Form of Sale

Form for validity

Limketkai v. Court of Appeals, G.R. No. 118509 December 1, 1995
G.R. No. 118509 December 1, 1995
LIMKETKAI
SONS
MILLING,
INC., petitioner,
vs.
COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS and NATIONAL BOOK
STORE, respondents.

MELO, J.:
The issue in the petition before us is whether or not there was a perfected contract
between petitioner Limketkai Sons Milling, Inc. and respondent Bank of the Philippine
Islands (BPI) covering the sale of a parcel of land, approximately 3.3 hectares in area,
and located in Barrio Bagong Ilog, Pasig City, Metro Manila.
Branch 151 of the Regional Trial Court of the National Capital Judicial Region stationed
in Pasig ruled that there was a perfected contract of sale between petitioner and BPI. It
stated that there was mutual consent between the parties; the subject matter is definite;
and the consideration was determined. It concluded that all the elements of a
consensual contract are attendant. It ordered the cancellation of a sale effected by BPI
to respondent National Book Store (NBS) while the case was pending and the
nullification of a title issued in favor of said respondent NBS.
Upon elevation of the case to the Court of Appeals, it was held that no contract of sale
was perfected because there was no concurrence of the three requisites enumerated in
Article 1318 of the Civil Code. The decision of the trial court was reversed and the
complaint dismissed.
Hence, the instant petition.
Shorn of the interpretations given to the acts of those who participated in the disputed
sale, the findings of facts of the trial court and the Court of Appeals narrate basically the
same events and occurrences. The records show that on May 14, 1976, Philippine
Remnants Co., Inc. constituted BPI as its trustee to manage, administer, and sell its real
estate property. One such piece of property placed under trust was the disputed lot, a
33,056-square meter lot at Barrio Bagong Ilog, Pasig, Metro Manila covered by Transfer
Certificate of Title No. 493122.
On June 23, 1988, Pedro Revilla, Jr., a licensed real estate broker was given formal
authority by BPI to sell the lot for P1,000.00 per square meter. This arrangement was
concurred in by the owners of the Philippine Remnants.

Broker Revilla contacted Alfonso Lim of petitioner company who agreed to buy the land.
On July 8, 1988, petitioner's officials and Revilla were given permission by Rolando V.
Aromin, BPI Assistant Vice-President, to enter and view the property they were buying.
On July 9, 1988, Revilla formally informed BPI that he had procured a buyer, herein
petitioner. On July 11, 1988, petitioner's officials, Alfonso Lim and Albino Limketkai, went
to BPI to confirm the sale. They were entertained by Vice-President Merlin Albano and
Asst. Vice-President Aromin. Petitioner asked that the price of P1,000.00 per square
meter be reduced to P900.00 while Albano stated the price to be P1,100.00. The parties
finally agreed that the lot would be sold at P1,000.00 per square meter to be paid in
cash. Since the authority to sell was on a first come, first served and non-exclusive
basis, it may be mentioned at this juncture that there is no dispute over petitioner's being
the first comer and the buyer to be first served.
Notwithstanding the final agreement to pay P1,000.00 per square meter on a cash basis,
Alfonso Lim asked if it was possible to pay on terms. The bank officials stated that there
was no harm in trying to ask for payment on terms because in previous transactions, the
same had been allowed. It was the understanding, however, that should the term
payment be disapproved, then the price shall be paid in cash.
It was Albano who dictated the terms under which the installment payment may be
approved, and acting thereon, Alfonso Lim, on the same date, July 11, 1988, wrote BPI
through Merlin Albano embodying the payment initially of 10% and the remaining 90%
within a period of 90 days.
Two or three days later, petitioner learned that its offer to pay on terms had been frozen.
Alfonso Lim went to BPI on July 18, 1988 and tendered the full payment of
P33,056,000.00 to Albano. The payment was refused because Albano stated that the
authority to sell that particular piece of property in Pasig had been withdrawn from his
unit. The same check was tendered to BPI Vice-President Nelson Bona who also
refused to receive payment.
An action for specific performance with damages was thereupon filed on August 25,
1988 by petitioner against BPI. In the course of the trial, BPI informed the trial court that
it had sold the property under litigation to NBS on July 14, 1989. The complaint was thus
amended to include NBS.
On June 10, 1991, the trial court rendered judgment in the case as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendants Bank of the Philippine Islands and National Book
Store, Inc.:
1. Declaring the Deed of Sale of the property covered by T.C.T. No.
493122 in the name of the Bank of the Philippine Islands, situated in
Barrio Bagong Ilog, Pasig, Metro Manila, in favor of National Book Store,
Inc., null and void;
2. Ordering the Register of Deeds of the Province of Rizal to cancel the
Transfer Certificate of Title which may have been issued in favor of

National Book Store, Inc. by virtue of the aforementioned Deed of Sale

dated July 14, 1989;
3. Ordering defendant BPI, upon receipt by it from plaintiff of the sum of
P33,056,000.00, to execute a Deed of Sale in favor of plaintiff of the
aforementioned property at the price of P1,000.00 per square meter; in
default thereof, the Clerk of this Court is directed to execute the said
deed;
4. Ordering the Register of Deeds of Pasig, upon registration of the said
deed, whether executed by defendant BPI or the Clerk of Court and
payment of the corresponding fees and charges, to cancel said T.C.T.
No. 493122 and to issue, in lieu thereof, another transfer certificate of title
in the name of plaintiff;
5. Ordering defendants BPI and National Book Store, Inc. to pay, jointly
and severally, to the plaintiff the sums of P10,000,000.00 as actual and
consequential damages and P150,000.00 as attorney's fees and litigation
expenses, both with interest at 12% per annum from date hereof;
6. On the cross-claim of defendant bank against National Book Store,
ordering the latter to indemnify the former of whatever amounts BPI shall
have paid to the plaintiff by reason hereof; and
7. Dismissing the counterclaims of the defendants against the plaintiff and
National Book Store's cross-claim against defendant bank.
Costs against defendants.
(pp. 44-45, Rollo.)
As earlier intimated, upon the decision being appealed, the Court of Appeals (Buena [P],
Rasul, and Mabutas, JJ.), on August 12, 1994, reversed the trial court's decision and
dismissed petitioner's complaint for specific performance and damages.
The issues raised by the parties revolve around the following four questions:
(1) Was there a meeting of the minds between petitioner Limketkai and respondent BPI
as to the subject matter of the contract and the cause of the obligation?
(2) Were the bank officials involved in the transaction authorized by BPI to enter into the
questioned contract?
(3) Is there competent and admissible evidence to support the alleged meeting of the
minds?
(4) Was the sale of the disputed land to the NBS during the pendency of trial effected in
good faith?

There is no dispute in regard to the following: (a) that BPI as trustee of the property of
Philippine Remnant Co. authorized a licensed broker, Pedro Revilla, to sell the lot for
P1,000.00 per square meter; (b) that Philippine Remnants confirmed the authority to sell
of Revilla and the price at which he may sell the lot; (c) that petitioner and Revilla agreed
on the former buying the property; (d) that BPI Assistant Vice-President Rolando V.
Aromin allowed the broker and the buyer to inspect the property; and (e) that BPI was
formally informed about the broker having procured a buyer.
The controversy revolves around the interpretation or the significance of the happenings
or events at this point.
Petitioner states that the contract to sell and to buy was perfected on July 11, 1988 when
its top officials and broker Revilla finalized the details with BPI Vice-Presidents Merlin
Albano and Rolando V. Aromin at the BPI offices.
Respondents, however, contend that what transpired on this date were part of continuing
negotiations to buy the land and not the perfection of the sale. The arguments of
respondents center on two propositions (1) Vice-Presidents Aromin and Albano had
no authority to bind BPI on this particular transaction and (2) the subsequent attempts of
petitioner to pay under terms instead of full payment in cash constitutes a counter-offer
which negates the existence of a perfected contract.
The alleged lack of authority of the bank officials acting in behalf of BPI is not sustained
by the record.
At the start of the transactions, broker Revilla by himself already had full authority to sell
the disputed lot. Exhibit B dated June 23, 1988 states, "this will serve as your authority to
sell on an as is, where is basis the property located at Pasig Blvd., Bagong Ilog . . . ." We
agree with Revilla's testimony that the authority given to him was to sell and not
merely to look for a buyer, as contended by respondents.
Revilla testified that at the time he perfected the agreement to sell the litigated property,
he was acting for and in behalf of the BPI as if he were the Bank itself. This
notwithstanding and to firm up the sale of the land, Revilla saw it fit to bring BPI officials
into the transaction. If BPI could give the authority to sell to a licensed broker, we see no
reason to doubt the authority to sell of the two BPI Vice-Presidents whose precise job in
the Bank was to manage and administer real estate property.
Respondent BPI alleges that sales of trust property need the approval of a Trust
Committee made up of top bank officials. It appears from the record that this trust
committee meets rather infrequently and it does not have to pass on regular
transactions.
Rolando Aromin was BPI Assistant Vice-President and Trust Officer. He directly
supervised the BPI Real Property Management Unit. He had been in the Real Estate
Division since 1985 and was the head supervising officer of real estate matters. Aromin
had been with the BPI Trust Department since 1968 and had been involved in the
handling of properties of beneficial owners since 1975 (tsn., December 3, 1990, p. 5).

Exhibit 10 of BPI, the February 15, 1989 letter from Senior Vice-President Edmundo
Barcelon, while purporting to inform Aromin of his poor performance, is an admission of
BPI that Aromin was in charge of Torrens titles, lease contracts, problems of tenants,
insurance policies, installment receivables, management fees, quitclaims, and other
matters involving real estate transactions. His immediate superior, Vice-President Merlin
Albano had been with the Real Estate Division for only one week but he was present
and joined in the discussions with petitioner.
There is nothing to show that Alfonso Lim and Albino Limketkai knew Aromin before the
incident. Revilla brought the brothers directly to Aromin upon entering the BPI premises.
Aromin acted in a perfectly natural manner on the transaction before him with not the
slightest indication that he was acting ultra vires. This shows that BPI held Aromin out to
the public as the officer routinely handling real estate transactions and, as Trust Officer,
entering into contracts to sell trust properties.
Respondents state and the record shows that the authority to buy and sell this particular
trust property was later withdrawn from Trust Officer Aromin and his entire unit. If Aromin
did not have any authority to act as alleged, there was no need to withdraw authority
which he never possessed.
Petitioner points to Areola vs. Court of Appeals (236 SCRA 643 [1994]) which
cited Prudential Bank vs. Court of Appeals (22 SCRA 350 [1993]), which in turn relied
upon McIntosh vs. Dakota Trust Co. (52 ND 752, 204 NW 818, 40 ALR 1021), to wit:
Accordingly a banking corporation is liable to innocent third persons
where the representation is made in the course of its business by an
agent acting within the general scope of his authority even though, in the
particular case, the agent is secretly abusing his authority and attempting
to perpetrate a fraud upon his principal or some other person for his own
ultimate benefit.
(at pp. 652-653.)
In the present case, the position and title of Aromin alone, not to mention the testimony
and documentary evidence about his work, leave no doubt that he had full authority to
act for BPI in the questioned transaction. There is no allegation of fraud, nor is there the
least indication that Aromin was acting for his own ultimate benefit. BPI later dismissed
Aromin because it appeared that a top official of the bank was personally interested in
the sale of the Pasig property and did not like Aromin's testimony. Aromin was charged
with poor performance but his dismissal was only sometime after he testified in court.
More than two long years after the disputed transaction, he was still Assistant VicePresident of BPI.
The records show that the letter of instruction dated June 14, 1988 from the owner of
Philippine Remnants Co. regarding the sale of the firm's property was addressed to
Aromin. The P1,000.00 figure on the first page of broker Revilla's authority to sell was
changed to P1,100.00 by Aromin. The price was later brought down again to P1,000.00,
also by Aromin. The permission given to petitioner to view the lot was signed by Aromin
and honored by the BPI guards. The letter dated July 9, 1988 from broker Revilla
informing BPI that he had a buyer was addressed to Aromin. The conference on July 11,

1988 when the contract was perfected was with Aromin and Vice-President Albano.
Albano and Aromin were the ones who assured petitioner Limketkai's officers that term
payment was possible. It was Aromin who called up Miguel Bicharra of Philippine
Remnants to state that the BPI rejected payment on terms and it was to Aromin that
Philippine Remnants gave the go signal to proceed with the cash sale. Everything in the
record points to the full authority of Aromin to bind the bank, except for the self-serving
memoranda or letters later produced by BPI that Aromin was an inefficient and
undesirable officer and who, in fact, was dismissed after he testified in this case. But, of
course, Aromin's alleged inefficiency is not proof that he was not fully clothed with
authority to bind BPI.
Respondents' second contention is that there was no perfected contract because
petitioner's request to pay on terms constituted a counter-offer and that negotiations
were still in progress at that point.
Asst. Vice-President Aromin was subpoenaed as a hostile witness for petitioner during
trial. Among his statements is one to the effect that
. . . Mr. Lim offered to buy the property at P900.00 per square meter while
Mr. Albano counter-offered to sell the property at P1,100.00 per square
meter but after the usual haggling, we finally agreed to sell the property at
the price of P1,000.00 per square meter . . .
(tsn, 12-3-90, p. 17; Emphasis supplied.)
Asked if there was a meeting of the minds between the buyer and the bank in respect to
the price of P1,000.00 per square meter, Aromin answered:
Yes, sir, as far as my evaluation there was a meeting of the minds as far
as the price is concerned, sir.
(ibid, p. 17.)
The requirements in the payment of the purchase price on terms instead of cash were
suggested by BPI Vice-President Albano. Since the authority given to broker Revilla
specified cash payment, the possibility of paying on terms was referred to the Trust
Committee but with the mutual agreement that "if the proposed payment on terms will
not be approved by our Trust Committee, Limketkai should pay in cash . . . the amount
was no longer subject to the approval or disapproval of the Committee, it is only on the
terms." (ibid, p. 19). This is incontrovertibly established in the following testimony of
Aromin:
A. After you were able to agree on the price of
P1,000.00/sq. m., since the letter or authority says the
payment must be in cash basis, what transpired later on?
B. After we have agreed on the price, the Lim brothers
inquired on how to go about submitting the covering
proposal if they will be allowed to pay on terms. They
requested us to give them a guide on how to prepare the

corresponding letter of proposal. I recall that, upon the

request of Mr. Albino Limketkai, we dictated a guide on
how to word a written firm offer that was to be submitted by
Mr. Lim to the bank setting out the terms of payment
but with the mutual agreement that if his proposed
payment on terms will not be approved by our trust
committee, Limketkai should pay the price in cash.
Q And did buyer Limketkai agree to pay in cash in case the
offer of terms will be cash (disapproved).
A Yes, sir.
Q At the start, did they show their willingness to pay in
cash?
A Yes, sir.
Q You said that the agreement on terms was to be
submitted to the trust committee for approval, are you
telling the Court that what was to be approved by the trust
committee was the provision on the payment on terms?
A Yes, sir.
Q So the amount was no longer subject to the approval or
disapproval of the committee, it is only on the terms?
A Yes, sir.
(tsn, Dec. 3, 1990, pp. 18-19; Emphasis supplied.)
The record shows that if payment was in cash, either broker Revilla or Aromin had full
authority. But because petitioner took advantage of the suggestion of Vice-President
Albano, the matter was sent to higher officials. Immediately upon learning that payment
on terms was frozen and/or denied, Limketkai exercised his right within the period given
to him and tendered payment in full. The BPI rejected the payment.
In its Comment and Memorandum, respondent NBS cites Ang Yu Asuncion vs. Court of
Appeals (238 SCRA 602 [1994]) to bolster its case. Contrarywise, it would seem that the
legal principles found in said case strengthen and support petitioner's submission that
the contract was perfected upon the meeting of the minds of the parties.
The negotiation or preparation stage started with the authority given by Philippine
Remnants to BPI to sell the lot, followed by (a) the authority given by BPI and confirmed
by Philippine Remnants to broker Revilla to sell the property, (b) the offer to sell to
Limketkai, (c) the inspection of the property and finally (d) the negotiations with Aromin
and Albano at the BPI offices.

The perfection of the contract took place when Aromin and Albano, acting for BPI,
agreed to sell and Alfonso Lim with Albino Limketkai, acting for petitioner Limketkai,
agreed to buy the disputed lot at P1,000.00 per square meter. Aside from this there was
the earlier agreement between petitioner and the authorized broker. There was a
concurrence of offer and acceptance, on the object, and on the cause thereof.
The phases that a contract goes through may be summarized as follows:
a. preparation, conception or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of the
parties;
b. perfection or birth of the contract, which is the moment when the
parties come to agree on the terms of the contract; and
c. consummation or death, which is the fulfillment or performance of the
terms agreed upon in the contract (Toyota Shaw, Inc. vs. Court of
Appeals, G.R. No. 116650, May 23, 1995).
But in more graphic prose, we turn to Ang Yu Asuncion, per Justice Vitug:
. . . A contract undergoes various stages that include its negotiation or
preparation,
its
perfection
and,
finally,
its
consummation. Negotiation covers
the
period from the
time
the
prospective contracting parties indicate interest in the contract to the time
the contract is concluded (perfected). The perfectionof the contract takes
place upon the concurrence of the essential elements thereof. A contract
which isconsensual as to perfection is so established upon a mere
meeting of minds, i.e., the concurrence of offer and acceptance, on the
object and on the cause thereof. A contract which requires, in addition to
the above, the delivery of the object of the agreement, as in a pledge
or commodatum, is commonly referred to as a real contract. In
a solemn contract, compliance with certain formalities prescribed by law,
such as in a donation of real property, is essential in order to make the
act valid, the prescribed form being thereby an essential element thereof.
The stage of consummation begins when the parties perform their
respective undertakings under the contract culminating in the
extinguishment thereof.
Until the contract is perfected, it cannot, as an independent source of
obligation, serve as a binding juridical relation. In sales, particularly, to
which the topic for discussion about the case at bench belongs, the
contract is perfected when a person, called the seller, obligates himself,
for a price certain, to deliver and to transfer ownership of a thing or right
to another, called the buyer, over which the latter agrees.
(238 SCRA 602; 611 [1994].)

In Villonco Realty Company vs. Bormaheco (65 SCRA 352 [1975]), bearing factual
antecendents similar to this case, the Court, through Justice Aquino (later to be Chief
Justice), quoting authorities, upheld the perfection of the contract of sale thusly:
The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the
price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of
contracts. (Art. 1475, Ibid.)
xxx xxx xxx
Consent is manifested by the meeting of the offer and the acceptance
upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer (Art. 1319, Civil Code). "An
acceptance may be express or implied." (Art. 1320, Civil Code).
xxx xxx xxx
It is true that an acceptance may contain a request for certain changes in
the terms of the offer and yet be a binding acceptance. "So long as it is
clear that the meaning of the acceptance is positively and unequivocally
to accept the offer, whether such request is granted or not, a contract is
formed." (Stuart vs. Franklin Life Ins. Co., 105 Fed. 2nd 965, citing Sec.
79, Williston on Contracts).
xxx xxx xxx
. . . the vendor's change in a phrase of the offer to purchase, which
change does not essentially change the terms of the offer, does not
amount to a rejection of the offer and the tender or a counter-offer. (Stuart
vs. Franklin Life Ins. Co., supra.)
(at pp. 362-363; 365-366.)
In the case at bench, the allegation of NBS that there was no concurrence of the offer
and acceptance upon the cause of the contract is belied by the testimony of the very BPI
official with whom the contract was perfected. Aromin and Albano concluded the sale for
BPI. The fact that the deed of sale still had to be signed and notarized does not mean
that no contract had already been perfected. A sale of land is valid regardless of the
form it may have been entered into (Claudel vs. Court of Appeals, 199 SCRA 113, 119
[1991]). The requisite form under Article 1458 of the Civil Code is merely for greater
efficacy or convenience and the failure to comply therewith does not affect the validity
and binding effect of the act between the parties (Vitug, Compendium of Civil Law and
Jurisprudence, 1993 Revised Edition, p. 552). If the law requires a document or other
special form, as in the sale of real property, the contracting parties may compel each
other to observe that form, once the contract has been perfected. Their right may be
exercised simultaneously with action upon the contract (Article 1359, Civil Code).

Regarding the admissibility and competence of the evidence adduced by petitioner,

respondent Court of Appeals ruled that because the sale involved real property, the
statute of frauds is applicable.
In any event, petitioner cites Abrenica vs. Gonda (34 Phil. 739 [1916]) wherein it was
held that contracts infringing the Statute of Frauds are ratified when the defense fails to
object, or asks questions on cross-examination. The succinct words of Justice Araullo
still ring in judicial cadence:
As no timely objection or protest was made to the admission of the
testimony of the plaintiff with respect to the contract; and as the motion to
strike out said evidence came too late; and, furthermore, as the
defendants themselves, by the cross-questions put by their counsel to the
witnesses in respect to said contract, tacitly waived their right to have it
stricken out, that evidence, therefore, cannot be considered either
inadmissible or illegal, and court, far from having erred in taking it into
consideration and basing his judgment thereon, notwithstanding the fact
that it was ordered to be stricken out during the trial, merely corrected the
error he committed in ordering it to be so stricken out and complied with
the rules of procedure hereinbefore cited.
(at p. 748.)
In the instant case, counsel for respondents cross-examined petitioner's witnesses at
length on the contract itself, the purchase price, the tender of cash payment, the
authority of Aromin and Revilla, and other details of the litigated contract. Under
the Abrenica rule (reiterated in a number of cases, among them Talosig vs. Vda. de
Nieba 43 SCRA 472 [1972]), even assuming that parol evidence was initially
inadmissible, the same became competent and admissible because of the crossexamination, which elicited evidence proving the evidence of a perfected contract. The
cross-examination on the contract is deemed a waiver of the defense of the Statute of
Frauds (Vitug, Compendium of Civil Law and Jurisprudence, 1993 Revised
Edition, supra, p. 563).
The reason for the rule is that as pointed out in Abrenica "if the answers of those
witnesses were stricken out, the cross-examination could have no object whatsoever,
and if the questions were put to the witnesses and answered by them, they could only be
taken into account by connecting them with the answers given by those witnesses on
direct examination" (pp. 747-748).
Moreover, under Article 1403 of the Civil Code, an exception to the unenforceability of
contracts pursuant to the Statute of Frauds is the existence of a written note or
memorandum evidencing the contract. The memorandum may be found in several
writings, not necessarily in one document. The memorandum or memoranda is/are
written evidence that such a contract was entered into.
We cite the findings of the trial court on this matter:
In accordance with the provisions of Art. 1403 of the Civil Code, the
existence of a written contract of the sale is not necessary so long as the

agreement to sell real property is evidenced by a written note or

memorandum, embodying the essentials of the contract and signed by
the party charged or his agent. Thus, it has been held:
The Statute of Frauds, embodied in Article 1403 of the Civil
Code of the Philippines, does not require that the contract
itself be written. The plain test of Article 1403, Paragraph
(2) is clear that a written note or memorandum, embodying
the essentials of the contract and signed by the party
charged, or his agent suffices to make the verbal
agreement enforceable, taking it out of the operation of the
statute. (Emphasis supplied)
xxx xxx xxx
In the case at bar, the complaint in its paragraph 3 pleads
that the deal had been closed by letter and telegram
(Record on Appeal, p. 2), and the letter referred to was
evidently the one copy of which was appended as Exhibit
A to plaintiffs opposition to the motion to dismiss. The
letter, transcribed above in part, together with the one
marked as Appendix B, constitute an adequate
memorandum of the transaction. They are signed by the
defendant-appellant; refer to the property sold as a Lot in
Puerto Princesa, Palawan, covered by T.C.T. No. 62, give
its area as 1,825 square meters and the purchase price of
four (P4.00) pesos per square meter payable in cash. We
have in them, therefore, all the essential terms of the
contract and they satisfy the requirements of the Statute of
Frauds.
(Footnote 26, Paredes vs. Espino, 22 SCRA 1000 [1968]).
While there is no written contract of sale of the Pasig property executed
by BPI in favor of plaintiff, there are abundant notes and memoranda
extant in the records of this case evidencing the elements of a perfected
contract. There is Exhibit P, the letter of Kenneth Richard Awad
addressed to Roland Aromin, authorizing the sale of the subject property
at the price of P1,000.00 per square meter giving 2% commission to the
broker and instructing that the sale be on cash basis. Concomitantly, on
the basis of the instruction of Mr. Awad, (Exh. P), an authority to sell,
(Exh. B) was issued by BPI to Pedro Revilla, Jr., representing Assetrade
Co., authorizing the latter to sell the property at the initial quoted price of
P1,000.00 per square meter which was altered on an unaccepted offer by
Technoland. After the letter authority was issued to Mr. Revilla, a letter
authority was signed by Mr. Aromin allowing the buyer to enter the
premises of the property to inspect the same (Exh. C). On July 9, 1988,
Pedro Revilla, Jr., acting as agent of BPI, wrote a letter to BPI informing it
that he had procured a buyer in the name of Limketkai Sons Milling, Inc.
with offices at Limketkai Bldg., Greenhills, San Juan, Metro Manila,

represented by its Exec. Vice-President, Alfonso Lim (Exh. D). On July

11, 1988, the plaintiff, through Alfonso Lim, wrote a letter to the bank,
through Merlin Albano, confirming their transaction regarding the
purchase of the subject property (Exh. E). On July 18, 1988, the plaintiff
tendered upon the officials of the bank a check for P33,056,000.00
covered by Check No. CA510883, dated July 18, 1988. On July 1, 1988,
Alfonso Zamora instructed Mr. Aromin in a letter to resubmit new offers
only if there is no transaction closed with Assetrade Co. (Exh. S).
Combining all these notes and memoranda, the Court is convinced of the
existence of perfected contract of sale. Aptly, the Supreme Court, citing
American cases with approval, held:
No particular form of language or instrument is necessary
to constitute a memorandum or note in writing under the
statute of frauds; any document or writing, formal or
informal, written either for the purpose of furnishing
evidence of the contract or for another purpose, which
satisfies all the requirements of the statute as to contents
and signature, as discussed respectively infra secs. 178200, and infra secs. 201-205, is a sufficient memorandum
or note. A memorandum may be written as well with lead
pencil as with pen and ink. It may also be filled in on a
printed form. (37 C.J.S., 653-654).
The note or memorandum required by the statute of frauds
need not be contained in a single document, nor, when
contained in two or more papers, need each paper be
sufficient as to contents and signature to satisfy the
statute. Two or more writings properly connected may be
considered together, matters missing or uncertain in one
may be supplied or rendered certain by another, and their
sufficiency will depend on whether, taken together, they
meet the requirements of the statute as to contents and
the requirements of the statutes as to signature, as
considered respectively infra secs. 179-200 and secs. 201215.
(pp. 460-463, Original RTC Record).
The credibility of witnesses is also decisive in this case. The trial court directly observed
the demeanor and manner of testifying of the witnesses while the Court of Appeals relied
merely on the transcript of stenographic notes.
In this regard, the court of origin had this to say:
Apart from weighing the merits of the evidence of the parties, the Court
had occasion to observe the demeanor of the witnesses they presented.
This is one important factor that inclined the Court to believe in the
version given by the plaintiff because its witnesses, including hostile
witness Roland V. Aromin, an assistant vice-president of the bank, were

straightforward, candid and unhesitating in giving their respective

testimonies. Upon the other hand, the witnesses of BPI were evasive,
less than candid and hesitant in giving their answers to cross examination
questions. Moreover, the witnesses for BPI and NBS contradicted each
other. Fernando Sison III insisted that the authority to sell issued to Mr.
Revilla was merely an evidence by which a broker may convince a
prospective buyer that he had authority to offer the property mentioned
therein for sale and did not bind the bank. On the contrary, Alfonso
Zamora, a Senior Vice-President of the bank, admitted that the authority
to sell issued to Mr. Pedro Revilla, Jr. was valid, effective and binding
upon the bank being signed by two class "A" signatories and that the
bank cannot back out from its commitment in the authority to sell to Mr.
Revilla.
While Alfredo Ramos of NBS insisted that he did not know personally and
was not acquainted with Edmundo Barcelon, the latter categorically
admitted that Alfredo Ramos was his friend and that they have even
discussed in one of the luncheon meetings the matter of the sale of the
Pasig property to NBS. George Feliciano emphatically said that he was
not a consultant of Mr. Ramos nor was he connected with him in any
manner, but his calling card states that he was a consultant to the
chairman of the Pacific Rim Export and Holdings Corp. whose chairman
is Alfredo Ramos. This deliberate act of Mr. Feliciano of concealing his
being a consultant to Mr. Alfredo Ramos evidently was done by him to
avoid possible implication that he committed some underhanded
maneuvers in manipulating to have the subject property sold to NBS,
instead of being sold to the plaintiff.
(pp. 454-455, Original RTC Record.)
On the matter of credibility of witnesses where the findings or conclusions of the Court of
Appeals and the trial court are contrary to each other, the pronouncement of the Court
in Serrano vs. Court of Appeals (196 SCRA 107 [1991]) bears stressing:
It is a settled principle of civil procedure that the conclusions of the trial
court regarding the credibility of witnesses are entitled to great respect
from the appellate courts because the trial court had an opportunity to
observe the demeanor of witnesses while giving testimony which may
indicate their candor or lack thereof. While the Supreme Court ordinarily
does not rule on the issue of credibility of witnesses, that being a question
of fact not properly raised in a petition under Rule 45, the Court has
undertaken to do so in exceptional situations where, for instance, as here,
the trial court and the Court of Appeals arrived at divergent conclusions
on questions of fact and the credibility of witnesses.
(at p. 110.)
On the fourth question of whether or not NBS is an innocent purchaser for value, the
record shows that it is not. It acted in bad faith.

Respondent NBS ignored the notice of lis pendens annotated on the title when it bought
the lot. It was the willingness and design of NBS to buy property already sold to another
party which led BPI to dishonor the contract with Limketkai.
Petitioner cites several badges of fraud indicating that BPI and NBS conspired to prevent
petitioner from paying the agreed price and getting possession of the property:
1. The sale was supposed to be done through an authorized broker, but top officials of
BPI personally and directly took over this particular sale when a close friend became
interested.
2. BPI Senior Vice President Edmundo Barcelon admitted that NBS's President, Alfredo
Ramos, was his friend; that they had lunch meetings before this incident and discussed
NBS's purchase of the lot. Barcelon's father was a business associate of Ramos.
3. George Feliciano, in behalf of NBS, offered P5 million and later P7 million if petitioner
would drop the case and give up the lot. Feliciano went to petitioner's office and haggled
with Alfonso Lim but failed to convince him inspite of various and increasing offers.
4. In a place where big and permanent buildings abound, NBS had constructed only a
warehouse marked by easy portability. The warehouse is bolted to its foundations and
can easily be dismantled.
It is the very nature of the deed of absolute sale between BPI and NBS which, however,
clearly negates any allegation of good faith on the part of the buyer. Instead of the
vendee insisting that the vendor guarantee its title to the land and recognize the right of
the vendee to proceed against the vendor if the title to the land turns out to be defective
as when the land belongs to another person, the reverse is found in the deed of sale
between BPI and NBS. Any losses which NBS may incur in the event the title turns out
to be vested in another person are to be borne by NBS alone. BPI is expressly freed
under the contract from any recourse of NBS against it should BPI's title be found
defective.
NBS, in its reply memorandum, does not refute or explain the above circumstance
squarely. It simply cites the badges of fraud mentioned in Oria vs. McMicking (21 Phil.
243 [1912]) and argues that the enumeration there is exclusive. The decision in said
case plainly states "the following are some of the circumstances attending sales which
have been denominated by courts (as) badges of fraud." There are innumerable
situations where fraud is manifested. One enumeration in a 1912 decision cannot
possibly cover all indications of fraud from that time up to the present and into the future.
The Court of Appeals did not discuss the issue of damages. Petitioner cites the fee for
filing the amended complaint to implead NBS, sheriffs fees, registration fees, plane fare
and hotel expenses of Cebu-based counsel. Petitioner also claimed, and the trial court
awarded, damages for the profits and opportunity losses caused to petitioner's business
in the amount of P10,000,000.00.
We rule that the profits and the use of the land which were denied to petitioner because
of the non-compliance or interference with a solemn obligation by respondents is
somehow made up by the appreciation in land values in the meantime.

Prescinding from the above, we rule that there was a perfected contract between BPI
and petitioner Limketkai; that the BPI officials who transacted with petitioner had full
authority to bind the bank; that the evidence supporting the sale is competent and
admissible; and that the sale of the lot to NBS during the trial of the case was
characterized by bad faith.
WHEREFORE, the questioned judgment of the Court of Appeals is hereby REVERSED
and SET ASIDE. The June 10, 1991 judgment of Branch 151 of the Regional Trial Court
of The National Capital Judicial Region stationed in Pasig, Metro Manila is
REINSTATED except for the award of Ten Million Pesos (P10,000,000.00) damages
which is hereby DELETED.
SO ORDERED.

Lim v. Court of Appeals, G.R. No. 102784, 28 February 1996

[G.R. No. 102784. February 28, 1996]

ROSA

LIM, petitioner, vs. COURT

PHILIPPINES, respondents.

OF

APPEALS

and

PEOPLE

OF

THE

SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACTS ARE OBLIGATORY
IN WHATEVER FORM ENTERED; PLACE OF SIGNATURE IMMATERIAL;
PARTY BOUND THEREON THE MOMENT SHE AFFIXED HER SIGNATURE. Rosa Lims signature indeed appears on the upper portion of the receipt
immediately below the description of the items taken. We find that this fact does not
have the effect of altering the terms of the transaction from a contract of agency to
sell on commission basis to a contract of sale. Neither does it indicate absence or
vitiation of consent thereto on the part of Rosa Lim which would make the contract
void or voidable. The moment she affixed her signature thereon, petitioner became
bound by all the terms stipulated in the receipt. She, thus, opened herself to all the
legal obligations that may arise from their breach. This is clear from Article 1356 of
the New Civil Code which provides: Contracts shall be obligatory in whatever form
they may have been entered into, provided all the essential requisites for their
validity are present. In the case before us, the parties did not execute a notarial will
but a simple contract of agency to sell on commission basis, thus making the
position of petitioners signature thereto immaterial.
2. ID.; ID.; CONTRACT OF AGENCY; NO FORMALITIES REQUIRED. - There are
some provisions of the law which require certain formalities for particular
contracts. The first is when the form is required for the validity of the contract; the
second is when it is required to make the contract effective as against the third
parties such as those mentioned in Articles 1357 and 1358; and the third is when
the form is required for the purppose of proving the existence of the contract, such
as those provided in the Statute of Frauds in Article 1403. A contract of agency to
sell on commission basis does not belong to any of these three categories, hence, it
is valid and enforceable in whatever form it may be entered into.
3. REMEDIAL LAW; EVIDENCE; WEIGHT THEREOF NOT DETERMINED BY
SUPERIORITY IN NUMBERS OF WITNESSES. - Weight of evidence is not
determined mathematically by the numerical superiority of the witnesses testifying to
a given fact. It depends upon its practical effect in inducing belief on the part of the
judge trying the case.
4. ID.; ID.; CREDIBILITY; FINDINGS OF THE TRIAL AND APPELLATE COURTS
GENERALLY NOT INTERFERED WITH ON APPEAL. - In the case at bench, both
the trial court and the Court of Appeals gave weight to the testimony of Vicky Suarez
that she did not authorize Rosa Lim to return the pieces of jewelry to Nadera. We
shall not disturb this finding of the respondent court. It is well settled that we should
not interfere with the judgment of the trial court in determining the credibility of

witnesses, unless there appears in the record some fact or circumstances of weight
and influence which has been overlooked or the significance of which has been
misinterpreted. The reason is that the trial court is in a better position to determine
questions involving credibility having heard the witnesses and having observed their
deportment and manner of testifying during the trial.
5. CRIMINAL LAW; ESTAFA WITH ABUSE OF CONFIDENCE; ELEMENTS. - The
elements of estafa with abuse of confidence under this subdivision are as follows:
(1) That money, goods, or other personal property be received by the offender in
trust, or on commission, or for administration, or under any other obligation involving
the duty to make delivery of, or to return, the same; (2) That there be
misappropriation or conversion of such money or property by the offender or denial
on his part of such receipt; (3) That such misappropriation or conversion or denial is
to the prejudice of another; and (4) That there is a demand made by the offended
party to the offender (Note: The 4th element is not necessary when there is
evidence of misappropriation of the goods by the defendant).
6. ID.; ID.; ID.; PRESENT IN CASE AT BAR. All the elements of estafa under Article
315, Paragraph 1(b) of the Revised Penal Code, are present in the case at
bench. First, the receipt marked as Exhibit A proves that petitioner Rosa Lim
received the pieces of jewelry in trust from Vicky Suarez to be sold on commission
basis. Second, petitioner misappropriated or converted the jewelry to her own use;
and, third, such misappropriation obviously caused damaged and prejudice to the
private respondent.
APPEARANCES OF COUNSEL
Zosa & Quijano Law Offices for petitioner.
The Solicitor General for respondents.
DECISION
HERMOSISIMA, JR., J.:
This is a petition to review the Decision of the Court of Appeals in CA-G.R. CR No.
10290, entitled People v. Rosa Lim, promulgated on August 30, 1991.
On January 26, 1989, an Information for Estafa was filed against petitioner Rosa
Lim before Branch 92 of the Regional Trial Court of Quezon City.[1] The Information
reads:
That on or about the 8th day of October 1987, in Quezon City, Philippines and within the
jurisdiction of this Honorable Court, the said accused with intent to gain, with
unfaithfulness and/or abuse of confidence, did, then and there, wilfully, unlawfully and
feloniously defraud one VICTORIA SUAREZ, in the following manner, to wit: on the date
and place aforementioned said accused got and received in trust from said complainant
one (1) ring 3.35 solo worth P169,000.00, Philippine Currency, with the obligation to sell
the same on commission basis and to turn over the proceeds of the sale to said
complainant or to return said jewelry if unsold, but the said accused once in possession
thereof and far from complying with her obligation despite repeated demands therefor,
misapplied, misappropriated and converted the same to her own personal use and
benefit, to the damage and prejudice of the said offended party in the amount

aforementioned and in such other amount as may be awarded under the provisions of
the Civil Code.
CONTRARY TO LAW.[2]
After arraignment and trial on the merits, the trial court rendered judgment, the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense of estafa
as defined and penalized under Article 315, paragraph 1(b) of the Revised Penal Code;
2. Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and TWO (2)
MONTHS of prision correccional as minimum, to TEN (10) YEARS ofprision mayor as
maximum;
3. Ordering her to return to the offended party Mrs. Victoria Suarez the ring or its value in
the amount of P169,000 without subsidiary imprisonment in case of insolvency; and
4. To pay costs.[3]
On appeal, the Court of Appeals affirmed the Judgment of conviction with the
modification that the penalty imposed shall be six (6) years, eight (8) months and twentyone (21) days to twenty (20) years in accordance with Article 315, paragraph 1 of the
Revised Penal Code.[4]
Petitioner filed a motion for reconsideration before the appellate court on September
20, 1991, but the motion was denied in a Resolution dated November 11, 1991.
In her final bid to exonerate herself, petitioner filed the instant petition for review
alleging the following grounds:
I
THE RESPONDENT COURT VIOLATED THE CONSTITUTION, THE RULES OF
COURT AND THE DECISION OF THIS HONORABLE COURT IN NOT PASSING
UPON THE FIRST AND THIRD ASSIGNED ERRORS IN PETITIONERS BRIEF;
II
THE RESPONDENT COURT FAILED TO APPLY THE PRINCIPLE THAT THE PAROL
EVIDENCE RULE WAS WAIVED WHEN THE PRIVATE PROSECUTOR CROSSEXAMINED THE PETITIONER AND AURELIA NADERA AND WHEN COMPLAINANT
WAS CROSS-EXAMINED BY THE COUNSEL FOR THE PETITIONER AS TO THE
TRUE NATURE OF THE AGREEMENT BETWEEN THE PARTIES WHEREIN IT WAS
DISCLOSED THAT THE TRUE AGREEMENT OF THE PARTIES WAS A SALE OF
JEWELRIES AND NOT WHAT WAS EMBODIED IN THE RECEIPT MARKED AS
EXHIBIT A WHICH WAS RELIED UPON BY THE RESPONDENT COURT IN
AFFIRMING THE JUDGMENT OF CONVICTION AGAINST HEREIN PETITIONER; and

III
THE RESPONDENT COURT FAILED TO APPLY IN THIS CASE THE PRINCIPLE
ENUNCIATED BY THIS HONORABLE COURT TO THE EFFECT THAT ACCUSATION
IS NOT, ACCORDING TO THE FUNDAMENTAL LAW, SYNONYMOUS WITH
GUILT: THE PROSECUTION MUST OVERTHROW THE PRESUMPTION OF
INNOCENCE WITH PROOF OF GUILT BEYOND REASONABLE DOUBT. TO MEET
THIS STANDARD, THERE IS NEED FOR THE MOST CAREFUL SCRUTINY OF THE
TESTIMONY OF THE STATE, BOTH ORAL AND DOCUMENTARY, INDEPENDENTLY
OF WHATEVER DEFENSE IS OFFERED BY THE ACCUSED. ONLY IF THE JUDGE
BELOW AND THE APPELLATE TRIBUNAL COULD ARRIVE AT A CONCLUSION
THAT THE CRIME HAD BEEN COMMITTED PRECISELY BY THE PERSON ON
TRIAL UNDER SUCH AN EXACTING TEST SHOULD SENTENCE THUS REQUIRED
THAT EVERY INNOCENCE BE DULY TAKEN INTO ACCOUNT. THE PROOF
AGAINST HIM MUST SURVIVE THE TEST OF REASON, THE STRONGEST
SUSPICION MUST NOT BE PERMITTED TO SWAY JUDGMENT. (People v. Austria,
195 SCRA 700)[5]
Herein the pertinent facts as alleged by the prosecution.
On or about October 8, 1987, petitioner Rosa Lim who had come from Cebu
received from private respondent Victoria Suarez the following two pieces of jewelry: one
(1) 3.35 carat diamond ring worth P169,000.00 and one (1) bracelet worth P170,000.00,
to be sold on commission basis. The agreement was reflected in a receipt marked as
Exhibit A[6] for the prosecution. The transaction took place at the Sir Williams Apartelle in
Timog Avenue, Quezon City, where Rosa Lim was temporarily billeted.
On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but failed
to return the diamond ring or to turn over the proceeds thereof if sold. As a result, private
complainant, aside from making verbal demands, wrote a demand letter[7] to petitioner
asking for the return of said ring or the proceeds of the sale thereof. In response,
petitioner, thru counsel, wrote a letter[8] to private respondents counsel alleging that
Rosa Lim had returned both ring and bracelet to Vicky Suarez sometime in September,
1987, for which reason, petitioner had no longer any liability to Mrs. Suarez insofar as
the pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa
under Article 315, par. 1(b) of the Revised Penal Code for which the petitioner herein
stands convicted.
Petitioner has a different version.
Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in
October 1987, together with one Aurelia Nadera, who introduced petitioner to private
respondent, and that they were lodged at the Williams Apartelle in Timog, Quezon
City. Petitioner denied that the transaction was for her to sell the two pieces of jewelry on
commission basis. She told Mrs. Suarez that she would consider buying the pieces of
jewelry for her own use and that she would inform the private complainant of such
decision before she goes back to Cebu. Thereafter, the petitioner took the pieces of
jewelry and told Mrs. Suarez to prepare the necessary paper for me to sign because I
was not yet prepare(d) to buy it.[9] After the document was prepared, petitioner signed
it. To prove that she did not agree to the terms of the receipt regarding the sale on
commission basis, petitioner insists that she signed the aforesaid document on the

upper portion thereof and not at the bottom where a space is provided for the signature
of the person(s) receiving the jewelry.[10]
On October 12, 1987 before departing for Cebu, petitioner called up Mrs. Suarez by
telephone in order to inform her that she was no longer interested in the ring and
bracelet. Mrs. Suarez replied that she was busy at the time and so, she instructed the
petitioner to give the pieces of jewelry to Aurelia Nadera who would in turn give them
back to the private complainant. The petitioner did as she was told and gave the two
pieces of jewelry to Nadera as evidenced by a handwritten receipt, dated October 12,
1987.[11]
Two issues need to be resolved: First, what was the real transaction between Rosa
Lim and Vicky Suarez - a contract of agency to sell on commission basis as set out in
the receipt or a sale on credit; and, second, was the subject diamond ring returned to
Mrs. Suarez through Aurelia Nadera?
Petitioner maintains that she cannot be liable for estafa since she never received
the jewelries in trust or on commission basis from Vicky Suarez.The real agreement
between her and the private respondent was a sale on credit with Mrs. Suarez as the
owner-seller and petitioner as the buyer, as indicated by the fact that petitioner did not
sign on the blank space provided for the signature of the person receiving the jewelry but
at the upper portion thereof immediately below the description of the items taken.[12]
The contention is far from meritorious.
The receipt marked as Exhibit A which establishes a contract of agency to sell on
commission basis between Vicky Suarez and Rosa Lim is herein reproduced in order to
come to a proper perspective:
THIS IS TO CERTIFY, that I received from Vicky Suarez PINATUTUNAYAN KO na
aking tinanggap kay _______________ the following jewelries:
ang mga alahas na sumusunod:
Description Price
Mga Uri Halaga
1 ring 3.35 dolo P 169,000.00
1 bracelet 170.000.00
total Kabuuan P 339.000.00
in good condition, to be sold in CASH ONLY within . . .days from date of signing this
receipt na nasa mabuting kalagayan upang ipagbili ng KALIWAAN (ALCONTADO)
lamang sa loob ng. . . araw mula ng ating pagkalagdaan:
if I could not sell, I shall return all the jewelry within the period mentioned above; if I
would be able to sell, I shall immediately deliver and account the whole proceeds of sale
thereof to the owner of the jewelries at his/her residence; my compensation or
commission shall be the over-price on the value of each jewelry quoted above. I am
prohibited to sell any jewelry on credit or by installment; deposit, give for safekeeping;
lend, pledge or give as security or guaranty under any circumstance or manner, any
jewelry to other person or persons.

kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng taning na

panahong nakatala sa itaas; kung maipagbili ko naman ay dagli kong isusulit at ibibigay
ang buong pinagbilhan sa may-ari ng mga alahas sa kanyang bahay tahanan; ang aking
gantimpala ay ang mapapahigit na halaga sa nakatakdang halaga sa itaas ng bawat
alahas HIND I ko ipinahihintulutang ipa-u-u-tang o ibibigay na hulugan ang alin mang
alahas, ilalagak, ipagkakatiwala; ipahihiram; isasangla o ipananagot kahit sa anong
paraan ang alin mang alahas sa ibang mga tao o tao.
I sign my name this . . . day of. . . 19 . . . at Manila, NILALAGDAAN ko ang kasunduang
ito ngayong ika____ ng dito sa Maynila.
Signature of Persons who
received jewelries (Lagda
ng Tumanggap ng mga
Alahas)
Address: . . . . . . . . . . .
Rosa Lims signature indeed appears on the upper portion of the receipt immediately
below the description of the items taken. We find that this fact does not have the effect of
altering the terms of the transaction from a contract of agency to sell on commission
basis to a contract of sale. Neither does it indicate absence or vitiation of consent thereto
on the part of Rosa Lim which would make the contract void or voidable. The moment
she affixed her signature thereon, petitioner became bound by all the terms stipulated in
the receipt. She, thus, opened herself to all the legal obligations that may arise from their
breach. This is clear from Article 1356 of the New Civil Code which provides:
Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. x x x.
However, there are some provisions of the law which require certain formalities for
particular contracts. The first is when the form is required for the validity of the contract;
the second is when it is required to make the contract effective as against third parties
such as those mentioned in Articles 1357 and 1358; and the third is when the form is
required for the purpose of proving the existence of the contract, such as those provided
in the Statute of Frauds in Article 1403.[13] A contract of agency to sell on commission
basis does not belong to any of these three categories, hence it is valid and enforceable
in whatever form it may be entered into.
Furthermore, there is only one type of legal instrument where the law strictly
prescribes the location of the signature of the parties thereto. This is in the case of
notarial wills found in Article 805 of the Civil Code, to wit:
Every will, other than a holographic will, must be subscribed at the end thereof by the
testator himself x x x.
The testator or the person requested by him to write his name and the instrumental
witnesses of the will, shall also sign, as aforesaid, each and every page thereof, except
the last, on the left margin x x x.

In the case before us, the parties did not execute a notarial will but a simple contract
of agency to sell on commission basis, thus making the position of petitioners signature
thereto immaterial.
Petitioner insists, however, that the diamond ring had been returned to Vicky Suarez
through Aurelia Nadera, thus relieving her of any liability.Rosa Lim testified to this effect
on direct examination by her counsel:
Q: And when she left the jewelries with you, what did you do thereafter?
A: On October 12, I was bound for Cebu. So I called up Vicky through
telephone and informed her that I am no longer interested in the bracelet
and ring and that 1 will just return it.
Q: And what was the reply of Vicky Suarez?
A: She told me that she could not come to the apartelle since she was very
busy. So, she asked me if Aurelia was there and when I informed her that
Aurelia was there, she instructed me to give the pieces of jewelry to Aurelia
who in turn will give it back to Vicky.
Q: And you gave the two (2) pieces of jewelry to Aurelia Nadera?
A: Yes, Your Honor.[14]
This was supported by Aurelia Nadera in her direct examination by petitioners
counsel:
Q: Do you know if Rosa Lim in fact returned the jewelries ?
A: She gave the jewelries to me.
Q: Why did Rosa Lim give the jewelries to you?
A: Rosa Lim called up Vicky Suarez the following morning and told Vicky
Suarez that she was going home to Cebu and asked if she could give the
jewelries to me.
Q: And when did Rosa Lim give to you the jewelries?
A: Before she left for Cebu.[15]
On rebuttal, these testimonies were belied by Vicky Suarez herself:
Q: It has been testified to here also by both Aurelia Nadera and Rosa Lim that
you gave authorization to Rosa Lim to turn over the two (2) pieces of
jewelries mentioned in Exhibit A to Aurelia Nadera, what can you say about
that?
A:. That is not true sir, because at that time Aurelia Nadera is highly indebted to
me in the amount of P 140,000.00, so if I gave it to Nadera, I will be
exposing myself to a high risk.[16]
The issue as to the return of the ring boils down to one of credibility. Weight of
evidence is not determined mathematically by the numerical superiority of the witnesses
testifying to a given fact. It depends upon its practical effect in inducing belief on the part
of the judge trying the case.[17] In the case at bench, both the trial court and the Court of
Appeals gave weight to the testimony of Vicky Suarez that she did not authorize Rosa

Lim to return the pieces of jewelry to Nadera. The respondent court, in affirming the trial
court, said:
x x x This claim (that the ring had been returned to Suarez thru Nadera) is
disconcerting. It contravenes the very terms of Exhibit A. The instruction by the
complaining witness to appellant to deliver the ring to Aurelia Nadera is vehemently
denied by the complaining witness, who declared that she did not authorize and/or
instruct appellant to do so. And thus, by delivering the ring to Aurelia without the express
authority and consent of the complaining witness, appellant assumed the right to dispose
of the jewelry as if it were hers, thereby committing conversion, a clear breach of trust,
punishable under Article 315, par. 1(b), Revised Penal Code.
We shall not disturb this finding of the respondent court. It is well settled that we
should not interfere with the judgment of the trial court in determining the credibility of
witnesses, unless there appears in the record some fact or circumstance of weight and
influence which has been overlooked or the significance of which has been
misinterpreted. The reason is that the trial court is in a better position to determine
questions involving credibility having heard the witnesses and having observed their
deportment and manner of testifying during the trial.[18]
Article 315, par. 1(b) of the Revised Penal Code provides:
ART. 315. Swindling (estafa). - Any person who shall defraud another by any of the
means mentioned hereinbelow shall be punished by:
xxx xxx xxx
(b) By misappropriating or converting, to the prejudice of another, money, goods, or any
other personal property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery of or to
return the same, even though such obligation be totally or partially guaranteed by a
bond; or by denying having received such money, goods, or other property.
xxx xxx xxx
The elements of estafa with abuse of confidence under this subdivision are as
follows: (1) That money, goods, or other personal property be received by the offender in
trust, or on commission, or for administration, or under any other obligation involving the
duty to make delivery of, or to return, the same; (2) That there be misappropriation or
conversion of such money or property by the offender or denial on his part of such
receipt; (3) That such misappropriation or conversion or denial is to the prejudice of
another; and (4) That there is a demand made by the offended party to the offender
(Note: The 4th element is not necessary when there is evidence of misappropriation of
the goods by the defendant).[19]
All the elements of estafa under Article 315, Paragraph 1(b) of the Revised Penal
Code, are present in the case at bench. First, the receipt marked as Exhibit A proves
that petitioner Rosa Lim received the pieces of jewelry in trust from Vicky Suarez to be
sold on commission basis. Second, petitioner misappropriated or converted the jewelry
to her own use; and, third, such misappropriation obviously caused damage and
prejudice to the private respondent.

WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals is
hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.

Form for enforceability (Statute of Frauds)

Paredes v. Espino, G.R. No. L-23351, 13 March 1968 memorandum
G.R. No. L-23351

March 13, 1968

CIRILO
vs.
JOSE L. ESPINO, defendant-appellee.
Simeon
Capule
Iigo R. Pea for defendant-appellee.

PAREDES, plaintiff-appellant,

for

plaintiff-appellant.

REYES, J.B.L., Actg. C.J.:

Appeal from an order of the Court of First Instance of Palawan in its Civil Case No.
453, granting a motion to dismiss the complaint.
Appellant Cirilo Parades had filed an action to compel defendant-appellee Jose L.
Espino to execute a deed of sale and to pay damages. The complaint alleged that the
defendant "had entered into the sale" to plaintiff of Lot No. 67 of the Puerto Princesa
Cadastre at P4.00 a square meter; that the deal had been "closed by letter and
telegram" but the actual execution of the deed of sale and payment of the price were
deferred to the arrival of defendant at Puerto Princesa; that defendant upon arrival had
refused to execute the deed of sale altho plaintiff was able and willing to pay the price,
and continued to refuse despite written demands of plaintiff; that as a result, plaintiff had
lost expected profits from a resale of the property, and caused plaintiff mental anguish
and suffering, for which reason the complaint prayed for specific performance and
damages.
Defendant filed a motion to dismiss upon the ground that the complaint stated no
cause of action, and that the plaintiff's claim upon which the action was founded was
unenforceable under the Statute of Frauds.
Plaintiff opposed in writing the motion to dismiss and annexed to his opposition a
copy of a letter purportedly signed by defendant (Annex "A"), wherein it was stated
(Record on Appeal, pp. 19-20)
106
Tuguegarao,Cagayan
May18,1964
Mr.CiriloParedes
Pto.Princesa,Palawan

GonzagaSt.

Dear Mr. Paredes:

So far I received two letters from you, one dated April 17 and the
other April 29, both 1964. In reply thereto, please be informed that after

consulting with my wife, we both decided to accept your last offer of Four
(P4.00) pesos per square meter of the lot which contains 1826 square
meters and on cash basis.
In order that we can facilitate the transaction of the sale in question,
we (Mrs. Espino and I), are going there (Puerto Princess, Pal.) to be there
during the last week of the month, May. I will send you a telegram, as per
your request, when I will reach Manila before taking the boat for Pto.
Princess. As it is now, there is no schedule yet of the boats plying
between Manila and Pto. Princess for next week.
Plaintiff also appended as Annex "A-1", a telegram apparently from defendant
advising plaintiff of his arrival by boat about the last week of May 1964 (Annex "A-1"
Record on Appeal, p. 21), as well as a previous letter of defendant (Appendix B, Record
on Appeal, p. 35) referring to the lot as the one covered by Certificate of Title No. 62.
These allegations and documents notwithstanding, the Court below dismissed the
complaint on the ground that there being no written contract, under Article 1403 of the
Civil Code of the Philippines
Although the contract is valid in itself, the same can not be enforced by
virtue of the Statute of Frauds. (Record on Appeal, p. 37).1wph1.t
Plaintiff duly appealed to this Court.
The sole issue here is whether enforcement of the contract pleaded in the
complaint is barred by the Statute of Frauds; and the Court a quo plainly erred in holding
that it was unenforceable.
The Statute of Frauds, embodied in Article 1403 of the Civil Code of the
Philippines, does not require that the contract itself be in writing. The plain text of Article
1403, paragraph (2) is clear that a written note or memorandum, embodying the
essentials of the contract and signed by the party charged, or his agent, suffices to make
the verbal agreement enforceable, taking it out of the operation of the statute.
Art. 1403. The following contracts are unenforceable, unless they are
ratified:
(1) . . .
(2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the writing, or a
secondary evidence of its contents:
xxx

xxx

xxx

(e) An agreement for the leasing for a longer period than one year, or for
the sale of real property or of an interest therein.1wph1.t
xxx

xxx

xxx

In the case at bar, the complaint in its paragraph 3 pleads that the deal had been
closed by letter and telegram" (Record on Appeal, p. 2), and the letter referred to was
evidently the one copy of which was appended as Exhibit A to plaintiff's opposition to the
motion dismiss. This letter, transcribed above in part, together with that one marked as
Appendix B, constitute an adequate memorandum of the transaction. They are signed by
the defendant-appellee; refer to the property sold as a lot in Puerto Princesa, Palawan,
covered, by TCT No. 62; give its area as 1826 square meters and the purchase price of
four (P4.00) pesos per square meter payable in cash. We have in them therefore, all the
essential terms of the contract, and they satisfy the requirements of the Statute of
Frauds. We have ruled in Berg vs. Magdalena Estate, Inc., 92 Phil. 110, 115, that a
sufficient memorandum may be contained in two or more documents.
Defendant-appellee argues that the authenticity of the letters has not been
established. That is not necessary for the purpose of showing prima facie that the
contract is enforceable. For as ruled by us in Shaffer vs. Palma, L-24115, March 1,
1968, whether the agreement is in writing or not, is a question of evidence; and the
authenticity of the writing need not be established until the trial is held. The plaintiff
having alleged that the contract is backed by letter and telegram, and the same being a
sufficient memorandum, his cause of action is thereby established, especially since the
defendant has not denied the letters in question. At any rate, if the Court below
entertained any doubts about the existence of the written memorandum, it should have
called for a preliminary hearing on that point, and not dismissed the complaint.
WHEREFORE, the appealed order is hereby set aside, and the case remanded to
the Court of origin for trial and decision. Costs against defendant-appellee Jose L.
Espino. So ordered.

Orduna v. Fuentabella, G.R. No. 176841, June 29, 2010 partially execute contracts
FIRST DIVISION
ANTHONY ORDUA, DENNIS ORDUA, and
ANTONITA ORDUA,
Petitioners,

- versus EDUARDO J. FUENTEBELLA, MARCOS S.

CID, BENJAMIN F. CID, BERNARD G.
BANTA, and ARMANDO GABRIEL, JR.,
Respondents.

G.R. No. 176841

Present:
CORONA, C.J., Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.
Promulgated:

June 29, 2010

x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
In this Petition for Review[1] under Rule 45 of the Rules of Court, Anthony Ordua,
Dennis Ordua and Antonita Ordua assail and seek to set aside the Decision[2] of the
Court of Appeals (CA) dated December 4, 2006 in CA-G.R. CV No. 79680, as reiterated
in its Resolution of March 6, 2007, which affirmed the May 26, 2003 Decision[3] of the
Regional Trial Court (RTC), Branch 3 in Baguio City, in Civil Case No. 4984-R, a suit
for annulment of title and reconveyance commenced by herein petitioners against herein
respondents.
Central to the case is a residential lot with an area of 74 square meters located at
Fairview Subdivision, Baguio City, originally registered in the name of Armando Gabriel,
Sr. (Gabriel Sr.) under Transfer Certificate of Title (TCT) No. 67181 of the Registry of
Deeds of Baguio City.[4]
As gathered from the petition, with its enclosures, and the comments thereon of
four of the five respondents,[5] the Court gathers the following relevant facts:
Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to petitioner
Antonita Ordua (Antonita), but no formal deed was executed to document the sale. The
contract price was apparently payable in installments as Antonita remitted from time to

time and Gabriel Sr. accepted partial payments. One of the Orduas would later testify
that Gabriel Sr. agreed to execute a final deed of sale upon full payment of the purchase
price.[6]
As early as 1979, however, Antonita and her sons, Dennis and Anthony Ordua,
were already occupying the subject lot on the basis of some arrangement undisclosed in
the records and even constructed their house thereon. They also paid real property
taxes for the house and declared it for tax purposes, as evidenced by Tax Declaration
No. (TD) 96-04012-111087[7] in which they place the assessed value of the structure at
PhP 20,090.
After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr.,
secured TCT No. T-71499[8] over the subject lot and continued accepting payments from
the petitioners. On December 12, 1996, Gabriel Jr. wrote Antonita authorizing her to
fence off the said lot and to construct a road in the adjacent lot.[9] On December 13,
1996,

Gabriel

petitioners.

[10]

Jr.

acknowledged

Through a letter

[11]

receipt

of

PhP

40,000

payment

from

dated May 1, 1997, Gabriel Jr. acknowledged that

petitioner had so far made an aggregate payment of PhP 65,000, leaving an outstanding
balance of PhP 60,000. A receipt Gabriel Jr. issued dated November 24, 1997 reflected
a PhP 10,000 payment.
Despite all those payments made for the subject lot, Gabriel Jr. would later sell it
to Bernard Banta (Bernard) obviously without the knowledge of petitioners, as later
developments would show.
As narrated by the RTC, the lot conveyance from Gabriel Jr. to Bernard was
effected against the following backdrop: Badly in need of money, Gabriel Jr. borrowed
from Bernard the amount of PhP 50,000, payable in two weeks at a fixed interest rate,
with the further condition that the subject lot would answer for the loan in case of
default. Gabriel Jr. failed to pay the loan and this led to the execution of a Deed of
Sale[12] dated June 30, 1999 and the issuance later of TCT No. T-72782[13] for subject lot
in the name of Bernard upon cancellation of TCT No. 71499 in the name of Gabriel, Jr.
As the RTC decision indicated, the reluctant Bernard agreed to acquire the lot, since he
had by then ready buyers in respondents Marcos Cid and Benjamin F. Cid (Marcos and
Benjamin or the Cids).

Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed
with a Deed of Absolute Sale of a Registered Land[14]dated January 19, 2000, the Cids
were able to cancel TCT No. T-72782 and secure TCT No. 72783[15] covering the subject
lot. Just like in the immediately preceding transaction, the deed of sale between Bernard
and the Cids had respondent Eduardo J. Fuentebella (Eduardo) as one of the
instrumental witnesses.
Marcos and Benjamin, in turn, ceded the subject lot to Eduardo through a Deed
of Absolute Sale[16] dated May 11, 2000. Thus, the consequent cancellation of TCT No.
T-72782 and issuance on May 16, 2000 of TCT No. T-3276[17] over subject lot in the
name of Eduardo.
As successive buyers of the subject lot, Bernard, then Marcos and Benjamin, and
finally Eduardo, checked, so each claimed, the title of their respective predecessors-ininterest with the Baguio Registry and discovered said title to be free and unencumbered
at the time each purchased the property. Furthermore, respondent Eduardo, before
buying the property, was said to have inspected the same and found it unoccupied by
the Orduas.[18]
Sometime in May 2000, or shortly after his purchase of the subject lot, Eduardo,
through his lawyer, sent a letter addressed to the residence of Gabriel Jr. demanding
that all persons residing on or physically occupying the subject lot vacate the premises
or face the prospect of being ejected.[19]
Learning of Eduardos threat, petitioners went to the residence of Gabriel Jr. at
No. 34 Dominican Hill, Baguio City. There, they met Gabriel Jr.s estranged wife,
Teresita, who informed them about her having filed an affidavit-complaint against her
husband and the Cids for falsification of public documents on March 30, 2000. According
to Teresita, her signature on the June 30, 1999 Gabriel Jr.Bernard deed of sale was a
forgery. Teresita further informed the petitioners of her intent to honor the
aforementioned 1996 verbal agreement between Gabriel Sr. and Antonita and the partial
payments they gave her father-in-law and her husband for the subject lot.
On
Complaint

[20]

July

3,

for Annulment

2001,
of

petitioners,
Title,

joined

Reconveyance

by
with

Teresita,

filed

Damages against

a
the

respondents before the RTC, docketed as Civil Case No. 4984-R, specifically praying

that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be annulled. Corollary
to this prayer, petitioners pleaded that Gabriel Jr.s title to the lot be reinstated and that
petitioners be declared as entitled to acquire ownership of the same upon payment of
the remaining balance of the purchase price therefor agreed upon by Gabriel Sr. and
Antonita.
While impleaded and served with summons, Gabriel Jr. opted not to submit an
answer.
Ruling of the RTC
By Decision dated May 26, 2003, the RTC ruled for the respondents, as
defendants a quo, and against the petitioners, as plaintiffs therein, the dispositive portion
of which reads:
WHEREFORE, the instant complaint is hereby DISMISSED for lack of
merit. The four (4) plaintiffs are hereby ordered by this Court to
pay eachdefendant (except Armando Gabriel, Jr., Benjamin F. Cid, and
Eduardo J. Fuentebella who did not testify on these damages), Moral
Damages
of
Twenty
Thousand
(P20,000.00)
Pesos,
so
that each defendant shall receive Moral Damages of Eighty Thousand
(P80,000.00) Pesos each. Plaintiffs shall also pay all defendants (except
Armando Gabriel, Jr., Benjamin F. Cid, and Eduardo J. Fuentebella who
did not testify on these damages), Exemplary Damages of Ten Thousand
(P10,000.00) Pesos each so that each defendant shall receive Forty
Thousand (P40,000.00) Pesos as Exemplary Damages. Also, plaintiffs
are ordered to pay each defendant (except Armando Gabriel, Jr.,
Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify on these
damages), Fifty Thousand (P50,000.00) Pesos as Attorneys Fees, jointly
and solidarily.
Cost of suit against the plaintiffs.[21]

On the main, the RTC predicated its dismissal action on the basis of the following
grounds and/or premises:

1. Eduardo was a purchaser in good faith and, hence, may avail himself of the
provision of Article 1544[22] of the Civil Code, which provides that in case of double sale,

the party in good faith who is able to register the property has better right over the
property;
2. Under Arts. 1356[23] and 1358[24] of the Code, conveyance of real property
must be in the proper form, else it is unenforceable;
3. The verbal sale had no adequate consideration; and
4. Petitioners right of action to assail Eduardos title prescribes in one year from
date of the issuance of such title and the one-year period has already lapsed.
From the above decision, only petitioners appealed to the CA, their appeal
docketed as CA-G.R. CV No. 79680.
The CA Ruling
On December 4, 2006, the appellate court rendered the assailed Decision
affirming the RTC decision. The fallo reads:
WHEREFORE, premises considered, the instant appeal is hereby
DISMISSED and the 26 May 2003 Decision of the Regional Trial Court,
Branch 3 of Baguio City in Civil Case No. 4989-R is hereby AFFIRMED.
SO ORDERED.[25]

Hence, the instant petition on the submission that the appellate court committed
reversible error of law:
1. xxx WHEN IT HELD THAT THE SALE OF
SUBJECT LOT BY
ARMANDO
GABRIEL,
SR.
RESPONDENT
ARMANDO
GABRIEL,
JR.
TO
PETITIONERS IS UNENFORCEABLE.

THE
AND
THE

2. xxx IN NOT FINDING THAT THE SALE OF THE

SUBJECT LOT BY RESPONDENT ARMANDO GABRIEL, JR. TO
RESPONDENT
BERNARD
BANTA
AND
ITS
SUBSEQUENT SALE BY
THE
LATTER
TO
HIS
CORESPONDENTS ARE NULL AND VOID.
3. xxx IN NOT FINDING THAT THE RESPONDENTS ARE
BUYERS IN BAD FAITH

4. xxx IN FINDING THAT THE SALE OF THE SUBJECT

LOT BETWEEN GABRIEL, SR. AND RESPONDENT GABRIEL,
JR. AND THE PETITIONERS HAS NO ADEQUATE
CONSIDERATION.
5. xxx IN RULING THAT THE INSTANT ACTION HAD
ALREADY PRESCRIBED.
6. xxx IN FINDING THAT THE PLAINTIFFS-APPELLANTS
ARE LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND
ATTORNEYS FEES.[26]

The Courts Ruling

The core issues tendered in this appeal may be reduced to four and formulated
as follows, to wit: first, whether or not the sale of the subject lot by Gabriel Sr. to Antonita
is unenforceable under the Statute of Frauds; second, whether or not such sale has
adequate consideration; third, whether the instant action has already prescribed;
and, fourth, whether or not respondents are purchasers in good faith.
The petition is meritorious.
Statute of Frauds Inapplicable
to Partially Executed Contracts

It is undisputed that Gabriel Sr., during his lifetime, sold the subject property to
Antonita, the purchase price payable on installment basis. Gabriel Sr. appeared to have
been a recipient of some partial payments. After his death, his son duly recognized the
sale by accepting payments and issuing what may be considered as receipts therefor.
Gabriel Jr., in a gesture virtually acknowledging the petitioners dominion of the property,
authorized them to construct a fence around it. And no less than his wife, Teresita,
testified as to the fact of sale and of payments received.
Pursuant to such sale, Antonita and her two sons established their residence on
the lot, occupying the house they earlier constructed thereon. They later declared the
property for tax purposes, as evidenced by the issuance of TD 96-04012-111087 in their
or Antonitas name, and paid the real estates due thereon, obviously as sign that they are
occupying the lot in the concept of owners.

Given the foregoing perspective, Eduardos assertion in his Answer that persons
appeared in the property[27] only after he initiated ejectment proceedings[28] is clearly
baseless. If indeed petitioners entered and took possession of the property after he
(Eduardo) instituted the ejectment suit, how could they explain the fact that he sent a
demand letter to vacate sometime in May 2000?
With the foregoing factual antecedents, the question to be resolved is whether or
not the Statute of Frauds bars the enforcement of the verbal sale contract between
Gabriel Sr. and Antonita.
The CA, just as the RTC, ruled that the contract is unenforceable for noncompliance with the Statute of Frauds.
We disagree for several reasons. Foremost of these is that the Statute of
Frauds expressed in Article 1403, par. (2),[29] of the Civil Codeapplies only to executory
contracts, i.e., those where no performance has yet been made. Stated a bit differently,
the legal consequence of non-compliance with the Statute does not come into play
where the contract in question is completed, executed, or partially consummated.[30]
The Statute of Frauds, in context, provides that a contract for the sale of real
property or of an interest therein shall be unenforceable unless the sale or some note or
memorandum thereof is in writing and subscribed by the party or his agent. However,
where the verbal contract of sale has been partially executed through the partial
payments made by one party duly received by the vendor, as in the present case, the
contract is taken out of the scope of the Statute.
The purpose of the Statute is to prevent fraud and perjury in the enforcement of
obligations depending for their evidence on the unassisted memory of witnesses, by
requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged.[31] The Statute requires certain contracts to be
evidenced by some note or memorandum in order to be enforceable.

The

termStatute of Frauds is descriptive of statutes that require certain classes of contracts

to be in writing. The Statute does not deprive the parties of the right to contract with
respect to the matters therein involved, but merely regulates the formalities of the
contract necessary to render it enforceable.[32]

Since contracts are generally obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present,[33] the
Statute simply provides the method by which the contracts enumerated in Art. 1403 (2)
may be proved but does not declare them invalid because they are not reduced to
writing. In fine, the form required under the Statute is for convenience or evidentiary
purposes only.

There can be no serious argument about the partial execution of the sale in
question. The records show that petitioners had, on separate occasions, given Gabriel
Sr. and Gabriel Jr. sums of money as partial payments of the purchase price. These
payments were duly receipted by Gabriel Jr. To recall, in his letter of May 1, 1997,
Gabriel, Jr. acknowledged having received the aggregate payment of PhP 65,000 from
petitioners with the balance of PhP 60,000 still remaining unpaid. But on top of the
partial payments thus made, possession of the subject of the sale had been transferred
to Antonita as buyer. Owing thus to its partial execution, the subject sale is no longer
within the purview of the Statute of Frauds.
Lest it be overlooked, a contract that infringes the Statute of Frauds is ratified by
the acceptance of benefits under the contract.[34]Evidently, Gabriel, Jr., as his father
earlier, had benefited from the partial payments made by the petitioners. Thus, neither
Gabriel Jr. nor the other respondentssuccessive purchasers of subject lotscould
plausibly set up the Statute of Frauds to thwart petitioners efforts towards establishing
their lawful right over the subject lot and removing any cloud in their title. As it were,
petitioners need only to pay the outstanding balance of the purchase price and that
would complete the execution of the oral sale.
There was Adequate Consideration
Without directly saying so, the trial court held that the petitioners cannot sue
upon the oral sale since in its own words: x x x for more than a decade, [petitioners]
have not paid in full Armando Gabriel, Sr. or his estate, so that the sale transaction
between Armando Gabriel Sr. and [petitioners] [has] no adequate consideration.
The trial courts posture, with which the CA effectively concurred, is patently
flawed. For starters, they equated incomplete payment of the purchase price with

inadequacy of price or what passes as lesion, when both are different civil law concepts
with differing legal consequences, the first being a ground to rescind an otherwise valid
and enforceable contract. Perceived inadequacy of price, on the other hand, is not a
sufficient ground for setting aside a sale freely entered into, save perhaps when the
inadequacy is shocking to the conscience.[35]
The Court to be sure takes stock of the fact that the contracting parties to the
1995 or 1996 sale agreed to a purchase price of PhP 125,000 payable on
installments. But the original lot owner, Gabriel Sr., died before full payment can be
effected. Nevertheless, petitioners continued remitting payments to Gabriel, Jr., who sold
the subject lot to Bernard on June 30, 1999. Gabriel, Jr., as may be noted, parted with
the property only for PhP 50,000. On the other hand, Bernard sold it for PhP 80,000 to
Marcos and Benjamin. From the foregoing price figures, what is abundantly clear is that
what Antonita agreed to pay Gabriel, Sr., albeit in installment, was very much more than
what his son, for the same lot, received from his buyer and the latters buyer later. The
Court, therefore, cannot see its way clear as to how the RTC arrived at its simplistic
conclusion about the transaction between Gabriel Sr. and Antonita being without
adequate consideration.
The Issues of Prescription and the Bona
Fides of the Respondents as Purchasers

Considering the interrelation of these two issues, we will discuss them jointly.
There can be no quibbling about the fraudulent nature of the conveyance of the
subject lot effected by Gabriel Jr. in favor of Bernard. It is understandable that after his
fathers death, Gabriel Jr. inherited subject lot and for which he was issued TCT No. No.
T-71499. Since the Gabriel Sr. Antonita sales transaction called for payment of the
contract price in installments, it is also understandable why the title to the property
remained with the Gabriels. And after the demise of his father, Gabriel Jr. received
payments from the Orduas and even authorized them to enclose the subject lot with a
fence. In sum, Gabriel Jr. knew fully well about the sale and is bound by the contract as
predecessor-in-interest of Gabriel Sr. over the property thus sold.

Yet, the other respondents (purchasers of subject lot) still maintain that they are
innocent purchasers for value whose rights are protected by law and besides which
prescription has set in against petitioners action for annulment of title and reconveyance.
The RTC and necessarily the CA found the purchaser-respondents thesis on
prescription correct stating in this regard that Eduardos TCT No. T-3276 was issued on
May 16, 2000 while petitioners filed their complaint for annulment only on July 3, 2001.
To the courts below, the one-year prescriptive period to assail the issuance of a
certificate of title had already elapsed.
We are not persuaded.
The basic complaint, as couched, ultimately seeks the reconveyance of a
fraudulently registered piece of residential land. Having possession of the subject lot,
petitioners right to the reconveyance thereof, and the annulment of the covering title, has
not prescribed or is not time-barred. This is so for an action for annulment of title or
reconveyance based on fraud is imprescriptible where the suitor is in possession of the
property subject of the acts,[36] the action partaking as it does of a suit for quieting of title
which is imprescriptible.[37] Such is the case in this instance. Petitioners have possession
of subject lots as owners having purchased the same from Gabriel, Sr. subject only to
the full payment of the agreed price.
The prescriptive period for the reconveyance of fraudulently registered real
property is 10 years, reckoned from the date of the issuance of the certificate of title, if
the plaintiff is not in possession, but imprescriptible if he is in possession of the
property.[38] Thus, one who is in actual possession of a piece of land claiming to be the
owner thereof may wait until his possession is disturbed or his title is attacked before
taking steps to vindicate his right.[39] As it is, petitioners action for reconveyance is
imprescriptible.

This brings us to the question of whether or not the respondent-purchasers, i.e.,

Bernard, Marcos and Benjamin, and Eduardo, have the status of innocent purchasers for
value, as was the thrust of the trial courts disquisition and disposition.

We are unable to agree with the RTC.

It is the common defense of the respondent-purchasers that they each checked
the title of the subject lot when it was his turn to acquire the same and found it clean,
meaning without annotation of any encumbrance or adverse third party interest. And it is
upon this postulate that each claims to be an innocent purchaser for value, or one who
buys the property of another without notice that some other person has a right to or
interest in it, and who pays therefor a full and fair price at the time of the purchase or
before receiving such notice.[40]
The general rule is that one dealing with a parcel of land registered under the
Torrens System may safely rely on the correctness of the certificate of title issued
therefor and is not obliged to go beyond the certificate.[41] Where, in other words, the
certificate of title is in the name of the seller, the innocent purchaser for value has the
right to rely on what appears on the certificate, as he is charged with notice only of
burdens or claims on the res as noted in the certificate. Another formulation of the rule is
that (a) in the absence of anything to arouse suspicion or (b) except where the party has
actual knowledge of facts and circumstances that would impel a reasonably cautious
man to make such inquiry or (c) when the purchaser has knowledge of a defect of title in
his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the
status of the title of the property,[42] said purchaser is without obligation to look beyond
the certificate and investigate the title of the seller.
Eduardo and, for that matter, Bernard and Marcos and Benjamin, can hardly
claim to be innocent purchasers for value or purchasers in good faith. For each knew or
was at least expected to know that somebody else other than Gabriel, Jr. has a right or
interest over the lot. This is borne by the fact that the initial seller, Gabriel Jr., was not in
possession of subject property. With respect to Marcos and Benjamin, they knew as
buyers that Bernard, the seller, was not also in possession of the same property. The
same goes with Eduardo, as buyer, with respect to Marcos and Benjamin.
Basic is the rule that a buyer of a piece of land which is in the actual possession
of persons other than the seller must be wary and should investigate the rights of those
in possession. Otherwise, without such inquiry, the buyer can hardly be regarded as a
buyer in good faith. When a man proposes to buy or deal with realty, his duty is to read
the public manuscript, i.e., to look and see who is there upon it and what his rights are. A
want of caution and diligence which an honest man of ordinary prudence is accustomed

to exercise in making purchases is, in contemplation of law, a want of good faith. The
buyer who has failed to know or discover that the land sold to him is in adverse
possession of another is a buyer in bad faith.[43]
Where the land sold is in the possession of a person other than the vendor, the
purchaser must go beyond the certificates of title and make inquiries concerning the
rights of the actual possessor.[44] And where, as in the instant case, Gabriel Jr. and the
subsequent vendors were not in possession of the property, the prospective vendees
are obliged to investigate the rights of the one in possession. Evidently, Bernard, Marcos
and Benjamin, and Eduardo did not investigate the rights over the subject lot of the
petitioners who, during the period material to this case, were in actual possession
thereof. Bernard, et al. are, thus, not purchasers in good faith and, as such, cannot be
accorded the protection extended by the law to such purchasers.[45] Moreover, not being
purchasers in good faith, their having registered the sale, will not, as against the
petitioners, carry the day for any of them under Art. 1544 of the Civil Code prescribing
rules

on

preference

property. Occea v. Esponilla

in
[46]

case

of

double

sales

of

immovable

laid down the following rules in the application of Art.

1544: (1) knowledge by the first buyer of the second sale cannot defeat the first buyers
rights except when the second buyer first register in good faith the second sale; and (2)
knowledge gained by the second buyer of the first sale defeats his rights even if he is
first to register, since such knowledge taints his registration with bad faith.
Upon the facts obtaining in this case, the act of registration by any of the three
respondent-purchasers was not coupled with good faith. At the minimum, each was
aware or is at least presumed to be aware of facts which should put him upon such
inquiry and investigation as might be necessary to acquaint him with the defects in the
title of his vendor.
The award by the lower courts of damages and attorneys fees to some of the
herein respondents was predicated on the filing by the original plaintiffs of what the RTC
characterized as an unwarranted suit. The basis of the award, needless to stress, no
longer obtains and, hence, the same is set aside.
WHEREFORE, the petition is hereby GRANTED. The appealed December 4,
2006 Decision and the March 6, 2007 Resolution of the Court of Appeals in CA-G.R. CV
No. 79680 affirming the May 26, 2003 Decision of the Regional Trial Court, Branch 3 in

Baguio City are hereby REVERSED and SET ASIDE. Accordingly, petitioner Antonita
Ordua is hereby recognized to have the right of ownership over subject lot covered
by TCT No. T-3276 of the Baguio Registry registered in the name of Eduardo J.
Fuentebella. The

Register

of

Deeds

of

Baguio

City

is

hereby ORDERED to

cancel said TCT No. T-3276 and to issue a new one in the name of Armando Gabriel, Jr.
with the proper annotation of the conditional sale of the lot covered by said title in favor
of Antonita Ordua subject to the payment of the PhP 50,000 outstanding balance. Upon
full payment of the purchase price by Antonita Ordua, Armando Gabriel, Jr.
is ORDERED to execute a Deed of Absolute Sale for the transfer of title of subject lot to
the name of Antonita Ordua, within three (3) days from receipt of said payment.
No pronouncement as to costs.
SO ORDERED.

Swedish Match v. Court of Appeals, G.R. No. 128120, 20 October 2004

[G.R. No. 128120. October 20, 2004]

SWEDISH MATCH, AB, JUAN ENRIQUEZ, RENE DIZON, FRANCISCO RAPACON,

FIEL SANTOS, BETH FLORES, LAMBRTO DE LA EVA, GLORIA REYES,
RODRIGO ORTIZ, NICANOR ESCALANTE, PETER HODGSON, SAMUEL
PARTOSA, HERMINDA ASUNCION, JUANITO HERRERA, JACOBUS
NICOLAAS, JOSEPH PEKELHARING (now Representing himself without
court sanction as JOOST PEKELHARING), MASSIMO ROSSI and ED
ENRIQUEZ,petitioners, vs. COURT OF APPEALS, ALS MANAGEMENT &
DEVELOPMENT CORPORATION and ANTONIO K. LITONJUA, respondents.
DECISION
TINGA, J.:
Petitioners seek a reversal of the twin Orders[1] of the Court of Appeals dated 15
November 1996[2] and 31 January 1997,[3] in CA-G.R. CV No. 35886, entitled ALS
Management et al., v. Swedish Match, AB et al. The appellate court overturned the trial
courts Order[4] dismissing the respondents complaint for specific performance and
remanded the case to the trial court for further proceedings.
Swedish Match, AB (hereinafter SMAB) is a corporation organized under the laws of
Sweden not doing business in the Philippines. SMAB, however, had three subsidiary
corporations in the Philippines, all organized under Philippine laws, to wit: Phimco
Industries, Inc. (Phimco), Provident Tree Farms, Inc., and OTT/Louie (Phils.), Inc.
Sometime in 1988, STORA, the then parent company of SMAB, decided to sell
SMAB of Sweden and the latters worldwide match, lighter and shaving products
operation to Eemland Management Services, now known as Swedish Match NV of
Netherlands, (SMNV), a corporation organized and existing under the laws of
Netherlands. STORA, however, retained for itself the packaging business.
SMNV initiated steps to sell the worldwide match and lighter businesses while
retaining for itself the shaving business. SMNV adopted a two-pronged strategy, the first
being to sell its shares in Phimco Industries, Inc. and a match company in Brazil, which
proposed sale would stave-off defaults in the loan covenants of SMNV with its syndicate
of lenders. The other move was to sell at once or in one package all the SMNV
companies worldwide which were engaged in match and lighter operations thru a global
deal (hereinafter, global deal).
Ed Enriquez (Enriquez), Vice-President of Swedish Match Sociedad Anonimas
(SMSA)the management company of the Swedish Match groupwas commissioned and
granted full powers to negotiate by SMNV, with the resulting transaction, however, made
subject to final approval by the board. Enriquez was held under strict instructions that the
sale of Phimco shares should be executed on or before 30 June 1990, in view of the
tight loan covenants of SMNV. Enriquez came to the Philippines in November 1989 and

informed the Philippine financial and business circles that the Phimco shares were for
sale.
Several interested parties tendered offers to acquire the Phimco shares, among
whom were the AFP Retirement and Separation Benefits System, herein respondent
ALS Management & Development Corporation and respondent Antonio Litonjua
(Litonjua), the president and general manager of ALS.
In his letter dated 3 November 1989, Litonjua submitted to SMAB a firm offer to buy
all of the latters shares in Phimco and all of Phimcos shares in Provident Tree Farm, Inc.
and OTT/Louie (Phils.), Inc. for the sum of P750,000,000.00.[5]
Through its Chief Executive Officer, Massimo Rossi (Rossi), SMAB, in its letter
dated 1 December 1989, thanked respondents for their interest in the Phimco shares.
Rossi informed respondents that their price offer was below their expectations but urged
them to undertake a comprehensive review and analysis of the value and profit
potentials of the Phimco shares, with the assurance that respondents would enjoy a
certain priority although several parties had indicated their interest to buy the shares.[6]
Thereafter, an exchange of correspondence ensued between petitioners and
respondents regarding the projected sale of the Phimco shares. In his letter dated 21
May 1990, Litonjua offered to buy the disputed shares, excluding the lighter division for
US$30.6 million, which per another letter of the same date was increased to US$36
million.[7] Litonjua stressed that the bid amount could be adjusted subject to availability of
additional information and audit verification of the company finances.
Responding to Litonjuas offer, Rossi sent his letter dated 11 June 1990, informing
the former that ALS should undertake a due diligence process or pre-acquisition audit
and review of the draft contract for the Match and Forestry activities of Phimco at ALS
convenience. However, Rossi made it clear that at the completion of the due diligence
process, ALS should submit its final offer in US dollar terms not later than 30 June 1990,
for the shares of SMAB corresponding to ninety-six percent (96%) of the Match and
Forestry activities of Phimco. Rossi added that in case the global deal presently under
negotiation for the Swedish Match Lights Group would materialize, SMAB would
reimburse up to US$20,000.00 of ALS costs related to the due diligence process.[8]
Litonjua in a letter dated 18 June 1990, expressed disappointment at the apparent
change in SMABs approach to the bidding process. He pointed out that in their 4 June
1990 meeting, he was advised that one final bidder would be selected from among the
four contending groups as of that date and that the decision would be made by 6 June
1990. He criticized SMABs decision to accept a new bidder who was not among those
who participated in the 25 May 1990 bidding. He informed Rossi that it may not be
possible for them to submit their final bid on 30 June 1990, citing the advice to him of the
auditing firm that the financial statements would not be completed until the end of July.
Litonjua added that he would indicate in their final offer more specific details of the
payment mechanics and consider the possibility of signing a conditional sale at that
time.[9]
Two days prior to the deadline for submission of the final bid, Litonjua again advised
Rossi that they would be unable to submit the final offer by 30 June 1990, considering
that the acquisition audit of Phimco and the review of the draft agreements had not yet
been completed. He said, however, that they would be able to finalize their bid on 17
July 1990 and that in case their bid would turn out better than any other proponent, they
would remit payment within ten (10) days from the execution of the contracts.[10]

Enriquez sent notice to Litonjua that they would be constrained to entertain bids
from other parties in view of Litonjuas failure to make a firm commitment for the shares
of Swedish Match in Phimco by 30 June 1990.[11]
In a letter dated 3 July 1990, Rossi informed Litonjua that on 2 July 1990, they
signed a conditional contract with a local group for the disposal of Phimco. He told
Litonjua that his bid would no longer be considered unless the local group would fail to
consummate the transaction on or before 15 September1990.[12]
Apparently irked by SMABs decision to junk his bid, Litonjua promptly responded by
letter dated 4 July 1990. Contrary to his prior manifestations, he asserted that, for all
intents and purposes, the US$36 million bid which he submitted on 21 May 1990 was
their final bid based on the financial statements for the year 1989. He pointed out that
they submitted the best bid and they were already finalizing the terms of the sale. He
stressed that they were firmly committed to their bid of US$36 million and if ever there
would be adjustments in the bid amount, the adjustments were brought about by SMABs
subsequent disclosures and validated accounts, such as the aspect that only ninety-six
percent (96%) of Phimco shares was actually being sold and not one-hundred percent
(100%).[13]
More than two months from receipt of Litonjuas last letter, Enriquez sent a fax
communication to the former, advising him that the proposed sale of SMABs shares in
Phimco with local buyers did not materialize. Enriquez then invited Litonjua to resume
negotiations with SMAB for the sale of Phimco shares. He indicated that SMAB would be
prepared to negotiate with ALS on an exclusive basis for a period of fifteen (15) days
from 26 September 1990 subject to the terms contained in the letter. Additionally,
Enriquez clarified that if the sale would not be completed at the end of the fifteen (15)day period, SMAB would enter into negotiations with other buyers.[14]
Shortly thereafter, Litonjua sent a letter expressing his objections to the totally new
set of terms and conditions for the sale of the Phimco shares. He emphasized that the
new offer constituted an attempt to reopen the already perfected contract of sale of the
shares in his favor. He intimated that he could not accept the new terms and conditions
contained therein.[15]
On 14 December 1990, respondents, as plaintiffs, filed before the Regional Trial
Court (RTC) of Pasig a complaint for specific performance with damages, with a prayer
for the issuance of a writ of preliminary injunction, against defendants, now petitioners.
The individual defendants were sued in their respective capacities as officers of the
corporations or entities involved in the aborted transaction.
Aside from the averments related to their principal cause of action for specific
performance, respondents alleged that the Phimco management, in utter bad faith,
induced SMAB to violate its contract with respondents. They contended that the Phimco
management took an interest in acquiring for itself the Phimco shares and that
petitioners conspired to thwart the closing of such sale by interposing various obstacles
to the completion of the acquisition audit.[16] Respondents claimed that the Phimco
management maliciously and deliberately delayed the delivery of documents to Laya
Manabat Salgado & Co. which prevented them from completing the acquisition audit in
time for the deadline on 30 June 1990 set by petitioners.[17]Respondents added that
SMABs refusal to consummate the perfected sale of the Phimco shares amounted to an
abuse of right and constituted conduct which is contrary to law, morals, good customs
and public policy.[18]

Respondents prayed that petitioners be enjoined from selling or transferring the

Phimco shares, or otherwise implementing the sale or transfer thereof, in favor of any
person or entity other than respondents, and that any such sale to third parties be
annulled and set aside. Respondents also asked that petitioners be ordered to execute
all documents or instruments and perform all acts necessary to consummate the sales
agreement in their favor.
Traversing the complaint, petitioners alleged that respondents have no cause of
action, contending that no perfected contract, whether verbal or written, existed between
them. Petitioners added that respondents cause of action, if any, was barred by the
Statute of Frauds since there was no written instrument or document evidencing the
alleged sale of the Phimco shares to respondents.
Petitioners filed a motion for a preliminary hearing of their defense of bar by the
Statute of Frauds, which the trial court granted. Both parties agreed to adopt as their
evidence in support of or against the motion to dismiss, as the case may be, the
evidence which they adduced in support of their respective positions on the writ of
preliminary injunction incident.
In its Order dated 17 April 1991, the RTC dismissed respondents complaint.[19] It
ruled that there was no perfected contract of sale between petitioners and respondents.
The court a quo said that the letter dated 11 June 1990, relied upon by respondents,
showed that petitioners did not accept the bid offer of respondents as the letter was a
mere invitation for respondents to conduct a due diligence process or pre-acquisition
audit of Phimcos match and forestry operations to enable them to submit their final offer
on 30 June 1990. Assuming that respondents bid was favored by an oral acceptance
made in private by officers of SMAB, the trial court noted, such acceptance was merely
preparatory to a formal acceptance by the SMABthe acceptance that would eventually
lead to the execution and signing of the contract of sale. Moreover, the court noted that
respondents failed to submit their final bid on the deadline set by petitioners.
Respondents appealed to the Court of Appeals, assigning the following errors:
A. THE TRIAL COURT EXCEEDED ITS AUTHORITY AND JURISDICTION WHEN IT
ERRED PROCEDURALLY IN MOTU PROPIO (sic) DISMISSING THE COMPLAINT IN
ITS ENTIRETY FOR LACK OF A VALID CAUSE OF ACTION WITHOUT THE BENEFIT
OF A FULL-BLOWN TRIAL AND ON THE MERE MOTION TO DISMISS.
B. THE TRIAL COURT ERRED IN IGNORING PLAINTIFF-APPELLANTS CAUSE OF
ACTION BASED ON TORT WHICH, HAVING BEEN SUFFICIENTLY PLEADED,
INDEPENDENTLY WARRANTED A FULL-BLOWN TRIAL.
C. THE TRIAL COURT ERRED IN IGNORING PLAINTIFFS-APPELLANTS CAUSE OF
ACTION BASED ON PROMISSORY ESTOPPEL WHICH, HAVING BEEN
SUFFICIENTLY PLEADED, WARRANTED A FULL-BLOWN TRIAL, INDEPENDENTLY
FOR THE OTHER CAUSES OF ACTION.
D. THE TRIAL COURT JUDGE ERRED IN FORSWEARING JUDICIAL OBJECTIVITY
TO FAVOR DEFENDANTS-APPELLEES BY MAKING UNFOUNDED FINDINGS, ALL
IN VIOLATION OF PLAINTIFFS-APPELLANTS RIGHT TO DUE PROCESS.[20]

After assessing the respective arguments of the parties, the Court of Appeals
reversed the trial courts decision. It ruled that the series of written communications
between petitioners and respondents collectively constitute a sufficient memorandum of
their agreement under Article 1403 of the Civil Code; thus, respondents complaint
should not have been dismissed on the ground that it was unenforceable under the
Statute of Frauds. The appellate court opined that any document or writing, whether
formal or informal, written either for the purpose of furnishing evidence of the contract or
for another purpose which satisfies all the Statutes requirements as to contents and
signature would be sufficient; and, that two or more writings properly connected could be
considered together. The appellate court concluded that the letters exchanged by and
between the parties, taken together, were sufficient to establish that an agreement to sell
the disputed shares to respondents was reached.
The Court of Appeals clarified, however, that by reversing the appealed decision it
was not thereby declaring that respondents are entitled to the reliefs prayed for in their
complaint, but only that the case should not have been dismissed on the ground of
unenforceability under the Statute of Frauds. It ordered the remand of the case to the
trial court for further proceedings.
Hence, this petition.
Petitioners argue that the Court of Appeals erred in failing to consider that the
Statute of Frauds requires not just the existence of any note or memorandum but that
such note or memorandum should evidence an agreement to sell; and, that in this case,
there was no word, phrase, or statement in the letters exchanged between the two
parties to show or even imply that an agreement had been reached for the sale of the
shares to respondent.
Petitioners stress that respondent Litonjua made it clear in his letters that the quoted
prices were merely tentative and still subject to further negotiations between him and the
seller. They point out that there was no meeting of the minds on the essential terms and
conditions of the sale because SMAB did not accept respondents offer that
consideration would be paid in Philippine pesos. Moreover, Litonjua signified their
inability to submit their final bid on 30 June 1990, at the same time stating that the broad
terms and conditions described in their meeting were inadequate for them to make a
response at that time so much so that he would have to await the corresponding
specifics. Petitioners argue that the foregoing circumstances prove that they failed to
reach an agreement on the sale of the Phimco shares.
In their Comment, respondents maintain that the Court of Appeals correctly ruled
that the Statute of Frauds does not apply to the instant case. Respondents assert that
the sale of the subject shares to them was perfected as shown by the following
circumstances, namely: petitioners assured them that should they increase their bid, the
sale would be awarded to them and that they did in fact increase their previous bid of
US$30.6 million to US$36 million; petitioners orally accepted their revised offer and the
acceptance was relayed to them by Rene Dizon; petitioners directed them to proceed
with the acquisition audit and to submit a comfort letter from the United Coconut Planters
Bank (UCPB); petitioner corporation confirmed its previous verbal acceptance of their
offer in a letter dated 11 June 1990; with the prior approval of petitioners, respondents
engaged the services of Laya, Manabat, Salgado & Co., an independent auditing firm, to
immediately proceed with the acquisition audit; and, petitioner corporation reiterated its
commitment to be bound by the result of the acquisition audit and promised to reimburse
respondents cost to the extent of US$20,000.00. All these incidents, according to

respondents, overwhelmingly prove that the contract of sale of the Phimco shares was
perfected.
Further, respondents argued that there was partial performance of the perfected
contract on their part. They alleged that with the prior approval of petitioners, they
engaged the services of Laya, Manabat, Salgado & Co. to conduct the acquisition audit.
They averred that petitioners agreed to be bound by the results of the audit and offered
to reimburse the costs thereof to the extent of US$20,000.00. Respondents added that
in compliance with their obligations under the contract, they have submitted a comfort
letter from UCPB to show petitioners that the bank was willing to finance the acquisition
of the Phimco shares.[21]
The basic issues to be resolved are: (1) whether the appellate court erred in
reversing the trial courts decision dismissing the complaint for being unenforceable
under the Statute of Frauds; and (2) whether there was a perfected contract of sale
between petitioners and respondents with respect to the Phimco shares.
The Statute of Frauds embodied in Article 1403, paragraph (2), of the Civil
Code[22] requires certain contracts enumerated therein to be evidenced by some note or
memorandum in order to be enforceable. The term Statute of Frauds is descriptive of
statutes which require certain classes of contracts to be in writing. The Statute does not
deprive the parties of the right to contract with respect to the matters therein involved,
but merely regulates the formalities of the contract necessary to render it
enforceable.[23] Evidence of the agreement cannot be received without the writing or a
secondary evidence of its contents.
The Statute, however, simply provides the method by which the contracts
enumerated therein may be proved but does not declare them invalid because they are
not reduced to writing. By law, contracts are obligatory in whatever form they may have
been entered into, provided all the essential requisites for their validity are present.
However, when the law requires that a contract be in some form in order that it may be
valid or enforceable, or that a contract be proved in a certain way, that requirement is
absolute and indispensable.[24] Consequently, the effect of non-compliance with the
requirement of the Statute is simply that no action can be enforced unless the
requirement is complied with.[25] Clearly, the form required is for evidentiary purposes
only. Hence, if the parties permit a contract to be proved, without any objection, it is then
just as binding as if the Statute has been complied with.[26]
The purpose of the Statute is to prevent fraud and perjury in the enforcement of
obligations depending for their evidence on the unassisted memory of witnesses, by
requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged.[27]
However, for a note or memorandum to satisfy the Statute, it must be complete in
itself and cannot rest partly in writing and partly in parol. The note or memorandum must
contain the names of the parties, the terms and conditions of the contract, and a
description of the property sufficient to render it capable of identification.[28] Such note or
memorandum must contain the essential elements of the contract expressed with
certainty that may be ascertained from the note or memorandum itself, or some other
writing to which it refers or within which it is connected, without resorting to parol
evidence.[29]
Contrary to the Court of Appeals conclusion, the exchange of correspondence
between the parties hardly constitutes the note or memorandum within the context of

Article 1403 of the Civil Code. Rossis letter dated 11 June 1990, heavily relied upon by
respondents, is not complete in itself. First, it does not indicate at what price the shares
were being sold. In paragraph (5) of the letter, respondents were supposed to submit
their final offer in U.S. dollar terms, at that after the completion of the due diligence
process. The paragraph undoubtedly proves that there was as yet no definite agreement
as to the price. Second, the letter does not state the mode of payment of the price. In
fact, Litonjua was supposed to indicate in his final offer how and where payment for the
shares was planned to be made.[30]
Evidently, the trial courts dismissal of the complaint on the ground of
unenforceability under the Statute of Frauds is warranted.[31]
Even if we were to consider the letters between the parties as a sufficient
memorandum for purposes of taking the case out of the operation of the Statute the
action for specific performance would still fail.
A contract is defined as a juridical convention manifested in legal form, by virtue of
which one or more persons bind themselves in favor of another, or others, or
reciprocally, to the fulfillment of a prestation to give, to do, or not to do.[32] There can be
no contract unless the following requisites concur: (a) consent of the contracting parties;
(b) object certain which is the subject matter of the contract; (c) cause of the obligation
which is established.[33]Contracts are perfected by mere consent, which is manifested by
the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract.[34]
Specifically, in the case of a contract of sale, required is the concurrence of three
elements, to wit: (a) consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price; (b) determinate subject matter, and (c) price certain
in money or its equivalent.[35] Such contract is born from the moment there is a meeting
of minds upon the thing which is the object of the contract and upon the price.[36]
In general, contracts undergo three distinct stages, to wit: negotiation; perfection or
birth; and consummation. Negotiation begins from the time the prospective contracting
parties manifest their interest in the contract and ends at the moment of agreement of
the parties. Perfection or birth of the contract takes place when the parties agree upon
the essential elements of the contract. Consummation occurs when the parties fulfill or
perform the terms agreed upon in the contract, culminating in the extinguishment
thereof.[37]
A negotiation is formally initiated by an offer. A perfected promise merely tends to
insure and pave the way for the celebration of a future contract. An imperfect promise
(policitacion), on the other hand, is a mere unaccepted offer.[38] Public advertisements or
solicitations and the like are ordinarily construed as mere invitations to make offers or
only as proposals. At any time prior to the perfection of the contract, either negotiating
party may stop the negotiation.[39] The offer, at this stage, may be withdrawn; the
withdrawal is effective immediately after its manifestation, such as by its mailing and not
necessarily when the offeree learns of the withdrawal.[40]
An offer would require, among other things, a clear certainty on both the object and
the cause or consideration of the envisioned contract. Consent in a contract of sale
should be manifested by the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer.[41]

Quite obviously, Litonjuas letter dated 21 May 1990, proposing the acquisition of the
Phimco shares for US$36 million was merely an offer. This offer, however, in Litonjuas
own words, is understood to be subject to adjustment on the basis of an audit of the
assets, liabilities and net worth of Phimco and its subsidiaries and on the final
negotiation between ourselves.[42]
Was the offer certain enough to satisfy the requirements of the Statute of Frauds?
Definitely not.
Litonjua repeatedly stressed in his letters that they would not be able to submit their
final bid by 30 June 1990.[43] With indubitable inconsistency, respondents later claimed
that for all intents and purposes, the US$36 million was their final bid. If this were so, it
would be inane for Litonjua to state, as he did, in his letter dated 28 June 1990 that they
would be in a position to submit their final bid only on 17 July 1990. The lack of a definite
offer on the part of respondents could not possibly serve as the basis of their claim that
the sale of the Phimco shares in their favor was perfected, for one essential element of a
contract of sale was obviously wantingthe price certain in money or its equivalent. The
price must be certain, otherwise there is no true consent between the parties.[44] There
can be no sale without a price.[45] Quite recently, this Court reiterated the long-standing
doctrine that the manner of payment of the purchase price is an essential element before
a valid and binding contract of sale can exist since the agreement on the manner of
payment goes into the price such that a disagreement on the manner of payment is
tantamount to a failure to agree on the price.[46]
Granting arguendo, that the amount of US$36 million was a definite offer, it would
remain as a mere offer in the absence of evidence of its acceptance. To produce a
contract, there must be acceptance, which may be express or implied, but it must not
qualify the terms of the offer.[47] The acceptance of an offer must be unqualified and
absolute to perfect the contract.[48] In other words, it must be identical in all respects with
that of the offer so as to produce consent or meeting of the minds.[49]
Respondents attempt to prove the alleged verbal acceptance of their US$36 million
bid becomes futile in the face of the overwhelming evidence on record that there was in
the first place no meeting of the minds with respect to the price. It is dramatically clear
that the US$36 million was not the actual price agreed upon but merely a preliminary
offer which was subject to adjustment after the conclusion of the audit of the company
finances. Respondents failure to submit their final bid on the deadline set by petitioners
prevented the perfection of the contract of sale. It was not perfected due to the absence
of one essential element which was the price certain in money or its equivalent.
At any rate, from the procedural stand point, the continuing objections raised by
petitioners to the admission of parol evidence[50] on the alleged verbal acceptance of the
offer rendered any evidence of acceptance inadmissible.
Respondents plea of partial performance should likewise fail. The acquisition audit
and submission of a comfort letter, even if considered together, failed to prove the
perfection of the contract. Quite the contrary, they indicated that the sale was far from
concluded. Respondents conducted the audit as part of the due diligence process to
help them arrive at and make their final offer. On the other hand, the submission of the
comfort letter was merely a guarantee that respondents had the financial capacity to pay
the price in the event that their bid was accepted by petitioners.
The Statute of Frauds is applicable only to contracts which are executory and not to
those which have been consummated either totally or partially.[51] If a contract has been

totally or partially performed, the exclusion of parol evidence would promote fraud or bad
faith, for it would enable the defendant to keep the benefits already derived by him from
the transaction in litigation, and at the same time, evade the obligations, responsibilities
or liabilities assumed or contracted by him thereby.[52] This rule, however, is predicated
on the fact of ratification of the contract within the meaning of Article 1405 of the Civil
Code either (1) by failure to object to the presentation of oral evidence to prove the
same, or (2) by the acceptance of benefits under them. In the instant case, respondents
failed to prove that there was partial performance of the contract within the purview of
the Statute.
Respondents insist that even on the assumption that the Statute of Frauds is
applicable in this case, the trial court erred in dismissing the complaint altogether. They
point out that the complaint presents several causes of action.
A close examination of the complaint reveals that it alleges two distinct causes of
action, the first is for specific performance[53] premised on the existence of the contract of
sale, while the other is solely for damages, predicated on the purported dilatory
maneuvers executed by the Phimco management.[54]
With respect to the first cause of action for specific performance, apart from
petitioners alleged refusal to honor the contract of salewhich has never been perfected
in the first placerespondents made a number of averments in their complaint all in
support of said cause of action. Respondents claimed that petitioners were guilty of
promissory estoppel,[55] warranty breaches[56] and tortious conduct[57] in refusing to honor
the alleged contract of sale. These averments are predicated on or at least interwoven
with the existence or perfection of the contract of sale. As there was no such perfected
contract, the trial court properly rejected the averments in conjunction with the dismissal
of the complaint for specific performance.
However, respondents second cause of action due to the alleged malicious and
deliberate delay of the Phimco management in the delivery of documents necessary for
the completion of the audit on time, not being based on the existence of the contract of
sale, could stand independently of the action for specific performance and should not be
deemed barred by the dismissal of the cause of action predicated on the failed contract.
If substantiated, this cause of action would entitle respondents to the recovery of
damages against the officers of the corporation responsible for the acts complained of.
Thus, the Court cannot forthwith order dismissal of the complaint without affording
respondents an opportunity to substantiate their allegations with respect to its cause of
action for damages against the officers of Phimco based on the latters alleged selfserving dilatory maneuvers.
WHEREFORE, the petition is in part GRANTED. The appealed Decision is hereby
MODIFIED insofar as it declared the agreement between the parties enforceable under
the Statute of Frauds. The complaint before the trial court is ordered DISMISSED insofar
as the cause of action for specific performance is concerned. The case is ordered
REMANDED to the trial court for further proceedings with respect to the cause of action
for damages as above specified.
SO ORDERED.

Alfredo v. Borras, 404 SCRA 145, G.R. No. 14225, 17 June 2003 SOF not applicable
when there is memorandum of sale or performance

[G.R. No. 144225. June 17, 2003]

SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES

ARNULFO SAVELLANO and EDITHA B. SAVELLANO, DANTON D.
MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S.
ESPIRITU and ELIZABETH TUAZON, petitioners, vs. SPOUSES ARMANDO
BORRAS and ADELIA LOBATON BORRAS,respondents.
DECISION
CARPIO, J.:

The Case
Before us is a petition for review assailing the Decision[1] of the Court of Appeals
dated 26 November 1999 affirming the decision[2] of the Regional Trial Court of Bataan,
Branch 4, in Civil Case No. DH-256-94. Petitioners also question the Resolution of the
Court of Appeals dated 26 July 2000 denying petitioners motion for reconsideration.

The Antecedent Facts

A parcel of land measuring 81,524 square meters (Subject Land) in Barrio Culis,
Mabiga, Hermosa, Bataan is the subject of controversy in this case. The registered
owners of the Subject Land were petitioner spouses, Godofredo Alfredo (Godofredo)
and Carmen Limon Alfredo (Carmen). The Subject Land is covered by Original
Certificate of Title No. 284 (OCT No. 284) issued to Godofredo and Carmen under
Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras (Armando)
and Adelia Lobaton Borras (Adelia), filed a complaint for specific performance against
Godofredo and Carmen before the Regional Trial Court of Bataan, Branch 4. The case
was docketed as Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen
mortgaged the Subject Land for P7,000.00 with the Development Bank of the Philippines
(DBP). To pay the debt, Carmen and Godofredo sold the Subject Land to Armando and
Adelia for P15,000.00, the buyers to pay the DBP loan and its accumulated interest, and
the balance to be paid in cash to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to
DBP which signed the release of mortgage and returned the owners duplicate copy of
OCT No. 284 to Godofredo and Carmen. Armando and Adelia subsequently paid the

balance of the purchase price of the Subject Land for which Carmen issued a receipt
dated 11 March 1970. Godofredo and Carmen then delivered to Adelia the owners
duplicate copy of OCT No. 284, with the document of cancellation of mortgage, official
receipts of realty tax payments, and tax declaration in the name of Godofredo.Godofredo
and Carmen introduced Armando and Adelia, as the new owners of the Subject Land, to
the Natanawans, the old tenants of the Subject Land. Armando and Adelia then took
possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered the
Subject Land and were cutting trees under instructions of allegedly new owners of the
Subject Land. Subsequently, Armando and Adelia discovered that Godofredo and
Carmen had re-sold portions of the Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register
of Deeds of Bataan. Armando and Adelia discovered that Godofredo and Carmen had
secured an owners duplicate copy of OCT No. 284 after filing a petition in court for the
issuance of a new copy. Godofredo and Carmen claimed in their petition that they lost
their owners duplicate copy. Armando and Adelia wrote Godofredo and Carmen
complaining about their acts, but the latter did not reply. Thus, Armando and Adelia filed
a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the
following persons as additional defendants: the spouses Arnulfo Savellano and Editha B.
Savellano, Danton D. Matawaran, the spouses Delfin F. Espiritu, Jr. and Estela S.
Espiritu, and Elizabeth Tuazon (Subsequent Buyers). The Subsequent Buyers, who are
also petitioners in this case, purchased from Godofredo and Carmen the subdivided
portions of the Subject Land. The Register of Deeds of Bataan issued to the Subsequent
Buyers transfer certificates of title to the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively
petitioners) argued that the action is unenforceable under the Statute of
Frauds. Petitioners pointed out that there is no written instrument evidencing the alleged
contract of sale over the Subject Land in favor of Armando and Adelia. Petitioners
objected to whatever parole evidence Armando and Adelia introduced or offered on the
alleged sale unless the same was in writing and subscribed by Godofredo. Petitioners
asserted that the Subsequent Buyers were buyers in good faith and for value. As
counterclaim, petitioners sought payment of attorneys fees and incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses: Adelia,
Jesus Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando Natanawan, Tomas
Natanawan, and Mildred Lobaton. Petitioners presented two witnesses, Godofredo and
Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and
Adelia. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs,
the spouses Adelia Lobaton Borras and Armando F. Borras, and against the defendantspouses Godofredo Alfredo and Carmen Limon Alfredo, spouses Arnulfo Sabellano and
Editha B. Sabellano, spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, Danton D.
Matawaran and Elizabeth Tuazon, as follows:

1. Declaring the Deeds of Absolute Sale of the disputed parcel of land

(covered by OCT No. 284) executed by the spouses Godofredo
Alfredo and Camen Limon Alfredo in favor of spouses Arnulfo
Sabellano and Editha B. Sabellano, spouses Delfin F. Espiritu,
Danton D. Matawaran and Elizabeth Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267
in the names of spouses Arnulfo Sabellano and Editha B.
Sabellano; Transfer Certificates of Title Nos. T-163268 and
163272 in the names of spouses Delfin F. Espiritu, Jr. and Estela
S. Espiritu; Transfer Certificates of Title Nos. T-163269 and T163271 in the name of Danton D. Matawaran; and Transfer
Certificate of Title No. T-163270 in the name of Elizabeth Tuazon,
as null and void and that the Register of Deeds of Bataan is
hereby ordered to cancel said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to execute and deliver a good and valid Deed of Absolute
Sale of the disputed parcel of land (covered by OCT No. 284) in
favor of the spouses Adelia Lobaton Borras and Armando F.
Borras within a period of ten (10) days from the finality of this
decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to surrender their owners duplicate copy of OCT No. 284
issued to them by virtue of the Order dated May 20, 1992 of the
Regional Trial Court of Bataan, Dinalupihan Branch, to the
Registry of Deeds of Bataan within ten (10) days from the finality
of this decision, who, in turn, is directed to cancel the same as
there exists in the possession of herein plaintiffs of the owners
duplicate copy of said OCT No. 284 and, to restore and/or
reinstate OCT No. 284 of the Register of Deeds of Bataan to its
full force and effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to restitute and/or return the amount of the respective
purchase prices and/or consideration of sale of the disputed
parcels of land they sold to their co-defendants within ten (10)
days from the finality of this decision with legal interest thereon
from date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses
the sum of P20,000.00 as and for attorneys fees and litigation
expenses; and
7. Ordering defendants to pay the costs of suit.
Defendants counterclaims are hereby dismissed for lack of merit.
SO ORDERED.[3]

Petitioners appealed to the Court of Appeals.

On 26 November 1999, the Court of Appeals issued its Decision affirming the
decision of the trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-25694 is hereby AFFIRMED in its entirety. Treble costs against the defendants-appellants.
SO ORDERED.[4]
On 26 July 2000, the Court of Appeals denied petitioners motion for reconsideration.

The Ruling of the Trial Court

The trial court ruled that there was a perfected contract of sale between the spouses
Godofredo and Carmen and the spouses Armando and Adelia. The trial court found that
all the elements of a contract of sale were present in this case. The object of the sale
was specifically identified as the 81,524-square meter lot in Barrio Culis, Mabigas,
Hermosa, Bataan, covered by OCT No. 284 issued by the Registry of Deeds of
Bataan. The purchase price was fixed at P15,000.00, with the buyers assuming to pay
the sellers P7,000.00 DBP mortgage loan including its accumulated interest.The balance
of the purchase price was to be paid in cash to the sellers. The last payment
of P2,524.00 constituted the full settlement of the purchase price and this was paid on
11 March 1970 as evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale: (1)
Godofredo and Carmen delivered to Armando and Adelia the Subject Land; (2) Armando
and Adelia treated as their own tenants the tenants of Godofredo and Carmen; (3)
Godofredo and Carmen turned over to Armando and Adelia documents such as the
owners duplicate copy of the title of the Subject Land, tax declaration, and the receipts of
realty tax payments in the name of Godofredo; and (4) the DBP cancelled the mortgage
on the Subject Property upon payment of the loan of Godofredo and Carmen. Moreover,
the receipt of payment issued by Carmen served as an acknowledgment, if not a
ratification, of the verbal sale between the sellers and the buyers. The trial court ruled
that the Statute of Frauds is not applicable because in this case the sale was perfected.
The trial court concluded that the Subsequent Buyers were not innocent
purchasers. Not one of the Subsequent Buyers testified in court on how they purchased
their respective lots. The Subsequent Buyers totally depended on the testimony of
Constancia Calonso (Calonso) to explain the subsequent sale. Calonso, a broker,
negotiated with Godofredo and Carmen the sale of the Subject Land which Godofredo
and Carmen subdivided so they could sell anew portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial court
pointed out that Calonso did not inquire on the nature of the tenancy of the Natanawans
and on who owned the Subject Land. Instead, she bought out the tenants
for P150,000.00. The buy out was embodied in aKasunduan. Apolinario Natanawan
(Apolinario) testified that he and his wife accepted the money and signed
the Kasunduan because Calonso and the Subsequent Buyers threatened them with
forcible ejectment. Calonso brought Apolinario to the Agrarian Reform Office where he

was asked to produce the documents showing that Adelia is the owner of the Subject
Land. Since Apolinario could not produce the documents, the agrarian officer told him
that he would lose the case. Thus, Apolinario was constrained to sign
the Kasunduan and accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that she saw an
adverse claim on the title of the Subject Land when she registered the deeds of sale in
the names of the Subsequent Buyers. Calonso ignored the adverse claim and
proceeded with the registration of the deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and Adelia. In
justifying the award of attorneys fees, the trial court invoked Article 2208 (2) of the Civil
Code which allows a court to award attorneys fees, including litigation expenses, when it
is just and equitable to award the same.The trial court ruled that Armando and Adelia are
entitled to attorneys fees since they were compelled to file this case due to petitioners
refusal to heed their just and valid demand.

The Ruling of the Court of Appeals

The Court of Appeals found the factual findings of the trial court well supported by
the evidence. Based on these findings, the Court of Appeals also concluded that there
was a perfected contract of sale and the Subsequent Buyers were not innocent
purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is
sufficient proof that Godofredo and Carmen sold the Subject Land to Armando and
Adelia upon payment of the balance of the purchase price. The Court of Appeals found
the recitals in the receipt as sufficient to serve as the memorandum or note as a writing
under the Statute of Frauds.[5] The Court of Appeals then reiterated the ruling of the trial
court that the Statute of Frauds does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando and
Adelia, Mildred Lobaton, who explained why the title to the Subject Land was not in the
name of Armando and Adelia. Lobaton testified that Godofredo was then busy preparing
to leave for Davao. Godofredo promised that he would sign all the papers once they
were ready. Since Armando and Adelia were close to the family of Carmen, they trusted
Godofredo and Carmen to honor their commitment. Armando and Adelia had no reason
to believe that their contract of sale was not perfected or validly executed considering
that they had received the duplicate copy of OCT No. 284 and other relevant
documents. Moreover, they had taken physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only Carmen
signed the receipt dated 11 March 1970. Citing Felipe v. Heirs of Maximo Aldon,[6] the
appellate court ruled that a contract of sale made by the wife without the husbands
consent is not void but merely voidable.The Court of Appeals further declared that the
sale in this case binds the conjugal partnership even if only the wife signed the receipt
because the proceeds of the sale were used for the benefit of the conjugal
partnership. The appellate court based this conclusion on Article 161[7] of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in
good faith because they had constructive notice of the adverse claim of Armando and

Adelia. Calonso, who brokered the subsequent sale, testified that when she registered
the subsequent deeds of sale, the adverse claim of Armando and Adelia was already
annotated on the title of the Subject Land. The Court of Appeals believed that the act of
Calonso and the Subsequent Buyers in forcibly ejecting the Natanawans from the
Subject Land buttresses the conclusion that the second sale was tainted with bad faith
from the very beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised in
the Answer. Nonetheless, the appellate court explained that since this action is actually
based on fraud, the prescriptive period is four years, with the period starting to run only
from the date of the discovery of the fraud. Armando and Adelia discovered the
fraudulent sale of the Subject Land only in January 1994. Armando and Adelia lost no
time in writing a letter to Godofredo and Carmen on 2 February 1994 and filed this case
on 7 March 1994. Plainly, Armando and Adelia did not sleep on their rights or lose their
rights by prescription.
The Court of Appeals sustained the award of attorneys fees and imposed treble
costs on petitioners.

The Issues
Petitioners raise the following issues:
I
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is
valid and enforceable, where (1) it was orally entered into and not in writing; (2)
Carmen did not obtain the consent and authority of her husband, Godofredo,
who was the sole owner of the Subject Land in whose name the title thereto
(OCT No. 284) was issued; and (3) it was entered into during the 25-year
prohibitive period for alienating the Subject Land without the approval of the
Secretary of Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24
years from its alleged perfection had been barred by prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over the
portions of the Subject Land issued to the Subsequent Buyers, innocent
purchasers in good faith and for value whose individual titles to their respective
lots are absolute and indefeasible, are valid.
IV

Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as

attorneys fees and litigation expenses and the treble costs, where the claim of
Armando and Adelia is clearly unfounded and baseless.
V
Whether petitioners are entitled to the counterclaim for attorneys fees and
litigation expenses, where they have sustained such expenses by reason of
institution of a clearly malicious and unfounded action by Armando and Adelia.[8]

The Courts Ruling

The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews only errors of
law and not errors of facts.[9] The factual findings of the appellate court are generally
binding on this Court.[10] This applies with greater force when both the trial court and the
Court of Appeals are in complete agreement on their factual findings.[11] In this case,
there is no reason to deviate from the findings of the lower courts. The facts relied upon
by the trial and appellate courts are borne out by the record. We agree with the
conclusions drawn by the lower courts from these facts.

Validity and Enforceability of the Sale

The contract of sale between the spouses Godofredo and Carmen and the spouses
Armando and Adelia was a perfected contract. A contract is perfected once there is
consent of the contracting parties on the object certain and on the cause of the
obligation.[12] In the instant case, the object of the sale is the Subject Land, and the price
certain is P15,000.00. The trial and appellate courts found that there was a meeting of
the minds on the sale of the Subject Land and on the purchase price of P15,000.00. This
is a finding of fact that is binding on this Court. We find no reason to disturb this finding
since it is supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated because the
sellers and buyers have performed their respective obligations under the contract. In a
contract of sale, the seller obligates himself to transfer the ownership of the determinate
thing sold, and to deliver the same, to the buyer who obligates himself to pay a price
certain to the seller.[13] In the instant case, Godofredo and Carmen delivered the Subject
Land to Armando and Adelia, placing the latter in actual physical possession of the
Subject Land. This physical delivery of the Subject Land also constituted a transfer of
ownership of the Subject Land to Armando and Adelia.[14] Ownership of the thing sold is
transferred to the vendee upon its actual or constructive delivery.[15] Godofredo and
Carmen also turned over to Armando and Adelia the documents of ownership to the
Subject Land, namely the owners duplicate copy of OCT No. 284, the tax declaration
and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as evidenced
by the receipt dated 11 March 1970 issued by Carmen. Armando and Adelia fulfilled

their obligation to provide the P7,000.00 to pay the DBP loan of Godofredo and Carmen,
and to pay the latter the balance ofP8,000.00 in cash. The P2,524.00 paid under the
receipt dated 11 March 1970 was the last installment to settle fully the purchase
price. Indeed, upon payment to DBP of the P7,000.00 and the accumulated interests,
the DBP cancelled the mortgage on the Subject Land and returned the owners duplicate
copy of OCT No. 284 to Godofredo and Carmen.
The trial and appellate courts correctly refused to apply the Statute of Frauds to this
case. The Statute of Frauds[16] provides that a contract for the sale of real property shall
be unenforceable unless the contract or some note or memorandum of the sale is in
writing and subscribed by the party charged or his agent. The existence of the receipt
dated 11 March 1970, which is a memorandum of the sale, removes the transaction from
the provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either
partially or totally performed.[17] Thus, where one party has performed ones obligation,
oral evidence will be admitted to prove the agreement.[18] In the instant case, the parties
have consummated the sale of the Subject Land, with both sellers and buyers
performing their respective obligations under the contract of sale. In addition, a contract
that violates the Statute of Frauds is ratified by the acceptance of benefits under the
contract.[19] Godofredo and Carmen benefited from the contract because they paid their
DBP loan and secured the cancellation of their mortgage using the money given by
Armando and Adelia. Godofredo and Carmen also accepted payment of the balance of
the purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence
of the verbal contract of sale because they have performed their obligations, and have
accepted benefits, under the verbal contract. [20] Armando and Adelia have also
performed their obligations under the verbal contract. Clearly, both the sellers and the
buyers have consummated the verbal contract of sale of the Subject Land. The Statute
of Frauds was enacted to prevent fraud.[21] This law cannot be used to advance the very
evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando and
Adelia is void on two grounds. First, Carmen sold the Subject Land without the marital
consent of Godofredo. Second, the sale was made during the 25-year period that the
law prohibits the alienation of land grants without the approval of the Secretary of
Agriculture and Natural Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any alienation
or encumbrance made by the husband of the conjugal partnership property without the
consent of the wife is void. However, when the sale is made before the effectivity of the
Family Code, the applicable law is the Civil Code.[22]
Article 173 of the Civil Code provides that the disposition of conjugal property
without the wifes consent is not void but merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction questioned,
ask the courts for the annulment of any contract of the husband entered into without her
consent, when such consent is required, or any act or contract of the husband which
tends to defraud her or impair her interest in the conjugal partnership property. Should

the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage,
may demand the value of property fraudulently alienated by the husband.
In Felipe v. Aldon,[23] we applied Article 173 in a case where the wife sold some parcels
of land belonging to the conjugal partnership without the consent of the husband. We
ruled that the contract of sale was voidable subject to annulment by the
husband. Following petitioners argument that Carmen sold the land to Armando and
Adelia without the consent of Carmens husband, the sale would only be voidable and
not void.
However, Godofredo can no longer question the sale. Voidable contracts are
susceptible of ratification.[24] Godofredo ratified the sale when he introduced Armando
and Adelia to his tenants as the new owners of the Subject Land. The trial court noted
that Godofredo failed to deny categorically on the witness stand the claim of the
complainants witnesses that Godofredo introduced Armando and Adelia as the new
landlords of the tenants.[25]That Godofredo and Carmen allowed Armando and Adelia to
enjoy possession of the Subject Land for 24 years is formidable proof of Godofredos
acquiescence to the sale. If the sale was truly unauthorized, then Godofredo should
have filed an action to annul the sale. He did not. The prescriptive period to annul the
sale has long lapsed. Godofredos conduct belies his claim that his wife sold the Subject
Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay
their debt with the DBP. We agree with the Court of Appeals that the sale redounded to
the benefit of the conjugal partnership. Article 161 of the Civil Code provides that the
conjugal partnership shall be liable for debts and obligations contracted by the wife for
the benefit of the conjugal partnership. Hence, even if Carmen sold the land without the
consent of her husband, the sale still binds the conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the
Subject Land to Armando and Adelia as shown by this portion of Adelias testimony on
cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me.[26]
Petitioners raise this factual issue for the first time. The Court of Appeals could have
passed upon this issue had petitioners raised this earlier. At any rate, the cited testimony
of Adelia does not convincingly prove that Godofredo and Carmen did not deliver the
Subject Land to Armando and Adelia. Adelias cited testimony must be examined in
context not only with her entire testimony but also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject
Land from Julie Limon (Julie), her classmate in college and the sister of Carmen. Earlier,
Adelias own sister had secured the title from the father of Carmen. However, Adelias
sister, who was about to leave for the United States, gave the title to Julie because of
the absence of the other documents. Adelias sister told Adelia to secure the title from
Julie, and this was how Adelia obtained the title from Julie.
It is not necessary that the seller himself deliver the title of the property to the buyer
because the thing sold is understood as delivered when it is placed in the control and
possession of the vendee.[27] To repeat, Godofredo and Carmen themselves introduced
the Natanawans, their tenants, to Armando and Adelia as the new owners of the Subject

Land. From then on, Armando and Adelia acted as the landlords of the
Natanawans. Obviously, Godofredo and Carmen themselves placed control and
possession of the Subject Land in the hands of Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of
Agriculture and Natural Resources to nullify the sale. Petitioners never raised this issue
before the trial court or the Court of Appeals. Litigants cannot raise an issue for the first
time on appeal, as this would contravene the basic rules of fair play, justice and due
process.[28] However, we will address this new issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary
did not approve the sale, which was made within 25 years from the issuance of the
homestead title. Section 118 of the Public Land Act (Commonwealth Act No. 141) reads
as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or institutions
or legally constituted banking corporation, lands acquired under free patent or
homestead provisions shall not be subject to encumbrance or alienation from the date of
the approval of the application and for a term of five years from and after the date of the
issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and before
twenty-five years after the issuance of title shall be valid without the approval of the
Secretary of Agriculture and Commerce, which approval shall not be denied except on
constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a land
grant within five years from the time that the patent or grant is issued.[29] A violation of
this prohibition renders a sale void.[30] This prohibition, however, expires on the fifth
year. From then on until the next 20 years[31] the land grant may be alienated provided
the Secretary of Agriculture and Natural Resources approves the alienation. The
Secretary is required to approve the alienation unless there are constitutional and legal
grounds to deny the approval. In this case, there are no apparent constitutional or legal
grounds for the Secretary to disapprove the sale of the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make a sale
void.[32] The absence of approval by the Secretary does not nullify a sale made after the
expiration of the 5-year period, for in such event the requirement of Section 118 of the
Public Land Act becomes merely directory[33] or a formality.[34] The approval may be
secured later, producing the effect of ratifying and adopting the transaction as if the sale
had been previously authorized.[35] As held in Evangelista v. Montano:[36]
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the
approval by the Department Secretary "shall not be denied except on constitutional and
legal grounds." There being no allegation that there were constitutional or legal
impediments to the sales, and no pretense that if the sales had been submitted to the
Secretary concerned they would have been disapproved, approval was a ministerial
duty, to be had as a matter of course and demandable if refused. For this reason, and if

necessary, approval may now be applied for and its effect will be to ratify and adopt the
transactions as if they had been previously authorized.(Emphasis supplied)

Action Not Barred by Prescription and Laches

Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is
captioned as one for Specific Performance. In reality, the ultimate relief sought by
Armando and Adelia is the reconveyance to them of the Subject Land. An action for
reconveyance is one that seeks to transfer property, wrongfully registered by another, to
its rightful and legal owner.[37] The body of the pleading or complaint determines the
nature of an action, not its title or heading.[38] Thus, the present action should be treated
as one for reconveyance.[39]
Article 1456 of the Civil Code provides that a person acquiring property through
fraud becomes by operation of law a trustee of an implied trust for the benefit of the real
owner of the property. The presence of fraud in this case created an implied trust in
favor of Armando and Adelia. This gives Armando and Adelia the right to seek
reconveyance of the property from the Subsequent Buyers.[40]
To determine when the prescriptive period commenced in an action for
reconveyance, plaintiffs possession of the disputed property is material. An action for
reconveyance based on an implied trust prescribes in ten years.[41] The ten-year
prescriptive period applies only if there is an actual need to reconvey the property as
when the plaintiff is not in possession of the property.[42] However, if the plaintiff, as the
real owner of the property also remains in possession of the property, the prescriptive
period to recover title and possession of the property does not run against him.[43] In
such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a
suit for quieting of title, an action that is imprescriptible.[44]
In this case, the appellate court resolved the issue of prescription by ruling that the
action should prescribe four years from discovery of the fraud.We must correct this
erroneous application of the four-year prescriptive period. In Caro v. Court of
Appeals,[45] we explained why an action for reconveyance based on an implied trust
should prescribe in ten years. In that case, the appellate court also erroneously applied
the four-year prescriptive period. We declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L33261, September 30, 1987,154 SCRA 396 illuminated what used to be a gray area on
the prescriptive period for an action to reconvey the title to real property and, corollarily,
its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the effectivity of the
new Civil Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It
provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real
property can only be brought within the following periods after the right of action accrues:

xxx xxx xxx

3. Within four years: xxx An action for relief on the ground of fraud, but the right of action
in such case shall not be deemed to have accrued until the discovery of the fraud;
xxx xxx xxx
In contrast, under the present Civil Code, we find that just as an implied or constructive
trust is an offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation
to reconvey the property and the title thereto in favor of the true owner. In this context,
and vis-a-vis prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the
right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxxxxxxxx
(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust must
perforce prescribe in ten years and not otherwise. A long line of decisions of this
Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now
well-settled that an action for reconveyance based on an implied or constructive
trust prescribes in ten years from the issuance of the Torrens title over the
property. The only discordant note, it seems, is Balbin vs. Medalla which states that the
prescriptive period for a reconveyance action is four years. However, this variance can
be explained by the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the
fraud was discovered on June 25,1948, hence Section 43(3) of Act No. 190, was
applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned
earlier. It must be stressed, at this juncture, that article 1144 and article 1456, are new
provisions. They have no counterparts in the old Civil Code or in the old Code of Civil
Procedure, the latter being then resorted to as legal basis of the four-year prescriptive
period for an action for reconveyance of title of real property acquired under false
pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential
Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice, however, to the
rights of any innocent holder of the decree of registration on the original petition or
application, xxx

This provision should be read in conjunction with Article 1456 of the Civil Code, which
provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is,
by force of law, considered a trustee of an implied trust for the benefit of the person from
whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the
title thereto in favor of the true owner. Correlating Section 53, paragraph 3 of
Presidential Decree No. 1529 and Article 1456 of the Civil Code with Article 1144(2) of
the Civil Code, supra, the prescriptive period for the reconveyance of fraudulently
registered real property is ten (10) years reckoned from the date of the issuance of the
certificate of title xxx (Emphasis supplied)[46]
Following Caro, we have consistently held that an action for reconveyance based
on an implied trust prescribes in ten years.[47] We went further by specifying the
reference point of the ten-year prescriptive period as the date of the registration of the
deed or the issuance of the title.[48]
Had Armando and Adelia remained in possession of the Subject Land, their action
for reconveyance, in effect an action to quiet title to property, would not be subject to
prescription. Prescription does not run against the plaintiff in actual possession of the
disputed land because such plaintiff has a right to wait until his possession is disturbed
or his title is questioned before initiating an action to vindicate his right.[49] His
undisturbed possession gives him the continuing right to seek the aid of a court of equity
to determine the nature of the adverse claim of a third party and its effect on his title.[50]
Armando and Adelia lost possession of the Subject Land when the Subsequent
Buyers forcibly drove away from the Subject Land the Natanawans, the tenants of
Armando and Adelia.[51] This created an actual need for Armando and Adelia to seek
reconveyance of the Subject Land. The statute of limitation becomes relevant in this
case. The ten-year prescriptive period started to run from the date the Subsequent
Buyers registered their deeds of sale with the Register of Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on 22
February 1994, the date of execution of their deeds of sale. The Register of Deeds
issued the transfer certificates of title to the Subsequent Buyers on 24 February
1994. Armando and Adelia filed the Complaint on 7 March 1994. Clearly, prescription
could not have set in since the case was filed at the early stage of the ten-year
prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or
neglect, for an unreasonable time, to do that which, by the exercise of due diligence,
could or should have been done earlier.[52] 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.[53] Armando and Adelia discovered in
January 1994 the subsequent sale of the Subject Land and they filed this case on 7
March 1994. Plainly, Armando and Adelia did not sleep on their rights.

Validity of Subsequent Sale of Portions of the Subject Land

Petitioners maintain that the subsequent sale must be upheld because the
Subsequent Buyers, the co-petitioners of Godofredo and Carmen, purchased and
registered the Subject Land in good faith. Petitioners argue that the testimony of
Calonso, the person who brokered the second sale, should not prejudice the
Subsequent Buyers. There is no evidence that Calonso was the agent of the
Subsequent Buyers and that she communicated to them what she knew about the
adverse claim and the prior sale. Petitioners assert that the adverse claim registered by
Armando and Adelia has no legal basis to render defective the transfer of title to the
Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject Land
to Armando and Adelia. The settled rule is when ownership or title passes to the buyer,
the seller ceases to have any title to transfer to any third person.[54] If the seller sells the
same land to another, the second buyer who has actual or constructive knowledge of the
prior sale cannot be a registrant in good faith.[55] Such second buyer cannot defeat the
first buyers title.[56] In case a title is issued to the second buyer, the first buyer may seek
reconveyance of the property subject of the sale.[57]
Thus, to merit protection under the second paragraph of Article 1544[58] of the Civil
Code, the second buyer must act in good faith in registering the deed.[59] In this case, the
Subsequent Buyers good faith hinges on whether they had knowledge of the previous
sale. Petitioners do not dispute that Armando and Adelia registered their adverse claim
with the Registry of Deeds of Bataan on 8 February 1994. The Subsequent Buyers
purchased their respective lots only on 22 February 1994 as shown by the date of their
deeds of sale. Consequently, the adverse claim registered prior to the second sale
charged the Subsequent Buyers with constructive notice of the defect in the title of the
sellers,[60] Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated to
the Subsequent Buyers the existence of the adverse claim. The registration of the
adverse claim on 8 February 1994 constituted, by operation of law, notice to the whole
world.[61] From that date onwards, the Subsequent Buyers were deemed to have
constructive notice of the adverse claim of Armando and Adelia. When the Subsequent
Buyers purchased portions of the Subject Land on 22 February 1994, they already had
constructive notice of the adverse claim registered earlier.[62] Thus, the Subsequent
Buyers were not buyers in good faith when they purchased their lots on 22 February
1994. They were also not registrants in good faith when they registered their deeds of
sale with the Registry of Deeds on 24 February 1994.
The Subsequent Buyers individual titles to their respective lots are not absolutely
indefeasible. The defense of indefeasibility of the Torrens Title does not extend to a
transferee who takes the certificate of title with notice of a flaw in his title.[63] The principle
of indefeasibility of title does not apply where fraud attended the issuance of the titles as
in this case.[64]

Attorneys Fees and Costs

We sustain the award of attorneys fees. The decision of the court must state the
grounds for the award of attorneys fees. The trial court complied with this
requirement.[65] We agree with the trial court that if it were not for petitioners unjustified

refusal to heed the just and valid demands of Armando and Adelia, the latter would not
have been compelled to file this action.
The Court of Appeals echoed the trial courts condemnation of petitioners fraudulent
maneuverings in securing the second sale of the Subject Land to the Subsequent
Buyers. We will also not turn a blind eye on petitioners brazen tactics. Thus, we uphold
the treble costs imposed by the Court of Appeals on petitioners.
WHEREFORE, the petition is DENIED
AFFIRMED. Treble costs against petitioners.
SO ORDERED.

and

the

appealed

decision

is

Claudel v. Court of Appeals, G.R. No. 85240, 12 July 1991

G.R. No. 85240 July 12, 1991
HEIRS OF CECILIO (also known as BASILIO) CLAUDEL, namely, MODESTA
CLAUDEL, LORETA HERRERA, JOSE CLAUDEL, BENJAMIN CLAUDEL, PACITA
CLAUDEL, CARMELITA CLAUDEL, MARIO CLAUDEL, ROBERTO CLAUDEL,
LEONARDO CLAUDEL, ARSENIA VILLALON, PERPETUA CLAUDEL and FELISA
CLAUDEL, petitioners,
vs.
HON. COURT OF APPEALS, HEIRS OF MACARIO, ESPERIDIONA, RAYMUNDA and
CELESTINA, all surnamed CLAUDEL, respondents.
Ricardo L. Moldez for petitioners.
Juan T. Aquino for private respondents

SARMIENTO, J.:p
This petition for review on certiorari seeks the reversal of the decision rendered by the
Court of Appeals in CA-G.R. CV No. 04429 1 and the reinstatement of the decision of the
then Court of First Instance (CFI) of Rizal, Branch CXI, in Civil Case No. M-5276-P,
entitled. "Heirs of Macario Claudel, et al. v. Heirs of Cecilio Claudel, et al.," which
dismissed the complaint of the private respondents against the petitioners for
cancellation of titles and reconveyance with damages. 2
As early as December 28, 1922, Basilio also known as "Cecilio" Claudel, acquired from
the Bureau of Lands, Lot No. 1230 of the Muntinlupa Estate Subdivision, located in the
poblacion of Muntinlupa, Rizal, with an area of 10,107 square meters; he secured
Transfer Certificate of Title (TCT) No. 7471 issued by the Registry of Deeds for the
Province of Rizal in 1923; he also declared the lot in his name, the latest Tax Declaration
being No. 5795. He dutifully paid the real estate taxes thereon until his death in
1937. 3 Thereafter, his widow "Basilia" and later, her son Jose, one of the herein
petitioners, paid the taxes.
The same piece of land purchased by Cecilio would, however, become the subject of
protracted litigation thirty-nine years after his death.
Two branches of Cecilio's family contested the ownership over the land-on one hand the
children of Cecilio, namely, Modesto, Loreta, Jose, Benjamin, Pacita, Carmelita,
Roberto, Mario, Leonardo, Nenita, Arsenia Villalon, and Felisa Claudel, and their
children and descendants, now the herein petitioners (hereinafter referred to as HEIRS
OF CECILIO), and on the other, the brother and sisters of Cecilio, namely, Macario,
Esperidiona, Raymunda, and Celestina and their children and descendants, now the
herein private respondents (hereinafter referred to as SIBLINGS OF CECILIO). In 1972,
the HEIRS OF CECILIO partitioned this lot among themselves and obtained the
corresponding Transfer Certificates of Title on their shares, as follows:

TCT No. 395391 1,997 sq. m. Jose Claudel

TCT No. 395392 1,997 sq. m. Modesta Claudel and children
TCT No. 395393 1,997 sq. m. Armenia C. Villalon
TCT No. 395394 1,997 sq. m. Felisa Claudel 4
Four years later, on December 7, 1976, private respondents SIBLINGS OF CECILIO,
filed Civil Case No. 5276-P as already adverted to at the outset, with the then Court of
First Instance of Rizal, a "Complaint for Cancellation of Titles and Reconveyance with
Damages," alleging that 46 years earlier, or sometime in 1930, their parents had
purchased from the late Cecilio Claudel several portions of Lot No. 1230 for the sum of
P30.00. They admitted that the transaction was verbal. However, as proof of the sale,
the SIBLINGS OF CECILIO presented a subdivision plan of the said land, dated March
25, 1930, indicating the portions allegedly sold to the SIBLINGS OF CECILIO.
As already mentioned, the then Court of First Instance of Rizal, Branch CXI, dismissed
the complaint, disregarding the above sole evidence (subdivision plan) presented by the
SIBLINGS OF CECILIO, thus:
Examining the pleadings as well as the evidence presented in this case
by the parties, the Court can not but notice that the present complaint was
filed in the name of the Heirs of Macario, Espiridiona, Raymunda and
Celestina, all surnamed Claudel, without naming the different heirs
particularly involved, and who wish to recover the lots from the
defendants. The Court tried to find this out from the evidence presented
by the plaintiffs but to no avail. On this point alone, the Court would not be
able to apportion the property to the real party in interest if ever they are
entitled to it as the persons indicated therein is in generic term (Section 2,
Rule 3). The Court has noticed also that with the exception of plaintiff
Lampitoc and (sic) the heirs of Raymunda Claudel are no longer residing
in the property as they have (sic) left the same in 1967. But most
important of all the plaintiffs failed to present any document evidencing
the alleged sale of the property to their predecessors in interest by the
father of the defendants. Considering that the subject matter of the
supposed sale is a real property the absence of any document evidencing
the sale would preclude the admission of oral testimony (Statute of
Frauds). Moreover, considering also that the alleged sale took place in
1930, the action filed by the plaintiffs herein for the recovery of the same
more than thirty years after the cause of action has accrued has already
prescribed.
WHEREFORE, the Court renders judgment dismissing the complaint,
without pronouncement as to costs.
SO ORDERED. 5
On appeal, the following errors 6 were assigned by the SIBLINGS OF CECILIO:

1. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFFS'

COMPLAINT DESPITE CONCLUSIVE EVIDENCE SHOWING THE
PORTION SOLD TO EACH OF PLAINTIFFS' PREDECESSORS.
2. THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFFS FAILED
TO PROVE ANY DOCUMENT EVIDENCING THE ALLEGED SALE.
3. THE TRIAL COURT ERRED IN NOT GIVING CREDIT TO THE PLAN,
EXHIBIT A, SHOWING THE PORTIONS SOLD TO EACH OF THE
PLAINTIFFS' PREDECESSORS-IN-INTEREST.
4. THE TRIAL COURT ERRED IN NOT DECLARING PLAINTIFFS AS
OWNERS OF THE PORTION COVERED BY THE PLAN, EXHIBIT A.
5. THE TRIAL COURT ERRED IN NOT DECLARING TRANSFER
CERTIFICATES OF TITLE NOS. 395391, 395392, 395393 AND 395394
OF THE REGISTER OF DEEDS OF RIZAL AS NULL AND VOID.
The Court of Appeals reversed the decision of the trial court on the following grounds:
1. The failure to bring and prosecute the action in the name of the real party in interest,
namely the parties themselves, was not a fatal omission since the court a quo could
have adjudicated the lots to the SIBLINGS OF CECILIO, the parents of the herein
respondents, leaving it to them to adjudicate the property among themselves.
2. The fact of residence in the disputed properties by the herein respondents had been
made possible by the toleration of the deceased Cecilio.
3. The Statute of Frauds applies only to executory contracts and not to consummated
sales as in the case at bar where oral evidence may be admitted as cited in Iigo
v. Estate of Magtoto 7 and Diana, et al. v. Macalibo. 8
In addition,
. . . Given the nature of their relationship with one another it is not unusual
that no document to evidence the sale was executed, . . ., in their blind
faith in friends and relatives, in their lack of experience and foresight, and
in their ignorance, men, in spite of laws, will make and continue to make
verbal contracts. . . . 9
4. The defense of prescription cannot be set up against the herein petitioners despite the
lapse of over forty years from the time of the alleged sale in 1930 up to the filing of the
"Complaint for Cancellation of Titles and Reconveyance . . ." in 1976.
According to the Court of Appeals, the action was not for the recovery of possession of
real property but for the cancellation of titles issued to the HEIRS OF CECILIO in 1973.
Since the SIBLINGS OF CECILIO commenced their complaint for cancellation of titles
and reconveyance with damages on December 7, 1976, only four years after the HEIRS

OF CECILIO partitioned this lot among themselves and obtained the corresponding
Transfer Certificates of Titles, then there is no prescription of action yet.
Thus the respondent court ordered the cancellation of the Transfer Certificates of Title
Nos. 395391, 395392, 395393, and 395394 of the Register of Deeds of Rizal issued in
the names of the HEIRS OF CECILIO and corollarily ordered the execution of the
following deeds of reconveyance:
To Celestina Claudel, Lot 1230-A with an area of 705 sq. m.
To Raymunda Claudel, Lot 1230-B with an area of 599 sq. m.
To Esperidiona Claudel, Lot 1230-C with an area of 597 sq. m.
To Macario Claudel, Lot 1230-D, with an area of 596 sq. m. 10
The respondent court also enjoined that this disposition is without prejudice to the
private respondents, as heirs of their deceased parents, the SIBLINGS OF CECILIO,
partitioning among themselves in accordance with law the respective portions sold to
and herein adjudicated to their parents.
The rest of the land, lots 1230-E and 1230-F, with an area of 598 and 6,927 square
meters, respectively would go to Cecilio or his heirs, the herein petitioners. Beyond
these apportionments, the HEIRS OF CECILIO would not receive anything else.
The crux of the entire litigation is whether or not the Court of Appeals committed a
reversible error in disposing the question of the true ownership of the lots.
And the real issues are:
1. Whether or not a contract of sale of land may be proven orally:
2. Whether or not the prescriptive period for filing an action for
cancellation of titles and reconveyance with damages (the action filed by
the SIBLINGS OF CECILIO) should be counted from the alleged sale
upon which they claim their ownership (1930) or from the date of the
issuance of the titles sought to be cancelled in favor of the HEIRS OF
CECILIO (1976).
The rule of thumb is that a sale of land, once consummated, is valid regardless of the
form it may have been entered into. 11 For nowhere does law or jurisprudence prescribe
that the contract of sale be put in writing before such contract can validly cede or
transmit rights over a certain real property between the parties themselves.
However, in the event that a third party, as in this case, disputes the ownership of the
property, the person against whom that claim is brought can not present any proof of
such sale and hence has no means to enforce the contract. Thus the Statute of Frauds
was precisely devised to protect the parties in a contract of sale of real property so that
no such contract is enforceable unless certain requisites, for purposes of proof, are met.

The provisions of the Statute of Frauds pertinent to the present controversy, state:
Art. 1403 (Civil Code). The following contracts are unenforceable, unless
they are ratified:
xxx xxx xxx
2) Those that do not comply with the Statute of Frauds as set forth in this
number. In the following cases, an agreement hereafter made shall be
unenforceable by action unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement cannot be received without
the writing, or a secondary evidence of its contents:
xxx xxx xxx
e) An agreement for the leasing for a longer period than one year, or for
the sale of real property or of an interest therein;
xxx xxx xxx
(Emphasis supplied.)
The purpose of the Statute of Frauds is to prevent fraud and perjury in the enforcement
of obligations depending for their evidence upon the unassisted memory of witnesses by
requiring certain enumerated contracts and transactions to be evidenced in Writing. 12
The provisions of the Statute of Frauds originally appeared under the old Rules of
Evidence. However when the Civil Code was re-written in 1949 (to take effect in 1950),
the provisions of the Statute of Frauds were taken out of the Rules of Evidence in order
to be included under the title on Unenforceable Contracts in the Civil Code. The transfer
was not only a matter of style but to show that the Statute of Frauds is also a substantive
law.
Therefore, except under the conditions provided by the Statute of Frauds, the existence
of the contract of sale made by Cecilio with his siblings 13 can not be proved.
On the second issue, the belated claim of the SIBLINGS OF CECILIO who filed a
complaint in court only in 1976 to enforce a light acquired allegedly as early as 1930, is
difficult to comprehend.
The Civil Code states:
Art. 1145. The following actions must be commenced within six years:
(1) Upon an oral contract . . . (Emphasis supplied).

If the parties SIBLINGS OF CECILIO had allegedly derived their right of action from the
oral purchase made by their parents in 1930, then the action filed in 1976 would have
clearly prescribed. More than six years had lapsed.
We do not agree with the parties SIBLINGS OF CECILIO when they reason that an
implied trust in favor of the SIBLINGS OF CECILIO was established in 1972, when the
HEIRS OF CECILIO executed a contract of partition over the said properties.
But as we had pointed out, the law recognizes the superiority of the torrens title.
Above all, the torrens title in the possession of the HEIRS OF CECILIO carries more
weight as proof of ownership than the survey or subdivision plan of a parcel of land in
the name of SIBLINGS OF CECILIO.
The Court has invariably upheld the indefeasibility of the torrens title. No possession by
any person of any portion of the land could defeat the title of the registered owners
thereof. 14
A torrens title, once registered, cannot be defeated, even by adverse,
open and notorious possession. A registered title under the torrens
system cannot be defeated by prescription. The title, once registered, is
notice to the world. All persons must take notice. No one can plead
ignorance of the registration. 15
xxx xxx xxx
Furthermore, a private individual may not bring an action for reversion or
any action which would have the effect of cancelling a free patent and the
corresponding certificate of title issued on the basis thereof, with the
result that the land covered thereby will again form part of the public
domain, as only the Solicitor General or the officer acting in his stead may
do so. 16
It is true that in some instances, the Court did away with the irrevocability of the torrens
title, but the circumstances in the case at bar varied significantly from these cases.
In Bornales v. IAC, 17 the defense of indefeasibility of a certificate of title was
disregarded when the transferee who took it had notice of the flaws in the transferor's
title. No right passed to a transferee from a vendor who did not have any in the first
place. The transferees bought the land registered under the torrens system from
vendors who procured title thereto by means of fraud. With this knowledge, they can not
invoke the indefeasibility of a certificate of title against the private respondent to the
extent of her interest. This is because the torrens system of land registration, though
indefeasible, should not be used as a means to perpetrate fraud against the rightful
owner of real property.
Mere registration of the sale is not good enough, good faith must concur with
registration. Otherwise registration becomes an exercise in futility. 18

In Amerol v. Bagumbaran, 19 we reversed the decision of the trial court. In this case, the
title was wrongfully registered in another person's name. An implied trust was therefore
created. This trustee was compelled by law to reconvey property fraudulently acquired
notwithstanding the irrevocability of the torrens title. 20
In the present case, however, the facts belie the claim of ownership.
For several years, when the SIBLINGS OF CECILIO, namely, Macario, Esperidiona
Raymunda, and Celestina were living on the contested premises, they regularly paid a
sum of money, designated as "taxes" at first, to the widow of Cecilio, and later, to his
heirs. 21 Why their payments were never directly made to the Municipal Government of
Muntinlupa when they were intended as payments for "taxes" is difficult to square with
their claim of ownership. We are rather inclined to consider this fact as an admission of
non-ownership. And when we consider also that the petitioners HEIRS OF CECILIO had
individually paid to the municipal treasury the taxes corresponding to the particular
portions they were occupying, 22 we can readily see the superiority of the petitioners'
position.
Renato Solema and Decimina Calvez, two of the respondents who derive their right from
the SIBLINGS OF CLAUDEL, bought a portion of the lot from Felisa Claudel, one of the
HEIRS OF CLAUDEL. 23 The Calvezes should not be paying for a lot that they already
owned and if they did not acknowledge Felisa as its owner.
In addition, before any of the SIBLINGS OF CECILIO could stay on any of the portions
of the property, they had to ask first the permission of Jose Claudel again, one of the
HEIRS OF CECILIO. 24 In fact the only reason why any of the heirs of SIBLINGS OF
CECILIO could stay on the lot was because they were allowed to do so by the HEIRS
OF CECILIO. 25
In view of the foregoing, we find that the appellate court committed a reversible error in
denigrating the transfer certificates of title of the petitioners to the survey or subdivision
plan proffered by the private respondents. The Court generally recognizes the profundity
of conclusions and findings of facts reached by the trial court and hence sustains them
on appeal except for strong and cogent reasons inasmuch as the trial court is in a better
position to examine real evidence and observe the demeanor of witnesses in a case.
No clear specific contrary evidence was cited by the respondent appellate court to justify
the reversal of the lower court's findings. Thus, in this case, between the factual findings
of the trial court and the appellate court, those of the trial court must prevail over that of
the latter. 26
WHEREFORE, the petition is GRANTED We REVERSE and SET ASIDE the decision
rendered in CA-G.R. CV No. 04429, and we hereby REINSTATE the decision of the
then Court of First Instance of Rizal (Branch 28, Pasay City) in Civil Case No. M-5276-P
which ruled for the dismissal of the Complaint for Cancellation of Titles and
Reconveyance with Damages filed by the Heirs of Macario, Esperidiona Raymunda, and
Celestina, all surnamed CLAUDEL. Costs against the private respondents.
SO ORDERED.

Ortega v. Leonardo, G.R. No. L-11311, 28 May 1958

G.R. No. L-11311

May 28, 1958

MARTA
C.
vs.
DANIEL LEONARDO, defendant-appellee.
Jose
Ma.
Tomas A. Leonardo for appellee.

Reyes

ORTEGA, plaintiff-appellant,

for

appellant.

BENGZON, J.:
Well known is the general rule in the Statute of Frauds precluding enforcement of oral
contracts for the sale of land. Not so well known is exception concerning the partially
executed contracts1 least our jurisprudence offers few, if any, apposite illustrations.
This appeal exemplifies such exception.
Alleging partial performance, plaintiff sought to compel defendant to comply with their
oral contract of sale of a parcel of land. Upon a motion to dismiss, the Manila court of
first instance ordered dismissal following the above general rule.
Hence this appeal. It should be sustained if the allegations of the complaint which the
motion to dismiss admitted set out an instance of partial performance.
Stripped of non-essentials, the complaint averred that long before and until her house
had been completely destroyed during the liberation of the City of Manila, plaintiff
occupied a parcel of land, designated as Lot 1, Block 3 etc. (hereinafter called Lot I)
located at San Andres Street, Malate, Manila; that after liberation she re-occupied it; that
when the administration and disposition of the said Lot I (together with other lots in the
Ana Sarmiento Estate) were assigned by the Government to the Rural Progress
Administration2 plaintiff asserted her right thereto (as occupant) for purposes of
purchase; that defendant also asserted a similar right, alleging occupancy of a portion of
the land subsequent to plaintiff's; that during the investigation of such conflicting
interests, defendant asked plaintiff to desist from pressing her claim and definitely
promised that if and when he succeeded in getting title to Lot I3 , he would sell to her a
portion thereof with an area of 55.60 square meters (particularly described) at the rate of
P25.00 per square meter, provided she paid for the surveying and subdivision of the Lot
and provided further that after he acquired title, she could continue holding the lot as
tenant by paying a monthly rental of P10.00 until said portion shall have been
segregated and the purchase price fully paid; that plaintiff accepted defendant's offer,
and desisted from further claiming Lot I; that defendant finally acquired title thereto; that
relying upon their agreement, plaintiff caused the survey and segregation of the portion
which defendant had promised to sell incurring expenses therefor, said portion being
now designated as Lot I-B in a duly prepared and approved subdivision plan; that in
remodelling her son's house constructed on a lot adjoining Lot I she extended it over
said Lot I-B; that after defendant had acquired Lot I plaintiff regularly paid him the
monthly rental of P10.00; that in July 1954, after the plans of subdivision and
segregation of the lot had been approved by the Bureau of Lands, plaintiff tendered to

defendant the purchase price which the latter refused to accept, without cause or
reason.
The court below explained in its order of dismissal:
It is admitted by both parties that an oral agreement to sell a piece of land is not
enforceable. (Art. 1403, Civil Code, Section 21, Rule 123, Rules of Court.)
Plaintiff, however, argues that the contract in question, although verbal, was
partially performed because plaintiff desisted from claiming the portion of lot I in
question due to the promise of defendant to transfer said portion to her after the
issuance of title to defendant. The court thinks that even granting that plaintiff
really desisted to claim not on oral promise to sell made by defendant, the oral
promise to sell cannot be enforced. The desistance to claim is not a part of the
contract of sale of the land. Only in essential part of the executory contract will, if
it has already been performed, make the verbal contract enforceable, payment of
price being an essential part of the contract of sale.
If the above means that partial performance of a sale contract occurs only when part of
the purchase price is paid, it surely constitutes a defective statement of the law.
American Jurisprudence in its title "Statute of Frauds" lists other acts of partial
performance, such as possession, the making of improvements, rendition of services,
payment of taxes, relinquishment of rights, etc.
Thus, it is stated that "The continuance in possession may, in a proper case, be
sufficiently referable to the parol contract of sale to constitute a part performance
thereof. There may be additional acts or peculiar circumstances which sufficiently refer
the possession to the contract. . . . Continued possession under an oral contract of sale,
by one already in possession as a tenant, has been held a sufficient part performance,
where accompanied by other acts which characterize the continued possession and
refer it to the contract of purchase. Especially is this true where the circumstances of the
case include the making of substantial, permanent, and valuable improvements." (49
American Jurisprudence 44)
It is also stated that "The making of valuable permanent improvements on the land by
the purchaser, in pursuance of the agreement and with the knowledge of the vendor, has
been said to be the strongest and the most unequivocal act of part performance by
which a verbal contract to sell land is taken out of the statute of frauds, and is ordinarily
an important element in such part performance. . . . Possession by the purchaser under
a parol contract for the purchase of real property, together with his making valuable and
permanent improvements on the property which are referable exclusively to the contract,
in reliance on the contract, in the honest belief that he has a right to make them, and
with the knowledge and consent or acquiescence of the vendor, is deemed a part
performance of the contract. The entry into possession and the making of the
improvements are held on amount to such an alteration in the purchaser's position as
will warrant the court's entering a degree of specific performance." (49 American
Jurisprudence p.755, 756.)
Again, it is stated that "A tender or offer of payment, declined by the vendor, has been
said to be equivalent to actual payment, for the purposes of determining whether or not
there has been a part performance of the contract. This is apparently true where the

tender is by a purchaser who has made improvements. But the doctrine now generally
accepted, that not even the payment of the purchase price, without something more, . . .
is a sufficient part performance. (49 American Jurisprudence p. 772.)
And the relinquishment of rights or the compromise thereof has likewise been held to
constitute part performance. (See same title secs. 473, 474, 475.)
In the light of the above four paragraphs, it would appear that the complaint in this case
described several circumstance indicating partial performance: relinquishment of
rights4 continued possession, building of improvements, tender of payment plus the
surveying of the lot at plaintiff's expense and the payment of rentals.
We shall not take, time to discuss whether one or the other or any two or three of them
constituted sufficient performance to take the matter away from the operation of the
Statute of Frauds. Enough to hold that the combination of all of them amounted to partial
performance; and we do so line with the accepted basis of the doctrine, that it would be
a fraud upon the plaintiff if the defendant were permitted to oppose performance of his
part after he has allowed or induced the former to perform in reliance upon the
agreement. (See 49 American Jurisprudence p. 725.)
The paragraph immediately preceding will serve as our comment on the appellee's
quotations from American Jurisprudence itself to the effect that "relinquishment" is not
part performance, and that neither "surveying the land"5nor tender of payment is
sufficient. The precedents hereinabove transcribed oppose or explain away or qualify the
appellee's citations. And at the risk of being repetitious we say: granting that none of the
three circumstances indicated by him, (relinquishment, survey, tender)
would separately suffice, still the combination of the three with the others already
mentioned, amounts to more than enough.
Hence, as there was partial performance, the principle excluding parol contracts for the
sale of realty, does not apply.
The judgment will accordingly be reversed and the record remanded for further
proceedings. With costs against appellee.

Clarin v. Court of Appeals, G.R. No. L-30786, 20 February 1984

FIRST
[G.R.

No.

L-30786.

February

DIVISION
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.chanrobles
virtual
lawlibrary
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.)
(SGD.)

OLEGARIO
ZOILA

B.
L.

CLARIN
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 coheirs 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
The

on

definite

petitioners

object.chanrobles.com.ph
contentions

are

virtual

law

without

library
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.

Form for convenience

Agasen v. Court of Appeals, G.R. No. 115508, 15 February 2000
FIRST DIVISION
[G.R. No. 115508. February 15, 2000]
ALEJANDRO AGASEN and FORTUNATA CALONGE-AGASEN, petitioners, vs. THE
HON. COURT OF APPEALS and PETRA BILOG, assisted by her husband FELIPE
BILOG, respondents.
DECISION
YNARES_SANTIAGO, J.:
On April 7, 1980, private respondent Petra Bilog, assisted by her husband Felipe Bilog,
filed a complaint for Recovery of Possession and Ownership[1]with the Regional Trial
Court of Agoo, La Union, involving an Eight Thousand Four Hundred Seventy Four
(8,474) square meter parcel of land registered in her name under Transfer Certificate of
Title No. T-16109 of the Registry of Deeds of La Union. She alleged that sometime in
1964 or 1965, petitioners took possession and assumed ownership of the said property,
appropriating the fruits therefrom. She alleged that despite demands on them to vacate
the land, petitioners refused to do so and even filed a case for Annulment of TCT and/or
Reconveyance with Damages before the same court, which case was, however,
dismissed on February 12, 1980. Thus, in her complaint, private respondent prayed that
she be declared the true and absolute owner of the subject land and petitioners be
ordered to turn over possession thereof to her. Additionally, private respondent prayed
for P300,000.00 as attorneys fees, P2,000.00 as expenses of litigation as well as
P60,000.00 representing the value of the lands produce from 1965 to the time of the
filing of the case and P4,000.00 annually until the case is terminated.
In their Answer,[2] petitioners Alejandro Agasen and Fortunata Calonge-Agasen asserted
that the subject land used to form part of Lot No. 2192, a forty two thousand three
hundred seventy two (42,372) square meter parcel of land owned in common by the five
(5) Bilog siblings, private respondent Petra Bilog being one of them. Petitioners claimed
that they became the owners of the portion of the subject land which belonged to private
respondent as her share therein, by virtue of: (1) the sale in their favor of 1,785 square
meters thereof by Leonora Calonge, sister of Fortunata Calonge-Agasen, and (2) the
sale in their favor by private respondent of the remaining 6,717.50 square meters on
June 24, 1968, by virtue of a notarized Partition with Sale. Petitioners also affirmed that
they had been in possession of the subject land since the time of the above-mentioned
sale transactions, with a house of strong materials built thereon. By way of counterclaim,
petitioners charged private respondent with having fraudulently caused title to the
subject land to be issued in her name, following the subdivision of the original land
between her and her co-heirs/owners, in violation of their (petitioners) rights over the
subject land. Thus, petitioners prayed for the annulment of title in private respondents
name and for the dismissal of the complaint, as well as for the award of P10,000.00 as
exemplary damages, P25,000.00 as moral damages, P5,000.00 as litigation expenses
and P7,000.00 as attorneys fees and costs.

On November 19, 1984, the Regional Trial Court of Agoo, La Union, Branch 3, rendered
judgment in favor of petitioners, dismissing the complaint and declaring Transfer
Certificate of Title No. 16109 in the name of private respondent null and void.[3]
On appeal, the Court of Appeals reversed the decision of the lower court and private
respondent was declared the true and absolute owner of the subject land.[4] Accordingly,
petitioners were ordered to turn over the subject land to private respondent.
With the denial of petitioners Motion for Reconsideration on May 20, 1994,[5] the instant
Petition was filed, anchored upon the following grounds
I. THE DECISION (ANNEX A) ERRED IN DECLARING THE DEED OF
PARTITION WITH SALE (EXH. 1) AND THE DEED OF ABSOLUTE
SALE (EXH. 2) NOT AUTHENTIC AND VALID;
II. THE DECISION ERRED IN HOLDING THAT DEFENDANTS FAILED
TO SUBSTANTIATE THEIR CLAIM OF OWNERSHIP AND IN GIVING
MORE CREDENCE TO PLAINTIFFS TESTIMONIAL EVIDENCE AND
TAX DECLARATION NO. 21460 (EXH. B) AND CERTIFICATION OF
TAX PAYMENTS (EXH. C);
III. THE DECISION ERRED IN FINDING/HOLDING THAT THE NONREGISTRATION OF THE DEED OF PARTITION WITH SALE AND THE
DEED OF ABSOLUTE SALE WITH THE REGISTER OF DEEDS MADE
THE PURCHASES THEREUNDER "DENTED" AND DID NOT
AUTOMATICALLY VEST TITLE OR OWNERSHIP OVER THE SUBJECT
PROPERTY TO THE BUYERS;
IV. THE DECISION ERRED IN HOLDING THAT THE DAILY
NOTEBOOK (EXH. 3) CONTAINING THE MEMORANDUM OF
INSTALLMENT SALE BY LEONORA CALONGE TO DEFENDANTAPPELLEE FORTUNATA AGASEN (EXH. 3-a TO 3-c) OVER THE
PARCEL OF LAND DESCRIBED IN EXH. 2 WAS NOT A VALID OR
CREDIBLE DOCUMENT OF TRANSFER;
V. THE DECISION GRAVELY ERRED IN HOLDING THAT TCT NO.
16109 (EXH. A) CANNOT BE COLLATERALLY ATTACKED ON THE
GROUND THAT IT IS BARRED BY THE RULE ON INDEFEASIBILITY
OF A TORRENS TITLE AFTER THE LAPSE OF ONE YEAR FROM THE
DECREE OF REGISTRATION.[6]
Although the instant case is a petition for review under Rule 45 which, as a general rule,
is limited to reviewing errors of law, findings of fact being conclusive as a matter of
general principle, however, considering the conflict between the factual findings of the
trial court and the respondent Court of Appeals, there is a need to review the factual
issues as an exception to the general rule.[7]
As correctly stated by the lower court, the crucial question in the instant controversy is
whether or not the two (2) documents, relied upon by petitioners as basis for their claim
of ownership, are valid. Overthrowing the lower courts finding of validity, the Court of

Appeals ruled that private respondents testimonial and documentary evidence "junked"
petitioners documents (Exhibits "1" and "2").
We disagree.
To begin with, it is not denied that the two subject documents are notarized documents
and, as such, are considered public documents which enjoy the presumption of validity
as to authenticity and due execution.[8] One of the documents, the Deed of Absolute
Sale, was identified by Assistant Provincial Fiscal Maximo Quero, the administering
officer who had notarized it. The legal presumption of validity of petitioners duly
notarized public documents has not been overcome by preponderant evidence by
private respondent, upon whom the burden of proof rests, having alleged the contrary.[9]
The subject documents were also attached by petitioners to their Answer where they
were alleged as part of the counterclaim. As such, private respondent should have
specifically denied under oath their genuineness and due execution.[10] After all, a
counterclaim is considered a complaint, only this time, it is the original defendant who
becomes the plaintiff. It stands on the same footing and is to be tested by the same rules
as if it were an independent action.[11] Having failed to specifically deny under oath the
genuineness and due execution of the said documents, private respondent is deemed to
have admitted the same.
And while private respondent denied having signed any document selling the subject
parcels of land, the trial court found her signature on the subject documents to be
genuine, after a comparison thereof with her own documentary evidence on record (Exh.
"B"). Indeed, it has been held that where a comparison is permissible, it may be made by
the court, with or without the aid of expert witnesses;[12] and evidence respecting
handwriting may be given by a comparison made by the court with writings admitted or
treated as genuine by the party against whom the evidence is offered.[13] In the case at
bar, the lower court compared private respondents signatures on the subject documents
with that appearing on her own evidence (Exh. "B") and found the same identical.
The following circumstances all indicate the genuineness and due execution of the
subject documents: (1) The subject documents were duly notarized public documents;
(2) The documents enjoy the legal presumption of validity; (3) Their genuineness and
due execution were not specifically denied under oath by private respondent; (4) Private
respondents signature thereon were found genuine by the lower court upon a
comparison of her signature thereon with that in her own documentary evidence; (5) The
actual identification and positive testimony of petitioner; and (6) The testimony of the
lawyer who had notarized one of the subject documents. Private respondents bare
denial of the same cannot, by any measure, overcome the above-mentioned evidence
and legal presumptions in petitioners favor.
As for the sale in petitioners favor by the original vendee thereof, Leonora Calonge, the
Court of Appeals accepted private respondents charges that there was no valid
document of transfer and that the notebook with memorandum of sale and record of
installment payments, relied upon by petitioners, was worse than the two subject
documents.

Again, we disagree. The memorandum of sale appearing in Exhibit "3" is sufficient to

prove the sale between petitioner Fortunata Calonge Agasen and her late sister, the
previous vendee of the land subject of the Deed of Absolute Sale from private
respondent. After all, contracts are obligatory in whatever form they may have been
entered into provided all essential requisites are present.[14] The provision of Article 1358
on the necessity of a public document is only for convenience, not for validity or
enforceability. It is not a requirement for the validity of a contract of sale of a parcel of
land that this be embodied in a public instrument.[15]
It was likewise error for the Court of Appeals to rule that the transactions were "dented
by the failure to register/annotate the same with the Register of Deeds" and that due to
such failure, the documents "did not automatically bind the subject property." First, one
of the subject documents, the Deed of Absolute Sale, was in fact registered. Second, as
elucidated in Fule vs. Court of Appeals[16]
"The Civil Code provides that contracts are perfected by mere consent.
From this moment, the parties are bound not only to the fulfillment of what
has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and
law. 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. Being consensual, a contract of sale has the force of law between
the contracting parties and they are expected to abide in good faith by
their respective contractual commitments. Article 1358 of the Civil Code
which requires the embodiment of certain contracts in a public instrument,
is only for convenience, and registration of the instrument only adversely
affects third parties. Formal requirements are, therefore, for the benefit of
third parties. Non-compliance therewith does not adversely affect the
validity of the contract nor the contractual rights and obligations of the
parties thereunder."
In the light of the foregoing, we reverse the Court of Appealss ruling that the failure of
petitioners to register the Partition with Sale was fatal.
The Court of Appeals also found petitioners claim of ownership to be unsubstantiated, in
contrast to that of private respondent who presented tax declarations and certification of
tax payments in her favor. As pointed out by petitioners, however, the tax declarations in
the name of private respondent for the year 1978 were issued only in 1977, and only
after she had secured title to the property in her name. Such a belated declaration has
been held to be indicative of an absence of a real claim of ownership over the subject
land prior to the declaration.[17] On the other hand, the real estate tax payments certified
as paid by the Municipal Treasurer refers to the entire mother Lot No. 2192 before it was
subdivided or partitioned into five (5) equal lots. Private respondent cannot be said to
have paid taxes on the subject property during the period when petitioners claimed that
the property had already been sold to them.
We also note that, far from being unsubstantiated, petitioners claim of ownership is
backed by their long years of possession of the subject parcels of land. There is no
dispute that petitioners had occupied the subject land since the sale in their favor, i.e.,
since 1964 in the case of the Deed of Absolute Sale and since 1968 in the case of the

Partition with Sale. They have also built a concrete house which has long been standing
thereon.
Then, too, petitioners have adequately explained why they have not pursued their action
for annulment of title against private respondent, which the Court of Appeals viewed as
having "further darkened the cloud of suspicion which hovered over the questioned
documents." Private respondent herself admits that petitioners were the first to assert
their right, by filing an action for annulment of title and/or for reconveyance with
damages against private respondent[18] which complaint was, however, dismissed
without prejudice.[19] On the other hand, the complaint of private respondent was filed
two months after the dismissal of their complaint, prompting them to merely interpose
their cause of action as a compulsory counterclaim in the lower court.
Finally, the Court of Appeals is likewise in error in holding that private respondents title
was "vested with the garment of indefeasibility." The rule on indefeasibility of torrens title
--- i.e., that torrens title can be attacked only for fraud, within one year after the date of
the issuance of the decree of registration --- applies only to original titles and not to
subsequent registration. An action for annulment of title and/or reconveyance which was
previously filed by petitioners and interposed in their counterclaim is an action open to
them to attack private respondents fraudulently acquired title. Neither may the
compulsory counterclaim of petitioners challenging the title of private respondent be
brushed aside as merely a collateral attack which would bar a ruling on the validity of the
said title.[20]
WHEREFORE, premises considered, the instant Petition for Review is GRANTED. The
Decision of the Court of Appeals dated January 11, 1994 in CA-G.R. CV No. 10309 is
SET ASIDE. The decision of the Regional Trial Court of Agoo, La Union, Branch 32,
dismissing Civil Case No. A-713, annulling Transfer Certificate of Title No. 16109 in the
name of private respondent and finding petitioners to be the lawful owners of the land
covered by the same, is REINSTATED. No pronouncement as to costs.
SO ORDERED.

Obligations of the Parties

Delivery (Tradicion)
San Lorenzo Development Corporation v. Court of Appeals, G.R. No. 124242, 21
January 2005

[G.R. No. 124242. January 21, 2005]

SAN

LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF

APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA
ZAVALLA LU, respondents.

DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu
and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated
in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both
measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos
(P15.00) per square meter. Babasanta made a downpayment of fifty thousand pesos
(P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same
date. Several other payments totaling two hundred thousand pesos (P200,000.00) were
made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the
execution of a final deed of sale in his favor so that he could effect full payment of the
purchase price. In the same letter, Babasanta notified the spouses about having
received information that the spouses sold the same property to another without his
knowledge and consent. He demanded that the second sale be cancelled and that a
final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged
having agreed to sell the property to him at fifteen pesos (P15.00) per square meter.
She, however, reminded Babasanta that when the balance of the purchase price
became due, he requested for a reduction of the price and when she refused, Babasanta
backed out of the sale. Pacita added that she returned the sum of fifty thousand pesos
(P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial
Court (RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance
and Damages[1] against his co-respondents herein, the Spouses Lu. Babasanta alleged
that the lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the
spouses at fifteen pesos (P15.00) per square meter. Despite his repeated demands for
the execution of a final deed of sale in his favor, respondents allegedly refused.

In their Answer,[2] the Spouses Lu alleged that Pacita Lu obtained loans from
Babasanta and when the total advances of Pacita reached fifty thousand pesos
(P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel
Lu, had verbally agreed to transform the transaction into a contract to sell the two
parcels of land to Babasanta with the fifty thousand pesos (P50,000.00) to be
considered as the downpayment for the property and the balance to be paid on or before
31 December 1987. Respondents Lu added that as of November 1987, total payments
made by Babasanta amounted to only two hundred thousand pesos (P200,000.00) and
the latter allegedly failed to pay the balance of two hundred sixty thousand pesos
(P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for
a reduction of the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square
meter and when the Spouses Lu refused to grant Babasantas request, the latter
rescinded the contract to sell and declared that the original loan transaction just be
carried out in that the spouses would be indebted to him in the amount of two hundred
thousand pesos (P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank
Managers Check No. 05020269 in the amount of two hundred thousand pesos
(P200,000.00) in the name of Babasanta to show that she was able and willing to pay
the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990[3] wherein he
prayed for the issuance of a writ of preliminary injunction with temporary restraining
order and the inclusion of the Register of Deeds of Calamba, Laguna as party
defendant. He contended that the issuance of a preliminary injunction was necessary to
restrain the transfer or conveyance by the Spouses Lu of the subject property to other
persons.
The Spouses Lu filed their Opposition[4] to the amended complaint contending that it
raised new matters which seriously affect their substantive rights under the original
complaint. However, the trial court in its Order dated 17 January 1990[5] admitted the
amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation
(SLDC) filed a Motion for Intervention[6] before the trial court. SLDC alleged that it had
legal interest in the subject matter under litigation because on 3 May 1989, the two
parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of
Absolute Sale with Mortgage.[7] It alleged that it was a buyer in good faith and for value
and therefore it had a better right over the property in litigation.
In his Opposition to SLDCs motion for intervention,[8] respondent Babasanta
demurred and argued that the latter had no legal interest in the case because the two
parcels of land involved herein had already been conveyed to him by the Spouses Lu
and hence, the vendors were without legal capacity to transfer or dispose of the two
parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to
intervene. SLDC filed its Complaint-in-Intervention on 19 April 1990.[9]Respondent
Babasantas motion for the issuance of a preliminary injunction was likewise granted by
the trial court in its Order dated 11 January 1991[10]conditioned upon his filing of a bond
in the amount of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the
Spouses Lu executed in its favor an Option to Buy the lots subject of the complaint.
Accordingly, it paid an option money in the amount of three hundred sixteen thousand

one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase of
the two lots of one million two hundred sixty-four thousand six hundred forty pesos
(P1,264,640.00). After the Spouses Lu received a total amount of six hundred thirty-two
thousand three hundred twenty pesos (P632,320.00) they executed on 3 May 1989
aDeed of Absolute Sale with Mortgage in its favor. SLDC added that the certificates of
title over the property were delivered to it by the spouses clean and free from any
adverse claims and/or notice of lis pendens. SLDC further alleged that it only learned of
the filing of the complaint sometime in the early part of January 1990 which prompted it
to file the motion to intervene without delay. Claiming that it was a buyer in good faith,
SLDC argued that it had no obligation to look beyond the titles submitted to it by the
Spouses Lu particularly because Babasantas claims were not annotated on the
certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the
sale of the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of
two hundred thousand pesos (P200,000.00) with legal interest plus the further sum of
fifty thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-inintervention, the trial court ordered the Register of Deeds of Laguna, Calamba Branch to
cancel the notice of lis pendens annotated on the original of the TCT No. T-39022 (T7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both
Babasanta and SLDC did not register the respective sales in their favor, ownership of
the property should pertain to the buyer who first acquired possession of the property.
The trial court equated the execution of a public instrument in favor of SLDC as sufficient
delivery of the property to the latter. It concluded that symbolic possession could be
considered to have been first transferred to SLDC and consequently ownership of the
property pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals
alleging in the main that the trial court erred in concluding that SLDC is a purchaser in
good faith and in upholding the validity of the sale made by the Spouses Lu in favor of
SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They
contended that the trial court erred in failing to consider that the contract to sell between
them and Babasanta had been novated when the latter abandoned the verbal contract of
sale and declared that the original loan transaction just be carried out. The Spouses Lu
argued that since the properties involved were conjugal, the trial court should have
declared the verbal contract to sell between Pacita Lu and Pablo Babasanta null and
void ab initio for lack of knowledge and consent of Miguel Lu. They further averred that
the trial court erred in not dismissing the complaint filed by Babasanta; in awarding
damages in his favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision[11] which set aside
the judgment of the trial court. It declared that the sale between Babasanta and the
Spouses Lu was valid and subsisting and ordered the spouses to execute the necessary
deed of conveyance in favor of Babasanta, and the latter to pay the balance of the
purchase price in the amount of two hundred sixty thousand pesos (P260,000.00). The
appellate court ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was
null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu
were further ordered to return all payments made by SLDC with legal interest and to pay
attorneys fees to Babasanta.

SLDC and the Spouses Lu filed separate motions for reconsideration with the
appellate court.[12] However, in a Manifestation dated 20 December 1995,[13] the Spouses
Lu informed the appellate court that they are no longer contesting the decision dated 4
October 1995.
In its Resolution dated 11 March 1996,[14] the appellate court considered as
withdrawn the motion for reconsideration filed by the Spouses Lu in view of their
manifestation of 20 December 1995. The appellate court denied SLDCs motion for
reconsideration on the ground that no new or substantial arguments were raised therein
which would warrant modification or reversal of the courts decision dated 4 October
1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A
BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU
OBTAINED FROM IT THE CASH ADVANCE OF P200,000.00, SAN LORENZO WAS
PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED
FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT
IN POSSESSION OF THE DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT
AND TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT
RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS
FULL CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT
REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING
THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD
FAITH. [15]
SLDC contended that the appellate court erred in concluding that it had prior notice
of Babasantas claim over the property merely on the basis of its having advanced the
amount of two hundred thousand pesos (P200,000.00) to Pacita Lu upon the latters
representation that she needed the money to pay her obligation to Babasanta. It argued
that it had no reason to suspect that Pacita was not telling the truth that the money
would be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that
the amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita
Lu would be deducted from the balance of the purchase price still due from it and should
not be construed as notice of the prior sale of the land to Babasanta. It added that at no
instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it
immediately took possession of the property and asserted its rights as new owner as
opposed to Babasanta who has never exercised acts of ownership. Since the titles bore

no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it
had every reason to rely on the correctness of the certificate of title and it was not
obliged to go beyond the certificate to determine the condition of the property. Invoking
the presumption of good faith, it added that the burden rests on Babasanta to prove that
it was aware of the prior sale to him but the latter failed to do so. SLDC pointed out that
the notice of lis pendens was annotated only on 2 June 1989 long after the sale of the
property to it was consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the
Spouses Lu informed the Court that due to financial constraints they have no more
interest to pursue their rights in the instant case and submit themselves to the decision
of the Court of Appeals.[16]
On the other hand, respondent Babasanta argued that SLDC could not have
acquired ownership of the property because it failed to comply with the requirement of
registration of the sale in good faith. He emphasized that at the time SLDC registered
the sale in its favor on 30 June 1990, there was already a notice of lis
pendens annotated on the titles of the property made as early as 2 June 1989. Hence,
petitioners registration of the sale did not confer upon it any right. Babasanta further
asserted that petitioners bad faith in the acquisition of the property is evident from the
fact that it failed to make necessary inquiry regarding the purpose of the issuance of the
two hundred thousand pesos (P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC
and Babasanta has a better right over the two parcels of land subject of the instant case
in view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a
document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos
(P50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay
Pulong, Sta. Cruz, Sta. Rosa, Laguna.[17]While the receipt signed by Pacita did not
mention the price for which the property was being sold, this deficiency was supplied by
Pacita Lus letter dated 29 May 1989[18] wherein she admitted that she agreed to sell the
3.6 hectares of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by
the parties, irresistibly leads to the conclusion that the agreement between Babasanta
and the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,[19] which is manifested by the
meeting of the offer and the acceptance upon the thing which are to constitute the
contract. The offer must be certain and the acceptance absolute.[20] Moreover, contracts
shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.[21]
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty
thousand pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm
lot situated in Sta. Rosa, Laguna. While there is no stipulation that the seller reserves
the ownership of the property until full payment of the price which is a distinguishing
feature of a contract to sell, the subsequent acts of the parties convince us that the
Spouses Lu never intended to transfer ownership to Babasanta except upon full
payment of the purchase price.

Babasantas letter dated 22 May 1989 was quite telling. He stated therein that
despite his repeated requests for the execution of the final deed of sale in his favor so
that he could effect full payment of the price, Pacita Lu allegedly refused to do so. In
effect, Babasanta himself recognized that ownership of the property would not be
transferred to him until such time as he shall have effected full payment of the price.
Moreover, had the sellers intended to transfer title, they could have easily executed the
document of sale in its required form simultaneously with their acceptance of the partial
payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be
considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In
a contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas
in a contract to sell, by agreement the ownership is reserved in the vendor and is not to
pass until the full payment of the price.[22] In a contract of sale, the vendor has lost and
cannot recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full payment of the
price, such payment being a positive suspensive condition and failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title from
becoming effective.[23]
The perfected contract to sell imposed upon Babasanta the obligation to pay the
balance of the purchase price. There being an obligation to pay the price, Babasanta
should have made the proper tender of payment and consignation of the price in court
as required by law. Mere sending of a letter by the vendee expressing the intention to
pay without the accompanying payment is not considered a valid tender of
payment.[24] Consignation of the amounts due in court is essential in order to extinguish
Babasantas obligation to pay the balance of the purchase price. Glaringly absent from
the records is any indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part of the sellers to convey
title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and
not a contract to sell, Babasantas claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent[25] and from that
moment, the parties may reciprocally demand performance.[26]The essential elements of
a contract of sale, to wit: (1) consent or meeting of the minds, that is, to transfer
ownership in exchange for the price; (2) object certain which is the subject matter of the
contract; (3) cause of the obligation which is established.[27]
The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should be noted
that sale is not a mode, but merely a title. A mode is the legal means by which dominion
or ownership is created, transferred or destroyed, but title is only the legal basis by
which to affect dominion or ownership.[28] Under Article 712 of the Civil Code, ownership
and other real rights over property are acquired and transmitted by law, by donation, by
testate and intestate succession, and in consequence of certain contracts, by tradition.
Contracts only constitute titles or rights to the transfer or acquisition of ownership, while
delivery or tradition is the mode of accomplishing the same.[29] Therefore, sale by itself
does not transfer or affect ownership; the most that sale does is to create the obligation
to transfer ownership. It is tradition or delivery, as a consequence of sale, that actually
transfers ownership.

Explicitly, the law provides that the ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways specified in Article
1497 to 1501.[30] The word delivered should not be taken restrictively to mean transfer of
actual physical possession of the property. The law recognizes two principal modes of
delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the
vendee.[31] Legal or constructive delivery, on the other hand, may be had through any of
the following ways: the execution of a public instrument evidencing the
sale;[32] symbolical tradition such as the delivery of the keys of the place where the
movable sold is being kept;[33] traditio longa manu or by mere consent or agreement if
the movable sold cannot yet be transferred to the possession of the buyer at the time of
the sale;[34] traditio brevi manu if the buyer already had possession of the object even
before the sale;[35] and traditio constitutum possessorium, where the seller remains in
possession of the property in a different capacity.[36]
Following the above disquisition, respondent Babasanta did not acquire ownership
by the mere execution of the receipt by Pacita Lu acknowledging receipt of partial
payment for the property. For one, the agreement between Babasanta and the Spouses
Lu, though valid, was not embodied in a public instrument. Hence, no constructive
delivery of the lands could have been effected. For another, Babasanta had not taken
possession of the property at any time after the perfection of the sale in his favor or
exercised acts of dominion over it despite his assertions that he was the rightful owner of
the lands. Simply stated, there was no delivery to Babasanta, whether actual or
constructive, which is essential to transfer ownership of the property. Thus, even on the
assumption that the perfected contract between the parties was a sale, ownership could
not have passed to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing sold.[37]
However, it must be stressed that the juridical relationship between the parties in a
double sale is primarily governed by Article 1544 which lays down the rules of
preference between the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who presents
the oldest title, provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains
greater significance in case of double sale of immovable property. When the thing sold
twice is an immovable, the one who acquires it and first records it in the Registry of
Property, both made in good faith, shall be deemed the owner.[38] Verily, the act of
registration must be coupled with good faith that is, the registrant must have no
knowledge of the defect or lack of title of his vendor or must not have been aware of
facts which should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor.[39]

Admittedly, SLDC registered the sale with the Registry of Deeds after it had
acquired knowledge of Babasantas claim. Babasanta, however, strongly argues that the
registration of the sale by SLDC was not sufficient to confer upon the latter any title to
the property since the registration was attended by bad faith. Specifically, he points out
that at the time SLDC registered the sale on 30 June 1990, there was already a notice
of lis pendenson the file with the Register of Deeds, the same having been filed one year
before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis
pendens obliterate the effects of delivery and possession in good faith which admittedly
had occurred prior to SLDCs knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed
the Option to Buy in favor of SLDC upon receiving P316,160.00 as option money from
SLDC. After SLDC had paid more than one half of the agreed purchase price
of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of
Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no
knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated,
from the time of execution of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and the subsequent
annotation of lis pendens has no effect at all on the consummated sale between SLDC
and the Spouses Lu.
A purchaser in good faith is one who buys property of another without notice that
some other person has a right to, or interest in, such property and pays a full and fair
price for the same at the time of such purchase, or before he has notice of the claim or
interest of some other person in the property.[40] Following the foregoing definition, we
rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in the
records that it had knowledge of the prior transaction in favor of Babasanta. At the time
of the sale of the property to SLDC, the vendors were still the registered owners of the
property and were in fact in possession of the lands. Time and again, this Court has
ruled that a person dealing with the owner of registered land is not bound to go beyond
the certificate of title as he is charged with notice of burdens on the property which are
noted on the face of the register or on the certificate of title.[41] In assailing knowledge of
the transaction between him and the Spouses Lu, Babasanta apparently relies on the
principle of constructive notice incorporated in Section 52 of the Property Registration
Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land shall, if
registered, filed, or entered in the office of the Register of Deeds for the province or city
where the land to which it relates lies, be constructive notice to all persons from the time
of such registering, filing, or entering.
However, the constructive notice operates as suchby the express wording of Section
52from the time of the registration of the notice of lis pendenswhich in this case was
effected only on 2 June 1989, at which time the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.

More fundamentally, given the superiority of the right of SLDC to the claim of
Babasanta the annotation of the notice of lis pendens cannot help Babasantas position a
bit and it is irrelevant to the good or bad faith characterization of SLDC as a purchaser. A
notice of lis pendens, as the Court held in Natao v. Esteban,[42] serves as a warning to a
prospective purchaser or incumbrancer that the particular property is in litigation; and
that he should keep his hands off the same, unless he intends to gamble on the results
of the litigation. Precisely, in this case SLDC has intervened in the pending litigation to
protect its rights. Obviously, SLDCs faith in the merit of its cause has been vindicated
with the Courts present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital[43] of SLDCs averment in its Complaint-inIntervention[44] that at the instance of Pacita Lu it issued a check for P200,000.00
payable to Babasanta and the confirmatory testimony of Pacita Lu herself on crossexamination.[45] However, there is nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the Spouses Lu and Babasanta
for what they attest to is that the amount was supposed to pay off the advances made by
Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had
already executed the Deed of Absolute Sale with Mortgage in favor of SLDC and
therefore, as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted
by the prior notice of lis pendens and assuming further for the same nonce that this is a
case of double sale, still Babasantas claim could not prevail over that of SLDCs.
In Abarquez v. Court of Appeals,[46] this Court had the occasion to rule that if a vendee in
a double sale registers the sale after he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and does not confer upon him any right.
If the registration is done in bad faith, it is as if there is no registration at all, and the
buyer who has taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only
after the second vendee, Abarquez, registered their deed of sale with the Registry of
Deeds, but the Israels were first in possession. This Court awarded the property to the
Israels because registration of the property by Abarquez lacked the element of good
faith. While the facts in the instant case substantially differ from that in Abarquez, we
would not hesitate to rule in favor of SLDC on the basis of its prior possession of the
property in good faith. Be it noted that delivery of the property to SLDC was immediately
effected after the execution of the deed in its favor, at which time SLDC had no
knowledge at all of the prior transaction by the Spouses Lu in favor of Babasanta.
The law speaks not only of one criterion. The first criterion is priority of entry in the
registry of property; there being no priority of such entry, the second is priority of
possession; and, in the absence of the two priorities, the third priority is of the date of
title, with good faith as the common critical element. Since SLDC acquired possession of
the property in good faith in contrast to Babasanta, who neither registered nor
possessed the property at any time, SLDCs right is definitely superior to that of
Babasantas.
At any rate, the above discussion on the rules on double sale would be purely
academic for as earlier stated in this decision, the contract between Babasanta and the
Spouses Lu is not a contract of sale but merely a contract to sell. In Dichoso v.
Roxas,[47] we had the occasion to rule that Article 1544 does not apply to a case where
there was a sale to one party of the land itself while the other contract was a mere

promise to sell the land or at most an actual assignment of the right to repurchase the
same land. Accordingly, there was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court
of Appeals appealed from is REVERSED and SET ASIDE and the decision of the
Regional Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.

Carrascoso, Jr. v. Court of Appeals, G.R. Nos. 123672 and 164489, 14 December 2005
THIRD DIVISION

FERNANDO CARRASCOSO, JR.,

Petitioner,
-versusTHE HONORABLE COURT OF APPEALS, LAURO LEVISTE, as Director and
Minority Stockholder and On Behalf of Other Stockholders of El Dorado
Plantation, Inc. and EL DORADO PLANTATION, INC., represented by one of its
minority stockholders, Lauro P. Leviste,
Respondents.
x---------------------------------------x
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,
Petitioner,
-versusLAURO LEVISTE, as Director and Minority Stockholder and On Behalf of Other
Stockholders of El Dorado Plantation, Inc., EL DORADO PLANTATION, INC.,
represented by Minority Stockholder, Lauro P. Leviste, and FERNANDO
CARRASCOSO, JR.
Respondents.
G.R. No. 123672
Present:
PANGANIBAN, J., Chairman,
SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES, and GARCIA, JJ.

G. R. No. 164489

Promulgated:
December 14, 2005

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

DECISION
CARPIO MORALES, J.:
El Dorado Plantation, Inc. (El Dorado) was the registered owner of a parcel of
land (the property) with an area of approximately 1,825 hectares covered by Transfer
Certificate of Title (TCT) No. T-93[1] situated in Sablayan, Occidental Mindoro.
On February 15, 1972, at a special meeting of El Dorados Board of Directors, a
Resolution[2] was passed authorizing Feliciano Leviste, then President of El Dorado, to
negotiate the sale of the property and sign all documents and contracts bearing thereon.
On March 23, 1972, by a Deed of Sale of Real Property,[3] El Dorado, through
Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr. (Carrascoso).
The pertinent provisions of the Deed of Sale read:
NOW, THEREFORE, for and in consideration of the sum of ONE
MILLION EIGHT HUNDRED THOUSAND (1,800,000.00) PESOS,
Philippine Currency, the Vendor hereby sells, cedes, and transfer (sic)
unto the herein VENDEE, his heirs, successors and assigns, the abovedescribed property subject to the following terms and consitions (sic):
1. Of the said sum of P1,800,000.00 which constitutes the full
consideration of this sale, P290,000.00 shall be paid, as it is hereby paid,
to the Philippines (sic) National Bank, thereby effecting the release and
cancellation fo (sic) the present mortgage over the above-described
property.
2. That the sum of P210,000.00 shall be paid, as it is hereby
paid by the VENDEE to the VENDOR, receipt of which amount is hereby
acknowledged by the VENDOR.
3. The remaining balance of P1,300,000.00 plus interest thereon
at the rate of 10% per annum shall be paid by the VENDEE to the
VENDOR within a period of three (3) years, as follows:
(a) One (1) year from the date of the signing of this agreement,
the VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED
NINETEEN THOUSAND EIGHT HUNDRED THIRTY THREE &
33/100 (P519,833.33) PESOS.
(b) Two (2) years from the date of signing of this agreement, the
VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED

NINETTEN (sic) THOUSAND EIGHT HUNDRED AND THIRTY-THREE

& 33/100 (P519,833.33) PESOS.
(c) Three (3) years from the date of signing of this agreement, the
VENDEE shall pay to the VENDOR the sum of FIVE Hundred NINETEEN
THOUSAND EIGHT HUNDRED AND THIRTY-THREE & 33/100
(P519,833.33) PESOS.
4. The title of the property, subject of this agreement, shall pass
and be transferred to the VENDEE who shall have full authority to
register the same and obtain the corresponding transfer certificate of title
in his name.
xxx
6. THE VENDOR certifies and warrants that the property abovedescribed is not being cultivated by any tenant and is therefore not
covered by the provisions of the Land Reform Code. If, therefore, the
VENDEE becomes liable under the said law, the VENDOR shall
reimburse the VENDEE for all expenses and damages he may incur
thereon.[4] (Underscoring supplied)
From the above-quoted provisions of the Deed of Sale, Carrascoso was to pay
the full amount of the purchase price on March 23, 1975.
On even date, the Board of Directors of El Dorado passed a Resolution reading:
RESOLVED that by reason of the sale of that parcel of land
covered by TCT No. T-93 to Dr. FERNANDO O. CARRASCOSO,
JR., the corporation interposes no objection to the property being
mortgage (sic) by Dr. FERNANDO O. CARRASCOSO, JR. to any
bank of his choice as long as the balance on the Deed of Sale shall
be recognized by Dr. FERNANDO O. CARRASCOSO, JR.;
RESOLVED, FURTHER, that the corporation authorizes the
prefered (sic) claim on the property to be subordinated to any mortgage
that may be constituted by Dr. FERNANDO O. CARRASCOSO, JR.;
RESOLVED, FINALLY, that in case of any mortgage on the
property, the corporation waives the preference of any vendors lien on
the property.[5] (Emphasis and underscoring supplied)

Feliciano Leviste also executed the following affidavit on the same day:
1. That by reason of the sale of that parcel of land covered by
Transfer Certificate of Title T-93 as evidenced by the Deed of Sale
attached hereto as Annex A and made an integral part hereof, the El
Dorado Plantation, Inc. has no objection to the aforementioned

property being mortgaged by Dr. Fernando O. Carrascoso, Jr. to any

bank of his choice, as long as the payment of the balance due the El
Dorado Plantation, Inc. under the Deed of Sale, Annex A hereof,
shall be recognized by the vendee therein, Dr. Fernando O.
Carrascoso, Jr. though subordinated to the preferred claim of the
mortgagee bank.
2. That in case of any mortgage on the property, the vendor
hereby waives the preference of any vendors lien on the property, subject
matter of the deed of sale.
3. That this affidavit is being executed to avoid any question on
the authority of Dr. Fernando O. Carrascoso, Jr. to mortgage the property
subject of the Deed of Sale, Annex A hereof, where the purchase price
provided therein has not been fully paid.
4. That this affidavit has been executed pursuant to a board
resolution of El Dorado Plantation, Inc.[6] (Emphasis and underscoring
supplied)
On the following day, March 24, 1972, Carrascoso and his wife Marlene
executed a Real Estate Mortgage[7] over the property in favor of Home Savings Bank
(HSB) to secure a loan in the amount of P1,000,000.00. Of this amount, P290,000.00
was paid to Philippine National Bank to release the mortgage priorly constituted on the
property and P210,000.00 was paid to El Dorado pursuant to above-quoted paragraph
Nos. 1 and 2 of the terms and conditions of the Deed of Sale.[8]
The March 23, 1972 Deed of Sale of Real Property was registered and
annotated on El Dorados TCT No. T-93 as Entry No. 15240[9]on April 5, 1972. On even
date, TCT No. T-93 covering the property was cancelled and TCT No. T-6055[10] was in
its stead issued by the Registry of Deeds of Occidental Mindoro in the name of
Carrascoso on which the real estate mortgage in favor of HSB was annotated as Entry
No. 15242.[11]
On May 18, 1972, the real estate mortgage in favor of HSB was amended to
include an additional three year loan of P70,000.00 as requested by the spouses
Carrascoso.[12] The Amendment of Real Estate Mortgage was also annotated on TCT
No. T-6055 as Entry No. 15486 on May 24, 1972.[13]
The 3-year period for Carrascoso to fully pay for the property on March 23, 1975
passed without him having complied therewith.

In the meantime, on July 11, 1975, Carrascoso and the Philippine Long Distance
Telephone Company (PLDT), through its President Ramon Cojuangco, executed an
Agreement to Buy and Sell[14] whereby the former agreed to sell 1,000 hectares of the
property to the latter at a consideration of P3,000.00 per hectare or a total
of P3,000,000.00.
The July 11, 1975 Agreement to Buy and Sell was not registered and annotated
on Carrascosos TCT No. T-6055.
Lauro Leviste (Lauro), a stockholder and member of the Board of Directors of El
Dorado, through his counsel, Atty. Benjamin Aquino, by letter[15] dated December 27,
1976, called the attention of the Board to Carrascosos failure to pay the balance of the
purchase price of the property amounting to P1,300,000.00. And Lauros lawyer
manifested that:
Because of the default for a long time of Mr. Carrascoso to pay the
balance of the consideration of the sale, Don Lauro Leviste, in his behalf
and in behalf of the other shareholders similarly situated like him, want a
rescission of the sale made by the El Dorado Plantation, Inc. to Mr.
Carrascoso. He desires that the Board of Directors take the corresponding
action for rescission.[16]

Lauros desire to rescind the sale was reiterated in two other letters[17] addressed
to the Board dated January 20, 1977 and March 3, 1977.
Jose P. Leviste, as President of El Dorado, later sent a letter of February 21,
1977

[18]

to Carrascoso informing him that in view of his failure to pay the balance of the

purchase price of the property, El Dorado was seeking the rescission of the March 23,
1972 Deed of Sale of Real Property.
The pertinent portions of the letter read:
xxx
I regret to inform you that the balance of P1,300,000.00 and the interest
thereon have long been due and payable, although you have mortgaged
said property with the Home Savings Bank for P1,000,000.00 on March 24,
1972, which was subsequently increased to P1,070,000.00 on May 18,
1972.

You very well know that the El Dorado Plantation, Inc., is a close family
corporation, owned exclusively by the members of the Leviste family and I
am one of the co-owners of the land. As nothing appears to have been
done on your part after our numerous requests for payment of the said
amount of P1,300,000.00 and the interest of 10% per annum due thereon,
please be advised that we would like to rescind the contract of sale of the
land.[19](Underscoring supplied)

Jose Leviste, by letter[20] dated March 10, 1977, informed Lauros counsel Atty.
Aquino of his (Joses) February 21, 1977 letter to Carrascoso, he lamenting that
Carrascoso has not deemed it fit to give [his] letter the courtesy of a reply and advis[ing]
that some of the Directors of [El Dorado] could not see their way clear in complying with
the demands of your client [Lauro] and have failed to reach a consensus to bring the
corresponding action for rescission of the contract against . . . Carrascoso.[21]
Lauro and El Dorado finally filed on March 15, 1977 a complaint[22] for rescission
of the March 23, 1972 Deed of Sale of Real Property between El Dorado and
Carrascoso with damages before the Court of First Instance (CFI) of Occidental
Mindoro, docketed as Civil Case No. R-226.

Lauro and El Dorado also sought the cancellation of TCT No. T-6055 in the name
of Carrascoso and the revival of TCT No. T-93 in the name of El Dorado, free from any
liens and encumbrances. Furthermore, the two prayed for the issuance of an order for
Carrascoso to: (1) reconvey the property to El Dorado upon return to him
of P500,000.00, (2) secure a discharge of the real estate mortgage constituted on the
property from HSB, (3) submit an accounting of the fruits of the property from March 23,
1972 up to the return of possession of the land to El Dorado, (4) turn over said fruits or
the equivalent value thereof to El Dorado and (5) pay the amount of P100,000.00 for
attorneys fees and other damages.[23]

Also on March 15, 1977, Lauro and El Dorado caused to be annotated on TCT
No. T-6055 a Notice of Lis Pendens, inscribed as Entry No. 39737.[24]

In the meantime, Carrascoso, as vendor and PLDT, as vendee forged on April 6,

1977 a Deed of Absolute Sale[25] over the 1,000 hectare portion of the property subject of
their July 11, 1975 Agreement to Buy and Sell. The pertinent portions of the Deed are as
follows:
WHEREAS, the VENDOR and the VENDEE entered into an
agreement To Buy and Sell on July 11, 1975, which is made a part hereof
by reference;
WHEREAS, the VENDOR and the VENDEE are now decided to
execute the Deed of Absolute Sale referred to in the aforementioned
agreement to Buy and Sell;
WHEREFORE, for and in consideration of the foregoing premises
and the terms hereunder stated, the VENDOR and the VENDEE have
agreed as follows:
1. For and in consideration of the sum of THREE MILLION PESOS
(P3,000,000.00), Philippine currency, of which ONE HUNDRED TWENTY
THOUSAND PESOS P120,000.00 have (sic) already been received by the
VENDOR, the VENDOR hereby sells, transfers and conveys unto the
VENDEE one thousand hectares (1,000 has.) of his parcel of land covered
by T.C.T. No. T-6055 of the Registry of Deeds of Mindoro, delineated as
Lot No. 3-B-1 in the subdivision survey plan xxx
2. The VENDEE shall pay to the VENDOR upon the signing of this
agreement, the sum of TWO MILLION FIVE HUNDRED THOUSAND
PESOS (P2,500,000.00) in the following manner:
a) The sum of TWO MILLION THREE HUNDRED THOUSAND
PESOS (P2,300,000.00) to Home Savings Bank in full payment of the
VENDORs mortgaged obligation therewith;
b) The sum of
(P200,000.00) to VENDOR;

TWO

HUNDRED

THOUSAND

PESOS

The remaining balance of the purchase price in the sum of THREE

HUNDRED EIGHTY THOUSAND PESOS (P380,000.00), less such
expenses which may be advanced by the VENDEE but which are for the
account of the VENDOR under Paragraph 6 of the Agreement to Buy and
Sell, shall be paid by the VENDEE to the VENDOR upon issuance of title
to the VENDEE.[26] (Underscoring supplied)

In turn, PLDT, by Deed of Absolute Sale[27] dated May 30, 1977, conveyed the
aforesaid 1,000 hectare portion of the property to its subsidiary, PLDT Agricultural
Corporation

(PLDTAC),

for

consideration

of P3,000,000.00,

the

amount

of P2,620,000.00 of which was payable to PLDT upon signing of said Deed,

and P380,000.00 to Carrascoso upon issuance of title to PLDTAC.
In the meantime, on October 19, 1977, the El Dorado Board of Directors, by a
special meeting,[28] adopted and approved a Resolution ratifying and conferring the
prosecution of Civil Case No. R-226 of the Court of First Instance of Occidental Mindoro,
entitled Lauro P. Leviste vs. Fernando Carascoso (sic), etc. initiated by stockholder Mr.
Lauro P. Leviste.[29]
In his Answer with Compulsory Counterclaim,[30] Carrascoso alleged that: (1) he
had not paid his remaining P1,300,000.00 obligation under the March 23, 1972 Deed of
Sale of Real Property in view of the extensions of time to comply therewith granted him
by El Dorado; (2) the complaint suffered from fatal defects, there being no showing of
compliance with the condition precedent of exhaustion of intra-corporate remedies and
the requirement that a derivative suit instituted by a complaining stockholder be verified
under oath; (3) El Dorado committed a gross misrepresentation when it warranted that
the property was not being cultivated by any tenant to take it out of the coverage of the
Land Reform Code; and (4) he suffered damages due to the premature filing of the
complaint for which Lauro and El Dorado must be held liable.
On February 21, 1978, the April 6, 1977 and May 30, 1977 Deeds of Absolute
Sale and the respective Articles of Incorporation of PLDT and PLDTAC were annotated
on

TCT

No.

T-6055

as

Entry

Nos.

24770,[31] 42774,[32] 42769[33] and

24772,[34] respectively. On even date, Carrascosos TCT No. T-6055 was cancelled and
TCT No. T-12480[35] covering the 1,000 hectare portion of the property was issued in the
name of PLDTAC. The March 15, 1977 Notice of Lis Pendens was carried over to TCT
No. T-12480.
On
Intervention

July
[36]

31,

1978,

PLDT

and

PLDTAC

filed

which was granted by the trial court by Order

[37]

an

Urgent

Motion

for

of September 7, 1978.

PLDT and PLDTAC thereupon filed their Answer In Intervention with Compulsory
Counterclaim and Crossclaim[38] against Carrascoso on November 13, 1978, alleging
that: (1) when Carrascoso executed the April 6, 1977 Deed of Absolute Sale in favor of
PLDT, PLDT was not aware of any litigation involving the 1,000 hectare portion of the
property or of any flaw in his title, (2) PLDT is a purchaser in good faith and for value; (3)

when PLDT executed the May 30, 1977 Deed of Absolute Sale in favor of PLDTAC, they
had no knowledge of any pending litigation over the property and neither were they
aware that a notice of lis pendens had been annotated on Carrascosos title; and (4)
Lauro and El Dorado knew of the sale by Carrascoso to PLDT and PLDTs actual
possession of the 1,000 hectare portion of the property since June 30, 1975 and of its
exercise of exclusive rights of ownership thereon through agricultural development.[39]
By Decision[40] of January 28, 1991, Branch 45 of the San Jose Occidental
Mindoro Regional Trial Court to which the CFI has been renamed, dismissed the
complaint on the ground of prematurity, disposing as follows, quoted verbatim:
WHEREFORE, in view of all the foregoing considerations,
judgment is hereby rendered:
1. Dismissing the plaintiffs complaint against the defendant on the
ground of prematurity;
2. Ordering the plaintiffs to pay to the defendant the sum of
P2,980,000.00 as actual and compensatory damages, as well as the sum
of P100,000.00 as and for attorneys fees; provided, however, that the
aforesaid amounts must first be set off from the latters unpaid balance to
the former;
3. Dismissing the defendants-intervenors counterclaim and crossclaim; and
4. Ordering the plaintiffs to pay to (sic) the costs of suit.
SO ORDERED.[41] (Underscoring supplied)

Carrascoso, PLDT and PLDTAC filed their respective appeals to the Court of
Appeals.
By Decision[42] of January 31, 1996, the appellate court reversed the decision of
the trial court, disposing as follows, quoted verbatim:
WHEREFORE, not being meritorious, PLDTs/PLDTACs appeal is
hereby DISMISSED and finding El Dorados appeal to be impressed with
merit, We REVERSE the appealed Decision and render the following
judgment:

1. The Deed of Sale of Real Property (Exhibit C) is hereby

rescinded and TCT No. T-12480 (Exhibit Q) is cancelled while TCT No.
T-93 (Exhibit A), is reactivated.
2. Fernando Carrascoso, Jr. is commanded to:
2.1. return the possession of the 825 [hectare-] remaining
portion of the land to El Dorado Plantation, Inc. without
prejudice to the landholdings of legitimate tenants thereon;
2.2. return the net fruits of the land to El Dorado
Plantation, Inc. from March 23, 1972 to July 11, 1975, and
of the 825-hectare-remaining portion minus the tenants
landholdings, from July 11, 1975 up to its delivery to El
Dorado Plantation, Inc. including whatever he may have
received from the tenants if any by way of compensation
under the Operation Land Transfer or under any other
pertinent agrarian law;
2.3 Pay El Dorado Plantation, Inc. an attorneys fee of
P20,000.00 and litigation expenses of P30,000.00;
2.4 Return to Philippine Long Distance Telephone
Company/PLDT Agricultural Corporation P3,000,000.00
plus legal interest from April 6, 1977 until fully paid;
3. PLDT Agricultural Corporation is ordered to surrender the
possession of the 1000-hectare Farm to El Dorado Plantation, Inc.;
4. El Dorado Plantation, Inc. is directed to return the P500,000.00
to Fernando Carrascoso, Jr. plus legal interest from March 23, 1972 until
fully paid. The performance of this obligation will however await the full
compliance by Fernando Carrascoso, Jr. of his obligation to account for
and deliver the net fruits of the land mentioned above to El Dorado
Plantation, Inc.
5. To comply with paragraph 2.2 herein, Carrascoso is directed to
submit in (sic) the court a quo a full accounting of the fruits of the land
during the period mentioned above for the latters approval, after which
the net fruits shall be delivered to El Dorado, Plantation, Inc.
6. El Dorado Plantation, Inc. should inform Philippine Long
Distance Telephone Co. and PLDT Agricultural Corporation in writing
within ten (10) days after finality of this decision regarding the exercise of
its option under Art. 448 of the Civil Code.
SO ORDERED.[43] (Underscoring supplied)

PLDT and PLDTAC filed on February 22, 1996, a Motion for Reconsideration[44] of
the January 31, 1996 CA Decision, while Carrascoso went up this Court by filing on
March 25, 1996 a petition for review,[45] docketed as G.R. No. 123672, assailing the
January 31, 1996 CA Decision and seeking the reinstatement of the January 28, 1991
Decision of the trial court except with respect to its finding that the acquisition of PLDT
and PLDTAC of the 1,000 hectare portion of the property was subject to the notice
of lis pendens.
Lauro, in the meantime, died, hence, on April 16, 1996, a Motion for Substitution
of Party[46] was filed praying that his heirs, represented by Conrad C. Leviste, be
substituted as respondents. The Motion was granted by Resolution[47] of July 10, 1996.
PLDT and PLDTAC filed their Comment[48] to Carrascosos petition and prayed
that judgment be rendered finding them to be purchasers in good faith to thus entitle
them to possession and ownership of the 1,000 hectare portion of the property, together
with all the improvements they built thereon. Reiterating that they were not
purchasers pendente lite, they averred that El Dorado and Lauro had actual knowledge of
their interests in the said portion of the property prior to the annotation of the notice of lis
pendens to thereby render said notice ineffective.
El Dorado and the heirs of Lauro, both represented by Conrad C. Leviste, also
filed their Comment[49] to Carrascosos petition, praying that it be dismissed for lack of
merit and that paragraph 6 of the dispositive portion of the January 31, 1996 CA Decision
be modified to read as follows:
6. El Dorado Plantation, Inc. should inform Philippine Long
Distance Telephone Co. and PLDT Agricultural Corporation in writing
within ten (10) days after finality of this decision regarding the exercise of
its option under Arts. 449 and 450 of the Civil Code, without right to
indemnity on the part of the latter should the former decide to keep the
improvements under Article 449.[50] (Underscoring supplied)

Carrascoso filed on November 13, 1996 his Reply[51] to the Comment of El Dorado
and the heirs of Lauro.

In the meantime, as the February 22, 1996 Motion for Reconsideration filed by
PLDT and PLDTAC of the CA decision had remained unresolved, this Court, by
Resolution[52] of June 30, 2003, directed the appellate court to resolve the same.
By Resolution[53] of July 8, 2004, the CA denied PLDT and PLDTACs Motion for
Reconsideration for lack of merit.
PLDT[54] thereupon filed on September 2, 2004 a petition for review[55] before this
Court, docketed as G.R. No. 164489, seeking to reverse and set aside the January 31,
1996 Decision and the July 8, 2004 Resolution of the appellate court. It prayed that
judgment be rendered upholding its right, interest and title to the 1,000 hectare portion of
the property and that it and its successors-in-interest be declared owners and legal
possessors thereof, together with all improvements built, sown and planted thereon.
By Resolution[56] of August 25, 2004, G.R. No. 164489 was consolidated with G.R.
No. 123672.
In his petition, Carrascoso faults the CA as follows:
I
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND COMMITTED A MISTAKE OF LAW IN NOT
DECLARING THAT THE ACTION FOR RESCISSION WAS
PREMATURELY FILED.
II
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AND COMMITTED A MISTAKE OF LAW IN
DISREGARDING THE CRUCIAL SIGNIFICANCE OF THE WARRANTY
OF NON-TENANCY EXPRESSLY STIPULATED IN THE CONTRACT
OF SALE.
III
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION IN REVERSING THE DECISION OF THE TRIAL
COURT.[57](Underscoring supplied)

PLDT, on the other hand, faults the CA as follows:

I
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
HOLDING THAT PETITIONER AND PLTAC (sic) TOOK THEIR RIGHT,
INTEREST AND TITLE TO THE FARM SUBJECT TO THE NOTICE
OF LIS PENDENS, THE SAME IN DISREGARD OF THE PROTECTION
ACCORDED THEM UNDER ARTICLES 1181 AND 1187 OF THE NEW
CIVIL CODE.
II
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
HOLDING THAT PETITIONER AND PLDTAC TOOK THEIR RIGHT,
INTEREST AND TITLE TO THE FARM SUBJECT TO THE NOTICE
OF LIS PENDENS, THE SAME IN DISREGARD OF THE LEGAL
PRINCIPLE THAT RESPONDENTS EL DORADO ET AL.s PRIOR,
ACTUAL KNOWLEDGE OF PETITIONER PLDTS AGREEMENT TO
BUY AND SELL WITH RESPONDENT CARRASCOSO RESULTING IN
THE DELIVERY TO, AND POSSESSION, OCCUPATION AND
DEVELOPMENT BY, SAID PETITIONER OF THE FARM, IS
EQUIVALENT TO REGISTRATION OF SUCH RIGHT, INTEREST AND
TITLE AND, THEREFORE, A PRIOR REGISTRATION NOT AFFECTED
BY THE LATER NOTICE OF LIS PENDENS.[58] (Underscoring supplied)

Carrascoso posits that in the El Dorado Board Resolution and the Affidavit of
Feliciano Leviste, both dated March 23, 1972, no objection was interposed to his
mortgaging of the property to any bank provided that the balance of the purchase price of
the property under the March 23, 1972 Deed of Sale of Real Property is recognized,
hence, El Dorado could collect the unpaid balance of P1,300,000.00 only after the
mortgage in favor of HSB is paid in full; and the filing of the complaint for rescission with
damages on March 15, 1977 was premature as he fully paid his obligation to HSB only
on April 5, 1977 as evidenced by the Cancellation of Mortgage[59] signed by HSB
President Gregorio B. Licaros.
Carrascoso further posits that extensions of the period to pay El Dorado were
verbally accorded him by El Dorados directors and officers, particularly Jose and Angel
Leviste.
Article 1191 of the Civil Code provides:

Art. 1191. The power to rescind obligations is implied in reciprocal

ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case.
He may also seek rescission, even after he has chosen fulfillment, if the
latter should become impossible.
The court shall decree the rescission claimed, unless there be just
cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third
persons who have acquired the thing, in accordance with Articles 1385
and 1388 and the Mortgage Law.

Reciprocal obligations are those which arise from the same cause, and in which
each party is a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other.[60] They are to be performed simultaneously
such that the performance of one is conditioned upon the simultaneous fulfillment of the
other.[61]
The right of rescission of a party to an obligation under Article 1191 is predicated
on a breach of faith by the other party who violates the reciprocity between them.[62]
A contract of sale is a reciprocal obligation. The seller obligates itself to transfer
the ownership of and deliver a determinate thing, and the buyer obligates itself to pay
therefor a price certain in money or its equivalent.[63] The non-payment of the price by
the buyer is a resolutory condition which extinguishes the transaction that for a time
existed, and discharges the obligations created thereunder.[64] Such failure to pay the
price in the manner prescribed by the contract of sale entitles the unpaid seller to sue
for collection or to rescind the contract.[65]
In the case at bar, El Dorado already performed its obligation through the
execution of the March 23, 1972 Deed of Sale of Real Property which effectively
transferred ownership of the property to Carrascoso. The latter, on the other hand,
failed to perform his correlative obligation of paying in full the contract price in the
manner and within the period agreed upon.

The terms of the Deed are clear and unequivocal: Carrascoso was to pay the
balance of the purchase price of the property amounting toP1,300,000.00 plus interest
thereon at the rate of 10% per annum within a period of three (3) years from the signing
of the contract on March 23, 1972. When Jose Leviste informed him that El Dorado was
seeking rescission of the contract by letter of February 21, 1977, the period given to him
within which to fully satisfy his obligation had long lapsed.
The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no
objection to Carrascosos mortgaging of the property to any bank did not have the effect
of suspending the period to fully pay the purchase price, as expressly stipulated in the
Deed, pending full payment of any mortgage obligation of Carrascoso.
As the CA correctly found:
The adverted resolution (Exhibit 2) does not say that the obligation
of Carrascoso to pay the balance was extended. Neither can We see in it
anything that can logically infer said accommodation.
A partially unpaid seller can agree to the buyers mortgaging the
subject of the sale without changing the time fixed for the payment of the
balance of the price. The two agreements are not incompatible with each
other such that when one is to be implemented, the other has to be
suspended. In the case at bench, there was no impediment for Carrascoso
to pay the balance of the price after mortgaging the land.
Also, El Dorados subordinating its preferred claim or waiving its
superior vendors lien over the land in favor of the mortgagee of said
property only means that in a situation where the unpaid price of the Land
and loan secured by the mortgage over the Land both become due and
demandable, the mortgagee shall have precedence in going after the Land
for the satisfaction of the loan. Such accommodations do not necessarily
imply the modification of the period fixed in the contract of sale for the
payment by Carrascoso of the balance.
The palpable purpose of El Dorado in not raising any objection to
Carrascosos mortgaging the land was to eliminate any legal impediment to
such a contract. That was so succinctly expressed in the Affidavit (Exhibit
2-A) of President Feleciano (sic) Leviste. El Dorados yielding its superior
lien over the land in favor of the mortgagee was plainly intended to
overcome the natural reluctance of lending institutions to accept a land
whose price has not yet been fully paid as collateral of a
loan.[66] (Underscoring supplied)

Respecting Carrascosos insistence that he was granted verbal extensions within

which to pay the balance of the purchase price of the property by El Dorados directors
and officers Jose and Angel Leviste, this Court finds the same unsubstantiated by the
evidence on record.
It bears recalling that Jose Leviste wrote Carrascoso, by letter of February 21,
1977, calling his attention to his failure to comply, despite numerous requests, with his
obligation to pay the amount of P1,300,000.00 and 10% annual interest thereon, and
advising him that we would like to rescind the contract of sale. This letter reiterated the
term of payment agreed upon in the March 23, 1972 Deed of Sale of Real Property and
Carrascososs non-compliance therewith.
Carrascoso, harping on Jose Levistes March 10, 1977 letter to Lauros counsel
wherein he (Jose Leviste) stated that some of the Directors of the corporation could not
see their way clear in complying with the demands of [Lauro] and have failed to reach a
consensus to bring the corresponding action for rescission of the contract against Dr.
Fernando Carrascoso, argues that the extensions priorly given to him no doubt lead to
the logical conclusion on some of the directors inability to file suit against him.[67]
The argument is specious. As the CA found, even if some officers of El Dorado
were initially reluctant to file suit against him, the same should not be interpreted to
mean that this was brought about by a prior extension of the period to pay the balance
of the purchase price of the property as such reluctance could have been due to a
myriad of reasons totally unrelated to the period of payment of the balance.
The bottomline however is, if El Dorado really intended to extend
the period of payment of the balance there was absolutely no reason why
it did not do it in writing in clear and unmistakable terms. That there is no
such writing negates all the speculations of the court a quo and
pretensions of Carrascoso.
xxx
The unalterable fact here remains that on March 23, 1973, with or
without demand, the obligation of Carrascoso to pay P519,933.33
became due. The same was true on March 23, 1974 and on March 23,
1975 for equal amounts. Since he did not perform his obligation under the
contract of sale, he, therefore, breached it. Having breached the contract,
El Dorados cause of action for rescission of that contract
arose.[68] (Underscoring supplied)

Carrascoso goes on to argue that the appellate court erred in ignoring the import
of the warranty of non-tenancy expressly stipulated in the March 23, 1972 Deed of Sale
of Real Property. He alleges that on March 8, 1972 or two weeks prior to the execution
of the Deed of Sale, he discovered, while inspecting the property on board a helicopter,
that there were people and cattle in the area; when he confronted El Dorado about it, he
was told that the occupants were caretakers of cattle who would soon leave;[69] four
months after the execution of the Deed of Sale, upon inquiry with the Bureau of Lands
and the Bureau of Soils, he was informed that there were people claiming to be tenants
in certain portions of the property;[70] and he thus brought the matter again to El Dorado
which informed him that the occupants were not tenants but squatters.[71]
Carrascoso now alleges that as a result of what he concludes to be a breach of
the warranty of non-tenancy committed by El Dorado, he incurred expenses in the
amount of P2,890,000.00 for which he should be reimbursed, his unpaid obligation to El
Dorado amounting toP1,300,000.00 to be deducted therefrom.[72]
The breach of an express warranty makes the seller liable for damages.[73] The
following requisites must be established in order that there be an express warranty in a
contract of sale: (1) the express warranty must be an affirmation of fact or any promise
by the seller relating to the subject matter of the sale; (2) the natural tendency of such
affirmation or promise is to induce the buyer to purchase the thing; and (3) the buyer
purchases the thing relying on such affirmation or promise thereon.[74]
Under the March 23, 1972 Deed of Sale of Real Property, El Dorado warranted
that the property was not being cultivated by any tenant and was, and therefore, not
covered by the provisions of the Land Reform Code. If Carrascoso would become liable
under the said law, he would be reimbursed for all expenses and damages incurred
thereon.
Carrascoso claims to have incurred expenses in relocating persons found on the
property four months after the execution of the Deed of Sale. Apart from such bare
claim, the records are bereft of any proof that those persons were indeed
tenants.[75] The fact of tenancy[76] not having been priorly established,[77] El Dorado may
not be held liable for actual damages.

Carrascoso further argues that both the trial and appellate courts erred in
holding that the sale of the 1,000 hectare portion of the property to PLDT, as well as its
subsequent sale to PLDTAC, is subject to the March 15, 1977 Notice of Lis Pendens.
PLDT additionally argues that the CA incorrectly ignored the Agreement to Buy
and Sell which it entered into with Carrascoso on July 11, 1975, positing that the
efficacy of its purchase from Carrascoso, upon his fulfillment of the condition it imposed
resulting in its decision to formalize their transaction and execute the April 6, 1977 Deed
of Sale, retroacted to July 11, 1975 or before the annotation of the Notice of Lis
Pendens.[78]
The pertinent portions of the July 11, 1975 Agreement to Buy and Sell between
PLDT and Carrascoso read:
2. That the VENDOR hereby agrees to sell to the VENDEE and
the latter hereby agrees to purchase from the former, 1,000 hectares of
the above-described parcel of land as shown in the map hereto attached
as Annex A and made an integral part hereof and as hereafter to be more
particularly determined by the survey to be conducted by Certeza & Co.,
at the purchase price of P3,000.00 per hectare or for a total consideration
of Three Million Pesos (P3,000,000.00) payable in cash.
3. That this contract shall be considered rescinded and cancelled
and of no further force and effect, upon failure of the VENDOR to clear
the aforementioned 1,000 hectares of land of all the occupants therein
located, within a period of one (1) year from the date of execution of this
Agreement. However, the VENDEE shall have the option to extend the
life of this Agreement by another six months, during which period the
VENDEE shall definitely inform the VENDOR of its decision on whether
or not to finalize the deed of absolute sale for the aforementioned 1,000
hectares of land.
The VENDOR agrees that the amount of P500.00 per family
within the aforementioned 1,000 hectares of land shall be spent by him
for relocation purposes, which amount however shall be advanced by the
VENDEE and which shall not exceed the total amount of P120,000.00,
the same to be thereafter deducted by the VENDEE from the
aforementioned purchase price of P3,000,000.00.
The aforementioned advance of P120,000.00 shall be remitted by
the VENDEE to the VENDOR upon the signing of this Agreement.
xxx

It is likewise further agreed that the VENDEE shall have the right
to enter into any part of the aforementioned 1,000 hectares at any time
within the period of this Agreement for purposes of commencing the
development of the same.
xxx
5. Title to the aforementioned land shall also be cleared of all liens
or encumbrances and if there are any unpaid taxes, existing mortgages,
liens and encumbrances on the land, the payments to be made by the
VENDEE to the VENDOR of the purchase price shall first be applied to
liquidate said mortgages, liens and/or encumbrances, such that said
payments shall be made directly to the corresponding creditors. Thus, the
balance of the purchase price will be paid to the VENDOR after the title to
the land is cleared of all such liens and encumbrances.
xxx
7. The VENDOR agrees that, during the existence of this
Agreement and without the previous written permission from the
VENDEE, he shall not sell, cede, assign and/or transfer the parcel of land
subject of this Agreement.[79]

A notice of lis pendens is an announcement to the whole world that a particular

real property is in litigation, and serves as a warning that one who acquires an interest
over said property does so at his own risk, or that he gambles on the result of the
litigation over said property.[80]
Once a notice of lis pendens has been duly registered, any cancellation or
issuance of title over the land involved as well as any subsequent transaction affecting
the same would have to be subject to the outcome of the suit. In other words, a
purchaser who buys registered land with full notice of the fact that it is in litigation
between the vendor and a third party stands in the shoes of his vendor and his title is
subject to the incidents and result of the pending litigation.[81]
x x x Notice of lis pendens has been conceived and, more often
than not, availed of, to protect the real rights of the registrant while the
case involving such rights is pending resolution or decision. With the notice
of lis pendens duly recorded, and while it remains uncancelled, the
registrant could rest secure that he would not lose the property or any part
of it during the litigation.
The filing of a notice of lis pendens in effect (1) keeps the subject
matter of litigation within the power of the court until the entry of the final

judgment so as to prevent the defeat of the latter by successive

alienations; and (2) binds a purchaser of the land subject of the litigation to
the judgment or decree that will be promulgated thereon whether such a
purchaser is a bona fide purchaser or not; but (3) does not create a nonexistent right or lien.
The doctrine of lis pendens is founded upon reason of public policy
and necessity, the purpose of which is to keep the subject matter of the
litigation within the power of the court until the judgment or decree shall
have been entered; otherwise by successive alienations pending the
litigation, its judgment or decree shall be rendered abortive and impossible
of execution. The doctrine of lis pendens is based on considerations of
public policy and convenience, which forbid a litigant to give rights to
others, pending the litigation, so as to affect the proceedings of the court
then progressing to enforce those rights, the rule being necessary to the
administration of justice in order that decisions in pending suits may be
binding and may be given full effect, by keeping the subject matter in
controversy within the power of the court until final adjudication, that there
may be an end to litigation, and to preserve the property that the purpose
of the pending suit may not be defeated by successive alienations and
transfers of title.[82] (Italics in the original)

In ruling against PLDT and PLDTAC, the appellate court held:

PLDT and PLDTAC argue that in reality the Farm was bought by
the former on July 11, 1975 when Carrascoso and it entered into the
Agreement to Buy and Sell (Exhibit 15). How can an agreement to buy and
sell which is a preparatory contract be the same as a contract of sale which
is a principal contract? If PLDTs contention is correct that it bought the
Farm on July 11, 1975, why did it buy the same property again on April 6,
1977? There is simply no way PLDT and PLDTAC can extricate
themselves from the effects of said Notice of Lis Pendens. It is admitted
that PLDT took possession of the Farm on July 11, 1975 after the
execution of the Agreement to Buy and Sell but it did so not as owner but
as prospective buyer of the property. As prospective buyer which had
actual on (sic) constructive notice of the lis pendens, why did it pursue and
go through with the sale if it had not been willing to gamble with the result
of this case?[83] (Underscoring supplied)

Further, in its July 8, 2004 Resolution, the CA held:

PLDT cannot shield itself from the notice of lis pendens because
all that it had at the time of its inscription was an Agreement to Buy and
Sell with CARRASCOSO, which in effect is a mere contract to sell that
did not pass to it the ownership of the property.
xxx

Ownership was retained by CARRASCOSO which EL DORADO may

very well recover through its action for rescission.
xxx
PLDTs possession at the time the notice of lis pendens was registered
not being a legal possession based on ownership but a mere possession
in fact and the Agreement to Buy and Sell under which it supposedly took
possession not being registered, it is not protected from an adverse
judgment that may be rendered in the case subject of the notice of lis
pendens.[84] (Underscoring supplied)

In a contract of sale, the title passes to the vendee upon the delivery of the thing
sold; whereas in a contract to sell, ownership is not transferred upon delivery of the
property but upon full payment of the purchase price.[85] In the former, the vendor has
lost and cannot recover ownership until and unless the contract is resolved or
rescinded; whereas in the latter, title is retained by the vendor until the fullpayment 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.[86]
PLDT argues that the July 11, 1975 Agreement to Buy and Sell is a conditional
contract of sale, thus calling for the application of Articles 1181[87] and 1187[88] of the
Civil Code as held in Coronel v. Court of Appeals.[89]
The Court is not persuaded.
For in a conditional contract of sale, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there had already been previous
delivery

of

the

property

subject

of

the

sale

to

the

buyer,

ownership

thereto automatically transfers to the buyer by operation of law without any further act
having to be performed by the seller.[90] Whereas in a contract to sell, upon fulfillment of
the suspensive condition, ownership will not automatically transfer to the buyer although
the property may have been previously delivered to him. The prospective seller still has
to convey title to the prospective buyer by entering into a contract of absolute sale.[91]

A perusal of the contract[92] adverted to in Coronel reveals marked differences

from the Agreement to Buy and Sell in the case at bar. In the Coronel contract, there
was a clear intent on the part of the therein petitioners-sellers to transfer title to the
therein respondent-buyer. In the July 11, 1975 Agreement to Buy and Sell, PLDT still
had to definitely inform Carrascoso of its decision on whether or not to finalize the deed
of absolute sale for the 1,000 hectare portion of the property, such that in the April 6,
1977 Deed of Absolute Sale subsequently executed, the parties declared that they are
now decided to execute such deed, indicating that the Agreement to Buy and Sell was,
as the appellate court held, merely a preparatory contract in the nature of a contract to
sell. In fact, the parties even had to stipulate in the said Agreement to Buy and Sell that
Carrascoso, during the existence of the Agreement, shall not sell, cede, assign and/or
transfer the parcel of land, which provision this Court has held to be a typical
characteristic of a contract to sell.[93]
Being a contract to sell, what was vested by the July 11, 1975 Agreement to Buy
and Sell to PLDT was merely the beneficial title to the 1,000 hectare portion of the
property.
The right of Daniel Jovellanos to the property under the contract
[to sell] with Philamlife was merely an inchoate and expectant right which
would ripen into a vested right only upon his acquisition of
ownership which, as aforestated, was contingent upon his full payment of
the rentals and compliance with all his contractual obligations thereunder.
A vested right is an immediate fixed right of present and future
enjoyment. It is to be distinguished from a right that is expectant or
contingent. It is a right which is fixed, unalterable, absolute, complete and
unconditional to the exercise of which no obstacle exists, and which is
perfect in itself and not dependent upon a contingency. Thus, for a
property right to be vested, there must be a transition from the potential
or contingent to the actual, and the proprietary interest must have
attached to a thing; it must have become fixed or established and is no
longer open to doubt or controversy.[94] (Underscoring supplied)

In the case at bar, the July 11, 1975 Agreement to Buy and Sell was not
registered, which act of registration is the operative act to convey and affect the land.
An agreement to sell is a voluntary instrument as it is a willful act of
the registered owner. As such voluntary instrument, Section 50 of Act No.
496 [now Section 51 of PD 1529] expressly provides that the act of
registration shall be the operative act to convey and affect the land. And

Section 55 of the same Act [now Section 53 of PD 1529] requires the

presentation of the owners duplicate certificate of title for the registration of
any deed or voluntary instrument. As the agreement to sell involves an
interest less than an estate in fee simple, the same should have been
registered by filing it with the Register of Deeds who, in turn, makes a brief
memorandum thereof upon the original and owners duplicate certificate of
title. The reason for requiring the production of the owners duplicate
certificate in the registration of a voluntary instrument is that, being a willful
act of the registered owner, it is to be presumed that he is interested in
registering the instrument and would willingly surrender, present or
produce his duplicate certificate of title to the Register of Deeds in order to
accomplish such registration. However, where the owner refuses to
surrender the duplicate certificate for the annotation of the voluntary
instrument, the grantee may file with the Register of Deeds a statement
setting forth his adverse claim, as provided for in Section 110 of Act No.
496. xxx[95] (Underscoring supplied)

In Valley Golf Club, Inc. v. Salas,[96] where a Deed of Absolute Sale covering a
parcel of land was executed prior to the annotation of a notice of lis pendens by the
original owner thereof but which Deed was registered after such annotation, this Court
held:
The advance payment of P15,000.00 by the CLUB on October 18,
1960 to ROMERO, and the additional payment by the CLUB of
P54,887.50 as full payment of the purchase price on October 26, 1960,
also to ROMERO, cannot be held to be the dates of sale such as to
precede the annotation of the adverse claim by the SISTERS on October
25, 1960 and the lis pendens on October 27, 1960. It is basic that it is the
act of registration of the sale that is the operative act to convey and affect
the land. That registration was not effected by the CLUB until December
4, 1963, or three (3) years after it had made full payment to ROMERO.
xxx
xxx
As matters stand, therefore, in view of the prior annotations of the
adverse claim and lis pendens, the CLUB must be legally held to have
been aware of the flaws in the title. By virtue of the lis pendens, its
acquisition of the property was subject to whatever judgment was to be
rendered in Civil Case No. 6365. xxx The CLUBs cause of action lies, not
against the SISTERS, to whom the property had been adjudged by final
judgment in Civil Case No. 6365, but against ROMERO who was found to
have had no right to dispose of the land.[97] (Underscoring supplied)

PLDT further argues that El Dorados prior, actual knowledge of the July 11,
1975 Agreement to Buy and Sell is equivalent to prior registration not affected by the
Notice of Lis Pendens. As such, it concludes that it was not a purchaser pendente
lite nor a purchaser in bad faith.
PLDT anchors its argument on the testimony of Lauro and El Dorados counsel
Atty. Aquino from which it infers that Atty. Aquino filed the complaint for rescission and
caused the notice of lis pendens to be annotated on Carrascosos title only after reading
newspaper reports on the sale to PLDT of the 1,000 hectare portion of the property.
The pertinent portions of Atty. Aquinos testimony are reproduced hereunder:
Q: Do you know, Atty. Aquino, what you did after the filing of the complaint
in the instant case of Dr. Carrascoso?
A: Yes, I asked my associates to go to Mamburao and had the notice of Lis
Pendens covering the property as a result of the filing of the instant
complaint.
Q: Do you know the notice of Lis Pendens?
A: Yes, it is evidenced by a [Transfer] Certificate Copy of Title of Dr.
Carrascoso entitled Notice of Lis Pendens.
Q: As a consequence of the filing of the complaint which was annotated,
you have known that?
A: Yes.
xxx
Q: After the annotation of the notice of Lis Pendens, do you know, if any
further transaction was held on the property?
A: As we have read in the newspaper, that Dr. Carrascoso had sold the
property in favor of the PLDT, Co.
Q: And what did you do?
A: We verified the portion of the property having recorded under entry No.
24770 xxx and we also discovered that the articles incorporated
(sic) and other corporate matters had been organized and
established of the PLDT, Co., and had been annotated.
xxx

Q: Do you know what happened to the property?

A: It was sold by the PLDT to its sub-PLDT Agitating (sic) Co. when at that
time there was already notice of Lis Pendens.
xxx
Q: In your testimony, you mentioned that you had come cross- (sic)
reading the sale of the subject litigation (sic) between Dr. Fernando
Carrascoso, the defendant herein and the PLDT, one of
defendants-intervenor, may I say when?
A: I cannot remember now, but it was in the newspaper where it was
informed or mentioned of the sold property to PLDT.
xxx
Q: Will you tell to the Honorable Court what newspaper was that?
A: Well, I cannot remember what is that newspaper. That is only a means
of [confirming] the transaction. What was [confirmed] to us is
whether there was really transaction (sic) and we found out that
there was in the Register of Deeds and that was the reason why we
obtained the case.
Q: Well, may I say, is there any reason, the answer is immaterial. The
question is as regard the matter of time when counsel is being able
(sic) to read the newspaper allegedly (interrupted)
xxx
Q: The idea of the question, your Honor, is to establish and ask further the
notice of [lis pendens] with regards (sic) to the transfer of property
to PLDT, would have been accorded prior to the pendency of the
case.
xxx
A: I cannot remember.[98]

PLDT also relies on the following testimony of Carrascoso:

Q: You mentioned Doctor a while ago that you mentioned to the late
Governor Feliciano Leviste regarding your transaction with the
PLDT in relation to the subject property you allegedly mention
(sic) your intention to sell with the PLDT?

A: It was Dr. Jose Leviste and Dr. Angel Leviste that was constantly in
touched (sic) with me with respect to my transaction with the
PLDT, sir.
Q: Any other officer of the corporation who knows with instruction aside
from Dr. Angel Leviste and Dr. Jose Leviste?
A: Yes, sir. It was Trinidad Andaya Leviste and Assemblyman Expedito
Leviste.
xxx
Q: What is the position of Mrs. Trinidad Andaya Leviste with the plaintiffcorporation?
A: One of the stockholders and director of the plaintiff-corporation, sir.
Q: Will you please tell us the other officers?
A: Expedito Leviste, sir.
A: Will you tell the position of Expedito Leviste?
A: He was the corporate secretary, sir.
Q: If you know, was Dr. Jose Leviste also a director at that time?
A: Yes, sir.[99]

On the other hand, El Dorado asserts that it had no knowledge of the July 11,
1975 Agreement to Buy and Sell prior to the filing of the complaint for rescission against
Carrascoso and the annotation of the notice of lis pendens on his title. It further asserts
that it always acted in good faith:
xxx The contract to sell between the Petitioner [Carrascoso] and
PLDT was executed in July 11, 1975. There is no evidence that El Dorado
was notified of this contract. The property is located in Mindoro, El Dorado
is based in Manila. The land was planted to rice. This was not an unusual
activity on the land, thus it could have been the Petitioner who was using
the land. Not having been notified of this sale, El Dorado could not have
stopped PLDT from developing the land.
The absolute sale of the land to PLDT took place on April 6, 1977,
or AFTER the filing of this case on March 15, 1977 and the annotation of a
notice of lis pendens on March 16, 1977. Inspite of the notice of lis
pendens, PLDT then PLDTAC persisted not only in buying the land but
also in putting up improvements on the property such as buildings, roads,
irrigation systems and drainage. This was done during the pendency of this

case, where PLDT and PLDTAC actively participated as intervenors. They

were not innocent bystanders. xxx[100]
This Court finds the above-quoted testimony of Atty. Aquino to be susceptible of
conflicting interpretations. As such, it cannot be the basis for inferring that El Dorado
knew of the July 11, 1975 Agreement to Buy and Sell prior to the annotation of the
notice of lis pendens on Carrascosos title.
Respecting Carrascosos allegation that some of the directors and officers of El
Dorado had knowledge of his dealings with PLDT, it is true that knowledge of facts
acquired or possessed by an officer or agent of a corporation in the course of his
employment, and in relation to matters within the scope of his authority, is notice to the
corporation, whether he communicates such knowledge or not.[101] In the case at bar,
however, apart from Carrascosos claim that he in fact notified several of the directors
about his intention to sell the 1,000 hectare portion of the property to PLDT, no
evidence was presented to substantiate his claim. Such self-serving, uncorroborated
assertion is indubitably inadequate to prove that El Dorado had notice of the July 11,
1975 Agreement to Buy and Sell before the annotation of the notice of lis pendens on
his title.
PLDT is, of course, not without recourse. As held by the CA:
Between Carrascoso and PLDT/PLDTAC, the former acted in bad
faith while the latter acted in good faith. This is so because it was
Carrascosos refusal to pay his just debt to El Dorado that caused
PLDT/PLDTAC to suffer pecuniary losses. Therefore, Carrascoso should
return to PLDT/PLDTAC the P3,000,000.00 price of the farm plus legal
interest from receipt thereof until paid.[102] (Underscoring supplied)
The appellate courts decision ordering the rescission of the March 23, 1972 Deed
of Sale of Real Property between El Dorado and Carrascoso being in order, mutual
restitution follows to put back the parties to their original situation prior to the
consummation of the contract.
The exercise of the power to rescind extinguishes the obligatory
relation as if it had never been created, the extinction having a retroactive
effect. The rescission is equivalent to invalidating and unmaking the
juridical tie, leaving things in their status before the celebration of the
contract.
Where a contract is rescinded, it is the duty of the court to
require both parties to surrender that which they have respectively

received and to place each other as far as practicable in his original

situation, the rescission has the effect of abrogating the contract in all
parts.[103] (Underscoring supplied)

The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being subject to the
notice of lis pendens, and as the Court affirms the declaration by the appellate court of
the rescission of the Deed of Sale executed by El Dorado in favor of Carrascoso,
possession of the 1,000 hectare portion of the property should be turned over by PLDT
to El Dorado.
As regards the improvements introduced by PLDT on the 1,000 hectare portion of
the property, a distinction should be made between those which it built prior to the
annotation of the notice of lis pendens and those which it introduced subsequent thereto.
When a person builds in good faith on the land of another, Article 448 of the Civil
Code governs:
Art. 448. The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as his
own the works, sowing or planting, after payment of the indemnity
provided for in Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if
its value is considerably more than that of the building or trees. In such a
case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after the proper indemnity.
The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.

The above provision covers cases in which the builders, sowers or planters
believe themselves to be owners of the land or, at least, to have a claim of title
thereto.[104] Good faith is thus identified by the belief that the land is owned; or that by
some title one has the right to build, plant, or sow thereon.[105]
The owner of the land on which anything has been built, sown or planted in good
faith shall have the right to appropriate as his own the building, planting or sowing, after
payment to the builder, planter or sower of the necessary and useful expenses,[106] and
in the proper case, expenses for pure luxury or mere pleasure.[107]

The owner of the land may also oblige the builder, planter or sower to purchase
and pay the price of the land.
If the owner chooses to sell his land, the builder, planter or sower must purchase
the land, otherwise the owner may remove the improvements thereon. The builder,
planter or sower, however, is not obliged to purchase the land if its value is considerably
more than the building, planting or sowing. In such case, the builder, planter or sower
must pay rent to the owner of the land.
If the parties cannot come to terms over the conditions of the lease, the court
must fix the terms thereof.
The right to choose between appropriating the improvement or selling the land
on which the improvement of the builder, planter or sower stands, is given to the owner
of the land.[108]
On the other hand, when a person builds in bad faith on the land of another,
Articles 449 and 450 govern:
Art. 449. He who builds, plants or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.
Art. 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work, or
that the planting or sowing be removed, in order to replace things in their
former condition at the expense of the person who built, planted or sowed;
or he may compel the builder or planter to pay the price of the land, and
the sower the proper rent.

In the case at bar, it is undisputed that PLDT commenced construction of

improvements on the 1,000 hectare portion of the property immediately after the
execution of the July 11, 1975 Agreement to Buy and Sell with the full consent of
Carrascoso.[109] Thus, until March 15, 1977 when the Notice of Lis Pendens was
annotated on Carrascosos TCT No. T-6055, PLDT is deemed to have been in good
faith in introducing improvements on the 1,000 hectare portion of the property.

After March 15, 1977, however, PLDT could no longer invoke the rights of a
builder in good faith.
Should El Dorado then opt to appropriate the improvements made by PLDT on
the 1,000 hectare portion of the property, it should only be made to pay for those
improvements at the time good faith existed on the part of PLDT or until March 15,
1977,[110] to be pegged at its current fair market value.[111]
The commencement of PLDTs payment of reasonable rent should start on
March 15, 1977 as well, to be paid until such time that the possession of the 1,000
hectare portion is delivered to El Dorado, subject to the reimbursement of expenses as
aforestated, that is, if El Dorado opts to appropriate the improvements.[112]
If El Dorado opts for compulsory sale, however, the payment of rent should
continue up to the actual transfer of ownership.[113]
WHEREFORE, the petitions are DENIED. The Decision dated January 13, 1996
and

Resolution

dated

July

8,

2004

of

the

Court

of

Appeals

are AFFIRMED with MODIFICATION in that

1) the Regional Trial Court of San Jose, Occidental Mindoro, Branch 45 is
further directed to:
a. determine the present fair price of the 1,000 hectare portion of the property
and the amount of the expenses actually spent by PLDT for the improvements thereon
as of March 15, 1977;
b. include for determination the increase in value (plus value) which the 1,000
hectare portion may have acquired by reason of the existence of the improvements built
by PLDT before March 15, 1977 and the current fair market value of said
improvements;
2. El Dorado is ordered to exercise its option under the law, whether to
appropriate the improvements, or to oblige PLDT to pay the price of the land, and
3) PLDT shall pay El Dorado the amount of Two Thousand Pesos (P2,000.00)
per month as reasonable compensation for its occupancy of the 1,000 hectare portion

of the property from the time that its good faith ceased to exist until such time that
possession of the same is delivered to El Dorado, subject to the reimbursement of the
aforesaid expenses in favor of PLDT or until such time that the payment of the purchase
price of the 1,000 hectare portion is made by PLDT in favor of El Dorado in case the
latter opts for its compulsory sale.
Costs against petitioners.
SO ORDERED.

Asset Privatization v. TJ Enterprises, 587 SCRA 481, G.R. No. 167195, 8 May 2009
SECOND DIVISION
G.R. No. 167195

May 8, 2009

ASSET
PRIVATIZATION
vs.
T.J. ENTERPRISES, Respondent.

TRUST, Petitioner,

DECISION
TINGA, J.:
This is a Rule 45 petition1 which seeks the reversal of the Court of Appeals
decision2 and resolution3 affirming the RTCs decision4 holding petitioner liable for actual
damages for breach of contract.
Petitioner Asset Privatization Trust5 (petitioner) was a government entity created for the
purpose to conserve, to provisionally manage and to dispose assets of government
institutions.6 Petitioner had acquired from the Development Bank of the Philippines
(DBP) assets consisting of machinery and refrigeration equipment which were then
stored at Golden City compound, Pasay City. The compound was then leased to and in
the physical possession of Creative Lines, Inc., (Creative Lines). These assets were
being sold on an as-is-where-is basis.
On 7 November 1990, petitioner and respondent entered into an absolute deed of sale
over certain machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5.
Respondent paid the full amount of P84,000.00 as evidenced by petitioners Receipt No.
12844. After two (2) days, respondent demanded the delivery of the machinery it had
purchased. Sometime in March 1991, petitioner issued Gate Pass No. 4955.
Respondent was able to pull out from the compound the properties designated as Lots
Nos. 3 and 5. However, during the hauling of Lot No. 2 consisting of sixteen (16) items,
only nine (9) items were pulled out by respondent. The seven (7) items that were left
behind consisted of the following: (1) one (1) Reefer Unit 1; (2) one (1) Reefer Unit 2; (3)
one (1) Reefer Unit 3; (4) one (1) unit blast freezer with all accessories; (5) one (1) unit
chest freezer; (6) one (1) unit room air-conditioner; and (7) one (1) unit air compressor.
Creative Lines employees prevented respondent from hauling the remaining machinery
and equipment.
Respondent filed a complaint for specific performance and damages against petitioner
and Creative Lines.7 During the pendency of the case, respondent was able to pull out
the remaining machinery and equipment. However, upon inspection it was discovered
that the machinery and equipment were damaged and had missing parts.
Petitioner argued that upon the execution of the deed of sale it had complied with its
obligation to deliver the object of the sale since there was no stipulation to the contrary.
It further argued that being a sale on an as-is-where-is basis, it was the duty of
respondent to take possession of the property. Petitioner claimed that there was already
a constructive delivery of the machinery and equipment.

The RTC ruled that the execution of the deed of absolute sale did not result in
constructive delivery of the machinery and equipment. It found that at the time of the
sale, petitioner did not have control over the machinery and equipment and, thus, could
not have transferred ownership by constructive delivery. The RTC ruled that petitioner is
liable for breach of contract and should pay for the actual damages suffered by
respondent.
On petitioners appeal, the Court of Appeals affirmed in toto the decision of the RTC.
Hence this petition.
Before this Court, petitioner raises issues by attributing the following errors to the Court
of Appeals, to wit:
I.
The Court of Appeals erred in not finding that petitioner had complied with its obligation
to make delivery of the properties subject of the contract of sale.
II.
The Court of Appeals erred in not considering that the sale was on an "as-is-where-is"
basis wherein the properties were sold in the condition and in the place where they were
located.
III.
The Court of Appeals erred in not considering that respondents acceptance of
petitioners disclaimer of warranty forecloses respondents legal basis to enforce any
right arising from the contract.
IV.
The reason for the failure to make actual delivery of the properties was not attributable to
the fault and was beyond the control of petitioner. The claim for damages against
petitioner is therefore bereft of legal basis.8
The first issue hinges on the determination of whether there was a constructive delivery
of the machinery and equipment upon the execution of the deed of absolute sale
between petitioner and respondent.
The ownership of a thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof.9The thing sold shall be understood as delivered when it is
placed in the control and possession of the vendee.10
As a general rule, when the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the contract,
if from the deed the contrary does not appear or cannot clearly be inferred. And with
regard to movable property, its delivery may also be made by the delivery of the keys of

the place or depository where it is stored or kept.11 In order for the execution of a public
instrument to effect tradition, the purchaser must be placed in control of the thing sold.12
However, the execution of a public instrument only gives rise to a prima facie
presumption of delivery. Such presumption is destroyed when the delivery is not effected
because of a legal impediment.13 It is necessary that the vendor shall have control over
the thing sold that, at the moment of sale, its material delivery could have been
made.14 Thus, a person who does not have actual possession of the thing sold cannot
transfer constructive possession by the execution and delivery of a public instrument.15
In this case, there was no constructive delivery of the machinery and equipment upon
the execution of the deed of absolute sale or upon the issuance of the gate pass since it
was not petitioner but Creative Lines which had actual possession of the property. The
presumption of constructive delivery is not applicable as it has to yield to the reality that
the purchaser was not placed in possession and control of the property.
On the second issue, petitioner posits that the sale being in an as-is-where-is basis,
respondent agreed to take possession of the things sold in the condition where they are
found and from the place
where they are located. The phrase as-is where-is basis pertains solely to the physical
condition of the thing sold, not to its legal situation.16 It is merely descriptive of the state
of the thing sold. Thus, the as-is where-is basis merely describes the actual state and
location of the machinery and equipment sold by petitioner to respondent. The depiction
does
not
alter
petitioners
responsibility
to
deliver
the
property
to
respondent.1awphi1.zw+
Anent the third issue, petitioner maintains that the presence of the disclaimer of warranty
in the deed of absolute sale absolves it from all warranties, implied or otherwise. The
position is untenable.
The vendor is bound to transfer the ownership of and deliver, as well as warrant the
thing which is the object of the sale.17 Ownership of the thing sold is acquired by the
vendee from the moment it its delivered to him in any of the ways specified in articles
1497 to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee.18 A perusal of the deed of absolute sale
shows that both the vendor and the vendee represented and warranted to each other
that each had all the requisite power and authority to enter into the deed of absolute sale
and that they shall perform each of their respective obligations under the deed of
absolute in accordance with the terms thereof.19 As previously shown, there was no
actual or constructive delivery of the things sold. Thus, petitioner has not performed its
obligation to transfer ownership and possession of the things sold to respondent.
As to the last issue, petitioner claims that its failure to make actual delivery was beyond
its control. It posits that the refusal of Creative Lines to allow the hauling of the
machinery and equipment was unforeseen and constituted a fortuitous event.
The matter of fortuitous events is governed by Art. 1174 of the Civil Code which provides
that except in cases expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires assumption of risk, no person

shall be responsible for those events which could not be foreseen, or which though
foreseen, were inevitable. The elements of a fortuitous event are: (a) the cause of the
unforeseen and unexpected occurrence, must have been independent of human will; (b)
the event that constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it
impossible for the debtors to fulfill their obligation in a normal manner, and; (d) the
obligor must have been free from any participation in the aggravation of the resulting
injury to the creditor.20
A fortuitous event may either be an act of God, or natural occurrences such as floods or
typhoons, or an act of man such as riots, strikes or wars.21 However, when the loss is
found to be partly the result of a persons participationwhether by active intervention,
neglect or failure to actthe whole occurrence is humanized and removed from the
rules applicable to a fortuitous event.22
We quote with approval the following findings of the Court of Appeals, to wit:
We find that Creative Lines refusal to surrender the property to the vendee does not
constitute force majeure which exculpates APT from the payment of damages. This
event cannot be considered unavoidable or unforeseen. APT knew for a fact that the
properties to be sold were housed in the premises leased by Creative Lines. It should
have made arrangements with Creative Lines beforehand for the smooth and orderly
removal of the equipment. The principle embodied in the act of God doctrine strictly
requires that the act must be one occasioned exclusively by the violence of nature and
all human agencies are to be excluded from creating or entering into the cause of the
mischief. When the effect, the cause of which is to be considered, is found to be in part
the result of the participation of man, whether it be from active intervention or neglect, or
failure to act, the whole occurrence is thereby humanized, as it were, and removed from
the rules applicable to the acts of God.23
Moreover, Art. 1504 of the Civil Code provides that where actual delivery has been
delayed through the fault of either the buyer or seller the goods are at the risk of the
party in fault. The risk of loss or deterioration of the goods sold does not pass to the
buyer until there is actual or constructive delivery thereof. As previously discussed, there
was no actual or constructive delivery of the machinery and equipment. Thus, the risk of
loss or deterioration of property is borne by petitioner. Thus, it should be liable for the
damages that may arise from the delay.1avvphi1
Assuming arguendo that Creative Lines refusal to allow the hauling of the machinery
and equipment is a fortuitous event, petitioner will still be liable for damages. This Court
agrees with the appellate courts findings on the matter of damages, thus:
Article 1170 of the Civil Code states: "Those who in the performance of their obligations
are guilty of fraud, negligence, or delay and those who in any manner contravene the
tenor thereof are liable for damages." In contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is liable shall be those that are the natural and
probable consequences of the breach of the obligation, and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was
constituted.24 The trial court correctly awarded actual damages as pleaded and proven
during trial.25

WHEREFORE, the Court AFFIRMS in toto the Decision of the Court of Appeals dated
31 August 2004. Cost against petitioner.
SO ORDERED.