsogon because there
was ordinary one signatory to the deed of sale instead of six, was it not?
A: Not one but two signatories.
[Decision of the Regional Trial Court of Sorsogon, Rollo, p. 35]
Such actual knowledge of the existence of other co-owners in whose names the lot subject of the
sale was registered should have prompted a searching inquiry by Afable considering the wellknown rule in this jurisdiction that:
... a person dealing with a registered land has a right to rely upon the face of the
Torrens certificate of title and to dispense with the need of inquiring further, except
when the party concerned has actual knowledge of facts and circumstances that
would impel a reasonably cautions man to make such inquiry. [Gonzales v. IAC and
Rural Bank of Pavia, Inc., G.R. No. 69622, January 29, 1988).
Moreover, the undisputed fact is that petitioners are relatives of his wife. As a genuine gesture of
good faith, he should have contacted the petitioners who were still listed as co-owners in the
certificate of title which was already in his possession even before the sale. In failing to exercise
even a minimum degree of ordinary prudence required by the situation, he is deemed to have
bought the lot at his own risk. Hence any prejudice or injury that may be occasioned to him by
such sale must be borne by him.
Indeed, aware of the flaws impairing his title, Afable went to the herein petitioner Delia BailonCasilao, asking the latter to sign a document obviously to cure the flaw [TSN, July 27, 1983, p.6].
Later, he even filed a petition in the Court of First Instance to register the title in his name which
was denied as aforesaid.

It may be gleaned from the foregoing examination of the facts that Celestino Afable is not a
buyer in good faith. Laches being an equitable defense, he who invokes it must come to the
court with clean hands.
WHEREFORE, the petition for certiorari is hereby GRANTED, the challenged decision of the Court
of Appeals is SET ASIDE, and the decision of the trial court is REINSTATED.
SO ORDERED.
Fernan, Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

FIRST DIVISION
G.R. No. L-33187 March 31, 1980
CORNELIO PAMPLONA alias GEMINIANO PAMPLONA and APOLONIA ONTE, petitioners,
vs.
VIVENCIO MORETO, VICTOR MORETO, ELIGIO MORETO, MARCELO MORETO, PAULINA
MORETO, ROSARIO MORETO, MARTA MORETO, SEVERINA MENDOZA, PABLO MENDOZA,
LAZARO MENDOZA, VICTORIA TUIZA, JOSEFINA MORETO, LEANDRO MORETO and
LORENZO MENDOZA, respondents.
E.P. Caguioa for petitioners.
Benjamin C. Yatco for respondents.
GUERRERO, J.:
This is a petition for certiorari by way of appeal from the decision of the Court of Appeals 1 in CAG.R. No. 35962-R, entitled "Vivencio Moreto, et al., Plaintiff-Appellees vs. Cornelio Pamplona, et
al., Defendants-Appellants," affirming the decision of the Court of First Instance of Laguna,
Branch I at Bian.
The facts, as stated in the decision appealed from, show that:
Flaviano Moreto and Monica Maniega were husband and wife. During their marriage, they
acquired adjacent lots Nos. 1495, 4545, and 1496 of the Calamba Friar Land Estate, situated in
Calamba, Laguna, containing 781-544 and 1,021 square meters respectively and covered by
certificates of title issued in the name of "Flaviano Moreto, married to Monica Maniega."
The spouses Flaviano Moreto and Monica Maniega begot during their marriage six (6) children,
namely, Ursulo, Marta, La Paz, Alipio, Pablo, and Leandro, all surnamed Moreto.
Ursulo Moreto died intestate on May 24, 1959 leaving as his heirs herein plaintiffs Vivencio,
Marcelo, Rosario, Victor, Paulina, Marta and Eligio, all surnamed Moreto.
Marta Moreto died also intestate on April 30, 1938 leaving as her heir plaintiff Victoria Tuiza.
La Paz Moreto died intestate on July 17, 1954 leaving the following heirs, namely, herein plaintiffs
Pablo, Severina, Lazaro, and Lorenzo, all surnamed Mendoza.
Alipio Moreto died intestate on June 30, 1943 leaving as his heir herein plaintiff Josefina Moreto.
Pablo Moreto died intestate on April 25, 1942 leaving no issue and as his heirs his brother
plaintiff Leandro Moreto and the other plaintiffs herein.
On May 6, 1946, Monica Maniega died intestate in Calamba, Laguna.
On July 30, 1952, or more than six (6) years after the death of his wife Monica Maniega, Flaviano
Moreto, without the consent of the heirs of his said deceased wife Monica, and before any
liquidation of the conjugal partnership of Monica and Flaviano could be effected, executed in
favor of Geminiano Pamplona, married to defendant Apolonia Onte, the deed of absolute sale
(Exh. "1") covering lot No. 1495 for P900.00. The deed of sale (Exh. "1") contained a description
of lot No. 1495 as having an area of 781 square meters and covered by transfer certificate of title
No. 14570 issued in the name of Flaviano Moreto, married to Monica Maniega, although the lot
was acquired during their marriage. As a result of the sale, the said certificate of title was
cancelled and a new transfer certificate of title No. T-5671 was issued in the name of Geminiano
Pamplona married to Apolonia Onte (Exh. "A").
After the execution of the above-mentioned deed of sale (Exh. "1"), the spouses Geminiano
Pamplona and Apolonia Onte constructed their house on the eastern part of lot 1496 as Flaviano
Moreto, at the time of the sale, pointed to it as the land which he sold to Geminiano Pamplona.

Shortly thereafter, Rafael Pamplona, son of the spouses Geminiano Pamplona and Apolonia Onte,
also built his house within lot 1496 about one meter from its boundary with the adjoining lot. The
vendor Flaviano Moreto and the vendee Geminiano Pamplona thought all the time that the
portion of 781 square meters which was the subject matter of their sale transaction was No.
1495 and so lot No. 1495 appears to be the subject matter in the deed of sale (Exh. "1") although
the fact is that the said portion sold thought of by the parties to be lot No. 1495 is a part of lot
No. 1496.
From 1956 to 1960, the spouses Geminiano Pamplona and Apolonio Onte enlarged their house
and they even constructed a piggery corral at the back of their said house about one and onehalf meters from the eastern boundary of lot 1496.
On August 12, 1956, Flaviano Moreto died intestate. In 1961, the plaintiffs demanded on the
defendants to vacate the premises where they had their house and piggery on the ground that
Flaviano Moreto had no right to sell the lot which he sold to Geminiano Pamplona as the same
belongs to the conjugal partnership of Flaviano and his deceased wife and the latter was already
dead when the sale was executed without the consent of the plaintiffs who are the heirs of
Monica. The spouses Geminiano Pamplona and Apolonia Onte refused to vacate the premises
occupied by them and hence, this suit was instituted by the heirs of Monica Maniega seeking for
the declaration of the nullity of the deed of sale of July 30, 1952 above-mentioned as regards
one-half of the property subject matter of said deed; to declare the plaintiffs as the rightful
owners of the other half of said lot; to allow the plaintiffs to redeem the one-half portion thereof
sold to the defendants. "After payment of the other half of the purchase price"; to order the
defendants to vacate the portions occupied by them; to order the defendants to pay actual and
moral damages and attorney's fees to the plaintiffs; to order the defendants to pay plaintiffs
P120.00 a year from August 1958 until they have vacated the premises occupied by them for the
use and occupancy of the same.
The defendants claim that the sale made by Flaviano Moreto in their favor is valid as the lot sold
is registered in the name of Flaviano Moreto and they are purchasers believing in good faith that
the vendor was the sole owner of the lot sold.
After a relocation of lots 1495, 1496 and 4545 made by agreement of the parties, it was found
out that there was mutual error between Flaviano Moreto and the defendants in the execution of
the deed of sale because while the said deed recited that the lot sold is lot No. 1495, the real
intention of the parties is that it was a portion consisting of 781 square meters of lot No. 1496
which was the subject matter of their sale transaction.
After trial, the lower court rendered judgment, the dispositive part thereof being as follows:
WHEREFORE, judgment is hereby rendered for the plaintiffs declaring the deed of
absolute sale dated July 30, 1952 pertaining to the eastern portion of Lot 1496
covering an area of 781 square meters null and void as regards the 390.5 square
meters of which plaintiffs are hereby declared the rightful owners and entitled to its
possession.
The sale is ordered valid with respect to the eastern one-half (1/2) of 1781 square
meters of Lot 1496 measuring 390.5 square meters of which defendants are
declared lawful owners and entitled to its possession.
After proper survey segregating the eastern one-half portion with an area of 390.5
square meters of Lot 1496, the defendants shall be entitled to a certificate of title
covering said portion and Transfer Certificate of Title No. 9843 of the office of the
Register of Deeds of Laguna shall be cancelled accordingly and new titles issued to
the plaintiffs and to the defendants covering their respective portions.
Transfer Certificate of Title No. 5671 of the office of the Register of Deeds of Laguna
covering Lot No. 1495 and registered in the name of Cornelio Pamplona, married to
Apolonia Onte, is by virtue of this decision ordered cancelled. The defendants are
ordered to surrender to the office of the Register of Deeds of Laguna the owner's
duplicate of Transfer Certificate of Title No. 5671 within thirty (30) days after this
decision shall have become final for cancellation in accordance with this decision.

Let copy of this decision be furnished the Register of Deeds for the province of
Laguna for his information and guidance.
With costs against the defendants.

The defendants-appellants, not being satisfied with said judgment, appealed to the Court of
Appeals, which affirmed the judgment, hence they now come to this Court.
The fundamental and crucial issue in the case at bar is whether under the facts and
circumstances duly established by the evidence, petitioners are entitled to the full ownership of
the property in litigation, or only one-half of the same.
There is no question that when the petitioners purchased the property on July 30, 1952 from
Flaviano Moreto for the price of P900.00, his wife Monica Maniega had already been dead six
years before, Monica having died on May 6, 1946. Hence, the conjugal partnership of the
spouses Flaviano Moreto and Monica Maniega had already been dissolved. (Article 175, (1) New
Civil Code; Article 1417, Old Civil Code). The records show that the conjugal estate had not been
inventoried, liquidated, settled and divided by the heirs thereto in accordance with law. The
necessary proceedings for the liquidation of the conjugal partnership were not instituted by the
heirs either in the testate or intestate proceedings of the deceased spouse pursuant to Act 3176
amending Section 685 of Act 190. Neither was there an extra-judicial partition between the
surviving spouse and the heirs of the deceased spouse nor was an ordinary action for partition
brought for the purpose. Accordingly, the estate became the property of a community between
the surviving husband, Flaviano Moreto, and his children with the deceased Monica Maniega in
the concept of a co-ownership.
The community property of the marriage, at the dissolution of this bond by the
death of one of the spouses, ceases to belong to the legal partnership and becomes
the property of a community, by operation of law, between the surviving spouse
and the heirs of the deceased spouse, or the exclusive property of the widower or
the widow, it he or she be the heir of the deceased spouse. Every co-owner shall
have full ownership of his part and in the fruits and benefits derived therefrom, and
he therefore may alienate, assign or mortgage it, and even substitute another
person in its enjoyment, unless personal rights are in question. (Marigsa vs.
Macabuntoc, 17 Phil. 107)
In Borja vs. Addision, 44 Phil. 895, 906, the Supreme Court said that "(t)here is no reason in law
why the heirs of the deceased wife may not form a partnership with the surviving husband for
the management and control of the community property of the marriage and conceivably such a
partnership, or rather community of property, between the heirs and the surviving husband
might be formed without a written agreement." In Prades vs. Tecson, 49 Phil. 230, the Supreme
Court held that "(a)lthough, when the wife dies, the surviving husband, as administrator of the
community property, has authority to sell the property with ut the concurrence of the children of
the marriage, nevertheless this power can be waived in favor of the children, with the result of
bringing about a conventional ownership in common between the father and children as to such
property; and any one purchasing with knowledge of the changed status of the property will
acquire only the undivided interest of those members of the family who join in the act of
conveyance.
It is also not disputed that immediately after the execution of the sale in 1952, the vendees
constructed their house on the eastern part of Lot 1496 which the vendor pointed out to them as
the area sold, and two weeks thereafter, Rafael who is a son of the vendees, also built his house
within Lot 1496. Subsequently, a cemented piggery coral was constructed by the vendees at the
back of their house about one and one-half meters from the eastern boundary of Lot 1496. Both
vendor and vendees believed all the time that the area of 781 sq. meters subject of the sale was
Lot No. 1495 which according to its title (T.C.T. No. 14570) contains an area of 781 sq. meters so
that the deed of sale between the parties Identified and described the land sold as Lot 1495. But
actually, as verified later by a surveyor upon agreement of the parties during the proceedings of
the case below, the area sold was within Lot 1496.
Again, there is no dispute that the houses of the spouses Cornelio Pamplona and Apolonia Onte
as well as that of their son Rafael Pamplona, including the concrete piggery coral adjacent
thereto, stood on the land from 1952 up to the filing of the complaint by the private respondents

on July 25, 1961, or a period of over nine (9) years. And during said period, the private
respondents who are the heirs of Monica Maniega as well as of Flaviano Moreto who also died
intestate on August 12, 1956, lived as neighbors to the petitioner-vendees, yet lifted no finger to
question the occupation, possession and ownership of the land purchased by the Pamplonas, so
that We are persuaded and convinced to rule that private respondents are in estoppel by laches
to claim half of the property, in dispute as null and void. Estoppel by laches is a rule of equity
which bars a claimant from presenting his claim when, by reason of abandonment and
negligence, he allowed a long time to elapse without presenting the same. (International Banking
Corporation vs. Yared, 59 Phil. 92)
We have ruled that at the time of the sale in 1952, the conjugal partnership was already
dissolved six years before and therefore, the estate became a co-ownership between Flaviano
Moreto, the surviving husband, and the heirs of his deceased wife, Monica Maniega. Article 493
of the New Civil Code is applicable and it provides a follows:
Art. 493. Each co-owner shall have the full ownership of his part and of the fruits
and benefits pertaining thereto, and he may therefore alienate, assign or mortgage
it, and even substitute another person in its enjoyment, except when personal rights
are involve. But the effect of the alienation or the mortgage, with respect to the coowners, shall be limited to the portion which may be allotted to him in the division
upon the termination of the co-ownership.
We agree with the petitioner that there was a partial partition of the co-ownership when at the
time of the sale Flaviano Moreto pointed out the area and location of the 781 sq. meters sold by
him to the petitioners-vendees on which the latter built their house and also that whereon Rafael,
the son of petitioners likewise erected his house and an adjacent coral for piggery.
Petitioners point to the fact that spouses Flaviano Moreto and Monica Maniega owned three
parcels of land denominated as Lot 1495 having an area of 781 sq. meters, Lot 1496 with an area
of 1,021 sq. meters, and Lot 4545 with an area of 544 sq. meters. The three lots have a total
area of 2,346 sq. meters. These three parcels of lots are contiguous with one another as each is
bounded on one side by the other, thus: Lot 4545 is bounded on the northeast by Lot 1495 and
on the southeast by Lot 1496. Lot 1495 is bounded on the west by Lot 4545. Lot 1496 is bounded
on the west by Lot 4545. It is therefore, clear that the three lots constitute one big land. They are
not separate properties located in different places but they abut each other. This is not disputed
by private respondents. Hence, at the time of the sale, the co-ownership constituted or covered
these three lots adjacent to each other. And since Flaviano Moreto was entitled to one-half proindiviso of the entire land area or 1,173 sq. meters as his share, he had a perfect legal and lawful
right to dispose of 781 sq. meters of his share to the Pamplona spouses. Indeed, there was still a
remainder of some 392 sq. meters belonging to him at the time of the sale.
We reject respondent Court's ruling that the sale was valid as to one-half and invalid as to the
other half for the very simple reason that Flaviano Moreto, the vendor, had the legal right to
more than 781 sq. meters of the communal estate, a title which he could dispose, alienate in
favor of the vendees-petitioners. The title may be pro-indiviso or inchoate but the moment the
co-owner as vendor pointed out its location and even indicated the boundaries over which the
fences were to be erectd without objection, protest or complaint by the other co-owners, on the
contrary they acquiesced and tolerated such alienation, occupation and possession, We rule that
a factual partition or termination of the co-ownership, although partial, was created, and barred
not only the vendor, Flaviano Moreto, but also his heirs, the private respondents herein from
asserting as against the vendees-petitioners any right or title in derogation of the deed of sale
executed by said vendor Flaiano Moreto.
Equity commands that the private respondents, the successors of both the deceased spouses,
Flaviano Moreto and Monica Maniega be not allowed to impugn the sale executed by Flaviano
Moreto who indisputably received the consideration of P900.00 and which he, including his
children, benefitted from the same. Moreover, as the heirs of both Monica Maniega and Flaviano
Moreto, private respondents are duty-bound to comply with the provisions of Articles 1458 and
1495, Civil Code, which is the obligation of the vendor of the property of delivering and
transfering the ownership of the whole property sold, which is transmitted on his death to his
heirs, the herein private respondents. The articles cited provide, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other part to
pay therefore a price certain in money or its equivalent.
A contract of sale may be absolute or conditionial.
Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale.
Under Article 776, New Civil Code, the inheritance which private respondents received from their
deceased parents and/or predecessors-in-interest included all the property rights and obligations
which were not extinguished by their parents' death. And under Art. 1311, paragraph 1, New Civil
Code, the contract of sale executed by the deceased Flaviano Moreto took effect between the
parties, their assigns and heirs, who are the private respondents herein. Accordingly, to the
private respondents is transmitted the obligation to deliver in full ownership the whole area of
781 sq. meters to the petitioners (which was the original obligation of their predecessor Flaviano
Moreto) and not only one-half thereof. Private respondents must comply with said obligation.
The records reveal that the area of 781 sq. meters sold to and occupied by petitioners for more
than 9 years already as of the filing of the complaint in 1961 had been re-surveyed by private
land surveyor Daniel Aranas. Petitioners are entitled to a segregation of the area from Transfer
Certificate of Title No. T-9843 covering Lot 1496 and they are also entitled to the issuance of a
new Transfer Certificate of Title in their name based on the relocation survey.
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby AFFIRMED
with modification in the sense that the sale made and executed by Flaviano Moreto in favor of
the petitioners-vendees is hereby declared legal and valid in its entirely.
Petitioners are hereby declared owners in full ownership of the 781 sq. meters at the eastern
portion of Lot 1496 now occupied by said petitioners and whereon their houses and piggery coral
stand.
The Register of Deeds of Laguna is hereby ordered to segregate the area of 781 sq. meters from
Certificate of Title No. 9843 and to issue a new Transfer Certificate of Title to the petitioners
covering the segregated area of 781 sq. meters.
No costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, De Castro and Melencio-Herrera, JJ., concur.
Footnotes
1 Second Division: Perez. J., ponente; Reyes, J., concurring and Enriquez, J.,
concurring in the result.
2 Records. pp. 12-17.

FIRST DIVISION
[G.R. No. 125233. March 9, 2000]
Spouses ALEXANDER CRUZ and ADELAIDA CRUZ, petitioners, vs. ELEUTERIO LEIS,
RAYMUNDO LEIS, ANASTACIO L. LAGDANO, LORETA L. CAYONDA and the HONORABLE
COURT OF APPEALS, respondents. Lexj uris
DECISION
KAPUNAN, J.:
Private respondents, the heirs of spouses Adriano Leis and Gertrudes Isidro, [1] filed an action
before the Regional Trial Court (RTC) of Pasig seeking the nullification of the contracts of sale
over a lot executed by Gertrudes Isidro in favor of petitioner Alexander Cruz, as well as the title
subsequently issued in the name of the latter. Private respondents claimed that the contracts
were vitiated by fraud as Gertrudes was illiterate and already 80 years old at the time of the
execution of the contracts; that the price for the land was insufficient as it was sold only
for P39,083.00 when the fair market value of the lot should be P1,000.00 per square meter,
instead of P390.00, more or less; and that the property subject of the sale was conjugal and,
consequently, its sale without the knowledge and consent of private respondents was in
derogation of their rights as heirs.
The facts that gave rise to the complaint: Juri smis
Adriano and Gertrudes were married on 19 April 1923. On 27 April 1955, Gertrudes acquired from
the then Department of Agriculture and Natural Resources (DANR) a parcel of land with an area
of one hundred (100) square meters, situated at Bo. Sto. Nio, Marikina, Rizal and covered by
Transfer Certificate of Title (TCT) No. 42245. The Deed of Sale described Gertrudes as a widow.
On 2 March 1956, TCT No. 43100 was issued in the name of "Gertrudes Isidro," who was also
referred to therein as a "widow."
On 2 December 1973, Adriano died. It does not appear that he executed a will before his death.
On 5 February 1985, Gertrudes obtained a loan from petitioners, the spouses Alexander and
Adelaida Cruz, in the amount of P15,000.00 at 5% interest, payable on or before 5 February
1986. The loan was secured by a mortgage over the property covered by TCT No. 43100.
Gertrudes, however, failed to pay the loan on the due date.
Unable to pay her outstanding obligation after the debt became due and payable, on 11 March
1986, Gertrudes executed two contracts in favor of petitioner Alexander Cruz. The first is
denominated as "Kasunduan," which the parties concede is a pacto de retro sale, granting
Gertrudes one year within which to repurchase the property. The second is a "Kasunduan ng
Tuwirang Bilihan," a Deed of Absolute Sale covering the same property for the price of
P39,083.00, the same amount stipulated in the "Kasunduan." Jjj uris
For failure of Gertrudes to repurchase the property, ownership thereof was consolidated in the
name of Alexander Cruz in whose name TCT No. 130584 was issued on 21 April 1987, canceling
TCT No. 43100 in the name of Gertrudes Isidro.
On 9 June 1987, Gertrudes Isidro died. Thereafter, her heirs, herein private respondents, received
demands to vacate the premises from petitioners, the new owners of the property. Private
respondents responded by filing a complaint as mentioned at the outset.
On the basis of the foregoing facts, the RTC rendered a decision in favor of private respondents.
The RTC held that the land was conjugal property since the evidence presented by private
respondents disclosed that the same was acquired during the marriage of the spouses and that
Adriano contributed money for the purchase of the property. Thus, the court concluded,
Gertrudes could only sell to petitioner spouses her one-half share in the property.

The trial court also ruled that no fraud attended the execution of the contracts. Nevertheless, the
"Kasunduan," providing for a sale conpacto de retro, had superseded the "Kasunduan ng
Tuwirang Bilihan," the deed of absolute sale. The trial court did not consider the pacto de
retro sale an equitable mortgage, despite the allegedly insufficient price. Nonetheless, the trial
court found for private respondents. It rationalized that petitioners failed to comply with the
provisions of Article 1607 of the Civil Code requiring a judicial order for the consolidation of the
ownership in the vendee a retro to be recorded in the Registry of Property.
The dispositive portion of the RTC's Decision reads: lex
WHEREFORE, in the light of all the foregoing, judgment is hereby rendered:
1. Declaring Exhibit G "Kasunduan ng Tuwirang Bilihan" Null and Void and
declar[ing] that the title issued pursuant thereto is likewise Null and Void;
2. Declaring the property in litigation as conjugal property;
3. Ordering the Registry of Deeds of Marikina Branch to reinstate the title of
Gertrudes Isidro;
4. Ordering the plaintiff[s] [sic] to comply with the provision[s] of Article 1607 in
relation to Article 1616 of the Civil Code;
5. Ordering the defendant[s] to pay plaintiff[s] P15,000.00 nominal damages for the
violation of plaintiffs rights;
6. Ordering the defendant[s] to pay plaintiff[s] the sum of P8,000.00 as and for
attorneys fees;
7. Dismissing defendant[s'] counterclaim; and
8. Ordering defendant[s] to pay the cost of suit. Jksm

SO ORDERED.[2]
Petitioners appealed to the Court of Appeals in vain. The Court of Appeals affirmed the decision
of the Regional Trial Court, holding that since the property was acquired during the marriage of
Gertrudes to Adriano, the same was presumed to be conjugal property under Article 160 of the
Civil Code. The appellate court, like the trial court, also noted that petitioner did not comply with
the provisions of Article 1607 of the Civil Code.
Petitioners are now before this Court seeking the reversal of the decision of the Court of Appeals.
First, they contend that the subject property is not conjugal but is owned exclusively by
Gertrudes, who was described in the Deed of Sale between Gertrudes and the DANR as well as in
TCT No. 43100 as a widow. Second, assuming the land was conjugal property, petitioners argue
that the same became Gertrudes exclusively when, in 1979, she mortgaged the property to the
Daily Savings Bank and Loan Association. The bank later foreclosed on the mortgage in 1981 but
Gertrudes redeemed the same in 1983. Chief
The paraphernal or conjugal nature of the property is not determinative of the ownership of the
disputed property. If the property was paraphernal as contended by petitioners, Gertrudes Isidro
would have the absolute right to dispose of the same, and absolute title and ownership was
vested in petitioners upon the failure of Gertrudes to redeem the property. On the other hand, if
the property was conjugal, as private respondents maintain, upon the death of Adriano Leis, the
conjugal partnership was terminated,[3] entitling Gertrudes to one-half of the property. [4] Adrianos
rights to the other half, in turn, were transmitted upon his death to his heirs, [5] which includes his
widow Gertrudes, who is entitled to the same share as that of each of the legitimate children.
[6]
Thus, as a result of the death of Adriano, a regime of co-ownership arose between Gertrudes
and the other heirs in relation to the property.

Incidentally, there is no merit in petitioners contention that Gertrudes redemption of the property
from the Daily Savings Bank vested in her ownership over the same to the exclusion of her coowners. We dismissed the same argument by one of the petitioners in Paulmitan vs. Court of
Appeals,[7] where one of the petitioners therein claimed ownership of the entire property subject
of the case by virtue of her redemption thereof after the same was forfeited in favor of the
provincial government for non-payment of taxes. We held, however, that the redemption of the
land "did not terminate the co-ownership nor give her title to the entire land subject of the coownership." We expounded, quoting our pronouncement in Adille vs. Court of Appeals: [8]
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership
over the property held in common? Esmsc
Essentially, it is the petitioners contention that the property subject of dispute
devolved upon him upon the failure of his co-heirs to join him in its redemption
within the period required by law. He relies on the provisions of Article 1515 of the
old Civil Code, Article 1613 of the present Code, giving the vendee a retro the right
to demand redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by a co-owner with respect to his share
alone (CIVL CODE, art. 1612; CIVIL CODE (1889), art. 1514.). While the records show
that petitioner redeemed the property in its entirety, shouldering the expenses
therefor, that did not make him the owner of all of it. In other words, it did not put to
end the existing state of co-ownership (Supra, Art. 489). There is no doubt that
redemption of property entails a necessary expense. Under the Civil Code: Esmmis
Art. 488. Each co-owner shall have a right to compel the other co-owners to
contribute to the expenses of preservation of the thing or right owned in common
and to the taxes. Any one of the latter may exempt himself from this obligation by
renouncing so much of his undivided interest as may be equivalent to his share of
the expenses and taxes. No such waiver shall be made if it is prejudicial to the coownership.
The result is that the property remains to be in a condition of co-ownership. While a
vendee a retro, under Article 1613 of the Code, "may not be compelled to consent
to a partial redemption," the redemption by one co-heir or co-owner of the property
in its totality does not vest in him ownership over it. Failure on the part of all the coowners to redeem it entitles the vendee a retro to retain the property and
consolidate title thereto in his name (Supra, art. 1607). But the provision does not
give to the redeeming co-owner the right to the entire property. It does not provide
for a mode of terminating a co-ownership.
It is conceded that, as a rule, a co-owner such as Gertrudes could only dispose of her share in the
property owned in common. Article 493 of the Civil Code provides:
ART. 493. Each co-owner shall have the full ownership of his part of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it,
and even substitute another person in its enjoyment, except when personal rights
are involved. But the effect of the alienation or the mortgage, with respect to the
co-owners, shall be limited to the portion which may be allotted to him in the
division upon the termination of the co-ownership. Es-mso
Unfortunately for private respondents, however, the property was registered in TCT No. 43100
solely in the name of "Gertrudes Isidro, widow." Where a parcel of land, forming part of the
undistributed properties of the dissolved conjugal partnership of gains, is sold by a widow to a
purchaser who merely relied on the face of the certificate of title thereto, issued solely in the
name of the widow, the purchaser acquires a valid title to the land even as against the heirs of
the deceased spouse. The rationale for this rule is that "a person dealing with registered land is
not required to go behind the register to determine the condition of the property. He is only
charged with notice of the burdens on the property which are noted on the face of the register or
the certificate of title. To require him to do more is to defeat one of the primary objects of the
Torrens system."[9]

As gleaned from the foregoing discussion, despite the Court of Appeals finding and conclusion
that Gertrudes as well as private respondents failed to repurchase the property within the period
stipulated and has lost all their rights to it, it still ruled against petitioners by affirming the
Regional Trial Court's decision on the premise that there was no compliance with Article 1607 of
the Civil Code requiring a judicial hearing before registration of the property in the name of
petitioners. This provision states: Ms-esm
ART. 1607. In case of real property, the consolidation of ownership in the vendee by
virtue of the failure of the vendor to comply with the provisions of article 1616 shall
not be recorded in the Registry of Property without a judicial order, after the vendor
has been duly heard.
The aforequoted article is intended to minimize the evils which the pacto de retro sale has
caused in the hands of usurers. A judicial order is necessary in order to determine the true nature
of the transaction and to prevent the interposition of buyers in good faith while the
determination is being made.[10]E-xsm
It bears stressing that notwithstanding Article 1607, the recording in the Registry of Property of
the consolidation of ownership of the vendee is not a condition sine qua non to the transfer of
ownership. Petitioners are the owners of the subject property since neither Gertrudes nor her coowners redeemed the same within the one-year period stipulated in the "Kasunduan." The
essence of a pacto de retro sale is that title and ownership of the property sold are immediately
vested in the vendee a retro, subject to the resolutory condition of repurchase by the vendor a
retro within the stipulated period. Failure thus of the vendor a retro to perform said resolutory
condition vests upon the vendee by operation of law absolute title and ownership over the
property sold. As title is already vested in the vendee a retro, his failure to consolidate his title
under Article 1607 of the Civil Code does not impair such title or ownership for the method
prescribed thereunder is merely for the purpose of registering the consolidated title. [11]
WHEREFORE, the decision of the Court of Appeals is MODIFIED in that the petitioners are
deemed owners of the property by reason of the failure of the vendor, Gertrudes Isidro, to
repurchase the same within the period stipulated. However, Transfer Certificate of Title No.
130584, in the name of Alexander M. Cruz, which was issued without judicial order, is hereby
ordered CANCELLED, and Transfer Certificate of Title No. 43100 in the name of Gertrudes Isidro is
ordered REINSTATED, without prejudice to compliance by petitioners with the provisions of Article
1607 of the Civil Code.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, and Ynares-Santiago, JJ., concur. Ky-le
Pardo, J., on official business abroad.

EN BANC
G.R. No. L-18536

March 31, 1965

JOSE B. AZNAR, plaintiff-appellant,

vs.
RAFAEL YAPDIANGCO, defendant-appellee;
TEODORO SANTOS, intervenor-appellee.
Florentino M. Guanlao for plaintiff-appellant.
Rafael Yapdiangco in his own behalf as defendant-appellee.
Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee.
REGALA, J.:
This is an appeal, on purely legal questions, from a decision of the Court of First Instance of
Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the
possession of the car in dispute.
The records before this Court disclose that sometime in May, 1959, Teodoro Santos advertised in
two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon of May 28, 1959, a
certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos residence to
answer the ad. However, Teodoro Santos was out during this call and only the latter's son, Irineo
Santos, received and talked with De Dios. The latter told the young Santos that he had come in
behalf of his uncle, Vicente Marella, who was interested to buy the advertised car.
On being informed of the above, Teodoro Santos instructed his son to see the said Vicente
Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And
so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this meeting,
Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid
only after the car had been registered in his name.
Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a certain
Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's favor. The
parties to the contract thereafter proceeded to the Motor Vehicles Office in Quezon City where
the registration of the car in Marella's name was effected. Up to this stage of the transaction, the
purchased price had not been paid.
From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the registration
papers and a copy of the deed of sale to his son, Irineo, and instructed him not to part with them
until Marella shall have given the full payment for the car. Irineo Santos and L. De Dios then
proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former demanded the
payment from Vicente Marella. Marella said that the amount he had on hand then was short by
some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly
living somewhere on Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go to
the said sister and suggested that Irineo Santos go with him. At the same time, he requested the
registration papers and the deed of sale from Irineo Santos on the pretext that he would like to
show them to his lawyer. Trusting the good faith of Marella, Irineo handed over the same to the
latter and thereupon, in the company of L. De Dios and another unidentified person, proceeded
to the alleged house of Marella's sister.
At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a house
while their unidentified companion remained in the car. Once inside, L. De Dios asked Irineo
Santos to wait at the sala while he went inside a room. That was the last that Irineo saw of him.
For, after a considerable length of time waiting in vain for De Dios to return, Irineo went down to
discover that neither the car nor their unidentified companion was there anymore. Going back to
the house, he inquired from a woman he saw for L. De Dios and he was told that no such name
lived or was even known therein. Whereupon, Irineo Santos rushed to 1642 Crisostomo to see
Marella. He found the house closed and Marella gone. Finally, he reported the matter to his father
who promptly advised the police authorities.

That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell the car
in question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar as the above
incidents are concerned, we are bound by the factual finding of the trial court that Jose B. Aznar
acquired the said car from Vicente Marella in good faith, for a valuable consideration and without
notice of the defect appertaining to the vendor's title.
While the car in question was thus in the possession of Jose B. Aznar and while he was attending
to its registration in his name, agents of the Philippine Constabulary seized and confiscated the
same in consequence of the report to them by Teodoro Santos that the said car was unlawfully
taken from him.
In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the
head of the Philippine Constabulary unit which seized the car in question Claiming ownership of
the vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro
Santos moved and was allowed to intervene by the lower court.
At the end of the trial, the lower court rendered a decision awarding the disputed motor vehicle
to the intervenor-appellee, Teodoro Santos. In brief, it ruled that Teodoro Santos had been
unlawfully deprived of his personal property by Vicente Marella, from whom the plaintiffappellant traced his right. Consequently, although the plaintiff-appellant acquired the car in good
faith and for a valuable consideration from Vicente Marella, the said decision concluded, still the
intervenor-appellee was entitled to its recovery on the mandate of Article 559 of the New Civil
Code which provides:
ART. 559. The possession of movable property acquired in good faith is equivalent to title.
Nevertheless, one who lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
From this decision, Jose B. Aznar appeals.
The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-appellant,
Jose B. Aznar, who has a better right to the possession of the disputed automobile?
We find for the intervenor-appellee, Teodoro Santos.
The plaintiff-appellant accepts that the car in question originally belonged to and was owned by
the intervenor-appellee, Teodoro Santos, and that the latter was unlawfully deprived of the same
by Vicente Marella. However, the appellant contends that upon the facts of this case, the
applicable provision of the Civil Code is Article 1506 and not Article 559 as was held by the
decision under review. Article 1506 provides:
ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been
voided at the time of the sale, the buyer acquires a good title to the goods, provided he
buys them in good faith, for value, and without notice of the seller's defect of title.
The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the
seller should have a voidable title at least. It is very clearly inapplicable where, as in this case,
the seller had no title at all.
Vicente Marella did not have any title to the property under litigation because the same was
never delivered to him. He sought ownership or acquisition of it by virtue of the contract. Vicente
Marella could have acquired ownership or title to the subject matter thereof only by the delivery
or tradition of the car to him.
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." As interpreted by this Court in a host of cases, by this provision,
ownership is not transferred by contract merely but by tradition or delivery. Contracts only
constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is

the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v.
International Bank, 37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v.
Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).
For the legal acquisition and transfer of ownership and other property rights, the thing
transferred must be delivered, inasmuch as, according to settled jurisprudence, the
tradition of the thing is a necessary and indispensable requisite in the acquisition of said
ownership by virtue of contract. (Walter Laston v. E. Diaz & Co. & the Provincial Sheriff of
Albay, supra.)
So long as property is not delivered, the ownership over it is not transferred by contract
merely but by delivery. Contracts only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is the method of accomplishing the
same, the title and the method of acquiring it being different in our law. (Gonzales v.
Roxas, 16 Phil. 51)
In the case on hand, the car in question was never delivered to the vendee by the vendor as to
complete or consummate the transfer of ownership by virtue of the contract. It should be
recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro
Santos, the former, as vendee, took possession of the subject matter thereof by stealing the
same while it was in the custody of the latter's son.
There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the
key to the car to the unidentified person who went with him and L. De Dios to the place on
Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the
delivery contemplated by Article 712 of the Civil Code. For then, it would be indisputable that he
turned it over to the unidentified companion only so that he may drive Irineo Santos and De Dios
to the said place on Azcarraga and not to vest the title to the said vehicle to him as agent of
Vicente Marella. Article 712 above contemplates that the act be coupled with the intent of
delivering the thing. (10 Manresa 132)
The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for under
it, the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully deprived
of it, he has a right to recover it, not only from the finder, thief or robber, but also from third
persons who may have acquired it in good faith from such finder, thief or robber. The said article
establishes two exceptions to the general rule of irrevindicability, to wit, when the owner (1) has
lost the thing, or (2) has been unlawfully deprived thereof. In these cases, the possessor cannot
retain the thing as against the owner, who may recover it without paying any indemnity, except
when the possessor acquired it in a public sale. (Del Rosario v. Lucena, 8 Phil. 535; Varela v.
Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v. Raymundo, 19 Phil. 46. Tolentino, id.,
Vol. II, p. 261.)
In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled
that
Under Article 559 of the new Civil Code, a person illegally deprived of any movable may
recover it from the person in possession of the same and the only defense the latter may
have is if he has acquired it in good faith at a public sale, in which case, the owner cannot
obtain its return without reimbursing the price paid therefor. In the present case, plaintiff
has been illegally deprived of his car through the ingenious scheme of defendant B to
enable the latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can
still recover possession of the car even if it is in the possession of a third party who had
acquired it in good faith from defendant B. The maxim that "no man can transfer to
another a better title than he had himself" obtains in the civil as well as in the common
law. (U.S. v. Sotelo, 28 Phil. 147)
Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee who
had caused the fraud to be perpetrated by his misplaced confidence on Vicente Marella, he, the
intervenor-appellee, should be made to suffer the consequences arising therefrom, following the
equitable principle to that effect. Suffice it to say in this regard that the right of the owner to
recover personal property acquired in good faith by another, is based on his being dispossessed
without his consent. The common law principle that where one of two innocent persons must
suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his

misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which
is covered by an express provision of the new Civil Code, specifically Article 559. Between a
common law principle and a statutory provision, the latter must prevail in this jurisdiction. (Cruz
v. Pahati, supra)
UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the decision of the lower
court affirmed in full. Costs against the appellant.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Makalintal,
Bengzon, J.P., and Zaldivar, JJ., concur.

Tagatac vs. Jimenez

Monday, September 8, 2014
Facts:

Trinidad Tagatac bought a car for $4,500 in the US. After 7 months, she brought the car to
the Philippines.
Warner Feist, who pretended to be a wealthy man, offered to buy Trinidads car for
P15,000, and Tagatac was amenable to the idea. Hnece, a deed of sale was exceuted.
Feist paid by means of a postdated check, and the car was delivered to Feist. However,
PNB refused to honor the checks and told her that Feist had no account in said bank.
Tagatac notified the law enforcement agencies of the estafa committed by Feist, but the
latter was not apprehended and the car disappeared.
Meanwhile, Feist managed succeeded in having the cars registration certificate (RC)
transferred in his name. He sold the car to Sanchez, who was able to transfer the registration
certificate to his name.
Sanchez then offered to sell the car to defendant Liberato Jimenez, who bought the car for
P10,000 after investigating in the Motor Vehicles Office.
Tagatac discovered that the car was in California Car Exchanges (place where Jimenez
displayed the car for sale), so she demanded from the manager for the delivery of the car,
but the latter refused.
Tagatac filed a suit for the recovery of the cars possession, and the sheriff, pursuant to a
warrant of seizure that Tagatac obtained, seized and impounded the car, but it was delivered
back to Jimenez upon his filing of a counter-bond.
The lower court held that Jimenez had the right of ownership and possession over the car.

Issue: WON Jimenez was a purchaser in good faith and thus entitled to the ownership and
possession of the car. YES
Held:
It must be noted that Tagactac was not unlawfully deprived of his car
In this case, there is a valid transmission of ownership from true owner [Tagatac] to the swindler
[Feist], considering that they had a contract of sale (note: but such sale is voidable for the fraud
and deceit by Feist).
The disputable presumption that a person found in possession of a thing taken in the doing of a
recent wrongful act is the taker and the doer of the whole act does NOT apply in this case
because the car was not stolen from Tagatac, and Jimenez came into possession of the car two
months after Feist swindled Tagatac.
Jimenez was a purchaser in good faith for he was not aware of any flaw invalidating
the title from the seller of the car
In addition, when Jimenez acquired the car, he had no knowledge of any flaw in the title of the
person from whom he acquired it. It was only later that he became fully aware that there were
some questions regarding the car, when he filed a petition to dissolve Tagatacs search warrant
which had as its subject the car in question.
The contract between Feist and Tagactac was a voidable contract, it can be annulled
or ratified
. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract
(Article 1390 N.C.C.). Being a voidable contract, it is susceptible of either ratification or
annulment.
(If the contract is ratified, the action to annul it is extinguished (Article 1392, N.C.C.) and the
contract is cleansed from all its defects (Article 1396, N.C.C.); if the contract is annulled, the
contracting parties are restored to their respective situations before the contract and mutual
restitution follows as a consequence (Article 1398, N.C.C.).
Being a voidable contract, it remains valid and binding until annulled
However, as long as no action is taken by the party entitled, either that of annulment or of
ratification, the contract of sale remains valid and binding. When plaintiff-appellant Trinidad C.

Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to the car
passed to Feist. Of course, the title that Feist acquired was defective and voidable.
Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been avoided
and he therefore conferred a good title on the latter, provided he bought the car in good faith, for
value and without notice of the defect in Feist's title (Article 1506, N.C.C.). There being no proof
on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith.

Philippine Trust Co. v. Roldan99 Phil 392 (1956)

Facts:
Mariano Bernardo, a minor, inherited 17 parcels of land from his deceased father.Respondent, Marianos
step-mother, was appointed his guardian. As guardian, she sold the 17 parcels to Dr. Ramos, her
brother-in-law, for P14,700. After a week (or a day after the judicial confirmation of the sale), Dr. Ramos
sold the lands to her for P15,000. Subsequently,she sold 4 out of 17 parcels to Emilio Cruz. Petitioner
replaced Roldan as guardian, and twomonths thereafter, this litigation sought to declare as null
and void the sale to Dr. Ramos, andthe sale to Emilio Cruz.
Issue:
Whether the sale of the land by the guardian is null and void for being violative of the prohibition for a
guardian to purchase either in person or through the mediation of another the property of her
ward
Held:
Remembering the general doctrine that guardianship is a trust of the highest order, and
thetrustee cannot be allowed to have any inducement to neglect his wards interest, and in
linewith the courts suspicion whenever the guardian acquires wards property we have
nohesitation to declare that in this case, in the eyes of the law, Socorro Roldan took by purchaseher wards
parcels thru Dr. Ramos, and that Article 1459 of the Civil Code appliesThis case is not similar to that cited
by defendant (Rodriguez v. Mactal) wherein it was notestablished that there was an agreed
scheme between the first buyer and the guardian and thatthe subsequent sale occurred after a
period of two years. In this case, the 2 sales were only aweek apart, raising the doubts as to the
motive of the guardian in selling the properties to Dr.Ramos.
Dispositive:
1st and 2nd sale are null and void for violation of Article 1459 of the NCC.
3rd is null and void because no title could pass from Roldan to Cruz.
So 3 sales annulled.
Minor is the owner of 17 parcels of land. But ordered to return14,700 pesos with interest to Roldan.
Roldan to pay minor the fruits of the land