Sales Digests Haystack

Haystacks
Sales
Michael Vernon Guerrero Mendiola

2003
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Table of Contents
Acap vs. CA [GR 118114, 7 December 1995] ......... 1
Adalin vs. CA [GR 120191, 10 October 1997] ......... 3
Addison vs. Felix [GR 12342, 3 August 1918] ......... 6
Adelfa Properties vs. CA [GR 111238, 25 January 1995] ......... 9
Agricultural and Home Extension Development Group vs. CA [GR 92310, 3
September 1992] ......... 15
Almendra vs. IAC [GR 75111, 21 November 1991] ......... 17
Ang Yu Asuncion, et.al, vs. CA [GR 109125, 2 December 1994] ......... 20
Angeles vs. Calasanz [GR L-42283, 18 March 1985]
......... 24 Azcona vs. Reyes [GR 39590, 6 February
1934] ......... 27
Aznar vs. Yapdiangco [GR L-18536, 31 March 1965] ......... 29
Babasa vs. CA [GR 124045, 21 May 1998] ......... 31
Bagnas vs. CA [GR 38498, 10 August 1989] ......... 34
Balatbat vs. CA [GR 109410, 28 August 1996] ......... 37
Calimlim-Canullas vs. Fortun [GR 57499, 22 June 1984] ......... 40
Carbonell vs. CA [GR L-29972, 26 January 1976] ......... 42
Carumba vs. CA [GR L-27587, 18 February 1970] ......... 49
Celestino Co vs. Collector of Internal Revenue [GR L-8506, 31 August 1956]
......... 50
Cheng vs. Genato [GR 129760, 29 December 1998] ......... 52
CIR vs. Engineering Equipment and Supply [GR L-27044, 30 June 1975] ......... 58
Coronel vs. CA [GR 103577, 7 October 1996] ......... 62
Coronel vs. Ona [GR 10280, 7 February 1916] ......... 68
Cruz vs. Cabana [GR 56232, 22 June 1984] ......... 71
Cruz vs. Filipinas Investment [GR L-24772, 27 May 1968]
......... 73 Cuyugan vs. Santos .........
[unavailable]
Dagupan Trading vs. Macam [GR L-18497, 31 May 1965] ......... 76
Dalion vs. CA [GR 78903, 28 February 1990] ......... 77
Daguilan vs. IAC [GR L-69970, 28 November 1988] ......... 79
De la Cavada vs. Diaz [GR L-11668, 1 April 1918] ......... 82
Delta Motors Sales vs. Niu Kim Duan [GR 61043, 2 September 1992] ......... 86
Dignos vs. Lumungsod [GR L-59266, 29 February 1988] .........
87
Dizon vs. CA, 302 SCRA 288 ......... [unavailable]
Doromal vs. CA [GR L-36083, 5 September 1975] ......... 90
Dy vs. CA [GR 92989, 8 July 1991] ......... 93
EDCA Publishing vs. Santos [GR 80298, 26 April 1990] ......... 96
Elisco Tool Manufacturing vs. CA, 308 SCRA 731 (1999) ......... [unavailable]
Engineering and Machinery Corp. vs. CA [GR 52267, 24 January 1996] ......... 99
Equatorial Realty vs. Mayfair Theater [GR 106063, 21 November 1996] .........
102
Intestate Estate of Emilio Camon; Ereneta vs. Bezore [GR L-29746, 26 November
1973] ......... 109
Heirs of Escanlar, et.al, vs. CA [GR 119777, 23 October 1997]
......... 110 Espiritu vs. Valerio [GR L-18018, 26 December
1963] ......... 116
Estoque vs. Pajimula [GR L-24419, 15 July 1968] ......... 117
Filinvest Credit vs. CA [GR 82508, 29 September 1989] .........

118
Filipinas Investment vs. Ridad [GR L-27645, 28 November 1969] ......... 121
First Philippine International Bank vs. CA, 252 SCRA (1996) ......... [unavailable]
Froilan vs. Pan-Oriental Shipping Co., 12 SCRA 276 (1964) ......... [unavailable]
Fule vs. CA [GR 112212, 2 March 1998] ......... 124
Gaite vs. Fonacier [GR L-11827, 31 July 1961] ......... 128
Goldenrod Inc, vs. CA [GR 126812, 24 November 1998] .........
131
Guiang vs. CA [GR 125172, 26 June 1998] ......... 133
J, Schuback & Sons vs. CA [GR 105387, 11 November 1993] ......... 135
Spouses Ladanga vs. CA [GR L-55999, 24 August 1984] ......... 137
Legarda Hermanos vs. Saldana [GR L-26578, 28 January 1974] ......... 138
Levy Hermanos vs. Gervacio [GR 46306, 27 October 1939] .........
140
Lim vs. CA, 263 SCRA 569 (1996) ......... [unavailable]
Limketkai Sons Milling vs. CA [GR 118509, 1 December 1995]
......... 141
Loyola vs. CA [GR 115734, 23 February 2000] ......... 147
Luzon Brokerage vs. Maritime, 86 SCRA 305 (1978) ......... [unavailable]
Macondray vs. Eustaquio [GR 43683, 16 July 1937] ......... 150
Manila Racing Club vs. Manila Jockey Club [GR L-46533, 28 October
1939] ......... 154 Mapalo vs. Mapalo [GR L-21489 and L-21628, 19 May
1966] ......... 155
Mate vs. CA [G.R, Nos, 120724-25, 21 May 1998] ......... 158
Mclaughin vs. CA, 144 SCRA 693 (1986) ......... [unavailable]
Medina vs. Collector of Internal Revenue [GR L-15113, 28 January 1961] .........
160
Melliza vs. Iloilo City [GR L-24732, 30 April 1968] ......... 161
Mendoza vs. Kalaw [GR 16420, 12 October 1921] ......... 163
Mindanao Academy vs. Yap [GR L-17681, 26 February 1965]
......... 165 Montilla vs. CA [GR L-47968, 9 May 1988]
......... 168
National Grains Authority vs. IAC [GR 74470, 8 March 1989] .........
170
Navera vs. CA [GR L-56838, 26 April 1990]
......... 171 Nietes vs. CA, 46 SCRA 654 .........
[unavailable]
Noel vs. CA [GR 59550, 11 January 1995] ......... 176
Spouses Nonato vs. IAC [GR L-67181, 22 November
1985] ......... 179 Nool vs. CA [GR 116635, 24 July
1997] ......... 180
Northern Motors vs. Sapinoso [GR L-28074, 29 May 1970] .........
184
Odyssey Park Inc, vs. CA, 280 SCRA 253 (1997) ......... [unavailable]
Ong vs. CA [GR 97347, 6 July 1999] ......... 186
Ong vs. Ong [GR L-67888, 8 October 1985] ......... 189
Pangilinan vs. CA, 279 SCRA 590 (1997) ......... [unavailable]
Pasagui vs. Villablanca [GR L-21998, 10 November 1975] .........
190
Paulmitan vs. CA [GR 61584, 25 November 1992] ......... 191
Philippine Trust Company vs. PNB [GR 16483, 7 December 1921] ......... 194
Philippine Trust Co. vs. Roldan [GR L-8477, 31 May 1956] .........
198
Pichel vs. Alonzo [GR L-36902, 30 January 1982] ......... 199

PNB vs. CA, 262 SCRA 464 (1995) ......... [unavailable]
Power Commercial and Industrial Corp. vs. CA [GR 119745, 20 June 1997] .........
203
Puyat & Sons vs. Arco Amusement [GR 47538, 20 June 1941]
......... 206
Quijada vs. CA [GR 126444, 4 December 1998] ......... 208
Quimson vs. Rosete [GR L-2397, 9 August 1950] ......... 211
Quiroga vs. Parsons Hardware [GR 11491, 23 August 1918] ......... 213
Radiowealth Finance vs. Palileo [GR 83432, 20 May 1991] .........
215
Republic vs. Philippine Development Corp. [GR L-10141, 31 January 1958]
......... 216
Ridad vs. Filipinas Investment [GR L-39806, 27 January 1983]
......... 219
Rillo vs. CA [GR 125347, 19 June 1997] ......... 221
Romero vs. CA [GR 103577, 7 October 1996] ......... 223
Roque vs. Lapuz, 96 SCRA 741 (1980) ......... [unavailable]
Rubias vs. Batiller [GR L-35702, 29 May 1973] ......... 226
Sanchez vs. Rigos [GR L-25494, 14 June 1972] ......... 229
Siy Cong Bieng and Co. vs. Hongkong and Shanghai Banking Corp. [GR 34655, 5
March 1932] ......... 232
Soriano, et al. vs. Bautista, et al. [GR L-15752, 29 December 1962] ......... 234
Sta. Ana vs. Hernandez [GR L-16394, 17 December 1966] .........
236
Suria vs. IAC, 151 SCRA 661(1987) ......... [unavailable]

Tagatac vs. Jimenez, 53 OG 3792 (1957) ......... [unavailable]
Tajanlangit vs. Southern Motors [GR L-10789, 28 May 1957] ......... 239
Tanedo vs. CA [GR 104482, 22 January 1996] ......... 241
Torres vs. CA [GR 134559, 9 December 1999] ......... 243
Toyota Shaw vs. CA [GR 116650, 23 May 1995] ......... 246
Universal Food Corp. vs. CA, 33 SCRA 1 (1970) ......... [unavailable]
Uy vs. CA [GR 120465, 9 September 1999] ......... 249
Vallarta vs. CA [GR L-40195, 29 May 1987] ......... 253
Vasquez vs. CA [GR 83759, 12 July 1991] ......... 256
Vda, De Gordon vs. CA [GR L-37831, 23 November 1981] ......... 258

Vda, De Jomoc vs. CA [GR 92871, 2 August 1991] ......... 260
Vda, De Quiambao vs. Manila Motor Company [GR L-17384, 31 October 1961] ......... 2
Velasco vs. CA [GR L-31018, 29 June 1973] ......... 264
Villaflor vs. CA [GR 95694, 9 October 1997] ......... 268
Villamor vs. CA [GR 97332, 10 October 1991] ......... 274
Villonco Realty vs. Bormaheco Inc, [GR L-26872, 25 July 1975] ......... 277
Yao Ka Sin Trading vs. CA, 209 SCRA 763 ......... [unavailable]
Yu Tek vs. Gonzales [GR 9935, 1 February 1915] ......... 283
Yuviengco vs. Dacuycuy, 104 SCRA 668 (1981) ......... [unavailable]
Zayas vs. Luneta Motor Company [GR L-30583, 23 October 1982] ......... 285
This collection contains one hundred three (103)

out of one hundred twenty one (121) assigned cases
summarized in this format by
Michael Vernon M. Guerrero (as a sophomore law student)
during the First Semester, school year 2003-2004
in the Sales class
under Atty. Amado Paolo Dimayuga
at the Arellano University School of Law (AUSL).
Compiled as PDF, July 2011.
Berne Guerrero entered AUSL in June 2002
and eventually graduated from AUSL in 2006.
He passed the Philippine bar examinations immediately after (April 2007).
www.berneguerrero.com
Haystacks (Berne Guerrero)
[1]
Acap v. CA [G.R. No. 118114. December 7, 1995.]
First Division, Padilla (J): 4 concurring
Facts: The title to Lot 1130 of the Cadastral Survey of Hinigaran, Negros Occidental
was evidenced by OCT
R-12179. The lot has an area of 13,720 sq. m. The title was issued and is registered in
the name of spouses
Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto
inherited the lot. In
1975, Felixberto executed a duly notarized document entitled Declaration of Heirship
and Deed of Absolute Sale in favor of Cosme Pido. Since 1960, Teodoro Acap had been
the tenant of a portion of the said land, covering an area of 9,500 sq. m. When
ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be
the registered tenant thereof and religiously paid his leasehold rentals to Pido and
thereafter, upon Pidos death, to his widow Laurenciana. The controversy began when
Pido died interstate and on 27 November 1981, his surviving heirs executed a notarized
document denominated as Declaration of Heirship and Waiver of Rights of Lot 1130
Hinigaran Cadastre, wherein they declared to have adjudicated upon themselves the
parcel of land in equal share, and that they waive, quitclaim all right, interests and
participation over the parcel of land in favor of Edy de los Reyes. The document was
signed by all of Pidos heirs. Edy de los Reyes did not sign said document. It will be
noted that at the time of Cosme Pidos death, title to the property continued to be
registered in the name of the Vasquez spouses. Upon obtaining the Declaration of
Heirship with Waiver of Rights in his favor, de los Reyes filed the same with the Registry
of Deeds as part of a notice of an adverse claim against the original certificate of title.
Thereafter, delos Reyes sought for Acap to personally inform him that he had become
the new owner of the land and that the lease rentals thereon should be paid to him.
Delos Reyes alleged that he and Acap entered into an oral lease agreement wherein
Acap agreed to pay 10 cavans of palay per annum as lease rental. In 1982, Acap
allegedly complied with said obligation. In 1983, however, Acap refused to pay any
further lease rentals on the land, prompting delos Reyes to seek the assistance of the
then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR
invited Acap, who sent his wife, to a conference scheduled on 13 October 1983. The
wife stated that the she and her husband did not recognize delos Reyess claim of
ownership over the land. On 28 April 1988, after the lapse of four (4) years, delos Reys
field a complaint for recovery of possession and damages against Acap, alleging that as
his leasehold tenant, Acap refused and failed to pay the agreed annual rental of 10
cavans of palay despite repeated demands. On 20 August 1991, the lower court
rendered a decision in favor of delos Reyes, ordering the forfeiture of Acaps preferred
right of a Certificae of Land Transfer under PD 27 and his farmholdings, the return of
the farmland in Acaps possession to delos Reyes, and Acap to pay P5,000.00 as
attorneys fees, the sum of P1,000.00 as expenses of litigation and the amount of
P10,000.00 as actual damages.
Aggrieved, petitioner appealed to the Court of Appeals. Subsequently, the CA affirmed
the lower courts decision, holding that de los Reyes had acquired ownership of Lot No.
1130 of the Cadastral Survey of Hinigaran, Negros Occidental based on a document
Sales, 2003 ( 1 )
entitled Declaration of Heirship and Waiver of Rights, and ordering the dispossession
of Acap as leasehold tenant of the land for failure to pay rentals. Hence, the petition for
review on certiorari.
The Supreme Court granted the petition, set aside the decision of the RTC Negros
Occidental, dismissed the complaint for recovery of possession and damages against
Acap for failure to properly state a cause of action, without prejudice to private
respondent taking the proper legal steps to establish the legal mode by which he claims
to have acquired ownership of the land in question.
1.
Asserted right or claim to ownership not sufficient per se to give rise to

ownership over the res
An asserted right or claim to ownership or a real right over a thing arising from a
juridical act, however justified, is not per se sufficient to give rise to ownership over the
res. That right or title must be completed by fulfilling certain conditions imposed by law.
Hence, ownership and real rights are acquired only pursuant to a legal mode or
process. While title is the juridical justification, mode is the actual process of acquisition
transfer of ownership over a thing in question.
2.
Classes of modes of acquiring ownership

Under Article 712 of the Civil Code, the modes of acquiring ownership are
generally classified into two (2) classes, namely, the original mode (i.e, through
occupation, acquisitive prescription, law or intellectual creation) and the derivative
mode (i.e., through succession mortis causa or tradition as a result of certain contracts,
such as sale, barter, donation, assignment or mutuum).
3.
Contract of Sale; Declaration of Heirship and Waiver of Rights an

extrajudicial settlement between heirs under Rule 74 of the Rules of Court
In a Contract of Sale, one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determinate thing, and the other party to pay a price
certain in money or its equivalent. On the other hand, a declaration of heirship and
waiver of rights operates as a public instrument when filed with the Registry of Deeds
whereby the intestate heirs adjudicate and divide the estate left by the decedent
among themselves as they see fit. It is in effect an extrajudicial settlement between the
heirs under Rule 74 of the Rules of Court. In the present case, the trial court erred in
equating the nature and effect of the Declaration of Heirship and Waiver of Rights the
same with a contract (deed) of sale.
4.
Sale of hereditary rights and waiver of hereditary rights distinguished

There is a marked difference between a sale of hereditary rights and a waiver of
hereditary rights. The first presumes the existence of a contract or deed of sale
between the parties. The second is, technically speaking, a mode of extinction of
ownership where there is an abdication or intentional relinquishment of a known right
with knowledge of its existence and intention to relinquish it, in favor of other persons
who are co-heirs in the succession. In the present case, de los Reyes, being then a
stranger to the succession of Cosme Pido, cannot conclusively claim ownership over the
subject lot on the sole basis of the waiver document which neither recites the elements
of either a sale, or a donation, or any other derivative mode of acquiring ownership.
Sales, 2003 ( 2 )
5.
Summon of Ministry of Agrarian Reform does not conclude actuality of sale

nor notice of such sale
The conclusion, made by the trial and appellate courts, that a sale transpired
between Cosme Pidos heirs and de los Reyes and that Acap acquired actual knowledge
of said sale when he was summoned by the Ministry of Agrarian Reform to discuss de
los Reyes claim over the lot in question, has no basis both in fact and in law.
6.
A notice of adverse claim does not prove ownership over the lot; Adverse
claim not sufficient to cancel the certificate of tile and for another to be
issued in his name
A notice of adverse claim, by its nature, does not however prove private
respondents ownership over the tenanted lot. A notice of adverse claim is nothing but
a notice of a claim adverse to the registered owner, the validity of which is yet to be
established in court at some future date, and is no better than a notice of lis pendens
which is a notice of a case already pending in court. In the present case, while the
existence of said adverse claim was duly proven (thus being filed with the Registry of
Deeds which contained the Declaration of Heirship with Waiver of rights an was
annotated at the back of the Original Certificate of Title to the land in question), there is
no evidence whatsoever that a deed of sale was executed between Cosme Pidos heirs
and de los Reyes transferring the rights of the heirs to the land in favor of de los Reyes.
De los Reyes right or interest therefore in the tenanted lot remains an adverse claim
which cannot by itself be sufficient to cancel the OCT to the land and title to be issued
in de los Reyes name.
7.
Transaction between heirs and de los Reyes binding between parties, but
cannot affect right of Acap to tenanted land without corresponding proof
thereof
While the transaction between Pidos heirs and de los Reyes may be binding on
both parties, the right of Acap as a registered tenant to the land cannot be perfunctorily
forfeited on a mere allegation of de los Reyes ownership without the corresponding
proof thereof. Acap had been a registered tenant in the subject land since 1960 and
religiously paid lease rentals thereon. In his mind, he continued to be the registered
tenant of Cosme Pido and his family (after Pidos death), even if in 1982, de los Reyes
allegedly informed Acap that he had become the new owner of the land.
8.
No unjustified or deliberate refusal to pay the lease rentals to the

landowner / agricultural lessor
De los Reyes never registered the Declaration of Heirship with Waiver of Rights
with the Registry of Deeds or with the MAR, but instead, he filed a notice of adverse
claim on the said lot to establish ownership thereof (which cannot be done). It stands to
reason, therefore, to hold that there was no unjustified or deliberate refusal by Acap to
pay the lease rentals or amortizations to the landowner/agricultural lessor which, in this
case, de los Reyes failed to established in his favor by clear and convincing evidence.
This notwithstanding the fact that initially, Acap may have, in good faith, assumed such
statement of de los Reyes to be true and may have in fact delivered 10 cavans of palay
as annual rental for 1982 to latter. For in 1983, it is clear that Acap had misgivings over
de los Reyes claim of ownership over the said land because in the October 1983 MAR
conference, his wife Laurenciana categorically denied all of de los Reyes allegations. In
fact, Acap even secured a certificate from the MAR dated 9 May 1988 to the effect that
he continued to be the registered tenant of Cosme Pido and not of delos Reyes.
Sales, 2003 ( 3 )
9.
Sanction of forfeiture of tenants preferred right and possession of

farmholdings should not be applied
The sanction of forfeiture of his preferred right to be issued a Certificate of Land
Transfer under PD 27 and to the possession of his farmholdings should not be applied
against Acap, since de los Reyes has not established a cause of action for recovery of
possession against Acap.
[2]
Adalin vs. CA [G.R. No. 120191. October 10, 1997.]
First Division, Hermosisima Jr. (J): 3 concurring, 1 took no part
Facts: In August 1987, Elena K. Palanca, in behalf of the Kado siblings, commissioned
Ester Bautista to look for buyers for their property fronting the Imperial Hotel in
Cotabato City. Bautista logically offered said property to the owners of the Imperial
Hotel which may be expected to grab the offer and take advantage of the proximity of
the property to the hotel site. True enough, Faustino Yu, the President-General Manager
of Imperial Hotel, agreed to buy said property. Thus during that same month of August
1987, a conference was held in Yus office at the Imperial Hotel. Present there were Yu,
Loreto Adalin who was one of the tenants of the 5-door, 1-storey building standing on
the subject property, and Elena Palanca and Teofilo Kado in their own behalf as sellers
and in behalf of the other tenants of said building. During the conference, Yu and Lim
categorically asked Palanca whether the other tenants were interested to buy the
property, but Palanca also categorically answered that the other tenants were not
interested to buy the same. Consequently, they agreed to meet at the house of Palanca
on 2 September 1987 to finalize the sale. On said date, Loreto Adalin; Yu and Lim and
their legal counsel; Palanca and Kado and their legal counsel; and one other tenant,
Magno Adalin, met at Palancas house. Magno Adalin was there in his own behalf as
tenant of two of the five doors of the one-storey building standing on the subject
property and in behalf of the tenants of the two other doors, namely. Carlos Calingasan
and Demetrio Adaya. Again, Yu and Lim asked Palanca and Magno Adalin whether the
other tenants were interested to buy the subject property, and Magno Adalin
unequivocally answered that he and the other tenants were not so interested mainly
because they could not afford it. However, Magno Adalin asserted that he and the other
tenants were each entitled to a disturbance fee of P50,000.00 as consideration for their
vacating the subject property. During said meeting, Palanca and Kado, as sellers, and
Loreto Adalin and Yu and Lim, as buyers, agreed that the latter will pay P300,000 as
downpayment for the property and that as soon as the former secures the eviction of
the tenants, they will be paid the balance of P2,300,000. Pursuant to the above terms
and conditions, a Deed of Conditional Sale was drafted by the counsel of Yu and Lim. On
8 September 1987, at Yus Imperial Hotel office, Palanca and Eduarda Vargas,
representing the sellers, and Loreto Adalin and Yu and Lim signed the Deed of
Conditional Sale. They also agreed to defer the registration of the deed until after the
sellers have secured the eviction of the tenants from the subject property. The tenants,
however, refused to vacate the subject property.
Being under obligation to secure the eviction of the tenants, in accordance with the
terms and conditions of the Deed of Conditional Sale, Elena Palanca filed with the
Sales, 2003 ( 4 )
Barangay Captain a letter complaint for unlawful detainer against the said tenants. Two
days after Palanca filed an ejectment case before the Barangay Captain against the
tenants of the subject property, Magno Adalin, Demetrio Adaya and Carlos Calingasan
wrote letters to Palanca informing the Kado siblings that they have decided to purchase
the doors that they were leasing for the purchase price of P600,000 per door. Almost
instantly, Palanca, in behalf of the Kado siblings, accepted the offer of the said tenants
and returned the downpayments of Yu and Lim. Of course, the latter refused to accept
the reimbursements.
Yu and Lim filed a complaint witht the Barangay Captain for Breach of Contract against
Elena Palanca. During the conference, Yu and Lim, if only to accommodate Magno
Adalin and settle the case amicably, agreed to buy only 1 door each so that the latter
could purchase the two doors he was occupying. However, Magno Adalin adamantly
refused, claiming that he was already the owner of the 2 doors. When Lim asked Magno
Adalin to show the Deed of Sale for the two doors, the latter insouciantly walked out.
There being no settlement forged, on 16 May 1988, the Barangay Captain issued the
Certification to File Action.
On 5 May 1988, Yu and Lim filed their complaint for Specific Performance against the
Palanca, et. al. and Adalin in the RTC. On 14 June 1988, Yu and Lim caused the
annotation of a Notice of Lis Pendens at the dorsal portion of TCT 12963. On 25
October 1988, Calingasan, Adalin, et.al. filed a Motion for Intervention as PlaintiffsIntervenors appending thereto a copy of the Deed of Sale of Registered Land signed
by Palanca, et.al. On 27 October 1988, Calingasan et.al. filed the Deed of Sale of
Registered Land with the Register of Deeds on the basis of which TCT 24791 over the
property was issued under their names. On the same day, Calingasan, et.al. filed in the
Court a quo a Motion To Admit Complaint-In-Intervention. Attached to the ComplaintIn-Intervention was the Deed of Sale of Registered Land. Yu and Lim were shocked to
learn that Palanca, et. al. had signed the said deed. As a counter-move, Yu and Lim filed
a motion for leave to amend Complaint and, on 11November1988, filed their Amended
Complaint impleading Calingasan, et. al. as additional Defendants. Palanca, et.al.
suffered a rebuff when, on 10 January 1989, the RTC General Santos City issued an
Order dismissing the Petition of Calingasan, et. al. for consignation. In the meantime,
on 30 November 1989, Loreto Adalin died and was substituted, per order of the Court a
quo, on 5 January 1990, by his heirs, namely, Anita, Anelita, Loreto, Jr., Teresita,
Wilfredo, Lilibeth, Nelson, Helen and Jocel, all surnamed Adalin. After trial, the Court a
quo rendered judgment in favor of Calingasan, Adalin, et.al. The Court order Palanca,
et.al. in solidum to pay moral damages of P500,000.00, P100,000.00 exemplary
damages each to both Yu and Lim and P50,000.00 as and for attorneys fees. They were
ordered to return the P200,000.00 initial payment received by them with legal interest
from date of receipt thereof up to 3 November 1987.
Yu and Lim wasted no time in appealing from the decision of the trial court. They were
vindicated when the Court of Appeals rendered its decision in their favor. Accordingly,
the Court of Appeals rendered another judgment in the case and ordered that the
Deed of Conditional Sale was declared valid; that the Deeds of Sale of Registered
Land and TCT 24791 were hereby declared null and void; that Calingasan, et.al. except
the heirs of Loreto Adalin were ordered to vacate the property within 30 days from the
finality of the Decision; that Palanca, et.al were ordered to execute, in favor of Yu and
Lim, a Deed of Absolute Sale covering 4 doors of the property (which includes the
Sales, 2003 ( 5 )
area of the property on which said four doors were constructed) except the door
purchased by Loreto Adalin, free of any liens or encumbrances; that Yu amd Lim were
ordered to remit to Palanca, et.al. the balance of the purchase price of the 4 doors in
the amount of P1,880,000; that Palanca, et.al. were ordered to refund to Calingasan,
et.al. the amount of P840,000 which they paid for the property under the Deed of
Conditional Sale of Registered Land without interest considering that they also acted in
bad faith; that Magno Adalin was ordered to pay the amount of P3,000 a month, and
each of other tenants, except Loreto Adalin, the amount of P1,500 to Yu and Lim, from
November 1987, up to the time the property was vacated and delivered to the latter, as
reasonable compensation for the occupancy of the property, with interest thereon at
the rate of 6% per annum; and that Palanca, et.al. were ordered to pay, jointly and
severally, to Yu and Lim, individually, the amount of P100,000.00 by way of moral
damages, P20,000.00 by way of exemplary damages and P20,000.00 by way of
attorneys fees. Hence, the petition for review.
The Supreme Court dismissed the petition; with costs against Calingasan, Adalin, et.al.
1.
Grounds merely splits aspects of the issue, i.e. the true nature of transaction
entered by Yu and
Lim with the Kado siblings
The grounds relied upon by Calingasan, Adalin, et.al. are essentially a splitting of
the various aspects of the one pivotal issue that holds the key to the resolution of this
controversy: the true nature of the sale transaction entered into by the Kado siblings
with Faustino Yu and Antonio Lim. The Courts task amounts to a declaration of what
kind of contract had been entered into by said parties and of what their respective
rights and obligations are thereunder.
2.
Deed of Conditional Sale; Obligation of the seller to eject the tenants and the
obligation of the buyer to pay the balance of the purchase price; Choice as to
whom to sell is determined
Palanca, in behalf of the Kado siblings who had already committed to sell the
property to Yu and Lim and Loreto Adalin, understood her obligation to eject the tenants
on the subject property. Having gone to the extent of filing an ejectment case before
the Barangay Captain, Palanca clearly showed an intelligent appreciation of the nature
of the transaction that she had entered into: that she, in behalf of the Kado siblings,
had already sold the subject property to Yu and Lim and Loreto Adalin, and that only the
payment of the balance of the purchase price was subject to the condition that she
would successfully secure the eviction of their tenants. In the sense that the payment
of the balance of the purchase price was subject to a condition, the sale transaction
was not yet completed, and both sellers and buyers have their respective obligations
yet to be fulfilled: the former, the ejectment of their tenants; and the latter, the
payment of the balance of the purchase price. In this sense, the Deed of Conditional
Sale may be an accurate denomination of the transaction. But the sale was conditional
only inasmuch as there remained yet to be fulfilled, the obligation of the sellers to eject
their tenants and the obligation of the buyers to pay the balance of the purchase price.
The choice of who to sell the property to, however, had already been made by the
sellers and is thus no longer subject to any condition nor open to any change. In that
Sales, 2003 ( 6 )
sense, therefore, the sale made by Palanca to Yu, Lim, and Adalin was definitive and
absolute.
3.
No acts of parties justifies radical change of Palancas posture; No legal basis

for the acceptance of tenants offer to buy
Nothing in the acts of the sellers and buyers before, during or after the said
transaction justifies the radical change of posture of Palanca who, in order to provide a
legal basis for her later acceptance of the tenants offer to buy the same property, in
effect claimed that the sale, being conditional, was dependent on the sellers not
changing their minds about selling the property to Yu and Lim. The tenants, for their
part, defended Palancas subsequent dealing with them by asserting their option rights
under Palancas letter of 2 September 1987 and harking on the non-fulfillment of the
condition that their ejectment be secured first.
4.
No legal rationalizing can sanction Palancas arbitrary breach of contract

The Court cannot countenance the double dealing perpetrated by Palanca in
behalf of the Kado siblings. No amount of legal rationalizing can sanction the arbitrary
breach of contract that Palanca committed in accepting the offer of Magno Adalin,
Adaya and Calingasan to purchase a property already earlier sold to Yu and Lim.
5.
Alleged 30-day option for tenant to purchase void for lack of consideration
The 30-day option to purchase the subject property allegedly given to the
tenants as contained in the 2 September 1987 letter of Palanca, is not valid for utter
lack of consideration.
6.
Palanca and tenants estopped

Yu and Lim twice asked Palanca and the tenants concerned as to whether or not
the latter were interested to buy the subject property, and twice, too, the answer given
was that the said tenants were not interested to buy the subject property because they
could not afford it. Clearly, said tenants and Palanca, who represented the former in the
initial negotiations with Yu and Lim, are estopped from denying their earlier statement
to the effect that the said tenants Magno Adalin, Adaya and Calingasan had no
intention of buying the four doors that they were leasing from the Kado siblings.
7.
Subsequent sale clearly made in bad faith

The subsequent sale of the subject property by Palanca to the tenants, smacks of
gross bad faith, considering that Palanca and the said tenants were in full awareness of
the August and September negotiations between Bautista and Palanca, on the one
hand, and Loreto Adalin, Faustino Yu and Antonio Lim, on the other, for the sale of the
one-storey building. It cannot be denied, thus, that Palanca and the said tenants
entered into the subsequent or second sale notwithstanding their full knowledge of the
subsistence of the earlier sale over the same property to Yu and Lim.
8.
Prior registration cannot erase gross bad faith characterizing second sale
Though the second sale to the said tenants was registered, such prior
registration cannot erase the gross bad faith that characterized such second sale, and
consequently, there is no legal basis to rule that such second sale prevails over the first
sale of the said property to Yu and Lim.
Sales, 2003 ( 7 )
9.
Refusal of tenants from vacating property not a valid justification to renege

on obligation to sell
Palanca, et.al. cannot invoke the refusal of the tenants to vacate the property
and the latters decision to themselves purchase the property as a valid justification to
renege on and turn their backs against their obligation to deliver or cause the eviction
of the tenants from and deliver physical possession o the property to Yu and Lim. It
would be the zenith of inequity for Palanca, et. al. to invoke the occupation by the
tenants, as of the property, as a justification to ignore their obligation to have the
tenants evicted from the property and for them to give P50,000.00 disturbance fee for
each of the tenants and a justification for the latter to hold on to the possession of the
property.
10.
Second sale cannot be preferred even if the prior conditional sale was not
consummated Assuming, gratia arguendi, for the nonce, that there had been no
consummation of the Deed of Conditional Sale by reason of the non-delivery to Yu
and Lim of the property, it does not thereby mean that the Deed of Sale of Registered
Land executed by Palanca, et.al and the tenants should be given preference.
[3]
Addison vs. Felix [G.R. No. 12342. August 3, 1918.]
En Banc, Fisher (J): 5 concurring
Facts: By a public instrument dated 11 June 1914, A. A. Addison sold to Marciana Felix,
with the consent of her husband, Balbino Tioco, 4 parcels of land. Felix paid, at the time
of the execution of the deed, the sum of P3,000 on account of the purchase price, and
bound herself to pay the remainder in installments, the first of P2,000 on 15 July 1914,
the second of P5,000 30 days after the issuance to her of a certificate of title under the
Land Registration Act, and further, within 10 years from the date of such title, P10 for
each coconut tree in bearing and P5 for each such tree not in bearing, that might be
growing on said 4 parcels of land on the date of the issuance of title to her, with the
condition that the total price should not exceed P85,000. It was further stipulated that
the purchaser was to deliver to the vendor 25% of the value of the products that she
might obtain from the 4 parcels from the moment she takes possession of them until
the Torrens certificate of title be issued in her favor. It was also covenanted that within
1 year from the date of the certificate of title in favor of Marciana Felix, this latter may
rescind the present contract of purchase and sale, in which case Felix shall be obliged
to return to Addison the net value of all the products of the 4 parcels sold, and shall be
obliged to return to her all the sums that was paid, together with interest at the rate of
10% per annum. After the execution of the deed of sale, at the request of Felix. Addison
went to Lucena, accompanied by the formers representative, for the purpose of
designating and delivering the lands sold. He was able to designate only 2 of the 4
parcels, and more than 2/3s of these were found to be in the possession of one Juan
Villafuerte, who claimed to be the owner of the parts so occupied by him. Addison
admitted that Felix would have to bring suit to obtain possession of the land. In June
1914, Felix filed an application with the Land Court for the registration in her name of 4
parcels of land described in the deed of sale executed in her favor, to obtain from the
Land Court a writ of injunction against the occupants, and for the purpose of the
issuance of this writ. The proceedings in the matter of this application were
subsequently dismissed, for failure to present the required plans within the period of
the time allowed for the purpose.
Sales, 2003 ( 8 )
In January 1915, Addison filed suit in the CFI Manila to compel Felix to make payment of
the first installment of P2,000, demandable on 15 July 1914, and of the interest in
arrears, at the stipulated rate of 8% per annum. Felix and Tioco answered the complaint
and alleged by way of special defense that Addison had absolutely failed to deliver the
lands that were the subject matter of the sale, notwithstanding the demands made
upon him for this purpose. She therefore asked that she be absolved from the
complaint, and that, after a declaration of the rescission of the contract of the purchase
and sale of said lands, Addison be ordered to refund the P3,000 that had been paid to
him on account, together with the interest agreed upon, and to pay an indemnity for
the losses and damages which the defendant alleged she had suffered through
Addisons nonfulfilment of the contract. The trial court rendered judgment in favor of
Felix, holding the contract of sale to be rescinded and ordering the return the P3,000
paid on account of the price, together with interest thereon at the rate of 10% per
annum. From this judgment Addison appealed.
The Supreme Court held that the contract of purchase and sale entered into by and
between the Parties on 11 June 1914 is rescinded, and ordered Addison to make
restitution of the sum of P3,000 received by him on account of the price of the sale,
together with interest thereon at the legal rate of 6% per annum from the date of the
filing of the complaint until payment, with the costs of both instances against Addison.
1.
Cross Complaint not founded on conventional rescission but on the failure to

deliver the land sold
The Cross complaint is not founded on the hypothesis of the conventional
rescission relied upon by the court, but on the failure to deliver the land sold. The right
to rescind the contract by virtue of the special agreement not only did not exist from
the moment of the execution of the contract up to one year after the registration of the
land, but does not accrue until the land is registered. The wording of the clause
substantiates the contention. The one years deliberation granted to the purchaser was
to be counted from the date of the certificate of title . . .. Therefore the right to elect
to rescind the contract was subject to a condition, namely, the issuance of the title. The
record shows that up to the present time that condition has not been fulfilled;
consequently Felix cannot be heard to invoke a right which depends on the existence of
that condition.
2.
Fulfillment of condition impossible for reason imputable to party not

presented
If in-the cross-complaint it had been alleged that the fulfillment of the condition
was impossible for reasons imputable to Addison, and if this allegation had been
proven, perhaps the condition would have been considered as fulfilled (arts. 1117,
1118, and 1119, Civ. Code). This issue, however, was not presented in Felixs answer.
3.
Tradition / Delivery by the vendor of the thing sold

The Code imposes upon the vendor the obligation to deliver the thing sold. The
thing is considered to be delivered when it is placed in the hands and possession of
the vendee. (Civ. Code, art. 1462.) It is true that the same article declares that the
execution of a public instrument is equivalent to the delivery of the thing which is the
object of the contract, but, in order that this symbolic delivery may produce the effect
of tradition, it is necessary that the vendor shall have had such control over the thing
sold that, at the moment of the sale, its material delivery could have been made. It is
Sales, 2003 ( 9 )
not enough to confer upon the purchaser the ownership and the right of possession.
The thing sold must be placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is sufficient. But
if, notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality the delivery has not been
effected.
4.
Delivery, according to Dalloz

The word delivery expresses a complex idea, the abandonment of the thing by
the person who makes the delivery and the taking control of it by the person to whom
the delivery is made (Dalloz;Gen. Rep., vol. 43, p. 174 in his commentaries on article
1604 of the French Civil Code).
5.
Execution of a public instrument, when sufficient

The execution of a public instrument is sufficient for the purposes of the
abandonment made by the vendor, but it is not always sufficient to permit of the
apprehension of the thing by the purchaser.
6.
Fictitious tradition not necessarily implies real tradition of the thing sold
When the sale is made through the means of a public instrument, the execution
of this latter is equivalent to the delivery of the thing sold: which does not and cannot
mean that this fictitious tradition necessarily implies the real tradition of the thing sold,
for it is incontrovertible that, while its ownership still pertains to the vendor (and with
greater reason if it does not), a third person may be in possession of the same thing;
wherefore, though, as a general rule, he who purchases by means of a public
instrument should be deemed to be the possessor in fact, yet this presumption gives
way before proof to the contrary (Supreme court of Spain, decision of November 10,
1903, [Civ. Rep., vol. 96, p. 560] interpreting article 1462 of the Civil Code).
7.
Rescission of sale and return of price due to non-delivery of thing sold

In the present case, the mere execution of the instrument was not a fulfillment of
the vendors obligation to deliver the thing sold, and that from such nonfulfillment
arises the purchasers right to demand, as she has demanded, the rescission of the sale
and the return of the price. (Civ. Code, arts. 1506 and 1124.)
8.
No agreement for vendee to take steps to obtain material possession of thing

sold
If the sale had been made under the express agreement of imposing upon the
purchaser the obligation to take the necessary steps to obtain the material possession
of the thing sold, and it were proven that she knew that the thing was in the possession
of a third person claiming to have property rights therein, such agreement would be
perfectly valid. But there is nothing in the instrument which would indicate, even
implicitly, that such was the agreement.
Possession while land is being registered contemplated in contract
8.
Sales, 2003 ( 10 )
The obligation was incumbent upon Felix to apply for and obtain the registration
of the land in the new registry of property; but from this it cannot be concluded that
she had to await the final decision of the Court of Land Registration, in order to be able
to enjoy the property sold. On the contrary, it was expressly stipulated in the contract
that the purchaser should deliver to the vendor 1/4 of the products of the 4 parcels
from the moment when she takes possession of them until the Torrens certificate of title
be issued in her favor. This obviously shows that it was not foreseen that the
purchaser might be deprived of her possession during the course of the registration
proceedings, but that the transaction rested on the assumption that she was to have,
during said period, the material possession and enjoyment of the 4 parcels of land.
9.
Legal interest due as rescission is made by virtue of provisions of law

As the rescission is made by virtue of the provisions of law and not by
contractual agreement, it is not the conventional but the legal interest that is
demandable.
[4]
Adelfa Properties vs. CA [G.R. No. 111238. January 25, 1995.]
Second Division, Regalado (J): 3 concurring
Facts: Rosario Jimenez-Castaneda, Salud Jimenez and their brothers, Jose and
Dominador Jimenez, were the registered co-owners of a parcel of land consisting of
17,710 sq. ms (TCT 309773) situated in Barrio Culasi, Las Pias, Metro Manila. On 28
July 1988, Jose and Dominador Jimenez sold their share consisting of 1/2 of said parcel
of land, specifically the eastern portion thereof, to Adelfa Properties pursuant to a
Kasulatan sa Bilihan ng Lupa. Subsequently, a Confirmatory Extrajudicial Partition
Agreement was executed by the Jimenezes, wherein the eastern portion of the subject
lot, with an area of 8,855 sq. ms. was adjudicated to Jose and Dominador Jimenez, while
the western portion was allocated to Rosario and Salud Jimenez. Thereafter, Adelfa
Properties expressed interest in buying the western portion of the property from Rosario
and Salud. Accordingly, on 25 November 1989, an Exclusive Option to Purchase was
executed between the parties, with the condition that the selling price shall be
P2,856,150, that the option money of P50,000 shall be credited as partial payment
upon the consummation of sale, that the balance is to be paid on or before 30
November 1989, and that in case of default by Adelfa Properties to pay the balance, the
option is cancelled and 50% of the option money shall be forfeited and the other 50%
refunded upon the sale of the property to a third party, and that all expenses including
capital gains tax, cost of documentary stamps are for the account of the vendors and
the expenses for the registration of the deed of sale for the account of Adelfa
properties. Considering, however, that the owners copy of the certificate of title issued
to Salud Jimenez had been lost, a petition for the re-issuance of a new owners copy of
said certificate of title was filed in court through Atty. Bayani L. Bernardo. Eventually, a
new owners copy of the certificate of title was issued but it remained in the possession
of Atty. Bernardo until he turned it over to Adelfa Properties, Inc.
Before Adelfa Properties could make payment, it received summons on 29 November
1989, together with a copy of a complaint filed by the nephews and nieces of Rosario
and Salud against the latter, Jose and Dominador Jimenez, and Adelfa Properties in the
Sales, 2003 ( 11 )
RTC Makati (Civil Case 89-5541), for annulment of the deed of sale in favor of
Household Corporation and recovery of ownership of the property covered by TCT
309773. As a consequence, in a letter dated 29 November 1989, Adelfa Properties
informed Rosario and Salud that it would hold payment of the full purchase price and
suggested that the latter settle the case with their nephews and nieces, adding that if
possible, although 30 November 1989 is a holiday, we will be waiting for you and said
plaintiffs at our office up to 7:00 p.m. Another letter of the same tenor and of even
date was sent by Adelfa Properties to Jose and Dominador Jimenez. Salud Jimenez
refused to heed the suggestion of Adelfa Properties and attributed the suspension of
payment of the purchase price to lack of word of honor. On 7 December 1989, Adelfa
Properties caused to be annotated on the title of the lot its option contract with Salud
and Rosario, and its contract of sale with Jose and Dominador Jimenez, as Entry No.
1437-4 and entry No. 1438-4, respectively. On 14 December 1989, Rosario and Salud
sent Francisca Jimenez to see Atty. Bernardo, in his capacity as Adelfa Properties
counsel, and to inform the latter that they were cancelling the transaction. In turn, Atty.
Bernardo offered to pay the purchase price provided that P500,000.00 be deducted
therefrom for the settlement of the civil case. This was rejected by Rosario and Salud.
On 22 December 1989, Atty. Bernardo wrote Rosario and Salud on the same matter but
this time reducing the amount from P500,000.00 to P300,000.00, and this was also
rejected by the latter. On 23 February 1990, the RTC dismissed Civil Case 89-5541.
On 28 February 1990, Adelfa Properties caused to be annotated anew on TCT 309773
the exclusive option to purchase as Entry 4442-4.On the same day, 28 February 1990,
Rosario and Salud executed a Deed of Conditional Sale in favor of Emylene Chua over
the same parcel of land for P3,029,250.00, of which P1,500,000.00 was paid to the
former on said date, with the balance to be paid upon the transfer of title to the
specified 1/2 portion. On 16 April 1990, Atty. Bernardo wrote Rosario and Salud
informing the latter that in view of the dismissal of the case against them, Adelfa
Properties was willing to pay the purchase price, and he requested that the
corresponding deed of absolute sale be executed. This was ignored by Rosario and
Salud. On 27 July 1990, Jimenez counsel sent a letter to Adelfa Properties enclosing
therein a check for P25,000.00 representing the refund of 50% of the option money
paid under the exclusive option to purchase. Rosario and Salud then requested Adelfa
Properties to return the owners duplicate copy of the certificate of title of Salud
Jimenez. Adelfa Properties failed to surrender the certificate of title.
Rosario and Salud Jimenez filed Civil Case 7532 in the RTC Pasay City (Branch 113) for
annulment of contract with damages, praying, among others, that the exclusive option
to purchase be declared null and void; that Adelfa Properties be ordered to return the
owners duplicate certificate of title; and that the annotation of the option contract on
TCT 309773 be cancelled. Emylene Chua, the subsequent purchaser of the lot, filed a
complaint in intervention. On 5 September 1991, the trial court rendered judgment
holding that the agreement entered into by the parties was merely an option contract,
and declaring that the suspension of payment by Adelfa Properties constituted a
counter-offer which, therefore, was tantamount to a rejection of the option. It likewise
ruled that Adelfa Properties could not validly suspend payment in favor of Rosario and
Salud on the ground that the vindicatory action filed by the latters kin did not involve
the western portion of the land covered by the contract between the parties, but the
Sales, 2003 ( 12 )
eastern portion thereof which was the subject of the sale between Adelfa Properties and
the brothers Jose and Dominador Jimenez. The trial court then directed the cancellation
of the exclusive option to purchase, declared the sale to intervenor Emylene Chua as
valid and binding, and ordered Adelfa Properties to pay damages and attorneys fees to
Rosario and Salud, with costs.
On appeal, the Court of appeals affirmed in toto the decision of the court a quo (CA-GR
34767) and held that the failure of petitioner to pay the purchase price within the
period agreed upon was tantamount to an election by petitioner not to buy the
property; that the suspension of payment constituted an imposition of a condition
which was actually a counter-offer amounting to a rejection of the option; and that
Article 1590 of the Civil Code on suspension of payments applies only to a contract of
sale or a contract to sell, but not to an option contract which it opined was the nature of
the document subject of the case at bar. Said appellate court similarly upheld the
validity of the deed of conditional sale executed by Rosario and Salud in favor of
intervenor Emylene Chua. Hence, the petition for review on certiorari.
The Supreme Court affirmed the assailed judgment of the Court of Appeals in CA-GR CV
34767, with modificatory premises.
1.
Agreement between parties a contract to sell and not an option contract or a

contract of sale
The alleged option contract is a contract to sell, rather than a contract of sale.
The distinction between the two is important for in contract of sale, the title passes to
the vendee upon the delivery of the thing sold; whereas in a contract to sell, by
agreement the ownership is reserved in the vendor and is not to pass until the full
payment of the price. In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a contract
to sell, title is retained by the vendor until the full payment of the price, such payment
being a positive suspensive condition and failure of which is not a breach but an event
that prevents the obligation of the vendor to convey title from becoming effective.
Thus, a deed of sale is considered absolute in nature where there is neither a
stipulation in the deed that title to the property sold is reserved in the seller until the
full payment of the price, nor one giving the vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay within a fixed period.
2.
Intent not to transfer ownership need not be expressed

The parties never intended to transfer ownership to Adelfa Properties to
completion of payment of the purchase price, this is inferred by the fact that the
exclusive option to purchase, although it provided for automatic rescission of the
contract and partial forfeiture of the amount already paid in case of default, does not
mention that Adelfa Properties is obliged to return possession or ownership of the
property as a consequence of non-payment. There is no stipulation anent reversion or
reconveyance of the property in the event that petitioner does not comply with its
obligation. With the absence of such a stipulation, it may legally be inferred that there
was an implied agreement that ownership shall not pass to the purchaser until he had
fully paid the price. Article 1478 of the Civil Code does not require that such a
stipulation be expressly made. Consequently, an implied stipulation to that effect is
considered valid and binding and enforceable between the parties. A contract which
contains this kind of stipulation is considered a contract to sell. Moreover, that the
Sales, 2003 ( 13 )
parties really intended to execute a contract to sell is bolstered by the fact that the
deed of absolute sale would have been issued only upon the payment of the balance of
the purchase price, as may be gleaned from Adelfa Properties letter dated 16 April
1990 wherein it informed the vendors that it is now ready and willing to pay you
simultaneously with the execution of the corresponding deed of absolute sale.
3.
No actual or constructive delivery of property to indicate contract of sale;

Circumstances negate presumption of possession of title is to be understood
as delivery
It has not been shown that there was delivery of the property, actual or
constructive, made. The exclusive option to purchase is not contained in a public
instrument the execution of which would have been considered equivalent to delivery.
Neither did Adelfa Properties take actual, physical possession of the property at any
given time. It is true that after the reconstitution of the certificate of title, it remained in
the possession of Atty. Bayani L. Bernardo, Adelfas counsel. Normally, under the law,
such possession by the vendee is to be understood as a delivery. However, Rosario and
Salud explained that there was really no intention on their part to deliver the title to
Adelfa Properties with the purpose of transferring ownership to it. They claim that Atty.
Bernardo had possession of the title only because he was their counsel in the petition
for reconstitution. The court found no reason not to believe said explanation, aside from
the fact that such contention was never refuted or contradicted by Adelfa Properties.
4.
Perfected contract to sell

The controverted document should legally be considered as a perfected contract to
sell, and not
strictly an option contract.
5.
Contract interpreted to ascertain intent of parties; Title not controlling if text

shows otherwise
The important task in contract interpretation is always the ascertainment of the
intention of the contracting parties and that task is to be discharged by looking to the
words they used to project that intention in their contract, all the words not just a
particular word or two, and words in context not words standing alone. Moreover,
judging from the subsequent acts of the parties which will hereinafter be discussed, it is
undeniable that the intention of the parties was to enter into a contract to sell. In
addition, the title of a contract does not necessarily determine its true nature. Hence,
the fact that the document under discussion is entitled Exclusive Option to Purchase
is not controlling where the text thereof shows that it is a contract to sell.
Option defined
As used in the law on sales, an option is a continuing offer or contract by which
the owner stipulates with another that the latter shall have the right to buy the
property at a fixed price within a certain time, or under, or in compliance with, certain
terms and conditions, or which gives to the owner of the property the right to sell or
demand a sale. It is also sometimes called an unaccepted offer. An option is not of
itself a purchase, but merely secures the privilege to buy. It is not a sale of property but
a sale of the right to purchase. It is simply a contract by which the owner of property
agrees with another person that he shall have the right to buy his property at a fixed
price within a certain time. He does not sell his land; he does not then agree to sell it;
6.
Sales, 2003 ( 14 )
but he does sell something, that is, the right or privilege to buy at the election or
option of the other party. Its distinguishing characteristic is that it imposes no binding
obligation on the person holding the option, aside from the consideration for the offer.
Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or
agree to transfer, any title to, or any interest or right in the subject matter, but is
merely a contract by which the owner of property gives the optionee the right or
privilege of accepting the offer and buying the property on certain terms.
7.
Contract defined
A contract, like a contract to sell, involves a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to
render some service. Contracts, in general, are perfected by mere consent, which is
manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the
acceptance absolute.
8.
Distinction between an option and a contract of sale

The distinction between an option and a contract of sale is that an option is an
unaccepted offer. It states the terms and conditions on which the owner is willing to sell
his land, if the holder elects to accept them within the time limited. If the holder does
so elect, he must give notice to the other party, and the accepted offer thereupon
becomes a valid and binding contract. If an acceptance is not made within the time
fixed, the owner is no longer bound by his offer, and the option is at an end. A contract
of sale, on the other hand, fixes definitely the relative rights and obligations of both
parties at the time of its execution. The offer and the acceptance are concurrent, since
the minds of the contracting parties meet in the terms of the agreement.
9.
Acceptance; formal or informal

Except where a formal acceptance is so required, although the acceptance must
be affirmatively and clearly made and must be evidenced by some acts or conduct
communicated to the offeror, it may be made either in a formal or an informal manner,
and may be shown by acts, conduct, or words of the accepting party that clearly
manifest a present intention or determination to accept the offer to buy or sell. Thus,
acceptance may be shown by the acts, conduct, or words of a party recognizing the
existence of the contract of sale. In the present case, a perusal of the contract involved,
as well as the oral and documentary evidence presented by the parties, readily shows
that there is indeed a concurrence of Adelfas offer to buy and the Jimenezes
acceptance thereof.
10.
Contract clear, only performance of obligations required of parties

The offer to buy a specific piece of land was definite and certain, while the
acceptance thereof was absolute and without any condition or qualification. The
agreement as to the object, the price of the property, and the terms of payment was
clear and well-defined. No other significance could be given to such acts that than that
they were meant to finalize and perfect the transaction. The parties even went beyond
the basic requirements of the law by stipulating that all expenses including the
corresponding capital gains tax, cost of documentary stamps are for the account of the
vendors, and expenses for the registration of the deed of sale in the Registry of Deeds
are for the account of Adelfa Properties, Inc. Hence, there was nothing left to be done
except the performance of the respective obligations of the parties.
Sales, 2003 ( 15 )
11.
No counter-offer
The offer of Adelfa Properties to deduct P500,000.00, (later reduced to
P300,000.00) from the purchase price for the settlement of the civil case was not a
counter-offer. There already existed a perfected contract between the parties at the
time the alleged counter-offer was made. Thus, any new offer by a party becomes
binding only when it is accepted by the other. In the case of the Jimenezes, they
actually refused to concur in said offer of petitioner, by reason of which the original
terms of the contract continued to be enforceable. At any rate, the same cannot be
considered a counter-offer for the simple reason that Adelfa Properties sole purpose
was to settle the civil case in order that it could already comply with its obligation. In
fact, it was even indicative of a desire by Adelfa Properties to immediately comply
therewith, except that it was being prevented from doing so because of the filing of the
civil case which, it believed in good faith, rendered compliance improbable at that time.
In addition, no inference can be drawn from that suggestion given by Adelfa Properties
that it was totally abandoning the original contract.
12.
Test to determine contract as a contract of sale or purchase or mere

option
The test in determining whether a contract is a contract of sale or purchase or
a mere option is whether or not the agreement could be specifically enforced. There
is no doubt that Adelfas obligation to pay the purchase price is specific, definite and
certain, and consequently binding and enforceable. Had the Jimenezes chosen to
enforce the contract, they could have specifically compelled Adelfa to pay the balance
of P2,806,150.00. This is distinctly made manifest in the contract itself as an integral
stipulation, compliance with which could legally and definitely be demanded from
petitioner as a consequence.
13.
Option agreement
An agreement is only an option when no obligation rests on the party to make
any payment except such as may be agreed on between the parties as consideration to
support the option until he has made up his mind within the time specified. An option,
and not a contract to purchase, is effected by an agreement to sell real estate for
payments to be made within specified time and providing for forfeiture of money paid
upon failure to make payment, where the purchaser does not agree to purchase, to
make payment, or to bind himself in any way other than the forfeiture of the payments
made. This is not a case where no right is as yet created nor an obligation declared, as
where something further remains to be done before the buyer and seller obligate
themselves.
14.
Contract not an option contract; Balance

While there is jurisprudence to the effect that a contract which provides that the
initial payment shall be totally forfeited in case of default in payment is to be
considered as an option contract, the contract executed between the parties is an
option contract, for the reason that the parties were already contemplating the
payment of the balance of the purchase price, and were not merely quoting an agreed
value for the property. The term balance, connotes a remainder or something
remaining from the original total sum already agreed upon.
Sales, 2003 ( 16 )
15.
When earnest money given in a contract of sale

Whenever earnest money is given in a contract of sale, it shall be considered as
part of the price and as proof of the perfection of the contract. It constitutes an
advance payment and must, therefore, be deducted from the total price. Also, earnest
money is given by the buyer to the seller to bind the bargain.
16.
Distinctions between earnest and option money There are clear distinctions
between earnest money and option money, viz.: (a) earnest money is part of the
purchase price, while option money is the money given as a distinct consideration for
an option contract; (b) earnest money is given only where there is already a sale, while
option money applies to a sale not yet perfected; and (c) when earnest money is given,
the buyer is bound to pay the balance, while when the would-be buyer gives option
money, he is not required to buy.
Article 1590, New Civil Code
Article 1590 of the Civil Code provides Should the vendee be disturbed in the
possession or ownership of the thing acquired, or should he have reasonable grounds to
fear such disturbance, by a vindicatory action or a foreclosure of mortgage, he may
suspend the payment of the price until the vendor has caused the disturbance or
danger to cease, unless the latter gives security for the return of the price in a proper
case, or it has been stipulated that, notwithstanding any such contingency, the vendee
shall be bound to make the payment. A mere act of trespass shall not authorize the
suspension of the payment of the price. As the agreement between the parties was
not an option contract but a perfected contract to sell; and therefore, Article 1590
would properly apply.
17.
18.
Adelfa Properties justified in suspending payment of balance by reason of

vindicatory action filed against it
In Civil Case 89-5541, it is easily discernible that, although the complaint prayed
for the annulment only of the contract of sale executed between Adelfa Properties and
the Jimenez brothers, the same likewise prayed for the recovery of therein Jimenez
share in that parcel of land specifically covered by TCT 309773. In other words, the
Jimenezes were claiming to be co-owners of the entire parcel of land described in TCT
309773, and not only of a portion thereof nor did their claim pertain exclusively to the
eastern half adjudicated to the Jimenez brothers. Therefore, Adelfa Properties was
justified in suspending payment of the balance of the purchase price by reason of the
aforesaid vindicatory action filed against it. The assurance made by the Jimenezes that
Adelfa Properties did not have to worry about the case because it was pure and simple
harassment is not the kind of guaranty contemplated under the exceptive clause in
Article 1590 wherein the vendor is bound to make payment even with the existence of
a vindicatory action if the vendee should give a security for the return of the price.
19.
Jimenezes may no longer be compelled to sell and deliver subject property

Be that as it may, and the validity of the suspension of payment notwithstanding,
the Jimenezes may no longer be compelled to sell and deliver the subject property to
Adelfa Properties for two reasons, that is, Adelfas failure to duly effect the consignation
of the purchase price after the disturbance had ceased; and, secondarily, the fact that
the contract to sell had been validly rescinded by the Jimenezes.
20.
Tender and consignation required in discharge of obligation (eg. Contract to

sell); Different in cases involving exercise of right or privilege
Sales, 2003 ( 17 )
The mere sending of a letter by the vendee expressing the intention to pay,
without the accompanying payment, is not considered a valid tender of payment.
Besides, a mere tender of payment is not sufficient to compel the Jimenezes to deliver
the property and execute the deed of absolute sale. It is consignation which is essential
in order to extinguish Adelfa Properties obligation to pay the balance of the purchase
price. The rule is different in case of an option contract or in legal redemption or in a
sale with right to repurchase, wherein consignation is not necessary because these
cases involve an exercise of a right or privilege (to buy, redeem or repurchase) rather
than the discharge of an obligation, hence tender of payment would be sufficient to
preserve the right or privilege. This is because the provisions on consignation are not
applicable when there is no obligation to pay. A contract to sell involves the
performance of an obligation, not merely the exercise of a privilege or a right.
Consequently, performance or payment may be effected not by tender of payment
alone but by both tender and consignation.
21.
22.
Adelfa no longer had right to suspend payment after dismissal of civil case
against it
Adelfa Properties no longer had the right to suspend payment after the
disturbance ceased with the dismissal of the civil case filed against it. Necessarily,
therefore, its obligation to pay the balance again arose and resumed after it received
notice of such dismissal. Unfortunately, Adelfa failed to seasonably make payment, as
in fact it has failed to do so up to the present time, or even to deposit the money with
the trial court when this case was originally filed therein.
Rescission in a contract to sell
Article 1592 of the Civil Code which requires rescission either by judicial action or
notarial act is not applicable to a contract to sell. Furthermore, judicial action for
rescission of a contract is not necessary where the contract provides for automatic
rescission in case of breach, as in the contract involved in the present controversy. By
Adelfas failure to comply with its obligation, the Jimenezes elected to resort to and did
announce the rescission of the contract through its letter to Adelfa dated 27 July 1990.
That written notice of rescission is deemed sufficient under the circumstances.
23.
Resolution of reciprocal contracts may be made extrajudicially, unless

impugned in court
It was held in University of the Philippines vs. De los Angeles, etc. that the right
to rescind is not absolute, being ever subject to scrutiny and review by the proper
court. However, this rule applies to a situation where the extrajudicial rescission is
contested by the defaulting party. In other words, resolution of reciprocal contracts may
be made extrajudicially unless successfully impugned in court. If the debtor impugns
the declaration, it shall be subject to judicial determination. Otherwise, if said party
does not oppose it, the extrajudicial rescission shall have legal effect. In the present
case, although Adelfa Properties was duly furnished and did receive a written notice of
rescission which specified the grounds therefore, it failed to reply thereto or protest
against it. Its silence thereon suggests an admission of the veracity and validity of
Jimenezes claim.
24.
Adelfa estopped
Sales, 2003 ( 18 )
Furthermore, the initiative of instituting suit was transferred from the rescinder to
the defaulter by virtue of the automatic rescission clause in the contract. But then,
aside from the lackadaisical manner with which Adelfa Properties treated the
Jimenezes letter of cancellation, it utterly failed to seriously seek redress from the
court for the enforcement of its alleged rights under the contract. If the Jimenezes had
not taken the initiative of filing Civil Case 7532, evidently Adelfa had no intention to
take any legal action to compel specific performance from the former. By such cavalier
disregard, it has been effectively estopped from seeking the affirmative relief it desires
but which it had theretofore disdained.
[5]
Agricultural and Home Extension Development Group vs. CA [G.R. No. 92310.
September 3, 1992.] First Division, Cruz (J): 3 concurring
Facts: On 29 March 1972, the spouses Andres Diaz and Josefa Mia sold to Bruno
Gundran a 19-hectare parcel of land in Las Pias, Rizal, covered by TCT 287416. The
owners duplicate copy of the title was turned over to Gundran. However, he did not
register the Deed of Absolute Sale because he said he was advised in the Office of the
Register of Deeds of Pasig of the existence of notices of lis pendens on the title. On 20
November 1972, Gundran and Agricultural and Home Development Group (AHDG)
entered into a Joint Venture Agreement for the improvement and subdivision of the
land. This agreement was also not annotated on the title. On 30 August 1976, the
spouses Andres Diaz and Josefa Mia again entered into another contract of sale of the
same property with Librado Cabautan. On 3 September 1976, by virtue of an order of
the CFI Rizal, a new owners copy of the certificate of title was issued to the Diaz
spouses, who had alleged the loss of their copy. On that same date, the notices of lis
pendens annotated on TCT 287416 were canceled and the Deed of Sale in favor of
Cabautan was recorded. A new TCT S-33850/T-172 was thereupon issued in his name in
lieu of the canceled TCT 287416.
On 14 March 1977, Gundran instituted an action for reconveyance before the CFI Pasay
City * against Librado Cabautan and Josefa Mia seeking, among others, the cancellation
of TCT 33850/T-172 and the issuance of a new certificate of title in his name. On 31
August 1977, AHDG, represented by Nicasio D. Sanchez, Sr. (later substituted by
Milagros S. Bucu), filed a complaint in intervention with substantially the same
allegations and prayers as that in Gundrans complaint. In a decision dated 12 January
1987, Gundrans complaint and petitioners complaint in intervention were dismissed
for lack of merit. So was Cabautans counterclaims, for insufficiency of evidence.
Upon appeal, this decision was affirmed by the Court of Appeals, with the modification
that Josefa Mia was ordered to pay Gundran the sum of P90,000.00, with legal interest
from 3 September 1976, plus the costs of suit.
The Supreme Court denied the petition and affirmed in toto the questioned decision;
with costs against AHDG.
1.
Article 1544
Under Article 1544 of the Civil Code of the Philippines, it is provided that If the
same thing should have been sold to different vendees, the ownership shall be
Sales, 2003 ( 19 )
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.
2.
Preferential right of first to register

The first sale to Gundran was not registered while the second sale to Cabautan
was registered. Preferential rights are accorded to Cabautan, who had registered the
sale in his favor, as against AHDGs coventurer whose right to the same property had
not been recorded.
3.
Purchaser in good faith

A purchaser in good faith is defined as one who buys the 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. In the present
case, an examination of TCT 287416 discloses no annotation of any sale, lien,
encumbrance or adverse claim in favor of Gundran or AHDC.
4.
Registered property under Torrens system; Person charge with notice of

burdens noted on the register of title
When the property sold is registered under the Torrens system, registration is the
operative act to convey or affect the land insofar as third persons are concerned. Thus,
a person dealing with registered land is only charged with notice of the burdens on the
property which are noted on the register or certificate of title.
5.
Notices of lis pendes not a lien or encumbrance, merely notice of litigation of

property subject to the result of the suit
Notices of lis pendens in favor of other persons were earlier inscribed on the title
did not have the effect of establishing a lien or encumbrance on the property affected.
Their only purpose was to give notice to third persons and to the whole world that any
interest they might acquire in the property pending litigation would be subject to the
result of the suit.
6.
Cabautan a purchaser in good faith and for value

Cabautan took the risk of acquiring the property even in the light of notice of lis
pendens inscribed in the title. Significantly, three days after the execution of the deed
of sale in his favor, the notices of lis pendens were canceled by virtue of the orders of
the CFI Rizal, Branch 23, dated 1 and 4 April 1974. Cabautan therefore acquired the
land free of any liens or encumbrances and so could claim to be a purchaser in good
faith and for value.
No evidence of alleged possession by AHDG
AHDG insists that it was already in possession of the disputed property when
Cabautan purchased it and that he could not have not known of that possession. Such
knowledge should belie his claim that he was an innocent purchaser for value.
7.
Sales, 2003 ( 20 )
However, the courts below found no evidence of the alleged possession, which the
Supreme Court must also reject in deference to this factual finding.
8.
Casis vs. CA not applicable; Different issues

The issue in the present case is whether Cabautan is an innocent purchaser for
value and so entitled to the priority granted under Article 1544 of the Civil Code. The
Casis case, on the other hand, involved the issues of whether or not: 1) certiorari was
the proper remedy of the petitioner: 2) the previous petition for certiorari which
originated from the quieting of title case was similar to and, hence, a bar to the petition
for certiorari arising from the forcible entry case; and 3) the court a quo committed
grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the order
which dissolved the restraining order issued in connection with the ejectment case. The
Court was not called upon in that case to determine who as between the two
purchasers of the subject property should be preferred.
9.
Excerpt used by AHDG a narration of background facts and not adopted as a

doctrine by the
Supreme Court
AHDG invokes the ruling of the lower court in that case to the effect that the
registration of the sale in favor of the second purchaser and the issuance of a new
certificate of title in his favor did not in any manner vest in him any right of possession
and ownership over the subject property because the seller, by reason of their prior
sale, had already lost whatever right or interest she might have had in the property at
the time the second sale was made. The excerpt was included in the ponencia only as
part of the narration of the background facts and was not thereby adopted as a
doctrine of the Court. It was considered only for the purpose of ascertaining if the court
below had determined the issue of the possession of the subject property pending
resolution of the question of ownership. Obviously, the Court could not have adopted
that questionable ruling as it would clearly militate against the provision of Article
1544.
10.
No one can sell what he does not own; Article 1544 either an exception to the
general rule or a reiteration of the general rule insofar as innocent third
parties are concerned
Justice Edgardo L. Paras observed that No one can sell what he does not own,
but this is merely the general rule. Is Art. 1544 then an exception to the general rule? In
a sense, yes, by reason of public convenience (See Aitken v. Lao, 36 Phil. 510); in still
another sense, it really reiterates the general rule in that insofar as innocent third
persons are concerned, the registered owner (in the case of real property) is still the
owner, with power of disposition.
11.
Language of Article 1544 clear; Cabautan deemed owner

The language of Article 1544 is clear and unequivocal. In light of its mandate and
of the facts established in the present case, Ownership must be recognized in the
private respondent, who bought the property in good faith and, as an innocent
purchaser for value, duly and promptly registered the sale in his favor.
[6]
Almendra vs. IAC [G.R. No. 75111. November 21, 1991.]
Sales, 2003 ( 21 )
Third Division, Fernan (CJ): 4 concurring

Facts: The mother, Aleja Ceno, was first married to Juanso Yu Book with whom she had
3 children named Magdaleno, Melecia and Bernardina, all surnamed Ceno. Sometime in
the 1920s, Juanso Yu Book took his family to China where he eventually died. Aleja and
her daughter Bernardina later returned to the Philippines. During said marriage, Aleja
acquired a parcel of land which she declared in her name under Tax Declaration 11500.
After Juanso Yu Books death, Bernardina filed against her mother a case for the
partition of the said property in the then CFI Leyte. On 17 August 1970, the lower court
rendered a supplemental decision finding that the said property had been subdivided
into Lots 6354 (13,738 sq.ms.), 6353 (16,604 sq.ms.), 6352 (23,868 sq.ms.) and 6366
(71,656 sq.ms.). The Court declared Bernardina Ojeda owner of and entitled to
possession of Lot 6354; Ojeda as owner of and entitled to possession of Lot 6353
without prejudice to whatever rights her sister Melecia Ceno (presently in China) may
have over the property; Aleja Almendra as owner of and entitled to possession of Lot
6366; and Aleja Almendra as owner of and entitled to possession of Lot 6352, subject to
whatever may be the rights thereto of her son Magdaleno Ceno (presently in China).
The Court ordered the parties to bear the fees of the commissioner. Meanwhile, Aleja
married Santiago Almendra with whom she had 4 children named Margarito, Angeles,
Roman and Delia. During said marriage Aleja and Santiago acquired a 59,196-sq.ms.
parcel of land in Cagbolo, Abuyog, Leyte. OCT 10094 was issued therefor in the name of
Santiago Almendra married to Aleja Ceno and it was declared for tax purposes in his
name. In addition to said properties, Aleja inherited from her father, Juan Geno, a
16,000-sq.ms. parcel of land also in Cagbolo. For his part, her husband Santiago
inherited from his mother, Nicolasa Alvero, a 16-sq. ms. parcel of residential land
located in Nalibunan, Abuyog, Leyte. While Santiago was alive, he apportioned these
properties among Alejas children in the Philippines, including Bernardina, who, in turn,
shared the produce of the properties with their parents. After Santiagos death, Aleja
sold to her daughter, Angeles Almendra, for P2,000 two parcels of land in the deed of
sale dated 10 August 1973 ( portion or conjugal share of land [TD
22234, OCT 10094], and portion or conjugal share of land [TD 27190] both located in
Bo. Cagbolo, Abuyog, Leyte. On 26 December 1973, Aleja sold to her son, Roman
Almendra, also for P2,000 a parcel of land described in the deed of sale as located in
Cagbolo, Abuyog, Leyte under T/D 11500 which cancelled
T/D 9635; having an area of 6.6181 hec., assessed at P1,580.00. On the same day,
Aleja sold to Angeles and Roman again for P2,000 yet another parcel of land described
in the deed of sale (Lot 6352). Aleja died on 7 May 1975.
On 21 January 1977 Margarito, Delia and Bernardina (plaintiffs) filed a complaint
against Angeles and Roman for the annulment of the deeds of sale in their favor,
partition of the properties subjects therein and accounting of their produce. From China,
their sister Melecia signed a special power of attorney in favor of Bernardina.
Magdaleno, who was still in China, was impleaded as a defendant in the case and
summons by publication was made on him. Later, the plaintiffs informed the court that
they had received a document in Chinese characters which purportedly showed that
Magdaleno had died. Said document, however, was not produced in court. Thereafter,
Magdaleno was considered as in default without prejudice to the provisions of Section
4, Rule 18 of the Rules of Court which allows the court to decide a case wherein there
Sales, 2003 ( 22 )
are several defendants upon the evidence submitted only by the answering defendants.
On 30 April 1981, the lower court rendered a decision declaring the deeds of sale to be
simulated and therefore null and void; ordering the partition of the estate of the
deceased Aleja Ceno among her heirs and assigns; appointing the Acting Clerk of Court,
Atty. Cristina T. Pontejos, as commissioner, for the purpose of said partition, who is
expected to proceed accordingly upon receipt of a copy of this decision; and to render
her report on or before 30 days from said receipt. The expenses of the commissioner
shall be borne proportionately by the parties.
The defendants appealed to the then Intermediate Appellate Court which, on 20
February 1986 rendered a decision upholding the validity of the deeds of sale and
ordered the partition of the undisposed properties left by Aleja and Santiago
Almendra and, if an extrajudicial partition can be had, that it be made within a
reasonable period of time after receipt of its decision. The plaintiffs filed their motion
for reconsideration, which was denied. Hence, the petition for review on certiorari.
1.
The Supreme Court affirmed the decision of the then Intermediate Appellate Court
subject to the modifications stated in the present decision. The Court directed the lower
court to facilitate with dispatch the preparation and approval of a project of partition of
the properties considered unsold under the present decision.
No convincing reason to nullify deeds of sale; Testimony of the notary given
more credence
There is no valid, legal and convincing reason for nullifying the questioned deeds
of sale. Petitioner had not presented any strong, complete and conclusive proof to
override the evidentiary value of the duly notarized deeds of sale. Moreover, the
testimony of the lawyer who notarized the deeds of sale that he saw not only Aleja
signing and affixing her thumbmark on the questioned deeds but also Angeles and
Aleja counting money between them, deserves more credence than the self-serving
allegations of the petitioners. Such testimony is admissible as evidence without further
proof of the due execution of the deeds in question and is conclusive as to the
truthfulness of their contents in the absence of clear and convincing evidence to the
contrary.
2.
No proof that price (P2,000) was grossly inadequate

The petitioners allegations that the deeds of sale were obtained through fraud,
undue influence and misrepresentation, and that there was a defect in the consent of
Aleja in the execution of the documents because she was then residing with Angeles,
had not been fully substantiated. They failed to show that the uniform price of P2,000
in all the sales was grossly inadequate. It should be emphasized that the sales were
effected between a mother and two of her children in which case filial love must be
taken into account.
3.
Defendants proved they have means to purchase the properties

Angeles and Roman amply proved that they had the means to purchase the
properties. Petitioner Margarito Almendra himself admitted that Angeles had a sari-sari
store and was engaged in the business of buying and selling logs. 20 Roman was a
policeman before he became an auto mechanic and his wife was a school teacher.
4.
Conjugal property; Aleja cannot claim title for definite portion of the conjugal
property before its partition
Sales, 2003 ( 23 )
The 10 August 1973 sale to Angeles of one-half portion of the conjugal property
covered by OCT P10094 may only be considered valid as a sale of Alejas one-half
interest therein. Aleja could not have sold the particular hilly portion specified in the
deed of sale in the absence of proof that the conjugal partnership property had been
partitioned after the death of Santiago. Before such partition, Aleja could not claim title
to any definite portion of the property for all she had was an ideal or abstract quota or
proportionate share in the entire property.
5.
Paraphernal property; Sale valid

The sale of the one-half portion of the parcel of land covered by Tax Declaration
27190 is valid because the said property is paraphernal being Alejas inheritance from
her own father.
6.
Land subject to Civil Case 4387; Aleja could not have intended the sale of
whole property already subdivided
As regards the sale of the property covered by Tax Declaration 11500, since the
property had been found in Civil Case 4387 to have been subdivided, Aleja could not
have intended the sale of the whole property covered by said tax declaration. She could
exercise her right of ownership only over Lot 6366 which was unconditionally
adjudicated to her in said case.
7.
Caveat emptor on Lot 6352; Lot still subject to rights of Magdaleno Ceno
Lot 6352 was given to Aleja in Civil Case 4387 subject to whatever may be the rights
thereto of her son Magdaleno Ceno. A reading of the deed of Sale covering this parcel
of land would show that the sale is subject to the condition stated above; hence, the
rights of Magdaleno Ceno are amply protected. The role on caveat emptor applies.
[7]
Ang Yu Asuncion, et.al. vs. CA [G.R. No. 109125. December 2, 1994.]
En Banc, Vitug (J): 11 concurring, 1 took no part, 1 on leave
Facts: On 29 July 1987 a Second Amended Complaint for Specific Performance was
filed by Ann Yu
Asuncion, Arthur Go, and Keh Tiong against Bobby Cu Unjieng, Rose Cu Unjieng and
Jose Tan before the RTC Manila (Branch 31, Civil Case 87-41058) alleging, among
others, that the former are tenants or lessees of residential and commercial spaces
owned by the latter described as 630-638 Ongpin Street, Binondo, Manila; that they
have occupied said spaces since 1935 and have been religiously paying the rental and
complying with all the conditions of the lease contract; that on several occasions before
9 October 1986, the latter informed the former that they are offering to sell the
premises and are giving them priority to acquire the same; that during the
negotiations, Bobby Cu Unjieng offered a price of P6-million while Ang Yu Asuncion,
et.al. (plaintiffs) made a counter offer of P5-million; that plaintiffs thereafter asked
Bobby Cu Unjieng, Rose Cu Unjueng and Jose Tan (defendants) to put their offer in
writing to which request defendants acceded; that in reply to defendants letter,
plaintiffs wrote them on 24 October 1986 asking that they specify the terms and
conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent
another letter dated 28 January 1987 with the same request; that since defendants
Sales, 2003 ( 24 )
failed to specify the terms and conditions of the offer to sell and because of information
received that defendants were about to sell the property, plaintiffs were compelled to
file the complaint to compel defendants to sell the property to them. After the issues
were joined, defendants filed a motion for summary judgment which was granted by
the lower court. The trial court found that defendants offer to sell was never accepted
by the plaintiffs for the reason that the parties did not agree upon the terms and
conditions of the proposed sale, hence, there was no contract of sale at all.
Nonetheless, the lower court ruled that should the defendants subsequently offer their
property for sale at a price of P11 million or below, plaintiffs will have the right of first
refusal.
Aggrieved by the decision, plaintiffs appealed to the Court of Appeals (CA-GR CV
21123). In a decision promulgated on 21 September 1990 (penned by Justice
Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and Fernando A.
Santiago), the appellate court affirmed with modification the lower courts judgment,
holding that there was no meeting of the minds between the parties concerning the
sale of the property and thus, the claim for specific performance will not lie. The
appellate did not grant the appellants the right of first refusal in the event the subject
property is sold for a price in excess of P11 million.
The decision of the appellate court was brought to the Supreme Court by petition for
review on certiorari. The Supreme Court denied the appeal on 6 May 1991 for
insufficiency in form and substances.
On 15 November 1990, while CA-GR CV 21123 was pending consideration by the
appellate court, the Cu
Unjieng spouses executed a Deed of Sale transferring the property in question to Buen
Realty and Development Corporation for P15 million. As a consequence of the sale, TCT
105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu thereof,
TCT 195816 was issued in the name of Buen Realty on 3 December 1990. On 1 July
1991, Buen Realty as the new owner of the subject property wrote a letter to the
lessees demanding that the latter vacate the premises. On 16 July 1991, the lessees
wrote a reply to Buen Realty stating that petitioner brought the property subject to the
notice of lis pendens regarding Civil Case 87-41058 annotated on TCT 105254/T-881 in
the name of the Cu Unjiengs.
The lessees filed a Motion for Execution dated 27 August 1991 of the Decision in Civil
Case 87-41058 as modified by the Court of Appeals in CA-GR CV 21123. On 30 August
1991, the Judge issued an order ordering Cu Unkieng to execute the necessary Deed of
Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and
Arthur Go for the consideration of P15 Million pesos in recognition of the latters right of
first refusal and that a new TCT be issued in favor of the buyer, and thus, setting aside
all previous transactions involving the same property notwithstanding the issuance of
another title to Buen Realty Corporation, which was said to have been executed in bad
faith. On 22 September 1991, the Judge issue another order directing the Deputy
Sheriff to implement the Writ of Execution ordering the defendants among others to
comply with the Order of the Court within a period of 1 week from receipt of this Order
and for defendants to execute the necessary Deed of Sale of the property in litigation in
favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of
P15,000,000.00 and ordering the Register of Deeds of the City of Manila, to cancel and
Sales, 2003 ( 25 )
set aside the title already issued in favor of Buen Realty Corporation which was
previously executed between the latter and defendants and to register the new title in
favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go. On the same
day, the corresponding writ of execution was issued.
On 4 December 1991, the appellate court, on appeal to it by Buen Realty (CA-GR SP
26345), set aside and declared without force and effect the questioned orders of the
court a quo. Hence, the petition for certiorari.
The Supreme Court upheld the decision of the Court of Appeals in ultimately setting
aside the questioned Orders, dated 30 August 1991 and 27 September 1991, of the
court a quo; with costs against Ang Yu Asuncion, et. al.
1.
Obligation defined
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil
Code).
2.
Obligation, elements
The obligation is constituted upon the concurrence of the essential elements
thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause
established by the various sources of obligations (law, contracts, quasi-contracts,
delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to
be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from
the demandability of the obligation, are the active (obligee) and the passive (obligor)
subjects.
3.
Contract as a source of obligation

Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is
a meeting of minds between two persons whereby one binds himself, with respect to
the other, to give something or to render some service (Art. 1305, Civil Code). Until the
contract is perfected, it cannot, as an independent source of obligation, serve as a
binding juridical relation.
4.
Various stages of a contract: Negotiation, preparation, and consummation

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 perfection of the contract takes
place upon the concurrence of the essential elements thereof. A contract which
is consensual 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
Sales, 2003 ( 26 )
respective undertakings under the contract culminating in the extinguishment

thereof.
5.
6.
Perfection of a contract of sale

In sales, 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. Article 1458 of the Civil Code
provides that By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent. A contract of sale may be absolute
or conditional.
Contract to sell is conditional; Effect of breach of condition
When the sale is not absolute but conditional, such as in a Contract to Sell
where invariably the ownership of the thing sold is retained until the fulfillment of a
positive suspensive condition (normally, the full payment of the purchase price), the
breach of the condition will prevent the obligation to convey title from acquiring an
obligatory force.
7.
Stipulations govern over title in determining contract to be a contract of sale

or contract to sell In Dignos vs. Court of Appeals (158 SCRA 375), although
denominated a Deed of Conditional Sale, a sale is still absolute where the contract is
devoid of any proviso that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to
the buyer upon actual or constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is imposed upon the perfection of
the contract itself, the failure of the condition would prevent such perfection. If the
condition is imposed on the obligation of a party which is not fulfilled, the other party
may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil
Code). Ff
8.
Unconditional mutual promise to buy and sell obligatory on the parties

An unconditional mutual promise to buy and sell, as long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted.
9.
Perfected contract of option

An accepted unilateral promise which specifies the thing to be sold and the price
to be paid, when coupled with a valuable consideration distinct and separate from the
price, is what may properly be termed a perfected contract of option. This contract is
legally binding, and in sales, it conforms with the second paragraph of Article 1479 of
the Civil Code, which provides that An accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the promissor if the promise is
supported by a consideration distinct from the price. (1451a)
10.
Option not the contract of sale itself

The option is not the contract of sale itself. The optionee has the right, but not
the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted
before a breach of the option, a bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their respective undertakings.
Sales, 2003 ( 27 )
11.
Offer
A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is
merely an offer. Public advertisements or solicitations and the like are ordinarily
construed as mere invitations to make offers or only as proposals. These
relations, until a contract is perfected, are not considered binding commitments.
Thus, at any time prior to the perfection of the contract, either negotiating party
may stop the negotiation. 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 (Laudico vs. Arias,
43 Phil. 270).
12.
Offer with a period; Effects of withdrawal

(1) If the period is not itself founded upon or supported by a consideration, the
offeror is still free and has the right to withdrawal the offer before its acceptance,
or, if an acceptance has been made, before the offerors coming to know of such
fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil Code;
see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is
applicable to a unilateral promise to sell under Art. 1479, modifying the previous
decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art.
1319, Civil Code; Rural Bank of Paraaque, Inc., vs. Remolado, 135 SCRA 409;
Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be
exercised whimsically or arbitrarily; otherwise, it could give rise to a damage
claim under Article 19 of the Civil Code which ordains that every person must,
in the exercise of his rights and in the performance of his duties, act with justice,
give everyone his due, and observe honesty and good faith.
(2) If the period has a separate consideration, a contract of option is deemed
perfected, and it would be a breach of that contract to withdraw the offer during
the agreed period. The option, however, is an independent contract by itself, and
it is to be distinguished from the projected main agreement (subject matter of
the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror
withdraws the offer before its acceptance (exercise of the option) by the
optionee-offeree, the latter may not sue for specific performance on the
proposed contract (object of the option) since it has failed to reach its own
stage of perfection. The optioner-offeror, however, renders himself liable for
damages for breach of the option. In these cases, care should be taken of the
real nature of the consideration given, for if, in fact, it has been intended to be
part of the consideration for the main contract with a right of withdrawal on the
part of the optionee, the main contract could be deemed perfected; a similar
instance would be an earnest money in a contract of sale that can evidence its
perfection (Art. 1482, Civil Code).
13.
Right of first refusal innovative; neither an option nor an offer

In the law on sales, the so-called right of first refusal is an innovative juridical
relation. It cannot be deemed a perfected contract of sale under Article 1458 of the
Civil Code. Neither can the right of first refusal, understood in its normal concept, per
se be brought within the purview of an option under the second paragraph of Article
1479, or possibly of an offer under Article 1319 of the same Code.
Sales, 2003 ( 28 )
14.
Distinction of right of first refusal to an option or to an offer

An option or an offer would require, among other things, a clear certainty on both
the object and the cause or consideration of the envisioned contract. In a right of first
refusal, while the object might be made determinate, the exercise of the right,
however, would be dependent not only on the grantors eventual intention to enter into
a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at best be so described as
merely belonging to a class of preparatory juridical relations governed not by contracts
(since the essential elements to establish the vinculum juris would still be indefinite and
inconclusive) but by, among other laws of general application, the pertinent scattered
provisions of the Civil Code on human conduct.
15.
Breach of right of first refusal does not warrant issuance of a writ of

execution nor sanction an action for specific performance; may only warrant
recovery for damages under Article 19 of the Civil
Code
Even on the premise that such right of first refusal has been decreed under a
final judgment, its breach cannot justify correspondingly an issuance of a writ of
execution under a judgment that merely recognizes its existence, nor would it sanction
an action for specific performance without thereby negating the indispensable element
of consensuality in the perfection of contracts. It is not to say, however, that the right
of first refusal would be inconsequential for an unjustified disregard thereof, the
circumstances expressed in Article 19 of the Civil Code, can warrant a recovery for
damages. In the present case, petitioners are aggrieved by the failure of private
respondents to honor the right of first refusal, the remedy is not a writ of execution on
the judgment, since there is none to execute, but an action for damages in a proper
forum for the purpose.
16.
Issue on Buen Realtys good faith should be addressed in appropriate

proceedings, as Buen Realty was not impleaded in Civil Case 87-41058
Whether Buen Realty Development Corporation, the alleged purchaser of the
property, has acted in good faith or bad faith and whether or not it should, in any case,
be considered bound to respect the registration of the lis pendens in Civil Case 8741058 are matters that must be independently addressed in appropriate proceedings.
Buen Realty, not having been impleaded in Civil Case 87-41058, cannot be held subject
to the writ of execution issued, let alone ousted from the ownership and possession of
the property, without first being duly afforded its day in court.
17.
Decision in Civil Case 87-41058 could have not been decreed

The decision in Civil Case 87-41058 could not have decreed at the time the
execution of any deed of sale between the Cu Unjiengs and Buen Realty. There was
nothing in the decision, as modified by the appellate court, that decreed the execution
of a deed of sale between the Cu Unjiengs and the lessees, or the fixing of the price of
the sale, or the cancellation of title in the name of Buen Realty (Limpin vs. IAC, 147
SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs.
CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885).
[8]
Angeles vs. Calasanz [G.R. No. L-42283. March 18, 1985.]
Sales, 2003 ( 29 )
En Banc, Gutierrez Jr. (J): 5 concurring, 1 took no part

Facts: On 19 December 1957, Ursula Torres Calasanz and Tomas Calasanz and
Buenaventura Angeles and
Teofila Juani entered into a contract to sell a piece of land located in Cainta, Rizal for
the amount of P3,920.00 plus 7% interest per annum. Angeles made a downpayment of
P392.00 upon the execution of the contract. They promised to pay the balance in
monthly installments of P41.20 until fully paid, the installments being due and payable
on the 19th day of each month. They paid the monthly installments until July 1966,
when their aggregate payment already amounted to P4,533.38. On numerous
occasions, Calasanz accepted and received delayed installment payments from
Angeles. On 7 December 1966, Calasanz wrote Angeles a letter requesting the
remittance of past due accounts. On 28 January 1967, Calasanz cancelled the said
contract because Angeles failed to meet subsequent payments. Angeles letter with
their plea for reconsideration of the said cancellation was denied by Calasanz.
Angeles filed Civil Case 8943 with the CFI Rizal, Seventh Judicial District, Branch X to
compel Calasanz to execute in their favor the final deed of sale alleging inter alia that
after computing all subsequent payments for the land in question, they found out that
they have already paid the total amount of P4,533.38 including interests, realty taxes
and incidental expenses for the registration and transfer of the land. Calasanz, on the
other hand, alleged that the complaint states no cause of action and that Angeles
violated paragraph 6 of the contract to sell when they failed and refused to pay and/or
offer to pay the monthly installments corresponding to the month of August, 1966 for
more than 5 months, thereby constraining Calasanz to cancel the said contract. The
lower court rendered judgment in favor of Angeles, ordering that the contract was not
validly cancelled by Calasanz, and ordered the latter to execute a final Deed of Sale In
favor of Angeles, and to pay the sum of P500 by way of attorneys fees; with costs
against Calasanz. A motion for reconsideration filed by Calasanz was denied.
On Appeal, the then Court of Appeals certified the case to the Supreme Court
considering that the appeal involves pure questions of law.
The Supreme Court denied the petition for lack of merit, affirmed the decision appealed
from is with the modification that Angeles should pay the balance of P671.67 without
any interests; with costs against Calasanz.
1.
Contents of Paragraph 6 of the Contract

Paragraph six of the contract provides In case the party of the SECOND PART
fails to satisfy any monthly installments, or any other payments herein agreed upon, he
is granted a month of grace within which to make the retarded payment, together with
the one corresponding to the said month of grace; it is understood, however, that
should the month of grace herein granted to the party of the SECOND PART expired;
without the payments corresponding to both months having been satisfied, an interest
of 10% per annum will be charged on the amounts he should have paid; it is
understood further, that should a period of 90 days elapse, to begin from the expiration
of the month of grace herein mentioned, and the party of SECOND PART has not paid all
the amounts he should have paid with the corresponding interest up to that date, the
Sales, 2003 ( 30 )
party of the FIRST PART has the right to declare this contract cancelled and of no effect,
and as consequence thereof, the party of the FIRST PART may dispose of the parcel of
land covered by this contract in favor of other persons, as if this contract had never
been entered into. In case of such cancellation of the contract, all the amounts paid in
accordance with this agreement together with all the improvements made on the
premises, shall be considered as rents paid for the use and occupation of the above
mentioned premises, and as payment for the damages suffered by failure of the party
of the SECOND PART to fulfill his part of the agreement, and the party of the SECOND
PART hereby renounces all his right to demand or reclaim the return of the same and
obliges himself to peacefully vacate the premises and deliver the same to the party of
the FIRST PART.
2.
Article 1191 of the Civil Code; Rescission of reciprocal obligations

Article 1191 of the Civil Code on the rescission of reciprocal obligations
provides: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 later should become impossible. Article 1191 is explicit. In reciprocal
obligations, either party has the right to rescind the contract upon the failure of the
other to perform the obligation assumed thereunder.
3.
Judicial action for rescission not necessary where contract provides for
revocation for breach;
Froilan vs. Pan Oriental Shipping
There is nothing in the law that prohibits the parties from entering into an
agreement that violation of the terms of the contract would cause its cancellation even
without court intervention (Froilan v. Pan Oriental Shipping, Co., et al., 12 SCRA 276). A
judicial action for the rescission of a contract is not necessary where the contract
provides that it may be revoked and cancelled for violation of any of its terms and
conditions (Lopez v. Commissioner of Customs, 37 SCRA 327, 334, and cases cited
therein). Resort to judicial action for rescission is obviously not contemplated . . . The
validity of the stipulation can not be seriously disputed. It is in the nature of a
facultative resolutory condition which in many cases has been upheld by the Supreme
Court. (Ponce Enrile v. Court of Appeals, 29 SCRA 504).
4.
UP vs. delos Angeles: Qualification to the Froilan ruling; Rescission must be

justified
The rule that it is not always necessary for the injured party to resort to court for
rescission of the contract when the contract itself provides that it may be rescinded for
violation of its terms and conditions, was qualified by the Court in University of the
Philippines v. De los Angeles, (35 SCRA 102). It was held therein that the act of a party
in treating a contract as cancelled or resolved on account of infractions by the other
contracting party must be made known to the other and is always provisional, being
ever subject to scrutiny and review by the proper court. If the other party denies that
rescission is justified, it is free to resort to judicial action in its own behalf, and bring the
matter to court. Then, should the court, after due hearing, decide that the resolution of
the contract was not warranted, the responsible party will be sentenced to damages; in
the contrary case, the resolution will be affirmed, and the consequent indemnity
awarded to the party prejudiced. Thus, the party who deems the contract violated
Sales, 2003 ( 31 )
many consider it resolved or rescinded, and act accordingly, without previous court
action, but it proceeds at its own risk. For it is only the final judgment of the
corresponding court that will conclusively and finally settle whether the action taken
was or was not correct in law . . .
5.
Extrajudicial resolution remains contestable and thus subject to judicial

invalidation, unless barred by acquiescence, estoppel or prescription
There is no conflict between this ruling and the previous jurisprudence of the
Court declaring that judicial action is necessary for the resolution of a reciprocal
obligation; (Ocejo, Perez & Co. v. International Banking Corp., 37 Phil. 631; Republic v.
Hospital de San Juan de Dios, et al., 84 Phil. 820) since in every case where the
extrajudicial resolution is contested only the final award of the court of competent
jurisdiction can conclusively settle whether the resolution was proper or not. It is in this
sense that judicial action will be necessary, as without it, the extrajudicial resolution will
remain contestable and subject to judicial invalidation, unless attack thereon should
become barred by acquiescence, estoppel or prescription.
6.
Right to rescind contract for non-performance of stipulations not absolute;

Universal Food
Corp. vs. CA
The right to rescind the contract for non-performance of one of its stipulations is
not absolute. In Universal Food Corp. v. Court of Appeals (33 SCRA 1) the Court stated
that the general rule is that rescission of a contract will not be permitted for a slight or
casual breach, but only for such substantial and fundamental breach as would defeat
the very object of the parties in making the agreement. (Song Fo & Co. v. HawaiianPhilippine Co., 47 Phil. 821, 827) The question of whether a breach of a contract is
substantial depends upon the attendant circumstances. (Corpus v. Hon. Alikpala, et al.,
L-23707 & L-23720, Jan. 17, 1968).
7.
Breach too slight; Sanctioning the rescission will do injustice, leads to unjust
enrichment
The breach of the contract adverted to by Calasanz is so slight and casual
considering that apart from the initial downpayment of P392.00 Angeles had already
paid the monthly installments for a period of almost 9 years. In other words, in only a
short time, the entire obligation would have been paid. Furthermore, although the
principal obligation was only P3,920.00 excluding the 7% interests, Angeles had already
paid an aggregate amount of P4,533.38. To sanction the rescission made by Calasanz
will work injustice to Angeles. (See J.M. Tuazon and Co., Inc. v. Javier, 31 SCRA 829) It
would unjustly enrich Calasanz.
8.
Article 1234 of the Civil Code; Substantial performance

Article 1234 of the Civil Code which provides that: If the obligation has been
substantially performed in good faith, the obligor may recover as though there had
been a strict and complete fulfillment, less damages suffered by the obligee.
9.
Purpose of subdivisions
Although the primary object of selling subdivided lots is business, yet, it cannot
be denied that this subdivision is likewise purposely done to afford those landless, low
Sales, 2003 ( 32 )
income group people of realizing their dream of a little parcel of land which they can
really call their own.
10.
Acceptance of delayed payments of installments, a waiver; Sellers estopped

from exercising right of rescission
When Calasanz, instead of availing of their alleged right to rescind, have
accepted and received delayed payments of installments, though Angeles have been in
arrears beyond the grace period mentioned in paragraph 6 of the contract, Calasanz
has waived and is now estopped from exercising her alleged right of rescission.
11.
De Guzman vs. Guieb in point

In De Guzman v. Guieb (48 SCRA 68), the Court held therein that In spite of the
long arrearages, neither they nor their predecessor, Teodoro de Guzman, even took
steps to cancel the option or to eject the appellees from the home-lot in question. On
the contrary, it is admitted that the delayed payments were received without protest or
qualification. Under these circumstances, the Court cannot but agree with the lower
court that at the time appellees exercised their option, appellants had already forfeited
their right to invoke the above-quoted provision regarding the nullifying effect of the
non-payment of six months rentals by appellees by their having accepted without
qualification on July 21, 1964 the full payment by appellees of all their arrearages.
12.
Present contract to sell has characteristics of contract of adhesion

The contract to sell entered into by the parties has some characteristics of a contract
of adhesion.
Calasanz drafted and prepared the contract; while Angeles, eager to acquire a lot upon
which to build a home, affixed their signatures and assented to the terms and
conditions of the contract. They had no opportunity to question nor change any of the
terms of the agreement. It was offered to them on a take it or leave it basis.
13.
Contract of adhesion; Sweet Lines vs. Teves

In Sweet Lines, Inc. v. Teves (83 SCRA 361), the Court held that while generally,
stipulations in a contract come about after deliberate drafting by the parties thereto, ..
there are certain contracts almost all the provisions of which have been drafted only by
one party, usually a corporation. Such contracts are called contracts of adhesion,
because the only participation of the party is the signing of his signature or his
`adhesion thereto. Insurance contracts, bills of lading, contracts of sale of lots on the
installment plan fall into this category. (Paras, Civil Code of the Philippines, Seventh
ed., Vol. I, p. 80.)
14.
Construction of a contract of adhesion

The contract to sell, being a contract of adhesion, must be construed against the
party causing it. The terms of a contract must be interpreted against the party who
drafted the same, especially where such interpretation will help effect justice to buyers
who, after having invested a big amount of money, are now sought to be deprived of
the same thru the prayed application of a contract clever in its phraseology,
condemnable in its lopsidedness and injurious in its effect which, in essence, and in its
entirety is most unfair to the buyers.
[9]
Sales, 2003 ( 33 )
Azcona vs. Reyes [G.R. No. 39590. February 6, 1934.]

Second Division, Villa-Real (J): 4 concurring
Facts: On 11 October 1920, Florentina Cordero, now deceased, executed a power of
attorney authorizing her only daughter, Alberta L. Reyes, to mortgage in her name and
representation all her land situated in the municipality of Pola, Mindoro. On 22 October
1920, Reyes, personally and as attorney in fact of her mother Florentina Cordero, in
consideration of the sum of P6,500 received from Enrique Azcona, now deceased, sold
to the latter, with the right of repurchase within the period of 4 years, 5 parcels of land
with certificates of title belonging to her and Cordero. The vendors became lessees of
the property sold, at a yearly rental of P780. On 23 October 1920, Reyes, as attorney in
fact of Cordero, in consideration of the sum of P5,000 received from Azcona, sold to the
latter, with the right of repurchase within the period of 4 years, a parcel of land with
certificate of title 58 of the registry of deeds of Mindoro, belonging to Cordero. Cordero
became the lessee of said property at a yearly rental of P600. On 1 October 1925,
Reyes and Cordero jointly executed a power of attorney authorizing Gregorio
Venturanza to sell and encumber all their real and personal including their cattle.
Azcona died on 12 May 1925, and was succeeded in all his rights by his only son, Jesus
Azcona, to whom the entire estate of his deceased father, together with the credits,
was judicially adjudicated.
Inasmuch as neither Reyes nor Cordero, during her lifetime, had exercised her right of
redemption within the period of4 years, and inasmuch as they had asked for an
extension of time, on 29 November 1926, Gregorio Venturanza, as attorney in fact of
Reyes and Cordero, on one side, and Jesus Azcona, on the other, executed a deed
whereby the deeds of sale with the right of repurchase dated October 22 and 23, 1920,
respectively, were cancelled and their respective amounts of P6,500 and P5,000,
together with the sum of P1,000 representing the unpaid accrued interest thereon, or a
total amount of P12,500, were converted into a mortgage credit. In order to secure the
cancellation of the registration of the alleged sales with the right of repurchase, the
parcels of land described in the respective deeds were resold to the vendors and a
mortgage was constituted thereon to secure the payment of said mortgage credit of
P12,500 within the period of 2 years, extensible to another two years, with interest at
12% per annum. Under said contract the mortgagors Reyes and Cordero were
permitted to liquidate said debt by installments in the sum of P2,500 with the interest
due, to be paid on December 1 of every year, beginning in 1927. Reyes and Cordero,
through Venturanza, paid by way of amortization and interest (P2,500 on 15 February
1927, P2,200 on 17 October 1927, P1,200 on 9 February 1929, P350 on 30 June 1929,
and P600 on 20 September 1929; leaving a balance of P8,935.12). Since the last
mentioned date, the mortgagors failed to pay amortization and interest so that on 30
June 1932, the unpaid balance thereof together with the unpaid accrued interest
amounted to P11,958.05.
<The facts do not provide the manner on how the issue was raised in the CFI
Mindoro>. The parties (Jesus
Azcona, on one hand; and Alberta Reyes and Gervasio Larracas as special administrator
of the estate of Florentina Cordero, on the other) admit and the trial court so found
that, although the instruments are in the form of deeds of sale with pacto de retro, in
Sales, 2003 ( 34 )
reality they represent mortgage loans. The CFI ordered Reyes, as administratix of
Corderos estate, to pay Azcona the um of P11,985.05 with 12% interest until fully paid,
10$ of the sum representing expenses and attorneys fees, and P2 as fees for the
registration of the mortgage deed. The court also ordered that in case Reyes fails to
pay the sums within 90 days from final judgment, the parcels of land shall be sold at
public auction and the proceeds thereof applied to the payment of the sum and the
balance delivered to Reyes. Reyes and Larracas appealed separately.
The Supreme Court found no error in the judgment appealed from, and thus affirmed it
in toto, with the costs against Reyes and Larracas.
1.
Deeds of sale are not true deeds of pacto de retro sale but of mortgage;
Resale mere formality to cancellation of registration and the notation of the
mortgage deed
The instruments are not true deeds of sale with pacto de retro but of mortgage,
the resale of the parcels of land, made by Jesus Azcona in favor of Reyes and Cordero,
is null and void on the ground that, as mere mortgagors, they never ceased to be the
owners thereof and that Enrique Azcona, as a mere mortgagee, never acquired any title
of ownership thereto. In order for a sale to be valid, it is necessary that the vendor be
the owner of the thing sold, inasmuch as it is a principle of law that nobody can dispose
of that which does not belong to him. However, the sales with pacto de retro were
fictitious for the reason that the contracts entered into by Reyes and the deceased
Enrique Azcona were really mortgage in their nature. Therefore, the resale was a mere
formality resorted to for the purpose of obtaining the lawful cancellation of the
registration thereof in the registry of deeds and the notation of the mortgage deed.
2.
Mortgage deed not void, does not lack consideration or principal obligation
which it purports to secure
Reyes received the sum of P6,500 and another sum of P5,000 from the deceased
Enrique Azcona, both sums representing the purchase price of certain parcels of land,
which were sold with the right of repurchase. The sum of P12,500 which constitutes the
cause or consideration of the deed of resale and mortgage Exhibit A is the total of the
sums of P6,500 and P5,000 which Reyes, personally and as attorney in fact of Cordero,
received from Enrique Azcona, together with the sum of P1,000 representing the unpaid
credits passed by inheritance to Jesus Azcona. It cannot be said that the mortgage,
executed by Venturanza, as attorney in fact of Reyes and Cordero, in favor of Jesus
Azcona, lacks consideration or principal obligation for the fulfillment of which said
instrument was executed as security.
3.
Contracts of mortgage loans executed in form (attachment of SPA), binds

Cordero
Upon examination of said documents, Reyes made it appear that she acted as
Florentina Corderos attorney in fact under a power of attorney issued to her by
attaching a copy of said power of attorney to the deed in question. In the case of Orden
de Dominicos vs. De Coster (50 Phil., 115), the Court held that such form is valid and
sufficient under the law. Considered as mere contracts of mortgage loans, the deeds
dated 22-23 October 1920 are binding upon Cordero, and compliance with the
obligations contracted thereunder may be demanded in her intestate proceedings
either as credit in favor of the intestate estate of Enrique Azcona or as credit in favor of
Jesus Azcona against Cordero under the mortgage deed.
Sales, 2003 ( 35 )
4.
No statement of facts of alleged usury

In regard to the question of usury raised, although it is true that failure to file a
sworn answer to a cross-complaint for the recovery of usurious interest paid implies an
admission of the existence of a usurious rate of interest (Lo Bun Chay vs. Paulino, 54
Phil., 144, cited with approval in the case of Ramirez and Polido vs. Bergado, 56 Phil.,
810), however, the counterclaim and cross-complaint filed in the present case failed to
state facts constituting the alleged usury but merely allege that in payment of a debt of
P9,500 Azcona and his predecessor in interest received the amount of P20,130. Such
statement does not in itself constitute an allegation of usury and failure to file a reply
thereto implies denial of such allegation (Sec. 104, Act No. 190).
5.
Existence of usurious interest not proven; 12% per annum stipulated,

Charging compound interest does not make loan usurious
The existence of usurious interest has not been proven during the trial inasmuch
as it is stipulated that the vendors, as lessees, would have to pay the sum of P1,380 as
yearly rental. Such sum, computed on the basis of a capital of P11,500 gives a rate of
interest of only 12% per annum, which is allowed by law (Robinson vs. Sackermann and
Postal Savings Bank, 46 Phil., 539). Furthermore, in the deed of resale and mortgage
loan, interest at the rate of only 12% per annum is stipulated. The existence of a
stipulation to the effect that accrued interest shall bear interest does not imply that the
loans in question are usurious inasmuch as it is permitted to charge compound interest
(sec. 5, Act No. 2655, as amended by sec. 3 of Act No. 3291; Cu Unjieng e Hijos vs.
Mabalacat Sugar Co., 54 Phil., 976).
[10]
Aznar vs. Yapdiangco [G.R. No. L-18536.
March 31, 1965.] En Banc, Regala (J): 10
concurring
Facts: In May 1959, Teodoro Santos advertised in two metropolitan papers the sale of
his Ford Fairlane 500. In the afternoon of 28 May 1959, a certain L. De Dios, claiming to
be a nephew of Vicente Marella, went to the Santos residence to answer the ad.
However, Teodoro was out during this call and only the latters son, Irineo received and
talked with De Dios. The latter told the young Santos that he had come in behalf of his
uncle, Marella, who was interested to buy the advertised car. On being informed of the
above, Teodoro instructed his son to see Marella the following day at his given address:
1642 Crisostomo Street, Sampaloc, Manila. And so, in the morning of 29 May 1959,
Irineo went to said address. At this meeting, Marella agreed to buy the car for
P14,700.00 on the understanding that the price would be paid only after the car had
been registered in his name. Irineo then fetched his father who, together with De Dios,
went to the office of a certain Atty. Jose Padolina where the deed of sale for the car was
executed in Marellas favor. The parties to the contract thereafter proceeded to the
Motor Vehicles Office in Quezon City where the registration of the car in Marellas name
was effected. Up to that stage of the transaction, the purchase price had not been paid.
From the Motor Vehicles Office, Teodoro returned to his house. He gave the registration
papers and a copy of the deed of sale to his son and instructed him not to part with
them until Marella shall have given the full payment for the car. Irineo and De Dios then
Sales, 2003 ( 36 )
proceeded to 1642 Crisostomo Street, Sampaloc in Manila where the former demanded
for the payment from Marella. Marella said that the amount he had on hand then was
short by some P2,000.00 and begged off to be allowed to secure the shortage from a
sister supposedly living somewhere in Azcarraga Street, also in Manila. Thereafter, he
ordered De Dios to go to the said sister and suggested that Irineo to go with him. At the
same time, he requested for the registration papers and the deed of sale from Ireneo
on the pretext that he would like to show them to his lawyers. Trusting the good faith of
Marella, Ireneo handed over the same to the latter and thereupon, in the company of
De Dios and another unidentified person, proceeded to the alleged house of Marellas
sister. At a place in Azcarraga, Irineo and De Dios alighted from the car and entered a
house, while their unidentified companion remained in the car. Once inside, De Dios
asked Irineo to wait at the sala while he went inside a room. That was the last that
Ireneo saw of him. For, after a considerable length of time waiting in vain for De Dios to
return, Ireneo went down to discover that neither the car nor their unidentified
companion was there anymore. Going back to the house, he inquired from a woman he
saw for De Dios and he was told that no such name lived or was even known therein.
Whereupon, Ireneo rushed to 1642 Crisostomo to see Marella. He found the house
closed and Marella gone. Finally, he reported the matter to his father who promptly
advised the police authorities. That very same day, Marella was able to sell the car in
question to Jose B. Aznar, for P15,000.00. Aznar acquired the said car from Marella in
good faith, for a valuable consideration and without notice of the defect appertaining to
the vendors title. While the car was thus in the possession of Aznar and while he was
attending to its registration in his name, agents of the Philippine Constabulary seized
and confiscated the same in consequence of the report to them by Teodoro that the
said car was unlawfully taken from him.
Aznar filed a complaint for replevin before the CFI Quezon City (Branch IV) against
Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit which seized
the car. Claiming ownership of the vehicle, he prayed for its delivery to him. In the
course of the litigation, however, Teodoro Santos moved and was allowed to intervene
by the lower court. At the end of the trial, the lower court rendered a decision awarding
the disputed motor vehicle to Santos. From the decision, Aznar appealed.
The Supreme Court dismissed the appeal and affirmed the decision of the lower court in
full; with costs against Aznar.
1.
Article 559 of the Civil Code; Santos entitled to recovery of personal property
Santos had been unlawfully deprived of his personal property by Marella, from
whom Aznar traces his right. Consequently, although Aznar acquired the car in good
faith and for a valuable consideration from Marella, the said decision concluded, still
Santos was entitled to its recovery on the mandate of Article 559 of the New Civil Code
which provides: The possession of movable property acquired in good faith is
equivalent to title. Nevertheless, one who has lost any movable or has been unlawfully
deprived thereof, may recover it from the person in possession of the same. If the
possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor. Under Article 559, the rule is to the effect that if
the owner has lost the thing, or if he has been unlawfully deprived of it, he has a right
to recover it, not only from the finder, thief or robber, but also from the third person
who may have acquired it in good faith from such finder, thief or robber.
Sales, 2003 ( 37 )
2.
Sellers title, voidable at least, essential in Article 1506; Article 559 applies
Article 1506 provides: Where the seller of goods has a voidable title thereto, but
his title has not been voided at the time of the sale, the buyer acquires a good title to
the goods, provided he buys them in good faith, for value, and without notice of the
sellers defect of title. Under the provision, it is essential that the seller should have a
voidable title at least. It is very clearly inapplicable where the seller had no title at all.
3.
Ownership or title acquired only by tradition or delivery; Article 712 of the

Civil Code
Under Article 712 of the Civil Code, ownership and other real rights over
property are acquired and transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by tradition. As interpreted by
this Court in a host of cases, by this provision, ownership is not transferred by contract
merely but by tradition or delivery. Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition is the mode of
accomplishing the same. (Gonzales vs. Rojas, 16 Phil. 51; Ocejo, Perez and Co. vs.
International Bank, 37 Phil. 631; Fidelity and Deposit Co. vs. Wilson, 8 Phil. 51; Kuenzle
& Streiff vs. Wacke & Chandler, 14 Phil. 610; Easton vs. Diaz & Co., 32 Phil. 180). For
the legal acquisition and transfer of ownership and other property rights, the thing
transferred must be delivered, inasmuch as, according to settled jurisprudence the
tradition of the thing is a necessary and indispensable requisite in the acquisition of
said ownership by virtue of a contract. (Walter Easton vs. E. Diaz & Co. & the Provincial
Sheriff of Albay, supra.) So long as property is not delivered, the ownership over it is
not transferred by contract merely but by delivery. Contracts only constitute titles or
rights to the transfer or acquisition of ownership, while delivery or tradition is the
method of accomplishing the same, the title and the method of acquiring it being
different in our law. (Gonzales vs. Rojas, 16 Phil. 51) In the present case, the car was
never delivered to the vendee by the vendor as to complete or consummate the
transfer of ownership by virtue of the contract. It should be recalled that while there
was indeed a contract of sale between Vicente Marella and Teodoro Santos, the former,
as vendee, took possession of the subject matter thereof by stealing the same while it
was in the custody of the latters son.
4.
Delivery of key not delivery contemplated by Article 712; Intent must be

present
There is no adequate evidence on record as to whether Irineo Santos voluntarily
delivered the key to the car to the unidentified person who went with him and L. De
Dios to the place in Azcarraga where a sister of Marella allegedly lived. But even if
Irineo Santos did, it was not the delivery contemplated by Article 712 of the Civil Code.
For then, it would be indisputable that he turned it over to the unidentified companion
only so that he may drive Irineo Santos and De Dios to the said place in Azcarraga and
not vest the title to the said vehicle to him as agent of Vicente Marella. Article 712
above contemplates that the act be coupled with the intent of delivering the thing. (10
Manresa 132)
5.
Article 559 establishes exception to the general rule or irrevindicability

Article 559 establishes two exceptions to the general rule of irrevindicability to
wit: when the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof.
Sales, 2003 ( 38 )
In these cases, the possessor cannot retain the thing as against the owner, who may
recover it without paying any indemnity, except when the possessor acquired it in a
public sale. (Del Rosario vs. Lucena, 8 Phil. 535; Varela vs. Finnick, 9 Phil. 482; Varela
vs. Matute, 9 Phil. 479; Arenas vs. Raymundo, 19 Phil. 46. Tolentino, id., Vol II, p. 261.)
6.
Cruz vs. Pahati on Article 559

In the case of Cruz vs. Pahati, et al., 52 OG 3053, the Court ruled that Under
Article 559 of the new Civil Code, a Person illegally deprived of any movable may
recover it from the person in possession of the same and the only defense the latter
may have is if he has acquired it in good faith at a public sale, in which case, the owner
cannot obtain its return without reimbursing the price paid therefor. In the present case,
plaintiff has been illegally deprived of his car through the ingenious scheme of
defendant B to enable the latter to dispose of it as if he were the owner thereof.
Plaintiff, therefore, can still recover possession of the car even if it is in the possession
of a third party who had acquired it in good faith from defendant B. The maxim that no
man can transfer to another a better title than he has himself obtains in the civil as
well as in the common law. (U.S. vs. Sootelo, 28 Phil. 147)
7.
Common law principle yields to statutory provision

The right of the owner to recover personal property acquired in good faith by
another, is based on his being dispossessed without his consent. The common law
principle that where one of two innocent persons must suffer by a fraud perpetrated by
another, the law imposes the loss upon the party who, by his misplaced confidence, has
enabled the fraud to be committed, cannot be applied in a case which is covered by an
express provision of the new Civil Code, specifically Article 559. Between a common law
principle and a statutory provision, the latter must prevail in this jurisdiction. (Cruz vs.
Pahati, supra).
[11]
Babasa vs. CA [G.R. No. 124045. May 21, 1998.]
First Division, Bellosillo (J): 4 concurring
Facts: On 11 April 1981 a contract of Conditional Sale of Registered Lands was
executed between the spouses Vivencio and Elena Babasa as vendors and Tabangao
Realty Inc. (Tabangao) as vendee over 3 parcels of land, Lots 17827-A, 17827-B and
17827-C, situated in Brgy. Libjo, Batangas City. Since the certificates of title over the
lots were in the name of third persons who had already executed deeds of
reconveyance and disclaimer in favor of the Babasas, it was agreed that the total
purchase price of P2,121,920.00 would be paid in the following manner: P300,000.00
upon signing of the contract, and P1,821,920.00 upon presentation by the Babasas of
transfer certificates of titles in their name, free from all liens and encumbrances, and
delivery of registerable documents of sale in favor of Tabangao within 20 months from
the signing of the contract. In the meantime, the retained balance of the purchase price
would earn interest at 17% per annum or P20,648.43 monthly payable to the Babasas
until 31 December 1982. It was expressly stipulated that Tabangao would have the
absolute and unconditional right to take immediate possession of the lots as well as
introduce any improvements thereon. On 18 May 1981 Tabangao leased the lots to
Shell Gas Philippines, Inc. (SHELL), which immediately started the construction thereon
of a Liquefied Petroleum Gas Terminal Project, an approved zone export enterprise of
Sales, 2003 ( 39 )
the Export Processing Zone. Tabangao is the real estate arm of SHELL. The parties
substantially complied with the terms of the contract. Tabangao paid the first
installment of
P300,000.00 to the Babasas while the latter delivered actual possession of the lots to
the former. In addition, Tabangao paid P379,625.00 to the tenants of the lots as
disturbance compensation and as payment for existing crops as well as P334,700.00 to
the owners of the houses standing thereon in addition to granting them residential lots
with the total area of 2,800 square meters. Tabangao likewise paid the stipulated
monthly interest for the 20-month period amounting to P408,580.80. Meanwhile, the
Babasas filed Civil Case 519 and
Petition 373 for the transfer of titles of the lots in their name. However, 2 days prior to
the expiration of the 20-month period, specifically on 31 December 1982, the Babasas
asked Tabangao for an indefinite extension within which to deliver clean titles over the
lots. They asked that Tabangao continue paying the monthly interest of P20,648.43
starting January 1983 on the ground that Civil Case 519 and Petition 373 had not yet
been resolved with finality in their favor. Tabangao refused the request. In retaliation
the Babasas executed a notarized unilateral rescission dated 28 February 1983 to
which Tabangao responded by reminding the Babasas that they were the ones who did
not comply with their contractual obligation to deliver clean titles within the stipulated
20-month period, hence, had no right to rescind their contract. The Babasas insisted on
the unilateral rescission and demanded that SHELL vacate the lots.
On 19 July 1983 Tabangao instituted an action for specific performance with damages in
the RTC Batangas
City to compel the spouses to comply with their obligation to deliver clean titles over
the properties. The Babasas moved to dismiss the complaint on the ground that their
contract with Tabangao became null and void with the expiration of the 20-month
period given them within which to deliver clean certificates of title. SHELL entered the
dispute as intervenor praying that its lease over the premises be respected by the
Babasas. Eventually, judgment was rendered in favor of Tabangao and SHELL, declaring
that the notarial rescission executed by the Babasas void and of no legal effect;
declaring that the lease contract between Tabangao and SHELL deemed legally binding
on the spouses; ordering the spouses to deliver to Tabangao clean transfer certificates
in their name and execute all necessary deeds and document necessary for the
Register of Deeds to facilitate the issuance of TCTs; directing Tabangao to pay the
spouses the remaining balance of P1,821,920.00 out of the full purchase price for these
three lots enumerated in the agreement plus interest thereon of 17% per annum or
P20,648.43 a month compounded annually beginning January 1983 until fully paid;
making the restraining order against the spouses in putting up structures interfering
with the activities of SHELL, its employees and agents, and canceling the bond posted
by Shell; and ordering the spouses to pay the cost of the proceedings as well as the
premium SHELL paid in the posting of the P2 million bond for the issuance of the
restraining order.
The spouses appealed to the Court of Appeals which on 29 February 1996 affirmed the
decision of the trial court; but ordered that the compounded interest to be paid from 19
July 1983 only and not from January 1983 as decreed by the trial court. Hence, the
appeal.
Sales, 2003 ( 40 )
The Supreme Court denied the petition, and affirmed the appealed decision of the Court
of Appeals in CA-GR CV 39554; without costs.
1.
Contract of sale and not of lease

The contract is replete with terms and stipulations clearly indicative of a contract
of sale. Thus, the opening whereas clause states that the parties desire and mutually
agreed on the sale and purchase of the . . . three parcels of land; the Babasas were
described as the vendors while Tabangao as the vendee from the beginning of the
contract to its end; the amount of P2,121,920.00 was stated as the purchase price of
the lots; Tabangao, as vendee, was granted absolute and unconditional right to take
immediate possession of the premises while the Babasas, as vendors, warranted such
peaceful possession forever; Tabangao was to shoulder the capital gains tax, and;
lastly, the Babasas were expected to execute a Final Deed of Absolute Sale in favor of
Tabangao necessary for the issuance of transfer certificates of title the moment they
were able to secure clean certificates of title in their name. It cannot be said that the
contract was one of lease simply because the word ownership was never mentioned
therein. Besides, the spouses did not object to the terms and stipulations employed in
the contract at the time of its execution when they could have easily done so
considering that they were then ably assisted by their counsel, Atty. Edgardo M.
Carreon, whose legal training negates their pretended ignorance on the matter.
2.
Contracts valid thought parties entered into it against own wish and desire,
or even against his better judgment
Although Tabangao dangled the threat of expropriation by the government
(through the Export Processing Zone Authority) in the event voluntary negotiations
failed, a cause to commiserate with the spouses may be perceived, it is not enough to
provide them with an avenue to escape contractual obligations validly entered into.
Contracts are valid even though one of the parties entered into it against his own wish
and desire, or even against his better judgment. Besides, a threat of eminent domain
proceedings by the government cannot be legally classified as the kind of imminent,
serious and wrongful injury to a contracting party as to vitiate his consent. Private
landowners ought to realize, and eventually accept, that property rights must yield to
the valid exercise by the state of its all-important power of eminent domain.
3.
Contract is absolute although denominated a conditional sale; Actual and

constructive delivery
Although denominated Conditional Sale of Registered Lands, the contract of 11
April 1981 between the spouses and Tabangao is one of absolute sale. Aside from the
terms and stipulations used therein indicating such kind of sale, there is absolutely no
proviso reserving title in the Babasas until full payment of the purchase price, nor any
stipulation giving them the right to unilaterally rescind the contract in case of
nonpayment. A deed of sale is absolute in nature although denominated a conditional
sale absent such stipulations. In such cases, ownership of the thing sold passes to the
vendee upon the constructive or actual delivery thereof. In the instant case, ownership
over Lots 17827-A, 17827-B and 17827-C passed to Tabangao both by constructive and
actual delivery. Constructive delivery was accomplished upon the execution of the
contract of 11 April 1981 without any reservation of title on the part of the Babasas
while actual delivery was made when Tabangao took unconditional possession of the
lots and leased them to its associate company SHELL which constructed its multimillion peso LPG Project thereon.
Sales, 2003 ( 41 )
4.
Distinction between conditions imposed on the perfection of contract and

condition imposed on the performance of an obligation
In Romero v. Court of Appeals and Lim v. Court of Appeals, the Court
distinguished between a condition imposed on the perfection of a contract and a
condition imposed merely on the performance of an obligation. While failure to comply
with the first condition results in the failure of a contract, failure to comply with the
second merely gives the other party the option to either refuse to proceed with the sale
or to waive the condition. In the present case, the spouses contract with Tabangao did
not lose its efficacy when the 20-month period stipulated therein expired without the
spouses being able to deliver clean certificates of title such that Tabangao may no
longer demand performance of their obligation.
5.
Unilateral rescission of the contract by the spouses unwarranted

The spouses act of unilaterally rescinding their contract with Tabangao is
unwarranted. The failure of petitioners to deliver clean titles within 20 months from the
signing of the contract merely gives Tabangao the option to either refuse to proceed
with the sale or to waive the condition in consonance with Article 1545 of the New Civil
Code. Besides, it would be the height of inequity to allow the Babasas to rescind their
contract of sale with Tabangao by invoking as a ground therefor their own failure to
deliver the titles over the lots within the stipulated period.
[12]
Bagnas v. CA [G.R. No. 38498. August 10, 1989.]
First Division, Narvasa (J): 4 concurring
Facts: Hilario Mateum of Kawit, Cavite, died on 11 March 1964, single, without
ascendants or descendants, and survived only by collateral relatives, of whom Isaac,
Encarnacion, Silvestre, Maximina, and Sixto Bagtas, and Agatona Encarnacion, his first
cousins, were the nearest. Mateum left no will, no debts, and an estate consisting of 29
parcels of land in Kawit and Imus, Cavite, 10 of which are involved in the case. On 3
April 1964, Rosa L. Retonil, Teofilo Encarnacion and Jose B. Nambayan, themselves
collateral relatives of Mateum though more remote in degree, registered with the
Registry of Deeds for the Province of Cavite 2 deeds of sale purportedly executed by
Mateum in their favor covering 10 parcels of land. Both deeds were in Tagalog, save for
the English descriptions of the lands conveyed under one of them; and each recited the
reconsideration of the sale to be P1, services rendered and to be rendered for Mateums
benefit. One deed was dated 6 February 1963 and covered 5 parcels of land, and the
other was dated 4 March 1963, covering 5 other parcels, both, therefore, antedating
Mateums death by more than a year. It is asserted by the Bagtas, et.al., but denied by
Retonil, et.al., that said sales notwithstanding, Mateum continued in the possession of
the lands purportedly conveyed until his death, that he remained the declared owner
thereof and that the tax payments thereon continued to be paid in his name. Whatever
the truth, however, is not crucial; what is not disputed is that on the strength of the
deeds of sale, Retonil, et.al. were able to secure title in their favor over 3 of the 10
parcels of land conveyed thereby.
Sales, 2003 ( 42 )
On 22 May 1964, Bagtas et.al. commenced suit against Retonil, et.al. in the CFI Cavite,
seeking annulment of the deeds of sale as fictitious, fraudulent or falsified, or,
alternatively, as donations void for want of acceptance embodied in a public
instrument. Claiming ownership pro indiviso of the lands subject of the deeds by virtue
of being intestate heirs of Hilario Mateum, Bagtas, et. al. prayed for recovery of
ownership and possession of said lands, accounting of the fruits thereof and damages.
Although the complaint originally sought recovery of all the 29 parcels of land left by
Mateum, at the pre-trial the parties agreed that the controversy be limited to the 10
parcels subject of the questioned sales, and the Trial Court ordered the exclusion of the
19 other parcels from the action. Of the 10 parcels which remained in litigation, 9 were
assessed for purposes of taxation at values aggregating P10,500.00. The record does
not disclose the assessed value of the tenth parcel, which has an area of 1,443 sq.ms.
Retonil, et.al. denied the allegations. After Bagtas, et.al. had presented their evidence,
Retonil, et.al. filed a motion for dismissal in effect, a demurrer to the evidence
reasserting the defense set up in their answer that Bagtas, et.al., as mere collateral
relatives of Hilario Mateum had no right to impugn the latters disposition of his
properties by means of the questioned conveyances and submitting, additionally, that
no evidence of fraud tainting said transfers had been presented. The Trial Court granted
the motion to dismiss, holding on the authority of Armentia vs. Patriarca, that Bagtas,
et.al., as mere collateral relatives, not forced heirs, of Hilario Mateum, could not legally
question the disposition made by said deceased during his life time, regardless of
whether, as a matter of objective reality, said dispositions were valid or not; and that
Bagtas, et.al.s evidence of alleged fraud was insufficient, the fact that the deeds of
sale each stated a consideration of only P1 not being in itself evidence of fraud or
simulation.
On appeal by Bagtas, et. al. to the Court of Appeals, that court affirmed, adverting with
approval to the Trial Courts reliance on the Armentia ruling which, it would appear,
both courts saw as denying, without exception, to collaterals, of a decedent, not forced
heirs, the right to impugn the latters dispositions inter vivos of his property.
The Supreme Court reversed the appealed Decision of the Court of Appeals, and
declared the questioned transfers void and of no force or effect. The Court ordered the
annulment of such certificates of title Retonil, et.al. may have obtained over the
properties subject of said transfers, and ordered them to return to Bagtas, et.al.
possession of all the properties involved in the action, to account to the latter for the
fruits thereof during the period of their possession, and to pay the costs. No damages,
attorneys fees or litigation expenses were awarded, there being no evidence thereof
before the Court.
1.
Void contracts: Cause not existing at time of transaction and contract without
or with false cause (where no hidden cause is proved)
Under the Civil Code of the Philippines, Article 1409, paragraph 3, Contracts, with
a cause that did not exist at the time of the transaction are in existent and void from
the beginning. The same is true of contracts stating a false cause (consideration) unless
the persons interested in upholding the contract should prove that there is another true
and lawful consideration therefor. (Article 1353).
Sales, 2003 ( 43 )
2.
Intestate heirs have legal standing; Property subject of void contract does
not leave patrimony of transferor and recoverable by the heirs or the estate
administrator
The heirs intestate have legal standing to contest the conveyance made by the
deceased if the same were made without any consideration, or for a false and fictitious
consideration. If therefore the contract has no causa or consideration, or the causa is
false and fictitious (and no true hidden causa is proved) the property allegedly
conveyed never really leaves the patrimony of the transferor, upon the latters death
without a testament, such property would passed to the transferors hairs intestate and
be, recoverable by them or by the Administrator of the transferors estate.
3.
Armentia ruling clarified Concepcion and Solis rulings; False cause without
hidden cause now not merely voidable, but void ab initio
The Armentia ruling does not reject, and is not to be construed as rejecting, the
Concepcion and Solis rulings (Concepcion vs. Sta. Ana, 87 Phil. 787 and Solis vs. Chua
Pua Hermanos, 50 Phil. 536) as outrightly erroneous. On the contrary, those rulings
undoubtedly read and applied correctly the law extant in their time: Article 1276 of the
Civil Code of 1889 under which the statement of a false cause in a contract rendered it
voidable only, not void ab initio. The fact that the law as it is now (during the time of
Armentia) no longer deems contracts with a false cause, or which are absolutely
simulated or fictitious, merely voidable, but declares them void, i.e., inexistent (nulo)
unless it is shown that they are supported by another true and lawful cause or
consideration.
4.
Armentia case; Effect of the change in the juridical status of contracts based
on false cause
A logical consequence of that change is the juridical status of contracts without,
or with a false, cause is that conveyances of property affected with such a vice cannot
operate to divest and transfer ownership, even if unimpugned. If afterwards the
transferor dies the property descends to his heirs, and without regard to the manner in
which they are called to the succession, said heirs may bring an action to recover the
property from the purported transferee. Such an action is not founded on fraud, but on
the premise that the property never leaves the estate of the transferor and is
transmitted upon his death to heirs, who would labor under no incapacity to maintain
the action from the mere fact that they may be only collateral relatives and bound
neither principally or subsidiarily under the deed / contract of conveyance.
5.
Armentia case; Conveyance merely annullable as action based on fraud

vitiating conveyance
In Armentia, the Court determined that the conveyance questioned was merely
annullable, not void ab initio, and that the action was based on fraud vitiating said
conveyance. The court found that Marta Armentia executed the document, a fact
uncontroverted by the cases plaintiff. Also, the vendees, being minors, makes the
contract, at worst, only annullable by them. Moreover, inadequacy of consideration
does not imply total want of consideration. Further, the purported acts of Marta
Armentia after the sale did not indicate that the said sale was void from the beginning.
Thus, in essence the plaintiffs case is bottomed on fraud, which renders the contract
merely voidable.
Sales, 2003 ( 44 )
6.
Armentia case applies to voidable contracts obtained or made fraudulently;

does not apply to transfers which are void for lack or falsity of consideration
As a precedent, Armentia only ruled that transfers made by a decedent in his
lifetime, which are voidable for having been fraudulently made or obtained, cannot be
posthumously impugned by collateral relatives succeeding to his estate who are not
principally or subsidiarily bound by such transfers. That ruling is not extendible to
transfers which, though made under closely similar circumstances, are void ab initio for
lack or falsity of consideration.
7.
False and fictitious consideration, without any alternative true or lawful

cause presented, renders contract void
Upon the consideration alone that the apparent gross, not to say enormous,
disproportion between the stipulated price in each deed of P1 plus unspecified and
unquantilled services and the undisputably valuable real estate allegedly sold (worth at
least P10,500.00 going only by assessments for tax purposes which, it is well-known,
are notoriously low indicators of actual value) plainly and unquestionably demonstrates
that they state a false and fictitious consideration, and no other true and lawful cause
having been shown, the Court finds both said deeds, insofar as they purport to be sales,
not merely voidable, but void ab initio.
10.
Donations of immovable property must be made and accepted in a public

document; Liberality as cause denied
The validity of the conveyances cannot be defended on the theory that their true
causa is the liberality of the transferor and they may be considered in reality donations,
because the law also prescribes that donations of immovable property, to be valid,
must be made and accepted in a public instrument, and it is not denied by Retonil, et.
al. that there has been no such acceptance which they claim is not required.
11.
Properties remained as part of estate of Mateum, and thus recoverable

The transfers in question being void, it follows as a necessary consequence and
conformably to the concurring opinion in Armentia, with which the Court fully agrees,
that the properties purportedly conveyed remained part of the estate of Hilario
Mateum, said transfers notwithstanding, recoverable by his intestate heirs, i.e. Bagtas,
et.al., whose status as such is not challenged.
12.
Lack of proof that could have saved transfers from taint of invalidity; Burden
of proof in the existence of a valid and licit contract
Retonil, et.al. have only themselves to blame for the lack of proof that might
have saved the questioned transfers from the taint of invalidity as being fictitious and
without licit cause; proof, to be brief, of the character and value of the services, past,
present, and future, constituting according to the very terms of said transfers the
principal consideration therefor. The onus of showing the existence of valid and licit
consideration for the questioned conveyances rested on Retonil, et.al.. But even on a
contrary assumption, and positing that Bagnas, et.al. initially had the burden of
showing that the transfers lacked such consideration as they alleged in their complaint,
that burden was shifted to Retonil, et.al. when Bagnas, et.al. presented the deeds which
they claimed showed that defect on their face and it became the duty of Retonil, et.al.
to offer evidence of existent, lawful consideration.
13.
Demurrer to evidence; Effect

Sales, 2003 ( 45 )
Retonil, et. al., opting to rely on a demurrer to Bagtas, et. al.s evidence and upon
the thesis that the latter, being mere collateral relatives of the deceased transferor,
were without right to the conveyances in question. In effect, they gambled their right to
adduce evidence on a dismissal in the Trial Court and lost, it being the rule that when a
dismissal thus obtained is reversed on appeal, the movant loses the right to present
evidence in his behalf.
[13]
Balatbat v. CA [G.R. No. 109410. August 28, 1996.]
Second division, Torres Jr (J): 4 concurring
Facts: On 15 June 1977, Aurelio A. Roque filed a complaint for partition against his
children Corazon,
Feliciano, Severa and Osmundo Roque, and Alberto de los Santos before the CFI Manila
(Branch IX, Civil
Case 109032). The Roque children were declared in default and Aurelio presented
evidence ex-parte. On 29
March 1979, the trial court rendered a decision in favor of Aurelio; holding that Aurelio
and his wife Maria Mesina acquired the lot (TCT 51330) during their conjugal union, as
well as the house that was constructed thereon; that when Maria Mesina died on 28
August 1966, leaving no debt, Aurelio (as surviving spouse) was entitled to share
pro-indiviso of the conjugal property (i.e. house and lot) and that Aurelio and his 4
children were entitled to 1/5 share pro-indiviso each of the share pro-indiviso forming
the estate of Maria Mesina; ordering the partition of the properties; and dismissing
Aurelios claim for moral, exemplary and actual damages and attorneys fees; without
pronouncement as to costs. On 2 June 1979, the decision became final and executory;
with the corresponding entry of judgment made 29 March 1979. On 5 October 1979,
the Register of Deeds of Manila issued TCT 135671 (with Aurelio Roque having 6/10
share; and the Roque children with 1/10 share each).
On 1 April 1980, Aurelio sold his 6/10 share in TCT 135671 to spouses Aurora TuazonRepuyan and Jose Repuyan as evidenced by a Deed of Absolute Sale. On 21 July
1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of adverse claim
on the TCT 135671, claiming that she bought 6/10 portion of the property from Aurelio
Roque for the amount of P50,000.00 with a downpayment of P5,000.00 and the balance
of P45,000.00 to be paid after the partition and subdivision of the property. On 20
August 1980, Aurelio Roque filed a complaint for Rescission of Contract against
spouses Repuyan before the then CFI Manila (Branch IV, Civil Case 134131). The
complaint is grounded on spouses Repuyans failure to pay the balance of P45,000.00
of the purchase price. On 5 September 1980, spouses Repuyan filed their answer with
counterclaim.
In the meantime, the trial court issued an order in Civil Case 109032 (Partition case)
dated 2 February 1982, ordering the Deputy Clerk of the court to sign the deed of
absolute sale for and in behalf of Roque children pursuant to Section 10, Rule 39 of the
Rules of Court, in order to effect the partition of the property involved in the case
(P100,000 purchase price for the 84 sq. ms. In Callejon Sulu, Sta. Cruz, Manila is
reasonable and fair; and that opportunities have been given to the children to sign the
Sales, 2003 ( 46 )
deed voluntarily). A deed of absolute sale was executed on 4 February 1982 between
Aurelio, Corazon, Feliciano, Severa and Osmundo Roque and Clara Balatbat, married to
Alejandro Balatbat. On 14 April 1982, Clara Balatbat filed a motion for the issuance of a
writ of possession which was granted by the trial court on 14 September 1982 subject,
however, to valid rights and interest of third persons over the same portion thereof,
other than vendor or any other person or persons privy to or claiming any rights or
interest under it. The corresponding writ of possession was issued on 20 September
1982.
On 20 May 1982, Clara Balatbat filed a motion to intervene in Civil Case 134131 which
was granted as per courts resolution of 21 October 1982. However, Clara Balatbat
failed to file her complaint in intervention. On
15 April 1986, the trial court rendered a decision dismissing the complaint, and
declaring the Deed of Absolute Sale dated 1 April 1980 as valid and enforceable and
Aurelio is, as he is hereby ordered, to partition and subdivide the land covered by TCT
135671, and to aggregate therefrom a portion equivalent to 6/10 thereof, and cause
the same to be titled in the name of spouses Repuyan, and after which, the latter to
pay Aurelio the sum of P45,000.00. Considering further that the spouses suffered
damages since they were forced to litigate unnecessarily, by way of their counterclaim,
Aurelio is hereby ordered to pay the spouses the sum of P15,000.00 as moral damages,
attorneys fees in the amount of P5,000.00; with costs against Aurelio.
On 3 March 1987, Balatbat filed a notice of lis pendens in Civil Case 109032 before the
Register of Deeds of Manila.
On 9 December 1988, Balatbat and her husband filed a complaint for delivery of the
owners duplicate copy of TCT 135671 before the RTC Manila (Branch 24, Civil Case 8847176) against Jose and Aurora Repuyan. On 27 January 1989, spouses Repuyan filed
their answer with affirmative defenses and compulsory counterclaim. The Repuyans
and the Balatbats submitted their memoranda on 13 November 1989 and 23 November
1989, respectively. On 2 August 1990, the RTC Manila rendered a decision dismissing
the complaint, finding that the Balatbats were not able to establish their cause of action
against the Repuyans and have no right to the reliefs demanded in the complaint, and
ordering Balatbat to pay the Repuyans the amount of P10,000 as attorneys fees,
P5,000 as costs of litigation, and to pay the costs of the suit.
Dissatisfied, Balatbat filed an appeal before the Court of Appeals (CA-GR CV 29994)
which rendered decision on 12 August 1992, affirming the judgment appealed from with
modification deleting the awards of P10,000 for attomeys fees and P5,000 as costs of
litigation. On 22 March 1993, the Court of Appeals denied Balatbats motion for
reconsideration. Hence, the petition for review pursuant to Rule 45 of the Revised Rules
of Court.
The Supreme Court dismissed the petition for review for lack of merit; without
pronouncement as to costs.
1.
1 April 1980 sale consummated, valid and enforceable

The sale dated 1 April 1980 in favor the Repuyan spouses is consummated,
hence, valid and enforceable; not merely executory for the reason that there was no
delivery of the subject property and that consideration/price was not fully paid. In a
Sales, 2003 ( 47 )
decision dated 15 April 1986 of the RTC Manila (Branch IV, Civil Case 134131), the
Court dismissed Aurelio complaint for rescission of the deed of sale and declared that
the sale dated 1 April 1980, as valid and enforceable. No appeal having been made, the
decision became final and executory. It must be noted that Balatbat filed a motion for
intervention in that case but did not file her complaint in intervention.
2.
1 April 1980 Deed of Sale devoid of stipulation withholding ownership of

thing until full payment; Ownership pass upon delivery of thing sold even if
purchase price not fully paid
The terms and conditions of the Deed of Sale dated 1 April 1980, the
P45,000.00 balance is payable only after the property covered by TCT 135671 has been
partitioned and subdivided, and title issued in the name of the buyer hence, the vendor
cannot demand payment of the balance unless and until the property has been
subdivided and titled in the name of the Repuyan spouses. Devoid of any stipulation
that ownership in the thing shall not pass to the purchaser until he has fully paid the
price, ownership in the thing shall pass from the vendor to the vendee upon actual or
constructive delivery of the thing sold even if the purchase price has not yet been fully
paid.
3.
Non-payment in a contract of sale merely creates right to demand fulfillment

of obligation or rescission of contract; Article 1191
The failure of the buyer to make good the price does not, in law, cause the
ownership to revest to the seller unless the bilateral contract of sale is first rescinded or
resolved pursuant to Article 1191 of the New Civil Code. Non-payment only creates a
right to demand the fulfillment of the obligation or to rescind the contract.
With respect to the non-delivery of the possession of the subject property to the
private respondent, suffice it to say that ownership of the thing sold is acquired only
from the time of delivery thereof, either actual or constructive. 28
4.
Ownership of a thing sold acquired from time of actual or constructive

delivery; Possession of public instrument of the land accords buyer rights of
ownership
Article 1498 of the Civil Code provides that 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 be inferred.
The execution of the public instrument, without actual delivery of the thing, transfers
the ownership from the vendor to the vendee, who may thereafter exercise the rights of
an owner over the same. It is not necessary that vendee be physically present at every
square inch of the land bought by him, possession of the public instrument of the land
is sufficient to accord him the rights of ownership. Thus, delivery of a parcel of land
may be done by placing the vendee in control and possession of the land (real) or by
embodying the sale in a public instrument (constructive). In the present case, vendor
Roque delivered the owners certificate of title to the Repuyan spouses.
5.
Necessity of public document merely for convenience, and not for validity or
enforceability of a contract of sale
Sales, 2003 ( 48 )
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.
6.
Contract of sale consensual, perfected by mere consent of the parties; Nonpayment does not render sale null and void for lack of consideration
A contract of sale being consensual, it is perfected by the mere consent of the
parties. Delivery of the thing bought or payment of the price is not necessary for the
perfection of the contract; and failure of the vendee to pay the price after the execution
of the contract does not make the sale null and void for lack of consideration but results
at most in default on the part of the vendee, for which the vendor may exercise his
legal remedies.
7.
Present case is a double sale

The present case is a case of double sale contemplated under Article 1544 of the
New Civil Code. In the present case, Aurelio Roque sold 6/10 portion of his share in TCT
135671 to the Repuyan spouses on 1 April 1980. Subsequently, the same lot was sold
again by vendor Aurelio Roque (6/10) and his children (4/10), represented by the Clerk
of Court pursuant to Section 10, Rule 39 of the Rules of Court, on 4 February 1982.
8.
Article 1544; Double sale

Article 1544 of the New Civil Code provides that 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 movable 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 present the oldest title,
provided there is good faith. Article 1544 of the Civil Code provides that in case of
double sale of an immovable property, ownership shall be transferred (1) to the person
acquiring it who in good faith first recorded it in the Registry of Property; (2) in default
thereof, to the person who in good faith was first in possession; and (3) in default
thereof, to the person who presents the oldest title, provided there is good faith.
9.
Ownership vests in person who acquired the immovable property in good

faith and who first recorded it in the Registry of Property; Annotation of
adverse claim sufficient
In an instance of a double sale of an immovable property, the ownership shall
vests in the person acquiring it who in good faith first recorded it in the Registry of
Property. In the present case, the Repuyan spouses caused the annotation of an
adverse claim on the title of the subject property denominated as Entry 5627/T-135671
on 21 July 1980. The annotation of the adverse claim on TCT 135671 in the Registry of
Property is sufficient compliance as mandated by law and serves notice to the whole
world. Balatbat, on the other hand, filed a notice of lis pendens only on 2 February
1982. Accordingly, the Repuyan spouses who first caused the annotation of the adverse
claim in good faith shall have a better right over Balatbat.
Possession of Balatbat merely provisionary
The physical possession of Balatbat by virtue of a writ of possession issued by
the trial court on 20 September 1982 is subject to the valid rights and interest of third
10.
Sales, 2003 ( 49 )
persons over the same portion thereof, other than vendor or any other person or
persons privy to or claiming any rights to interest under it.
11.
First registrant, first in possession, else oldest title

As between two purchasers, the one who has registered the sale in his favor, has
a preferred right over the other who has not registered his title even if the latter is in
actual possession of the immovable property. Even in default of the first registrant or
first in possession, the Repuyan spouses have presented the oldest title. Thus, the
spouses who acquired the subject property in good faith and for valuable consideration
established a superior right as against Balatbat.
12.
Due diligence in the purchase of real estate required to allege good faith
It is incumbent upon the vendee of the property to ask for the delivery of the
owners duplicate copy of the title from the vendor. A purchaser of a valued piece of
property cannot just close his eyes to facts which should put a reasonable man upon his
guard and then claim that he acted in good faith and under the belief that there were
no defect in the title of the vendor. One who purchases real estate with knowledge of a
defect or lack of title in his vendor cannot claim that he has acquired title thereto in
good faith as against the true owner of the land or of an interest therein; and the same
rule must be applied to one who has knowledge 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. Good faith, or the want of it is not a visible, tangible
fact that can be seen or touched, but rather a state or condition of mind which can only
be judged of by actual or fancied tokens or signs.
13.
Balatbat not a buyer in good faith

Balatbat cannot be considered as a buyer in good faith. In the complaint for
rescission filed by Aurelio Roque on 20 August 1980, Balatbat filed a motion for
intervention on 20 May 1982 but did not file her complaint in intervention, hence, the
decision was rendered adversely against her. If Balatbat did investigate before buying
the land on 4 February 1982, she should have known that there was a pending case
and an annotation of adverse claim was made in the title of the property before the
Register of Deeds and she could have discovered that the subject property was already
sold to the Repuyan spouses.
14.
Gross negligence equvalent to intentional wrong

Balatbat had nobody to blame but herself in dealing with the disputed property
for failure to inquire or discover a flaw in the title to the property, thus, it is axiomatic
that culpa lata dolo aequiparatur gross negligence is equivalent to intentional
wrong.
[14]
Calimlim-Canullas v. Fortun [G.R. No. 57499. June 22, 1984.]
First Division, Melencio-Herrera (J): 5 concurring
Facts: Mercedes Calimlim-Canullas and Fernando Canullas were married on 19
December 1962. They begot five children. They lived in a small house on the residential
Sales, 2003 ( 50 )
land in question with an area of approximately 891 sq. m., located at Bacabac,
Bugallon, Pangasinan. After Canullas father died in 1965, he inherited the land. In
1978, Canullas abandoned his family and lived with Corazon Daguines. On 15 April
1980, Canullas sold the subject property with the house thereon to Daguines for the
sum of P2,000.00. In the document of sale, Canullas described the house as also
inherited by me from my deceased parents. Unable to take possession of the lot and
house, Daguines initiated a complaint beore the CFI Pangasinan (Branch 1, Civil Case
15620) on 19 June 1980 for quieting of title and damages against Calimlim-Canullas.
CalimlimCanullas resisted and claimed that the house in dispute where she and her
children were residing, including the coconut trees on the land, were built and planted
with conjugal funds and through her industry; that the sale of the land together with
the house and improvements to Daguines was null and void because they are conjugal
properties and she had not given her consent to the sale. On 6 October 1980, the trial
court ruled in favor of Daguines as the lawful owner of the land as well as of the
house erected on the land. Upon reconsideration and on 27 November 1980, however,
the lower court modified the judgment by declaring Daguines as the lawful owner of the
land and 10 coconut trees thereon but declaring the sale of the conjugal house
including 3 coconuts and other crops during the conjugal relation of the spouses null
and void. A petition for review on certiorari was filed with Supreme Court.
During the pendency of the appeal, however, Fernando Canullas and Corazon Daguines
were convicted of concubinage in a judgment rendered on 27 October 1981 by the then
CFI Pangasinan, Branch II, which judgment has become final.
The Supreme Court set aside the decision and resolution of the lower court, and
declared the sale of the lot, house and improvements null and void; without costs.
1.
Land and building belongs to the conjugal partnership, spouse owning the
land becomes the creditor of the conjugal partnership
Pursuant to the second paragraph of Article 158 of the Civil Code, which provides
that buildings constructed at the expense of the partnership during the marriage on
land belonging to one of the spouses also pertain to the partnership, but the value of
the land shall be reimbursed to the spouse who owns the same, both the land and the
building belong to the conjugal partnership but the conjugal partnership is indebted to
the husband for the value of the land. The spouse owning the lot becomes a creditor of
the conjugal partnership for the value of the lot, which value would be reimbursed at
the liquidation of the conjugal partnership.
2.
Padilla v. Paterno is better rule than Maramba v. Lozano; Spouse cannot

alienate property without the consent of the other
In the case of Maramba vs. Lozano, it was held that the land belonging to one of
the spouses, upon which the spouses have built a house, becomes conjugal property
only when the conjugal partnership is liquidated and indemnity paid to the owner of the
land. The better rule, however, is that held in Padilla vs. Paterno, where the conversion
of the properties from paraphernal to conjugal assets should be deemed to retroact to
the time the conjugal buildings were first constructed thereon or at the very latest, to
the time immediately before the death of one spouse that ended the conjugal
partnership. They can not be considered to have become conjugal property only as of
the time their values were paid to the estate of the widow because by that time the
conjugal partnership no longer existed and it could not acquire the ownership of said
Sales, 2003 ( 51 )
properties. The acquisition by the partnership of the properties was, under the 1943
decision, subject to the suspensive condition that their values would be reimbursed to
the widow at the liquidation of the conjugal partnership; once paid, the effects of the
fulfillment of the condition should be deemed to retroact to the date the obligation was
constituted (Article 1187, New Civil Code). Thus, in the present case, considering the
foregoing premises, Canullas cannot have alienated the house and lot to Daguines
since the wife had not given her consent to the sale.
3.
Contract of sale null and void for being contrary to morals and public policy
Article 1409 of the Civil Code provides contracts whose cause, object, or
purpose is contrary to law, morals, good customs, public order, or public policy are void
and inexistent from the very beginning. Article 1352 also provides that contracts
without cause, or with unlawful cause, produce no effect whatsoever. The cause is
unlawful if it is contrary to law, morals, good customs, public order, or public policy. In
the present case, the contract of sale was null and void for being contrary to morals
and public policy. The sale was made by a husband in favor of a concubine after he had
abandoned his family and left the conjugal home where his wife and children lived and
from whence they derived their support. That sale was subversive of the stability of the
family, a basic social institution which public policy cherishes and protects.
4.
Law prohibits sale and donation between husband and wife, such applies
even those living together without benefit of marriage
The law prohibits the spouses from selling property to each other subject to
certain exceptions. Similarly, donations between spouses during marriage are
prohibited. And this is so because if transfers or conveyances between spouses were
allowed during marriage, that would destroy the system of conjugal partnership, a basic
policy in civil law. It was also designed to prevent the exercise of undue influence by
one spouse over the other, as well as to protect the institution of marriage, which is the
cornerstone of family law. The prohibitions apply to a couple living as husband and wife
without benefit of marriage, otherwise, the condition of those who incurred guilt would
turn out to be better than those in legal union. Those provisions are dictated by public
interest and their criterion must be imposed upon the will of the parties. (Buenaventura
v. Bautista [CA])
5.
Disabilities attached to marriage also applies to concubinage

The ruling in Buenaventura vs. Bautista [CA] was cited in Matabuena vs.
Cervantes, reiterating that while Article 133 of the Civil Code considers as void a
donation between the spouses during the marriage, policy considerations of the most
exigent character as well as the dictates of morality require that the same prohibition
should apply to a common-law relationship. If the policy of the law is to prohibit
donations in favor of the other consort and his descendants because of fear of undue
influence and improper pressure upon the donor, a prejudice deeply rooted in our
ancient law, then there is every reason to apply the same prohibitive policy to persons
living together as husband and wife without benefit of nuptials. For it is not to be
doubted that assent to such irregular connection for thirty years bespeaks greater
influence of one party over the other, so that the danger that the law seeks to avoid is
correspondingly increased. Moreover, as pointed out by Ulpian, it would not be just that
such donations should subsist, lest the conditions of those who incurred guilt should
Sales, 2003 ( 52 )
turn out to be better. So long as marriage remains the cornerstone of our family law,
reason and morality alike demand that the disabilities attached to marriage should
likewise attach to concubinage.
[15]
Carbonell vs. CA [G.R. No. L-29972. January 26, 1976.]
First Division, Makasiar (J): 3 concurring
Facts: Prior to 27 January 1955, Jose Poncio, a native of the Batanes Islands, was the
owner of the parcel of land with improvements situated at 179 V. Agan St., San Juan,
Rizal, having an area of some 195 square meters, more or less, covered by TCT 5040
and subject to a mortgage in favor of the Republic Savings Bank for the sum of
P1,500.00. Rosario Carbonell, a cousin and adjacent neighbor of Poncio, and also from
the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.
Both Rosario
Carbonell and Emma Infante offered to buy the said lot from Poncio. Poncio, unable to
keep up with the installments due on the mortgage, approached Carbonell one day and
offered to sell to the latter the said lot, excluding the house wherein he lived. Carbonell
accepted the offer and proposed the price of P9.50 per square meter. Poncio, after
having secured the consent of his wife and parents, accepted the price proposed by
Carbonell, on the condition that from the purchase price would come the money to be
paid to the bank. Carbonell and Poncio went to the bank and secured the consent of the
President thereof for her to pay the arrears on the mortgage and to continue the
payment of the installments as they fall due. The amount in arrears reached a total
sum of P247.26. But because Poncio had previously told her that the money needed
was only P200, only the latter amount was brought by Carbonell constraining
respondent Poncio to withdraw the sum of P47 from his bank deposit with Republic
Savings Bank. The next day, Carbonell refunded to Poncio the sum of P47. On 27
January 1955, Carbonell and Poncio, in the presence of a witness, made and executed a
document in the Batanes dialect, allowing Poncio to occupy the land sold within one
year, and may continue occupying the site with rent thereafter if could not find any
place to move his house. Thereafter, Carbonell asked Atty. Salvador Reyes, also from
the Batanes Islands, to prepare the formal deed of sale, which she brought to Poncio
together with the amount of some P400, the balance she still had to pay in addition to
her assuming the mortgage obligation to Republic Savings Bank. Upon arriving at
Poncios house, however, the latter told Carbonell that he could not proceed any more
with the sale, because he had already given the lot to Emma Infante (and Ramon
Infante); and that he could not withdraw from his deal with Infante, even if he were to
go to jail. Carbonell then sought to contact Infante, but the latter refused to see her.
On 5 February 1955, Carbonell saw Infante erecting a wall around the lot with a gate.
Carbonell then consulted Atty. Jose Garcia, who advised her to present and adverse
claim over the land in question with the Office of the Register of Deeds Rizal. Atty.
Garcia actually sent a letter of inquiry to the Register of Deeds and demand letters to
Jose Poncio and Emma Infante. In his answer to the complaint, Poncio admitted that on
30 January 1955, Infante improved her offer and he agreed to sell the land and its
improvements to her for P3,535.00. In a private memorandum agreement dated 31
January 1955, Poncio indeed bound himself to sell to Infante, the property for the sum
of P2,357.52, with Infante still assuming the existing mortgage debt in favor of Republic
Savings Bank in the amount of P1,177.48. Infante lives just behind the houses of Poncio
Sales, 2003 ( 53 )
and Carbonell. On 2 February 1955, Poncio executed the formal deed of sale in favor of
Infante in the total sum of P3,554.00 and on the same date, the latter paid Republic
Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot was
eventually discharged. Informed that the sale in favor of Infante had not yet been
registered, Atty. Garcia prepared an adverse claim for Carbonell, who signed and swore
to and registered the same on 8 February 1955. The deed of sale in favor of Infante was
registered only on 12 February 1955. As a consequence thereof, a TCT was issued to
her but with the annotation of the adverse claim of Carbonell. Infante took immediate
possession of the lot involved, covered the same with 500 cubic meters of garden soil
and built therein a wall and gate, spending the sum of P1,500. She further contracted
the services of an architect to build a house; but the construction of the same started
only in 1959, years after the litigation actually began and during its pendency. Infante
spent for the house the total amount of P11,929.
On 1 June 1955, Carbonell, thru counsel, filed a second amended complaint against
Poncio and Infante, praying that she be declared the lawful owner of the questioned
parcel of land; that the subsequent sale to Infante be declared null and void, and that
Poncio be ordered to execute the corresponding deed of conveyance of said land in her
favor and for damages and attorneys fees. Poncio and Infante first moved to dismiss
the complaint on the ground, among others, that Carbonells claim is unenforceable
under the Statute of Frauds, the alleged sale in her favor not being evidenced by a
written document; and when said motion was denied without prejudice to passing on
the question raised therein when the case would be tried on the merits,
Poncio and Infante filed separate answers, reiterating the grounds of their motion to
dismiss. In its order of 26 April 1966, the trial court sustained the objection and
dismissed the complaint on the ground that the memorandum presented by Carbonell
to prove said sale does not satisfy the requirements of the law.
From the above order of dismissal, Carbonnel appealed to the Supreme Court (GR L11231) which ruled in a decision dated 12 May 1958, that the Statute of Frauds, being
applicable only to executory contracts, does not apply to the alleged sale between
Carbonell and Poncio, which Carbonell claimed to have been partially performed, so
that Carbonell is entitled to establish by parol evidence the truth of this allegation, as
well as the contract itself. The order appealed from was thus reversed, and the case
remanded to the court a quo for further proceedings.
After trial in the court a quo, a decision was rendered on 5 December 1962, declaring
the second sale by Poncio to Infante of the land in question null and void and ordering
Poncio to execute the proper deed of conveyance of said land in favor of Carbonell
after compliance by the latter of her covenants under her agreement with Poncio. On
23 January 1963, Infante, through another counsel, filed a motion for re-trial to adduce
evidence for the proper implementation of the courts decision in case it would be
affirmed on appeal, which motion was opposed by Carbonell for being premature.
Before their motion for re-trial could be resolved, Infante, this time through their
former counsel, filed another motion for new trial, claiming that the decision of the
trial court is contrary to the evidence and the law, which motion was also opposed by
Carbonell. The trial court granted a new trial, at which re-hearing only Infante
introduced additional evidence consisting principally of the cost of improvements they
Sales, 2003 ( 54 )
introduced on the land in question. After the rehearing, the trial court rendered a
decision, reversing its decision of 5 December 1962 on the ground that the claim of
Infante was superior to the claim of Carbonell, and dismissing the complaint\. From this
decision, Carbonell appealed to the Court of Appeals.
On 2 November 1967, the Court of Appeals (Fifth Division composed of Justices Magno
Gatmaitan, Salvador V. Esguerra and Angel H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the trial court, declaring
Carbonell to have a superior right to the land in question, and condemning Infante to
reconvey to Carbonell, after her reimbursement to them of the sum of P3,000 plus legal
interest, the land in question and all its improvements.
Infante sought reconsideration of said decision and acting on the motion for
reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and Nolasco), of
Special Division of Five, granted said motion, annulled and set aside its decision of 2
November 1967, and entered another judgment affirming in toto the decision of the
court a quo, with Justices Gatmaitan and Rodriguez dissenting. Carbonell moved to
reconsider the Resolution of the Special Division of Five, which motion was denied by
Minute Resolution of 6 December 1968 (but with Justices Rodriguez and Gatmaitan
voting for reconsideration). Hence, this appeal by certiorari.
The Supreme Court reversed the decision of the special division of five of the court of
appeals of 30 October 1968; declared Carbonell to have the superior right to the land in
question and directed Carbonell to reimburse to Infante the sum of P1,500 within 3
months from the finality of the decision; directed the Register of Deeds of Rizal to
cancel TCT 37842 issued in favor of Infante covering the disputed lot, which cancelled
TCT 5040 in the name of Poncio, and to issue a new TCT in favor of Carbonell upon
presentation of proof of payment by her to Infante of the aforesaid amount. Infante
may remove their useful improvements from the lot within 3 months from the finality of
this decision, unless Carbonell elects to acquire the same and pay Infante the amount
of P13,429 within 3 months from the finality of the decision. Should Carbonell fail to pay
the said amount within the period of 3 months from the finality of the decision, the
period of 3 months within which Infante may remove their useful improvements shall
commence from the expiration of the 3 months given Carbonell to pay for the said
useful improvements; with costs against Poncio and Infante.
1.
Double sale; Article 1544

Article 1544, New Civil Code, which is decisive of this case, recites 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.
2.
Good faith essential in registering deed of sale

It is essential that the buyer of realty must act in good faith in registering his
deed of sale to merit the protection of the second paragraph of said Article 1544.
Unlike the first and third paragraphs of said Article 1544, which accord preference to
Sales, 2003 ( 55 )
the one who first takes possession in good faith of personal or real property, the
second paragraph directs that ownership of immovable property should be recognized
in favor of one who in good faith first recorded his right. Under the first and third
paragraphs, good faith must characterize the prior possession. Under the second
paragraph, good faith must characterize the act of anterior registration (DBP vs.
Mangawang, et al., 11 SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489).
3.
Decisive fact if there is no inscription, or if there is inscription

If there is no inscription, what is decisive is prior possession in good faith. If there
is inscription, as in the present case, prior registration in good faith is a pre-condition to
superior title.
4.
Carbonells prior purchase and registration in good faith

When Carbonell bought the lot from Poncio on 27 January 1955, she was the only
buyer thereof and the title of Poncio was still in his name solely encumbered by bank
mortgage duly annotated thereon. Carbonell was not aware of any sale to Infante as
there was no such sale to Infante then. Hence, Carbonells prior purchase of the land
was made in good faith. Her good faith subsisted and continued to exist when she
recorded her adverse claim 4 days prior to the registration of Infantes deed of sale.
Carbonells good faith did not cease after Poncio told her on 31 January 1955 of his
second sale of the same lot to Infante. Because of that information, Carbonell wanted
an audience with Infante, which desire underscores Carbonells good faith. Infante
refused to see her. Carbonell did the next best thing to protect her right, she registered
her adverse claim on 8 February 1955. Under the circumstances, this recording of her
adverse claim should be deemed to have been done in good faith and should
emphasize Infantes bad faith when she registered her deed of sale 4 days later on 12
February 1955.
5.
Bad faith of Infante; Facts showing bad faith

Bad faith arising from previous knowledge by Infante of the prior sale to
Carbonell is shown by the following facts: (1) Infante refused to see Carbonell, who
wanted to see Infante after she was informed by Poncio that he sold the lot to Infante
but several days before Infante registered her deed of sale. Ordinarily, one will not
refuse to see a neighbor. Her refusal to talk to Carbonell could only mean that she did
not want to listen to Carbonells story that the latter had previously bought the lot from
Poncio. (2) Carbonell was already in possession of the mortgage passbook [not Poncios
savings deposit passbook: Infantes] and Poncios copy of the mortgage contract, when
Poncio sold the lot to Infante. This shows that the lot was already sold to Carbonell who,
after paying the arrearages of Poncio, assumed the balance of his mortgage
indebtedness to the bank, which in the normal course of business must have
necessarily informed Infante about the said assumption by Carbonell of the mortgage
indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of
Poncio to the bank, Infante naturally must have demanded from Poncio the delivery to
her of his mortgage passbook as well as Poncios mortgage contract so that the fact of
full payment of his bank mortgage will be entered therein; and Poncio, as well as the
bank, must have inevitably informed her that said mortgage passbook could not be
given to her because it was already delivered to Carbonell; (3) The fact that Poncio was
no longer in possession of his mortgage passbook and that the said mortgage passbook
Sales, 2003 ( 56 )
was already in possession of Carbonell, should have compelled Infante to inquire from
Poncio why he was no longer in possession of the mortgage passbook and from
Carbonell why she was in possession of the same (Paglago, et al., vs. Jarabe, et al., 22
SCRA 1247, 1252-1253); (4) Carbonell registered on 8 February 1955 her adverse
claim, which was accordingly annotated on Poncios title 4 days before Infante
registered on 12 February 1955 her deed of sale executed on 2 February 1955. Infante
was again on notice of the prior sale to
Carbonell. Such registration of adverse claim is valid and effective (Jovellanos vs.
Dimalanta, L-11736-37,
January 30, 1959, 105 Phil. 1250-51); (5) In his answer to the complaint filed by Poncio,
as defendant in the CFI, he alleged that both Infante and Carbonell offered to buy the
lot at P15 per sq.m., which offers he rejected as he believed that his lot is worth at least
P20 per sq.m. Knowledge of this should have put Infante on her guard and should have
compelled her to inquire from Poncio whether or not he had already sold the property to
Carbonell (See Carbonell vs. Poncio, L-11231, 12 May 1958).
6.
Contract for lot not in the purview of Statute of Frauds; not a contract
of sale; indicates sale as an accomplished act
The private document executed by Poncio and Carbonell and witnessed by
Constancio Meonada captioned Contract for One-half Lot which I Bought from Jose
Poncio, was not such a memorandum in writing within the purview of the Statute of
Frauds. The memorandum in question merely states that Poncio is allowed to stay in
the property which he had sold to Carbonell. There is no mention of the consideration, a
description of the property and such other essential elements of the contract of sale.
There is nothing in the memorandum which would tend to show even in the slightest
manner that it was intended to be an evidence of contract of sale. On the contrary,
from the terms of the memorandum, it tends to show that the sale of the property in
favor of Carbonell is already an accomplished act. By the very contents of the
memorandum itself, it cannot therefore, be considered to be the memorandum which
would show that a sale has been made by Poncio in favor of Carbonell.
7.
Contract of Sale not in the purview of Statute of Frauds as it is allegedly

partially performed
Because the complaint alleges and the Carbonell claims that the contract of sale
was partly performed, the same is removed from the application of the Statute of
Frauds and Carbonell should be allowed to establish by parol evidence the truth of her
allegation of partial performance of the contract of sale. There was a partial
performance of the verbal sale executed by Poncio in favor of the Carbonell, when the
latter paid P247.26 to the Republic Savings Bank on account of Poncios mortgage
indebtedness.
8.
Language (Dialect) used of memorandum indicates lack of intent on the part

of Carbonell to mislead Poncio
The document signed by Poncio is in the Batanes dialect, which, according to
Carbonells uncontradicted evidence, is the one spoken by Poncio, he being a native of
said region. The allegation in Poncios answer to the effect that he signed the document
under the belief that it was a permit for him to remain in the premises in the event
that he decided to sell the property to Carbonell at P20 a sq. m. is, on its face,
difficult to believe. If he had not decided as yet to sell the land to Carbonell, who had
never increased her offer of P15 a sq,m., there was no reason for Poncio to get said
Sales, 2003 ( 57 )
permit from her. Upon the other hand, if Carbonell intended to mislead Poncio, she
would have caused the document to be drafted, probably, in
English, instead of taking the trouble of seeing to it that it was written precisely in his
native dialect, the Batanes. Moreover, Poncios signature on the document suggests
that he is neither illiterate nor so ignorant as to sign a document without reading its
contents, apart from the fact that Meonada had read the document to him and given
him a copy thereof , before he signed thereon, according to Meonadas uncontradicted
testimony.
9.
Carbonell entitled to introduce parol evidence

The Court would not know why Poncios bank deposit book is in Carbonells
possession, or whether there is any relation between the P247.26 entry therein and the
partial payment of P247.26 allegedly made by Carbonell to Poncio on account of the
price of his land, if the Court does not allow Carbonell to explain it on the witness stand.
She is entitled, legally as well as from the viewpoint of equity, to an opportunity to
introduce parol evidence in support of the allegations of her second amended
complaint.
10.
One-half lot clearly the parcel of land occupied by Poncio and where he has
his improvements erected
The one half lot was mentioned in the document because the original description
carried in the title states that it was formerly part of a bigger lot and only segregated
later. Such explanation is tenable, in considering the time value of the contents of the
document, there is a sufficient description of the lot referred to as none other than the
parcel of land occupied by Poncio and where he has his improvements erected. The
identity of the parcel of land involved is sufficiently established by the contents of the
note.
11.
Existence of a contract of sale

There had been celebrated a sale of the property excluding the house for the
price of P9.50 per square meter, so much so that on faith of that, Rosario had advanced
the sum of P247.26 and binding herself to pay unto Jose the balance of the purchase
price after deducting the indebtedness to the Bank. Since the wording of the private
document goes so far as to describe their transaction as one of sale, already
consummated between them, as can be noted with the past tense used in the phrase,
the lot sold by him to me and going so far even as to state that from that day
onwards, vendor would continue to live therein, for one year, during which time he will
not pay anything this can only mean that between Rosario and Jose, there had been a
true contract of sale, consummated by delivery constitutum possessorium (Art.1500,
New Civil Code); vendors possession having become converted from then on, as a
mere tenant of vendee, with the special privilege of not paying rental for one year.
12.
Contract is consensual; Oral contract does not invalidate sale but merely
incapable of proof
Even if the document was not registered at all, it was a valid contract
nonetheless. Under the law, a contract sale is consensual, perfected by mere consent
(Couto vs. Cortes, 8 Phil. 459). Under the New Civil Code, while a sale of an immovable
is ordered to be reduced to a public document (Art. 1358), that mandate does not
Sales, 2003 ( 58 )
render an oral sale of realty invalid, but merely incapable of proof. Where still executory
and action is brought and resisted for its performance (1403, par. 2, 3); but where
already wholly or partly executed or where even if not yet, it is evidenced by a
memorandum, in any case where evidence to further demonstrate is presented and
admitted, then the oral sale becomes perfectly good, and becomes a good cause of
action not only to reduce it to the form of a public document, but even to enforce the
contract in its entirety (Art. 1357).
13.
Perfected sale; Justice Gatmaitan correct

In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his
decision of 2 November 1967 as well as his findings of facts therein, and reiterated that
the private memorandum is a perfected sale, as a sale is consensual and consummated
by mere consent, and is binding on and effective between the parties. This statement
of the principle is correct.
14.
Mortgage of lot about to be foreclosed when Poncio agreed to sell the lot to
Carbonell; Ample consideration in the sale
The mortgage on the lot was about to be foreclosed by the bank for failure on the
part of Poncio to pay the amortizations thereon. To forestall the foreclosure and at the
same time to realize some money from his mortgaged lot, Poncio agreed to sell the
same to Carbonell at P9.50 per square meter, on condition that Carbonell [1] should
pay (a) the amount of P400.00 to Poncio and (b) the arrears in the amount of P247.26
to the bank; and [2] should assume his mortgage indebtedness. The bank president
agreed to the said sale with assumption of mortgage in favor of Carbonell and
Carbonell accordingly paid the arrears of P247.26. On January 27, 1955, she paid the
amount of P200.00 to the bank because that was the amount that Poncio told her as his
arrearages and Poncio advanced the sum of P47.26 which amount was refunded to him
by Carbonell the following day. This conveyance was confirmed that same day, January
27, 1955, by the private document which was prepared in the Batanes dialect by the
witness Constancio Meonada, who is also from Batanes like Poncio and Carbonell. The
sale did not include Poncios house on the lot. Poncio was given the right to continue
staying on the land without paying any rental for one year, after which he should pay
rent if he could not still find a place to transfer his house. All these terms are part of the
consideration of the sale to Carbonell. There was ample consideration, and not merely
the sum of P200.00, for the sale of Poncio to Carbonell of the lot in question.
15.
Carbonell, not Infante, victim of injustice and outrage

Poncio, induced by the higher price offered to him by Infante, reneged on his
commitment to
Carbonell and told Carbonell, who confronted him about it, that he would not withdraw
from his deal with Infante even if he is sent to jail. The victim, therefore, of injustice
and outrage is the widow Carbonell and not the Infantes, who without moral
compunction exploited the greed and treacherous nature of Poncio, who, for love of
money and without remorse of conscience, dishonored his own plighted word to
Carbonell, his own cousin.
16.
Infante not entitled to recover value of improvements introduced in the lot

The bad faith of Emma Infante from the time she enticed Poncio to dishonor his
contract with Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a
much hinger price than the price for which he sold the same to Carbonell is clear.
Sales, 2003 ( 59 )
Being guilty of bad faith, both in taking physical possession of the lot and in recording
their deed of sale, the Infantes cannot recover the value of the improvements they
introduced in the lot. And after the filing by Carbonell of the complaint in June 1955,
the Infantes had less justification to erect a building thereon since their title to said lot
is seriously disputed by Carbonell on the basis of a prior sale to her.
17.
Poncio did not remain owner by possessing the lot

Being a valid consensual contract, the document effectively transferred the
possession of the lot to the vendee Carbonell by constitutum possessorium (Article
1500, New Civil Code); because thereunder the vendor Poncio continued to retain
physical possession of the lot as tenant of the vendee and no longer as owner thereof.
More than just the signing of the document by Poncio and Carbonell with Constancio
Meonada as witness to perfect the contract of sale, the transaction was further
confirmed when Poncio agreed to the actual payment by Carbonell of his mortgage
arrearages to the bank on 27 January 1955 and by his consequent delivery of his own
mortgage passbook to Carbonell. If he remained owner and mortgagor, Poncio would
not have surrendered his mortgage passbook to Carbonell.
18.
Poncio does not own another parcel of land with the same area adjacent to
Carbonell
It is not shown that Poncio owns another parcel with the same area, adjacent to the lot
of his cousin
Carbonell and likewise mortgaged by him to the Republic Savings Bank. The transaction
therefore between Poncio and Carbonell can only refer and does refer to the lot
involved. If Poncio had another lot to remove his house, the document would not have
stipulated to allow him to stay in the sold lot without paying any rent for one year and
thereafter to pay rental in case he cannot find another place to transfer his house.
19.
Carbonell liable to efund amount Infante paid the bank to redeem the
mortgage
While Carbonell has the superior title to the lot, she must however refund to
Infante the amount of P1,500, which Infante paid to the Republic Savings Bank to
redeem the mortgage.
20.
Article 546 and 547

The Infante spouses being possessors in bad faith, their rights to the
improvements they introduced on the disputed lot are governed by Articles 546 and
547 of the New Civil Code.
21.
Infantes expenses
Their expenses consisting of P1,500 for draining the property, filling it with 500 cubic
meters of garden soil, building a wall around it and installing a gate and P11,929for
erecting a bungalow thereon, are useful expenditures; for they add to the value of the
property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs.
Ayala de Roxas, 13 Phil. 45).
Sales, 2003 ( 60 )
21.
Article 546 and 547; Possessor in good faith entitled to right of
retention of useful improvement and right to a refund for useful expenses;
Implies contrary to possessor in bad faith
Under the second paragraph of Article 546, the possessor in good faith can retain
the useful improvements unless the person who defeated him in his possession refunds
him the amount of such useful expenses or pay him the increased value the land may
have acquired by reason thereof. Under Article 547, the possessor in good faith has also
the right to remove the useful improvements if such removal can be done without
damage to the land, unless the person with the superior right elects to pay for the
useful improvements or reimburse the expenses therefor under paragraph 2 of Article
546. These provisions seem to imply that the possessor in bad faith has neither the
right of retention of useful improvements nor the right to a refund for useful expenses.
22.
Equity; Infantes right of remotion or the value of the improvements
(not current value) if Carbonell appropriates for herself the improvements
If the lawful possessor can retain the improvements introduced by the possessor
in bad faith for pure luxury or mere pleasure only by paying the value thereof at the
time he enters into possession (Article 549 NCC), as a matter of equity, the Infantes,
although possessors in bad faith, should be allowed to remove the improvements,
unless Carbonell chooses to pay for their value at the time Infante introduced said
useful improvements in 1955 and 1959. Infante cannot claim reimbursement for the
current value of the said useful improvements; because they have been enjoying such
improvements for about 2 decades without paying any rent on the land and during
which period Carbonell was deprived of its possession and use.
[16]
Carumba vs. CA [G.R. No. L-27587. February 18, 1970.]
En Banc, Reyes JBL (J): 10 concurring
Facts: On 12 April 1956, the spouses Amado Canuto and Nemesia Ibasco, by virtue of
a Deed of Sale of Unregistered Land with Covenants of Warranty, sold a parcel of land,
partly residential and partly coconut land with a periphery (area) of 359.09 square
meters, more or less, located in the barrio of Santo Domingo, Iriga, Camarines Sur, to
the spouses Amado Carumba and Benita Canuto, for the sum of P350.00. The referred
deed of sale was never registered in the Office of the Register of Deeds of Camarines
Sur, and the Notary, Mr. Vicente Malaya, was not then an authorized notary public in
the place. Besides, it has been expressly admitted by Carumba that he is the brother-inlaw of Canuto, the alleged vendor of the property sold to him. Canuto is the older
brother of the wife of Carumba.
On 21 January 1957, a complaint for a sum of money was filed by Santiago Balbuena
(and wife Angeles
Boaquina) against Canuto and Ibasco before the Justice of the Peace Court of Iriga,
Camarines Sur (Civil Case 139) and on 15 April 1967, a decision was rendered in favor
of Balbuena. On 1 October 1958, the exofficio Sheriff, Justo V. Imperial, of Camarines
Sur, issued a Definite Deed of Sale of the property in favor of Balbuena, which
instrument of sale was registered before the Office of the Register of Deeds of
Camarines Sur, on 3 October 1958. The aforesaid property was declared for taxation
purposes in the name of Balbuena in 1958.
Sales, 2003 ( 61 )
The Court of First Instance Camarines Sur (Civil Case 4646), finding that after execution
of the document Carumba had taken possession of the land, planting bananas, coffee
and other vegetables thereon, declared him to be the owner of the property under a
consummated sale; held void the execution levy made by the sheriff, pursuant to a
judgment against Carumbas vendor, Amado Canuto; and nullified the sale in favor of
the judgment creditor, Balbuena. The Court, therefore, declared Carumba the owner of
the litigated property and ordered Balbuena to pay P30.00, as damages, plus the costs.
The Court of Appeals (Case 36094-R), without altering the findings of fact made by the
court of origin, declared that there having been a double sale of the land subject of the
suit Balbuenas title was superior to that of his adversary under Article 1644 of the Civil
Code of the Philippines, since the execution sale had been properly registered in good
faith and the sale to Carumba was not recorded. Hence, the petition for review on
certiorari by Amado Carumba.
The Supreme Court reversed the decision of the Court of Appeals and affirmed that of
the CFI; with costs against Santiago Balbuena.
1.
Unregistered land; Article 1544 does not apply

While under the invoked Article 1544, registration in good faith prevails over
possession in the event of a doubt sale by the vendor of the same piece of land to
different vendees, said article is of no application to the present case, even if
Balbuena, the later vendee, was ignorant of the prior sale made by his judgment
debtor in favor of Carumba. The reason is that the purchaser of Unregistered land at a
sheriffs execution sale only steps into the shoes of the judgment debtor, and merely
acquires the latters interest in the property sold as of the time the property was levied
upon. This is specifically provided by section 35 of Rule 39 of the Revised Rules of
Court, the second paragraph of said section specifically providing that Upon the
execution and delivery of said (final) deed the purchaser, redemptioner, or his
assignee shall be substituted to and acquire all the right, title, interest, and claim of
the judgment debtor to the property as of the time of the levy, except as against the
judgment debtor in possession, in which case the substitution shall be effective as of
the time of the deed.
2.
Deed of sale (even in private instrument) coupled with possession of

registered land suffice to vest ownership
The deed of sale in favor of Canuto had been executed on 12 April 1955, two
years before the decision against the former owners of the land was rendered in favor
of Balbuena (15 April 1957), and while only embodied in a private document, the same,
coupled with the fact that the buyer (Carumba) had taken possession of the
unregistered land sold, sufficed to vest ownership on the said buyer. When the levy was
made by the Sheriff, therefore, the judgment debtor no longer had dominical interest
nor any real right over the land that could pass to the purchaser at the execution sale.
Hence, the latter must yield the land to petitioner Carumba.
3.
Rule different in cases covered by Torrens title
Sales, 2003 ( 62 )
The rule is different in case of lands covered by Torrens titles, where the prior
sale is neither recorded nor known to the execution purchaser prior to the levy; but the
land here in question is admittedly not registered under Act 496.
[17]
Celestino Co v. Collector of Internal Revenue [G.R. No. L-8506.
August 31, 1956.] First Division, Bengzon (J): 7 concurring
Facts: Celestino Co & Company is a duly registered general copartnership doing
business under the trade name of Oriental Sash Factory. From 1946 to 1951 it paid
percentage taxes of 7% on the gross receipts of its sash, door and window factory, in
accordance with section 186 of the National Revenue Code imposing taxes on sales of
manufactured articles. However in 1952 it began to claim liability only to the
contractors 3% tax (instead of 7%) under section 191 of the same Code; and having
failed to convince the Bureau of Internal Revenue, it brought the matter to the Court of
Tax Appeals, where it also failed. Hence, the appeal.
The Supreme Court affirmed the appealed decision.
1.
2.
3.
Business name and income militates against claim as ordinary contractor

The company has taken all the trouble and expense of registering a special trade
name for its sash business and has ordered company stationery carrying the bold print
Oriental Sash Factory (Celestino Co & Company, Prop.) 926 Raon St. Quiapo, Manila,
Tel. No. 33076, Manufacturers of all kinds of doors, windows, sashes, furnitures, etc.
used season-dried and kiln-dried lumber, of the best quality workmanship. It is unlikely
that these act were made solely for the purpose of supplying the needs for doors,
windows and sash of its special and limited customers. Further, the Company has
chosen for its tradename and has offered itself to the public as a Factory, which
means it is out to do business, in its chosen lines on a big scale. Moreover, as shown
from the investigation of the Companys books of accounts (for transactions covering
the period of 1 January 1952 to 30 September 1952), it sold sash, doors and windows
worth P188,754.69. It will be difficult to believe that such amount that ran to six figures
was derived entirely from its few customers who made special orders. Thus, Celestino
Co & Company habitually makes sash, windows and doors, as it has represented in its
stationery and advertisements to the public, and it has admitted by the appellant itself
that the company manufactures.
Construction work contractors defined
Construction work contractors are those who alter or repair buildings, structures,
streets, highways, sewers, street railways, railroads, logging roads, electric, steam or
water plants telegraph and telephone plants and lines, electric lines or power lines, and
includes any other work for the construction, altering or repairing for which machinery
driven by mechanical power is used. (Payton vs. City of Anadardo 64 P. 2d 878, 880,
179 Okl. 68).
Nature of business does not fall in any of the occupation that may be
classified as contractor within the purview of Section 191 of the National
Internal Revenue Code
Even if it were to believe that the company does not manufacture ready-made
sash, doors and windows for the public and that it makes these articles only upon
Sales, 2003 ( 63 )
special order of its customers, that does not make it a contractor within the purview of
section 191 of the National Internal Revenue Code. There are no less than fifty
occupations enumerated in the said section of the National Internal Revenue Code
subject to percentage tax, not one under which the business enterprise of petitioner
could appropriately fall. It would require a stretch of the law to make the business of
manufacturing sash, doors and windows upon special order of customers fall under the
category of road, building, navigation, artesian well, water works and other
construction work contractors.
4.
Percentage tax imposed under Section 191 of the Tax Code a tax on sales of
service, while tax imposed by Section 186 a tax on original sales of articles
The percentage tax imposed in section 191 of the Tax Code is generally a tax on
the sales of services, in contradiction with the tax imposed in section 186 of the same
Code which is a tax on the original sales of articles by the manufacturer, producer or
importer. (Formillezas Commentaries and Jurisprudence on the National Internal
Revenue Code, Vol II, p. 744). The fact that the articles sold are manufactured by the
seller does not exchange the contract from the purview of section 186 of the National
Internal Revenue Code as a sale of articles.
5.
Custom specifications required by customer does not alter character of

business, the company does not become an employee or servant of the
customer
Nobody will say that when a sawmill cuts lumber in accordance with the peculiar
specifications of a customer, sizes not previously held in stock for sale to the public, it
thereby becomes an employee or servant of the customer, not the seller of lumber. The
same consideration applies to this sash manufacturer. The Sash Factory does nothing
more than sell the goods that it mass-produces or habitually makes; sash, panels,
mouldings, frames, cutting them to such sizes and combining them in such forms as its
customers may desire.
6.
Installation of window panels not construction work in common parlance

Petitioners idea of being a contractor doing construction jobs is untenable.
Nobody would regard the doing of two window panels as construction work in common
parlance.
7.
Contract of sale distinguished from a contract for a piece of work

Article 1467 of the New Civil Code provides that a contract for the delivery at a
certain price of an article which the vendor in the ordinary course of his business
manufactures or procures for the general market, whether the same is on hand at the
time or not, is a contract of sale, but if the goods are to be manufactured specially for
the customer and upon his special order, and not for the general market, it is contract
for a piece of work. In the present case, it is apparent that the Factory did not merely
sell its services to Teodoro & Co. because it also sold the materials. When it sold
materials ordinarily manufactured by it (sash, panels, mouldings), although in such
form or combination as suited the fancy of the purchaser, such new form does not
divest the Factory of its character as manufacturer. Neither does it take the transaction
out of the category of sales under Article 1467 because although the Factory does not,
in the ordinary course of its business, manufacture and keep on stock doors of the kind
Sales, 2003 ( 64 )
sold to Teodoro, it could stock and/or probably had in stock the sash, mouldings and
panels it used therefor.
8.
Contract for a piece of work in Factory happens if the use of extraordinary or

additional equipment is required or if it involves services not generally
performed by it
When the Factory accepts a job that requires the use of extraordinary or
additional equipment, or involves services not generally performed by it, it thereby
contracts for a piece of work, i.e. filling special orders within the meaning of Article
1467. In the present case, however, the orders exhibited were not shown to be special.
They were merely orders for work, regular work.
9.
Transfers under Section 186 of the Tax Code

If all the work of appellant is only to fill orders previously made, such orders
should not be called special work, but regular work; and supposing for the moment that
the transactions were not sales, they were neither lease of services nor contract jobs by
a contractor. Still, as the doors and windows had been admittedly manufactured by
the Sash Factory, such transactions could be, and should be taxed as transfers
thereof under section 186 of the National Revenue Code.
[18]
Cheng vs. Genato [G.R. No. 129760. December 29, 1998.]
Second Division, Martinez (J): 3 concurring
Facts: Ramon B. Genato is the owner of two parcels of land located at Paradise Farms,
San Jose del Monte, Bulacan covered by TCTs T-76.196 (M) and T-76.197 (M) with an
aggregate area of 35,821 square meters, more or less. On 6 September 1989, Genato
entered into an agreement with spouses Ernesto R. Da Jose and Socorro B. Da Jose (Da
Jose spouses) over the two parcels of land. The agreement culminated in the execution
of a contract to sell for which the purchase price was P80 per sq. m. The contract was in
a public instrument and was duly annotated at the back of the two certificates of title
on the same day. On October 4, 1989, the Da Jose spouses, not having finished
verifying the titles (to confirm the truth and authenticity of documents, and that no
restrictions, limitations, and developments imposed on and/or affecting the property
subject of this contract shall be detrimental to his interest), asked for and was granted
by Genato an extension of another 30 days, or until 5 November 1989. However,
according to Genato, the extension was granted on condition that a new set of
documents is made 7 days from 4 October 1989, which was denied by the Da Jose
spouses. Pending the effectivity of the aforesaid extension period, and without due
notice to the Da Jose spouses, Genato executed an Affidavit to Annul the Contract to
Sell on 13 October 1989. Moreover, no annotation of the said affidavit at the back of his
titles was made right away. The affidavit contained the stipulation that the parties
agreed that the downpayment of P950,000 shall be paid 30 days from the execution of
the Contract (thus, on 6 October 1989), that the vendees failed to pay the
downpayment (thus, a breach of contract), and that the affidavit was executed to annul
the contract to sell. On 24 October 1989, Ricardo Cheng went to Genatos residence
and expressed interest in buying the subject properties. On that occasion, Genato
showed Cheng copies of his TCTs and the annotations at the back thereof of his contract
to sell with the Da Jose spouses. Genato also showed him the Affidavit to Annul the
Sales, 2003 ( 65 )
Contract to Sell which has not been annotated at the back of the titles. Despite these,
Cheng went ahead and issued a check for P50,000.00 upon the assurance by Genato
that the previous contract with the Da Jose spouses will be annulled for which Genato
issued a handwritten receipt. On 25 October 1989, Genato deposited Chengs check.
On the same day, Cheng called up Genato reminding him to register the affidavit to
annul the contract to sell. The following day, acting on Chengs request, Genato caused
the registration of the Affidavit to Annul the Contract to Sell in the Registry of Deeds,
Meycauayan, Bulacan as primary entry 262702. While the Da Jose spouses were at the
Office of the Registry of Deeds of Meycauayan, Bulacan on 27 October 1989, they met
Genato by coincidence. It was only then that the Da Jose spouses discovered about the
affidavit to annul their contract. The latter were shocked at the disclosure and protested
against the rescission of their contract. After being reminded that Genato had given the
Da Jose spouses an additional 30-day period to finish their verification of his titles, that
the period was still in effect, and that they were willing and able to pay the balance of
the agreed down payment, later on in the day, Genato decided to continue the Contract
he had with them. The agreement to continue with their contract was formalized in a
conforme letter dated 27 October 1989. Thereafter, Genato advised Cheng of his
decision to continue his contract with the Da Jose spouses and the return of Chengs
P50,000.00 check. Consequently, on 30 October 1989, Chengs lawyer sent a letter to
Genato demanding compliance with their agreement to sell the property to him stating
that the contract to sell between him and Genato was already perfected and
threatening legal action. On 2 November 1989, Genato sent a letter to Cheng enclosing
a BPI Cashiers Check for P50,000 and expressed regret for his inability to
consummate his transaction with him. After having received the letter of Genato on 4
November 1989, Cheng, however, returned the said check to the former via RCPI
telegram dated 6 November 1989, reiterating that our contract to sell your property
had already been perfected. Meanwhile, also on 2 November 1989, Cheng executed an
affidavit of adverse claim and had it annotated on the subject TCTs. On the same day,
consistent with the decision of Genato and the Da Jose spouses to continue with their
Contract to Sell, the Da Jose spouses paid Genato the complete down payment of
P950,000 and delivered to him 3 postdated checks (all dated 6 May 1990, the
stipulated due date) in the total amount of P1,865,680 to cover full payment of the
balance of the agreed purchase price.
On 8 December 1989, Cheng instituted a complaint for specific performance with the
RTC Quezon City (Branch 96) to compel Genato to execute a deed of sale to him of the
subject properties plus damages and prayer for preliminary attachment. After trial on
the merits, and on 18 January 1994, the lower court ruled that the receipt issued by
Genato to Cheng unerringly meant a sale and not just a priority or an option to buy. It
cannot be true that the transaction was subjected to some condition or reservation, like
the priority in favor of the Da Jose spouses as first buyer because, if it were otherwise,
the receipt would have provided such material condition or reservation, especially as it
was Genato himself who had made the receipt in his own hand. It also opined that there
was a valid rescission of the Contract to Sell by virtue of the Affidavit to Annul the
Contract to Sell. Time was of the essence in the execution of the agreement between
Genato and Cheng, under this circumstance demand, extrajudicial or judicial, is not
necessary. It falls under the exception to the rule provided in Article 1169 of the Civil
Code. The right of Genato to unilaterally rescind the contract is said to be under Article
Sales, 2003 ( 66 )
1191 of the Civil Code. Additionally, after reference was made to the substance of the
agreement between Genato and the Da Jose spouses, the lower court also concluded
that Cheng should be preferred over the Da Jose spouses in the purchase of the subject
properties. The trial court rendered its decision declaring the contract to sell dated 6
September 1989 executed between Genato, as vendor, and Spouses Da Jose, as
vendees, resolved and rescinded in accordance with Article 1191, Civil Code, by virtue
of Genatos affidavit to annul contract to sell dated 13 October 1989 and as the
consequence of the spouses failure to execute within 7 days from 4 October 1989
another contract to sell pursuant to their mutual agreement with Genato; ordering
Genato to return to the spouses the sum of P1 million plus interest at the legal rate
from 2 November 1989 until full payment; directing Genato to return to the spouses the
3 postdated checks immediately upon finality of this judgment; commanding Genato to
execute with and in favor of
Cheng, as vendee, a deed of conveyance and sale of the real properties described and
covered in TCTs T-76196 (M) and T-76.197 (M) of the Registry of Deeds of Bulacan,
Meycauayan Branch, at the rate of P70/square meter, less the amount of P50,000.00
already paid to Genato, which is considered as part of the purchase price, with the
Cheng being liable for payment of the capital gains taxes and other expenses of the
transfer pursuant to the agreement to sell dated 24 October 1989; and ordering Genato
to pay Cheng and the spouses P50,000.00, as nominal damages, to Cheng; P50,000.00,
as nominal damages, to the spouses; P20,000.00, as and for attorneys fees, to Cheng;
P20,000.00 as and for attorneys fees, to the spouses; and the cost of the suit.
Not satisfied with the decision, Genato and Da Jose spouses appealed to the appellate
court (in CA-GR 44706) which, on 7 July 1997, reversed such judgment and ruled that
the prior contract to sell in favor of the Da Jose spouses was not validly rescinded; that
the subsequent contract to sell between Genato and Cheng, embodied in the
handwritten receipt, was without force and effect due to the failure to rescind the prior
contract; and that Cheng should pay damages to Genato and the spouses herein being
found to be in bad faith. The Court of Appeals reversed and set aside the appealed
decision ordering the dismissal of the complaint; the cancellation of the annotations of
the Genatos Affidavit to Annul Contract to Sell and Chengs Notice of Adverse Claim in
the subject TCTs namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M); payment by
the spouses of the remaining balance of the purchase price pursuant to their
agreement with the Genato to suspend encashment of the three post-dated checks
issued since 1989; execution by the Genato of the Deed of Absolute Sale over the
subject two lots in favor of the spouses; return by Genato of the P50,000.00 paid to him
by Cheng; and payment by Cheng of moral damages to the spouses of P100,000,
exemplary damages of
P50,000, attorneys fees of P50,000, and costs of suit; and to Genato, of P100,000 in
exemplary damages, P50,000 in attorneys fees. The amounts payable to Genato may
be compensated by Cheng with the amount of the check Genato has to pay Cheng.
Hence, the petition for review on certiorari.
The Supreme Court denied the instant petition for review and affirmed the assailed
decision en toto.
1.
Contract to sell; non-payment of purchase price not a breach

In a Contract to Sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that
Sales, 2003 ( 67 )
prevents the obligation of the vendor to convey title from acquiring an obligatory force.
It is one where the happening of the event gives rise to an obligation. Thus, for its nonfulfillment there will be no contract to speak of, the obligor having failed to perform the
suspensive condition which enforces a juridical relation. In fact with this circumstance,
there can be no rescission of an obligation that is still non-existent, the suspensive
condition not having occurred as yet.
2.
Breach contemplated in Article 1191

The breach contemplated in Article 1191 of the New Civil Code is the obligors
failure to comply with an obligation already extant, not a failure of a condition to render
binding that obligation.
3.
No default can be ascribed to the spouses

No default can be ascribed to the Da Jose spouses since the 30-day extension
period has not yet expired. The Da Jose spouses contention that no further condition
was agreed when they were granted the 30days extension period from 7 October 1989
in connection with a clause of their contract to sell dated 6 September 1989 should be
upheld: firstly, If this were not true, Genato could not have been persuaded to continue
his contract with them and later on agree to accept the full settlement of the purchase
price knowing fully well that he himself imposed such sine qua non condition in order
for the extension to be valid; secondly, Genato could have immediately annotated his
affidavit to annul the contract to sell on his title when it was executed on 13 October
1989 and not only on 26 October 1989 after Cheng reminded him of the annotation;
thirdly, Genato could have sent at least a notice of such fact, there being no stipulation
authorizing him for automatic rescission, so as to finally clear the encumbrance on his
titles and make it available to other would be buyers. It likewise settles the holding of
the trial court that Genato needed money urgently.
4.
Affidavit to annul contract uncalled for; Conditional obligation does not exist
if suspensive condition does not take place
Even assuming in gratia argumenti that the Da Jose spouses defaulted, in their
Contract to Sell, the execution by Genato of the affidavit to annul the contract is not
even called for. For with or without the affidavit their non-payment to complete the full
downpayment of the purchase price ipso facto avoids their contract to sell, it being
subjected to a suspensive condition. When a contract is subject to a suspensive
condition, its birth or effectivity can take place only if and when the event which
constitutes the condition happens or is fulfilled. If the suspensive condition does not
take place, the parties would stand as if the conditional obligation had never existed.
5.
Notice to other party required to cancel contract; Act always provisional

Genato is not relieved from the giving of a notice, verbal or written, to the Da Jose
spouses for his
decision to rescind their contract. In many cases, even though the validity of a
stipulation in a contract to sell authorizing automatic rescission for a violation of its
terms and conditions is upheld, at least a written notice must be sent to the defaulter
informing him of the same. The act of a party in treating a contract as cancelled should
be made known to the other. For such act is always provisional. It is always subject to
Sales, 2003 ( 68 )
scrutiny and review by the courts in case the alleged defaulter brings the matter to the
proper courts.
6.
Extrajudicial steps to protect interest an exercise of due diligence to

minimize damages
In University of the Philippines vs. De Los Angeles, it was held that the
party who deems the contract violated may consider it resolved or rescinded, and act
accordingly, without previous court action, but it proceeds at its own risk. For it is only
the final judgment of the corresponding court that will conclusively and finally settle
whether the action taken was or was not correct in law. But the law definitely does not
require that the contracting party who believes itself injured must first file suit and wait
for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the
party injured by the others breach will have to passively sit and watch its damages
accumulate during the pendency of the suit until the final judgment of rescission is
rendered when the law itself requires that he should exercise due diligence to minimize
its own damages (Civil Code. Article 2203).
7.
Notice required to prevent defaulting party from assuming offer still in effect
The rule validates, both in equity and justice, contracts, in order to avoid and
prevent the defaulting party from assuming the offer as still in effect due to the
obligees tolerance for such non-fulfillment. Resultantly, litigations shall be prevented
and the relations among would-be parties may be preserved.
8.
Issue not raised during trial cannot be raised for the first time on appeal
An issue which was not raised during the trial in the court below cannot be raised
for the first time on appeal. Issues of fact and arguments not adequately brought to the
attention of the trial court need not be and ordinarily will not be considered by a
reviewing court as they cannot be raised for the first time on appeal. In the present
case, Cheng alleged that the P50,000 was earnest money, but in his testimony, offered
to prove the transaction was actually a perfected contract to sell. Both courts correctly
held that the receipt which was the result of their agreement is a contract to sell. This
was, in fact Chengs contention in his pleadings before said courts. The patent twist
only operates against Chengs posture which is indicative of the weakness of his claim.
9.
Receipt, even if a conditional contract of sale does not have any obligatory
force
Even if it is assumed that the receipt is to be treated as a conditional contract of
sale, it did not acquire any obligatory force since it was subject to suspensive condition
that the earlier contract to sell between Genato and the Da Jose spouses should first be
cancelled or rescinded, a condition never met, as Genato, to his credit, upon realizing
his error, redeemed himself by respecting and maintaining his earlier contract with the
Da Jose spouses.
10.
Receipt does not contain requisites of a valid contract of sale

A careful reading of the receipt alone would not even show that a conditional
contract of sale has been entered by Genato and Cheng. When the requisites of
a valid contract of sale are lacking in said receipt, therefore the sale is neither
valid or enforceable.
11.
Coronel vs. CA not foursquare

Sales, 2003 ( 69 )
The factual milieu in Coronel is not on all fours with those in the present case. In
Coronel, the Court found that the petitioners therein clearly intended to transfer title to
the buyer which petitioner themselves admitted in their pleading. The agreement of the
parties therein was definitively outlined in the Receipt of Down Payment both as to
property, the purchase price, the delivery of the seller of the property and the manner
of the transfer of title subject to the specific condition that upon the transfer in their
names of the subject property the Coronels will execute the deed of absolute sale.
Whereas, in the present case, even by a careful perusal of the receipt alone, such kind
of circumstances cannot be ascertained without however resorting to the exceptions of
the Rule on Parol Evidence.
12.

Article 1544 provides that 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 possession; and in
the absence thereof, to the person who presents the oldest title, provided there is good
faith
13.
Article 1544 is not apropos to present case, according to Court of Appeals

A meticulous reading of the Article 1544 shows that said law is not apropos to the
present case. This provision connotes that the following circumstances must
concur: (a) The two (or more) sales transactions in issue must pertain to exactly
the same subject matter, and must be valid sales transactions. (b) The two (or
more) buyers at odds over the rightful ownership of the subject matter must
each represent conflicting interests; and (c) The two (or more) buyers at odds
over the rightful ownership of the subject matter must each have bought from
the very same seller. These situations obviously are lacking in a contract to sell
for neither a transfer of ownership nor a sales transaction has been
consummated. The contract to be binding upon the obligee or the vendor
depends upon the fulfillment or non-fulfillment of an event.
15.
Article 1544 applies in the present case, according to Supreme Court: First in
time, stronger in right
The governing principle of Article 1544, Civil Code, applies in the present
situation. Jurisprudence teaches us that the governing principle is PRIMUS TEMPORE,
PORTIOR JURE (first in time, stronger in right). For not only was the contract between
Genato and the spouses first in time; it was also registered long before Chengs
intrusion as a second buyer. This principle only applies when the special rules provided
in Article 1544 of the Civil Code do not apply or fit the specific circumstances mandated
under said law or by jurisprudence interpreting the article.
16.
Article 1544, How second buyer can displace first buyer

The rule exacted by Article 1544 of the Civil Code for the second buyer to be able
to displace the first buyer are: (1) that the second buyer must show that he acted in
good faith (i.e. in ignorance of the first sale and of the first buyers rights) from the time
Sales, 2003 ( 70 )
of acquisition until title is transferred to him by registration or failing registration, by

delivery of possession; (2) the second buyer must show continuing good faith and
innocence or lack of knowledge of the first sale until his contract ripens into full
ownership through prior registration as provided by law. In the present case, knowledge
gained by Cheng of the first transaction between the Da Jose spouses and Genato
defeats his rights even if he is first to register the second transaction, since such
knowledge taints his prior registration with bad faith.
17.
Knowledge of first buyer of the second transaction does not defeat his rights
The knowledge gained by the Da Jose spouses, as first buyers, of the new
agreement between Cheng and Genato will not defeat their rights as first buyers except
where Cheng, as second buyer, registers or annotates his transaction or agreement on
the title of the subject properties in good faith ahead of the Da Jose spouses. Moreover,
although the Da Jose spouses, as first buyers, knew of the second transaction it will not
bar them from availing of their rights granted by law, among them, to register first their
agreement as against the second buyer.
18.
Registration defined
Registration, as defined by Soler and Castillo, means any entry made in the
books of the registry, including both registration in its ordinary and strict sense, and
cancellation, annotation, and even marginal notes. In its strict acceptation, it is the
entry made in the registry which records solemnly and permanently the right of
ownership and other real rights.
19.
Inscription of Deed of Sale in registry of property on original document a

registration of sale
When a Deed of Sale is inscribed in the registry of property on the original
document itself, what was done with respect to said entries or annotations and
marginal notes amounted to a registration of the sale. In the present case, there is no
reason why the annotation made by the Da Jose spouses with respect to their Contract
to Sell dated 6 September 1989 should not be given priority in right.
20.
Good faith in registration for right to be enforceable

Good faith must concur with registration for such prior right to be enforceable. In
the present case, the annotation made by the Da Jose spouses on the titles of Genato
of their Contract To Sell more than satisfies this requirement. Whereas in the case of
Genatos agreement with Cheng such is unavailing. For even before the receipt was
issued to Cheng information of such pre-existing agreement has been brought to his
knowledge which did not deter him from pursuing his agreement with Genato. Since
Cheng was fully aware, or could have been if he had chosen to inquire, of the rights of
the Da Jose spouses under the Contract to Sell duly annotated on the TCTs of Genato, it
becomes unnecessary to further elaborate in detail the fact that he is indeed in bad
faith in entering into such agreement.
21.
Knowledge of defect in tile cannot claim good faith against another interest
In Leung Yee vs. F . L . Strong Machinery Co., it was stated that One who
purchases real estate with knowledge of a defect of title in his vendor cannot claim that
he has acquired title thereto in good faith as against an interest therein; and the same
rule must be applied to one who has knowledge of facts which should have put him
upon such inquiry and investigation as might be necessary to acquaint him with the
Sales, 2003 ( 71 )
defects in the title of his vendor. A purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor. His mere refusal to
believe that such defect exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendors title, will not make him an innocent purchaser for
value, if it afterwards develops that the title was in fact defective, and it appears that
he had such notice of the defect as would have led to its discovery had he acted with
that measure of precaution which may reasonably be required of a prudent man in a
like situation. Good faith, or lack of it, is in its last analysis a question of intention; but
in ascertaining the intention by which one is actuated on a given occasion, we are
necessarily controlled by the evidence as to the conduct and outward acts by which
alone the inward motive may, with safety, be determined. So it is that the honesty of
intention, the honest lawful intent, which constitutes good faith implies a freedom
from knowledge and circumstances which ought to put a person on inquiry, and so it is
that proof of such knowledge overcomes the presumption of good faith in which the
courts always indulge in the absence of the proof to the contrary. Good faith, or the
want of it, is not a visible, tangible fact that can be seen or touched, but rather a state
or condition of mind which can only be judge of by actual or fancied tokens or signs.
(Wilder vs. Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250;
BreauxRenoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton
Bros. Co. vs. Bromely, 119
Mich., 8, 10, 17)
22.
Bad faith basis for damages

Damages were awarded by the appellate court on the basis of its finding that
Cheng was in bad faith when he filed the suit for specific performance knowing fully
well that his agreement with Genato did not push through. Such bad faith, coupled
with his wrongful interference with the contractual relations between Genato and the
Da Jose spouses, which culminated in his filing of the present suit and thereby creating
what the counsel for Genato and the spouses describes as a prolonged and
economically unhealthy gridlock on both the land itself and their rights provides ample
basis for the damages awarded. Based on these overwhelming evidence of bad faith on
the part of Cheng, the award of damages made by the appellate court is in order.
[19]
CIR v. Engineering Equipment and Supply [G.R. No. L-27044. June 30, 1975.]
Engineering Equipment and Supply v. CIR [G.R. No. L-27452. June
30, 1975.] First Division, Esguerra (J): 4 concurring
Facts: Engineering Equipment and Supply Co. is an engineering and machinery firm;
and being an operator of an integrated engineering ship, is engaged in the design and
installation of central type air conditioning system, pumping plants and steel
fabrications. On 27 July 1956, one Juan de la Cruz, wrote the then Collector, now
Commissioner, of Internal Revenue denouncing the Company for tax evasion by
misdeclaring its imported articles and failing to pay the correct percentage taxes due
thereon in connivance with its foreign suppliers. The Company was likewise denounced
to the Central Bank for alleged fraud in obtaining its dollar allocations. Acting on these
denunciations, a raid and search was conducted by a joint team of Central Bank, (CB),
Sales, 2003 ( 72 )
National Bureau of Investigation (NBI) and Bureau of Internal Revenue (BIR) agents on
27 September 1956, on which occasion voluminous records of the firm were seized and
confiscated.
On 30 September 1957, revenue examiners reported and recommended to the then
Collector, now Commissioner, of Internal Revenue that the Company be assessed for
P480,912.01 as deficiency advance sales tax on the theory that it misdeclared its
importation of air conditioning units and parts and accessories thereof which are
subject to tax under Section 185(m) 1 of the Tax Code, instead of Section 186 of the
same Code. This assessment was revised on 23 January 1959, in line with the
observation of the Chief, BIR Law Division, and was raised to P916,362.56 representing
deficiency advance sales tax and manufacturers sales tax, inclusive of the 25% and
50% surcharges. On 3 March 1959, the Commissioner assessed against, and demanded
upon, the Company payment of the increased amount and suggested that P10,000 be
paid as compromise in extrajudicial settlement of the Companys penal liability for
violation of the Tax Code. The firm, however, contested the tax assessment and
requested that it be furnished with the details and particulars of the Commissioners
assessment. The Commissioner replied that the assessment was in accordance with law
and the facts of the case.
On 30 July 1959, the Company appealed the case to the Court of Tax Appeals (CTA) and
during the pendency of the case the investigating revenue examiners reduced the
Companys deficiency tax liabilities from P916,362.65 to P740,587.86, based on
findings after conferences had with the Companys Accountant and Auditor. On 29
November 1966, the CTA rendered its decision, modifying the decision appealed from,
declaring the Company as contractor exempt from the deficiency manufacturers sales
tax covering the period from 1 June 1948 to 2 September 1956 but ordered said
company to pay the Commissioner, or his collection agent, the sum of P174,141.62 as
compensating tax and 25% surcharge for the period from 1953 to September 1956;
With costs against the Company.
The Commissioner, not satisfied with the decision of the CTA, appealed to the Supreme
Court on 18 January 1967, (GR L-27044). On the other hand, the Company, on 4 January
1967, filed with the CTA a motion for reconsideration; which was denied on 6 April
1967, prompting the Company to file also with the Supreme Court its appeal (GR L27452). Since the two cases involve the same parties and issues, the Court decided to
consolidate and jointly decide them.
The Supreme Court affirmed the decision appealed from with modification that the
Company is also made liable to pay the 50% fraud surcharge.
1.
Manufacturer defined
Section 194 of the Tax code provides that Manufacturer includes every person
who by physical or chemical process alters the exterior texture or form or inner
substance of any raw material or manufactured or partially manufactured products in
such manner as to prepare it for a special use or uses to which it could not have been
put in its original condition, or who by any such process alters the quality of any such
material or manufactured or partially manufactured product so as to reduce it to
marketable shape, or prepare it for any of the uses of industry, or who by any such
process combines any such raw material or manufactured or partially manufactured
Sales, 2003 ( 73 )
products with other materials or products of the same or of different kinds and in such
manner that the finished product of such process of manufacture can be put to special
use or uses to which such raw material or manufactured or partially manufactured
products in their original condition could not have been put, and who in addition alters
such raw material or manufactured or partially manufactured products, or combines the
same to produce such finished products for the purpose of their sale or distribution to
others and not for his own use or consumption.
2.
Test to distinguish contract of sale and contract for work, labor and materials
The distinction between a contract of sale and one for work, labor and materials
is tested by the inquiry whether the thing transferred is one not in existence and which
never would have existed but for the order of the party desiring to acquire it, or a thing
which would have existed and has been the subject of sale to some other persons even
if the order had not been given. If the article ordered by the purchaser is exactly such
as the plaintiff makes and keeps on hand for sale to anyone, and no change or
modification of it is made at defendants request, it is a contract of sale, even though it
may be entirely made after, and in consequence of, the defendants order for it.
3.
Contract of sale distinguished from a contract for a piece of work

The New Civil Code distinguishes a contract of sale from a contract for a piece of
work. Article 1467 provides that a contract for the delivery at a certain price of an
article which the vendor in the ordinary course of his business manufactures or
procures for the general market, whether the same is on hand at the time or not, is a
contract of sale, but if the goods are to be manufactured specially for the customer and
upon his special order and not for the general market, it is a contract for a piece of
work.
Contractor defined; Test to determine contractor
The word contractor has come to be used with special reference to a person
who, in the pursuit of the independent business, undertakes to do a specific job or
piece of work for other persons, using his own means and methods without submitting
himself to control as to the petty details. (Araas, Annotations and Jurisprudence on the
National Internal Revenue Code, p. 318, par. 191(2), 1970 Ed.) The true test of a
contractor as was held in the cases of Luzon Stevedoring Co., vs. Trinidad 43, Phil. 803,
807-808, and La Carlota Sugar Central vs. Trinidad 43, Phil. 816, 819, would seem to be
that he renders service in the course of an independent occupation, representing the
will of his employer only as to the result of his work, and not as to the means by which
it is accomplished.
4.
5.
Engineering Equipment Co. is a contractor and not a manufacturer

The Company did not manufacture air conditioning units for sale to the general
public, but imported some items (as refrigeration compressors in complete set, heat
exchangers or coils), which were used in executing contracts entered into by it. The
Company fabricates, assembles, supplies and installs in the buildings of its various
customers the central type air conditioning system; prepares the plans and
specifications therefor which are distinct and different from each other; the air
conditioning units and spare parts or accessories thereof used are not the window type
of air conditioner which are manufactured, assembled and produced locally for sale to
the general market; and the imported air conditioning units and spare parts or
Sales, 2003 ( 74 )
accessories thereof are supplied and installed upon previous orders of its customers
conformably with their needs and requirements. The facts and circumstances support
the theory that the Company is a contractor rather than a manufacturer.
6.
Engineering Equipment Co. subject to contractors tax (Section 191); As it

imports goods not subject to sales tax, it also liable to 30% compensation tax
(Section 190 in relation to Section 18[m], but without the 50% mark up
provided in Section 183[b]
The Company, being a contractor and not a manufacturer, is subject to the
contractors tax prescribed by Section 191 of the Code and not to the advance sales tax
imposed by Section 185(m) in relation to Section 194 of the same Code. Since it has
been proved that the Company imported air conditioning units parts or accessories
thereof for use in its construction business and these items were never sold resold
bartered or exchanged the Company should be held liable to pay taxes prescribed
under Section 190 of the Code. This compensating tax is not a tax on the importation of
goods but a tax on the use of imported goods not subject to sales tax. The Company,
therefore, should be held liable to the payment of 30% compensating tax in accordance
with Section 190 of the Tax Code in relation to Section 185(m) of the same, but without
the 50% mark up provided in Section 183(b).
7.
Air conditioning equipment grouped into 2 classifications, unitary and central

system
There is a great variety of equipment in use to do air conditioning. Some devices
are designed to serve a specific type of space; others to perform a specific function;
and still others as components to be assembled into a tailor-made system to fit a
particular building. Generally, however, they may be grouped into two classifications,
unitary and central system. The unitary equipment classification includes those designs
such as room air conditioner, where all of the functional components are included in
one or two packages, and installation involves only making service connection such as
electricity, water and drains. Central-station systems, often referred to as applied or
built-up systems, require the installation of components at different points in a building
and their interconnection. The room air conditioner is a unitary equipment designed
specifically for a room or similar small space. It is unique among air conditioning
equipment in two respects: It is in the electrical appliance classification, and it is made
by a great number of manufacturers (Engineering handbook by LC Morrow). The central
type air conditioning system is an engineering job that requires planning and
meticulous layout due to the fact that usually architects assign definite space and
usually the spaces they assign are very small and of various sizes, in buildings
dissimilar to existing buildings. The window type air conditioner is a sort of
compromise; it cannot control humidity to the desired level; rather the manufacturers,
by hit and miss, were able to satisfy themselves that the desired comfort within a room
could be made by a definite setting of the machine as it comes from the factory;
whereas the central type system definitely requires an intelligent operator.
8.
Celestino Co v. CIR, Advertising Associates v. Collector of customs, Manila

Trading v. City of
Manila not applicable
The Company did not and was not engaged in the manufacture of air
conditioning units but had its services contracted for the installation of a central
system. The cases cited by the Commissioner (Advertising Associates, Inc. vs. Collector
Sales, 2003 ( 75 )
9.
10.
of Customs, 97, Phil. 636; Celestino Co & Co. vs. Collector of Internal Revenue, 99 Phil.
841 and Manila Trading & Supply Co. vs. City of Manila, 56 O.G. 3629), are not in point.
Neither are they applicable because the facts in all the cases cited are entirely
different.
In Celestino Co, the Court held the taxpayer to be a manufacturer rather than a
contractor of sash, doors and windows manufactured in its factory. From the very start,
Celestino Co intended itself to be a manufacturer of doors, windows, sashes etc. as it
did register a special trade name for its sash business and ordered company stationery
carrying the bold print ORIENTAL SASH FACTORY (CELESTINO CO AND COMPANY,
PROP.) 926 Raon St., Quiapo, Manila, Tel. No. etc., Manufacturers of All Kinds of Doors,
Windows . . . Likewise, Celestino Co never put up a contractors bond as required by
Article 1729 of the Civil Code. Also, as a general rule, sash factories receive orders for
doors and windows of special design only in particular cases, but the bulk of their sales
is derived from ready-made doors and windows of standard sizes for the average home,
which sales were reflected in their books of accounts totalling P118,754.69 for the
period of only nine (9) months. The Court found said sum difficult to have been derived
from its few customers who placed special orders for these items.
In the present case, the Company advertised itself as Engineering Equipment and
Supply Company, Machinery Mechanical Supplies, Engineers, Contractors, 174 Marques
de Comillas, Manila and not as manufacturers. It likewise paid the contractors tax on all
the contracts for the design and construction of central system. Similarly, ot did not
have ready-made air conditioning units for sale.
SM Lawrence Co. v. McFarland, CIR of the State of Tennessee and McCanless
is on all fours with present case
The case of S.M. Lawrence Co. vs. McFarland, Commissioner of Internal Revenue
of the State of Tennessee and McCanless, 355 SW 2d, 100, 101, is the one on all fours
with the present case, where the cause presents the question of whether one engaged
in the business of contracting for the establishment of air conditioning system in
buildings, which work requires, in addition to the furnishing of a cooling unit, the
connection of such unit with electrical and plumbing facilities and the installation of
ducts within and through walls, ceilings and floors to convey cool air to various parts of
the building, is liable for sale or use tax as a contractor rather than a retailer of tangible
personal property. Appellee took the position that appellant was not engaged in the
business of selling air conditioning equipment as such but in the furnishing to its
customers of completed air conditioning systems pursuant to contract, was a contractor
engaged in the construction or improvement of real property, and as such was liable for
sales or use tax as the consumer of materials and equipment used in the
consummation of contracts, irrespective of the tax status of its contractors. To transmit
the warm or cool air over the buildings, the appellant installed system of ducts running
from the basic units through walls, ceilings and floors to registers. The contract called
for completed air conditioning systems which became permanent part of the buildings
and improvements to the realty. The Court held the appellant a contractor which used
the materials and the equipment upon the value of which the tax herein imposed war
levied in the performance of its contracts with its customers, and that the customers
did not purchase the equipment and have the same installed.
Engineering Equipment had intent to misdeclare its importation as evidenced
by its communications; Company liable to 50% fraud surcharge
Sales, 2003 ( 76 )
The communications (between the Company and various suppliers such as Trane
Co., Acme Industries Inc., and Owens-Corning Fiberglass Corp.) presented as exhibits in
the case were strongly indicative of the fraudulent intent of the Company to misdeclare
its importation of air conditioning units and spare parts or accessories thereof to evade
payment of the 30% tax. Since the commission of fraud is altogether too glaring, the
Court cannot agree with the CTA in absolving the Company from the 50% fraud
surcharge, otherwise it will be tantamount to giving premium to a plainly intolerable act
of tax evasion.
11.
12.
Company liable to 25% compensation tax; Section 190 as amended

The original text of Section 190 of Commonwealth Act 466, otherwise know as
the National Internal Revenue Code, as amended by CA 503, effective on 1 October
1939, does not provide for the filing of a compensating tax return and payment of the
25% surcharge for late payment thereof. Under the original text of Section 190 of the
Tax Code, as amended by CA 503, the contention of the Company that it is not subject
to the 25% surcharge appears to be legally tenable. However, Section 190 of the Tax
Code was subsequently amended by RA 48, 253, 361, 1511 and 1612 effective 1
October 1946, 1 July 1948, 9 June 1949, 16 June 1956 and 24 August 1956 respectively,
which invariably provides among others, that if any article withdrawn from the
customhouse or the post office without payment of the compensating tax is
subsequently used by the importer for other purposes corresponding entry should be
made in the looks of accounts if any are kept or a written notice thereof sent to the
Collector of Internal Revenue and payment of the corresponding compensating tax
made within 30 days from the date of such entry or notice and if tax is not paid within
such period the amount of the tax shall be increased by 25% the increment to be a part
of the tax, and that since the imported air conditioning units and spare parts or
accessories thereof are subject to the compensating tax of 30% as the same were used
in the construction business of Engineering, it is incumbent upon the latter to comply
with the aforequoted requirement of Section 190 of the Code, by posting in its books of
accounts or notifying the Collector of Internal Revenue that the imported articles were
used for other purposes within 30 days. . . . Consequently, as the 30% compensating
tax was not paid by petitioner within the time prescribed by Section 190 of the Tax
Code as amended, it is therefore subject to the 25% surcharge for delinquency in the
payment of the said tax.
Prescription not yet set in; Prescription of tax assessment is 10 years if
based on false or fraudulent return to evade tax
A review of the record reveals that the Company filed a tax return or declaration
with the Bureau of Customs before it paid the advance sales tax of 7%, and the
declaration filed reveals that it did in fact misdeclare its importations. Section 332 (a)
of the Tax Code therefore is applicable. Section 332 (a) provides for the exceptions as to
period of limitation of assessment and collection of taxes, providing that (a) in the
case of a false or fraudulent return with intent to evade tax or of a failure to file a
return, the tax may be assessed, or a proceeding in court for the collection of such tax
may be begun without assessment at any time within ten years after the discovery of
the falsity, fraud or omission. Thus, considering the preponderance of evidence of
fraud with the intent to evade the higher rate of percentage tax due from the Company,
the tax assessment was made within the period prescribed by law and prescription had
not set in against the Government.
[20]
Sales, 2003 ( 77 )
Coronel v. CA [G.R. No. 103577. October 7, 1996.]

Third division, Melo (J): 3 concurring, 1 took no part
Facts: On 19 January 1985, Romulo Coronel, et al. executed a document entitled
Receipt of Down Payment in favor of Ramona Patricia Alcaraz for P50,000
downpayment of the total amount of P1.24M as purchase price for an inherited house
and lot (TCT 119627, Registry of Deeds of Quezon City), promising to execute a deed of
absolute sale of said property as soon as such has been transferred in their name. The
balance of P1.19M is due upon the execution of said deed. On the same date,
Concepcion D. Alcaraz, mother of Ramona, paid the down payment of P50,000.00. On 6
February 1985, the property originally registered in the name of the Coronels father
was transferred in their names (TCT 327043). However, on 18 February 1985, the
Coronels sold the property to Catalina B. Mabanag for P1,580,000.00 after the latter
has paid P300,000.00. For this reason, Coronels canceled and rescinded the contract
with Alcaraz by depositing the down payment in the bank in trust for Alcaraz.
On 22 February 1985, Alcaraz filed a complaint for specific performance against the
Coronels and caused the annotation of a notice of lis pendens at the back of TCT
327403. On 2 April 1985, Mabanag caused the annotation of a notice of adverse claim
covering the same property with the Registry of Deeds of Quezon City. On 25 April
1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor
of Mabanag. On 5 June 1985, a new title over the subject property was issued in the
name of Mabanag under TCT 351582.
In the course of the proceedings, the parties agreed to submit the case for decision
solely on the basis of documentary exhibits. Upon submission of their respective
memoranda and the corresponding comment or reply thereto, and on 1 March 1989,
judgment was handed down in favor of the plaintiffs, ordering the defendant to execute
a deed of absolute sale of the land covered by TCT 327403 and canceling TCT 331582
and declaring the latter without force and effect. Claims for damages by plaintiffs and
counterclaims by the defendants and intervenors were dismissed. A motion for
reconsideration was thereafter filed, which was denied.
Petitioners interposed an appeal, but on 16 December 1991, the CA rendered its
decision fully agreeing with the trial court. Hence, the instant petition.
The Supreme Court dismissed the petition and affirmed the appealed judgment.
1.
Receipt of downpayment a binding contract; Meeting of the minds

The document embodied the binding contract between Ramona Patricia Alcaraz and
the heirs of Constancio P. Coronel, pertaining to a particular house and lot covered by
TCT 119627, as defined in Article 1305 of the Civil Code of the Philippines.
2.
Definition of contract of sale

The Civil Code defines a contract of sale, in Article 1458, as one of the
contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its
Sales, 2003 ( 78 )
equivalent. Sale, thus, by its very nature a consensual contract because it is perfected
by mere consent.
3.
Elements of contract of sale; Contract to sell not contract of sale due to the
lack of first element; Distinction necessary when property is sold to a third
person
The essential elements of a contract of sale are (a) Consent or meeting of the
minds, that is, consent to transfer ownership in exchange for the price; (b) Determinate
subject matter; and (c) Price certain in money or its equivalent. A Contract to Sell may
not be considered as a Contract of Sale because the first essential element is lacking. It
is essential to distinguish between a contract to sell and a conditional contract of sale
specially in cases where the subject property is sold by the owner not to the party the
seller contracted with, but to a third person.
4.
Contract to sell: Seller agrees to sell property when purchase price is

delivered to him; seller reserves transfer of title until fulfillment of
suspensive condition (payment)
In a contract to sell, the prospective seller explicitly reserves the transfer of title
to the prospective buyer, meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of the contract to sell until the
happening of an event, which for present purposes taken to be the full payment of the
purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to
sell the subject property when the entire amount of the purchase price is delivered to
him. In other words the full payment of the purchase price partakes of a suspensive
condition, the non-fulfillment of which prevents the obligation to sell from arising and
thus, ownership is retained by the prospective seller without further remedies by the
prospective buyer.
5.
Contract to sell: failure to deliver payment is not a breach but event

preventing vendor to convey title; obligation demandable upon full payment
of price; promise binding if supported by payment distinct from the price
When a contract is a contract to sell where the ownership or title is retained by
the seller and is not to pass until the full payment of the price, such payment being a
positive suspensive condition and failure of which is not a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to convey title from
acquiring binding force (Roque v. Lapuz). Upon the fulfillment of the suspensive
condition which is the full payment of the purchase price, the prospective sellers
obligation to sell the subject property by entering into a contract of sale with the
prospective buyer becomes demandable as provided in Article 1479 of the Civil Code
(A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.) An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
6.
Contract to sell defined

A contract to sell be defined as a bilateral contract whereby the prospective seller,
while expressly reserving the ownership of the subject property despite delivery
thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed
upon, that is, full payment of the purchase price.
Sales, 2003 ( 79 )
7.
Contract to sell not a conditional contract of sale (existence of first element)

A contract to sell may not even be considered as a conditional contract of sale
where the seller maylikewise reserve title to the property subject of the sale until
the fulfillment of a suspensive condition, because in a conditional contract of
sale, the first element of consent is present, although it is conditioned upon the
happening of a contingent event which may or may not occur.
8.
Conditional contract of sale: if suspensive condition not fulfilled, pefection

abated; if fulfilled, contract of sale perfected and ownership automatically
transfers to buyer
If the suspensive condition is not fulfilled, the perfection of the contract of sale is
completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777
[1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby
perfected, such that if there had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the seller.
9.
Contract to sell: if suspensive condition fulfilled, seller has still to convey title
even if property is previously delivered
In a contract to sell, upon the fulfillment of the suspensive condition which is the
full payment of the purchase price, ownership will not automatically transfer to the
buyer although the property may have been previously delivered to him. The
prospective seller still has to convey title to the prospective buyer by entering into a
contract of absolute sale.
10.
Contract to sell: there is no double sale; if property sold to another, the seller
may be sued for damages
In a contract to sell, there being no previous sale of the property, a third person
buying such property despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer in bad faith
and the prospective buyer cannot seek the relief of reconveyance of the property. There
is no double sale in such case. Title to the property will transfer to the buyer after
registration because there is no defect in the owner-sellers title per se, but the latter,
of course, may be sued for damages by the intending buyer.
11.
Conditional contract of sale: sale becomes absolute upon fulfillment of

condition; if property sold to another, first buyer may seek reconveyance
In a conditional contract of sale, upon the fulfillment of the suspensive condition,
the sale becomes absolute and this will definitely affect the sellers title thereto. In fact,
if there had been previous delivery of the subject property, the sellers ownership or
title to the property is automatically transferred to the buyer such that, the seller will
no longer have any title to transfer to any third person. Applying Article 1544 of the
Civil Code, such second buyer of the property who may have had actual or constructive
knowledge of such defect in the sellers title, or at least was charged with the obligation
to discover such defect, cannot be a registrant in good faith. Such second buyer cannot
defeat the first buyers title. In case a title is issued to the second buyer, the first buyer
may seek reconveyance of the property subject of the sale.
Sales, 2003 ( 80 )
12.
Interpretation of contracts, natural and meaning of words unless technical

meaning was intended
It is a canon in the interpretation of contracts that the words used therein should
be given their natural and ordinary meaning unless a technical meaning was intended
(Tan vs. Court of Appeals, 212 SCRA 586 [1992]).
13.
Document entitled Receipt of Down Payment indicates Conditional Contract

of Sale and not contract to sell
The agreement could not have been a contract to sell because the sellers made
no express reservation of ownership or title to the subject parcel of land. Furthermore,
the circumstance which prevented the parties from entering into an absolute contract
of sale pertained to the sellers themselves (the certificate of title was not in their
names) and not the full payment of the purchase price. Under the established facts and
circumstances of the case, had the certificate of title been in the names of petitionerssellers at that time, there would have been no reason why an absolute contract of sale
could not have been executed and consummated right there and then. Moreover, unlike
in a contract to sell, petitioners did not merely promise to sell the property to private
respondent upon the fulfillment of the suspensive condition. On the contrary, having
already agreed to sell the subject property, they undertook to have the certificate of
title changed to their names and immediately thereafter, to execute the written deed of
absolute sale. What is clearly established by the plain language of the subject
document is that when the said Receipt of Down Payment was prepared and signed
by petitioners, the parties had agreed to a conditional contract of sale, consummation
of which is subject only to the successful transfer of the certificate of title from the
name of petitioners father to their names. The suspensive condition was fulfilled on 6
February 1985 and thus, the conditional contract of sale between the parties became
obligatory, the only act required for the consummation thereof being the delivery of the
property by means of the execution of the deed of absolute sale in a public instrument,
which petitioners unequivocally committed themselves to do as evidenced by the
Receipt of Down Payment.
14.
Article 1475 and 1181 applies to present case; Perfection of a contract of sale
and Conditional obligation based on the happening of the event
Article 1475 of the New Civil Code provides that 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. Article 1181 of the same code provides that in conditional obligations, the
acquisition of rights, as well as the extinguishment or loss of those already acquired,
shall depend upon the happening of the event which constitutes the condition. In the
present case, since the condition contemplated by the parties which is the issuance of
a certificate of title in petitioners names was fulfilled on 6 February 1985, the
respective obligations of the parties under the contract of sale became mutually
demandable, i.e. the sellers were obliged to present the TCT already in their names to
he buyer, and to immediately execute the deed of absolute sale, while the buyer on her
part, was obliged to forthwith pay the balance of the purchase price amounting to
P1,190,000.00.
15.
Condition deemed fulfilled when obligor voluntary prevents its fulfillment;

Condition fulfilled, such fact controlling over hypothetical arguments
Sales, 2003 ( 81 )
Article 1186 provides that the condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment. Thus, in the present case, the petitioners
having recognized that they entered into a contract of sale subject to a suspensive
condition, as evidenced in the first paragraph in page 9 of their petition, cannot now
contend that there could have been no perfected contract of sale had the petitioners
not complied with the condition of first transferring the title of the property under their
names. It should be stressed and emphasized that the condition was fulfilled on 6
February 1985, when TCT 327403 was issued in petitioners name, and such fact is
more controlling than mere hypothetical arguments.
16.
Retroactivity of conditional obligation to day of constitution of obligation

Article 1187 provides that the effects of conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the constitution of the
obligation. In obligations to do or not to do, the courts shall determine, in each case,
the retroactive effect of the condition that has been complied with. In the present case,
the rights and obligations of the parties with respect to the perfected contract of sale
became mutually due and demandable as of the time of fulfillment or occurrence of the
suspensive condition on 6 February 1985. As of that point in time, reciprocal obligations
of both seller and buyer arose.
17.
Succession as a mode of transferring ownership

Article 774 of the Civil Code defines Succession as a mode of transferring
ownership, providing succession is a mode of acquisition by virtue of which the
property, rights and obligations to the extent and value of the inheritance of a person
are transmitted through his death to another or others by his will or by operation of
law. In the present case, petitioners-sellers being the sons and daughters of the
decedent
Constancio P. Coronel are compulsory heirs who were called to succession by operation
of law. Thus, at the instance of their fathers death, petitioners stepped into his shoes
insofar as the subject property is concerned, such that any rights or obligations
pertaining thereto became binding and enforceable upon them. It is expressly provided
that rights to the succession are transmitted from the moment of death of the decedent
(Article 777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]).
18.
Estoppel, as to lack of capacity

Article 1431 provides that through estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon. In the present case, the petitioners, having
represented themselves as the true owners of the subject property at the time of sale,
cannot claim now that they were not yet the absolute owners thereof at the time they
entered into agreement.
19.
Mere allegation is not evidence

The supposed grounds for petitioners rescission, are mere allegations found only
in their responsive pleadings, which by express provision of the rules, are deemed
controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of
Court). The records are absolutely bereft of any supporting evidence to substantiate
petitioners allegations. We have stressed time and again that allegations must be
Sales, 2003 ( 82 )
proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro
vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De
Vera, 79 Phil. 376 [1947]).
20.
No stipulation to authorize extrajudicial rescission of contract of sale

Even assuming arguendo that Ramona P. Alcaraz was in the United States of
America on 6 February 1985, petitioners-sellers act of unilaterally and extrajudicially
rescinding the contract of sale cannot be justified as there was no express stipulation
authorizing the sellers to extrajudicially rescind the contract of sale. (cf Dignos vs. CA,
158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])
21.
Estoppel, acceptance of check from buyers mother; buyers absence not a

ground for rescission
Petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz
because although the evidence on record shows that the sale was in the name of
Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D.
Alcaraz, Ramonas mother, who had acted for and in behalf of her daughter, if not also
in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with
her own personal check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz.
There is no evidence showing that petitioners ever questioned Concepcions authority
to represent Ramona P. Alcaraz when they accepted her personal check. Neither did
they raise any objection as regards payment being effected by a third person.
Accordingly, as far as petitioners are concerned, the physical absence of Ramona P.
Alcaraz is not a ground to rescind the contract of sale.
22.
Buyer not in default as there is no proof that seller presented the TCT and
signify their readiness to execute the deed of absolute sale
Article 1169 of the Civil Code defines when a party in a contract involving
reciprocal obligations may be considered in default. Said article provides that those
obliged to deliver or to do something, incur in delay from the time the obligee judicially
or extrajudicially demands from them the fulfillment of their obligation. xxx In
reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfill his obligation, delay by the other begins. In the
present case, there is no proof offered whatsoever to show that the seller actually
presented the new transfer certificate of title in their names and signified their
willingness and readiness to execute the deed of absolute sale in accordance with their
agreement. Ramonas corresponding obligation to pay the balance of the purchase
price in the amount of P1,190,000.00 (as buyer) never became due and demandable
and, therefore, she cannot be deemed to have been in default.
23.
Double sale; Article 1544, paragraph 2 applies in the present case

Article 1544 of the Civil Code provides that 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 if be immovable property, the ownership shall belong to the person acquiring it
possession; and, in the absence thereof to the person who presents the oldest title,
provided there is good faith. In the present case, the record of the case shows that the
Sales, 2003 ( 83 )
Deed of Absolute Sale dated 25 April 1985 as proof of the second contract of sale was
registered with the Registry of Deeds of Quezon City giving rise to the issuance of a
new certificate of title in the name of Catalina B. Mabanag on 5 June 1985. Thus, the
second paragraph of Article 1544 shall apply.
24.
Double sale presumes title to pass to first buyer, exceptions

Article 1544, the provision on double sale, presumes title or ownership to pass to
the first buyer, the exceptions being: (a) when the second buyer, in good faith,
registers the sale ahead of the first buyer, and (b) should there be no inscription by
either of the two buyers, when the second buyer, in good faith, acquires possession of
the property ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice of the first
buyer.
25.
Prius tempore, potior jure (first in time, stronger in right); First to register in
good faith
The governing principle is prius tempore, potior jure (first in time, stronger in
right). Knowledge by the first buyer of the second sale cannot defeat the first buyers
rights except when the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the second
buyer of the first sale defeats his rights even if he is first to register, since knowledge
taints his registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No.
58530, 26 December 1984). It was further held that it is essential, to merit the
protection of Article 1544, second paragraph, that the second realty buyer must act in
good faith in registering his deed of sale (Cruz v. Cabana, 129 SCRA 656, citing
Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No. 95843, 02
September 1992).
26.
Double sale; good faith in recording of second sale, not in buying

In a case of double sale, what finds relevance and materiality is not whether or
not the second buyer was a buyer in good faith but whether or not said second buyer
registers such second sale in good faith, that is, without knowledge of any defect in the
title of the property sold. In the present case, Mabanag could not have in good faith
registered the sale entered into on 18 February 1985 because as early as 22 February
1985, a notice of lis pendens had been annotated on the TCT in the names of
petitioners, whereas Mabanag registered the said sale sometime in April 1985. At the
time of registration, therefore, petitioner knew that the same property had already
been previously sold to Coronel, or, at least, she was charged with knowledge that a
previous buyer is claiming title to the same property. Mabanag thus cannot close her
eyes to the defect in petitioners title to the property at the time of the registration of
the property.
27.
Double sale; Bad faith in registration does not confer registrant any right
If a vendee in a double sale registers the sale after he has acquired knowledge
that there was a previous sale of the same property to a third party or that another
person claims said property in a previous sale, the registration will constitute a
registration in bad faith and will not confer upon him any right. (Salvoro vs. Tanega, 87
Sales, 2003 ( 84 )
SCRA 349 [1981];citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan,
43 Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
28.
Agency; The issue whether Concepcion, mother of Ramona, is an agent or a

co-buyer is undisturbed
Although there may be ample indications that there was in fact an agency
between Ramona as principal and Concepcion, her mother, as agent insofar as the
subject contract of sale is concerned, the issue of whether or not Concepcion was also
acting in her own behalf as a co-buyer is not squarely raised in the instant petition, nor
in such assumption disputed between mother and daughter. The Court did not touch
this issue and did not disturb the lower courts ruling on this point.
[21]
Coronel vs. Ona [G.R. No. 10280. February 7, 1916.]
First Division, Torres (J): 3 concurring, 1 took no part
Facts: In the administration of the intestate estate of the deceased Isidra Coronel, the
administrator thereof, Engracio Coronel, discovered certain arrangements between the
surviving spouse, Cenon Ona, and other persons, which decreased and injured the
property under administration, whereof, by permission of the court, the said
administrator on 16 May 1913, filed suit against Cenon, et. al., in which suit, by
agreement of the parties, they were included as plaintiffs the heirs of the said deceased
named Francisco Coronel, Agripina Coronel, Engracia Torres, Manuela Torres and her
husband Lucio Paganiban, and the minor Anastacia Ramon, represented by his curator
ad litem, Engracio Coronel. Coronel, et. al. allege in their complaint that the
administration is the owner of one-half pro indiviso of a rural estate, 10 hectares and 42
centares in area, situate in the barrio of Lagalag of the town of Tiaong, Province of
Tayabas, planted with 2,000 coco palms from 4 to 5 years old, the boundaries whereof
are set forth in the complaint, said realty being conjugal property as it was acquired for
a consideration by the deceased Isidra Coronel and her husband Cenon Ona during
their marriage; that upon the death of the wife in April 1911, the surviving spouse
Cenon Ona became the administrator of said undivided property, taking all its products
and refusing to make partition of the land with the lawful heirs of his deceased wife;
that on 5 November 1912, Cenon Ona and the other defendants formed a conspiracy,
with intent of gain for themselves, to the fraud and injury of the plaintiff administration,
and drew up and signed an alleged instrument of sale, whereby Cenon Ona sold to the
spouses Benigno Nadres and Victoria Villa the said land, which instrument they falsely
dated as prior to the death of his wife Isidra Coronel and forged and imitated her
signature or mark by writing her name and surname thereon with a cross between
them; that on the same date, 5 November 1912, the same defendants, continuing their
fraudulent proceedings, executed another instrument of sale of the same land, wherein
they made to appear as vendors thereof Benigno Nadres and Victoria Villa and as
vendees the spouses Crispin Castillo and Maria recto, so that thereby it would be more
difficult for the plaintiff administration to recover said estate, and from that date Cenon
Ona surrendered possession and enjoyment of the said land to the spouses Crispin
Castillo and Maria Recto, who have been up to the present time in possession thereof
and have taken the products therefrom, having refused to give the administration any
portion of the latter; that by reason of the malicious and fraudulent acts of these
defendants the administration has suffered damages to the extent of P1,000. On 29
Sales, 2003 ( 85 )
May 1913, Benigno Nadres, Victoria Villa, Crispin Castillo, and Maria Recto answered
the complaint, denying all the allegations thereof generally and specifically, and
alleging in special defense: That on 8 November 1910, the spouses Benigno Nadres and
Victoria Castillo [Villa] had acquired the land which is the subject matter of the
complaint at a genuine and absolute sale from the spouses Cenon Ona and Isidra
Coronel, and that spouses Crispin Castillo and Maria Recto acquired the same land on 5
November 1912, at a genuine and absolute sale from Nadres and Villa. In another
document of a later date, Crispin Castillo and Maria Recto, denied the facts set forth in
the complaint and in special defense alleged that they are the exclusive owners of the
land described in the complaint, as they acquired it by purchase from the spouses
Nadres and Villa. Counsel for Cenon Ona in answer denied generally and specifically all
the paragraphs of the complaint and alleged solely in special defense that he had
never, either before or at the time of the sale made by him and his deceased wife Isidra
Coronel of the land which is the subject matter of the complaint, concerted or conspired
with his codefendants to effect said sale. After trial and examination of the evidence
adduced by both parties and on 29 April 1914, the CFI Tayabas rendered the judgment
denying the claim of spouses Crispin Castillo and Maria Recto, for recovery of damages
they had suffered by reason of the filing of the complaint against them, finding that the
instruments of conveyance of the land in litigation void and of no force or legal effect
because the parties who sold the land by means of said instruments lacked any right to
alienate it; denying the claim of Coronel, et. al. that the defendants pay the value of
one-half of the products of this land received by them and a sum of money in the
nature of compensatory damages, and merely sentencing Cenon Ona and Benigno
Nadres to the payment of the costs in equal parts. Hence the appeal through a bill of
exceptions by counsel for the defendants.
The Supreme affirmed the judgment appealed from, with the costs against the
appellants.
1.
Facts: Identity of property not disputed

There is no question whatsoever as to the identity of the land claimed in the
complaint, it being a rural estate situated in the barrio of Lagalag of the municipality of
Tiaong, Tayabas, with an area of ten hectares and forty-two centiares and planted with
2,000 coco palms.
2.
Property conjugal; Coronels heirs by operation of law

Cenon Ona was lawfully married to Isidra Coronel and during their marriage they
acquired by purchase from Juan Cadiz the land, wherefore said realty is their conjugal
property. This marriage was dissolved by the death of Isidra Coronel on 13 April 1911,
without issue from these spouse and without a will executed in life by the woman, so
the heirs that by operations of law must succeed said deceased Isidra Coronel are her
brothers and sisters and nephews and nieces, residing in the town of San Juan de
Bocboc,
Batangas. The land in litigation is not only conjugal property, with one-half thereof
belonging to the deceased Isidra Coronel, but also from the moment of her death it
passed by operation of law into the ownership of her intestate heirs, and for this reason
her widower could not dispose of said half to the injury of the nearest relatives and
heirs of his deceased wife. (Arts. 657, 659, 661, Civil Code.)
Sales, 2003 ( 86 )
3.
Facts: Stipulations in the instrument of purchase and sale

In the instrument of purchase and sale, written in the Tagalog dialect (Case 776)
and translated in the present case, the spouses Cenon Ona and Isidra Coronel
transferred by absolute sale on 8 November 1910, the land litigation to te spouses
Benigno Nadres and Victoria Villa, under the following conditions: (1) The spouses
Cenon Ona and Isidra Coronel had planted coco palms on a certain tract of land
belonging to Benigno Nadres and his wife, which land Cenon Ona and Isidra Coronel
had alienated without the consent of the owners thereof, the said Nadres and wife; (2)
on their part the spouses Ona and Coronel possessed another tract of land which they
had purchased from Juan Cadiz, whereon they has already set out 1,400 young coco
palms and 800 more could be planted; (3) as Benigno Nadres and his wife were
demanding return of the land previously sold by Ona and Coronel, the latter thought it
fair to cede their own land to said Nadres and wife in exchange for what they had
alienated, Nadres and his wife there in hand paying P2,500 as the increase in the price;
(4) this exchange was made on the condition that Cenon Ona and his wife should for
the period of four years; (5) the betel nut, paddy, buri, and other products shall pertain
exclusively to the vendors, Cenon Ona and Isidra Coronel, who shall pay the land tax for
the said four years of the life of the contract; and (6) the spouses Benigno Nadres and
Victoria Villa were agreed that they would no participation in the crops from the land.
This instrument is signed by the contracting parties and the witnesses, except Isidra
Coronel, who placed her mark on the instrument her name and surname, which must
have been affixed by another person, as she could not write.
4.
Deduced facts of the case

From the abundant, but contradictory, evidence adduced at the trial, the
following facts are deduced: (1) The consideration which gave rise to the execution by
Cenon Ona and Isidra Coronel, with reference to their having alienated a parcel of land
belonging to Benigno Nadres and his wife, is not a valid one; (2) the consideration for
the transfer of the land in question to the Nadres couple, with payment by them of
P2,500 to the vendors, is false and simulated; (3) the instrument evidencing the sale of
this land was executed after Isidra Coronels death and cannot therefore produce any
effect against her heirs; and (4) the transfer by exchange and sale of the land to the
vendee Benigno Nadres is not valid, as said transfer was recorded in the instrument for
the sole and deliberate purpose of preventing the lawful heirs of Isidra Coronel from
inheriting their portion thereof.
Consideration false and simulated
Cenon Ona stated that he and his wife Isidra Coronel had received a tract of land
from said Benigno Nadres, on which to set out coco-palms, with the condition that after
the planting had been finished and 6 years had elapsed, he and his wife should become
the owners if one-half of the said tract, as had happened, and as he was then in need of
money he had sold to a third person said portion of land that then belonged to him; but
it is not true that he obligated himself not to sell that portion of land to anybody but its
original owner, Nadres. This testimony of Ona, which was not rebutted or contradicted
by the other defendants, constitutes conclusive proof of the invalidity of the reason
given for the exchange of the land in question for that previously sold and for
transferring it to the said Benigno Nadres and his wife; and it is furthermore to be noted
that Ona himself stated under oath that in transferring this land to Nadres on 8
November 1910, he had no intention of transferring it absolutely but had made this
transfer appear in an instrument so that Nadres might take charge of the land and not
bother him, as he was then old, and also to prevent the heirs of his wife Coronel from
5.
Sales, 2003 ( 87 )
participating in her inheritance. Hence it is inferred that the consideration which gave
rise to the transfer of this land to Nadres and his wife is not valid, but false and
simulated. Hence, said realty was not sold to Nadres but a pretense was made of
transferring it in order to sell it as the agent of Ona, and therefore the land continued to
belong to Ona and his wife, the deceased Coronel. It is furthermore to be noted that
when said transfer was made to Nadres the heirs of the deceased Coronel had already
filed a claim for the land and consequently any alienation thereof that may have been
made after the date of said claim filed by the heirs of the deceased Coronel is
fraudulent. (Oria vs. McMicking, 21 Phil., Rep., 243,249)
7.
Instrument simulated
The simulation of the instrument is corroborated by the fact that Cenon Ona
delivered to the administrator, Engracio Coronel, the sum of P900 so that the latter and
his coplaintiffs should desist from filing a judicial, claim to the land in litigation, and,
according to agreement, they executed the instrument setting forth that sum, both
parties, signing it in the presence of two witnesses and ratifying it before a justice of
the peace. Coronel and Ona affirm the truth of the fact set forth in said instrument to
demonstrate that the land was not absolutely alienated but continued to be at the
disposition of the widower. But the CFI disapproved said agreement and ordered
restitution to the widower Ona of the money received by Coronel.
8.
Suppressed testimony presumed prejudicial

One of the individuals who played a principal part in the sale of the realty,
Benigno Nadres, was not presented by the defendants s a witness at the trial to clear
up certain obscure and doubtful points, for he only testified in rebuttal, although he was
present in the court at the last session of the trial in this case; wherefore it is to be
supposed, in the absence of proof to the contrary, that his testimony, which was
willfully suppressed by the defendants, would have been prejudicial to them (No. 5,
section 334, Code of Civil Procedure), while the record shows that Cenon Ona made
declarations contrary to the interest of his other codefendants, which could not be
contradicted or impugned as false.
9.
First sale simulated, Second sale void and ineffective for lack of right to
dispose of land
Having reached the conclusion that the instrument, where it appears that the
spouses Benigno Nadres and Victoria Villa purchased the land in question, is false and
void, because said sale was not effected. Therefore, the sale made by them to the
spouses Crispin Castillo and Maria Recto on 5 November 1912, is also void and
ineffective, for the parties who figure therein as vendors had no right to dispose of the
land, nor could they transmit to the vendees any title of ownership, nor could the latter
acquire ownership of the land sold.
10.
Article 1254 of the Civil Code; Consent

Article 1254 of the Civil Code states A contract exists from the moment one or
more persons consent to bind himself or themselves, with regard to another or others,
to give something or to render some service. In the present case, since Coronel was
dead on the date when the contract was drawn up and could not have taken part in the
execution thereof or given her consent to the pretended sale of the land to which it
Sales, 2003 ( 88 )
refers and which belonged to the conjugal partnership of Ona and Coronel, said
contract has never existed, and being void it could not serve as a legal means for
transferring ownership to the alleged purchasers, Nadres and Villa; and as they could
not acquire any right of ownership to the land sold by virtue of a contract that had not
existed and was consequently null and void they had not transfer such a right to the
spouses Crispin Castillo and Maria Recto.
11.
Requisites of a valid contract; Article 1261

There is no contract, says article 1261 of the same Code, unless there exist the
essential requisites of consent of the contracting parties, a definite object which may
be the subject of the contract, and the consideration for the obligation which may be
established. In the present case, Isidra Coronel was not present to give her consent to
the alleged contract of sale, because she was dead when said contract was simulated,
nor is any consideration for the obligation stated therein, and consequently the
contract set forth in said instrument is flagrantly null and void. Although it appears to
have been dated 8 November 1910, while Isidra Coronel was still alive, it was prepared
on 5 November 1912, for the widower Cenon Ona so testified.
12.
Crispin Castillo and Maria Recto not entitled to damages

Since Coronel, et. al. did not take part in the execution of the contracts of sale
and did not act in bad faith in filing this complaint against the efendants, Crispin
Castillo and Maria Recto, the latter are not entitled to recover any indemnity for
damages.
13.
Coco palms not yet borne fruit, therefore claim on value of products cannot
be granted
By the declaration of the administrator himself, Engracio Coronel, and by that of Cenon
Ona, that the coco palms set out on the land in dispute have not yet borne fruit,
wherefore Coronel et.als claim that they be paid the value of one-half of the products
taken from the land in question cannot be granted.
[22]
Cruz vs. Cabana [G.R. No. 56232. June 22, 1984.]
First Division, Teehankee (J): 5 concurring
Facts: The land in question was sold by Leodegracia Cabana with right of repurchase
on 1 June 1965 to Spouses Teofilo Legaspi and lluminada Cabaa. The said document
Bilihang Muling Mabibili stipulated that the land can be repurchased by the vendor
within 1 year from 31 December 1966. Said land was not repurchased and in the
meantime, said spouses took possession of the land. Upon request of Leodegaria
Cabaa, the title of the land was lent to her in order to mortgage the property to the
PNB. Said title was, forthwith, deposited with the PNB. On 21 October 1968, Cabaa
sold the land by way of absolute sale to the spouses. Said spouses attempted to
register the deed of sale but said registration was not accomplished because they could
not present the owners duplicate of title which was at that time in the possession of
the PNB as mortgage. However, on 29 November 1968 Cabana sold the same property
to Abellardo Cruz. Likewise, when Cruz tried to register the deed of sale executed by
Leodegaria Cabaa on 3 September 1970, he was informed that the owner thereof had
Sales, 2003 ( 89 )
sold the land to the spouses on 21 October 1968. Still, Cruz was able to register the
land in his name on 9 February 1971.
Raised in the CFI Quezon Province, the court ruled in favor of the spouses. Appeal was
made in the Court of
Appeals. Abelardo Cruz died while the case was pending, and by resolution, he was
substituted by his heirs, Consuelo C. Cruz, Claro C. Cruz and Stephen C. Cruz. The Court
of Appeals affirmed the decision of the CFI.
The Supreme Court affirmed in toto the appealed judgment of appellate court,
upholding spouses Teofilo Legaspi and Iluminada Cabana as the true and rightful
owners of the property in litigation and ordering the issuance of a new title with the
cancellation as null and void of Title T-99140 obtained by Abelardo C. Cruz; and ordered
Leodegracia Cabana, in accordance with the partial grant of Cruz prayer for alternative
relief, to reimburse and pay to Cruz heirs the total sum of P5,750 (P2,352.50 as
payment to PNB to discharge mortgage obligation, and P3,397.50 as consideration of
the sale with pacto de retro of the property).
1.
CA Ruling: Applicability of Article 1544, when invoked; Registration should be

in good faith
In order that the provisions of Article 1544 of the new Civil Code may be invoked,
it is necessary that the conveyance must have been made by a party who has an
existing right in the thing and the power to dispose of it (10 Manresa 170, 171). It
cannot be set up by a second purchaser who comes into possession of the property that
has already been acquired by the first purchaser in full dominion (Bautista vs. Sison, 39
Phil. 615), this notwithstanding that the second purchaser records his title in the public
registry, if the registration be done in bad faith. The philosophy underlying this rule
being that the public records cannot be covered into instruments of fraud and
oppression by one who secures an inscription therein in bad faith (Chupinghong vs.
Borreros, 7 CA Rep. 699).
2.
CA Ruling: Purchaser with knowledge of defect of vendors title not a

purchaser in good faith
A purchaser who has knowledge of fact which would put him upon inquiry and
investigation as to possible defects of the title of the vendor and fails to make such
inquiry and investigation, cannot claim that he is a purchaser in good faith. Knowledge
of a prior transfer of a registered property by a subsequent purchaser makes him a
purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by
virtue of the latter instrument of conveyance which creates no right as against the first
purchaser (Reylago vs. Jarabe, L-20046, March 27, 1968, 22 SCRA 1247).
3.
CA Ruling: Spouses first to register deed of sale

The spouses registered the deed of absolute sale ahead of Cruz. Said spouses
were not only able to obtain the title because at that time, the owners duplicate
certificate was still with the Philippine National Bank.
4.
CA Ruling: Spouses first in possession
Sales, 2003 ( 90 )
The spouses have been in possession all along of the land in question. If
immovable property is sold to different vendees, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the registry of property; and
should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession (Soriano, et al. vs. The Heirs of Domingo Magali, et al.,
L-15133, July 31, 1963, 8 SCRA 489). Priority of possession stands good in favor of the
spouses (Evangelista vs. Abad, [CA] 36 O.G. 2913; Sanchez vs. Ramos, 40 Phil. 614;
Quimson vs. Rosete, 87 Phil. 159).
5.
Double Sale; Article 1544

Article 1544 provides that If the same thing should have been sold to different
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.
6.
Spouses are first buyers; Spouses first and only ones in possession
Spouses were the first buyers, first on 1 June 1965 under a sale with right of
repurchase and later on 21 October 1968 under a deed of absolute sale and that they
had taken possession of the land sold to them. Cruz was the second buyer under a
deed of sale dated 29 November 1968, which to all indications, contrary to the text,
was a sale with right of repurchase for 90 days. The spouses were the first and the only
ones to be in possession of the subject property.
Spouses first to register sale; Cruz registered sale in bad faith
The spouses were likewise the first to register the sale with right of repurchase in
their favor on 13 May 1965 under Primary Entry 210113 of the Register of Deeds. They
could not register the absolute deed of sale in their favor and obtain the corresponding
transfer certificate of title because at that time the sellers duplicate certificate was still
with the bank. When Cruz succeeded in registering the later sale in his favor, he knew
and he was informed of the prior sale in favor of the spouses. Such knowledge of a
prior transfer of a registered property by a subsequent purchaser makes him a
purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by
virtue of the latter instrument of conveyance which creates no right as against the first
purchaser.
7.
8.
Buyer must act in good daith to merit protection of the second paragraph of
Article 1544; Governing principle is Prius tempore, potior jure; How second
buyer may displace first buyer
As held in Carbonell vs. Court of Appeals, it is essential that the buyer of
realty must act in good faith in registering his deed of sale to merit the protection of
the second paragraph of Article 1544. The governing principle here is prius tempore,
potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the
second sale cannot defeat the first buyers rights except only as provided by the Civil
Code and that is where the second buyer first registers in good faith the second sale
ahead of the first. Such knowledge of the first buyer does not bar her from availing of
her rights under the law, among them, to register first her purchase as against the
second buyer. But in converso knowledge gained by the second buyer of the first sale
Sales, 2003 ( 91 )
defeats his rights even if he is first to register the second sale, since such knowledge
taints his prior registration with bad faith. This is the price exacted by Article 1544 of
the Civil Code for the second buyer being able to displace the first buyer; that before
the second buyer can obtain priority over the first, he must show that he acted in good
faith throughout (i.e. in ignorance of the first sale and of the first buyers rights) from
the time of acquisition until the title is transferred to him by registration or failing
registration, by delivery of possession. The second buyer must show continuing good
faith and innocence or lack of knowledge of the first sale until his contract ripens into
full ownership through prior registration as provided by law.
9.
Cruz prayer of affirmative relief; Cabana, not the Legaspi spouses, liable for
amounts paid; No reimbursement for realty taxes
Cruz prayer for alternative relief for reimbursement of the amount of P2,352.50
paid by him to the bank to discharge the existing mortgage on the property and of the
amount of P3,397.50 representing the price of the second sale are well taken insofar as
the seller Leodegaria Cabana is concerned. These amounts have been received by
Cabana on account of a void second sale and must be duly reimbursed by her to Cruz
heirs, but the Legaspi spouses cannot be held liable therefor since they had nothing to
do with the said second sale nor did they receive any benefit therefrom. Cruz claim for
reimbursement of the amount of P102.58 as real estate taxes paid on the property is
not well taken because the Legaspi spouses had been paying the real estate taxes on
the same property since 1 June 1969.
[23]
Cruz vs. Filipinas Investment [G.R. No. L-24772. May 27, 1968.]
En Banc, Reyes JBL (J): 7 concurring, 1 on leave
Facts: On 15 July 1963, Ruperto G. Cruz purchased on installments, from the Far East
Motor Corporation, 1 unit of Isuzu Diesel Bus for P44,616.24, payable in installments of
P1,487.20 per month for 30 months, beginning 22 October 1963, with 12% interest per
annum, until fully paid. As evidence of said indebtedness, Cruz executed and delivered
to the Far East Motor Corporation a negotiable promissory in the sum of
P44,616.24. To secure the payment of the promissory note, Cruz executed in favor of
the seller Far East Motor Corporation, a chattel mortgage over the motor vehicle. As no
down payment was made by Cruz, the seller, Far East Motor Corporation, on the very
same date, 15 July 1963, required and Cruz agreed to give, additional security for his
obligation besides the chattel mortgage. Additional security was given by Felicidad Vda.
de Reyes in the form of Second Mortgage on a parcel of land owned by her (68,902 sq.
ms., TCT T36480 of the Registry of Deeds of Bulacan, mortgaged to the DBP to secure
loan of P2,600), together with the building and improvements thereon, in San Miguel,
Bulacan. On 15 July 1963, the Far East Motors for value received indorsed the
promissory note and assigned all its rights and interest in the Deeds of Chattel
Mortgage and in the Deed of Real Estate Mortgage to Filipinas Investment & Finance
Corporation (FIFC), with due notice of such assignment to Cruz, et.al. Cruz defaulted in
the payment of the promissory note and that the only sum ever paid was P500 on 2
October 1963, which was applied as partial payment of interests on his principal
obligation. Notwithstanding FIFCs demands, Cruz made no payment on any of the
installments stipulated in the promissory note. By reason of Cruzs default, FIFC took
Sales, 2003 ( 92 )
steps to foreclose the chattel mortgage on the bus. However, said vehicle had been
damaged in an accident while in the possession of Cruz. At the foreclosure sale held on
31 January 1964 by the Sheriff of Manila, FIFC was the highest bidder (for P15,000.00).
The proceeds of the sale of the bus were not sufficient to cover the expenses of sale,
the principal obligation, interests, and attorneys fees, i.e., they were not sufficient to
discharge fully the indebtedness of Cruz to FIFC. On 12 February 1964, preparatory to
foreclosing its real estate mortgage on Mrs. Reyes land, FIFC paid the mortgage
indebtedness of Mrs. Reyes to the DBP, in the sum of P2,148.07, the unpaid balance of
said obligation. Pursuant to a provision of the real estate mortgage contract,
authorizing the mortgagee to foreclose the mortgage judicially or extra-judicially, FIFC
on 29 February 1964 requested the Provincial Sheriff of Bulacan to take possession of,
and sell, the land subject of the Real Estate Mortgage to satisfy the sum of P43,318.92,
the total outstanding obligation of Cruz, et. al. to FIFC. Notices of sale were duly posted
and served to the Mortgagor, Mrs. Reyes, pursuant to and in compliance with the
requirements of Act 3135. On 20 March 1964, Reyes through counsel, wrote a letter to
FIFC asking for the cancellation of the real estate mortgage on her land, but FIFC did
not comply with such demand as it was of the belief that Reyes request was without
any legal basis.
An action was commenced by Cruz and Reyes in the CFI Rizal (Civil Case Q- 7949), for
cancellation of the real estate mortgage constituted on Reyes land in favor of FIFC (as
assignee of the Far East Motor Corporation). The provincial Sheriff of Bulacan held in
abeyance the sale of the mortgaged real estate pending the resolution of the case. The
trial court in its decision of 21 April 1965, sustained Cruz, et.al.s stand and declared
that the extrajudicial foreclosure of the chattel mortgage on the bus barred further
action against the additional security put up by Reyes. Consequently, the real estate
mortgage constituted on Reyes land was ordered cancelled and FIFC was directed to
pay Reyes attorneys fees in the sum of P200.00. Hence, the appeal by FIFC.
The Supreme Court modified the decision appealed from, by ordering Reyes to
reimburse to FIFC the sum of P2,148.07, with legal interest thereon from the finality of
this decision until it is fully paid. In all other respects, the judgment of the trial court
was affirmed, with costs against FIFC.
1.
Article 1484 of the Civil Code

Article 1484 of the Civil Code of the Philippines is the pertinent legal provision on
sale of personal property on installments. It provides that In a contract of sale of
personal property the price of which is payable in installments, the vendor may
exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the
vendee fail to pay; (2) Cancel the sale, should the vendees failure to pay cover two or
more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendees failure to pay cover two or more installments. In this
case, he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void.
2.
Provision clear as to available remedies; Remedies alternative not cumulative

The provision is clear and simple: should the vendee or purchaser of a personal
property default in the payment of two or more of the agreed installments, the vendor
or seller has the option to avail of any one of these three remedies either to exact
fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the
Sales, 2003 ( 93 )
mortgage on the purchased personal property, if one was constituted. These remedies
have been recognized as alternative, not cumulative, that the exercise of one would bar
the exercise of the orders.
3.
Foreclosure and actual sale of mortgage chattel bars recovery of any balance
by vendor; Reason for the doctrine
The foreclosure and actual sale of a mortgage chattel bars further recovery by
the vendor of any balance on the purchasers outstanding obligation not so satisfied by
the sale. The reason for the doctrine was aptly stated in the case of Bachrach Motor Co.
vs. Millan, thus the principal object of the amendment was to remedy the abuses
committed in connection with the foreclosure of chattel mortgages. This amendment
prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale
for a low price and then bringing suit against the mortgagor for a deficiency judgment.
The almost invariable result of this procedure was that the mortgagor found himself
minus the property and still owing practically the full amount of his original
indebtedness. Under this amendment the vendor of personal property, the purchase
price of which is payable in installments, has the right to cancel the sale or foreclose
the mortgage if one has been given on the property. Whichever right the vendor elects
he need not return to the purchaser the amount of the installments already paid, if
there be an agreement to that effect. Furthermore, if the vendor avails himself of the
right to foreclose the mortgage this amendment prohibits him from bringing an action
against the purchaser for the unpaid balance.
4.
Further action against guarantor would indirectly subvert protection given by

Article 1484 to purchaser
To sustain FIFCs argument (that what is being withheld from the vendor, by the
proviso of Article 1484 of the Civil Code, is only the right to recover against the
purchaser and not a recourse to the additional security put up, not by the purchaser
himself, but by a third person) is to overlook the fact that if the guarantor should be
compelled to pay the balance of the purchaser price, the guarantor will in turn be
entitled to recover what she has paid from the debtor vendee (Article 2066, Civil Code).
Thus, ultimately, it will be the vendee who will be made to bear the payment of the
balance of the price, despite the earlier foreclosure of the chattel mortgage given by
him. Thus, the protection given by Article 1484 would be indirectly subverted, and
public policy overturned.
5.
Action without a definitive or exclusive meaning; Action referred to in

Article 1484 thus may be judicial or extrajudicial
The word action is without a definite or exclusive meaning. It has been
invariably defined as the legal demand of ones right, or rights; the lawful demand of
ones rights in the form given by law; a demand of a right in a court of justice; the
lawful demand of ones right in a court of justice; the legal and formal demand of ones
rights from another person or party, made and insisted on in a court of justice; a claim
made before a tribunal; an assertion in a court of justice of a right given by law; a
demand or legal proceeding in a court of justice to secure ones rights; the prosecution
of some demand in a court of justice; the means by which men litigate with each other;
the means that the law has provided to put the cause of action into effect (Gutierrez
Hermanos vs. De la Riva, 46 Phil. 827, 834-835). Considering the purpose for which the
Sales, 2003 ( 94 )
prohibition contained in Article 1484 was intended, the word action used therein may
be construed as referring to any judicial or extrajudicial proceeding by virtue of which
the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied
balance of the purchase price from the purchaser or his privy. Certainly, an extrajudicial
foreclosure of a real estate mortgage is one such proceeding.
6.
Award of attorneys fees; Litigation was avoidable as law and jurisprudence

are explicit
The provision of law and jurisprudence on the matter being explicit so that this
litigation could have been avoided, the award by the lower court of attorneys fees to
Cruz, et.al. in the sum of P200.00 is reasonable and in order.
7.
Reimbursement for FIFC payment of Reyes outstanding balance on loan with

DBP
To the extent that she was benefited by the payment of FIFC to DBP, for the release of
the first mortgage of Reyes land, Reyes should have been required to reimburse FIFC.
[24]
Cuyugan v. Santos, 34 PHIL 100 (1916)
[25]
Dagupan Trading vs. Macam [G.R. No. L-18497.
May 31, 1965.] En Banc, Dizon (J): 7 concurring
Facts: In 1955, Sammy Maron and his 7 brothers and sisters were pro-indiviso owners
of a parcel of unregistered land located in barrio Parayao, Binmaley, Pangasinan. While
their application for registration of said land under Act 496 was pending, they executed,
on June 19 and 21 September 1955, two deeds of sale conveying the property to
Rustico Macam, who thereafter took possession thereof and proceeded to introduce
substantial improvements therein. One month later, that is on 14 October 1955, OCT
6942 covering the land was issued in the name of the Marons, free from all liens and
encumbrances. On 4 August 1956, by virtue of a final judgment rendered in Civil Case
42215 of the Municipal Court of Manila against Sammy Maron in favor of the Manila
Trading and Supply Company, levy was made upon whatever interest he had in the the
property, and thereafter said interest was sold at public auction to the judgment
creditor. The corresponding notice of levy, certificate of sale and the sheriffs certificate
of final sale in favor of the Manila Trading and Supply Co. (because nobody exercised
the right of redemption) were duly registered. On 1 March 1958, the latter sold all its
rights and title in the property to Dagupan Trading Company.
On 4 September 1958, Dagupan Trading commenced an action against Macam with the
CFI Pangasinan (Civil Case 13772), praying that it be declared owner of 1/7 portion of
the land; that a partition of the whole property be made; that Macam be ordered to pay
it the amount of P500.00 a year as damages from 1958 until said portion is delivered,
plus attorneys fees and costs. Answering the complaint, Macam alleged that Sammy
Marons share in the property, as well as that of all his co-heirs, had been acquired by
purchase by him since June 19 and 21 September 1955, before the issuance of the OCT
in their name; that at the time levy in execution was made on Marons share therein,
Sales, 2003 ( 95 )
the latter had no longer any right or interest in said property; that Dagupan Trading and
its predecessor in interest were cognizant of the facts already mentioned; that since the
sales made in his favor, he had enjoyed uninterrupted possession of the property and
introduced considerable improvements therein. Macam likewise sought to recover
damages by way of counterclaim.
After trial upon the issue thus joined, the court rendered judgment dismissing the
complaint, which, on appear, was affirmed by the Court of Appeals. Hence, the appeal
by Dagupan Trading.
The Supreme Court affirmed the decision appealed from; with costs.
1.
[If] Situation 1: Unregistered land, Macam having better right

If the property covered by the conflicting sales were unregistered land, Macam
would undoubtedly have the better right in view of the fact that his claim is based on a
prior sale coupled with public, exclusive and continuous possession thereof as owner.
2.
[If] Situation 2: Registered Land, Dagupan Trading having better right

Were the land involved in the conflicting transactions duly registered land,
Dagupan Trading has the better right because in case of conveyance of registered real
estate, the registration of the deed of sale is the operative act that gives validity to the
transfer. This would be fatal to Macams claim, the deeds of sale executed in his favor
by the Marons not having been registered, while the levy in execution and the
provisional certificate of sale as well as the final deed of sale in favor of appellant were
registered.
Consequently, this registered conveyance must prevail although posterior to the one
executed in favor of Macam, and Dagupan Trading must be deemed to have acquired
such right, title and interest as appeared on the certificate of title issued in favor of
Sammy Maron, subject to no lien, encumbrance or burden not noted thereon.
(Anderson & Co., vs. Garcia 64 Phil. 506; Reynes et al., vs. Barrera, et al., 68 Phil. 656;
Banco National, etc. vs. Camus, 70 Phil. 289)
3.
Present case does not fall within either situation; Last paragraph of Section
35, Rule 39 of Rules of Court applies
The sale in favor of Macam was executed before the land subject matter thereof
was registered, while the conflicting sale in favor of Dagupan Trading was executed
after the same property had been registered. The case, therefore, cannot be decide the
case in the light of whatever adjudicated cases there are covering the two situations
mentioned. What should determine the issue are the provisions of the last paragraph of
Section 35, Rule 39 of the Rules of Court, to the effect that upon the execution and
delivery of the final certificate of sale in favor of the purchaser of land sold in an
execution sale, such purchaser shall be substituted to and acquire all the right, title,
interest and claim of the judgment debtor to the property as of the time of the levy.
4.
Maron does not have claim and interest on 1/8 portion of land at time of levy
Sammy Maron has no interest or claim on the 1/8 portion of the property
inherited by him and his coheirs, at the time of the levy, because for a considerable
Sales, 2003 ( 96 )
time prior to the levy, his interest had already been conveyed to Macam, fully and
irretrievably.
5.
Levy was void and of no effect

Consequently, subsequent levy made on the property for the purpose of
satisfying the judgment rendered against Sammy Maron in favor of the Manila Trading
Company was void and of no effect. (Buson vs. Licauco 13 Phil. 357-358; Landig vs. U.
S. Commercial Company, 89 Phil. 638).
6.
Torrens title did not cancel unregistered sale and consequent conveyance of
title and ownership
The unregistered sale and the consequent conveyance of title and ownership in
favor of Macam could not have been cancelled and rendered of no effect upon the
subsequent issuance of the Torrens title over the entire parcel of land.
7.
Right fixed and established cannot be overthrown by artificial and technical

grounds
In the inevitable conflict between a right of ownership already fixed and
established under the Civil Law and/or the Spanish Mortgage Law (which cannot be
affected by any subsequent levy or attachment or executions) and a new law or system
which would make possible the overthrowing of such ownership on admittedly artificial
and technical grounds, the former must be upheld and applied.
8.
Circumstances does not justify technicality to prevail; Justice and Equity

An important circumstance must be noted; that upon the execution of the deed
of sale in his favor by Sammy Maron, Macam took possession of the land conveyed as
owner thereof, and introduced considerable improvements therein. To deprive him now
of the same by sheer force of technicality would be against both justice and equity.
[26]
Dalion vs. CA [G.R. No. 78903. February 28, 1990.]
First Division, Medialdea (J): 3 concurring
Facts: On 28 May 1973, Ruperto Sabesaje Jr. sued to recover ownership of a parcel of
land (located at Panyawan, Sogod, Southern Leyte; TCT 11148, with an area of 8947
sq.ms., assessed at P180), based on a private document of absolute sale, dated 1 July
1965, allegedly executed by Segundo Dalion, who, however denied the fact of sale,
contending that the document sued upon is fictitious, his signature thereon, a forgery,
and that subject land is conjugal property, which he and his wife (Epifania SabesajeDalion) acquired in 1960 from Saturnina Sabesaje as evidenced by the Escritura de
Venta Absoluta. The spouses denied claims of Sabesaje that after executing a deed of
sale over the parcel of land, they had pleaded with Sabesaje, their relative, to be
allowed to administer the land because Dalion did not have any means of livelihood.
They admitted, however, administering since 1958, 5 parcels of land in Sogod,
Southern Leyte, which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who
died in 1956. They never received their agreed 10% and 15% commission on the
sales of copra and abaca, respectively. Sabesajes suit, they countered, was intended
merely to harass, preempt and forestall Dalions threat to sue for these unpaid
commissions. The trial court rendered its decision on 17 January 1984, ordering Dalion
Sales, 2003 ( 97 )
to deliver to Sabesaje the parcel of land subject of the case and to execute the
corresponding formal deed of conveyance in a public document in favor of Sabesaje (or
in case of default, the deed shall be executed in their behalf by the Provincial Sheriff or
his deputy), ordering Dalion to pay Sabesaje the amount of P2,000 as attorney fees and
P500 as litigation fees, and to pay the costs.
From the adverse decision of the trial court, Dalion appealed, assigning errors some of
which, however, were disregarded by the appellate court, not having been raised in the
trial court. On 26 May 1987, the Court of Appeals affirmed in toto the ruling of the trial
court, upholding the validity of the sale of a parcel of land by Segundo Dalion in favor of
Ruperto Sabesaje, Jr. Hence, the petition.
The Supreme Court denied the petition, and affirmed the decision of the Court of
Appeals upholding the ruling of the trial court; without costs.
1.
Admissibility of a private writing

Section 21, Rule 132 of the Rules of Court (Private writing, its execution and
authenticity, how proved) provides that Before any private writing may be received in
evidence, its due execution and authenticity must be proved either: (a) By anyone who
saw the writing executed; (b) By evidence of the genuineness of the handwriting of the
maker; or (c) By a subscribing witness.
2.
Proof of Handwriting
Section 23, Rule 132 of the Rules of Court (Handwriting, how proved.) provides
that The handwriting of a person may be proved by any witness who believes it to be
the handwriting of such person, and has seen the person write, or has seen writing
purporting to be his upon which the witness has acted or been charged, and has thus
acquired knowledge of the handwriting of such person. Evidence respecting the
handwriting may also be given by a comparison, made by the witness or the court, with
writings admitted or treated as genuine by the party against whom the evidence is
offered, or proved to be genuine to the satisfaction of the judge.
3.
Each party must prove his own affirmative allegations

Against Dalions mere denial that he signed the document, the positive
testimonies of the instrumental witnesses Ogsoc (the one who prepared the deed) and
Espina, aside from the testimony of Sabesaje, must prevail. Dalion has affirmatively
alleged forgery, but he never presented any witness or evidence to prove his claim of
forgery. Each party must prove his own affirmative allegations (Section 1, Rule 131,
Rules of Court).
4.
Forgery not presumed; Presumption of innocence

It is presumed that a person is innocent of a crime or wrong (Section 5 (a), idem),
and defense should have come forward with clear and convincing evidence to show
that Sabesaje committed forgery or caused said forgery to be committed, to overcome
the presumption of innocence. Mere denial of having signed does not suffice to show
forgery.
Forger would attempt to forge an unnecessary signature
5.
Sales, 2003 ( 98 )
Two signatures of Segundo D. Dalion appear on the face of the questioned

document, one at the right corner bottom of the document and the other at the left
hand margin thereof. The second signature is already a surplusage. A forger would not
attempt to forge another signature, an unnecessary one, for fear he may commit a
revealing error or an erroneous stroke.
6.
Conclusions and findings of fact by trial court entitled to great weight on

appeal
Appellate courts have consistently subscribed to the principle that conclusions
and findings of fact by the trial courts are entitled to great weight on appeal and should
not be disturbed unless for strong and cogent reasons, since it is undeniable that the
trial court is in a more advantageous position to examine real evidence, as well as to
observe the demeanor of the witnesses while testifying in the case (Chase v.
Buencamino, Sr., G.R. No. L-20395, May 13, 1985, 136 SCRA 365; Pring v. Court of
Appeals, G.R. No. L-41605, August 19, 1985, 138 SCRA 185)
7.
Article 1358 for convenience, not for validity or enforceability

The provision of Article 1358 on the necessity of a public document (i.e. acts
and contracts which have for their object the creation, transmission, modification or
extinction of real rights over immovable property must appear in a public instrument)
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.
8.
Contract of sale is consensual

A contract of sale is a consensual contract, which means that the sale is perfected
by mere consent. No particular form is required for its validity. Upon perfection of
the contract, the parties may reciprocally demand performance (Art. 1475, NCC),
i.e., the vendee may compel transfer of ownership of the object of the sale, and
the vendor may require the vendee to pay the thing sold (Art. 1458, NCC).
9.
Delivery; Execution of formal deed of conveyance in public document

equivalent to delivery of thing
Under Art. 1498, NCC, when the sale is made through a public instrument, the
execution of the corresponding formal deed of conveyance in a public document
thereof is equivalent to the delivery of the thing. Delivery may either be actual (real) or
constructive. Thus delivery of a parcel of land may be done by placing the vendee in
control and possession of the land (real) or by embodying the sale in a public
instrument (constructive).
10.
Suit for recovery of ownership is proper

Article 1475 of the Civil Code gives the parties to a perfected contract of sale the
right to reciprocally demand performance, and to observe a particular form, if
warranted, (Art. 1357). Sabesajes complaint sufficiently alleged a cause of action to
compel Dalion to execute a formal deed of sale, and the suit for recovery of ownership,
which is premised on the binding effect and validity inter partes of the contract of sale,
merely seeks consummation of said contract.
11.
Sale of real property may be in a private instrument
Sales, 2003 ( 99 )
A sale of a real property may be in a private instrument, but that contract is valid
and binding between the parties upon its perfection. And a party may compel
the other party to execute a public instrument embodying their contract
affecting real rights once the contract appearing in a private instrument has
been perfected (See Art. 1357).
[27]
Daguilan vs. IAC [G.R. No. L-69970. November 28, 1988.]
First Division, Cruz (J): 4 concur
Facts: Two lots were owned by Domingo Melad. The lots are claimed by both Felix
Daguilan and Apolonia
Melad (and her husband Jose Tagacay). On 29 January 1962, Apolonia Melad filed a
complaint against Daguilan in the then CFI Cagayan for recovery of a farm lot and a
residential lot which she claimed she had purchased from Domingo Melad in 1943 and
were now being unlawfully withheld by Daguilan. In his answer, Daguilan denied the
allegation and averred that he was the owner of the said lots of which he had been in
open, continuous and adverse possession, having acquired them from Domingo Melad
in 1941 and 1943. The case was dismissed for failure to prosecute but was refiled in
1967. At the trial, Melad presented a deed of sale dated 4 December 1943, purportedly
signed by Domingo Melad and duly notarized, which conveyed the said properties to
her for the sum of P80.00. She said the amount was earned by her mother as a worker
at the Tabacalera factory. She claimed to be the illegitimate daughter of Domingo
Melad, with whom she and her mother were living when he died in 1945. She moved
out of the farm only when in 1946 Felix Danguilan approached her and asked
permission to cultivate the land and to stay therein. She had agreed on condition that
he would deliver part of the harvest from the farm to her, which he did from that year
to 1958. The deliveries having stopped, she then consulted the municipal judge who
advised her to file the complaint against Danguilan. Melads mother, her only other
witness, corroborated this testimony. Daguilan testified that he was the husband of
Isidra Melad, Domingos niece, whom Domingo Melad and his wife Juana Malupang had
taken into their home as their ward as they had no children of their own. He and his
wife lived with the couple in their house on the residential lot and helped Domingo with
the cultivation of the farm. Domingo Melad signed in 1941 a private instrument in
which he gave Daguilan the farm and in 1943 another private instrument in which he
also gave him the residential lot, on the understanding that the latter would take care
of the grantor and would bury him upon his death. Danguilan presented three other
witnesses to corroborate his statements and to prove that he had been living in the
land since his marriage to Isidra and had remained in possession thereof after Domingo
Melads death in 1945. Two of said witnesses declared that neither the plaintiff nor her
mother lived in the land with Domingo Melad. The trial court believed Daguilan and
rendered a decision based mainly on the issue of possession.
On appeal, however, the appellate court upheld Melad as the true and lawful owner of
the disputed property, holding that the private instruments where Domingo Melad had
conveyed the land to Daguilan were null and void for reason that donation of real
Sales, 2003 ( 100 )
property should be effected through a public instrument. Hence, the petition to the
Supreme Court.
The Supreme Court set aside the decision of the appellate court and reinstated that of
the trial court, with costs against Apolonia Melad.
1.
Onerous donations not covered by Articled 749, requiring donations of real

properties be effected through a public instrument
Considering the language of the two private instruments delivering the
residential lots, Domingo Melad did intend to donate the properties to Daqguilan. The
donee, however, was not moved by pure liberality. While truly donations, the
conveyances were onerous donations as the properties were given to Daguilan in
exchange for his obligation to take care of the donee for the rest of his life and provide
for his burial. Hence, it was not covered by the rule in Article 749 of the Civil Code
requiring donations of real properties to be effected through a public instrument.
2.
Doctrine in Manalo vs. de Mesa applies

The present case is squarely under the doctrine laid down in Manalo v. De Mesa,
where it was held that the donation in question was made for a valuable consideration,
since the donors made it conditional upon the donees bearing the expenses that might
be occasioned by the death and burial of the donor, a condition and obligation which
the donee carried out in his own behalf and for his wife. Therefore, in order to
determine whether or not said donation is valid and effective, it should be sufficient to
demonstrate that, as a contract, it embraces the conditions the law requires and is
valid and effective, although not recorded in a public instrument.
3.
No evidence adduced to support values exchanged were disproportionate or

equal
No evidence has been adduced to support the contention that the values
exchanged (the value of the lands donated and the services for which they were being
exchanged) were disproportionate or unequal for the two transactions to be considered
pure or gratuitous donations of real rights, and hence, be effected through a public
instrument and not by mere private writings.
4.
Daguilan took care of the Melad spouses; Proof of onerous donation

Both the trial and appellate court affirmed the factual allegation that Daguilan
took care of Domingo Melad and later arranged for his burial in accordance with the
condition imposed by the donor. Daguilan farmed the land practically by himself and so
provided for the donee (and his wife) during the latter part of Domingo Melads life. It
may be assumed that there was a fair exchange between the donor and the donee that
made the transaction an onerous donation.
5.
Deed of Sale in favor of Apolonia Melad suspicious

The deed of sale in favor of Apolonia Melad was suspicious. It was allegedly
executed when Apolonia was only three years old and the consideration was
supposedly paid by her mother, Maria Yedan, from her earnings as a wage worker in a
factory. One may well wonder why the transfer was not made to the mother herself,
who was after all the one paying for the lands. The sale was made out in favor of
Apolonia Melad although she had been using the surname Yedan, her mothers
surname, before that instrument was signed and in fact even after she got married.
Sales, 2003 ( 101 )
Averment was also made that the contract was simulated and prepared after Domingo
Melads death in 1945. It was also alleged that even after the supposed execution of
the said contract, Apolonia Melad considered Domingo Melad the owner of the
properties and that she had never occupied the same. Considering these serious
challenges, the appellate court could have devoted a little more time to examining the
deed and the circumstances surrounding its execution before pronouncing its validity.
6.
Presumption of due execution of a public instrument

Due execution of a public instrument is presumed, the presumption is disputable
and will yield to contradictory evidence, which in the present case was not refuted.
7.
Melads testimony inconsistent, fails to prove actual delivery of thing sold in

the alleged deed of sale
Even assuming the validity of the deed of sale, the record shows that Melad did
not take possession of the disputed properties and indeed waited until 1962 to file the
action for recovery of the lands from Daguilan. If she did have possession, she
transferred the same to Daguilan in 1946, by her own sworn admission, and moved out
to another lot belonging to her step-brother. Her claim that Daguilan was her tenant
(later changed to administrator) was disbelieved by the trial court, and properly so, for
its inconsistency. In short, she failed to show that she consummated the contract of
sale by actual delivery of the properties to her and her actual possession thereof in
concept of purchaser-owner.
8.
Garchitorena vs. Almeda; Tradition: Ownership does not pass by mere

stipulation but only by delivery
As held in Garchitorena v. Almeda, it is a fundamental and elementary
principle that ownership does not pass by mere stipulation but only by delivery (Civil
Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the execution of a
public document does not constitute sufficient delivery where the property involved is
in the actual and adverse possession of third persons (Addison vs. Felix, 38 Phil. 404;
Masallo vs. Cesar, 39 Phil. 134), it becomes incontestable that even if included in the
contract, the ownership of the property in dispute did not pass to the vendee.
Garchitorena vs. Almeda; Proper action against present possessors: specific
performance of sale and not revindicacion
Not having become the owner for lack of delivery, the vendee cannot presume to
recover the property from its present possessors. His action, therefore, is not one of
revindicacion, but one against his vendor for specific performance of the sale to him.
9.
9.
Non mudis pactis, sed traditione dominia rerum transferuntur

In Fidelity and Deposit Co. v. Wilson, it was declared that it is a fundamental
principle in all matters of contracts and a well-known doctrine of law that non mudis
pactis, sed traditione dominia rerum transferuntur. As established in paragraph 2 of
article 609 of Civil Code, the ownership and other property rights are acquired and
transmitted by law, by gift, by testate or intestate succession, and, in consequence of
certain contracts, by tradition. The logical application of this disposition article 1095
prescribes that a creditor has the rights to the fruits of a thing from the time the
obligation to deliver it arises. However, he shall not acquire a real right (and the
ownership is surely such) until the property has been delivered to him. In accordance
Sales, 2003 ( 102 )
with such disposition and provisions the delivery of a thing constitutes a necessary and
indispensable requisite for the purpose of acquiring the ownership of the same by
virtue of a contract.
10.
Doctrine of transfer of property by mere consent not admitted

As Manresa states in his Commentaries on the Civil Code, volume 10, pages 339
and 340: Our law does not admit the doctrine of the transfer of property by mere
consent but limits the effect of the agreement to the due execution of the contract . . .
The ownership, the property right, is only derived from the delivery of a thing . . .
11.
Actual delivery of the thing sold

The Code imposes upon the vendor the obligation to deliver the thing sold. The
thing is considered to be delivered when it is placed in the hands and possession of the
vendee. (Civil Code, art. 1462). It is true that the same article declares that the
execution of a public instrument is equivalent to the delivery of the thing which is the
object of the contract, but, in order that this symbolic delivery may produce the effect
of tradition, it is necessary that the vendor shall have had such control over the thing
sold that, at the moment of the sale, its material delivery could have been made. It is
not enough to confer upon the purchaser the ownership and the right of possession.
The thing sold must be placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is sufficient. But
if, notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality the delivery has not been
effected. In the present case, Daguilan and not Melad is in actual possession of the
litigated properties.
12.
In case the respective claims of the parties are weak; Santos & Espinosa v.
Estejada
Even if the respective claims of the parties were both to be discarded as being
inherently weak, the decision should still incline in favor of Daguilan pursuant to the
doctrine announced in Santos & Espinosa v. Estejada, where the Court announced
that if the claim of both the plaintiff and the defendant are weak, judgment must be for
the one who is in possession, as he is presumed to be the owner, and cannot be obliged
to show or prove a better right.
[28]
De la Cavada v. Diaz [G.R. No. L-11668. April 1, 1918.]
First Division, Johnson (J): 5 concurring
Facts: On 15 November 1912, Antonio Diaz and Antonio Enriquez de la Cavada entered
into a contract of option for the latter to purchase the formers hacienda at Pitogo,
within the period necessary for the approval and issuance of a Torrens title thereto by
the Government for P30,000 in cash or P40,000 with 6% interest per annum within 6
years with due security, i.e. the 100 hectares of land in Pitogo, Tayabas; containing
20,000 coconut trees and 10,000 nipa-palm trees sold to Enriquez for P70,000.
Subsequently, Enriquez informed Diaz of his conformity with the letter of option under
the condition that he shall send a surveyor to survey the said property, and to apply to
Sales, 2003 ( 103 )
the Government for a Torrens title therefor, and, if the expenses incurred for the same
should not exceed P1,000, he shall pay the P500 and you the other P500; Provided,
however, that Diaz shall give the surveyor all necessary assistance during his stay at
the hacienda; and that he shall pay the purchase price to you in conformity with our
letter of option of this date, and after the Torrens title shall have been officially
approved. Soon after the execution of said contract, and in part compliance with the
terms thereof, Diaz presented 2 petitions in the Court of Land Registration (13909 and
13919), each for the purpose of obtaining the registration of a part of the Hacienda de
Pitogo. Said petitions were granted, and each parcel was registered and a certificate of
title was issued for each part under the Torrens system to Diaz. Later, and pretending to
comply with the terms of said contract, Diaz offered to transfer to Enriquez one of said
parcels only, which was a part of said hacienda. Enriquez refused to accept said
certificate for a part only of said hacienda upon the ground that it was only a part of
the Hacienda de Pitogo, and under the contract he was entitled to a transfer to him a
all said hacienda.
Raised in the lower court, Diaz theorized that the contract of sale of said Hacienda de
Pitogo included only 100 hectares, more or less, of said hacienda, and that offering
to convey to Enriquez a portion of said hacienda, and that by offering to convey to
Enriquez a portion of said hacienda composed of 100 hectares, more or less, he
thereby complied with the terms of the contract. Enriquez theorized, on the other hand,
that he had purchased all of said hacienda, and that the same contained, at least,
100 hectares, more or less. The lower court sustained the contention of Enriquez, that
the sale was a sale of the Hacienda de Pitogo and not a sale of a part of it. The Court
ordered Diaz, within 30 days from the date upon which this decision becomes final,
convey to Enriquez a good and sufficient title in fee simple to the Court of Land
Registration, upon payment or legal tender of payment by Enriquez of the sum of
P30,000 in cash, and upon Enriquez giving security approved by this court for the
payment within the term of 6 years from the date of the conveyance for the additional
sum of P40,000 with interest at the rate of 6% per annum. The Court further ordered
and adjudged that in the event of the failure of Diaz to execute the conveyance,
Enriquez has and recover judgment against him, Diaz, for the sum of P20,000, with
interest at the rate of 6% (6% per annum from the date upon which the conveyance
should have been made). From the judgment, Diaz appealed.
The Supreme Court affirmed the judgment of the lower court, with costs.
1.
Agreement between parties in civil litigation valid

On 21 November 1914, the parties agreed (with reference to the method of
presenting their proof) that each of the litigating parties shall present his evidence
before Don Felipe Canillas, assistant clerk of the CFI Manila, who, for such purpose,
should be appointed commissioner; that said commissioner shall set a day and hour for
the presentation of the evidence, both oral and documentary, and in the stenographic
notes shall have record entered of all objections made to the evidence by either party,
in order that they may afterwards be decided by the court; that the transcription of the
stenographic notes, containing the record of the evidence taken, shall be paid for in
equal shares by both parties; and that at the close of the taking of the evidence, each
of the parties shall file his brief in respect to such evidence, whereupon the case as it
Sales, 2003 ( 104 )
then stands shall be submitted to the decision of the court. Said agreement was
approved by the lower court. There is nothing in the law nor in public policy which
prohibits the parties in a civil litigation from making an agreement on the method of
presentation of their proofs. While the law concedes to parties litigant, generally, the
right to have their proof taken in the presence of the judge, such a right is a
renounceable one. In a civil action the parties litigant have a right to agree, outside of
the court, upon the facts in litigation. Under certain conditions the parties litigant have
a right to take the depositions of witnesses and submit the sworn statements in that
form to the court. The proof, as it was submitted to the court in the present case, by
virtue of said agreement, was, in effect, in the form of a deposition of the various
witnesses presented. Having agreed to the method of taking the proof, and the same
having been taking in compliance with said agreement, it is now too late, there being
no law to the contrary, for them to deny and repudiate the effect of their agreement.
(Biunas vs. Mora, R.G. No. 11464, March 11, 1918; Behr vs. Levy Hermanos, R.G. No.
12211, March 19, 1918.) Not only is there no law prohibiting the parties from entering
into an agreement to submit their proof to the court in civil actions, but it may be a
method highly convenient, not only to the parties, but to busy courts. The judgment of
the lower court, therefore, should not be modified or reversed.
2.
Contract offered in evidence, and not objected to; thus, was properly
presented
The contract was offered in evidence and admitted as proof without objection.
Said contract was, therefore, properly presented to the court as proof. Not only was the
contract before the court by reason of its having been presented in evidence, but that
Diaz himself made said contract an integral part of his pleadings. Diaz admitted the
execution and delivery of the contract, and alleged that he made an effort to comply
with its terms. His only defense is that he sold to Enriquez a part of the hacienda only
and that he offered, in compliance with the terms of the contract, to convey to Enriquez
all of the land which he had promised to sell.
3.
Inadequacy of consideration raised for the first time on appeal

With reference to the objection that there was no consideration for said contract
it may be said (a) that the contract was for the sale of a definite parcel of land: (b) that
it was reduced to writing; (c) that Diaz promised to convey to Enriquez said parcel of
land; (d) that Enriquez promised to pay therefor the sum of P70,000 in the manner
prescribed in said contract; (e) that Diaz admitted the execution and delivery of the
contract and alleged that he made an effort to comply with the same and requested
Enriquez to comply with his part of the contract; and (f) that no defense or prevention
was made in the lower court that there was no consideration for his contract. Having
admitted the execution and delivery of the contract, having admitted an attempt to
comply with its terms, and having failed in the court below to raise any question
whatsoever concerning the inadequacy of consideration, it is rather late, in the face of
said admissions, to raise that question for the first time in the Supreme Court.
4.
A promise made in accordance with forms required by law may be a good

consideration for a another partys promise
A promise made by one party, if made in accordance with the forms required by
the law, may be a good consideration (causa) for a promise made by another party.
(Art. 1274, Civil Code.) The consideration (causa) need not pass from one to the other
at the time the contract is entered into. For example, A promises to sell a certain parcel
Sales, 2003 ( 105 )
of land to B for the sum of P70,000. If A, by virtue of the promise of B to P70,000,

promises to sell said parcel of land to B for said sum, then the contract is complete,
provided they have complied with the forms required by the law. A cannot enforce a
compliance with the contract and require B to pay said sum until he has complied with
his part of the contract.
5.
Contract not an optional contract in its ordinary meaning, but an absolute

promise to sell a land for a fixed price upon definite condition
The contract was not an optional contract as that phrase in generally used. It is
clearly an absolute promise to sell a definite parcel of land for a fixed price upon
definite conditions. Diaz promised to convey to Enriquez the land in question as soon as
the same was registered under the Torrens system, and Enriquez promised to pay to
Diaz the sum of P70,000, under the condition named, upon the happening of that
event.
6.
Contract of option distinguished from present contract

The contract was not what is generally known as a contract of option. It differs
very essentially from a contract of option. An optional contract is a privilege existing in
one person, for which he had paid a consideration, which gives him the right to buy, for
example, certain merchandise of certain specified property, from another person, if he
chooses, at any time within the agreed period, at a fixed price. The contract of option is
a separate and distinct contract from the contract which the parties may enter into
upon the consummation of the option. A consideration for an optional contract is just as
important as the consideration for any other kind of contract. If there was no
consideration for the contract of option, then it cannot be enforced any more than any
other contract where no consideration exists. To illustrate, A and B the sum of
P100,000 for the option of buying his property within the period of 30 days. While it is
true that the conditions upon which A promises to buy the property at the end of the
period mentioned are usually fixed in the option, the consideration from the
consideration of the contract with reference to which the option exists. A contract of
option is a contract by virtue of the terms of which the parties thereto promise and
obligate themselves to enter into another contract at a future time, upon the happening
of certain events, or the fulfillment of certain conditions.
7.
Laying the foundation for action damages

When Diaz alleged that he had complied with his part of the contract and
demanded that Enriquez should immediately comply with his part of the same, he
evident was laying the foundation for an action damages, the nullification or a specific
compliance with contract.
8.
Contract made with Enriquez, and not Rosenstock

Upon the face of the contract, the contract was made by Diaz with Enriquez. Not
having raised the contention, that the contract was made with Rosenstock, Elser & Co.
and not with Enriquez, in the lower court, and having admitted the execution and
delivery of the contract in question with the plaintiff, Diaz admission is conclusive upon
that question and need not be further discussed.
Sales, 2003 ( 106 )
9.
Action not premature; Payment simultaneous with delivery of deed of

conveyance but not need not be made until deed of conveyance is offered
The action was not premature. The contention that Enriquez had not paid nor
offered to pay the price agreed upon, under the conditions named, for the land in
question was not raised in the lower court, which fact, ordinarily, would be a sufficient
answer to the contention of the appellant. Still, Diaz could not demand the payment
until he had offered the deeds of conveyance, in accordance with the terms of the
contract, as he did not offer to comply with the terms of his contract. He offered to
comply partially with the terms of the contract, but not fully. While the payment must
be simultaneous with the delivery of the deeds of conveyance, the payment need not
be made until deed of conveyance is offered. Enriquez stood ready and willing to
perform his part of the contract immediately upon on the part of Diaz. (Arts. 1258 and
1451 of Civil Code.)
10.
Enriquez stood ready to comply

It cannot be said that Diaz was not obligated to sell the Hacienda de Pitogo to
Enriquez due to Enriquez alleged nonfulfillment, renunciation, abandonment and
negligence, as such question was not presented to the lower court. Still, the record
shows that Enriquez, at all times, insisted upon a compliance with the terms of the
contract on the part of Diaz, standing ready to comply with his part of the same.
Enriquez was constantly insisting upon compliance with the terms of the contract, to
wit, a conveyance to him of the Hacienda de Pitogo by Diaz. Naturally, he refused,
under the contract, to accept a conveyance of a part only be said hacienda.
11.
No modification due to Enriquez claim for damages

The only proof upon the question of damages suffered by Enriquez for the
noncompliance with the terms of the contract in question on the part of Diaz is that
Enriquez, in contemplation of the compliance with the terms of the contract on the part
of Diaz, entered into a contract with a third party to sell the said hacienda at a profit
of P30,000. That proof is not disputed. No attempt was made in the lower court to deny
that fact. The proof shows that the person with whom Enriquez had entered into a
conditional sale of the land in question had made a deposit for the purpose of
guaranteeing the final consummation of the that contract. By reason of the failure of
Diaz to comply with the contract here in question, Diaz was obliged to return the sum
deposited by said third party with a promise to pay damages. The record does not show
why Enriquez did not ask for damages in the sum of P30,000, but asked for a judgment
only in the sum of P20,000. Considering the fact that he neither asked for a judgment
for more than P20,000 nor appealed from the judgment of the lower court, Enriquez
request to modify the judgment of the lower court cannot be granted.
12.
Subsequent sale of land to third person not an excuse for compliance of

terms of contracts or to answer for damages
The mere fact that Diaz had sold a part of the hacienda to other person, is no
sufficient reason for not requiring a strict compliance with the terms of his contract with
Enriquez, or to answer in damages for his failure. (Arts. 1101 and 1251 of the Civil
Code.)
[29]
Sales, 2003 ( 107 )
Delta Motors Sales vs. Niu Kim Duan [G.R. No. 61043.
September 2, 1992.] Second Division, Nocon (J): 4 concurring
Facts: On 5 July 1975, Niu Kim Duan and Chan Fue Eng (defendants) purchased from
Delta Motor Sales Corporation 3 units of DAIKIN air-conditioner all valued at
P19,350.00. The deed of sale stipulates that the defendants shall pay a down payment
of P774.00 and the balance of P18,576.00 shall be paid by them in 24 installments; that
the title to the properties purchased shall remain with Delta Motors until the purchase
price thereof is fully paid; that if any two installments are not paid by the defendants on
their due dates, the whole of the principal sum remaining unpaid shall become due,
with interest at the rate of 14% per annum: and in case of a suit, the defendants shall
pay an amount equivalent to 25% of the remaining unpaid obligation as damages,
penalty and attorneys fees; that to secure the payment of the balance of P18,576.00
the defendants jointly and severally executed in favor of the Delta Motors a promissory
note. The 3 air-conditioners were delivered to and received by the defendants. After
paying the amount of P6,966.00, the defendants failed to pay at least 2 monthly
installments; that as of 6 January 1977, the remaining unpaid obligation of the
defendants amounted to P12,920.08. Statements of accounts were sent to the
defendants and the Delta Motors collectors personally went to the former to effect
collections but they failed to do so. Because of the unjustified refusal of the defendants
to pay their outstanding account and their wrongful detention of the properties in
question, Delta Motors tried to recover the said properties extra-judicially but it failed to
do so. The matter was later referred by Delta Motors to its legal counsel for legal action.
In its verified complaint dated 28 January 1977, Delta Motors prayed for the issuance of
a writ of replevin, which the Court granted in its Order dated 28 February 1977, after
Delta Motors posted the requisite bond. On 11 April 1977, Delta Motors, by virtue of the
writ, succeeded in retrieving the properties in question. As of 3 October 1977, the
outstanding account of the defendants is only in the amount of P6,188.29 as shown by
the computation, after deducting the interests in arrears, cover charges, replevin bond
premiums, the value of the units repossessed and the like. In view of the failure of the
defendants to pay their obligations, the amount of P6,966.00 which had been paid by
way of installments were treated as rentals for the units in question for 2 years
pursuant to the provisions of paragraph 5 of the Deed of Conditional Sale. The trial
court promulgated its decision on 11 October 1977 ordering the defendants to pay
Delta Motors the amount of P6,188.29 with a 14% per annum interest which was due
on the 3 Daikin air-conditioners the defendants purchased from Delta Motors under a
Deed of Conditional Sale, after the same was declared rescinded by the trial court. They
were likewise ordered to pay Delta Motors P1,000.00 for and as attorneys fees.
Niu Kim Duan and Chan Fue Eng appealed. The case was elevated to the Supreme
Court by the Court of Appeals, in its Resolution of 20 May 1982, on a pure question of
law.
1.
The Supreme Court set aside the judgment of the trial court in Civil Case 25578 and
dismissed the complaint filed by Delta Motor Sales Corporation; without costs.
Treatment of installment payments as rentals not unconscionable (even if it
approximates 1/3 of cost of the 3 airconditioners)
Sales, 2003 ( 108 )
Defendants cannot complain that their downpayment of P774.00 and installment

payments of P5,655.92 were treated as rentals, even though the total amount of
P6,429,92 which they had paid, approximates one-third (1/3) of the cost of the 3 airconditioners. A stipulation in a contract that the installments paid shall not be returned
to the vendee is valid insofar as the same may not be unconscionable under the
circumstances is sanctioned by Article 1486 of the New Civil Code. The monthly
installment payable by defendants was P774.00. The P5,655.92 installment payments
correspond only to 7 monthly installments. Since they admit having used the airconditioners for 22 months, this means that they did not pay 15 monthly installments
on the said air-conditioners and were thus using the same FREE for said period, to the
prejudice of Delta Motors. Under the circumstances, the treatment of the installment
payments as rentals cannot be said to be unconscionable.
2.
Remedies available to vendor in a sale of personal property payable in

installments
The vendor in a sale of personal property payable in installments may exercise
one of three remedies, namely, (1) exact the fulfillment of the obligation, should the
vendee fail to pay; (2) cancel the sale upon the vendees failure to pay two or more
installments; (3) foreclose the chattel mortgage, if one has been constituted on the
property sold, upon the vendees failure to pay two or more installments. The third
option or remedy, however, is subject to the limitation that the vendor cannot recover
any unpaid balance of the price and any agreement to the contrary is void (Art. 1484).
3.
Remedies alternative, not cumulative

The 3 remedies are alternative and NOT cumulative. If the creditor chooses one
remedy, he cannot avail himself of the other two.
4.
Air-conditioning units repossessed, bars action to exact payment for balance

of the price
Delta Motors had taken possession of the 3 air-conditioners, through a writ of
replevin when defendants refused to extra-judicially surrender the same. The case
Delta Motors filed was to seek a judicial declaration that it had validly rescinded the
Deed of Conditional Sale. Delta Motors thus chose the second remedy of Article 1484 in
seeking enforcement of its contract with defendants. Having done so, it is barred from
exacting payment from defendants of the balance of the price of the three airconditioning units which it had already repossessed. It cannot have its cake and eat it
too.
[30]
Dignos vs. Lumungsod [G.R. No. L-59266.
February 29, 1988.] Third Division,
Bidin (J): 4
concurring
Facts: The spouses Silvestre Dignos and Isabel Lumungsod were owners of a parcel of
land (Lot 3453, Opon Cadastre), of the cadastral survey of Opon, Lapu-Lapu City. On 7
June 1965, the Dignos spouses sold the said parcel of land to Atilano J. Jabil for the sum
of P28,000.00, payable in two installments, with an assumption of indebtedness with
the First Insular Bank of Cebu in the sum of P12,000.00, which was paid and
acknowledged by the vendors in the deed of sale executed in favor of Jabil, and the
Sales, 2003 ( 109 )
next installment in the sum of P4,000.00 to be paid on or before 15 September 1965.

On 25 November 1965, the Dignos spouses sold the same land in favor of Luciano
Cabigas and Jovita L. De Cabigas, who were then US citizens, for the price of
P35,000.00. A deed of absolute sale was executed by the Dignos spouses in favor of the
Cabigas spouses, and which was registered in the Office of the Register of Deeds
pursuant to the provisions of Act 3344.
As the Dignos spouses refused to accept from Jabil the balance of the purchase price of
the land, and as Jabil discovered the second sale made by the Dignos spouses to the
Cabigas spouses, Jabil filed the suit with the CFI Cebu (Civil Case 23-L). After due trial,
the CFI Cebu rendered its Decision on 25 August 1972, declaring the deed of sale
executed on 25 November 1965 in favor of the Cabigas spouses null and void, and the
deed of sale in favor of Jabil not rescinded; ordering Jabil to pay the sum of P16,0000 to
the Dignos spouses upon the execution of the Deed of Absolute Sale and when the
decision of the case becomes final and executory; ordering Jabil to reimburse the
Cabigas couple reasonable amount corresponding to the expenses or costs of the
hollow block fence, so far constructed; ordering the Dignos spouses to return to the
Cabigas spouses the sum of P35,000; and making the writ of preliminary injunction
issued 23 September 1966 permanent by virtue of the decision.
Jabil and the Dignos spouses appealed to the Court of Appeals (CA-GR 54393-R). On 31
July 1981, the Court of Appeals affirmed the decision of the lower court except as to the
portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the
building of a fence upon the land in question. A motion for reconsideration of said
decision was filed by the Dignos spouses, but on 16 December 1981, a resolution was
issued by the Court of Appeals denying the motion for lack of merit. Hence, the petition
for review on certiorari.
In the resolution of 10 February 1982, the Second Division of the Supreme Court denied
the petition for lack of merit. A motion for reconsideration of said resolution was filed on
16 March 1982. In the resolution dated 26 April 1982, Jabil was required to comment
thereon, which comment was filed on 11 May 1982 and a reply thereto was filed on 26
July 1982 in compliance with the resolution of 16 June 1982 . On 9 August 1982, acting
on the motion for reconsideration and on all subsequent pleadings filed, the Supreme
Court resolved to reconsider its resolution of 10 February 1982 and to give due course
to the present petition. On 6 September 1982, Jabil filed a rejoinder to reply of the
Dignos spouses which was noted on the resolution of 20 September 1982. The Supreme
Court dismissed the petition filed for lack of merit and affirmed the assailed decision of
the Court of Appeals in toto.
1.
Contract is a Deed of Sale

The contract in question is a Deed of Sale, with the conditions that (1) Atilano G.
Jabil is to pay the amount of Twelve Thousand Pesos (P12,000.00) Philippine Currency
as advance payment; (2) Atilano G. Jabil is to assume the balance of Twelve Thousand
Pesos (P12,000.00) Loan from the First Insular Bank of Cebu; (3) Atilano G. Jabil is to
pay the said spouses the balance of Four Thousand Pesos (P4,000.00) on or before
September 15, 1965. (4) That the said spouses agreed to defend the said Atilano G.
Jabil from other claims on the said property; (5) the spouses agrees to sign a final deed
Sales, 2003 ( 110 )
of absolute sale in favor of Atilano G. Jabil over the above-mentioned property upon the
payment of the balance of Four Thousand Pesos. By and large, the issues in the
present case have already been settled by the Court in analogous cases.
2.
Deed of Sale absolute although denominated as a Deed of Conditional Sale

A deed of sale is absolute in nature although denominated as a Deed of
Conditional Sale where nowhere in the contract in question is a proviso or stipulation
to the effect that title to the property sold is reserved in the vendor until full payment of
the purchase price, nor is there a stipulation giving the vendor the right to unilaterally
rescind the contract the moment the vendee fails to pay within a fixed period (Taguba
v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc.,
86 SCRA 305). In the present case, there is no stipulation reserving the title of the
property on the vendors nor does it give them the right to unilaterally rescind the
contract upon non-payment of the balance thereof within a fixed period.
3.
Elements of valid contract present; Article 1458

All the elements of a valid contract of sale under Article 1458 of the Civil Code,
are present, such as: (1) consent or meeting of the minds; (2) determinate subject
matter; and (3) price certain in money or its equivalent.
Ownership transferred upon actual or constructive delivery; Froilan vs. Pan
Oriental Shipping
In addition, Article 1477 of the same Code provides that The ownership of the
thing sold shall be transferred to the vendee upon actual or constructive delivery
thereof. As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA
276), the Supreme Court held that in the absence of stipulation to the contrary, the
ownership of the thing sold passes to the vendee upon actual or constructive delivery
thereof.
.
Actual delivery made in the present case
While there was no constructive delivery of the land sold in the present case, as
subject Deed of Sale is a private instrument, it is beyond question that there was actual
delivery thereof. As found by the trial court, the Dignos spouses delivered the
possession of the land in question to Jabil as early as 27 March 1965 so that the latter
constructed thereon Sallys Beach Resort also known as Jabils Beach Resort in March,
1965; Mactan White Beach Resort on 15 January 1966 and Bevirlyns Beach Resort on 1
September 1965. Such facts were admitted by the Dignos spouses.
4.
5.
6.
Contemporaneous acts show that absolute deed of sale was intended

The Court of Appeals in its resolution dated 16 December 1981 found that the
acts of the Dignos spouses, contemporaneous with the contract, clearly show that an
absolute deed of sale was intended by the parties and not a contract to sell.
7.
Subsequent sale to the Cabigas spouses null and void

When the Dignoes spouses sold said land to the Cabigas spouses, they were no
longer owners of the same and the sale is null and void.
8.
Taguba vs. Vda. De Leon on all fours; Articles 1592 of the Civil Code
Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on
all fours with the present case, the contract of sale being absolute in nature is governed
by Article 1592 of the Civil Code. The Dignos spouses never notified Jabil by notarial act
Sales, 2003 ( 111 )
that they were rescinding the contract, and neither did they file a suit in court to
rescind the sale.
9.
Article 1358 of the Civil Code, Acts and contracts for the extinguishments of
reaql rights over immovable property must appear in public document
The most that the Dignos spouses were able to show is a letter of Cipriano
Amistad who, claiming to be an emissary of Jabil, informed the Dignos spouses not to
go to the house of Jabil because the latter had no money and further advised the
Dignos spouses to sell the land in litigation to another party. There is no showing that
Amistad was properly authorized by Jabil to make such extra judicial rescission for the
latter who, on the contrary, vigorously denied having sent Amistad to tell the Dignos
spouses that he was already waiving his rights to the land in question. Under Article
1358 of the Civil Code, it is required that acts and contracts which have for their object
the extinguishment of real rights over immovable property must appear in a public
document.
10.
Slight delay by one party not sufficient ground fro rescission

Where time is not of the essence of the agreement, a slight delay on the part of
one party in the performance of his obligation is not a sufficient ground for the
rescission of the agreement (Taguba v. Vda. de Leon, supra). Considering that Jabil has
only a balance of P4,000.00 and was delayed in payment only for one month, equity
and justice mandate as in the case that Jabil be given an additional period within which
to complete payment of the purchase price.
[31]
Dizon v. CA, 302 SCRA 288
[32]
Doromal vs. CA [G.R. No. L-36083. September 5, 1975.]
En Banc, Barredo (J): 6 concurring, 2 took no part, 2 on leave
Facts: Lot 3504 of the cadastral survey of Iloilo, situated in the poblacion of La Paz, one
of its districts, with an area of a little more than 2-1/2 hectares was originally decreed in
the name of the late Justice Antonio Horilleno, in 1916, under OCT 1314. Before he
died, on a date not particularized in the record, he executed a last will and testament
attesting to the fact that it was a co-ownership between himself and his brothers and
sisters. The truth was that the owners or better stated, the co-owners were, besides
Justice Horilleno, Luis, Soledad, Fe, Rosita, Carlos and Esperanza, all surnamed
Horilleno, in the proportion of 1/7 undivided ownership each. Since Esperanza had
already died, she was succeeded by her only daughter, Filomena Javellana. Still, even
though their right had not as yet been annotated in the title, the co-owners led by
Carlos, and as to deceased Justice Antonio Horilleno, his daughter Mary, sometime
since early 1967, had wanted to sell their shares, or if possible if Filomena Javellana
were agreeable, to sell the entire property. They hired an acquaintance Cresencia
Harder, to look for buyers, and the latter came to the interest of Ramon Doromal, Sr.
and Jr. In preparation for the execution of the sale (since the brothers and sisters
Horilleno were scattered in various parts of the country: Carlos in Ilocos Sur, Mary in
Sales, 2003 ( 112 )
Baguio, Soledad and Fe, in Mandaluyong, Rizal, and Rosita in Basilan City), the
Horillenos executed various powers of attorney in favor of their niece, Mary H. Jimenez.
They also caused preparation of a power of attorney of identical tenor for signature by
Javellana, and sent it with a letter of Carlos, dated 18 January 1968 unto her thru Mrs.
Harder. Carlos informed Javellana that the price was P4.00 a square meter. It appears,
however, that as early as 22 October, 1967, Carlos had received in check as earnest
money from Ramon Doromal, Jr., the sum of P5,000.00 and the price therein agreed
upon was P5.00 a square meter. At any rate, Javellana, not being agreeable, did not
sign the power of attorney, and the rest of the co-owners went ahead with their sale of
their 6/7. Carlos saw to it that the deed of sale prepared by their common attorney in
fact, Mary H. Jimenez, be signed and ratified. The Deed was signed and ratified in
Candon, Ilocos Sur, on 15 January 1968, and was brought to Iloilo by Carlos in the same
month. The Register of Deeds of Iloilo refused to register right away, since the original
registered owner, Justice Antonio Horilleno was already dead. Carlos had to hire Atty.
Teotimo Arandela to file a petition within the cadastral case, on 26 February 1968, for
the purpose. After which, Carlos returned to Luzon. After compliance with the requisites
of publication, hearing and notice, the petition was approved. On 29 April 1968, Carlos
(in Iloilo) went to the Register of Deeds and caused the registration of the order of the
cadastral court approving the issuance of a new title in the name of the co-owners, as
well as of the deed of sale to the Doromals, as a result of which on that same date, a
new title was issued TCT 23152, in the name of the Horillenos to 6/7 and Javellana to
1/7, Exh. D, only to be cancelled on the same day under TCT 23153, , already in the
names of the vendees Doromals for 6/7 and to Javellana, 1/7. On 30 April 1968, the
Doromals paid Carlos the sum of P97,000.00 by a check of the Chartered Bank which
was later substituted by check of PNB, because there was no Chartered Bank Branch in
Ilocos Sur. Besides the amount paid in check, the Doromals according to their evidence
still paid an additional amount in cash of P18,250.00 since the agreed price was P5.00 a
square meter; and thus was consummated the transaction. On 10 June 1968, Atty.
Arturo H. Villanueva (Javellanas lawyer) arrived at the residence of the Doromals in
Dumangas, Iloilo, bringing with him her letter of that date, making a formal offer to
repurchase or redeem the 6/7 undivided share in Lot No. 3504, of the Iloilo Cadastre,
which the Doromals bought from her erstwhile co-owners, the Horillenos, for the sum of
P30,000.00 (the sum Atty. Villanueva has with him which he would deliver to the
Doromals as soon as they execute the contract of sale in her favor). The Doromals
refused.
On 11 June, 1968, Javellana filed the case before the CFI Iloilo seeking to exercise her
right to redeem the share of the property, as co-owner, at the price stated in the deed
of sale, i.e. P30,000.00. The trial judge, after hearing the evidence, ruled in favor of the
Doromals, holding that Javellana had no more right, to redeem as she was already
informed of the intended sale of the 6/7 share belonging to the Horillenos, and further
condemned Javellana to pay attorneys fees, and moral and exemplary damages.
Javellana appealed.
The Court of Appeals (in CA-GR 47945-R) reversed the trial courts decision and held
that although respondent Javellana was informed of her co-owners proposal to sell the
land in question to the Doromals she was, however, never notified least of all, in
writing, of the actual execution and registration of the corresponding deed of sale,
hence, Javellana s right to redeem had not yet expired at the time she made her offer
for that purpose thru her letter of 10 June 1968 delivered to the Doromals on even date.
The intermediate court further held that the redemption price to be paid by Javellana
Sales, 2003 ( 113 )
should be that stated in the deed of sale which is P30,000 notwithstanding that the
preponderance of the evidence proves that the actual price paid by the Doromals was
P115,250. The Doromals appealed.
The Supreme Court affirmed the decision of the Court of Appeals, with costs against
Spouses Doromal Sr.
and Doromal Jr.
1.
Right of pre-emption or redemption

Article 1623 of the Civil Code which provides that The right of legal pre-emption
or redemption shall not be exercised except within thirty days from the notice in writing
by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall
not be recorded in the Registry of Property, unless accompanied by an affidavit of the
vendor that he has given written notice thereof to all possible redemptioners. The right
of redemption of co-owners excludes that of adjoining owners.
2.
Carlos letters do not constitute notice for the computation of the 30-day
period in Article 1623;
Alleged letters do not refer to a consummated sale
The letters sent by Carlos Horilleno to Filomena Javellana (dated 18 January 1968
and 5 November 1967) do not constitute the required notice in writing from which the
30-day period fixed in said provision should be computed. There is no showing that said
letters were in fact received by Javellana and when they were actually received. In any
event, neither of said letters referred to a consummated sale. It was Carlos Horilleno
alone who signed them, and as of 18 January 1968, powers of attorney from the various
co-owners were still to be secured. Indeed, the later letter of 18 January 1968
mentioned that the price was P4.00/sq.m. whereas in the earlier letter of 5 November
1967 it was P5.00. In fact, as early as 21 October 1967, Carlos had already received
P5,000 from the Doromals supposedly as earnest money, of which, however, mention
was made by him to his niece only in the later letter of 18 January 1968, the
explanation being that at later negotiation it was increased to P5.00/sq.m.
3.
Sale not yet perfected during the time of the sending of letters; Earnest
money was made as understood under the Old Civil Code
While the letters relied upon by the Doromals could convey the idea that more or
less some kind of consensus had been arrived at among the other co-owners to sell the
property in dispute to the Doromals, it cannot be said definitely that such a sale had
even been actually perfected. The difference in the prices per square meter in the two
letters negatives the possibility that a price definite had already been agreed upon.
While P5,000 might have indeed been paid to Carlos in October 1967, there is nothing
to show that the same was in the concept of the earnest money contemplated in Article
1482 of the Civil Code as signifying perfection of the sale. Viewed in the backdrop of
the factual milieu thereof extant in the record, said P5,000 were paid in the concept of
earnest money as the term was understood under the Old Civil Code, that is, as a
guarantee that the buyer would not back out, considering that it is not clear that there
was already a definite agreement as to the price then and that the Doromals were
decided to buy 6/7 only of the property should Javellana refuse to agree to part with her
1/7 share.
Sales, 2003 ( 114 )
3.
Right of redemption; Requirement of notice, must be in a public instrument

(Article 1620 and
1623)
For purposes of the co-owners right of redemption granted by Article 1620 of the
Civil Code, the notice in writing which Article 1623 requires to be made to the other coowners and from receipt of which the 30-day period to redeem should be counted is a
notice not only of a perfected sale but of the actual execution and delivery of the deed
of sale. This is implied from the latter portion of Article 1623 which requires that before
a register of deeds can record a sale by a co-owner, there must be presented to him, an
affidavit to the effect that the notice of the sale had been sent in writing to the other
co-owners. A sale may not be presented to the register of deeds for registration unless
it be in the form of a duly executed public instrument. Moreover, the law prefers that all
the terms and conditions of the sale should be definite and in writing.
4.
Co-owners right of redemption (Article 1619)

Article 1619 of the Civil Code bestows unto a co-owner the right to redeem and
to be subrogated under the same terms and conditions stipulated in the contract, and
to avoid any controversy as to the terms and conditions under which the right to
redeem may be exercised, it is best that the period therefor should not be deemed to
have commenced unless the notice of the disposition is made after the formal deed of
disposal has been duly executed.
5.
Javellana not notified in writing

Javellana has never been notified in writing of the execution of the deed of sale by
which the
Doromals acquired the subject property, it necessarily follows that her tender to
redeem the same made on 10 June 1968 was well within the period prescribed by law.
Indeed, it is immaterial when she might have actually come to know about said deed, it
appearing she has never been shown a copy thereof through a written communication
by either any of the Doromals or any of the Horillenos. (Cf. Cornejo et al. vs. CA et al.,
16 SCRA 775.)
6.
Tax evasion must be condemned

It is impossible for the Supreme Court to sanction the Doromals pragmatic but
immoral posture. Being patently violative of public policy and injurious to public
interest, the seemingly wide practice of understating considerations of transactions for
the purpose of evading taxes and fees due to the government must be condemned and
all parties guilty thereof must be made to suffer the consequences of their ill-advised
agreement to defraud the state. The trial court fell short of its devotion and loyalty to
the Republic in officially giving its stamp of approval to the stand of the Doromals and
even berating Javellana as wanting to enrich herself at the expense of her own blood
relatives who are her aunts, uncles and cousins. On the contrary, said blood
relatives should have been sternly told that they are in pari-delicto with the Doromals
in committing tax evasion and should not receive any consideration from any court in
respect to the money paid for the sale in dispute. Their situation is similar to that of
parties to an illegal contract.
7.
Consideration is P30,000
The consideration of P30,000 only was placed in the deed of sale to minimize the
payment of the registration fees, stamps and sales tax. The redemption in controversy
Sales, 2003 ( 115 )
should be only for the price stipulated in the deed, regardless of what might have been
actually paid by the Doromals.
8.
Article 1619: Legal redemption as the right to be subrogated

Legal redemption is the right to be subrogated, upon the same terms and
conditions stipulated in the contract, in the place of one who acquires a thing by
purchase or dation in payment, or by any other transaction whereby ownership is
transmitted by onerous title. In the present case, the stipulation in the public evidence
of the contract, made public by both vendors and vendees is that the price was
P30,000.00.
9.
Article 1620 and 1623; Reasonable price

A co-owner of a thing may exercise the right of redemption in case the share of
all the other coowners or any of them, are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable one. The
law seeks to protect redemptioner and converts his position into one not that of a
contractually but of a legally subrogated creditor as to the right of redemption, if the
price is not grossly excessive, what the law had intended redemptioner to pay can be
read in Art. 1623, which provides that The right of a legal pre-emption or redemption
shall not be exercised except within thirty (30) days from the notice in writing by the
prospective vendor, or by the vendor as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied by an affidavit of the vendor
that he has given written notice thereof of all possible redemptioners.
10.
Affidavits intended for a definitive purpose

Affidavit must have been intended by the lawmakers for a definite purpose, to
argue that this affidavit has no purpose is to go against all canons of statutory
construction. No law mandatory in character and worse, prohibitive should be
understood to have no purpose at all. That would be an absurdity. Purpose could not
but have been to give a clear and unmistakable guide to redemptioner, on how much
he should pay and when he should redeem. Notice must have been intended to state
the truth and if vendor and vendee should have instead, decided to state an untruth
therein, it is they who should bear the consequences of having thereby misled the
redemptioner who had the right to rely and act thereon and on nothing else.
11.
Equitable estoppel
Stated otherwise, all the elements of equitable estoppel are present since the
requirement of the law is to submit the affidavit of notice to all possible redemptioners,
that affidavit to be a condition precedent to registration of the sale therefore. The law
must have intended that it be by the parties understood that they were there asking a
solemn representation to all possible redemptioners, who upon faith of that are thus
induced to act. In the present case, the parties to the sale sought to avoid compliance
with the law and certainly refusal to comply cannot be rewarded with exception and
acceptance of the plea that they cannot be now estopped by their own representation.
12.
No unjust enrichment, as right is not contractual but granted by law

Javellanas right is not contractual, but a mere legal one, the exercise of a right
granted by the law, and the law is definite that she can subrogate herself in place of
Sales, 2003 ( 116 )
the buyer, upon the same terms and conditions stipulated in the contract, in the words
of Art. 1619, and here the price. stipulated in the contract was P30,000.00, in other
words, if this be possible enrichment on the part of Javellana, it was not unjust but just
enrichment because permitted by the law.
13.
Exercise of right, just solution, promotion of justice

What Javellana sought to enforce is not an abuse but a mere exercise of a right.
The solution is not unjust because it only binds the parties to make good their solemn
representation to possible redemptioners on the price of the sale, to what they had
solemnly averred in a public document required by the law to be the only basis for that
exercise of redemption. This thus promote justice.
[33]
Dy vs. CA [G.R. No. 92989. July 8, 1991.]
Third Division, Gutierrez Jr. (J): 3 concur, 1 took no part
Facts: Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo Dy
purchased a truck and a farm tractor through financing extended by Libra Finance and
Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as
security for the loan. Perfecto Dy wanted to buy the tractor from his brother so on 20
August 1979, he wrote a letter to Libra requesting that he be allowed to purchase from
Wilfredo Dy the said tractor and assume the mortgage debt of the latter. In a letter
dated 27 August 1979, Libra thru its manager, Cipriano Ares approved the Perfectos
request. Thus, on 4 September 1979, Wilfredo executed a deed of absolute sale in favor
of Perfecto over the tractor in question. At that time, the subject tractor was in the
possession of Libra Finance due to Wilfredos failure to pay the amortizations. Despite
the offer of full payment by Perfecto to Libra for the tractor, the immediate release
could not be effected because
Wilfredo had obtained financing not only for said tractor but also for a truck and Libra
insisted on full payment for both. Perfecto was able to convince his sister, Carol DySeno, to purchase the truck so that full payment could be made for both. On 22
November 1979, a PNB check was issued in the amount of P22,000 in favor of Libra,
thus settling in full the indebtedness of Wilfredo with the financing firm. Payment
having been effected through an out-of-town check, Libra insisted that it be cleared first
before Libra could release the chattels in question.
Meanwhile, Civil Case R-16646 entitled Gelac Trading, Inc. v. Wilfredo Dy, a collection
case to recover the sum of P12,269.80 was pending in another court in Cebu. On the
strength of an alias writ of execution issued on 27 December 1979, the provincial
sheriff was able to seize and levy on the tractor which was in the premises of Libra in
Carmen, Cebu. The tractor was subsequently sold at public auction where Gelac Trading
was the lone bidder. Later, Gelac sold the tractor to one of its stockholders, Antonio
Gonzales. It was only when the check was cleared on 17 January 1980 that Perfecto
learned about GELAC having already taken custody of the subject tractor.
Perfecto Dy filed an action to recover the subject tractor against GELAC Trading with
the RTC Cebu City. On 8 April 1988, the RTC rendered judgment in favor of Perfecto,
pronouncing that Perfecto is the owner of the tractor and directing Gelac Trading
Corporation and Antonio Gonzales to return the same to Perfecto; directing the Gelac
Sales, 2003 ( 117 )
Trading and Gonzales jointly and severally to pay Perfecto the amount of P1,541.00 as
expenses for hiring a tractor; P50,000 for moral damages; P50,000 for exemplary
damages; and to pay the cost.
On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the
complaint with costs against Perfecto. The Court of Appeals held that the tractor in
question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by
virtue of the alias writ of execution issued in Civil Case R-16646. Hence, the petition for
review on certiorari.
The Supreme Court granted the petition, set aside the decision of the Court of Appeals
promulgated on 23 March 1990, and reinstated the decision of the Regional Trial Court
dated 8 April 1988.
1.
Sale of mortgaged property valid; Mortgagor maintains ownership of the

property offered as security
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court
(174 SCRA 80 [1989]), it was stated that the chattel mortgagor continues to be the
owner of the property, and therefore, has the power to alienate the same; however, he
is obliged under pain of penal liability, to secure the written consent of the mortgagee.
(Francisco, Vicente, Jr., Revised Rules of Court in the Philippines, [1972], Volume IV-s
Part I, p. 5s251) Thus, the instruments of mortgage are binding, while they subsist, not
only upon the parties executing them but also upon those who later, by purchase or
otherwise, acquire the properties referred to therein. The absence of the written
consent of the mortgagee to the sale of the mortgaged property in favor of a third
person, therefore, effects not the validity of the sale but only the penal liability of the
mortgagor under the Revised Penal Code and the binding effect of such sale on the
mortgagee under the Deed of Chattel Mortgage. The mortgagor who gave the
property as security under a chattel mortgage did not part with the ownership over the
same. He had the right to sell it although he was under the obligation to secure the
written consent of the mortgagee or he lays himself open to criminal prosecution under
the provision of Article 319 par. 2 of the Revised Penal Code. And even if no consent
was obtained from the mortgagee, the validity of the sale would still not be affected. In
the present case, Wilfredo Dy can sell the subject tractor. The consent of Libra Finance
was obtained. In a letter dated 27 August 1979, Libra allowed Perfecto to purchase the
tractor and assume the mortgage debt of his brother. The sale between the brothers
was therefore valid and binding as between them and to the mortgagee, as well.
2.
Ownership acquired when thing delivered to vendee; Article 1496

Article 1496 of the Civil Code states 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 Articles 1497 to
1501 or in any other manner signing an agreement that the possession is transferred
from the vendor to the vendee.
3.
Article 1498 and 1499 applicable in present case; Tractor cannot be delivered
Articles 1498 and 1499 are applicable in the present case. Article 1498 states
that when the sale is made through a public instrument, the execution thereof shall be
Sales, 2003 ( 118 )
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. Article 1499 provides
that The delivery of movable property may likewise be made by the mere consent or
agreement of the contracting parties, if the thing sold cannot be transferred to the
possession of the vendee at the time of the sale, or if the latter already had it in his
possession for any other reason. In the present case, actual delivery of the subject
tractor could not be made. However, there was constructive delivery already upon the
execution of the public instrument pursuant to Article 1498 and upon the consent or
agreement of the parties when the thing sold cannot be immediately transferred to the
possession of the vendee.
4.
Mortgagees right of foreclosure; implied right to possess property to effect

foreclosure
A mortgagee has the right of foreclosure upon default by the mortgagor in the
performance of the conditions mentioned in the contract of mortgage. The law implies
that the mortgagee is entitled to possess the mortgaged property because possession
is necessary in order to enable him to have the property sold. In the present case, it
was Libra Finance which was in possession of the subject tractor due to Wilfredos
failure to pay the amortization as a preliminary step to foreclosure.
5.
Mortgagee not owner of the property mortgaged; Mortgagees remedy is to

have property sold in public auction and to apply proceeds to obligation
secured
While it is true that Wilfredo Dy was not in actual possession and control of the
subject tractor, his right of ownership was not divested from him upon his default.
Neither could it be said that Libra was the owner of the subject tractor because the
mortgagee can not become the owner of or convert and appropriate to himself the
property mortgaged. (Article 2088, Civil Code) Said property continues to belong to the
mortgagor. The only remedy given to the mortgagee is to have said property sold at
public auction and the proceeds of the sale applied to the payment of the obligation
secured by the mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no
showing that Libra Finance has already foreclosed the mortgage and that it was the
new owner of the subject tractor.
6.
Third person who purchases the mortgaged property assumes obligation of

original mortgagor Where a third person purchases the mortgaged property, he
automatically steps into the shoes of the original mortgagor. (See Industrial Finance
Corp. v. Apostol, 177 SCRA 521[1989]). His right of ownership shall be subject to the
mortgage of the thing sold to him. In the present case, Perfecto was fully aware of the
existing mortgage of the subject tractor to Libra. In fact, when he was obtaining Libras
consent to the sale, he volunteered to assume the remaining balance of the mortgage
debt of Wilfredo which Libra undeniably agreed to.
7.
Payment of check intended to extinguish mortgage obligation and not a

payment of purchase price
The payment of the check was actually intended to extinguish the mortgage
obligation so that the tractor could be released to Perfecto. It was never intended nor
could it be considered as payment of the purchase price because the relationship
between Libra and Perfecto is not one of sale but still a mortgage. The clearing or
encashment of the check which produced the effect of payment determined the full
Sales, 2003 ( 119 )
8.
payment of the money obligation and the release of the chattel mortgage. It was not
determinative of the consummation of the sale. The transaction between the brothers
is distinct and apart from the transaction between Libra and Perfecto. The contention,
therefore, that the consummation of the sale depended upon the encashment of the
check is untenable.
Sale consummated upon execution of public instrument; Constructive
delivery
The sale of the subject tractor was consummated upon the execution of the
public instrument on 4 September 1979. At this time constructive delivery was already
effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it was
levied upon by the sheriff in December 1979.
9.
Only properties unquestionably owned by judgment debtor can be levied

upon
Only properties unquestionably owned by the judgment debtor and which are not
exempt by law from execution should be levied upon or sought to be levied upon. For
the power of the court in the execution of its judgment extends only over properties
belonging to the judgment debtor. (Consolidated Bank and Trust Corp. v. Court of
Appeals, G.R. No. 78771, January 23, 1991).
10.
Third party not precluded from taking other legal remedies to prosecute
claim
It is inconsequential whether a third party claim has been filed or not by Perfecto
during the time the sheriff levied on the subject tractor. A person other than the
judgment debtor who claims ownership or right over levied properties is not precluded,
however, from taking other legal remedies to prosecute his claim. (Consolidated Bank
and Trust Corp. v. Court of Appeals, supra) This is precisely what the petitioner did
when he filed the action for replevin with the RTC.
11.
Factual finding of trial court given great respect and weight; Fraud not
presumed but established by clear evidence; Relationship not a badge of
fraud
The Court accords great respect and weight to the findings of fact of the trial
court. There is no sufficient evidence to show that the sale of the tractor was in fraud of
Wilfredo and creditors. While it is true that Wilfredo and Perfecto are brothers, this fact
alone does not give rise to the presumption that the sale was fraudulent. Relationship is
not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663 [1963]). Moreover, fraud can not
be presumed; it must be established by clear convincing evidence.
12.
Actuations of Gelac trading violative of provisions on human relations

Gelac Trading knew very well of the transfer of the property to Perfecto on 14 July
1980 when it received summons based on the complaint for replevin filed by Perfecto
with the RTC. Notwithstanding said summons, it continued to sell the subject tractor to
one of its stockholders on 2 August 1980.
[34]
EDCA Publishing vs. Santos [G.R. No. 80298. April 26, 1990.]
Sales, 2003 ( 120 )
First Division, Cruz (J): 4 concur

Facts: On 5 October 1981, a person identifying himself as Professor Jose Cruz placed
an order by telephone with EDCA Publishing and Distributing Corp. for 406 books,
payable on delivery. EDCA prepared the corresponding invoice and delivered the books
as ordered, for which Cruz issued a personal check covering the purchase price of
P8,995.65. On 7 October 1981, Cruz sold 120 of the books to Leonor Santos who, after
verifying the sellers ownership from the invoice he showed her, paid him P1,700.00.
Meanwhile, EDCA having become suspicious over a second order placed by Cruz even
before clearing of his first check, made inquiries with the De la Salle College where he
had claimed to be a dean and was informed that there was no such person in its
employ. Further verification revealed that Cruz had no more account or deposit with the
Philippine Amanah Bank, against which he had drawn the payment check. EDCA then
went to the police, which set a trap and arrested Cruz on 7 October 1981. Investigation
disclosed his real name as Tomas de la Pea and his sale of 120 of the books he had
ordered from EDCA to Leonor Santos (and Gerardo Santos, doing business as Santos
Bookstore). On the night of said date 7 October 1981, EDCA sought the assistance of
the police in Precinct 5 at the UN Avenue, which forced their way into Santos Bookstore
and threatened Leonor Santos with prosecution for buying stolen property. They seized
the 120 books without warrant, loading them in a van belonging to EDCA, and
thereafter turned them over to EDCA. Protesting this highhanded action, the Santos
spouses sued for recovery of the books after demand for their return was rejected by
EDCA. A writ of preliminary attachment was issued and EDCA, after initial refusal, finally
surrendered the books to the Santos spouses.
Ownership of the books was recognized in the Santos spouses by the Municipal Trial
Court, which was sustained by the Regional Trial Court, which was in turn sustained by
the Court of Appeals. EDCA appealed to the Supreme Court.
The Supreme Court affirmed the challenged decision and denied the petition, with costs
against EDCA Publishing.
1.

Article 559 provides that The possession of movable property acquired in good
faith is equivalent to a title. Nevertheless, one who has lost any movable or has been
unlawfully deprived thereof, may recover it from the person in possession of the same.
If the possessor of a movable lost or of which the owner has been unlawfully deprived
has acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.
2.
Arbitrary action, act of taking the law on own hands, condemned

The Court expresses its disapproval of the arbitrary action of EDCA Publishing in
taking the law into its own hands and forcibly recovering the disputed books from the
Santos spouses. The circumstance that it did so with the assistance of the police, which
should have been the first to uphold legal and peaceful processes, has compounded the
wrong even more deplorably. Questions, such as the ownership of the books, are
decided not by policemen but by judges and with the use not of brute force but of
lawful writs.
3.
Possession of movable property acquired in good faith equivalent to title

Sales, 2003 ( 121 )
The first sentence of Article 559 provides that the possession of movable
property acquired in good faith is equivalent to a title, thus dispensing with further
proof. It cannot be said that the spouses cannot establish their ownership of the
disputed books because they have not even produced a receipt to prove they had
bought the stock.
4.
Santos a purchaser in good faith, even if books were bought at discount

Leonor Santos first ascertained the ownership of the books from the EDCA
invoice showing that they had been sold to Cruz, who said he was selling them for a
discount because he was in financial need. The Santos spouses are in the business of
buying and selling books and often deal with hard-up sellers who urgently have to part
with their books at reduced prices. To Leonor Santos, Cruz must have been only one of
the many such sellers she was accustomed to dealing with. It is hardly bad faith for any
one in the business of buying and selling books to buy them at a discount and resell
them for a profit.
5.
Contract of sale consensual and is perfected upon agreement

The contract of sale is consensual and is perfected once agreement is reached
between the parties on the subject matter and the consideration. According to Article
1475 of the Civil Code, 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. Article 1477, on the other hand,
provides that The ownership of the thing sold shall be transferred to the vendee upon
the actual or constructive delivery thereof. Article 1478 provides that The parties may
stipulate that ownership in the thing shall not pass to the purchaser until he has fully
paid the price.
6.
Rule in the transfer of ownership

Ownership in the thing sold shall not pass to the buyer until full payment of the
purchase price only if
there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass
from the vendor to the vendee upon the actual or constructive delivery of the thing sold
even if the purchase price has not yet been paid. Absent the stipulation, delivery of the
thing sold will effectively transfer ownership to the buyer who can in turn transfer it to
another.
7.
Effect of non-payment; Relief

Non-payment only creates a right to demand payment or to rescind the contract,
or to criminal prosecution in the case of bouncing checks.
8.
Asiatic Commercial Corporation vs. Ang; Company not unlawfully deprived of

property, sale valid
In Asiatic Commercial Corporation v. Ang, the company sold some cosmetics to
Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by
Ang, it sued for the recovery of the articles from Tan, who claimed he had validly
bought them from Ang, paying for the same in cash. Finding that there was no
conspiracy between Tan and Ang to deceive Asiatic, the Court of Appeals declared that
Sales, 2003 ( 122 )
the company was not unlawfully deprived of the cartons of Gloco Tonic within the scope
of this legal provision. It has voluntarily parted with them pursuant to a contract of
purchase and sale. The circumstance that the price was not subsequently paid did not
render illegal a transaction which was valid and legal at the beginning.
9.
Tagatac vs. Jimenez; Sale voidable due to fraud but subsists as valid until
annulled
In Tagatac v. Jimenez, Trinidad C. Tagatac sold her car to Warner Feist, who sold it
to Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac by Feist
was dishonored, Tagatac sued to recover the vehicle from Jimenez on the ground that
she had been unlawfully deprived of it by reason of Feists deception. In ruling for
Jimenez, the Court of Appeals held that the fraud and deceit practiced by Feist
earmarks this sale as a voidable contract (Article 1390). Being a voidable contract, it is
susceptible of either ratification or annulment. If the contract is ratified, the action to
annul it is extinguished (Article 1392) and the contract is cleansed from all its defects
(Article 1396); if the contract is annulled, the contracting parties are restored to their
respective situations before the contract and mutual restitution follows as a
consequence (Article 1398). However, as long as no action is taken by the party
entitled, either that of annulment or of ratification, the contract of sale remains valid
and binding. When Tagatac delivered the car to Feist by virtue of said voidable contract
of sale, the title to the car passed to Feist (the title was defective and voidable).
Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been
avoided and he therefore conferred a good title on the latter, provided he bought the
car in good faith, for value and without notice of the defect in Feists title (Article 1506).
There being no proof on record that Felix Sanchez acted in bad faith, it is safe to
assume that he acted in good faith.
10.
Ownership validly transferred to the Santos spouses

Actual delivery of the books having been made, Cruz acquired ownership over
the books which he could then validly transfer to the Santos spouses. The fact that he
had not yet paid for them to EDCA was a matter between him and EDCA and did not
impair the title acquired by the spouses to the books.
11.
Injustice will arise if unlawfully deprived would be interpreted in a different

manner
One may well imagine the adverse consequences if the phrase unlawfully
deprived were to be interpreted in the manner premised on the argument that the
impostor acquired no title to the books that he could have validly transferred to the
spouses. A person relying on the sellers title who buys a movable property from him
would have to surrender it to another person claiming to be the original owner who had
not yet been paid the purchase price therefor. The buyer in the second sale would be
left holding the bag, so to speak, and would be compelled to return the thing bought by
him in good faith without even the right to reimbursement of the amount he had paid
for it.
12.
Diligence exercised by Santos, but not by EDCA

Leonor Santos took care to ascertain first that the books belonged to Cruz before
she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the
books had been paid for on delivery. Santos did not have to go beyond that invoice to
satisfy herself that the books being offered for sale by Cruz belonged to him; yet she
Sales, 2003 ( 123 )
did. Although the title of Cruz was presumed under Article 559 by his mere possession
of the books, these being movable property, Leonor Santos nevertheless demanded
more proof before deciding to buy them. By contrast, EDCA was less than cautious in
fact, too trusting in dealing with the impostor. Although it had never transacted with
him before, it readily delivered the books he had ordered (by telephone) and as readily
accepted his personal check in payment. It did not verify his identity although it was
easy enough to do this. It did not wait to clear the check of this unknown drawer.
Worse, it indicated in the sales invoice issued to him, by the printed terms thereon, that
the books had been paid for on delivery, thereby vesting ownership in the buyer.
13.
Santos spouses cannot be made to suffer

It would certainly be unfair to make the spouses bear the prejudice sustained by
EDCA as a result of its own negligence. There is no justice in transferring EDCAs loss to
the Santoses who had acted in good faith, and with proper care, when they bought the
books from Cruz. While the Court sympathized with EDCA for its plight, it is clear that
its remedy is not against the spouses but against Tomas de la Pea, who has apparently
caused all this trouble.
14.
Santos have the right to complain

The spouses have themselves been unduly inconvenienced, and for merely
transacting a customary deal not really unusual in their kind of business. It is they and
not EDCA who have a right to complain.
[35]
Elisco Tool Manufacturing v. CA, 308 SCRA 731 (1999)
[36]
Engineering and Machinery Corp. v. CA [G.R. No. 52267.
January 24, 1996.] Third Division, Panganiban (J): 3 concur
Facts: Pursuant to the contract dated 10 September 1962 between the Engineering
and Machinery Corporation (the Corporation) and Almeda, the former undertook to
fabricate, furnish and install the airconditioning system in the latters building along
Buendia Avenue, Makati in consideration of P12,000.00. The Corporation was to furnish
the materials, labor, tools and all services required in order to so fabricate and install
said system. The system was completed in 1963 and accepted by Almeda, who paid in
full the contract price. On 2 September 1965, Almeda sold the building to the National
Investment and Development Corporation (NIDC). The latter took possession of the
building but on account of NIDCs noncompliance with the terms and conditions of the
deed of sale, Almeda was able to secure judicial rescission thereof. The ownership of
the building having been decreed back to Almeda, he re-acquired possession sometime
in 1971. It was then that he learned from some NIDC employees of the defects of the
air-conditioning system of the building. Acting on this information, Almeda
commissioned Engineer David R. Sapico to render a technical evaluation of the system
in relation to the contract with the Corporation. In his report, Sapico enumerated the
Sales, 2003 ( 124 )
defects of the system and concluded that it was not capable of maintaining the
desired room temperature of 76F 2F.
On the basis of this report, Almeda filed on 8 May 1971 an action for damages against
the Corporation with the then CFI Rizal (Civil Case 14712). The complaint alleged that
the air-conditioning system installed by the Corporation did not comply with the agreed
plans and specifications, hence, Almeda prayed for the amount of P210,000.00
representing the rectification cost, P100,000.00 as damages and P15,000.00 as
attorneys fees.
Sales, 2003 ( 125 )
The Corporation moved to dismissed the case, alleging prescription, but which was
denied by the Court. Thereafter, Almeda filed an ex-parte motion for preliminary
attachment on the strength of the Corporations own statement to the effect that it had
sold its business and was no longer doing business in Manila. The trial court granted the
motion and, upon Almedas posting of a bond of P50,000.00, ordered the issuance of a
writ of attachment.
In due course, and on 15 April 1974, the trial court rendered a decision, which ordered
the Corporation to pay
Almeda the amount needed to rectify the faults and deficiencies of the air-conditioning
system installed by the Corporation in Almedas building, plus damages, attorneys fees
and costs). Petitioner appealed to the Court of Appeals, which affirmed on 28 November
1978 the decision of the trial court. Hence, it instituted a petition for review on
certiorari under Rule 45 of the Rules of Court.
The Supreme Court denied the petition and affirmed the decision assailed; without
costs.
1.
The Courts power to review

The Supreme Court reviews only errors of law in petitions for review on certiorari
under Rule 45. It is not the function of this Court to re-examine the findings of fact of
the appellate court unless said findings are not supported by the evidence on record or
the judgment is based on a misapprehension of facts. The Court has consistently held
that the factual findings of the trial court, as well as the Court of Appeals, are final and
conclusive and may not be reviewed on appeal. Among the exceptional circumstances
where a reassessment of facts found by the lower courts is allowed are when the
conclusion is a finding grounded entirely on speculation, surmises or conjectures; when
the inference made is manifestly absurd, mistaken or impossible; when there is grave
abuse of discretion in the appreciation of facts; when the judgment is premised on a
misapprehension of facts; when the findings went beyond the issues of the case and
the same are contrary to the admissions of both appellant and appellee. After a careful
study of the case at bench, we find none of the above grounds present to justify the reevaluation of the findings of fact made by the courts below.
2.
Contract of a piece of work defined

Article 1713 of the Civil Code defines a contract for a piece of work as by the
contract for a piece of work the contractor binds himself to execute a piece of work for
the employer, in consideration of a certain price or compensation. The contractor may
either employ only his labor or skill, or also furnish the material.
3.
Contract for a piece of work distinguished from a contract of sale

A contract for a piece of work, labor and materials may be distinguished from a
contract of sale by the inquiry as to whether the thing transferred is one not in
Sales, 2003 ( 126 )
4.
5.
existence and which would never have existed but for the order of the person desiring
it . In such case, the contract is one for a piece of work, not a sale. On the other hand, if
the thing subject of the contract would have existed and been the subject of a sale to
some other person even if the order had not been given, then the contract is one of
sale.
A contract for the delivery at a certain price of an article which the vendor in the
ordinary course of his business manufactures or procures for the general market
whether the same is on hand at the time or not is a contract of sale, but if the goods
are to be manufactured specially for the customer and upon his special order, and not
for the general market, it is a contract for a piece of work (Art. 1467, Civil Code). The
mere fact alone that certain articles are made upon previous orders of customers will
not argue against the imposition of the sales tax if such articles are ordinarily
manufactured by the taxpayer for sale to the public. (Celestino Co. vs. Collector, 99
Phil. 8411).
To Tolentino, the distinction between the two contracts depends on the intention
of the parties. Thus, if the parties intended that at some future date an object has to be
delivered, without considering the work or labor of the party bound to deliver, the
contract is one of sale. But if one of the parties accepts the undertaking on the basis of
some plan, taking into account the work he will employ personally or through another,
there is a contract for a piece of work.
Contract in question is one for a piece of work
The contract in question is one for a piece of work. It is not the Corporations line
of business to manufacture air-conditioning systems to be sold off-the-shelf. Its
business and particular field of expertise is the fabrication and installation of such
systems as ordered by customers and in accordance with the particular plans and
specifications provided by the customers. Naturally, the price or compensation for the
system manufactured and installed will depend greatly on the particular plans and
specifications agreed upon with the customers.
Obligations of a contractor for a piece of work
The obligations of a contractor for a piece of work are set forth in Articles 1714
and 1715 of the Civil Code. Article 1714 provides that if the contractor agrees to
produce the work from material furnished by him, he shall deliver the thing produced to
the employer and transfer dominion over the thing. This contract shall be governed
by the following articles as well as by the pertinent provisions on warranty of title and
against hidden defects and the payment of price in a contract of sale. Article 1715
provides that the contractor shall execute the work in such a manner that it has the
qualities agreed upon and has no defects which destroy or lessen its value or fitness for
its ordinary or stipulated use. Should the work be not of such quality, the employer may
require that the contractor remove the defect or execute another work. If the contractor
Sales, 2003 ( 127 )
fails or refuses to comply with this obligation, the employer may have the defect
removed or another work executed, at the contractors cost.
6.
Provisions on warranty against hidden defects

The provisions on warranty against hidden defects, referred to in Article 1714,
are found in Articles 1561 and 1566. Article 1561 provides that the vendor shall be
responsible for warranty against the hidden defects which the thing sold may have,
should they render it unfit for the use for which it is intended, or should they diminish
its fitness for such use to such an extent that, had the vendee been aware thereof, he
would not have acquired it or would have given a lower price for it; but said vendor
shall not be answerable for patent defects or those which may be visible, or for those
which are not visible if the vendee is an expert who, by reason of his trade or
profession, should have known them. Article 1566 provides that the vendor is
responsible to the vendee for any hidden faults or defects in the thing sold, even
though he was not aware thereof, and provides further that the provision shall not
apply if the contrary has been stipulated, and the vendor was not aware of the hidden
faults or defects in the thing sold.
7.
Remedy against violation of the warranty against hidden defects

The remedy against violations of the warranty against hidden defects is either to
withdraw from the contract (rehibitory action) or to demand a proportionate reduction
of the price (accion quanti minoris), with damages in either case.
8.
Prescriptive period as specified in express warranty, or in the absence of

which, 4 years;
Prescriptive period of 6 months for rehibitory action is applicable only in
implied warranties
While it is true that Article 1571 of the Civil Code provides for a prescriptive
period of six months for a rehibitory action, a cursory reading of the ten preceding
articles to which it refers will reveal that said rule may be applied only in case of
implied warranties; and where there is an express warranty in the contract, the
prescriptive period is the one specified in the express warranty, and in the absence of
such period, the general rule on rescission of contract, which is four years (Article 1389,
Civil Code) shall apply. (Villostas v. CA)
9.
Original complaint is one for arising from breach of a written contact and not
a suit to enforce warranty against hidden defects; Article 1715 in relation to
Article 1144 apply, prescription in 10 years; Action not prescribed
The lower courts opined and so held that the failure of the defendant to follow
the contract specifications and said omissions and deviations having resulted in the
operational ineffectiveness of the system installed makes the defendant liable to the
plaintiff in the amount necessary to rectify to put the air conditioning system in its
proper operational condition to make it serve the purpose for which the plaintiff
Sales, 2003 ( 128 )
entered into the contract with the defendant. Thus, having concluded that the original
complaint is one for damages arising from breach of a written contract, and not a suit
to enforce warranties against hidden defects, the governing law therefore is Article
1715. However, inasmuch as this provision does not contain a specific prescriptive
period, the general law on prescription, which is Article 1144 of the Civil Code, will
apply. Said provision states, inter alia, that actions upon a written contract prescribe
in 10 years. Since the governing contract was executed on 10 September 1962 and
the complaint was filed on 8 May 1971, it is clear that the action has not prescribed.
10.
Acceptance of the work by the employer does not relieve the contractor of
liability for any defect in the work
The mere fact that Almeda accepted the work does not, ipso facto, relieve the
Corporation from liability for deviations from and violations of the written contract, as
the law gives him 10 years within which to file an action based on breach thereof. As
held by the Court of Appeals, as the breach of contract consisted in appellants
omission to install the equipment [sic], parts and accessories not in accordance with
the plan and specifications provided for in the contract and the deviations made in
putting into the air-conditioning system parts and accessories not in accordance with
the contract specifications, it is evident that the defect in the installation was not
apparent at the time of the delivery and acceptance of the work, considering further
that Almeda is not an expert to recognize the same. From the very nature of things, it is
impossible to determine by the simple inspection of air conditioning system installed in
an 8-floor building whether it has been furnished and installed as per agreed
specifications.
[37]
Equatorial Realty vs. Mayfair Theater [G.R. No. 106063.
November 21, 1996.] En Banc, Hermosisima Jr. (J): 13 concur, 1
took no part
Facts: Carmelo & Bauermann Inc. (Carmelo) owned a parcel of land, together with two
2-storey buildings constructed thereon located at Claro M Recto Avenue, Manila (TCT
18529, Register of Deeds of Manila). On 1 June 1967, Carmelo entered into a contract of
lease with Mayfair Theater for the latters lease of a portion of Carmelos property, i.e. a
portion of the 2/F of the two-storey building with floor area of 1610 sq.ms. and the
second floor and mezzanine of the two-storey building situated at CM Recto Avenue,
Manila with a floor area of 150 sq.ms. for use by Mayfair as a motion picture theater
and for a term of 20 years. Mayfair thereafter constructed on the leased property a
movie house known as Maxim Theatre. On 31 March 1969, Mayfair entered into a
second contract of lease with Carmelo for the lease of another portion of Carmelos
Sales, 2003 ( 129 )
property, i.e. a portion of the 2/F of the two-storey building with floor area of 1064
sq.ms. and two store spaces at the ground floor and mezzanine of the two-storey
building situated at CM Recto Avenue, Manila with a floor area of 300 sq.ms. and
bearing street numbers 1871 and 1875 for similar use as a movie theater and for a
similar term of 20 years. Mayfair put up another movie house known as Miramar
Theatre on this leased property. Both contracts of lease provide identically worded
paragraph 8, which reads That if the LESSOR should desire to sell the leased premises,
the lessee shall be given 30-days exclusive option to purchase the same. In the event,
however, that the leased premises is sold to someone other than the Lessee, the lessor
is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed
of Sale thereof that the purchaser shall recognize this lease and be bound by all the
terms and conditions thereof. Sometime in August 1974, Mr. Henry Pascal of Carmelo
informed Mr. Henry Yang, President of Mayfair, through a telephone conversation that
Carmelo was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr.
Yang that a certain Jose Araneta was offering to buy the whole property for
US$1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing to buy the
property for P6 million to P7 million. Mr. Yang replied that he would let Mr. Pascal know
of his decision. On 23 August 1974, Mayfair replied through a letter confirming the
correspondence between Pascual and Yang and reiterating paragraph 8 of the two
contracts of lease. Carmelo did no reply to this letter. On 18 September 1974, Mayfair
sent another letter to Carmelo purporting to express interest in acquiring not only the
leased premises but the entire building and other improvements if the price is
reasonable. However, both Carmelo and Equatorial questioned the authenticity of the
second letter. Four years later, on 30 July 1978, Carmelo sold its entire CM. Recto
Avenue land and building, which included the leased premises housing the Maxim and
Miramar theatres, to Equatorial by virtue of a Deed of Absolute Sale, for the total sum
of P1,300,000.
In September 1978, Mayfair instituted the action for specific performance and
annulment of the sale of the leased premises to Equatorial. In its Answer, Carmelo
alleged as special and affirmative defense that it had informed Mayfair of its desire to
sell the entire CM. Recto Avenue property and offered the same to Mayfair, but the
latter answered that it was interested only in buying the areas under lease, which was
impossible since the property was not a condominium; and that the option to purchase
invoked by Mayfair is null and void for lack of consideration. Equatorial, in its Answer,
pleaded as special and affirmative defense that the option is void for lack of
consideration and is unenforceable by reason of its impossibility of performance
because the leased premises could not be sold separately from the other portions of
the land and building. It counterclaimed for cancellation of the contracts of lease, and
for increase of rentals in view of alleged supervening extraordinary devaluation of the
currency. Equatorial likewise cross-claimed against codefendant Carmelo for
indemnification in respect of Mayfairs claims. After assessing the evidence, the court
rendered decision dismissing the complaint with costs against Mayfair; ordering Mayfair
Sales, 2003 ( 130 )
to pay Carmelo & Bauermann P40,000.00 by way of attorneyss fees on its

counterclaim; and ordering Mayfair to pay Equatorial Realty P35,000.00 per month as
reasonable compensation for the use of areas not covered by the contracts of lease
from 31 July 1979 until Mayfair vacates said areas plus legal interest from 31 July 1978;
P70,000.00 per month as reasonable compensation for the use of the premises covered
by the contracts of lease dated (1 June 1967 from 1 June 1987 until Mayfair vacates the
premises plus legal interest from 1 June 1987; P55,000.00 per month as reasonable
compensation for the use of the premises covered by the contract of lease dated 31
March 1969 from 30 March 1989 until Mayfair vacates the premises plus legal interest
from 30 March 1989; and P40,000.00 as attorneys fees; and dismissing Equatorials
crossclaim against Carmelo & Bauermann. The trial court adjudged the identically
worded paragraph 8 found in both lease contracts to be an option clause which
however cannot be deemed to be binding on Carmelo because of lack of distinct
consideration therefor.
Mayfair taking exception to the decision of the trial court, appealed to the Court of
Appeals. The appellate court reversed the trial court and rendered judgment reversing
and setting aside the appealed Decision; directing Mayfair to pay and return to
Equatorial the amount of P11,300,000.00 within 15 days from notice of this Decision,
and ordering Equatorial to accept such payment; directing Equatorial, upon payment of
the sum of P11,300,000, to execute the deeds and documents necessary for the
issuance and transfer of ownership to Mayfair of the lot registered under TCT 17350,
118612, 60936, and 52571; and should Mayfair be unable to pay the amount as
adjudged, declaring the Deed of Absolute Sale between Carmelo and Equatorial as
valid and binding upon an the parties. Hence, the petition for review.
The Supreme Court denied the petition for review of the decision of the Court of
Appeals (23 June 1992, in CA-GR CV 32918), declaring the Deed of Absolute Sale
between Equatorial and Carmelo as deemed rescinded; ordering Carmelo to return to
Equatorial the purchase price; directing Equatorial to execute the deeds and documents
necessary to return ownership to Carmelo of the disputed lots; and ordering Carmelo to
allow Mayfair to buy the lots for P11,300,000.
1.
Issue on irregularities in Court of Appeals passed upon so as not to preempt

the administrative proceedings related thereto
It was raised that the Court of Appeals violated its own internal rules in the
assignment of appealed cases when it allowed the same Division XII, particularly Justice
Manuel Herrera, to resolve all the motions in the Completion Process and to still
resolve the merits of the case in the Decision Stage. This was related to letter
complaint written by the counsel for Equatorial on 20 September 1992 to the Supreme
Court alleging certain irregularities and infractions committed by certain lawyers, and
Sales, 2003 ( 131 )
Justices of the Court of Appeals and of the Supreme Court in connection with case CAGR CV 32918 (GR 106063). This partakes of the nature of an administrative complaint
for misconduct, against members of the judiciary. While the lettercomplaint arose as an
incident in said case, the disposition thereof should be separate and independent from
case GR 106063. It would be correct, prudent and consistent course of action not to
pre-empt the administrative proceedings to be undertaken respecting the said
irregularities. A discussion of such in the present case would entail a finding on the
merits as to the real nature of the questioned procedures and the true intentions and
motives of the players therein.
2.
Paragraph 8 of lease contracts provides for a right of first refusal, and is not
an option clause nor an option contract
The contractual stipulation (Paragraph 8) provides for a right of first refusal in
favor of Mayfair. It is not an option clause or an option contact. It is a contract of a right
of first refusal. The true nature of the paragraph 8 is ascertained to be that of a
contractual grant of the right of first refusal to Mayfair.
3.
Option contract; Validity based on a separate and distinct consideration

As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our
characterization of an option contract as one necessarily invoking the choice granted to
another for a distinct and separate consideration as to whether or not to purchase a
determinate thing at a predetermined fixed price. T he deed of option or option clause
in a contract, in order to be valid and enforceable, must, among other things, indicate
the definite price at which the person granting the option, is willing to sell.
4.
Option contract, according to Bouvier Law Dictionary

Bouvier, in his Law Dictionary (edition of 1897) defines an option as a contract,
a contract by virtue of which A, in consideration of the payment of a certain sum to B,
acquires the privilege of buying from, or selling to B, certain securities or properties
within a limited time at a specified price. (Story vs Salamon, 71 N.Y. 420.)
5.
Option contract, according to Words and Phrases

An agreement in writing to give a person the option to purchase lands within a
given time at a named price is neither a sale nor an agreement to sell. It is simply a
contract by which the owner of property agrees with another person that he shall have
the right to buy his property at a fixed price within a certain time. He does not sell his
land, he does not then agree to sell it; but he does sell something; that is, the right or
privilege to buy at the election or option of the other party. The second party gets in
praesenti, not lands, nor an agreement that he shall have lands, but he does get
something of value, that is, the right to call for and receive lands if he elects The owner
parts with his right to sell his lands, except to the second party, for a limited period The
second party receives this right, or, rather, from his point of view, he receives the right
Sales, 2003 ( 132 )
to elect to buy. (Vol. 6, page 5001, of the work Words and Phrases, citing the case of
Ide vs. Leiser [24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17]).
6.
Cases involving option contracts

In Tuason vs. de Asis (107 PHIL 131 [1960]), it was held that the lessee loses
his right to buy the leased property for a named price per square meter upon failure to
make the purchase within the time specified. In Mendoza vs. Comple (15 SCRA 162),
the Court freed the landowner from her promise to sell her land if the prospective buyer
could raise P4,500.00 in 3 weeks because such option was not supported by a distinct
consideration. In the same vein, in Sanchez vs. Rigos (45 SCRA 368 [1972]), the
Court also invalidated an instrument entitled, Option to Purchase a parcel of land for
the sum of P1,510.00 because of lack of consideration. And as an exception to the
doctrine enumerated in the two preceding cases, in Vda de
Quirino vs. Palarca (29 SCRA 1 [1969]), it was ruled that the option to buy the leased
premises for P12,000.00 as stipulated in the lease contract, is not without consideration
for in reciprocal contracts, like lease, the obligation or promise of each party is the
consideration for that of the other. In all these cases, the selling price of the object
thereof is always predetermined and specified in the option clause in the contract or in
the separate deed of option.
Ang Yu Asuncion case:
7.

In sales, 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. Article 1458 of the Civil Code
provides that By the contract of sale one of the contracting parties obligates himself to
transfer the ownership of and to deliver a determinate thing, and the other to pay
therefor a price certain in money or its equivalent. A contract of sale may be absolute
or conditional.
8.
Contract to sell is conditional; Effect of breach of condition

When the sale is not absolute but conditional, such as in a Contract to Sell
where invariably the ownership of the thing sold is retained until the fulfillment of a
positive suspensive condition (normally, the full payment of the purchase price), the
breach of the condition will prevent the obligation to convey title from acquiring an
obligatory force.
9.
Unconditional mutual promise to buy and sell obligatory on the parties
Sales, 2003 ( 133 )
An unconditional mutual promise to buy and sell, as long as the object is made
determinate and the price is fixed, can be obligatory on the parties, and compliance
therewith may accordingly be exacted.
10.
Perfected contract of option

An accepted unilateral promise which specifies the thing to be sold and the price
to be paid, when coupled with a valuable consideration distinct and separate from the
price, is what may properly be termed a perfected contract of option. This contract is
legally binding, and in sales, it conforms with the second paragraph of Article 1479 of
the Civil Code, which provides that An accepted unilateral promise to buy or to sell a
supported by a consideration distinct from the price. (1451a)
11.
Option not the contract of sale itself

The option is not the contract of sale itself. The optionee has the right, but not
the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted
before a breach of the option, a bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their respective undertakings.
12.
Offer
A negotiation is formally initiated by an offer. An imperfect promise (policitacion)
is merely an offer. Public advertisements or solicitations and the like are ordinarily
construed as mere invitations to make offers or only as proposals. These relations, until
a contract is perfected, are not considered binding commitments. Thus, at any time
prior to the perfection of the contract, either negotiating party may stop the
negotiation. 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 (Laudico vs. Arias, 43 Phil. 270).
13.
Offer with a period; Effects of withdrawal

(1) If the period is not itself founded upon or supported by a consideration, the
offeror is still free and has the right to withdrawal the offer before its acceptance, or, if
an acceptance has been made, before the offerors coming to know of such fact, by
communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also
Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a
unilateral promise to sell under Art. 1479, modifying the previous decision in South
Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank
of Paraaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The
right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise,
it could give rise to a damage claim under Article 19 of the Civil Code which ordains
that every person must, in the exercise of his rights and in the performance of his
duties, act with justice, give everyone his due, and observe honesty and good faith.
(2) If the period has a separate consideration, a contract of option is deemed
Sales, 2003 ( 134 )
perfected, and it would be a breach of that contract to withdraw the offer during the
agreed period. The option, however, is an independent contract by itself, and it is to be
distinguished from the projected main agreement (subject matter of the option) which
is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer
before its acceptance (exercise of the option) by the optionee-offeree, the latter may
not sue for specific performance on the proposed contract (object of the option) since
it has failed to reach its own stage of perfection. The optioner-offeror, however, renders
himself liable for damages for breach of the option. In these cases, care should be
taken of the real nature of the consideration given, for if, in fact, it has been intended to
be part of the consideration for the main contract with a right of withdrawal on the part
of the optionee, the main contract could be deemed perfected; a similar instance would
be an earnest money in a contract of sale that can evidence its perfection (Art. 1482,
Civil Code).
14.
Requirement for separate consideration has no applicability as paragraph 8 is

not an option contract but a right of first refusal
No option to purchase in contemplation of the second paragraph of Article 1479
of the Civil Code, has been granted to Mayfair under the said lease contracts.
Paragraph 8 grants the right of first refusal to Mayfair and is not an option contract. The
requirement of a separate consideration for the option, thus, has no applicability in the
case. There is nothing in paragraph 8 of the contracts which would bring them into
the ambit of the usual offer or option requiring an independent consideration.
15.
Option and Right of First Refusal distinguished

An option is a contract granting a privilege to buy or sell within an agreed time
and at a determined price. It is a separate and distinct contract from that which the
parties may enter into upon the consummation of the option. It must be supported by
consideration. In the instant case, the right of first refusal is an integral part of the
contracts of lease. The consideration is built into the reciprocal obligations of the
parties.
16.
Right of First Refusal inutile if governed by Article 1324 on withdrawal of the

offer on Article
1479 on promise to buy and sell
To rule that a contractual stipulation such as that found in paragraph 8 of the
contracts is governed by Article 1324 on withdrawal of the offer on Article 1479 on
promise to buy and sell would render ineffectual or inutile the provisions on right of
first refusal so commonly inserted in leases of real estate nowadays. Paragraph 8 was
incorporated into the contracts of lease for the benefit of Mayfair which wanted to be
assured that it shall be given the first crack or the first option to buy the property at the
price which Carmelo is willing to accept.
Sales, 2003 ( 135 )
17.
Consideration in an agreement of right of first refusal: Consideration for

lease
It is not correct to say that there is no consideration in an agreement of right of
first refusal. The stipulation is part and parcel of the entire contract of lease. The
consideration for the lease includes the consideration for the right of first refusal.
18.
Consideration in an agreement of right of first refusal: Consideration is

obligation or promise (reciprocal contract)
Mayfair is in effect stating that it consents to lease the premises and to pay the
price agreed upon provided the lessor also consents that, should it sell the leased
property, then, Mayfair shall be given the right to match the offered purchase price and
to buy the property at that price. As stated in Vda. De Quirino vs. Palarca, in
reciprocal contract, the obligation or promise of each party is the consideration for that
of the other.
Difference to Ang Yu Asuncion case: Equatorial Realty and Carmelo acted in
bad faith
Carmelo and Equatorial Realty acted in bad faith to render Paragraph 8 inutile.
What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that
Mayfair will have the right of first refusal in the event Carmelo sells the leased
premises. It is undisputed that Carmelo did recognize this right of Mayfair, for it
informed the latter of its intention to sell the said property in 1974. There was an
exchange of letters evidencing the offer and counter-offers made by both parties.
Carmelo, however, did not pursue the exercise to its logical end. While it initially
recognized Mayfairs right of first refusal, Carmelo violated such right when without
affording its negotiations with Mayfair the full process to ripen to at least an interface of
a definite offer and a possible corresponding acceptance within the 30-day exclusive
option time granted Mayfair, Carmelo abandoned negotiations, kept a low profile for
some time, and then sold, without prior notice to Mayfair, the entire Claro M. Recto
property to Equatorial.
19.
20.
Rescission lies when the purchase is in bad faith

Equatorial (being aware of the lease contracts because its lawyers had, prior to
the sale, studied the said contracts) is a buyer in bad faith, and thus renders the sale to
it of the property in question rescissible.
Guzman, Bocaling & Co. vs. Bonnevie case
21.
Rescission as remedy
Rescission is a remedy granted by law to the contracting parties and even to
third persons, to secure reparation for damages caused to them by a contract, even if
this should be valid, by means of the restoration of things to their condition at the
moment prior to the celebration of said contract. It is a relief allowed for the protection
of one of the contracting parties and even third persons from all injury and damage the
Sales, 2003 ( 136 )
contract may cause, or to protect some incompatible and preferential right created by
the contract. Rescission implies a contract which, even if initially valid, produces a
lesion or pecuniary damage to someone that justifies its invalidation for reasons of
equity.
22.
Purchaser not considered a third party

It is true that the acquisition by a third person of the property subject of the
contract is an obstacle to the action for its rescission where it is shown that such third
person is in lawful possession of the subject of the contract and that he did not act in
bad faith. However, this rule is not applicable in the case before us because the
petitoner is not considered a third party in relation to the Contract of Sale nor may its
possession of the subject property be regarded as acquired lawfully and in good faith.
23.
Purchaser in good faith defined

A purchaser in good faith and for value who buys the 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. Good faith connotes an honest
intention to abstain from taking unconscientious advantage of another. Tested by these
principles, the petitioner cannot tenably claim to be a buyer in good faith as it had
notice of the lease of the property and such knowledge should have cautioned it to look
deeper into the agreement to determine if it involved stipulations that would prejudice
its own interests.
24.
Purchaser required to know term of lease contract when buying property

under lease
Having known that the property it was buying was under lease, it behooved it as
a prudent person to have required the owner of the property or the broker to show to it
the Contract of Lease in which the right of first refusal is contained.
25.
Indivisibility of the property

Common sense and fairness dictate that instead of nullifying the agreement on the
basis that the entire
property is indivisible property, the stipulation should be given effect by including the
indivisible appurtenances in the sale of the dominant portion under the right of first
refusal. A valid and legal contract where the ascendant or the more important of the
two parties is the landowner should be given effect, if possible, instead of being
nullified on a selfish pretext posited by the owner. Following the arguments of
petitioners and the participation of the owner in the attempt to strip Mayfair of its
rights; the right of first refusal should include not only the property specified in the
Sales, 2003 ( 137 )
contracts but also the appurtenant portions sold to Equatorial which are claimed by
petitioners to be indivisible.
26.
Boundaries of the property sold

Mayfair is authorized to exercise its right of first refusal under the contract to
include the entirety of the indivisible property. The boundaries of the property sold
should be the boundaries of the offer under the right of first refusal.
27.
Doctrine in Ang Yu Asuncion deemed modified

As to the remedy to enforce Mayfairs right, the Court disagrees to a certain
extent with the concluding part of the dissenting opinion of Justice Vitug. The doctrine
enunciated in Ang Yu Asuncion vs. Court of Appeals should be modified, it not amplified
under the peculiar facts of the present case.
28.
Multiplicity of suits frowned upon by Court; Relief: (1) Contract between

Equatorial and
Carmelo rescinded, (2) Price fixed
The Supreme Court has always been against multiplicity of suits where all
remedies according to the facts and the law can be included. Since Mayfair has a right
of first refusal, it can exercise the right only if the fraudulent sale is first set aside or
rescinded. All of these matters are now before us and so there should be no piecemeal
determination of this case and leave festering sores to deteriorate into endless
litigation. Since Carmelo sold the property for P11,300,000 to Equatorial, the price at
which Mayfair could have purchased the property is, therefore, fixed. The damages
which Mayfair suffered are in terms of actual injury and lost opportunities. The fairest
solution would be to allow Mayfair to exercise its right of first refusal at the price which
it was entitled to accept or reject which is P11,300,000. To follow an alternative solution
that Carmelo and Mayfair may resume negotiations for the sale to the latter of the
disputed property would be unjust and unkind to Mayfair because it is once more
compelled to litigate to enforce its right.
29.
Present case covered by law on contracts, not merely by codal provisions on

human relations
Under the Ang Yu Asuncion vs. Court of Appeals decision, the Court stated that
there was nothing to execute because a contract over the right of first refusal belongs
to a class of preparatory juridical relations governed not by the law on contracts but by
the codal provisions on human relations. This may apply if the contract is limited to the
buying and selling of the real property. However, the obligation of Carmelo to first offer
the property to Mayfair is embodied in a contract. It is Paragraph 8 on the right of first
refusal which created the obligation. It should be enforced according to the law on
contracts instead of the panoramic and indefinite rule on human relations. The latter
remedy encourages multiplicity of suits. There is something to execute and that is for
Carmelo to comply with its obligation to the property under the right of the first refusal
Sales, 2003 ( 138 )
according to the terms at which they should have been offered then to Mayfair, at the
price when that offer should have been made. Also, Mayfair has to accept the offer. This
juridical relation is not amorphous nor is it merely preparatory. Paragraphs 8 of the two
leases can be executed according to their terms.
30.
No interest due
Carmelo and Equatorial cannot avail of considerations based on equity which
might warrant the grant of interests. The vendor received as payment from the vendee
what, at the time, was a full and fair price for the property. It has used the
P11,300,000.00 all these years earning income or interest from the amount. Equatorial,
on the other hand, has received rents and otherwise profited from the use of the
property turned over to it by Carmelo. In fact, during all the years that this controversy
was being litigated, Mayfair paid rentals regularly to the buyer who had an inferior right
to purchase the property. Mayfair is under no obligation to pay any interests arising
from this judgment to either Carmelo or Equatorial.
[38]
Intestate Estate of Emilio Camon; Ereneta v. Bezore [G.R. No. L-29746.
November 26, 1973.] First Division, Castro (J): 5 concur
Facts: Emilio Camon was the lessee of the hacienda Rosario, located in Pontevedra,
Negros Occidental, for the period from crop year 1940-41 to crop year 1960-61. proindiviso of the said sugar plantation belonged to Ignatius Henry Bezore, Elwood
Knickerbocker and Mary Irene Fallon McCormick (as their inheritance from the late
Thomas Fallon), while the other half belonged to Petronila Alunan vda. de Sta. Romana,
Amparo Sta. Romana and Alberta vda. de Hopon (as their inheritance from their mother
Rosario Sta. Romana).
Upon the death of Emilio Camon in 1967, his widow, Concepcion Ereeta, filed a
petition in the CFI Negros Occidental (Special Proceeding 8366) praying for the grant
to her of letters of administration of the estate of the deceased Camon. The petition
was granted. Thereafter, the court issued an order requiring all persons with money
claims against the estate to file their claims within the period prescribed in the
order.Thru their judicial administrator and counsel, Martiniano O. de la Cruz, Bezore,
et al. filed a claim against the estate in the amounts of P62,065 as the money
value of sugar allotments and allowances and P2,100 as the money value of palay and
rentals, or a total of P64,165, appertaining to the claimants half-share in the hacienda.
Bezore, et. al. and Ereneta are agreed that the late Emilio Camon appropriated for
himself the amounts claimed. Bezore, et. al. had demanded payment of their claim
from Emilio Camon when he was still alive, but Ereneta ignored the demands. At the
Sales, 2003 ( 139 )
trial, 3 documents were submitted in evidence by Ereneta, the authenticity of

each of which is not controverted by Bezore, et.al.; i.e. (1) An Agreement to Sell,
executed on 11 January 1961, whereby Bezore, et al., agreed to sell their share in the
hacienda Rosario to Amparo Sta. Romana and Alberta vda. de Hopon; (2) A Release
and Waiver of Claims, executed on 12 January 961, whereby Amparo Sta. Romana and
Alberta vda. de Hopon, for and in consideration of their gratitude for the various
services, financial and personal extended to them by Emilio Camon, released him from
any and all claims that may have accrued pertaining to the 2/4 pro-indiviso share in
Hacienda Rosario owned by Bezore, et. al. who had bound themselves to sell their
share in the said Hacienda Rosario to Amparo and Alberta, including rights accrued or
accruing, and whereby Amparo and Alberta bound themselves to waive in favor of Mr.
Emilio
Camon for his own use and benefit said rights accrued or accruing; and (3) A Deed of
Sale, executed on 4 August 1961, whereby Bezore, et al., for and in consideration of
the sum of P78,000, to be paid in the manner stated in the instrument, sold, transferred
and conveyed all their rights, title, interest and participation, whether accrued or
accruing in their 2/4 pro-indiviso share in the hacienda Rosario, together with all the
improvements existing thereon, including its sugar quota, in favor of Amparo Sta.
Romana and Alberta vda. de Hopon. On 20 July 1968, the lower court dismissed the
claim, rejecting Bezore et.als contention that the sugar allotments and allowances,
subject of their claim against the estate of Emilio Camon, were not included in the sale,
and held that by the positive and categorical terms of the deed of sale, all benefits
accrued and accruing to the appellants before 4 August 1961 were included in the sale.
Bezore, et.al. filed a direct appeal with the Supreme Court.
The Supreme Court affirmed the order of the lower court, at Bezore et. al.s cost.
1.
Right to accrued claims not waived in January 1961

At the time of the execution, on 12 January 1961, of the deed of Release and Waiver of
Claims,
Amparo Sta. Romana and Alberta vda. de Hopon could not release or waive accrued
claims belonging to Bezore et..al, because the right that Amparo and Alberta then had
was a mere promise by Bezore, et.al. to sell their share in the hacienda, not the right to
the accrued claims. What was agreed to be sold in the future was different from what
was purportedly waived; and even if the object in both contracts were the same, the
waiver would still be invalid for it is essential that a right, in order that it may be validly
waived, must be in existence at the time of the waiver.
2.
Defect in waiver cured in August 1961; Bezore, et.al. parted with their
accrued rights
Whatever defect there was in the waiver was subsequently cured by the deed of
sale of 4 August 1961 by virtue of which Bezore, et.al. sold not only their pro-indiviso
half-share in the hacienda but also their accrued rights therein. It is immaterial that
Sales, 2003 ( 140 )
Emilio Camon was not the vendee since what mattered is that Bezore, et.al. parted with
their accrued rights for a valuable consideration.
3.
Question of fact not reviewable in direct appeal to Supreme Court

Whether the vendees (Bezore etal) represented to Martiniano O. de la Cruz that
the sugar quedans and palay were not included in the sale and that such was the
intention of the parties, involves a question of fact which is not reviewable in a direct
appeal to the Supreme Court.
4.
Accrued or accruing; Literal meaning of contractual stipulations control if

terms are clear
The words accrued or accruing in the deed of sale are not obscure and, as the
lower court declared, are in fact positive and categorical enough to include accrued
allotments and allowances. Since the said words are not ambiguous, there is no need to
interpret them. Article 1370 of the Civil Code provides that if the terms of a contract
are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control.
5.
Inadequacy of cause does not of itself invalidates the contract

That the consideration in the sale was cheap is not a ground for the infirmity of
the sale. Inadequacy of cause in a contract does not of itself invalidate the contract.
6.
Silence as to demand letters not admission of debt

The silence of Camon with respect to the several demand letters sent to him was
an admission of his debt, is without support or sanction in law of evidence.
7.
No change in the juridical relationship between hacienda owners and Emilio

Camon after the written contract of lease; Continued cultivation merely
implied a new lease, did not convert into express trust
There was no change in the juridical relationship between the hacienda owners
and Emilio Camon when, after the expiration of their written contract of lease, he
continued cultivating the hacienda during the crop years 1952-53 to 1960-61. The
continuance in the cultivation, with the acquiescence of the owners, did not convert the
original relationship into an express trust but merely implied a new lease over the
property, with the same terms and conditions provided in the original contract, except
as to the period of the lease.
8.

Article 1670 of the Civil Code provides that if at the end of the contract the
lessee should continue enjoying the thing leased for 15 days with the acquiescence of
the lessor, and unless a notice to the contrary by either party has previously been
Sales, 2003 ( 141 )
given, it is understood that there is an implied new lease, not for the period of the
original contract, but for the time established in articles 1682 and 1687. The other
terms of the original contract shall be revived.
9.
Fiduciary relationship an essential characteristic of trust; No express trust

There is nothing in the record that evidence the creation of a fiduciary
relationship between the lessors and the lessee after the expiration of their written
contract of lease. Fiduciary relationship is an essential characteristic of trust, and no
written instrument has been pointed to as establishing an express trust, which writing
is required in express trusts over immovables. There is no basis for the claim that an
express trust was created when Camon continued to cultivate the land after the
expiration of the written contract of lease.
[39]
Heirs of Escanlar, et.al. v. CA [G.R. No. 119777. October 23, 1997.]
Holgado, et. al. v. CA [G.R. No. 120690. October 23,
1997.] Third division, Romero (J): 3 concur, 1 on
leave
Facts: Spouses Guillermo Nombre and Victoriana Cari-an died without issue in 1924
and 1938, respectively. Nombres heirs include his nephews and grandnephews.
Victoriana Cari-an was succeeded by her late brothers son, Gregorio Cari-an. The latter
was declared as Victorianas heir in the estate proceedings for Nombre and his wife
(Special Proceeding 7-7279). After Gregorio died in 1971, his wife, Generosa Martinez,
and children, Rodolfo, Carmen, Leonardo and Fredisminda Cari-an, were also adjudged
as heirs by representation to Victorianas estate. Leonardo Cari-an passed away,
leaving his widow, Nelly Chua vda. de Cari-an and minor son Leonell, as his heirs.
2 parcels of land, denominated as Lot 1616 and 1617 of the Kabankalan Cadastre with
an area of 29,350 sq.ms. and 460,948 sq.ms., respectively, formed part of the estate of
Nombre and Cari-an. On 15 September 1978, Gregorio Cari-ans heirs executed the
Deed of Sale of Rights, Interests and Participation in favor of Pedro Escanlar and
Francisco Holgado portion pro-indiviso of Lot 1616 and 1617 of the Kabankalan
Cadastre, pertaining to the portion pro-indiviso of the late Victoriana Cari-an in
consideration of P275,000 to be paid to the heirs except the share of the minor Leonell
Cari-an, which shall be deposited with the Municipal Treasurer of Himamaylan, Negros
Occidental; pursuant to the order of the CFI Negros Occidental (Branch VI)
Hiimamaylan; said contract of sale being effective only upon the approval of said CFI in
Himamaylan. Escanlar and Holgado, the vendees, were concurrently the lessees of the
lots referred to. They stipulated that the balance of the purchase price (P225,000.00)
shall be paid on or before May 1979 in a Deed of Agreement executed by the parties on
the same day confirming and affirming the Deed of Sale of 15 September 1978; that
pending complete payment thereof, the vendees are not to assign, sell, lease, nor
Sales, 2003 ( 142 )
mortgage the rights, interests and participation over said land; and that in the event
the vendees fail and/or omit to pay the balance of said purchase price on 31 May 1979
and the cancellation of said Contract of Sale is made thereby, the sum of P50,000.00
shall be deemed as damages thereof to vendors. Escanlar and Holgado were unable to
pay the Cari-an heirs individual shares, amounting to P55,000.00 each, by the due
date. However, said heirs received at least 12 installments from them after May 1979.
Rodolfo Cari-an was fully paid by 21 June 1979. Generosa Martinez, Carmen Cari-an and
Fredisminda Cari-an were likewise fully compensated for their individual shares, per
receipts given in evidence. The minor Leonells share was deposited with the RTC on 7
September 1982. Being former lessees, Escanlar and Holgado continued in possession
of Lots 1616 and 1617. Interestingly, they continued to pay rent based on their lease
contract.
On 10 September 1981, Escanlar and Holgado moved to intervene in the probate
proceedings of Nombre and
Cari-an as the buyers of the Cari-ans share in Lots 1616 and 1617. Their motion for
approval of the 15
September 1978 sale before the same court, filed on 10 November 1981, was opposed
by the Cari-ans on 5
January 1982. On 16 September 1982, the probate court approved a motion filed by
the heirs of Cari-an and Nombre to sell their respective shares in the estate. On 21
September 1982, the Cari-ans, in addition to some heirs of Guillermo Nombre, sold their
shares in 8 parcels of land including Lots 1616 and 1617 to the spouses Ney Sarrosa
Chua and Paquito Chua for P1,850,000.00. A week later, the vendor-heirs, including the
Carians, filed a motion for approval of sale of hereditary rights, i.e. the sale made on 21
September 1982 to the Chuas.
The Cari-ans instituted a case for cancellation of sale against Escanlar and Holgado on
3 November 1982. They complained of the latters failure to pay the balance of the
purchase price by 31 May 1979 and alleged that they only received a total of
P132,551.00 in cash and goods. Escanlar and Holgado replied that the Carians, having
been paid, had no right to resell the subject lots; that the Chuas were purchasers in bad
faith; and that the court approval of the sale to the Chuas was subject to their existing
claim over said properties. On 20 April 1983, Escanlar and Holgado also sold their rights
and interests in the subject parcels of land (Lots 1616 and 1617) to Edwin Jayme for
P735,000.00 and turned over possession of both lots to the latter. The Jaymes in turn,
were included in the civil case as fourth-party defendants.
On 3 December 1984, the probate court approved the 21 September 1982 sale
without prejudice to whatever rights, claims and interests over any of those properties
of the estate which cannot be properly and legally ventilated and resolved by the court
Sales, 2003 ( 143 )
in the same intestate proceedings. The certificates of title over the 8 lots sold by the
heirs of Nombre and Cari-an were later issued in the name of the spouses Chua.
The trial court allowed a third-party complaint against the spouses Chua on 7 January
1986 where Escanlar and Holgado alleged that the Cari-ans conspired with the Chuas
when they executed the second sale on 21 September 1982 and that the latter sale is
illegal and of no effect. Spouses Chua countered that they did not know of the earlier
sale of portion of the subject lots to Escanlar and Holgado. Both parties claimed
damages. On 28 April 1988, the trial court approved the Chuas motion to file a fourthparty complaint against the spouses Jayme. Spouses Chua alleged that the Jaymes
refused to vacate said lots despite repeated demands; and that by reason of the illegal
occupation of Lots 1616 and 1617 by the Jaymes, they suffered materially from
uncollected rentals.
Meanwhile, the RTC Himamaylan which took cognizance of Special Proceeding 7-7279
(Intestate Estate of Guillermo Nombre and Victoriana Cari-an) had rendered its decision
on 30 October 1987. The probate court concluded that since all the properties of the
estate were disposed of or sold by the declared heirs of both spouses, the case is
considered terminated and the intestate estate of Guillermo Nombre and Victoriana
Carian is closed, and thus found it unnecessary to resolve the Motion for Subrogation of
movants Escanlar and Holgado in view of the proceedings summary nature and the
probate courts lack of jurisdiction upon the validity of sale of rights of the Nombre and
Cari-an heirs to third parties.
On 18 December 1991, the trial court resolved the case in favor of the cancellation of
the 15 September 1978 sale as it was not approved by the probate court as required by
the contested deed of sale of rights, interests and participation and because the Carians were not fully paid. Consequently, the Deed of Sale executed by the heirs of
Nombre and Cari-an in favor of the spouses Chua, which was approved by the probate
court, was upheld. Thus, the court declared the 15 September 1978 Deed of Sale, and
likewise the Deed of Agreement of the same date, executed by the heirs in favor of
Escanlar and Holgado; the 20 April 1983 Deed of sale, and likewise the sale of
leasehold rights, executed by Escanlar and Holgado in favor of spouses Jayme; were
declared null and void and of no effect. The court also declared the amount of P50,000
as forfeited in favor of the heirs but ordering the heirs to return to Escanlar and
Holgado the amounts they received after 31 May 1979 and the amount of P35,218.75
deposited with the Treasurer of Himamaylan; declared the 23 September 1982 Deed of
Sale in favor of spouses Chua as legal, valid and enforceable subject to the burdens of
the estate; ordered Holgado, Escanlar and spouses Jayme to pay in solidum the amount
of P100,000 as moral damages, P30,000 as attorneys fees to spouses Chua; ordered
spouses Jayme to pay spouses Chua the sum of P157,000 as rentals for the Riceland
and P3,200,000 as rentals for the fishpond from October 1985 to 24 July 1989 plus
rentals from the latter date until the property is delivered to the spouses Chua; ordered
Sales, 2003 ( 144 )
Escanlar, Holgado and spouses Jayme to immediately vacate Lots 1616 and 1617, and
to pay the costs.
Escanlar and Holgado raised the case to the Court of Appeals (CA-GR CV 39975). The
appellate court affirmed the decision of the trial court on 17 February 1995 and held
that the questioned deed of sale of rights, interests and participation is a contract to
sell because it shall become effective only upon approval by the probate court and
upon full payment of the purchase price. Their motion for reconsideration was denied
by the appellate court on 3 April 1995. Hence, the consolidated petitions for review.
The Supreme Court granted the petitions; reversed and set aside the decision of the
Court of Appeals under review; remanded the case to the RTC Negros Occidental
(Branch 61) for Escanlar and Holgado and the Carians or their successors-in-interest to
determine exactly which portion of Lots 1616 and 1617 will be owned by each party,
at the option of Escanlar and Holgado; and directed the trial court to order the issuance
of the corresponding certificates of title in the name of the respective parties and to
resolve the matter of rental payments of the land not delivered to the Chua spouses
subject to the rates specified by the Court with legal interest from date of demand.
1.
Distinction with contracts of sale and contract to sell with reserved title
The distinction between contracts of sale and contracts to sell with reserved title
has been recognized by the Court in repeated decisions, such as that in Luzon
Brokerage Co. Inc. v. Maritime Building Co., Inc., upholding the power of promisors
under contracts to sell in case of failure of the other party to complete payment, to
extrajudicially terminate the operation of the contract, refuse the conveyance, and
retain the sums of installments already received where such rights are expressly
provided for.
2.
Contract to sell vs. Deed of conditional sale

In contracts to sell, ownership is retained by the seller and is not to pass until the
full payment of the price. Such payment is a positive suspensive condition, the failure
of which is not a breach of contract but simply an event that prevented the obligation
of the vendor to convey title from acquiring binding force. To illustrate, although a deed
of conditional sale is denominated as such, absent a proviso that title to the property
sold is reserved in the vendor until full payment of the purchase price nor a stipulation
giving the vendor the right to unilaterally rescind the contract the moment the vendee
fails to pay within a fixed period, by its nature, it shall be declared a deed of absolute
sale.
3.
The 15 September 1978 Deed of Sale of Rights, Interests and Participation a

contract of sale
Sales, 2003 ( 145 )
The 15 September 1978 sale of rights, interests and participation as to portion

pro indiviso of the 2 subject lots is a contract of sale for the reasons that (1) the sellers
did not reserve unto themselves the ownership of the property until full payment of the
unpaid balance of P225,000.00; (2) there is no stipulation giving the sellers the right to
unilaterally rescind the contract the moment the buyer fails to pay within the fixed
period.
4.
Delivery effected for the 15 September 1978 deed of sale; Traditio brevi
manu
Prior to the sale, Escanlar were in possession of the subject property as lessees.
Upon sale to them of the rights, interests and participation as to the portion pro
indiviso, they remained in possession, not in concept of lessees anymore but as owners
now through symbolic delivery known as traditio brevi manu. Under Article 1477 of the
Civil Code, the ownership of the thing sold is acquired by the vendee upon actual or
constructive delivery thereof.
5.
Non-payment of price in a contract of sale; Remedies

In a contract of sale, the non-payment of the price is a resolutory condition which
extinguishes the transaction that, for a time, existed and discharges the obligations
created thereunder. The remedy of an unpaid seller in a contract of sale is to seek
either specific performance or rescission.
6.
Contracts, Requisites
Under Article 1318 of the Civil Code, the essential requisites of a contract are:
consent of the contracting parties; object certain which is the subject matter of the
contract and cause of the obligation which is established. Absent one of the above, no
contract can arise. Conversely, where all are present, the result is a valid contract.
7.
Modalities and restrictions do not affect validity of the contract, merely its
effectivity
Some parties introduce various kinds of restrictions or modalities, the lack of
which will not, however, affect the validity of the contract. In the present case, the
Deed of Sale is a valid one, even if it did not bear the stamp of approval of the probate
court. The contracts validity was not affected for in the words of the stipulation, this
Contract of Sale of rights, interests and participations shall become effective only upon
the approval by the Honorable Court. Only the effectivity and not the validity of the
contract is affected.
8.
Need of probate courts approval exists where specific properties of the

estate are sold and not when ideal and indivisible shares of an heir are
disposed of
The need for approval by the probate court exists only where specific properties
of the estate are sold and not when only ideal and indivisible shares of an heir are
Sales, 2003 ( 146 )
disposed of. In Dillena v. Court of Appeals, the Court declared that it is within the
jurisdiction of the probate court to approve the sale of properties of a deceased person
by his prospective heirs before final adjudication. The probate courts approval is
necessary for the validity of any disposition of the decedents estate. However,
reference to judicial approval cannot adversely affect the substantive rights of the heirs
to dispose of their ideal share in the co-heirship and/or coownership among the heirs. It
must be recalled that during the period of indivision of a decedents estate, each heir,
being a co-owner, has full ownership of his part and may therefore alienate it. But the
effect of the alienation with respect to the co-owners shall be limited to the portion
which may be allotted to him in the division upon the termination of the co-ownership.
9.
Hereditary rights in an estate validly sold without need of court approval

Hereditary rights in an estate can be validly sold without need of court approval.
In the present case, when the Cari-ans sold their rights, interests and participation in
Lots 1616 and 1617, they could legally sell the same without the approval of the
probate court.
10.
Contractual stipulations considered law between parties; Exception:

contemporaneous acts of parties
As a general rule, the pertinent contractual stipulation (requiring court approval)
should be considered as the law between the parties. However, the presence of two
factors militate against this conclusion: (1) the evident intention of the parties appears
to be contrary to the mandatory character of said stipulation. Whoever crafted the
document of conveyance, must have been of the belief that the controversial
stipulation was a legal requirement for the validity of the sale. But the
contemporaneous and subsequent acts of the parties reveal that the original objective
of the parties was to give effect to the deed of sale even without court approval.
Receipt and acceptance of the numerous installments on the balance of the purchase
price by the Cari-ans, although the period to pay the balance of the purchase price
expired in May 1979, and leaving Escanlar and Holgado in possession of Lots 1616 and
1617 reveal their intention to effect the mutual transmission of rights and obligations.
The Cari-ans did not seek judicial relief until late 1982 or three years later; (2) the
requisite approval was virtually rendered impossible by the Cari-ans because they
opposed the motion for approval of the sale filed by Escanlar and Holgado, and sued
the latter for the cancellation of that sale. Having provided the obstacle and the
justification for the stipulated approval not to be granted, the Cari-ans should not be
allowed to cancel their first transaction with Escanlar and Holgado because of lack of
approval by the probate court, which lack is of their own making.
11.
Rescission of a sale of real property; Vendee may pay beyond due date as
long as there is no judicial or notarial demand for rescission
Sales, 2003 ( 147 )
With respect to rescission of a sale of real property, Article 1592 of the Civil Code
governs. The provides that in the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even after the
expiration of the period, a long as no demand for rescission of the contract has been
made upon him either judicially or by a notarial act. After the demand, the court may
not grant him a new term. In the present case, the sellers gave the buyers until May
1979 to pay the balance of the purchase price. After the latter failed to pay installments
due, the former made no judicial demand for rescission of the contract nor did they
execute any notarial act demanding the same, as required under Article 1592.
Consequently, the buyers could lawfully make payments even after the May 1979
deadline, as in fact they paid several installments to the sellers which the latter
accepted.
12.
Acceptance of payment beyond due date a waiver to right to rescind; Sellers

estopped
As the sellers, upon the expiration of the period to pay, made no move to rescind
but continued accepting late payments, such act cannot but be construed as a waiver
of the right to rescind. When the sellers, instead of availing of their right to rescind,
accepted and received delayed payments of installments beyond the period stipulated,
and the buyers were in arrears, the sellers in effect waived and are now estopped from
exercising said right to rescind.
13.
Evidence does not prove Escanlar and Holgado were unable to complete
payments
Despite all her claims, Fredismindas testimony fails to convince the Court that
the heirs were not fully compensated by Escanlar and Holgado. Fredisminda admits that
her mother and her sister signed their individual receipts of full payment on their own
and not in her presence. The receipts presented in evidence show that Generosa
Martinez was paid P45,625.00; Carmen Cari-an, P45,625.00; Rodolfo Cari-an,
P47,500.00 on June 21, 1979; Nelly Chua vda. de Cari-an, P11,334.00 and the sum of
P34,218.00 was consigned in court for the minor Leonell Cari-an. Fredisminda insists
that she signed a receipt for full payment without receiving the money therefor and
admits that she did not object to the computation. It is incredible that a mature woman
like Fredisminda Cari-an, would sign a receipt for money she did not receive.
Furthermore, her claims regarding the actual amount of the installments paid to her
and her kin are quite vague and unsupported by competent evidence. She even admits
that all the receipts were taken by Escanlar. Supporting testimony from her co-heirs and
siblings Carmen Cari-an, Rodolfo Cari-an and Nelly Chua vda. de Cari-an is also absent.
Thus, in the absence of proof on the contrary, the Cari-ans were indeed paid the
balance of the purchase price, despite having accepted installments therefor belatedly.
There is thus no ground to rescind the contract of sale because of non-payment.
Sales, 2003 ( 148 )
14.
Continued payment of lease indicate vendees did not take undue advantage
of the Cari-an heirs
Escanlar and Holgado, in continuing to pay the rent for the parcels of land they
allegedly bought until 1986 in compliance with their lease contract, only proves that
they respected the contract and did not take undue advantage of the heirs of Nombre
and Cari-an who benefited from the lease; contrary to the findings of the lower court
that such act admits that the purchase price was not fully paid the Cari-ans. It should
be stressed that Escanlar and Holgado purchased the hereditary shares solely of the
Cari-ans and not the entire lot.
15.
Subsequent sale of 8 parcels of land to spouses Chua is valid except to the

extent of what was sold to Escanlar and Holgado on 15 September 1978
It must be emphasized that what was sold to Escanlar and Holgado was only the
Cari-ans hereditary shares in Lots 1616 and 1617 being held pro indiviso by them and
is thus a valid conveyance only of said ideal shares. Specific or designated portions of
land were not involved. Thus, the subsequent sale of 8 parcels of land, including Lots
1616 and 1617, to the spouses Chua is valid except to the extent of what was sold to
Escanlar and Holgado in the 15 September 1978 conveyance.
16.
Intestate proceedings final and cannot be re-opened; Need for the Supreme
Court to resolve case definitively
The proceedings surrounding the estate of Nombre and Cari-an having attained
finality for nearly a decade since, the same cannot be re-opened. It must be noted that
the probate court desisted from awarding the individual shares of each heir because all
the properties belonging to the estate had already been sold. Thus it is not certain how
much the Cari-ans were entitled to with respect to the two lots, or if they were even
going to be awarded shares in said lots. The protracted proceedings which have
undoubtedly left the property under a cloud and the parties involved in a state of
uncertainty compels the Supreme Court to resolve it definitively.
Cari-an heirs (and successor-in-interest) entitled to half of the estate, or half
interest in each property in the estate
The Cari-ans are the sole heirs by representation of Victoriana Cari-an who was
indisputably entitled to half of the estate. There being no exact apportionment of the
shares of each heir and no competent proof that the heirs received unequal shares in
the disposition of the estate, it can be assumed that the heirs of Victoriana Cari-an
collectively are entitled to half of each property in the estate. More particularly, the
Carians are entitled to half of Lots 1616 and 1617 (14,675 sq.ms. of Lot 1616 and
230,474 sq.ms. of Lot 1617). Consequently, Escanlar and Holgado, as their successorsin-interest, own said half of the subject lots and ought to deliver the possession of the
other half, as well as pay rents thereon, to the spouses Chua but only if the former
(Escanlar and Holgado) remained in possession thereof.
17.
Sales, 2003 ( 149 )
18.
Rate of rentals
The rate of rental payments to be made were given in evidence by Ney Sarrosa
Chua in her unrebutted testimony on 24 July 1989: For the fishpond (Lot 1617) From
1982 up to 1986, rental payment of P3,000.00 per hectare; from 1986-1989 (and
succeeding years), rental payment of P10,000.00 per hectare. For the riceland (Lot
1616) 15 cavans per hectare per year; from 1982 to 1986, P125.00 per cavan;
19871988; P175.00 per cavan; and 1989 and succeeding years, P200.00 per cavan.
[40]
Espiritu vs. Valerio [G.R. No. L-18018. December 26, 1963.]
En Banc, Dizon (J): 9 concur, 1 took no part
Facts: On 15 September 1955 Valerio filed an action to quiet title in the CFI
Pangasinan (Civil Case 13293) against Esperanza Espiritu and Antonia Apostol, alleging
in his complaint that he was the owner of a parcel of unregistered land containing an
area of approximately 8,573 square meters situated in Barrio Olo, Municipality of
Mangatarem, Pangasinan, having acquired the same from the former owner, Pelagia
Vegilia, as evidenced by a deed of sale executed by the latter in his favor on 31 January
1955; that Espiritu and Apostol had been asserting adversary rights over said land and
disturbing his possession thereof. Espiritu and Apostol denied the material allegations
of the complaint and alleged that they were the owners of the land in question, having
acquired it by inheritance from the late Santiago Apostol, husband and father of
appellants Espiritu and Apostol, respectively; that said deceased bought the property
from Mariano Vegilia on 3 June
1934, as evidenced by the deed of sale, who, in turn, had acquired it from his niece,
Pelagia Vegilia, on 26 May 1932, by virtue of the deed of sale. The CFI rendered
decision declaring Valerio to be the owner of the land and enjoined Espiritu and Apostol
from molesting him in the peaceful possession thereof. Hence, the appeal by Espiritu
and her daughter Apostol.
The Supreme Court affirmed the decision appealed from, with costs.
1.
Espiritu and Apostol have better right only if both their deeds were valid
The present appeal depends entirely upon the validity of the Deed of Sale
allegedly executed by Pelagia Vegilia in favor of Mariano Vegilia, and of the Deed of
Sale allegedly executed by the latter in favor of Santiago Apostol. If both are valid,
Espiritus and Apostols contention that they have a better right than that claimed by
Valerio would seem to be meritorious in the light of the facts of the case and the
provisions of Article 1544 of the New Civil Code, it not being disputed that the Deed of
Sale in favor of Valerio was registered under the provisions of Act 3344 on 16 June
1955, while the two deeds of Espiritu and Apostol were similarly registered 11 days
before.
Sales, 2003 ( 150 )
2.
Deeds / Documents falsified; Witnesses and proof

The document dated 26 May 1932, is fictitious and a falsification, and that the
private document of
3 June 1934 is likewise null and void, being without the necessary formal requisites,
aside to its being fictitious and the fact that the alleged vendor acquired no right
whatsoever in the land. The determination that the documents are falsified is based
upon the testimony of Pelagia Vegilia and Mariano Vegilia. Pelagia emphatically denied
that she sold the land in question to Mariano Vegilia, and that she appeared before
Notary Public Lino Abad Pine before whom the Escritura de Compraventa Definita, was
allegedly ratified. On the other hand, Mariano denied that he bought the said land from
Pelagia Vegilia, and that he sold the same to Santiago Apostol as recited in Pecivo. In
giving credence to the testimony of the two witnesses, the trial court said that (1) an
examination of first deed reveals the glaring fact that it cannot be determined whose
thumbmark is the one appearing on said document for the simple reason that it
immediately precedes the name Anselmo Vegilia but it is under the name Pelagia
Vegilia. Ordinarily, this thumbmark would be considered as the thumbmark of Anselmo
Vegilia and not of Pelagia Vegilia; (2) that the one who wrote the name Anselmo Vegilia
is the very one who wrote the name Pelagia Vegilia; (3) that Anselmo Vegilia could not
have written the name Anselmo Vegilia in the document for the simple reason that it
has been certified by the Notary Public that said Anselmo Vegilia is physically incapable
(inutil physicamente); (4) that there is an apparent difference of the ink used in writing
the names of Pelagia Vegilia and Anselmo Vegilia from the ink used by the other
persons who signed the document indicating that the names Pelagia Vegilia and
Anselmo Vegilia must have been written in a much later date than the other names
appearing in the said document. On the other document, the names Mariano Vegilia
and Jose B. Aviles must have been written by only one man.
[41]
Estoque vs. Pajimula [G.R. No. L-24419. July 15, 1968.]
En Banc, Reyes JBL (J): 8 concur
Facts: Lot 802 of the Cadastral survey of Rosario, covered by OCT RO-2720 (N.A.), was
originally owned by the late spouses Rosendo Perez and Fortunata Bernal, who were
survived by their children namely, Crispina Perez, Lorenzo Perez and Ricardo Perez.
Ricardo Perez is also now dead. On 28 October 1951, Crispina P. Vda. de Aquitania sold
her right and participation in Lot 802 consisting of 1/3 portion with an area of 640
square meters to Leonora Estoque. On 29 October 1951, Lorenzo Perez, Crispina Perez
and Emilia P. Posadas, widow of her deceased husband, Ricardo Perez, for herself and in
behalf of her minor children,
Sales, 2003 ( 151 )
Gumersindo, Raquel, Emilio and Ricardo, Jr., executed a deed of extrajudicial settlement
wherein Lorenzo Perez, Emilia P. Posadas and her minor children assigned all their right,
interest and participation in Lot 802 to Crispina Perez. On 30 December 1959, Crispina
Perez and her children, Rosita Aquitania Belmonte, Remedios Aquitania Misa, Manuel
Aquitania, Sergio Aquitania and Aurora Aquitania sold to Elena Pajimula (and Ciriaco
Pajimula), the remaining 2/3 western portion of Lot 802 with an area of 958 square
meters.
Leonora Estoque based her complaint for legal redemption on a claim that she is a coowner of lot 802, for having purchased 1/3 portion thereof, containing an area of 640
square meters as evidenced by a deed of sale, which was executed on 28 October 1951
by Crispina Perez de Aquitania, one of the co-owners, in her favor. On the other hand,
Elena Pajimula (and Ciriaco Pajimula), who on 30 December 1959 acquired the other
2/3 portion of Lot 802 from Crispina Aquitania and her children, claimed that Estoque
bought the 1/3 southeastern portion, which is definitely identified and segregated
hence there existed no co-ownership at the time and after Estoque bought the portion,
upon which right of legal redemption can be exercised or taken advantage of. The CFI
La Union (Civil Case 1990), upon motion by Pajimula, dismissed the complaint for legal
redemption by a co-owner (retracto legal de comuneros) on account of failure to state a
cause of action. The Court held that the deeds of sale show that the lot acquired by
Estoque was different from that of the Pajimula; hence they never became co-owners,
and the alleged right of legal redemption was not proper. Estoque appealed.
1.
2.
The Supreme Court affirmed the appealed order of dismissal; with cost against Estoque.
Co-ownership does not exist; Article 1620 does not apply
The lower court held that the deeds of sale show that the lot acquired by Estoque
was different from that of the Pajimula; hence they never became co-owners, and the
alleged right of legal redemption was not proper. Article 1620, which provides that A
co-owner of a thing may exercise the right of redemption in case the shares of all the
other co-owners or of any of them, are sold to a third person. If the price of the
alienation is grossly excessive the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may only
do so in proportion to the share they may respectively have in the thing owned in
common, does not apply.
Object sold is the southeastern third portion, not one-third undivided interest
in Lot 802
The deed of sale to Estoque clearly specifies the object sold as the southeastern third
portion of Lot
802 of the Rosario Cadastre, with an area of 840 square meters, more or less. Granting
that the seller, Crispina Perez Vda. de Aquitania could not have sold this particular
portion of the lot owned in common by her and her two brothers, Lorenzo and Ricardo
Perez, by no means does it follow that she intended to sell to Estoque her 1/3 undivided
Sales, 2003 ( 152 )
interest in the lot. There is nothing in the deed of sale to justify such inference. That the
seller could have validly sold her one-third undivided interest to appellant is no proof
that she did choose to sell the same. Ab posse ad actu non valet illatio.
3.
Estoques deed initially ineffective but validated when Crispina Perez

acquired entire interest in
Lot 802
While on the date of the sale to Estoque said contract may have been ineffective,
for lack of power in the vendor to sell the specific portion described in the deed, the
transaction was validated and became fully effective when the next day the vendor,
Crispina Perez, acquired the entire interest of her remaining coowners and thereby
became the sole owner of Lot 802 of the Rosario Cadastral survey (Llacer vs. Muoz, 12
Phil. 328). Article 1434 of the Civil Code of the Philippines clearly prescribes that When
a person who is not the owner of a thing sells or alienates and delivers it, and later the
seller or grantor acquires title thereto, such title passes by operation of law to the
buyer or grantee. Pursuant to this rule, Estoque became the actual owner of the
southeastern third of lot 802 on 29 October 1951.
4.
Estoque acquired no undivided interest in Lot 802 as portions sold to Estoque

and Pajimula distinct and separate
Estoque never acquired an undivided interest in Lot 802. And when eight years
later Crispina Perez sold to Pajimula the western two-thirds of the same lot Estoque did
not acquire a right to redeem the property thus sold, since their respective portions
were distinct and separate.
[42]
Filinvest Credit vs. CA [G.R. No. 82508. September 29, 1989.]
Second Division, Sarmiento (J): 3 concur, 1 on leave
Facts: The spouses Jose Sy Bang and Iluminada Tan were engaged in the sale of gravel
produced from crushed rocks and used for construction purposes. In order to increase
their production, they engaged the services of Mr. Ruben Mercurio, the proprietor of
Gemini Motor Sales in Lucena City, to look for a rock crusher which they could buy. Mr.
Mercurio referred the spouses to the Rizal Consolidated Corporation which then had for
sale one such machinery (Lippman portable crushing plant, reconditioned; Jaw crusher,
10 x 16, Double roll crusher, 16 x 16; 3 units product conveyor, 75 HP electric motor, 8
pcs. Brand new tires; Chassis 19696, Good running condition). Oscar Sy Bang, a brother
of Jose Sy Bang, went to inspect the machine at the Rizal Consolidateds plant site.
Apparently satisfied with the machine, Sy Bang signified their intent to purchase the
same. They were confronted with a problem, the rock crusher carried a cash price tag
Sales, 2003 ( 153 )
of P550,000.00. Bent on acquiring the machinery, the spouses applied for financial
assistance from Filinvest
Credit Corporation. Filinvest agreed to extend to the spouses financial aid on the
following conditions: that the machinery be purchased in Filinvests name; that it be
leased (with option to purchase upon the termination of the lease period) to the
spouses; and that the spouses execute a real estate mortgage in favor of Filinvest as
security for the amount advanced by the latter. Accordingly, on 18 May 1981, a
contract of lease of machinery (with option to purchase) was entered into by the parties
whereby the spouses agreed to lease from the petitioner the rock crusher for two years
starting from 5 July 1981 payable at P10,000.00 for first 3 months, P23,000.00 for the
next 6 months, and P24,800.00 for the next 15 months. The contract likewise stipulated
that at the end of the two-year period, the machine would be owned by the spouses.
Thus, the spouses issued in favor of Filinvest a check for P150,550.00, as initial rental
(or guaranty deposit), and 24 postdated checks corresponding to the 24 monthly
rentals. In addition, to guarantee their compliance with the lease contract, the spouses
executed a real estate mortgage over two parcels of land in favor of Filinvest. The rock
crusher was delivered to the spouses on 9 June 1981. Three months from the date of
delivery, or on 7 September 1981, however, the spouses, claiming that they had only
tested the machine that month, sent a letter-complaint to Filinvest, alleging that
contrary to the 20 to 40 tons per hour capacity of the machine as stated in the lease
contract, the machine could only process 5 tons of rocks and stones per hour. They
then demanded that Filinvest make good the stipulation in the lease contract. They
followed that up with similar written complaints to Filinvest, but the latter did not,
however, act on them. Subsequently, the spouses stopped payment on the remaining
checks they had issued to Filinvest. As a consequence of the non-payment by the
spouses of the rentals on the rock crusher as they fell due despite the repeated written
demands, Filinvest extrajudicially foreclosed the real estate mortgage. On 18 April
1983, the spouses received a Sheriff a Notice of Auction Sale informing them that their
mortgaged properties were going to be sold at a public auction on 25 May 1983, 10:00
a.m., at the Office of the Provincial Sheriff in Lucena City to satisfy their indebtedness
to Filinvest.
To thwart the impending auction of their properties, the spouses filed before the RTC
Quezon (Branch LIX, Lucena City), on 4 May 1983, a complaint against Filinvest for the
rescission of the contract of lease, annullment of the real estate mortgage, and for
injunction and damages, with prayer for the issuance of a writ of preliminary injunction.
On 23 May 1983, 3 days before the scheduled auction sale, the trial court issued a
temporary restraining order commanding the Provincial Sheriff of Quezon, and Filinvest,
to refrain and desist from proceeding with the public auction. Two years later, on 4
September 1985, the trial court rendered a decision in favor of the spouses, making the
injunction permanent, rescinding the contract of lease of the machinery and equipment
and ordering the spouses to return to the Filinvest the machinery subject of the lease
contract, and Filinvest to return to the spouses the sum of P470,950.00 it received from
Sales, 2003 ( 154 )
the latter as guaranty deposit and rentals with legal interest thereon until the amount is
fully restituted; annulling the real estate mortgage constituted over the properties of
the spouses covered by TCTs T-32480 and T-5779 of the Registry of Deeds of Lucena
City; and ordering the Filinvest to pay the spouses P30,000.00 as attorneys fees and
the costs of the suit.
Dissatisfied with the trial courts decision, Filinvest elevated the case to the Court of
Appeals. On 17 March 1988, the appellate court, finding no error in the appealed
judgment, affirmed the same in toto. Hence, the petition for review on certiorari by
Filinvest.
The Supreme Court granted the petition, reversed and set aside the 17 March 1988
Decision of the Court of Appeals, and rendered another one dismissing the complaint;
with costs against the spouses.
1.
2.
3.
Financial institution not immune from recourse of the spouses; Filinvest owns
crusher
While it is accepted that Filinvest Credit Corporation is a financing institution, it is
not, however, immune from any recourse by the private respondents. Notwithstanding
the testimony of Jose Sy Bang that he did not purchase the rock crusher from Filinvest,
the fact that the rock crusher was purchased from Rizal Consolidated Corporation in the
name and with the funds of Filinvest proves beyond doubt that the ownership thereof
was effectively transferred to it. It is precisely this ownership which enabled Filinvest to
enter into the Contract of Lease of Machinery and Equipment with the spouses
Nomenclature of agreement cannot change its true essence; sale on
installment
The real intention of the parties should prevail. The nomenclature of the
agreement cannot change its true essence, i.e., a sale on installments. It is basic that a
contract is what the law defines it and the parties intend it to be, not what it is called by
the parties. It is apparent that the intent of the parties to the subject contract is for the
so-called rentals to be the installment payments. Upon the completion of the payments,
then the rock crusher, subject matter of the contract, would become the property of the
spouses. This form of agreement has been criticized as a lease only in name.
Payment in contract of lease with option to buy are installment payments
In Vda. de Jose v. Barrueco, it was stated that Sellers desirous of making
conditional sales of their goods, but who do not wish openly to make a bargain in that
form, for one reason or another, have frequently resorted to the device of making
contracts in the form of leases either with options to the buyer to purchase for a small
consideration at the end of term, provided the so-called rent has been duly paid, or
with stipulations that if the rent throughout the term is paid, title shall thereupon vest
Sales, 2003 ( 155 )
in the lessee. It is obvious that such transactions are leases only in name. The so-called
rent must necessarily be regarded as payment of the price in installments since the due
payment of the agreed amount results, by the terms of bargain, in the transfer of title
to the lessee.
4.
Article 1484
Article 1484 of the new Civil Code, which provides for the remedies of an unpaid
seller of movables in installment basis, states In a contract of sale of personal property
the price of which is payable in installments, the vendor may exercise any of the
following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendees failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage or the thing sold, if one has been constituted, should
the vendees failure to pay cover two or more installments. In this case, he shall have
no further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void.
5.
Remedies under Article 1484 alternative and not cumulative

Under Article 1484, the seller of movables in installments, in case the buyer fails
to pay two or more installments, may elect to pursue either of the following remedies:
(1) exact fulfillment by the purchaser of the obligation; (2) cancel the sale; or (3)
foreclose the mortgage on the purchased property if one was constituted thereon. It is
now settled that the said remedies are alternative and not cumulative and therefore,
the exercise of one bars the exercise of the others.
6.
Contract of lease with option to buy a device to circumvent Article 1484

The device contract of lease with option to buy is at times resorted to as a
means to circumvent Article 1484, particularly paragraph (3) thereof. Through the setup, the vendor, by retaining ownership over the property in the guise of being the
lessor, retains, likewise, the right to repossess the same, without going through the
process of foreclosure, in the event the vendee-lessee defaults in the payment of the
installments. There arises therefore no need to constitute a chattel mortgage over the
movable sold. More important, the vendor, after repossessing the property and, in
effect, canceling the contract of sale, gets to keep all the installments-cum-rentals
already paid.
7.
Article 1485 places contract of lease with option to buy within the
applicability of Article 1484
Article 1485 of the new Civil Code provides that The preceding article shall be
applied to contracts purporting to be leases of personal property with option to buy,
when the lessor has deprived the lessee of possession or enjoyment of the thing.
8.
No reason to hold Filinvest liable for failure of rock crusher to produce in

accordance with its capacity
Sales, 2003 ( 156 )
The Court failed to find any reason to hold the petitioner liable for the rock
crushers failure to produce in accordance with its described capacity. It was the
spouses who chose, inspected, and tested the subject machinery. It was only after they
had inspected and tested the machine, and found it to their satisfaction, that the
spouses sought financial aid from Filinvest. These allegations of the petitioner had
never been rebutted by the spouses, but in fact, even been admitted in the contract
they signed (LESSEES SELECTION, INSPECTION AND VERIFICATION. The LESSEE
hereby confirms and acknowledges that he has independently inspected and verified
the leased property and has selected and received the same from the Dealer of his own
choosing in good order and excellent running and operating condition and on the basis
of such verification, etc. the LESSEE has agreed to enter into this Contract.)
9.
Spouses presumed knowledgeable on machinery subject of the contract;

Spouses negligent
Considering that between the parties, it is the spouses, by reason of their
business, who are presumed to be more knowledgeable, if not experts, on the
machinery subject of the contract, they should not therefore be heard now to complain
of any alleged deficiency of the said machinery. It is their failure or neglect to exercise
the caution and prudence of an expert, or, at least, of a prudent man, in the selection,
testing, and inspection of the rock crusher that gave rise to their difficulty and to this
conflict. A well-established principle in law is that between two parties, he, who by his
negligence caused the loss, shall bear the same.
10.
Spouses precluded from imputing liability on Filinvest; Express waiver of

warranties
Even if the spouses could not be adjudged as negligent, they still are precluded
from imputing any liability on Filinvest. One of the stipulations in the contract they
entered into with Filinvest is an express waiver of warranties in favor of the latter. By so
signing the agreement, the spouses absolved Filinvest from any liability arising from
any defect or deficiency of the machinery they bought. The stipulation on the
machines production capacity being typewritten and that of the waiver being
printed does not militate against the latters effectivity. As such, whether a capacity
of 20 to 40 tons per hour is a condition or a description is of no moment. What stands
is that the spouses had expressly exemptd Filinvest from any warranty whatsoever.
Their Contract of Lease Of Machinery And Equipment states WARRANTY LESSEE
absolutely releases the lessor from any liability whatsoever as to any and all matters in
relation to warranty in accordance with the provisions hereinafter stipulated.
11.
Common sense dictates buyer inspects product before purchasing it; Caveat
emptor
Sales, 2003 ( 157 )
Common sense dictates that a buyer inspects a product before purchasing it

(under the principle of caveat emptor or buyer beware) and does not return it for
defects discovered later on, particularly if the return of the product is not covered by or
stipulated in a contract or warranty.
12.
Declaration of waiver as non-effective would impair obligations of contracts

Taking into account that due to the nature of its business and its mode of
providing financial assistance to clients, Filinvest deals in goods over which it has no
sufficient know-how or expertise, and the selection of a particular item is left to the
client concerned, the latter, therefore, shoulders the responsibility of protecting himself
against product defects. This is where the waiver of warranties is of paramount
importance. In the present case, to declare the waiver as non-effective would impair
the obligation of contracts. Certainly, the waiver in question could not be considered a
mere surplusage in the contract between the parties. Moreover, nowhere is it shown in
the records of the case that the spouses has argued for its nullity or illegality.
13.
No ambiguity in the language of the waiver

In any event, there is no ambiguity in the language of the waiver or the release
of warranty. There is therefore no room for any interpretation as to its effect or
applicability vis-a-vis the deficient output of the rock crusher. Suffice it to say that the
spouses have validly excused Filinvest from any warranty on the rock crusher. Hence,
they should bear the loss for any defect found therein.
[43]
Filipinas Investment vs. Ridad [G.R. No. L-27645.
November 28, 1969.] En Banc, Castro (J): 9 concur
Facts: The spouses Ridad (Lourdes V. Ridad and Luis Ridad) bought from the Supreme
Sales &
Development Corporation, Filipinas Investment and Finance Corporation (FIFC)s
assignor-in-interest, a Ford Consul sedan for the total price of P13,371.40. The sum of
P1,160 was paid on delivery, the balance of P12,211.50 being payable in 24 equal
monthly installments, with interest at 12% per annum, secured by a promissory note
and a chattel mortgage on the car executed on 19 March 1964. The spouses thereafter
failed to pay 5 consecutive installments on a remaining balance of P5,274.53. On 13
October 1965, FIFC instituted a replevin suit in the city court of Manila for the seizure of
the car, or the recovery of the unpaid balance in case delivery could not be effected.
The car was then seized by the sheriff of Manila and possession thereof was awarded to
FIFC. During the progress of the case, FIFC instituted extrajudicial foreclosure
proceedings, as a result of which, on 22 December 1965, the car was sold at public
auction with FIFC as the highest bidder and purchaser.
Sales, 2003 ( 158 )
Meanwhile, in view of the failure of the spouses to appear at the scheduled hearing of
the case, allegedly due to non-receipt of the summons, they were declared in default.
The default judgment ordered them to pay to FIFC the sum of P500 as attorneys fees,
and P163,65 representing actual expenses relative to the seizure of the car, plus costs.
Their motion to set aside the order of default and the decision having been denied, they
appealed to the Court of First Instance of Manila.
The CFI advanced the opinion (during pre-trial) that there was no need for the parties to
adduce evidence and that the case could be decided on the basis of the pleadings
submitted by the parties. On 5 September 1966, the trial court rendered judgment
holding that FIFC is entitled to recover the amout of P163.65 which represents the
expenses incurred by FIFC in the seizure of the car involved. The court also reduced the
attorneys fees granted to the plaintiff to P300.00 considering that FIFC recovered the
car while still in the lower court and that the Ridads did not resist the case. The spouses
Ridads appealed.
The Supreme Court affirmed the judgment; without costs.
1.
Decision complies with requirements of law by referring to pre-trial order as

part of its conclusion
The disputed decision of the lower court complies substantially with the
requirements of law because it referred to the pre-trial order it issued on 27 May 1966
which contains substantial findings of facts. For although settled is the doctrine that a
decree with absolutely nothing to support it is a nullity, the law, however, merely
requires that a decision state the essential ultimate facts upon which the courts
conclusion is drawn. There being an express reference to the pre-trial order, the latter
must be considered and taken as forming part of the decision. The claim, therefore,
that the judgment clearly transgresses the legal precept because it does not state the
facts of the case and the law on which it is based and hence, is a nullity, finds no
justification here.
2.
Article 1484 applies even if case is one for replevin as it culminated in the
foreclosure of chattel mortgage
It is true that the present action is one for replevin, but because it culminated in
the foreclosure of the chattel mortgage and the sale of the car at public auction, it is
our view that the provisions of art. 1484 of the Civil Code (Recto Law) must govern the
resolution of the issue presented.
3.
Article 1484
In a contract of sale of personal property the price of which is payable in installments,
the vendor
Sales, 2003 ( 159 )
may exercise any of the following remedies: (1) Exact fulfillment of the obligation,
should the vendee fail to pay; (2) Cancel the sale, should the vendees failure to pay
cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if
one has been constituted, should the vendees failure to pay cover two or more
installments. In this case, he shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement to the contrary shall be void.
4.
Source of Article 1454

Article 1454 was reproduced from the old Article 1454-A, which in turn was
inserted by Act 4122 (Recto Law). Three remedies are available to the vendor who has
sold personal property on the installment plan: (1) He may elect to exact the fulfillment
of the obligation. (Bachrach Motor Co. vs. Millan, 61 Phil. 409) (2) If the vendee shall
have failed to pay two or more installments, the vendor may cancel the sale. (3) If the
vendee shall have failed to pay two or more installments, the vendor may foreclose the
mortgage, if one has been given on the property. The basis of the first option is the Civil
Code. The basis of the last two options is Act 4122 (inserted in the Spanish Civil Code
as art. 4154-A and now reproduced in arts. 1485 and 1485), amendatory of the Civil
Code. And the proviso to the right to foreclose is that if the vendor has chosen this
remedy, he shall have no further action against the purchaser for the recovery of any
unpaid balance owing by the same. In other words, as we see it, the Act does no more
than qualify the remedy.
5.
Macondray & Co. vs. Eustaquio; Mortgage limited to property mortgage and
not entitled to attorney's fees and cost of suit
Under the amendment, in all proceedings for the foreclosure of a chattel
mortgage, executed on chattels which have been sold on the installment plan, the
mortgagee is limited to the property mortgaged and is not entitled to attorneys fees
and costs of suit.
6.
Luneta Motor vs. Salvador; Cancellation of attorneys fees and cost of suit
when chattel mortgage was foreclosed during progress of action to recover
unpaid balance of purchase price
In a subsequent case, where the vendor in a sale of personal property in
installments, upon failure of the vendee to pay his obligations, the vendor commenced,
through court action, to recover the unpaid balance of the purchase price, but later,
during the progress of the action, foreclosed the chattel mortgage constituted on the
property, attorneys fees and costs of suit were denied to the vendor.
7.
Luneta Motor vs. Salvador; Remedies alternative not pursued conjunctively

Paragraph 3 of Article 1484, New Civil Code, is clear that foreclosure of the
chattel mortgage and recovery of the unpaid balance of the price are alternative
remedies and may not be pursued conjunctively. It appearing that the vendor had
already foreclosed the chattel mortgage constituted on the property and had taken
Sales, 2003 ( 160 )
possession thereof, the lower court acted rightly in dismissing the complaint filed for
the purpose of recovering the unpaid balance of the purchase price. Thus, in that case,
by seizing the truck and foreclosing the mortgage at the progress of the suit, the
plaintiff renounced whatever claim it may have had under the promissory note, and
consequently, he has no more cause of action against the promisor and the guarantor.
And he has no more right either to the costs and the attorneys fees that would go with
the suit. This might be considered a reiteration of the ruling in Macondray.
8.
9.
10.
Purpose of the doctrine as to Article 1484 (3)

The doctrines ultimate and salutary purpose is to prevent the vendor from
circumventing the Recto Law. Congress sought to protect the buyers on installment who
more often than not have been victimized by sellers who, before the enactment of this
law, succeeded in unjustly enriching themselves at the expense of the buyers, because
aside from recovering the goods sold, upon default of the buyer in the payment of two
installments, still retained for themselves all amounts already paid, and, in addition,
were adjudged entitled to damages, such as attorneys fees, expenses of litigation and
costs. Congress could not have intended to impair much less do away with, the right of
the seller to make commercial use of his credit against the buyer, provided the buyer is
not burdened beyond what this law allows.
Philosophy of the Recto Law
The emphasis and precision of the language employed in the decisions already
adverted to that in no instance whatsoever may the mortgagee re cover from the
mortgagor any amount or sum after the foreclosure of the mortgage, for, as we
understand it, the philosophy of the Recto Law is that the underprivileged mortgagors
must be afforded full protection against the rapacity of the mortgagees.
Action for replevin; Necessary expenses borne by mortgagor
It is part of conventional wisdom and the rule of law that no man can take the
law into his own hands; so it is not to be supposed that the Legislature intended that
the mortgagee should wrest or seize the chattel forcibly from the control and
possession of the mortgagor, even to the extent of using violence which is unwarranted
in law. Since the mortgagee would enforce his rights through the means and within the
limits delineated by law, the next step in such situations being the filing of an action for
replevin to the end that he may recover immediate possession of the chattel and,
thereafter, enforce his rights in accordance with the contractual relationship between
him and the mortgagor as embodied in their agreement, then it logically follows as a
matter of common sense, that the necessary expenses incurred in the prosecution by
the mortgagee of the action for replevin so that he can regain possession of the chattel,
should be borne by the mortgagor. Recoverable expenses would include expenses
properly incurred in effecting seizure of the chattel and reasonable attorneys fees in
Sales, 2003 ( 161 )
prosecuting the action for replevin. The amounts awarded by the lower court to the
mortgagee are reasonable.
11.
Note as to potential matters which may be obiter dictum

To the extent that the pronouncement in the present case conflicts with the
ruling announced and followed in the cases discussed, the latter must be considered
pro tanto qualified.
[44]
First Philippine International Bank v. CA, 252 SCRA (1996)
[45]
Froilan v. Pan-Oriental Shipping Co., 12 SCRA 276 (1964)
[46]
Fule v. CA [G.R. No. 112212. March 2, 1998.]
Third division, Romero (J): 3 concur
Facts: Fr. Antonio Jacobe initially mortgage a 10-hectare property in Tanay, Rizal
(covered by TCT 320725) to the Rural Bank of Alaminos, Laguna to secure a loan in the
amount of P10,000. Said mortgage was later foreclosed and the property offered for
public auction upon his default. In June 1984, Gregorio Fule, as corporate secretary of
the bank, asked Remelia Dichoso and Olivia Mendoza to look for a buyer who might be
interested in the Tanay property. The two found one in the person of Ninevetch Cruz. It
so happened that in January of said year, Gregorio Fule, also a jeweler, has shown
interest in buying a pair of emerald-cut diamond earrings owned by Dr. Cruz. Dr. Cruz
has declined Fules offer to buy said jewelry for P100,000; and a subsequent bid by Fule
to buy them for US$6,000 at $1 to P25 while making a sketch of said jewelry during an
inspection at the lobby of Prudential Bank (the latter instance was declined, since the
exchange rate appreciated to P19 per dollar). Subsequently, however, negotiations for
the barter of the jewelry and the Tanay property ensued. Atty. Belarmino was requested
by Dr. Cruz to check the property and found out that no sale or barter was feasible as
the 1-year period of redemption has not expired. In an effort to cut through any legal
impediment, Fule executed on 19 October 1984, a deed of redemption on behalf of Fr.
Jacobe purportedly in the amount of P15,987.78, and on even date, Fr. Jacobe sold the
property to Fule for P75,000.00. The haste with which the two deeds were executed is
shown by the fact that the deed of sale was notarized ahead of the deed of redemption.
As Dr. Cruz had already agreed to the proposed barter, Fule went to Prudential Bank to
take a look at the jewelry.
Sales, 2003 ( 162 )
On 23 October 1984, Fule met Atty. Belarmino at the latters residence to prepare the
documents of sale. Atty. Belarmino accordingly caused the preparation of a deed of
absolute sale while Fule and Dr. Cruz attended to the safekeeping of the jewelry. The
following day, Fule, together with Dichoso and Mendoza, arrived at the residence of
Atty. Belarmino to finally execute a deed of absolute sale. Fule signed the deed and
gave Atty. Belarmino the amount of P13,700.00 for necessary expenses in the transfer
of title over the Tanay property; and issued a certification to the effect that the actual
consideration of the sale was P200,000.00 and not P80,000.00 as indicated in the deed
of absolute sale (the disparity purportedly aimed at minimizing the amount of the
capital gains tax that Fule would have to shoulder). Since the jewelry was appraised
only at P160,000.00, the parties agreed that the balance of P40,000.00 would just be
paid later in cash. Thereafter, at the bank, as pre-arranged, Dr. Cruz and the cashier
opened the safety deposit box, and delivered the contents thereof to Fule. Fule
inspected the jewelry, near the electric light at the banks lobby, for 10-15 minutes.
Fule expressed his satisfaction by nodding his head when asked by Dr. Cruz if the
jewelry was okay. For services rendered, Fule paid the agents, Dichoso and Mendoza,
the amount of US$300.00 and some pieces of jewelry. He did not, however, give them
half of the pair of earrings in question, which he had earlier promised. Later in the
evening, Fule arrived at the residence of Atty. Belarmino complaining that the jewelry
given him was fake. Dichoso, who borrowed the car of Dr. Cruz, called up Atty.
Belarmino. Informed that Fule was at the lawyers house, went there posthaste thinking
that Fule had finally agreed to give them half of the pair of earrings, only to find Fule
demonstrating with a tester that the earrings were fake. Fule then accused Dichoso and
Mendoza of deceiving him which they, however, denied. They countered that Fule could
not have been fooled because he had vast experience regarding jewelry. Fule
nonetheless took back the US$300.00 and jewelry he had given them. Thereafter, the
group decided to go to the house of a certain Macario Dimayuga, a jeweler, to have the
earrings tested. Dimayuga, after taking one look at the earrings, immediately declared
them counterfeit. At around 9:30 p.m., Fule went to one Atty. Reynaldo Alcantara
residing at Lakeside Subdivision in San Pablo City, complaining about the fake jewelry.
Upon being advised by the latter, Fule reported the matter to the police station where
Dichoso and Mendoza likewise executed sworn statements.
On 26 October 1984, Fule filed a complaint before the RTC San Pablo City against
private respondents praying, among other things, that the contract of sale over the
Tanay property be declared null and void on the ground of fraud and deceit. On 30
October 1984, the lower court issued a temporary restraining order directing the
Register of Deeds of Rizal to refrain from acting on the pertinent documents involved in
the transaction. On 20 November 1984, however, the same court lifted its previous
order and denied the prayer for a writ of preliminary injunction. After trial, the lower
court rendered its decision on 7 March 1989; holding that the genuine pair of earrings
Sales, 2003 ( 163 )
used as consideration for the sale was delivered by Dr. Cruz to Fule, that the contract
was valid even if the agreement between the parties was principally a barter contract,
that the agreement has been consummated at the time the principal parties parted
ways at the bank, and that damages are due to the defendants. From the trial courts
adverse decision, petitioner elevated the matter to the Court of Appeals. On 20 October
1992, the Court of Appeals, however, rendered a decision affirming in toto the lower
courts decision. His motion for reconsideration having been denied on 19 October
1993. Hence, the petition for review on certiorari.
The Supreme Court affirmed in toto the decision of the Court of Appeals, but ordered
Dr. Cruz to pay Fule the balance of the purchase price of P40,000 within 10 days from
the finality of the decision; with costs against petitioner.
1.
New factual issues cannot be examined as it unduly transcends the limits of

the Supreme Courts review power
The Supreme Court cannot entertain a factual issue, and thus examine and
weigh anew the facts regarding the genuineness of the earrings bartered in exchange
for the Tanay property, as this would unduly transcend the limits of the Courts review
power in petitions of this nature which are confined merely to pure questions of law. As
a general rule, the Supreme Court accords conclusiveness to a lower courts findings of
fact unless it is shown, inter alia, that: (1) the conclusion is a finding grounded on
speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd
and impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of fact are conflicting; and
(6) when the Court of Appeals, in making its findings, went beyond the issues of the
case and the same is contrary to the admission of both parties. To reiterate, the
Supreme Courts jurisdiction is only limited to reviewing errors of law in the absence of
any showing that the findings complained of are totally devoid of support in the record
or that they are glaringly erroneous as to constitute serious abuse of discretion.
2.
Immediate rendition of decision not anomalous

No proof has been adduced that Judge Jaramillo was motivated by a malicious or
sinister intent in disposing of the case with dispatch. Neither is there proof that
someone else wrote the decision for him. The immediate rendition of the decision was
no more than Judge Jaramillos compliance with his duty as a judge to dispose of the
courts business promptly and decide cases within the required periods. The two-year
period within which Judge Jaramillo handled the case provided him with all the time to
study it and even write down its facts as soon as these were presented to court. In fact,
the Supreme Court does not see anything wrong in the practice of writing a decision
days before the scheduled promulgation of judgment and leaving the dispositive
portion for typing at a time close to the date of promulgation, provided that no malice
or any wrongful conduct attends its adoption. The practice serves the dual purposes of
safeguarding the confidentiality of draft decisions and rendering decisions with
Sales, 2003 ( 164 )
promptness. Neither can Judge Jaramillo be made administratively answerable for the
immediate rendition of the decision. The acts of a judge which pertain to his judicial
functions are not subject to disciplinary power unless they are committed with fraud,
dishonesty, corruption or bad faith. Hence, in the absence of sufficient proof to the
contrary, Judge Jaramillo is presumed to have performed his job in accordance with law
and should instead be commended for his close attention to duty.
3.
Contract perfected by mere consent, binds parties to stipulation and all the
consequences;
Contract of sale perfected upon meeting of minds upon the thing object of
the contract and upon price; Embodiment of contract in public instrument
only for convenience, and registration only to affect third parties; Lack of
formal requirements does not invalidate the contract
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.
4.
Voidable or annullable contracts

Contracts that are voidable or annullable, even though there may have been no
damage to the contracting parties are: (1) those where one of the parties is incapable
of giving consent to a contract; and (2) those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud. The contract can be voided in
accordance with law so as to compel the parties to restore to each other the things that
have been the subject of the contract with their fruits, and the price with interest.
Fraud; No inducement made by the private respondents
There is fraud when, through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract which, without them,
he would not have agreed to. In the present case, the records, are bare of any evidence
manifesting that private respondents employed such insidious words or machinations to
entice petitioner into entering the contract of barter. Neither is there any evidence
5.
Sales, 2003 ( 165 )
showing that Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled
him to take the earrings in exchange for said property. On the contrary, Dr. Cruz did not
initially accede to petitioners proposal to buy the said jewelry. Rather, it appears that it
was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay property
was worth exchanging for her jewelry as he represented that its value was P400,000.00
or more than double that of the jewelry which was valued only at P160,000.00. If
indeed petitioners property was truly worth that much, it was certainly contrary to the
nature of a businessman-banker like him to have parted with his real estate for half its
price. In short, it was in fact petitioner who resorted to machinations to convince Dr.
Cruz to exchange her jewelry for the Tanay property.
6.
Mistake; Mistake caused by manifest negligence cannot invalidate a judicial

act
To invalidate a contract, mistake must refer to the substance of the thing that is the
object of the contract, or to those conditions which have principally moved one or both
parties to enter into the contract. An example of mistake as to the object of the
contract is the substitution of a specific thing contemplated by the parties with another.
In the present case, the petitioner failed to prove the fact that prior to the delivery of
the jewelry to him, private respondents endeavored to make such substitution of an
inferior one or one with Russian diamonds for the jewelry he wanted to exchange with
his 10-hectare land. Further, on account of his work as a banker-jeweler, it can be
rightfully assumed that he was an expert on matters regarding gems. He had the
intellectual capacity and the business acumen as a banker to take precautionary
measures to avert such a mistake, considering the value of both the jewelry and his
land. A mistake caused by manifest negligence cannot invalidate a juridical act. As the
Civil Code provides, (t)here is no mistake if the party alleging it knew the doubt,
contingency or risk affecting the object of the contract.
7.
Contract of sale absolute if no stipulation that title to property is reserved to

seller until full payment; Ownership transferred upon actual or constructive
delivery
A contract of sale being absolute in nature, title passed to the vendee upon
delivery of the thing sold since there was no stipulation in the contract that title
to the property sold has been reserved in the seller until full payment of the
price or that the vendor has the right to unilaterally resolve the contract the
moment the buyer fails to pay within a fixed period. Such stipulations are not
manifest in the contract of sale. In the present case, both the trial and appellate
courts, therefore, correctly ruled that there were no legal bases for the
nullification of the contract of sale. Ownership over the parcel of land and the
pair of emerald-cut diamond earrings had been transferred to Dr. Cruz and Fule,
respectively, upon the actual and constructive delivery thereof.
Sales, 2003 ( 166 )
8.
Contract silent when balance is due and demandable; non-payment does not
invalidate the contract
While it is true that the amount of P40,000.00 forming part of the consideration was still
payable to Fule, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate the
contract or bar the transfer of ownership and possession of the things exchanged
considering the fact that their contract is silent as to when it becomes due and
demandable.
9.
No interest due if it is not stipulated

Failure to pay the balance of the purchase price does not result in the payment of
interest thereon. Article 1589 of the Civil Code prescribes the payment of interest by
the vendee for the period between the delivery of the thing and the payment of the
price in cases (1) Should it have been so stipulated; (2) Should the thing sold and
delivered produce fruits or income; (3) Should he be in default, from the time of judicial
or extrajudicial demand for the payment of the price.
10.
Case distinguished from de la Cruz v Legaspi

The present case should be distinguished from De la Cruz v. Legaspi, where the
court held that failure to pay the consideration after the notarization of the contract as
previously promised resulted in the vendees liability for payment of interest. In the
present, there is no stipulation for the payment of interest in the contract of sale nor
proof that the Tanay property produced fruits or income. Neither did petitioner demand
payment of the price as in fact he filed an action to nullify the contract of sale.
11.
Award of moral and exemplary damages

Moral and exemplary damages may be awarded without proof of pecuniary loss.
In awarding such damages, the court shall take into account the circumstances
obtaining in the case and assess damages according to its discretion. To warrant the
award of damages, it must be shown that the person to whom these are awarded has
sustained injury. He must likewise establish sufficient data upon which the court can
properly base its estimate of the amount of damages. Statements of facts should
establish such data rather than mere conclusions or opinions of witnesses. Thus, for
moral damages to be awarded, it is essential that the claimant must have satisfactorily
proved during the trial the existence of the factual basis of the damages and its causal
connection with the adverse partys acts. If the court has no proof or evidence upon
which the claim for moral damages could be based, such indemnity could not be
outrightly awarded. The same holds true with respect to the award of exemplary
damages where it must be shown that the party acted in a wanton, oppressive or
malevolent manner.
Sales, 2003 ( 167 )
12.
Rule that moral damages cannot be recovered from person who filed a
complaint does not apply in present case
While, as a rule, moral damages cannot be recovered from a person who has
filed a complaint against another in good faith because it is not sound policy to place a
penalty on the right to litigate, the same, however, cannot apply in the present case.
This is not a situation where petitioners complaint was simply found later to be based
on an erroneous ground which, under settled jurisprudence, would not have been a
reason for awarding moral and exemplary damages. Instead, the cause of action of the
instant case appears to have been contrived by petitioner himself. The factual findings
of the courts a quo to the effect that petitioner filed this case because he was the
victim of fraud; that he could not have been such a victim because he should have
examined the jewelry in question before accepting delivery thereof, considering his
exposure to the banking and jewelry businesses; and that he filed the action for the
nullification of the contract of sale with unclean hands, all deserve full faith and credit
to support the conclusion that petitioner was motivated more by ill will than a sincere
attempt to protect his rights in commencing suit against respondents. It must be noted
that before petitioner was able to convince Dr. Cruz to exchange her jewelry for the
Tanay property, petitioner took pains to thoroughly examine said jewelry, even going to
the extent of sketching their appearance. Why at the precise moment when he was
about to take physical possession thereof he failed to exert extra efforts to check their
genuineness despite the large consideration involved has never been explained at all
by petitioner. His acts thus failed to accord with what an ordinary prudent man would
have done in the same situation.
[47]
Gaite v. Fonacier [G.R. No. L-11827. July 31, 1961.]
En Banc, Reyes JBL (J): 9 concur
Facts: Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims
(Dawahan Group), situated in Jose Panganiban, Camarines Norte. By a Deed of
Assignment dated 29 September 1952, Fonacier constituted and appointed Fernando
A. Gaite as his true and lawful attorney-in-fact to enter into a contract with any
individual or juridical person for the exploration and development of the mining claims
on a royalty basis of not less than P0.50 per ton of ore that might be extracted
therefrom. On 19 March 1954, Gaite in turn executed a general assignment conveying
the development and exploitation of said mining claims unto the Larap Iron Mines,
owned solely by him. Thereafter Gaite embarked upon the development and
exploitation of the mining claims, opening and paving roads within and outside their
boundaries, making other improvements and installing facilities therein for use in the
development of the mines, and in time extracted therefrom what he claimed and
estimated to be approximately 24,000 metric tons of iron ore.
Sales, 2003 ( 168 )
For some reason or another, Isabelo Fonacier decided to revoke the authority granted
by him to Gaite, and
Gaite assented thereto subject to certain conditions. As a result, a document entitled
Revocation of Power of Attorney and Contract was executed on 8 December 1954,
wherein Gaite transferred to Fonacier, for the consideration of P20,000, plus 10% of the
royalties that Fonacier would receive from the mining claims, all his rights and interests
on all the roads, improvements, and facilities in or outside said claims, the right to use
the business name Larap Iron Mines and its goodwill, and all the records and
documents relative to the mines. In the same document, Gaite transferred to Fonacier
all his rights and interests over the 24,000 tons of iron ore, more or less that the
former had already extracted from the mineral claims, in consideration of the sum of
P75,000, P10,000, of which was paid upon the signing of the agreement, and the
balance to be paid out of the first letter of credit covering the first shipment of iron ores
or the first amount derived from the local sale of iron ore made by the Larap Mines &
Smelting Co. To secure the payment of the balance, Fonacier promised to execute in
favor of Gaite a surety bond; delivered on 8 December 1954 with Fonacier as principal
and the Larap Mines and Smelting Co. and its stockholders as sureties. A second bond
was executed by the parties to the first bond, on the same day, with the Far Eastern
Surety and Insurance Co. as additional surety, but it provided that the liability of the
surety company would attach only when there had been an actual sale of iron ore by
the Larap Mines & Smelting Co. for an amount of not less than P65,000. Both bond were
attached and made integral parts of the Revocation of Power of Attorney and
Contract. On the same day that Fonacier revoked the power of attorney, Fonacier
entered into a Contract of Mining Operation with Larap Mines and Smelting Co., Inc. to
grant it the right to develop, exploit, and explore the mining claims, together with the
improvements therein and the use of the name Larap Iron Mines and its goodwill, in
consideration of certain royalties. Fonacier likewise transferred, in the same document,
the complete title to the approximately 24,000 tons of iron ore which he acquired from
Gaite, to the Larap Mines & Smelting Co., in consideration for the signing by the
company and its stockholders of the surety bonds delivered by Fonacier to Gaite. On 8
December 1955, the bond with respect to the Far Eastern Surety and Insurance
Company expired with no sale of the approximately 24,000 tons of iron ore, nor had the
65,000 balance of the price of said ore been paid to Gaite by Fonacier and his sureties.
Whereupon, Gaite demanded from Fonacier and his sureties payment of said amount.
When Fonacier and his sureties failed to pay as demanded by Gaite, the latter filed a
complaint against them in the CFI Manila (Civil Case 29310) for the payment of the
P65,000 balance of the price of the ore, consequential damages, and attorneys fees.
Judgment was, accordingly, rendered in favor of plaintiff Gaite ordering defendants to
pay him, jointly and severally, P65,000 with interest at 6% per annum from 9 December
Sales, 2003 ( 169 )
1955 until full payment, plus costs. From this judgment, defendants jointly appealed to
the Supreme Court as the claims involved aggregate to more than P200,000.
The Supreme Court affirmed the decision appealed from, with costs against appellants.
1.
2.
Shipment or local sale of ore not a condition precedent but a suspensive

period or term
The shipment or local sale of the iron ore is not a condition precedent (or
suspensive) to the payment of the balance of P65,000, but was only a suspensive
period or term. What characterizes a conditional obligation is the fact that its efficacy or
obligatory force (as distinguished from its demandability) is subordinated to the
happening of a future and uncertain event; so that if the suspensive condition does not
take place, the parties would stand as if the conditional obligation had never existed.
The words of the contract express no contingency in the buyers obligation to
pay.
The contract stipulates that the balance of Sixty-Five Thousand Pesos (P65,000)
will be paid out of the first letter of credit covering the first shipment of iron ore . . .
etc. There is no uncertainty that the payment will have to be made sooner or later;
what is undetermined is merely the exact date at which it will be made. By the very
terms of the contract, therefore, the existence of the obligation to pay is recognized;
only its maturity or demandability is deferred.
3.
Contract of sale commutative and onerous; Each party assume correlative

obligation and anticipate performance from the other
A contract of sale is normally commutative and onerous: not only does each one
of the parties assume a correlative obligation (the seller to deliver and transfer
ownership of the thing sold and the buyer to pay the price), but each party anticipates
performance by the other from the very start. While in a sale the obligation of one party
can be lawfully subordinated to an uncertain event, so that the other understands that
he assumes the risk of receiving nothing for what he gives (as in the case of a sale of
hopes or expectations, emptio spei), it is not in the usual course of business to do so;
hence, the contingent character of the obligation must clearly appear. In the present
case, nothing is found in the record to evidence that Gaite desired or assumed to run
the risk of losing his rights over the ore without getting paid for it, or that Fonacier
understood that Gaite assumed any such risk. The fact that appellants did put up such
bonds indicates that they admitted the definite existence of their obligation to pay the
balance of P65,000.
4.
To consider sale as a condition precedent leaves the payment at the

discretion o fthe debtor
To subordinate the obligation to pay the remaining P65,000 to the sale or
shipment of the ore as a condition precedent, would be tantamount to leaving the
payment at the discretion of the debtor, for the sale or shipment could not be made
Sales, 2003 ( 170 )
unless the appellants took steps to sell the ore. Appellants would thus be able to
postpone payment indefinitely. Such construction of the contract should be avoided.
5.
Interpretation incline in favor of the greatest reciprocity of interests

Assuming that there could be doubt whether by the wording of the contract the
parties intended a suspensive condition or a suspensive period (dies ad quem) for the
payment of the P65,000, the rules of interpretation would incline the scales in favor of
the greatest reciprocity of interests, since sale is essentially onerous. The Civil Code
of the Philippines, Article 1378, paragraph 1, in fine, provides if the contract is
onerous, the doubt shall be settled in favor of the greatest reciprocity of interests and
there can be no question that greater reciprocity obtains if the buyers obligation is
deemed to be actually existing, with only its maturity (due date) postponed or deferred,
than if such obligation were viewed as non-existent or not binding until the ore was
sold.
6.
Sale of ore to Fonacier was a sale on credit, not an aleatory contract

The sale of the ore to Fonacier was a sale on credit, and not an aleatory contract
where the transferor, Gaite, would assume the risk of not being paid at all; and that the
previous sale or shipment of the ore was not a suspensive condition for the payment of
the balance of the agreed price, but was intended merely to fix the future date of the
payment.
7.
Non-renewal of bond impaired the securities given to the creditor

Appellants have forfeited the right to compel Gaite to wait for the sale of the ore
before receiving payment of the balance of P65,000, because of their failure to renew
the bond of the Far Eastern Surety Company or else replace it with an equivalent
guarantee. The expiration of the bonding companys undertaking on 8 December 1955
substantially reduced the security of the vendors rights as creditor for the unpaid
P65,000, a security that Gaite considered essential and upon which he had insisted
when he executed the deed of sale of the ore to Fonacier. The case squarely comes
under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines which
provides (2) When he does not furnish to the creditor the guaranties or securities
which he has promised. (3) When by his own acts he has impaired said guaranties or
securities after their establishment, and when through fortuitous event they disappear,
unless he immediately gives new ones equally satisfactory. Appellants failure to
renew or extend the surety companys bond upon its expiration plainly impaired the
securities given to the creditor (appellee Gaite), unless immediately renewed or
replaced.
8.
No waiver intended by creditor
Sales, 2003 ( 171 )
Gaites acceptance of the surety companys bond with full knowledge that on its
face it would automatically expire within one year was not a waiver of its renewal after
the expiration date. No such waiver could have been intended, for Gaite stood to lose
and had nothing to gain thereby; and if there was any, it could be rationally explained
only if the appellants had agreed to sell the ore and pay Gaite before the surety
companys bond expired on 8 December 1955. But in the latter case the defendantsappellants obligation to pay became absolute after 1 year from the transfer of the ore
to Fonacier by virtue of the deed.
9.
No short-delivery made by Gaite

This is a case of a sale of a specific mass of fungible goods for a single price or a
lump sum, the quantity of 24,000 tons of iron ore, more or less, stated in the
contract, being a mere estimate by the parties of the total tonnage weight of the mass;
and second, that the evidence shows that neither of the parties had actually measured
or weighed the mass, so that they both tried to arrive at the total quantity by making
an estimate of the volume thereof in cubic meters and then multiplying it by the
estimated weight per ton of each cubic meter. The sale between the parties is a sale of
a specific mass of iron ore because no provision was made in their contract for the
measuring or weighing of the ore sold in order to complete or perfect the sale, nor was
the price of P75,000 agreed upon by the parties based upon any such measurement
(see Art. 1480, second par., New Civil Code). The subject-matter of the sale is,
therefore, a determinate object, the mass, and not the actual number of units or tons
contained therein, so that all that was required of the seller Gaite was to deliver in good
faith to his buyer all of the ore found in the mass, notwithstanding that the quantity
delivered is less than the amount estimated by them (Mobile Machinery & Supply Co.,
Inc. vs. York Oilfield Salvage Co., Inc. 171 So. 872, applying art. 2459 of the Luisiana
Civil Code). The contract expressly stated the amount to be 24,000 tons, more or less.
Applying the tonnage factor provided by the chief of Mines and Metallurgical Division of
the Bureau of Mines which was between 3 metric tons minimum to 5 metric tons
maximum, which was near the 3.3 metric ton tonnage factor adopted by Engr.
Gamatero (at the request of Krakower, a stockholder of Larap), and if appellants
witness is correct in his estimate of 6,609 cubic meters of ore, the product is 21,809.7
tons which is not far from the 24,000 tons estimate. (cf. Pine River Logging &
Improvement Co. vs. U. S., 186 U.S. 279, 46, L. Ed. 1164). Thus, there was no shortdelivery as would entitle appellants to the payment of damages, nor could Gaite have
been guilty of any fraud in making any misrepresentation to appellants as to the total
quantity of ore in the stockpiles of the mining claims in question since Gaites estimate
appears to be substantially correct.
[48]
Sales, 2003 ( 172 )
Goldenrod Inc. vs. CA [G.R. No. 126812.

November 24, 1998.] First Division, Bellosillo: 4
concur
Facts: Pio Barreto and Sons, Inc. owned 43 of registered land with a total area of
18,500 sq. ms. located at
Carlos Palanca St. Quiapo, Manila which were mortgaged with the United Coconut
Planters Bank (UCPB). In 1988, the obligation of the corporation with UCPB remained
unpaid making foreclosure of the mortgage imminent. Goldenrod, Inc. offered to buy
the property from Barreto & Sons. On 25 May 1988, through its president Sonya G.
Mathay, Goldenrod wrote Anthony Que, President of Barreto & Sons, confirming the
latters acceptance of formers offer to buy the Echague property (with the latters
amendments that the payment of interest should be monthly instead of semi-annually
and the period to remove the trusses, steel frames etc. which shall be 180 days instead
of 90 days only), and enclosing the earnest money of P1 million. [Barreto Realty;
Additional agreement] When the term of existence of Barreto & Sons expired, all its
assets and liabilities including the property located in Quiapo, were transferred to Pio
Barreto Realty Development, Inc. Goldenrods offer to buy the property resulted in its
agreement with Barreto Realty that Goldenrod would pay the amounts of P24.5 million
representing the outstanding obligations of Barreto Realty with UCPB on 30 June 1988,
the deadline set by the bank for payment; and P20 million which was the balance of the
purchase price of the property to be paid in installments within a 3-year period with
interest at 18% per annum. Goldenrod did not pay UCPB the P24.5 million loan
obligation of Barreto Realty on the deadline set for payment; instead, it asked for an
extension of 1 month or up to 31 July 1988 to settle the obligation, which the bank
granted. On 31 July 1988, Goldenrod requested another extension of 60 days to pay the
loan. This time the bank demurred. In the meantime Barreto Realty was able to cause
the reconsolidation of the 43 titles covering the property subject of the purchase into 2
titles covering Lots 1 and 2, which were issued on 4 August 1988. The reconsolidation
of the titles was made pursuant to the request of Goldenrod in its letter to Barreto and
Sons (or Barreto Realty) on 25 May 1988. Barreto Realty allegedly incurred expenses for
the reconsolidation amounting to P250,000. On 25 August 1988 Goldenrod sought
reconsideration of the denial by the bank of its request for extension of 60 days by
asking for a shorter period of 30 days. This was again denied by UCPB. [Rescission of
agreement by Goldenrod] On 30 August 1988 Alicia P. Logarta, President of Logarta
Realty and Development Corporation, which acted as agent and broker of Goldenrod,
wrote Anthony Que informing him on behalf of Goldenrod that it could not go through
with the purchase of the property due to circumstances beyond its fault, i.e., the denial
by UCPB of its request for extension of time to pay the obligation. In the same letter,
Logarta also demanded the refund of the earnest money of P1 million which Goldenrod
gave to Barreto Realty. [Lot 2 sold to Asiaworld] On 31 August 1988 Barreto Realty
Sales, 2003 ( 173 )
sold to Asiaworld Trade Center Phils., Inc., Lot 2, one of the 2 consolidated lots, for the
price of P23 million. On 13
October 1988 Barreto Realty executed deed transferring by way of dacion the
property reconsolidated as Lot 1 in favor of UCPB, which in turn sold the property to
Asiaworld for P24 million. [Demand for reimbursement of earnest money] On 12
December 1988 Logarta again wrote Que demanding the return of the earnest money
to Goldenrod. On 7 February 1989 Goldenrod through its lawyer reiterated its demand,
but the same remained un-heeded by Barreto Realty.
Goldenrod filed a complaint with the RTC Manila against Barreto Realty, et.al. for the
return of the amount of P1 million and the payment of damages including lost interests
or profits. In their answer, Barreto Realty, et.al. contended that it was the agreement of
the parties that the earnest money of P1 million would be forfeited to answer for losses
and damages that might be suffered by Barreto Realty in case of failure by Goldenrod
to comply with the terms of their purchase agreement. On 15 March 1991 the trial court
rendered a decision ordering Barreto Realty, et.al. jointly and severally to pay
Goldenrod P1,000,000.00 with legal interest from 9 February 1989 until fully paid,
P50,000.00 representing unrealized profits and P10,000.00 as attorneys fees. The trial
court found that there was no written agreement between the parties concerning
forfeiture of the earnest money if the sale did not push through. It further declared that
the earnest money given by Goldenrod to Barreto Realty was intended to form part of
the purchase price; thus, the refusal of the latter to return the money when the sale
was not consummated violated Arts. 22 and 23 of the Civil Code against unjust
enrichment.
Obviously dissatisfied with the decision of the trial court, Barreto Realty appealed to the
Court of Appeals which reversed the trial court and ordered the dismissal of the
complaint; hence, the petition.
The Supreme Court granted the petition, reversed and set aside the decision of the
Court of Appeals, and ordered Barreto Realty, its successors and assigns are ordered to
return to Goldenrod, the amount of P1,000,000.00 with legal interest thereon from 30
August 1988, the date of notice of extrajudicial rescission, until the amount is fully paid,
with costs against Barreto Realty, et.al.
1.
Purpose of earnest money

Under Article 1482 of the Civil Code, whenever earnest money is given in a contract of
sale, it shall
be considered as part of the purchase price and as proof of the perfection of the
contract. In the present case, Goldenrod clearly stated without any objection from
Barreto Realty that the earnest money was intended to form part of the purchase price.
It was an advance payment which must be deducted from the total price. Hence, the
parties could not have intended that the earnest money or advance payment would be
Sales, 2003 ( 174 )
forfeited when the buyer should fail to pay the balance of the price, especially in the
absence of a clear and express agreement thereon.
2.
Right to rescind not absolute, must be successfully impugned in court

In University of the Philippines v. de los Angeles, the right to rescind
contracts is not absolute and is subject to scrutiny and review by the proper court. In
Adelfa Properties, Inc. v. Court of Appeals, that rescission of reciprocal contracts
may be extrajudicially rescinded unless successfully impugned in court.
3.
Lack of opposition to rescission an admission of validity of the claim of

rescinding party
If the party does not oppose the declaration of rescission of the other party,
specifying the grounds therefor, and it fails to reply or protest against it, its silence
thereon suggests an admission of the veracity and validity of the rescinding partys
claim. In the present case, Barreto Realty did not interpose any objection to the
rescission by Goldenrod of the agreement. Barreto Realty even sold Lot 2 of the subject
consolidated lots to another buyer, Asiaworld, one day after its President Anthony Que
received the brokers letter rescinding the sale. Subsequently, on 13 October 1988
respondent Barreto Realty also conveyed ownership over Lot 1 to UCPB which, in turn,
sold the same to Asiaworld.
4.
Rescission creates obligation to return things subject of contract with fruits

and interests
Article 1385 of the Civil Code provides that rescission creates the obligation to
return the things which were the object of the contract together with their fruits and
interest. The vendor is therefore obliged to return the purchase price paid to him by the
buyer if the latter rescinds the sale, or when the transaction was called off and the
subject property had already been sold to a third person, as what obtained in this case.
In the present case, by virtue of the extrajudicial rescission of the contract to sell,
Barreto Realty as the vendor, had the obligation to return the earnest money of
P1,000,000 plus legal interest from the date it received notice of rescission from
Goldenrod, i.e., 30 August 1988, up to the date of the return or payment.
[49]
Guiang v. CA [G.R. No. 125172. June 26, 1998.]
First Division, Panganiban (J): 4 concur
Facts: Gilda and Judie Corpuz were married civilly on 24 December 1968 in Bacolod
City. The couple have 3 children (Junie, Harriet, and Jodie or Joji. On 14 February 1983,
the Corpuzes, with Gilda Corpuz as vendee, bought a 421 sq. m. lot (Lot 8, Block 9,
Sales, 2003 ( 175 )
(LRC) Psd-165409) located in Barangay Gen. Paulino Santos (Bo. 1), Koronadal, South
Cotabato from Manuel Callejo who signed as vendor through a conditional deed of sale
for a total consideration of P14,735.00. The consideration was payable in installment,
with right of cancellation in favor of vendor should vendee fail to pay 3 successive
installments. On 22 April 1988, the Corpuzes sold portion of their lot to spouses
Antonio and Luzviminda Guiang. The latter have since then occupied the portion and
built their house thereon. They are thus adjoining neighbors of the Corpuzes. On June
1989, Gilda Corpuz left for Manila, with the consent of her husband, to look for work
abroad. Unfortunately, she became a victim of an unscrupulous illegal recruiter, was
not able to go abroad, and stayed for sometime in Manila. Sometime in January 1990,
Harriet Corpuz learned that her father intended to sell the remaining portion
including their house, of their homelot to the Guiangs. She wrote a letter to her mother
informing her, who in turn replied that she was objecting to the sale. Harriet, however,
did not inform her father about this; but instead gave the letter to Mrs. Luzviminda
Guiang so that Guiang would advise her father. However, in the absence of his wife
Gilda Corpuz, and on 1 March 1990, Judie Corpuz sold the remaining portion of the
lot and the house thereon to Luzviminda Guiang thru a document known as Deed of
Transfer of Rights (Exh. A) for a total consideration of P30,000.00 of which P5,000.00
was to be paid in June 1990. Judie Corpuzs children Junie and Harriet signed the
document as witnesses. On 5 March 1990, obviously to cure whatever defect in Judie
Corpuzs title over the lot transferred, Luzviminda Guiang as vendee executed another
agreement over the lot with Manuela Jimenez Callejo, widow of Manuel Callejo (the
original registered owner), who signed as vendor for a consideration of P9,000.00. Judie
Corpuz signed as a witness to the sale. The new sale describes the lot sold as Lot 8,
Block 9, (LRC) Psd-165408. As a consequence of the sale, the Guiangs spent P600.00
for the preparation of the Deed of Transfer of Rights; P9,000.00 as the amount they
paid to Mrs. Manuela Callejo, having assumed the remaining obligation of the Corpuzes
to Mrs. Callejo; P100.00; a total of P759.62 basic tax and special educational fund on
the lot; P127.50 as the total documentary stamp tax on the various documents;
P535.72 for the capital gains tax; P22.50 as transfer tax; a standard fee of P17.00;
certification fee of P5.00. These expenses particularly the taxes and other expenses
towards the transfer of the title to the Guiangs were incurred for the whole Lot 9, Block
8, (LRC) Psd-165409.
On 11 March 1990, Gilda Corpuz returned home. She gathered her children, who were
staying in different households, together and stayed at their house. Her husband was
nowhere to be found. She was informed by her children that their father had a wife
already. For staying in their house sold by her husband, Gilda was complained against
by the Guiangs before the Barangay authorities of Barangay General Paulino Santos
(Bo. 1), Koronadal, South Cotabato, for trespassing (Barangay Case 38). On 16 March
1990, the parties thereat signed a document known as amicable settlement requiring
the Corpuzes to leave the house voluntarily on or before 7 April 1990, without any
charge. Believing that she had received the shorter end of the bargain, Gilda
Sales, 2003 ( 176 )
approached the Barangay Captain for the annulment of the settlement. Annulment not
having been made, Gilda stayed put in her house and lot. The Guiangs followed thru
the amicable settlement with a motion for the execution of the amicable settlement,
filing the same with the MTC Koronadal, South Cotabato. The proceedings [are] still
pending before the said court, with the filing of the instant suit.
On 28 May 1990, Gilda Corpuz filed an Amended Complaint against her husband Judie
Corpuz and the Guiangs. The said Complaint sought the declaration of a certain deed of
sale, which involved the conjugal property of private respondent and her husband, null
and void. On 9 September 1992, The RTC Koronodal, South Cotabato (Branch 25)
rendered a decision in favor of Gilda Corpuz, recognizing her lawful and valid ownership
and possession over the remaining portion of the lot, declaring the deed of transfer
of rights and the amicable settlement null and void, and ordering Gilda Corpuz to
reimburse the Guiangs the amount of P9,000 corresponding to the payment made by
the Guiangs to Callejo for the unpaid balance and another P379.62 representing of
the amount of realty taxes paid by the Guiangs, both with legal interests thereon
computed from the finality of the decision; without pronouncement as to costs.
Dissatisfied, the Guiangs filed an appeal with the Court of Appeals. On 30 January 1996,
the appellate court affirmed the decision of the lower court. Their motion for
reconsideration was also denied. A petition for review was before the Supreme Court.
The Supreme Court denied the petition, and affirmed the challenged decision and
resolution; with costs against the Guiangs.
1.
Valid contract, elements

To constitute a valid contract, the Civil Code requires the concurrence of the
following elements: (1) cause, (2) object, and (3) consent. The last element is
indubitably absent in the present case, thus the nullity of the contract of sale is
premised on the absence of private respondents consent.
2.
Contract void for lack of consent by the other spouse

The consent of one spouse to the contract of sale of the conjugal property was
totally inexistent or absent. This being the case, said contract properly falls within the
ambit of Article 124 of the Family Code. Article 124 of the Family Code provides that
the administration and enjoyment of the conjugal partnership property shall belong to
both spouses jointly. In case of disagreement, the husbands decision shall prevail,
subject to recourse to the court by the wife for proper remedy, which must be availed
of within five years from the date of the contract implementing such decision and that
in the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration. These powers do not include the powers of disposition or encumbrance
which must have the authority of the court or the written consent of the other spouse.
Sales, 2003 ( 177 )
In the absence of such authority or consent, the disposition or encumbrance shall be

void. However, the transaction shall be construed as a continuing offer on the part of
the consenting spouse and the third person, and may be perfected as a binding
contract upon the acceptance by the other spouse or authorization by the court before
the offer is withdrawn by either or both offerors. (165a)
3.
Amendatory effect of Article 124 FC to Article 166 NCC in relation to Article

173 NCC
Under Article 166 of the Civil Code, the husband cannot generally alienate or
encumber any real property of the conjugal partnership without the wifes consent. The
alienation or encumbrance if so made however is not null and void. It is merely
voidable. The offended wife may bring an action to annul the said alienation or
encumbrance. Thus, the provision of Article 173 of the Civil Code of the Philippines
provides that 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. The particular provision giving the wife 10 years during the
marriage to annul the alienation or encumbrance was not carried over to the Family
Code. It is thus clear that any alienation or encumbrance made after 3 August 1988
when the Family Code took effect by the husband of the conjugal partnership property
without the consent of the wife is null and void.
4.
Execution of document amicable settlement does not affect void character

of deed of sale
The fraud and the intimidation referred to by petitioners were perpetrated in the
execution of the document embodying the amicable settlement. Gilda Corpuz alleged
during trial that barangay authorities made her sign said document through
misrepresentation and coercion. In any event, its execution does not alter the void
character of the deed of sale between the husband and the Guiangs. The fact remains
that such contract was entered into without the wifes consent.
5.
Void contract cannot be ratified

By the specific provision of the law [Article 1390, Civil Code], the Deed of
Transfer of Rights cannot be ratified, even by an amicable settlement. The
participation by some barangay authorities in the amicable settlement cannot
otherwise validate an invalid act. Moreover, it cannot be denied that the amicable
settlement entered into by Gilda Corpuz and the Guiangs is a contract. It is a direct
offshoot of the Deed of Transfer of Rights. By express provision of law (Article 1422),
such a contract is also void. Article 1422 of the Civil Code provides that a contract
which is the direct result of a previous illegal contract, is also void and inexistent.
Sales, 2003 ( 178 )
6.
Amicable settlement cannot be considered a continuing offer

Neither can the amicable settlement be considered a continuing offer that was
accepted and perfected by the parties, following the last sentence of Article 124. The
order of the pertinent events is clear: after the sale, the Guiangs filed a complaint for
trespassing against Gilda Corpuz, after which the barangay authorities secured an
amicable settlement and the Guiangs filed before the MTC a motion for its execution.
The settlement, however, does not mention a continuing offer to sell the property or an
acceptance of such a continuing offer. Its tenor was to the effect that the Guiangs
would vacate the property. By no stretch of the imagination, can the Court interpret this
document as the acceptance mentioned in Article 124.
[50]
J. Schuback & Sons v. CA [G.R. No. 105387.
November 11, 1993.] Third Division, Romero (J): 4 concur
Facts: In 1981, Ramon San Jose (Philippine SJ Industrial Trading) established contact
with Johannes
Schuback & Sons Philippine Trading Corporation through the Philippine Consulate
General in Hamburg, West Germany, because he wanted to purchase MAN bus spare
parts from Germany. Schuback communicated with its trading partner, Johannes
Schuback and Sohne Handelsgesellschaft m.b.n. & Co. (Schuback
Hamburg) regarding the spare parts San Jose wanted to order. On 16 October 1981, San
Jose submitted to Schuback a list of the parts he wanted to purchase with specific part
numbers and description. Schuback referred the list to Schuback Hamburg for
quotations. Upon receipt of the quotations, Schuback sent to San Jose a letter dated 25
November 1981 enclosing its offer on the items listed. On 4 December 1981, San Jose
informed Schuback that he preferred genuine to replacement parts, and requested that
he be given a 15% discount on all items. On 17 December 1981, Schuback submitted
its formal offer containing the item number, quantity, part number, description, unit
price and total to San Jose. On 24 December 1981, San Jose informed Schuback of his
desire to avail of the prices of the parts at that time and enclosed its Purchase Order
0101 dated 14 December 1981. On 29 December 1981, San Jose personally submitted
the quantities he wanted to Mr. Dieter Reichert, General Manager of Schuback, at the
latters residence. The quantities were written in ink by San Jose in the same PO
previously submitted. At the bottom of said PO, San Jose wrote in ink above his
signature: NOTE: Above PO will include a 3% discount. The above will serve as our
initial PO. Schuback immediately ordered the items needed by San Jose from Schuback
Hamburg. Schuback
Hamburg in turn ordered the items from NDK, a supplier of MAN spare parts in West
Germany. On 4 January 1982, Schuback Hamburg sent Schuback a proforma invoice to
be used by San Jose in applying for a letter of credit. Said invoice required that the
Sales, 2003 ( 179 )
letter of credit be opened in favor of Schuback Hamburg. San Jose acknowledged

receipt of the invoice. An order confirmation was later sent by Schuback Hamburg to
Schuback which was forwarded to and received by San Jose on 3 February 1981. On 16
February 1982, Schuback reminded San Jose to open the letter of credit to avoid delay
in shipment and payment of interest.
In the meantime, Schuback Hamburg received invoices from NDK for partial deliveries
on Order 12204. On 16 February 1984, Schuback Hamburg paid NDK. On 18 October
1982, Schuback again reminded San Jose of his order and advised that the case may be
endorsed to its lawyers. San Jose replied that he did not make any valid PO and that
there was no definite contract between him and Schuback. Schuback sent a rejoinder
explaining that there is a valid PO and suggesting that San Jose either proceed with the
order and open a letter of credit or cancel the order and pay the cancellation fee of
30% F.O.B. value, or Schuback will endorse the case to its lawyers. Schuback Hamburg
issued a Statement of Account to Schuback enclosing therewith Debit Note charging
Schuback 30% cancellation fee, storage and interest charges in the total amount of DM
51,917.81. Said amount was deducted from Schubacks account with Schuback
Hamburg. Demand letters sent to San Jose by Schubacks counsel dated 22 March 1983
and 9 June 1983 were to no avail.
Schuback filed a complaint for recovery of actual or compensatory damages, unearned
profits, interest, attorneys fees and costs against San Jose. In its decision dated 13
June 1988, the trial court ruled in favor of Schuback by ordering San Jose to pay it,
among others, actual compensatory damages in the amount of DM 51,917.81,
unearned profits in the amount of DM 14,061.07, or their peso equivalent. San Jose
elevated his case before the Court of Appeals. On 18 February 1992, the appellate
court reversed the decision of the trial court and dismissed Schubacks complaint. It
ruled that there was no perfection of contract since there was no meeting of the minds
as to the price between the last week of December 1981 and the first week of January
The Supreme Court granted the petition, and reinstated the decision of the trial court
dated 13 June 1988 with modification.
1.

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.
2.
Consent manifested: Offer and acceptance

Article 1319 of the Civil Code provides that consent is manifested by the
meeting of the offer and 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. In the present case, the facts indicate
that consent on both sides has been manifested. The offer was manifested on 17
Sales, 2003 ( 180 )
December 1981 when Schuback submitted its proposal containing the item number,
quantity, part number, description, the unit price and total to San Jose. On 24
December 1981, San Jose informed Schuback of his desire to avail of the prices of the
parts at that time and simultaneously enclosed its PO 0101 dated 14 December 1981.
At this stage, a meeting of the minds between vendor and vendee has occurred, the
object of the contract being the spare parts and the consideration, the price stated in
Schubacks offer dated 17 December 1981 and accepted by San Jose on 24 December
1981.
3.
Quantity is immaterial to the perfection of a sales contract

Although the quantity to be ordered was made determinate only on 29 December
1981, quantity is immaterial in the perfection of a sales contract. What is of importance
is the meeting of the minds as to the object and cause, which from the facts disclosed,
show that as of 24 December 1981, these essential elements had already concurred.
Thus, perfection of the contract took place, not on 29 December 1981, but rather on 24
December 1981.
4.
Letter of credit only a mode of payment, not an essential requirement of sale

The opening of a letter of credit in favor of a vendor is only a mode of payment.
It is not among the essential requirements of a contract of sale enumerated in Article
1305 and 1474 of the Civil Code, the absence of any of which will prevent the
perfection of the contract from taking place. In the present case, when San Jose failed
to open an irrevocable letter of credit without recourse in favor of Schuback Hamburg,
such did not prevent the perfection of the contract between the parties, for the opening
of a letter of credit is not to be deemed a suspensive condition. Schuback did not
reserve title to the goods until San Juan had opened a letter of credit. Schuback did not
incorporate any provision declaring their contract of sale without effect until after the
fulfillment of the act of opening a letter of credit. To adopt the Court of Appeals ruling
that the contract of sale was dependent on the opening of a letter of credit would be
untenable from a pragmatic point of view because San Jose would not be able to avail
of the old prices which were open to him only for a limited period of time.
[51]
Spouses Ladanga v. CA [G.R. No. L-55999. August 24, 1984.]
Second Division, Aquino (J): 4 concur, 1 took no part, 1 reserved vote
Facts: Clemencia A. Aseneta, a spinster who retired as division superintendent of
public schools at 65 in 1961, had a nephew named Bernardo S. Aseneta, the child of
her sister Gloria, and a niece named Salvacion, the daughter of her sister Flora. She
legally adopted Bernardo in 1961. On a single date, 6 April 1974, she 9then 78 years
Sales, 2003 ( 181 )
old) signed 9 deeds of sale in favor of Salvacion, for various real properties. One deed
of sale concerned the said Paco property (166 sq. m. lot located at 1238 Sison Street
Paco Manila and administered by the Ladanga spouses, Agustin and Salvacion) which
purportedly was sold to Salvacion for P26,000. The total price involved in the 9 deeds of
sale and in the 10th sale executed on 8 November 1974 was P92,200. The deed of sale
for the Paco property was signed in the office of the Quezon City registry of deeds.
In May 1975, Bernardo, as guardian of Clemencia, filed an action for reconveyance of
the Paco property, accounting of the rentals and damages, with the CFI Manila.
Clemencia was not mentally incompetent but she was placed under guardianship
because she was an easy prey for exploitation and deceit. Clemencia testified and
denied having received even one centavo of the price of P26,000), much less the
P92,000. This testimony was corroborated by Soledad L. Maninang, 69, a dentist with
whom Clemencia had lived for more than 30 years in Kamuning, Quezon City. The
notary public stated that he did not see Salvacion hand any money to Clemencia for the
purported sale when the deed was signed in the registry of deeds. The trial court
declared void the sale of the Paco property.
Clemencia died on 21 May 1977 at the age of 80. She allegedly bequeathed her
properties in a holographic will dated 23 November 1973 to Doctor Maninang. In that
will she disinherited Bernardo. The will was presented for probate. The testate case was
consolidated with the intestate proceeding filed by Bernardo in the sala of Judge
Ricardo L. Pronove at Pasig, Rizal. He dismissed the testate case. He appointed
Bernardo as administrator in the intestate case.
On appeal, the Court of Appeals affirmed the decision of the CFI, ordered the register of
deeds to issue a new title to Clemencia, and ordered the spouses to pay Clemencias
estate P21,000 as moral and exemplary damages and attorneys fees and to render to
Bernardo an accounting of the rentals of the property from 6 April 1974. The spouses
appealed to the Supreme Court.
The Supreme Court affirmed the judgment of the Appellate Court with the modification
that the adjudication for moral and exemplary damages is discarded; Without costs.
1.
Only legal issues may be raised in a review of the decision of the appellate
court
As a rule, only important legal issues, as contemplated in section 4, Rule 45 of
the Rules of Court, may be raised in a review of the Appellate Courts decision. The
present case does not fall within any of the exceptions to that rule (2 Morans
Comments on the Rules of Court, 1979 Ed. p. 475; Ramos vs. Pepsi-Cola Bottling Co.,
125 Phil. 701).
2.
Burden of proof
Sales, 2003 ( 182 )
Clemencia herself testified that the price of P26,000 was not paid to her; and
thus, the burden of the evidence shifted to the Ladanga spouses. They were not able to
prove the payment of that amount, thus the sale was fictitious.
3.
Void contract in the absence of price being paid; Sale inexistent and cannot
be considered consummated
A contract of sale is void and produces no effect whatsoever where the price,
which appears therein as paid, has in fact never been paid by the purchaser to the
vendor (Meneses Vda. de Catindig vs. Heirs of Catalina Roque, L-25777, November 26,
1976, 74 SCRA 83, 88; Mapalo vs. Mapalo, 123 Phil. 979, 987; Syllabus, Ocejo, Perez &
Co. vs. Flores and Bas, 40 Phil. 921). Such a sale is inexistent and cannot be considered
consummated (Borromeo vs. Borromeo, 98 Phil. 432; Cruzado vs. Bustos and Escaler,
34 Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA 229).
4.
No evidence of intention of vendor to donate the property

Clemencia did not intended to donate the Paco property to the Ladangas. Her
testimony and the notarys testimony destroyed any presumption that the sale was fair
and regular and for a true consideration. It seemed that the Ladangas abused
Clemencias confidence and defrauded her of properties with a market value of
P393,559.25 when she was already 78 years old.
5.
Bernardos capacity to sue

Bernardo was Clemencias adopted son. Moreover, Clemencia, by testifying in
this case, tacitly approved the action brought in her behalf. Bernardo had the right to
institute the instant action.
Award of moral damages not sanctioned
The moral damages awarded by the trial court is not sanctioned by articles 2217
to 2220 of the Civil Code. Clemencias own signature in the deed brought about the
mess within which she was entangled.
6.
[52]
Legarda Hermanos vs. Saldana [G.R. No. L-26578.
January 28, 1974.] First Division, Teehankee (J): 5 concur
Facts: Felipe Saldana had entered into two written contracts with Legarda Hermanos
as subdivision owner, whereby the latter agreed to sell to him Lots 7 and 8 of block 5N
of the subdivision with an area of 150 sq. ms. each, for the sum of P1,500.00 per lot,
payable over the span of 10 years divided into 120 equal monthly installments of
P19.83 with 10% interest per annum, to commence on 26 May 1948, date of execution
of the contracts. Saldana faithfully paid for 8 continuous years about 95 (of the
Sales, 2003 ( 183 )
stipulated 120) monthly installments totalling P3,582.06 up to the month of February

1956, which as per Legarda Hermanos own statement of account, was applied to
Saldanas account (without distinguishing the two lots). After February 1956 up to the
filing of the complaint, Saldana did not make further payments. The account shows that
he owed Legarda Hermanos the sum of P1,311.72 on account of the balance of the
purchase price (principal) of the two lots (in the total sum of P3,000.00), although he
had paid more than the stipulated purchase price of P1,500.00 for one lot. Almost 5
years later, on 2 February 1961 just before the filing of the action, Saldana wrote
Legarda Hermanos stating that his desire to build a house on the lots was prevented by
their failure to introduce improvements on the subdivision as there is still no road to
these lots, and requesting information of the amount owing to update his account as I
intend to continue paying the balance due on said lots. Legarda Hermanos replied in
their letter of 11 February 1961 that as Saldana had failed to complete total payment of
the 120 installments by May 1958 as stipulated in the contracts to sell, pursuant to the
provisions of both contracts all the amounts paid in accordance with the agreement
together with the improvements on the premises have been considered as rents paid
and as payment for damages suffered by your failure, and Said cancellation being in
order, is hereby confirmed.
Saldana filed an action in the CFI Manila as a complaint for delivery of two parcels of
land in Sampaloc, Manila and for execution of the corresponding deed of conveyance
after payment of the balance still due on their purchase price. Subsequently, Legarda
Hermanos partitioned the subdivision among the brothers and sisters, and the two lots
were among those allotted to Jose Legarda, who was included as co-respondent as a
result thereof in the case. On 17 July 1963, the trial court sustained Legarda Hermanos
cancellation of the contracts and dismissing Saldanas complaint.
On appeal and on 27 July 1966, the appellate court rendered its judgment reversing the
lower courts judgment and ordering Legarda Hermanos to deliver to Saldana
possession of one of the two lots, at the choice of Legarda Hermanos, and to execute
the corresponding deed of conveyance to Saldana for the said lot. Hence, the present
petition for review.
The Supreme Court affirmed the appealed judgment of the appellate court; without
1.
Application of broad principles of equity and justice by Court of Appeals

The Court of Appeals elected to apply the broad principles of equity and justice.
Saldana has paid the total sum of P3,582.06 including interests, which is even more
than the value of the two lots. And even if the sum applied to the principal alone were
to be considered, which was of the total of P1,682.28, the same was already more than
the value of one lot, which is P1,500.00. The only balance due on both lots was
P1,317.72, which was even less than the value of one lot. The Court considered as fully
Sales, 2003 ( 184 )
paid by Saldana at least one of the two lots, at the choice of Legarda Hermanos. This is
more in line with good conscience than a total denial to Saldana of a little token of what
he has paid Legarda Hermanos.
2.
Court of Appeals ruling fair and just and in accordance with law and equity;
Article 1234 vs.
1592
The appellate courts judgment finding that of the total sum of P3,582.06
(including interests of P1,889.78) already paid by Saldana (which was more than the
value of two lots), the sum applied by petitioners to the principal alone in the amount of
P1,682.28 was already more than the value of one lot of P1,500.00 and hence one of
the two lots as chosen by Legarda Hermanos would be considered as fully paid, is fair
and just and in accordance with law and equity. Even considering that Saldana as
having defaulted after February 1956, when he suspended payments after the 95th
installment, he had as of the already paid by way of principal (P1,682.28) more than
the full value of one lot (P1,500.00). The judgment recognizing this fact and ordering
the conveyance to him of one lot of his choice while also recognizing Legarda
Hermanos right to retain the interests of P1,889.78 paid by him for eight years on both
lots, besides the cancellation of the contract for one lot which thus reverts to Legarda
Hermanos, cannot be deemed to deny substantial justice to Legarda Hermanos nor to
defeat their rights under the letter and spirit of the contracts in question. Further,
regardless of the propriety of applying Article 1592 thereto, Legarda Hermanos has not
been denied substantial justice, for, according to Article 1234 of the Code: If the
obligation has been substantially performed in good faith, the obligor may recover as
though there had been a strict and complete fulfillment, less damages suffered by the
obligee, and that in the interest of justice and equity, the decision appealed from may
be upheld upon the authority of Article 1234 of the Code.
3.
Doctrine in JM Tuason & Co. vs. Javier case fully applicable

The doctrine in the case of J.M. Tuason & Co. Inc. vs. Javier is fully applicable to
the present case, with the buyer being granted lesser benefits, since no rescission of
contract was therein permitted. There, where the buyer had likewise defaulted in
completing the payments after having religiously paid the stipulated monthly
installments for almost 8 years and notwithstanding that the seller had duly notified the
buyer of the rescission of the contract to sell, the Court upheld the lower courts
judgment denying judicial confirmation of the rescission and instead granting the buyer
an additional grace period of 60 days from notice of judgment to pay all the installment
payments in arrears together with the stipulated 10% interest per annum from the date
of default, apart from reasonable attorneys fees and costs, which payments, the Court
observed, would have the seller recover everything due thereto, pursuant to its
Sales, 2003 ( 185 )
contract with the defendant, including such damages as the former may have suffered
in consequence of the latters default. [53]
Levy Hermanos vs. Gervacio [G.R. No. 46306.
October 27, 1939.] En Banc, Moran (J): 5 concur
Facts: On 15 March 1937, Levy Hermanos, Inc., sold to Lazaro Blas Gervacio, a Packard
car. Gervacio, after making the initial payment, executed a promissory note for the
balance of P2,400, payable on or before 15 June 1937, with interest at 12% per annum,
and to secure the payment of the note, he mortgaged the car to Levy Hermanos.
Gervacio failed to pay the note at its maturity; wherefore, Levy Hermanos foreclosed
the mortgage and the car was sold at public auction, at which plaintiff was the highest
bidder for P800.
On 24 February 1938, Levy Hermanos filed a complaint in the CFI Manila for the
collection of the balance of P1,600 and interest. Gervacio admitted the allegations of
the complaint, and with this admission, the parties submitted the case for decision. The
lower court applied the provisions of Act 4122, inserted as articles 1454A of the Civil
Code, and rendered judgment in favor of Gervacio. Levy Hermanos appealed.
The Supreme Court reversed the judgment, and Gervacio is hereby sentenced to pay
Levy Hermanos the sum of P1,600 interest at the rate of 12% per annum from 15 June
1937, and the sum of P52.08 with interest at the rate of 6% from the date of the filing
of the complaint, with costs in both instances against Gervacio.
1.
Article 1454-A of Civil Code

Article 1454-A of the Civil Code provides that In a contract for the sale of
personal property payable in installments, failure to pay two or more installments shall
confer upon the vendor the right to cancel the sale or foreclose the mortgage if one has
been given on the property, without reimbursement to the purchaser of the
installments already paid, if there be an agreement to this effect. However, if the
vendor has chosen to foreclose the mortgage he shall have no further action agaist the
purchaser for the recovery of any unpaid balance owing by the same, and any
agreement to the contrary shall be null and void.
2.
Application of Article 1454: Contract of sale of personal property in

installment where there is failure to pay 2 or more installments
In Macondray & Co. vs. De Santos (33 OG 2170), it was held that in order to
apply the provisions of article 1454-A of the Civil Code it must appear that there was a
contract for the sale of personal property payable in installments and that there has
been a failure to pay two or more installments. The contract, in the present case, while
a sale of personal property, is not, however, one on installments, but on straight term,
in which the balance, after payment of the initial sum, should be paid in its totality at
Sales, 2003 ( 186 )
the time specified in the promissory note. The transaction is not, therefore, the one
contemplated in Act 4122 and accordingly the mortgagee is not bound by the
prohibition therein contained as to its right to the recovery of the unpaid balance.
3.
Article 1454; Price payable in several installments; possible miscalculation of

ability to pay
The law is aimed at those sales where the price is payable in several
installments, for, generally, it is in these cases that partial payments consist in
relatively small amounts, constituting thus a great temptation for improvident
purchasers to buy beyond their means. There is no such temptation where the price is
to be paid in cash, or partly in cash and partly in one term, for, in the latter case, the
partial payments are not so small as to place purchasers off their guard and delude
them to a miscalculation of their ability to pay.
4.
Difference exists in actual practice between paying price in 2 installments

and paying partly in cash and partly in an installment
Theoretically, there is no difference between paying the price in two installments
and paying the same partly in cash and partly in one installment, in so far as the size of
each partial payment is concerned; but in actual practice the difference exists, for,
according to the regular course of business, in contracts providing for payment of the
price in two installments, there is generally a provision for initial payment.
5.
Law clear, does not require construction

The considerations made in the discussion of the decision in the current case are
immaterial as the language of the law being so clear as to require no construction at
all.
6.
Article 1454 does not apply; cash payment not a payment by installment
A cash payment cannot be considered as a payment by installment, and even if it
can be so considered, still the law does not apply, for it requires non-payment of two or
more installments in order that its provisions may be invoked. In the present case, only
one installment was unpaid.
[54]
Lim v. CA, 263 SCRA 569 (1996)
[55]
Limketkai Sons Milling v. CA [G.R. No. 118509. December 1, 1995.]
Third Division, Melo (J): 4 concur
Sales, 2003 ( 187 )
Facts: On 14 May 1976, Philippine Remnants Co., Inc. constituted the Bank of the
Philippine Islands (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 33,056sq.ms. lot at Barrio Bagong Ilog, Pasig (TCT 493122). On 23 June 1988, Pedro Revilla, Jr.,
a licensed real estate broker was given formal authority by BPI to sell the lot for
P1,000.00 per sq.m. This arrangement was concurred in by the owners of the Philippine
Remnants. Broker Revilla contacted Alfonso Lim of Limketkai Sons Milling (LSM) who
agreed to buy the land. On 8 July 1988, LSMs officials and Revilla were given
permission to enter and view the property they were buying (by Rolando V. Aromin, BPI
Assistant Vice-President). On 9 July 1988, Revilla formally informed BPI that he had
procured a buyer, LSM. On 11 July 1988, LSMs 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. LSM asked that the price of P1,000.00
per sq.m. 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 sq.m. 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 LSMs being
the first comer and the buyer to be first served. Notwithstanding the final agreement to
pay P1,000.00 per sq.m. 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, 11 July
1988, wrote BPI through Merlin Albano embodying the payment initially of 10% and the
remaining 90% within a period of 90 days. 2 or 3 days later, LSM learned that its offer
to pay on terms had been frozen. Alfonso Lim went to BPI on 18 July 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 25 August
1988 by LSM against BPI with the RTC Pasig (Branch 151). In the course of the trial, BPI
informed the trial court that it had sold the property under litigation to National Book
Store (NBS) on 14 July 1989. The complaint was thus amended to include NBS. On 10
June 1991, the trial court rendered judgment in favor of LSM; holding that there was a
perfected contract between LSM and BPI, and thus declared the Deed of Sale involving
the lot in Pasig in the name of BPI and in favor of NBS as null and void; ordered the
Register of Deeds of the Province of Rizal to cancel the TCT which may have been
issued in favor of NBS by virtue of the said deed; ordered BPI upon receipt by it from
LSM of the sum of P33,056,000,00 to execute a Deed of Sale in favor of the latter of the
said property at the price of P1,000.00 per sq.m. and in default thereof, the Clerk of
Sales, 2003 ( 188 )
Court is directed to execute the deed dated 14 July 1989; ordered the Register of Deeds
of Pasig, upon registration of the said deed, whether executed by BPI or the Clerk of
Court and payment of the corresponding fees and charges, to cancel said TCT 493122
and to issue, in lieu thereof, another transfer certificate of title in the name of LSM;
ordered BPI and NBS to pay in solidum to LSM the sums of P10,000,000.00 as actual
and consequential damages and P150,000.00 as attorneys fees and litigation
expenses, both with interest at 12% per annum from date of judgment; on the crossclaim by the bank against NBS, ordered NBS to indemnify the bank of whatever BPI
shall have paid to LSM; dismissed the counterclaim of both BPI and NBS against LSM
and the cross-claim of NBS against BPI; with costs against BPI and NBS.
Upon elevation of the case to the Court of Appeals, the decision of the trial court was
reversed and the complaint dismissed on 12 August 1994. 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. Hence, the petition.
The Supreme Court reversed and set aside the questioned judgment of the Court of
Appeals, and reinstated the 10 June 1991 judgment of Branch 151 of the RTC of The
National Capital Judicial Region stationed in Pasig, Metro Manila except for the award of
P10,000,000.00 damages, which was deleted.
1.
Broker given authority to sell and not merely to look for a buyer
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 sq.m. Philippine Remnants
confirmed the authority to sell of Revilla and the price at which he may sell the lot. LSM
and Revilla agreed on the former buying the property. BPI Assistant Vice-President
Rolando V. Aromin allowed the broker and the buyer to inspect the property. BPI was
formally informed about the broker having procured a buyer. At the start of the
transactions, Revilla by himself already had full authority to sell the disputed lot. The
note dated 23 June 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. Thus, the authority
given to Revilla was to sell and not merely to look for a buyer. 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.
2.
BPI Vice Presidents have authority to sell

The alleged lack of authority of the bank officials acting in behalf of BPI is not
sustained by the record. If BPI could give the authority to sell to a licensed broker, there
is 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. Rolando Aromin
Sales, 2003 ( 189 )
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. He had been with the BPI Trust
Department since 1968 and had been involved in the handling of properties of
beneficial owners since 1975. He 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 1
week but he was present and joined in the discussions with LSM. 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. Further, it must be noted 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. Everything
in the record points to the full authority of Aromin to bind the bank, except for the selfserving 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, Aromins alleged inefficiency is not proof that he was not fully clothed with
authority to bind BPI.
3.
Trust Committee does not have to pass on regular transactions

On the allegation 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.
4.
Bank liable to innocent third persons where representation is made in course

of its business even if agent abused his authority
In 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), it was stated
that 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. 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
Sales, 2003 ( 190 )
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
Aromins testimony. Aromin was charged with poor performance but his dismissal was
only sometime after he testified in court. More than 2 long years after the disputed
transaction, he was still Assistant Vice-President of BPI.
5.
Meeting of the minds on the price; Manner of payment

Asst. Vice-President Aromin admitted that there was a meeting of the minds
between the buyer and the bank in respect to the price of P1,000.00 per sq.m. 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. The record shows that if payment was in cash, either broker Revilla or Aromin
had full authority. But because LSM 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.
6.
Stages of the contract

The stages of a contracts are (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).
7.
Ang Yu Asuncion; Stages in ordinary contracts (consensual); Real contract:

delivery required;
Solemn contract: compliance with formalities prescribe by law
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 perfection of the contract takes place upon the
concurrence of the essential elements thereof. A contract which is consensual 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
Sales, 2003 ( 191 )
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.
8.
Ang Yu Asuncion; Perfected contract of sale

Until the contract is perfected, it cannot, as an independent source of obligation,
serve as a binding juridical relation. In sales, particularly, 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 (Ang Yu Asuncion).
9.
Stages of the contract in the present case

The negotiation or preparation stage started with the authority given by Philippine
Remnants to BPI
to sell the lot, followed by the authority given by BPI and confirmed by Philippine
Remnants to broker Revilla to sell the property, the offer to sell to Limketkai, the
inspection of the property and 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 LSM, agreed to buy
the disputed lot at P1,000.00 per sq.m.. Aside from this there was the earlier
agreement between LSM and the authorized broker. There was a concurrence of offer
and acceptance, on the object, and on the cause thereof.
10.
Villonco Realty v. Bormaheco; Perfected contract of sale

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).
11.
Villonco Realty v. Bormaheco; Consent

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).
12.
Villonco Realty v. Bormaheco; A contract is formed if offer is accepted,

whether request for changes in terms is granted or not; Change does not
amount to rejection of offer or a counter-offer
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
Sales, 2003 ( 192 )
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). The vendors 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.)
13.
Requisite form under Article 1458 merely for greater efficacy or convenience
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. 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).
14.
Abrenica Rule: Contracts infringing the Statute of Frauds ratified when

defense fails to object or asks questions on cross-examination
In Abrenica vs. Gonda (34 Phil. 739 [1916]) 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 reason for the rule is that 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. Under said 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
crossexamination on the contract is deemed a waiver of the defense of the Statute of
Frauds. In the present case, counsel for respondents cross-examined petitioners
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.
15.
Written note or memorandum an exception to the unenforceability of

contracts pursuant to
Statute of Frauds
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
Sales, 2003 ( 193 )
writings, not necessarily in one document. The memorandum or memoranda is/are

written evidence that such a contract was entered into. Thus, 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. Such note or memorandum suffices to
make the verbal agreement enforceable, taking it out of the operation of the statute. In
the present case, while there is no written contract of sale of the Pasig property
executed by BPI in favor of LSM, there are abundant notes and memoranda extant in
the records of this case evidencing the elements of a perfected contract.
16.
Form of memorandum or note

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 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.
17.
Demeanor of witnesses as factor for Court to incline to the version of the

case by one party
The demeanor of the witnesses the parties presented is one important factor that
inclined the trial court to believe in the version given by LSM because its witnesses,
including hostile witness Roland V. Aromin, an assistant vice-president of the bank,
were straight forward, 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.
18.
Credibility of witnesses where the findings of the trial and appellate courts
are contrary to each other; Trial courts findings given great respect
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
Sales, 2003 ( 194 )
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 property 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.
19.
NBS not an innocent purchaser for value

National Bookstore (NBS) is not an innocent purchaser for value, as it acted in
bad faith. 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 LSM. It is the very nature of the deed
of absolute sale between BPI and NBS which 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 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 BPIs title be found defective.
20.
Enumeration of badges of fraud found in Oria v. McMicking cannot cover all

indications from
1912 to present and future
NBS simply cited the badges of fraud mentioned in Oria vs. McMicking (21 Phil.
243 (1912]) in its memorandum 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.
21.Damages; Loss of profits and use of land compensated by appreciation
in land value
The profits and the use of the land which were denied to LSM because of the noncompliance or interference with a solemn obligation by BPI and NBS is somehow made
up by the appreciation in land values.
[56]
Loyola v. CA [G.R. No. 115734. February 23, 2000.]
Sales, 2003 ( 195 )
Second Division, Quisumbing (J): 3 concur, 1 on leave

Facts: A parcel of land (Lot 115-A-1 of subdivision plan [LRC] Psd-32117, a portion of
Lot 115-A described on Plan Psd-55228, LRC [GLRO] Record 8374, located in Poblacion,
Binan, Laguna, and containing 753 sq.m., TCT T-32007) was originally owned in
common by the siblings Mariano and Gaudencia Zarraga, who inherited it from their
father. Mariano predeceased his sister who died single, without offspring on 5 August
1983, at the age of 97. Victorina Zarraga vda. de Loyola and Cecilia Zarraga, are sisters
of Gaudencia and Mariano.
The property was subject of Civil Case B-1094 before the then CFI Laguna (Branch 1,
Spouses Romualdo Zarraga, et al. v. Gaudencia Zarraga, et al.). Romualdo Zarraga was
the plaintiff in Civil Case B-1094. The defendants were his siblings: Nieves, Romana,
Guillermo, Purificacion, Angeles, Roberto, Estrella, and Jose, all surnamed Zarraga, as
well as his aunt, Gaudencia. The trial court decided Civil Case B-1094 in favor of the
defendants. Gaudencia was adjudged owner of the 1/2 portion of Lot 115-A-1.
Romualdo elevated the decision to the Court of Appeals and later the Supreme Court.
The petition (GR 59529) was denied by the Court on 17 March 1982.
On 24 August 1980, nearly 3 years before the death of Gaudencia while GR 59529 was
still pending before the Supreme Court. On said date, Gaudencia allegedly sold to the
children of Mariano Zarraga (Nieves, Romana, Romualdo, Guillermo, Lucia, Purificacion,
Angeles, Roberto, Estrella Zarraga) and the heirs of Jose Zarraga Aurora, Marita, Jose,
Ronaldo, Victor, Lauriano, and Ariel Zarraga; first cousins of the Loyolas) her share in
Lot 115-A- 1 for P34,000.00. The sale was evidenced by a notarized document
denominated as Bilihang Tuluyan ng Kalahati (1/2) ng Isang Lagay na Lupa.
Romualdo, the petitioner in GR 59529, was among the vendees.
The decision in Civil Case B-1094 became final. The children of Mariano Zarraga and
the heirs of Jose Zarraga (private respondents) filed a motion for execution. On 16
February 1984, the sheriff executed the corresponding deed of reconveyance to
Gaudencia. On 23 July 1984, however, the Register of Deeds of Laguna, Calamba
Branch, issued in favor of private respondents, TCT T-116067, on the basis of the sale
on 24 August 1980 by Gaudencia to them.
On 31 January 1985, Victorina and Cecilia filed a complaint, docketed as Civil Case B2194, with the RTC of
Bian, Laguna, for the purpose of annulling the sale and the TCT. Victorina died on 18
October 1989, while Civil Case B-2194 was pending with the trial court. Cecilia died on
4 August 1990, unmarried and childless.
Victorina and Cecilia were substituted by Ruben, Candelaria, Lorenzo, Flora, Nicadro,
Rosario, Teresita and Vicente Loyola as plaintiffs. The trial court rendered judgment in
favor of complainants; declaring the simulated deed of absolute sale as well as the
Sales, 2003 ( 196 )
issuance of the corresponding TCT null and void, ordering the Register of Deeds of
Laguna to cancel TCT T-116087 and to issue another one in favor of the plaintiffs and
the defendants as co-owners and legal heirs of the late Gaudencia, ordering the
defendants to reconvey and deliver the possession of the shares of the plaintiff on the
subject property, ordering the defendants to pay P20,000 as attorneys fees and cost of
suit, dismissing the petitioners claim for moral and exemplary damages, and
dismissing the defendants counterclaim for lack of merit.
On appeal, and on 31 August 1993, the appellate court reversed the trial court (CA-GR
CV 36090). On September 15, 1993, the petitioners (as substitute parties for Victorina
and Cecilia, the original plaintiffs) filed a motion for reconsideration, which was denied
on 6 June 1994. Hence, the petition for review on certiorari.
The Supreme Court denied the petition, and affirmed the assailed decision of the Court
of Appeals; with costs against petitioners.
1.
Presumption of regularity of notarized document

A notarized document carries the evidentiary weight conferred upon it with respect
to its due execution, and documents acknowledged before a notary public have
in their favor the presumption of regularity. In the present case, the petitioners
allege that since the notary public who prepared and acknowledged the
questioned Bilihan did not personally know Gaudencia, the execution of the deed
was suspect. However, the notary public testified that he interviewed Gaudencia
prior to preparing the deed of sale. By their failure to overcome this
presumption, with clear and convincing evidence, petitioners are estopped from
questioning the regularity of the execution of the deed.
2.
Jose Zarraga alive when the sale took place

Petitioners charge that one of the vendees, Jose Zarraga, was already dead at
the time of the sale. However, the records reveal that Jose died on 29 July 1981. He was
still alive on 24 August 1980, when the sale took place.
3.
Simulation defined
Simulation is the declaration of a fictitious will, deliberately made by agreement
of the parties, in order to produce, for the purposes of deception, the appearances of a
juridical act which does not exist or is different what that which was really executed.
Characteristic of simulation is that the apparent contract is not really desired or
intended to produce legal effect or in any way alter the juridical situation of the parties.
Further, in a simulated contract, the parties have no intention to be bound by the
contract. In the present case, perusal of the questioned deed shows that the sale of the
property would convert the co-owners to vendors and vendees, a clear alteration of the
Sales, 2003 ( 197 )
juridical relationships. This is contrary to the requisite of simulation that the apparent
contract was not really meant to produce any legal effect. The parties clearly intended
to be bound by the contract of sale, an intention they did not deny.
4.
Simulation, requisites
The requisites for simulation are: (a) an outward declaration of will different from the
will of the
parties; (b) the false appearance must have been intended by mutual agreement; and
(c) the purpose is to deceive third persons. In the present case, none of these are
present in the assailed transaction.
5.
Contracts binding only upon parties executing them

Contracts are binding only upon the parties who execute them. Article 1311 of
the Civil Code clearly covers this situation. In the present case Romualdo had no
knowledge of the sale, and thus, he was a stranger and not a party to it. Even if
curiously Romualdo, one of those included as buyer in the deed of sale, was the one
who questioned Gaudencias ownership in Civil Case B-1094, Romana testified that
Romualdo really had no knowledge of the transaction and he was included as a buyer of
the land only because he was a brother.
6.
Fraud is never presumed

Fraud is never presumed, but must be both alleged and proved. For a contract to
be annulled on the ground of fraud, it must be shown that the vendor never gave
consent to its execution. If a competent person has assented to a contract freely and
fairly, said person is bound. There also is a disputable presumption, that private
transactions have been fair and regular. Applied to contracts, the presumption is in
favor of validity and regularity. In the present case, the allegations of fraud was
unsupported, and the presumption stands that the contract Gaudencia entered into was
fair and regular.
7.
Person not incapacitated to contract merely because of advanced age or due

to physical infimities
A person is not incapacitated to contract merely because of advanced years or by
reason of physical infirmities. Only when such age or infirmities impair his
mental faculties to such extent as to prevent him from properly, intelligently,
and fairly protecting his property rights, is he considered incapacitated. In the
present case, petitioners show no proof that Gaudencia had lost control of her
mental faculties at the time of the sale. The notary public who interviewed her,
testified that when he talked to Gaudencia before preparing the deed of sale, she
answered correctly and he was convinced that Gaudencia was mentally fit and
knew what she was doing.
8.
Undue influence defined, circumstances considered; Article 1337
Sales, 2003 ( 198 )
Article 1337 of the Civil Code provides that there is undue influence when a
person takes improper advantage of his power over the will of another, depriving the
latter of a reasonable freedom of choice. The following circumstances shall be
considered: confidential, family, spiritual, and other relations between the parties, or
the fact that the person alleged to have been unduly influenced was suffering from
mental weakness, or was ignorant or in financial distress.
9.
Undue influence case-to-case basis; Elements

Undue influence depends upon the circumstances of each case and not on bare
academic rules. For undue influence to be established to justify the cancellation of an
instrument, three elements must be present: (a) a person who can be influenced; (b)
the fact that improper influence was exerted; (c) submission to the overwhelming effect
of such unlawful conduct.
10.
Confidential or fiduciary relationship

In the absence of a confidential or fiduciary relationship between the parties, the
law does not presume that one person exercised undue influence upon the other. A
confidential or fiduciary relationship may include any relation between persons, which
allows one to dominate the other, with the opportunity to use that superiority to the
others disadvantage. Included are those of attorney and client, physician and patient,
nurse and invalid, parent and child, guardian and ward, member of a church or sect and
spiritual adviser, a person and his confidential adviser, or whenever a confidential
relationship exists as a fact. To prove a confidential relationship from which undue
influence may arise, the relationship must reflect a dominant, overmastering influence
which controls over the dependent person. In the present case, that Gaudencia looked
after Romana in her old age is not sufficient to show that the relationship was
confidential.
Petitioners failed to show that Romana used her aunts reliance upon her to take
advantage or dominate her and dictate that she sell her land.
11.
Undue influence cannot be inferred from age, sickness, or debility of body

Undue influence is not to be inferred from age, sickness, or debility of body, if
sufficient intelligence remains. In the present case. petitioners never rebutted the
testimony of the notary public that he observed Gaudencia still alert and sharp.
12.
Solicitation, importunity, argument, and persuasion not undue influence

In Baez v. Court of Appeals, (59 SCRA 15 [1974]), it was held that
solicitation, importunity, argument, and persuasion are not undue influence. A contract
is not to be set aside merely because one party used these means to obtain the
consent of the other. In Martinez v. Hongkong and Shanghai Bank (15 Phil. 252
[1910]), that influence obtained by persuasion, argument, or by appeal to the affections
Sales, 2003 ( 199 )
is not prohibited either in law or morals, and is not obnoxious even in courts of equity.
In the present case, absent any proof that Romana exerted undue influence, the
presumption is that she did not.
13.
Issue cannot be raised for the first time on appeal

Lesion was not an issue raised before the lower courts. An issue which was
neither averred in the complaint nor raised in the court below, cannot be raised for the
first time on appeal. To do so would be offensive to the basic rules of fair play.
14.
Grounds of simulated sale and inadequacy of the price not reconcilable

Petitioners seem to be unsure whether they are assailing the sale of Lot 115-A-1
for being absolutely simulated or for inadequacy of the price. These two grounds are
irreconcilable. If there exists an actual consideration for transfer evidenced by the
alleged act of sale, no matter how inadequate it be, the transaction could not be a
simulated sale. No reversible error was thus committed by the Court of Appeals in
refusing to annul the questioned sale for alleged inadequacy of the price.
[57]
Luzon Brokerage v. Maritime, 86 SCRA 305 (1978)
[58]
Macondray vs. Eustaquio [G.R. No. 43683. July 16, 1937.]
First Division, Imperial (J): 6 concur
Facts: Macondray & Co. Inc. sold Urbano Eustaquio a De Soto car, Sedan, for the price
of which, P595, he executed in its favor the note of 22 May 1934. Under the note,
Eustaquio undertook to pay the car in 12 monthly installments with 12% interest per
annum, likewise agreed that, should he fail to pay any monthly installment together
with interest, the remaining installments would become due and payable, and
Eustaquio shall pay 20% upon the principal owing as attorneys fees, expenses of
collection which the plaintiff might incur, and the costs. To guarantee the performance
of his obligations under the note, Eustaquio on the same date mortgaged the
purchased car in favor of Macondray, and bound himself under the same condition
stipulated in the note relative to the monthly installments, interest, attorneys fees,
expenses of collection, and costs. The mortgaged deed was registered on 11 June 1934,
in the office of the register of deeds of the Province of Rizal. On the 22nd of the same
month, Eustaquio paid P43.75 upon the first installment, and thereafter failed to pay
any of the remaining installments. In accordance with the terms of the mortgage,
Macondray called upon the sheriff to take possession of the car, but Eustaquio refused
to yield possession thereof. Whereupon, Macondray brought the replevin sought and
Sales, 2003 ( 200 )
thereby succeeded in getting possession of the car. The car was sold at public auction
to Macondray for P250, the latter incurring legal expenses in the amount of P10.68.
Macondray brought the action against Eustaquio to obtain the possession of an
automobile mortgaged by the latter, and to recover the balance owing upon a note
executed by him, the interest thereon, attorneys fees, expenses of collection, and the
costs (According to the liquidation filed by Macondray, Eustaquio was still indebted in
the amount of P342.20, interest at 12% from 20 November 1934, P110.25 as attorneys
fees, and the costs.). Eustaquio was duly summoned, but he failed to appear or file his
answer, wherefore, he was declared in default. Still, the CFI Manila dismissed the
complaint, without costs. Hence, the appeal by Macondray.
The Supreme Court affirmed the appealed judgment, with the costs against Macondray
and Co.
1.
Non-appearance by defendant does not imply a waiver of rights excepts

those of being heard and of presenting evidence in his favor; Court did not
err in applying Act 4122
Under section 128 of the Code of Civil Procedure, the judgment by default
against a defendant who has neither appeared nor filed his answer does not imply a
waiver of rights except that of being heard and of presenting evidence in his favor. It
does not imply admission by the defendant of the facts and causes of action of the
plaintiff, because the codal section requires the latter to adduce his evidence in support
of his allegations as an indispensable condition before final judgment could be given in
his favor. Nor could it be interpreted as an admission by the defendant that the
plaintiffs causes of action find support in the law or that the latter is entitled to the
relief prayed for. (Chaffin vs. McFadden, 41 Ark., 42; Johnson vs. Pierce, 12 Ark., 599;
Mayden vs. Johnson, 59 Ga., 105; Peo. vs. Rust, 292 Ill., 412; Madison County vs. Smith,
95 Ill., 328; Keen vs. Leipold, 211 Ill. A., 163; Chicago etc. Electric R. Co. vs. Krempel,
116 Ill. A., 253.) Thus, the defendant did not waive the application by the court of Act
4122.
2.
Act 4122 valid; Conclusion in Manila Trading vs. Reyes sustained

In Manila Trading & Supply Co. vs. Reyes (62 Phil., 461), the validity of the Act
4122 was already passed upon when it was questioned for the same reasons advanced,
i.e. that it takes property without due process of law, denies the equal protection of the
laws, and impairs the obligations of contract, thereby violating the provisions of section
3 of the Act of The United States Congress of 29 August 1916, known as the Jones Law.
As Macondray, through counsel, advanced no new arguments which have not already
been considered in the Reyes case, there is no reason for reaching a different
conclusion. The law seeks to remedy an evil which the Legislature wished to suppress;
Sales, 2003 ( 201 )
this legislative body has power to promulgate the law. The law does not completely
deprive vendors on the installment basis of a remedy, but requires them to elect
among three alternative remedies. The law, on the other hand, does not completely
exonerate the purchasers, but only limits their liabilities. Finally, there is no vested right
when a procedural law is involved, wherefore the Legislature could enact Act 4122
without violating the organic law.
3.
Manila Trading vs. Reyes; Validity of act solely one of constitutional power;
Motive or results irrelevant
The question of the validity of an act is solely one of constitutional power.
Questions of expediency, of motive, or of results are irrelevant. Nevertheless it is not
improper to inquire as to the occasion for the enactment of a law. The legislative
purpose thus disclosed can then serve as a fit background for constitutional inquiry.
4.
Manila Trading vs. Reyes; Purpose of Act 4122

Act 4122 aims to correct a social and economic evil, the inordinate love for
luxury of those who, without sufficient means, purchase personal effects, and the
ruinous practice of some commercial houses of purchasing back the goods sold for a
nominal price besides keeping a part of the price already paid and collecting the
balance, with stipulated interest, costs, and attorneys fees. As a consequence, the
vendor does not only recover the goods sold, used hardly 2 months perhaps with only
slight wear and tear, but also collects the entire stipulated purchase price, probably
swelled up 50% including interest, costs, and attorneys fees. This practice is worse
than usurious in many instances. And although, of course, the purchaser must suffer
the consequences of his imprudence and lack of foresight, the chastisement must not
be to the extent of ruining him completely and, on the other hand, enriching the vendor
in a manner which shocks the conscience. The object of the law is highly commendable.
5.
Manila Trading vs. Reyes, citing Bachrach Motor vs. Millan; Purpose of
amendment
The principal object of the amendment was to remedy the abuses committed in
connection with the foreclosure of chattel mortgages. The amendment prevents
mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low
price and then bringing suit against the mortgagor for a deficiency judgment. The
almost invariable result of this procedure was that the mortgagor found himself minus
the property and still owing practically the full amount of his original indebtedness.
Under this amendment the vendor of personal property, the purchase price of which is
payable in installments, has the right to cancel the sale or foreclose the mortgage if
one has been given on the property. Whichever right the vendor elects he need not
return to the purchaser the amount of the installments already paid, if there be an
agreement to that effect. Furthermore, if the vendor avails himself of the right to
foreclose the mortgage this amendment prohibits him from bringing an action against
the purchaser for the unpaid balance. Under the amendment, in, all proceedings for the
Sales, 2003 ( 202 )
foreclosure of chattel mortgages, executed on chattels which have been sold on the
installment plan, the mortgagee is limited to the property included in the mortgage.
(Bachrach Motor Co. vs. Millan [1935], 61 Phil., 409.)
6.
Manila Trading vs. Reyes; US Jurisprudence, 1897 Act passed in State of

Washington not controlling
In 1897, an Act was passed in the State of Washington which provided that in all
proceedings for the foreclosure of mortgages hereafter executed, or on judgments
rendered upon the debt thereby secured, the mortgagee or assignee shall be limited to
the property included in the mortgage. It was held by a divided court of three to two
that the statute since limiting the right to enforce a debt secured by mortgage to the
property mortgaged, whether realty or chattels, was an undue restraint upon the liberty
of a citizen to contract with respect to his property rights. But as is readily apparent,
the Washington law and the Philippine law are radically different in phraseology and in
effect. (Dennis vs. Moses [1898], 40 L. R. A., 302.)
7.
Manila Trading vs. Reyes; US Jurisprudence, Act passed in State of Oregon

not controlling
In Oregon, in a decision of a later date, an Act abolishing deficiency judgments
upon the foreclosure of mortgages to secure the unpaid balance of the purchase price
of real property was unanimously sustained by the Supreme Court of that State. The
importance of the subject matter in that jurisdiction was revealed by the fact that four
separate opinions were prepared by the justices participating, in one of which Mr.
Justice Johns, shortly thereafter to become a member of this court, concurred. However,
it is but fair to state that one of the reasons prompting the court to uphold the law was
the financial depression which had prevailed in that State. While in the Philippines, the
court can take judicial notice of the stringency of finances that presses upon the
people, there is no reason to believe that this was the reason which motivated the
enactment of Act 4122. (Wright vs. Wimberley [1919], 184 Pac., 740).
8.
Manila Trading vs. Reyes; US Jurisprudence, Bronzon vs. Kinzie

In the case of Bronzon vs. Kinzie [1843], 1 How., 311), decided by the Supreme
Court of the United States, the Court had under consideration a law passed in the State
of Illinois, which provided that the equitable estate of the mortgagor should not be
extinguished for 12 months after sale on decree, and which prevented any sale of the
mortgaged property unless 2/3 of the amount at which the property had been valued
by appraisers should be bid therefor. The court declared that Mortgages made since
the passage of these laws must undoubtedly be governed by them; for every State has
the power to describe the legal and equitable obligations of a contract to be made and
executed within its jurisdiction. It may exempt any property it thinks proper from sale
for the payment of a debt; and may impose such conditions and restrictions upon the
Sales, 2003 ( 203 )
creditor as its judgment and policy may dictate. And all future contracts would be
subject to such provisions; and they would be obligatory upon the parties in the courts
of the United States, as well as in those of the State.
9.
Manila Trading vs. Reyes; US Jurisprudence, Parties have no vested right in

particular remedies or modes of procedure
Parties have no vested right in particular remedies or modes of procedure, and
the legislature may change existing remedies or modes of procedure without impairing
the obligation of contracts, provided an efficacious remedy remains for enforcement.
But changes in the remedies available for the enforcement of a mortgage may not,
even when public policy is invoked as an excuse, be pressed so far as to cut down the
security of a mortgage without moderation or reason or in a spirit of oppression.
(Brotherhood of American Yeoman vs. Manz [1922], 206 Pac., 403; Oshkosh Waterworks
Co. vs. Oshkosh [1908], 187 U. S., 437; W. B. Worthen Co. vs. Kavanaugh [1935], 79 U.
S. Supreme Court Advance Opinions, 638.)
10.
Manila Trading vs. Reyes; Chattel Mortgage Law does not provide for
deficiency judgment upon foreclosure of mortgage
In the Philippines, the Chattel Mortgage Law did not expressly provide for a
deficiency judgment upon the foreclosure of a mortgage. Indeed, it required decisions
of the Court to authorize such a procedure. (Bank of the Philippine Islands vs. Olutanga
Lumber Co. [1924], 47 Phil., 20; Manila Trading & Supply Co. vs. Tamaraw Plantation
Co., supra.) But the practice became universal enough to acquire the force of direct
legislative enactment regarding procedure. To a certain extent the Legislature has now
disauthorized the practice, but has left a sufficient remedy remaining.
11.
Manila Trading vs. Reyes; Remedies available to vendor who has sold
personal property on installment plan; Basis of remedies
Three remedies are available to the vendor who has sold personal property on
the installment plan. (1) He may elect to exact the fulfillment of the obligation.
(Bachrach Motor Co. vs. Millan, supra.) (2) If the vendee shall have failed to pay two or
more installments, the vendor may cancel the sale. (3) If the vendee shall have failed
to pay two or more installments, the vendor may foreclose the mortgage, if one has
been given on the property. The basis of the first option is the Civil Code. The basis of
the last two options is Act 4122, amendatory of the Civil Code. And the proviso to the
right to foreclose is, that if the vendor has chosen this remedy, he shall have no further
action against the purchaser for the recovery of any unpaid balance owing by the
same. In other words, as we see it, the Act does no more than qualify the remedy.
12.
Manila Trading vs. Reyes; Determination of constitutional issues, all doubts

resolve in the presumption to their validity
Most constitutional issues are determined by the courts approach to them. The
proper approach in cases of this character should be to resolve all presumptions in
Sales, 2003 ( 204 )
favor of the validity of an act in the absence of a clear conflict between it and the
constitution. All doubts should be resolved in its favor.
13.
Manila Trading vs. Reyes; Public policy defined and established by

legislature, courts to perpetuate policy
The controlling purpose of Act 4122 is revealed to be to close the door to abuses
committed in connection with the foreclosure of chattel mortgages when sales were
payable in installments. That public policy, obvious from the statute, was defined and
established by legislative authority. It is for the courts to perpetuate it.
14.
Manila Trading vs. Reyes; Legislature may change judicial methods and
remedies for the enforcement of contracts
The Legislature may change judicial methods and remedies for the enforcement
of contracts, as it has done by the enactment of Act 4122, without unduly interfering
with the obligation of the contract, without sanctioning class legislation, and without a
denial of the equal protection of the laws.
Interpretation of laws, Intent of legislature; Restriction of meaning of
unpaid balance should be expressly stated
The provision However, if the vendor has chosen to foreclose the mortgage he
shall have no further action against the purchaser for the recovery of any unpaid
balance owing by the same, and any agreement to the contrary shall be null and void,
is the subject of the interpretation. The paragraph, as its language shows, refers to the
mortgage contract executed by the parties, whereby the purchaser mortgages the
chattel sold to him on the installment basis in order to guarantee the payment of its
price, and the words any unpaid balance should be interpreted as having reference to
the deficiency judgment to which the mortgagee may be entitled where, after the
mortgaged chattel is sold at public auction, the proceeds obtained therefrom are
insufficient to cover the full amount of the secured obligations which, in the case at bar
as shown by the note and by the mortgage deed, include interest on the principal,
attorneys fees, expenses of collection, and the costs. The fundamental rule which
should govern the interpretation of laws is to ascertain the intention and meaning of
the Legislature and to give effect thereto. (Sec. 288, Code of Civil Procedure; U. S. vs.
Toribio, 15 Phil., 85; U. S. vs. Navarro, 19 Phil., 134; De Jesus vs. City of Manila, 29 Phil.,
73; Borromeo vs. Mariano, 41 Phil., 322; People vs. Concepcion, 44 Phil., 126.) Were it
the intention of the Legislature to limit its meaning to the unpaid balance of the
principal, it would have so stated.
15.
[59]
Manila Racing Club vs. Manila Jockey Club [G.R. No. L-46533.
October 28, 1939.] En Banc, Avancena (J): 6 concur
Sales, 2003 ( 205 )
Facts: On 18 September 1936, Rafael J. Campos entered into a contract with the
Manila Jockey Club, an unregistered partnership, whereby he purchased from it the
parcel of land described in TCT 8724 with its improvements, the good-will, and certain
personal property. The price agreed upon in this transaction is P1,200,000 (P50,000
upon the signing of the contract; P50,000 on or before 28 September 1936; P300,000
on or before 24 December 1936; P200,000 on or before 24 March 1937; and P600,000
on or before 24 September 1937). It was agreed that should the purchaser fail to pay
the amount corresponding to each installment in due time, the vendor may rescind the
contract and keep the amounts paid for itself. One of the clauses of the deed also
states that the purchaser may form a corporation called the Manila Racing Club, Inc., to
whom he may transfer all his rights and obligations under the contract. The purchaser
Campos made the down payment of P50,000 upon signing the contract and on 28
September 1938 paid the second installment of P50,000. On 22 October 1936, the
Manila Racing Club, Inc., was organized and Campos transferred to it all his rights and
obligations under his contract with the Manila Jockey Club. As the third installment of
P300,000 became due on 24 December 1936, and the purchaser could not pay it, the
vendor, on 11 January 1937, declared the contract cancelled and kept the amount of
P100,000 already paid. The purchaser was, however, granted an extension until 22
January 1937, to revive the contract by paying the P300,000, but having failed to do
this, the partners of the vendor ratified on 23 January 1937, the cancellation of the
contract agreed upon by its board of directors and the forfeiture of the P100,000 paid
by the purchaser. On 23 March 1937 the Manila Jockey Club, Inc., was organized and to
it were transferred all the properties, rights and actions of the Manila Jockey Club.
An action was filed by the Manila Racing Club against the Manila Jockey Club and its
partners for the recovery from them of the forfeited amount of P100,000 and for the
payment of P50,000 as damages. The trial court rendered judgment absolving the
Manila Jockey Club and its partners.
The Supreme Court affirmed the appealed judgment, with the costs against the Manila
Racing Club.
1.
Clause referring to forfeiture of amounts paid valid, not contrary to law,

morals or public order; Purpose of a penal clause
The clause regarding the forfeiture of what has been partially paid is valid. It is in
the nature of a penal clause which may be legally established by the parties (articles
1152 and 1255 of the Civil Code). In its double purpose of insuring compliance with the
contract and of otherwise measuring beforehand the damages which may result from
non-compliance, it is not contrary to law, morals or public order because it was
voluntarily and knowingly agreed upon by the parties. Viewing concretely the true
effects thereof in the present case, the amount forfeited constitutes only 8% of the
stipulated price, which is not excessive if considered as the profit which would have
been obtained had the contract been complied with. There is evidence that the Manila
Sales, 2003 ( 206 )
Jockey Club, because of the contract with Campos, had to reject other propositions to
buy the same property. At any rate, the penal clause does away with the duty to prove
the existence and measure of the damages caused by the breach.
2.
Allegation that Manila Jockey Club responsible for non-compliance with

contract not justified
The allegation that the Manila Jockey Club was responsible for the noncompliance with the contract is not justified. There is no sufficient evidence that the
majority of the members of the Manila Jockey Club promised to subscribe to one-half of
the shares of Manila Racing Club, and for failure to live up to this promise, the money to
pay the third installment of P300,000 could not be raised. Campos himself attributes
the failure to pay the third installment to the fact that the public, due to the state of the
stock market, did not respond to the expectations of the incorporators of the Manila
Racing Club. But it seems that even this is not the cause of the breach, for on the date
the third installment became due, the Manila Racing Club had subscribed shares of its
capital stock in the amount of P600,000, paid in part and the remainder payable on
demand. The deduction from all this is that the breach of the contract cannot be
attributed to the Manila Jockey Club and, much less, to the company which, it is also
alleged, the defendants brought into being to defeat the organization of the Manila
Racing Club.
[60]
Mapalo v. Mapalo [G.R. No. L-21489 and L-21628.
May 19, 1966.] En Banc, Bengzon JP (J): 10 concur
Facts: Spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were
registered owners of a 1,635 sq.ms. residential land in Manaoag, Pangasinan (OCT
46503). The spouses-owners, out of love and affection for Maximo Mapalo, brother of
Miguel who was about to get married, decided to donate the eastern half of the land to
him. OCT 46503 was delivered. As a result, however, they were deceived into signing,
on 15 October 1936, a deed of absolute sale over the entire land in his favor. Their
signature thereto were procured by fraud, i.e. they were made to believe by Maximo
Mapalo and the attorney who acted as notary public who translated the document,
that the same was a deed of donation in Maximos favor covering (the eastern half)
of their land. Although the document of sale stated a consideration of P500, the
spouses did not receive anything of value for the land. The attorneys misbehavior was
the subject of an investigation but its result does not appear on record. Following the
execution of the document the spouses immediately built a fence of permanent
structure in the middle of their land segregating the eastern portion from its western
portion. Said fence still exists. The spouses have always been in continued possession
Sales, 2003 ( 207 )
over the western half of the land up to the present. Unknown to them, Maximo Mapalo,
on 15 March 1938, registered the deed of sale in his favor and obtained in his name
TCT 12829 over the entire land. 13 years later, on 20 October 1951, he sold for
P2,500.00 said entire land in favor Evaristo, Petronila, Pacifico and Miguel Narciso. The
sale to the Narcisos was in turn registered on 5 November 1951 and TCT 11350 was
issued for the whole land in their names. The Narcisos took possession only of the
eastern portion of the land in 1951, after the sale in their favor was made.
On 7 February 1952 the Narcisos filed suit in the CFI Pangasinan (Civil Case 11991) to
be declared owners of the entire land; for possession of its western portion; for
damages; and for rentals. It was brought against the Mapalo spouses as well as against
Floro Guieb and Rosalia Mapalo Guieb who had a house on the western part of the land
with the consent of the spouses Mapalo and Quiba. The Mapalo spouses filed their
answer with a counterclaim on 17 March 1952, seeking cancellation of the TCT of the
Narcisos as to the western half of the land, on the grounds that their signatures to the
deed of sale of 1936 were procured by fraud and that the Narcisos were buyers in bad
faith. They asked for reconveyance to them of the western portion of the land and
issuance of a TCT in their names as to said portion. In addition, the Mapalo spouses
filed on 16 December 1957 their own complaint in the CFI Pangasinan (Civil Case U133) against the the Narcisos and Maximo Mapalo. They asked that the deeds of sale of
1936 and of 1951 over the land in question declared null and void as to the western
half of said land. Judge Amado Santiago of the CFI Pangasinan located in the
municipality of Urdaneta the two cases jointly. Said court rendered judgment on 18
January 1961 dismissing the complaint in Civil Case 11991, declaring the deed as that
of donation only over the eastern half portion of the land, and as null and void with
respect to the western half portion thereof, declaring TCT 12829 issued to Maximo
Mapalo as regards the western portion of the land null and void and without legal force
as well as TCT 11350 subsequently issued to the Narcisos, ordering the Mapalo spouses
and the Narcisos to have the land subdivided by a competent land surveyor, the
expenses of which to be borne out by the parties pro-rata, ordering the Register of
Deed to issue in lieu of TCT 11350 two new titles upon completion of the subdivision
plan (one in favor of the Mapalo spouses for the western portion, and one for the
Narcisos covering the eastern half), and ordering Maximo Mapalo and the Narcisos to
pay the costs.
The Narcisos appealed to the Court of Appeals. In its decision on 28 May 1963, the
Court of Appeals reversed the Judgment of the CFI, solely on the ground that the
consent of the Mapalo spouses to the deed of sale of 1936 having been obtained by
fraud, the same was voidable, not void ab initio, and, therefore, the action to annul the
same, within 4 years from notice of the fraud, had long prescribed. It reckoned said
notice of the fraud from the date of registration of the sale on 15 March 1938. The CFI
and the CA are therefore unanimous that the spouses Mapalo and Quiba were definitely
Sales, 2003 ( 208 )
the victims of fraud. It was only on prescription that they lost in the Court of Appeals.
From said decision of the Court of Appeals, the Mapalo spouses appealed to the Court.
The Supreme Court reversed and set aside the decision of the Court of Appeals, and
rendered another affirming in toto the judgment of the CFI, with attorneys fees on
appeal in favor of the Mapalo Spouses in the amount of P1,000.00, plus the costs, both
against Maximo Mapalo and the Narcisos.
1.
Contract; Requisites
Under the Civil Code, either old or the new, for a contract to exist at all, three
essential requisites must concur: (1) consent; (2) object, and (3) cause or consideration.
2.
Eastern half donated; Finding of the lower court as to the donation not
assailed and thus is final
As regards the eastern portion of the land, the Mapalo spouses are not claiming
the same, it being their stand that they had donated and freely given said half of their
land to Maximo Mapalo. And since they did not appeal from the decision of the trial
court finding that there was a valid and effective donation of the eastern portion of
their land in favor of Maximo Mapalo, the same pronouncement has become final as to
them, rendering it no longer proper herein to examine the existence, validity or efficacy
of said donation as to said eastern portion.
3.
Contracts without a cause void

Under the Civil Code, be it the old or the new, is that contracts without a cause or
consideration produce no effect whatsoever.
4.
Old Civil Code; Contracts with false consideration voidable; Prescription of

voidable contracts
Under the Old Civil Code, the statement of a false consideration renders the
contract voidable, unless it is proven that it is supported by another real and licit
consideration. And it is further provided by the Old
Civil Code that the action for annulment of a contract on the ground of falsity of
consideration shall last 4 years, the term to run from the date of the consummation of
the contract.
5.
False consideration a real consideration but not the one stated in the
document
According to Manresa, what is meant by a contract that states a false
consideration is one that has in fact a real consideration but the same is not the one
stated in the document. (The difference between simulation and the contract with
Sales, 2003 ( 209 )
fraudulent intention (purpose). This, although illicit is real; but the first is false in fact,
although it appears to be real. [Manresa, Civil Code Volume VIII, vol. II, p. 354]).
6.
Only a disturbed man would contract without cause; False cause vitiates
consent and annuls contract (Sanchez Roman)
The inspection of cause in the contract is necessary, and that without it they are
null; it can only be conceived that a disturbed man would, in his reason, contract
without cause. For the same reason of the necessity of inspection of cause in the
contract, it is precise that such is real and not supposed, as it pretends or appears. The
falsification of the cause vitiates the consent and annuls the contract, that is, not only
as a doctrine undoubtedly of scientific law, but also of old laws of Castile, that in
multitude of laws that declare it. (Sanchez Roman, Civil Right, Volume IV, p. 206.)
7.
No consideration does not mean false consideration for Article 1276 to be

applied
Where there was in fact no consideration, the statement of one in the deed will
not suffice to bring it under the rule of Article 1276 of the Old Civil Code as stating a
false consideration.
8.
Oceio Perez v. Flores applies; Contract null and void if without cause or
consideration
The ruling of the Court in Ocejo Perez & Co. vs. Flores (40 Phil. 921), is squarely
applicable herein. In that case, it was ruled that a contract of purchase and sale is null
and void and produces no effect whatsoever where the same is without cause or
consideration in that the purchase price which appears thereon as paid has in fact
never been paid by the purchaser to the vendor.
9.
Void contract incurable and cannot be subject of prescription

The inexistence of a contract is permanent and incurable and cannot be the
subject of prescription. The nonexistence is perpetual and irreplaceable not being able
to be object of confirmation nor prescription. As held in Eugenio vs. Perdido (97 Phil.
41, 42-43 [1932]), it was stated that under the existing classification, such contract
would be inexistent and the action or defense for declaration of such inexistence
does not prescribe. (Art. 1410, New Civil Code.) While it is true that this is a new
provision of the New Civil Code, it is nevertheless a principle recognized since Tipton
vs. Velasco (6 Phil. 67) that mere a lapse of time cannot give efficacy to contracts that
are null and void.
10.
Narcisos not purchasers in good faith

It has been positively shown by the undisputed testimony of Candida Quiba that
Pacifico Narciso and Evaristo Narciso stayed for some days on the western side of the
land until their house was removed in 1940 by the spouses Mapalo. Also, Pacifico
Narciso admitted in his testimony that when they bought the property, Miguel Mapalo
Sales, 2003 ( 210 )
was still in the premises in question (western part) which he is occupying and his house
is still standing thereon. Moreover, Pacifico Narciso when presented as a rebuttal and
sub-rebuttal witness categorically declared that before buying the land in question he
went to the house of spouses Mapalo and asked them if they will permit Maximo Mapalo
to sell the property. Further, as the parties in the cases are neighbors (except Maximo
Mapalo), it is clear that the Narcisos were aware of the extent of the interest of Maximo
Mapalo over the land before and after the execution of the deed of sale. Under the
situation, thus, the Narcisos may be considered in value but certainly not as purchasers
in good faith.
11.
No need to remand case to trial court as facts of trial court sustained by

Court of Appeals
As the Court of Appeals declared that on the merits, the appealed decision
called have been upheld under Article 1332 of Civil Code and the following authorities:
Ayola vs. Valderrama Lumber Manufacturers Ca., Inc., 49 OG 980, 982; Trasporte
Beltran, 51 OG 1434, 1435; Cortez vs. Cortez, CA- 18451-R, August 8, 1961; Castilllo vs.
Laberinto, CA-G.R. No. 18118-R, December 20, 1961; and 13 C. J. 372-373, as well as
the several facts and circumstances appreciated by the trial court as supporting the
Mapalo spouses case, it thus sustained barring only its ruling on prescription the
judgment and findings of the trial court, including that of bad faith on the part of the
Narcisos in purchasing the land in question. The Supreme Court thus do not see the
need to further remand the case to the Court of Appeals for a ruling on the point in the
event that the 1936 contract is held to be inexistent as regards the western portion of
the land.
12.
Bad faith justifies award of attorneys fees

In view of the Narcisos bad faith under the circumstances we deem it just and
equitable to award, in the Mapalo spouses favor, attorneys fees on appeal, in the
amount of P1,000.00 as prayed for in the counterclaim.
[61]
Mate v. CA [G.R. Nos. 120724-25. May 21, 1998.]
Second Division, Martinez (J): 4 concur
Facts: On 6 October 1986 Josefina R. Rey and Inocencio Tan went to the residence of
Fernando Mate at Tacloban City. Josie who is a cousin of Mates wife solicited his help to
stave off her and her familys prosecution by Tan for violation of BP 22 on account of
the rubber checks that she, her mother, sister and brother issued to Tan amounting to
P4,432,067.00. She requested Mate to cede to Tan his 3 lots in Tacloban City in order to
placate him. On hearing Josies proposal, he immediately rejected it as he owed Tan
Sales, 2003 ( 211 )
nothing and he was under no obligation to convey to him his properties. Furthermore,
his lots were not for sale. Josie explained to him that he was in no danger of losing his
properties as he will merely execute a simulated document transferring them to Tan but
they will be redeemed by her with her own funds. After a long discussion, he agreed to
execute a fictitious deed of sale with right to repurchase covering his 3 lots, subject to
the conditions that the amount to be stated in the document is P1,400,000.00 with
interest thereon at 5% a month; the properties will be repurchased within 6 months or
on or before 4 April 1987; although it would appear in the document that Mate is the
vendor, it is Josie who will provide the money for the redemption of the properties with
her own funds; and the titles to the properties will be delivered to Tan but the sale will
not be registered in the Register of Deeds and annotated on the titles. Josie, to assure
Mate that she will redeem the properties, issued him 2 BPI checks both postdated 15
December 1986. One check was for P1,400,000.00 supposedly for the selling price and
the other was for P420,000.00 corresponding to the interests for 6 months. Immediately
thereafter Mate prepared the Deed of Sale with Right to Repurchase and after it has
been signed and notarized, it was given to Tan together with the titles of the properties
and the latter did not register the transaction in the Register of Deeds as agreed upon.
On 14 January 1987, Mate deposited the check for P1,400,000.00 in his account at the
UCPB and the other check for P420,000.00 in his account at MetroBank preparatory to
the redemption of his properties. Both of them were dishonored by the drawee bank for
having been drawn against a closed account. Realizing that he was swindled, he sent
Josie a telegram about her checks and when she failed to respond, he went to Manila to
look for her but she could not be found.
Mate returned to Tacloban City and filed Criminal Cases 8310 and 8312 against her for
violation of BP 22 but the cases were later archived as the accused (Josie) could not be
found as she went into hiding. To protect his interest, he filed Civil Case 7396 of the RTC
Leyte (Branch VII, Mate vs. Rey and Tan) for Annulment of Contract with Damages. Josie
was declared in default and the case proceeded against Tan. But during the trial the
RTC court asked Tan to file an action for consolidation of ownership of the properties
subject of the sale and pursuant thereto he filed Civil Case 7587 that was consolidated
with the case he filed earlier which were later decided jointly by the trial court in favor
of Tan and was subsequently appealed to the Court of Appeals. The appellate court, on
29 August 1994 (CA-GR CV 28225-26), affirmed the decision with modification that
Mate is ordered to pay Tan the sum of P140,000 for and as attorneys fees; with costs
against Mate. Thereupon, Mate filed a motion to reconsider the decision but it was
denied. Hence, the petition for review.
The Supreme Court affirmed the decision of the Court of Appeals dated 29 August
1994, and denied due course to the petition for review for lack of merit.
1.
Consideration exist in the Deed of Sale with Right to Repurchase (Sale with
Pacto de Retro)
Sales, 2003 ( 212 )
To ensure that he could repurchase his lots, Mate got a check of P1,400,000.00
from Josie. By allowing his titles to be in possession of Tan for a period of 6 months,
Mate secured from her another check for P420,000.00. It is thus plain that
consideration existed at the time of the execution of the deed of sale with right of
repurchase. It is not only Mates kindness to Josefina, being his cousin, but also his
receipt of P420,000.00 from her which impelled him to execute such contract. While
Mate did not receive the P1.4M purchase price from Tan, he had in his possession a
postdated check of Josie in an equivalent amount precisely to repurchase the 2 lots on
or before the 6th month.
2.
No basis to file an action to annul the pacto de retro sale; Proper cause of
action is BP 22 against Josie; Filing of criminal case a tacit admission that
there is consideration of the pacto de retro sale
There is absolutely no basis for Mate to file a complaint against Tan and Josie to
annul the pacto de retro sale on the ground of lack of consideration, invoking his failure
to encash the two checks. Mates cause of action was to file criminal actions against
Josie under BP 22, which he did. The filing of the criminal cases was a tacit admission
by petitioner that there was a consideration of the pacto de retro sale. Mate knew that
he was bound by the deed of sale with right to repurchase, as evidenced by his filing
criminal cases against Josie when the two checks bounced.
3.
Singson v. Isabela Sawmill does not apply

Mates reliance on the doctrine in Singson vs. Isabela Sawmill (88 SCRA 633,
643), where the Court said that where one or two innocent persons must suffer, that
person who gave occasion for the damages to be caused must bear consequences is
misplaced. He is not an innocent person. As a matter of fact, he gave occasion for the
damage caused by virtue of the deed of sale with right to repurchase which he
prepared and signed. Thus, there is the equitable maxim that between two innocent
parties, the one who made it possible for the wrong to be done should be the one to
bear the resulting loss.
4.
Tan incurred no false pretense; Mate has no one to blame but himself for his
misfortune; Mate a lawyer
Tan did not employ any devious scheme to make the former sign the deed of
sale. Tan waived his right to collect from Josie by virtue of the pacto de retro sale. In
turn, Josie gave Mate a postdated check in the amount of P1.4M to ensure that the
latter would not lose his two lots. Mate, a lawyer, should have known that the
transaction was fraught with risks since Josie and family had a checkered history of
issuing worthless checks. But had Mate not agreed to the arrangement, Tan would not
have agreed to waive prosecution of Josie. Apparently, it was Mates greed for a huge
profit that impelled him to accede to the scheme of Josie even if he knew it was a
Sales, 2003 ( 213 )
dangerous undertaking. When he drafted the pacto de retro document, he threw

caution to the winds forgetting that prudence might have been the better course of
action. When Josies checks bounced, he should have repurchased his lots with his own
money. Instead, he sued not only Josie but also Tan for annulment of contract on the
ground of lack of consideration and false pretenses on their part.
5.
Contracts
A contract is a contract. Once agreed upon, and provided all the essential
elements are present, it is valid and binding between the parties.
[62]
Mclaughin v. CA, 144 SCRA 693 (1986)
[63]
Medina v. Collector of Internal Revenue [G.R. No. L-15113.
January 28, 1961.] En Banc, Reyes JBL (J): 6 concur
Facts: On 20 May 1944, Antonio Medina married Antonia Rodriguez. Before 1946, the
spouses had neither property nor business of their own. Later, however, Antonio
acquired forest concessions in the municipalities of San Mariano and Palanan, Isabela.
From 1946 to 1948, the logs cut and removed by the Antonio from his concessions were
sold to different persons in Manila through his agent, Mariano Osorio. In 1949, Antonia
started to engage in business as a lumber dealer, and up to around 1952, Antonio sold
to her almost all the logs produced in his San Mariano concession. Antonia, in turn, sold
in Manila the logs bought from her husband through the same agent, Mariano Osorio.
The proceeds were either received by Osorio for Antonio or deposited by said agent in
Antonios current account with the PNB.
On the thesis that the sales made by Antonio to his wife were null and void pursuant to
the provisions of
Article 1490 of the Civil Code of the Philippines, the Collector considered the sales
made by Antonia as Antonios original sales taxable under Section 186 of the National
Internal Revenue Code and, therefore, imposed a tax assessment on Antonio. On 30
November 1963, Antonio protested the assessment; however, the Collector insisted on
his demand. On 9 July 1954, Antonio filed a petition for reconsideration, revealing for
the first time the existence of an alleged premarital agreement of complete separation
of properties between him and his wife, and contending that the assessment for the
years 1946 to 1952 had already prescribed. After one hearing, the Conference Staff of
the Bureau of Internal Revenue eliminated the 50% fraud penalty and held that the
taxes assessed against him before 1948 had already prescribed. Based on these
findings, the Collector issued a modified assessment, demanding the payment of only
Sales, 2003 ( 214 )
P3,325.68. Antonio again requested for reconsideration, but the Collector, in his letter
of 4 April 1955, denied the same.
Antonio appealed to the Court of Tax Appeals, which rendered judgment upholding a
tax assessment of the Collector of Internal Revenue except with respect to the
imposition of so-called compromise penalties, which were set aside. Hence a petition to
review the decision of the CTA.
The Supreme Court affirmed the appealed decision with cost against the petitioner.
1.
No evidence proving pre-marital agreement of absolute separation between

the spouses
Aside from the material inconsistencies in the testimony of petitioners
witnesses, the circumstantial evidence is against petitioners claim. (1) It appears that
at the time of the marriage between the petitioner and his wife, they neither had any
property nor business of their own, as to have really urged them to enter into the
supposed property agreement. (2) The testimony that the separation of property
agreement was recorded in the Registry of Property 3 months before the marriage, is
patently absurd, since such a pre-nuptial agreement could not be effective before
marriage is celebrated. (3) Despite their insistence on the existence of the antenuptial
contract, the couple, strangely enough, did not act in accordance with its alleged
covenants; but that even during their taxable years, the ownership, usufruct, and
administration of their properties and business were in the husband. (4) Although
petitioner already knew that Article 1490 prohibits sales between spouses married
under a community system, it was not until July 1954 that the allege the existence of
the alleged property separation agreement. (5) The Day Book of the Register of Deeds
on which the agreement would have been entered, which was saved from the ravages
of war, did not show that the document in question was among those recorded therein.
2.
Trial courts judgment on the degree of credence of witness considered

seriously by the Supreme Court
When the credibility of witnesses is the one at issue, the trial courts judgment as
to their degree of credence deserves serious consideration by this Court (Collector vs.
Bautista, et al., G. R. Nos. L-12250, L12259, May 27, 1959). This is all the more true
because not every copy of the supposed agreement, particularly the one that was said
to have been filed with the Clerk of Court of Isabela, was accounted for as lost; so that,
applying the best evidence rule, the court did right in giving little or no credence to
the secondary evidence to prove the due execution and contents of the alleged
document (see Comments on the Rules of Court, Moran, 1957 Ed., Vol. 3, pp. 10-12).
Sales, 2003 ( 215 )
3.
Article 7 and 10 of Code of Commerce does not exempt from the prohibition
of sale between spouses under Article 1490 of the Civil Code
Article 7 and 10 of the Code of Commerce merely state, under certain conditions,
a presumption that the wife is authorized to engage in business and for the incidents
that flow therefrom when she so engages therein. The transactions permitted therein
however are those entered into with strangers, and do not constitute exceptions to the
prohibitory provisions of Article 1490 against sales between spouses.
4.
Government always an interested party in taxable transactions

The government is always an interested party to all matters involving taxable
transactions and qualified to question their validity or legitimacy whenever necessary
to block tax evasion. It cannot be contended thus that the Collector cannot assail the
questioned sales, he being a stranger to said transactions.
5.
Contracts violative of Article 1490 null and void

Contracts violative of the provisions of Article 1490 of the Civil Code are null and
void (Uy Sui Pin vs. Cantollas, 70 Phil. 55; Uy Coque vs. Sioca, 45 Phil. 43). In the
present case, being void transactions, the sales made by the petitioner to his wife were
correctly disregarded by the Collector in his tax assessments that considered as the
taxable sales those made by the wife through the spouses common agent, Mariano
Osorio.
6.
(?) Illegally obtained documents and papers admissible to evidence; Revenue

officers can require production of books of accounts and other records from
taxpayers
Illegally obtained documents and papers are admissible in evidence, if they are
found to be competent and relevant to the case (see Wong & Lee vs. Collector of
Internal Revenue, 104 Phil., 469). Petitioners imputation, that the documentary
evidence is illegally seized, is vehemently denied by him, and relying on Sections 3, 9,
337 and 338 of the Tax Code and the pertinent portions of Revenue Regulations No. V-1
and citing this Courts ruling in U.S. vs. Aviado 38 Phil., 10, the Collector maintains that
he and other internal revenue officers and agents could require the production of books
of accounts and other records from a taxpayer.
[64]
Melliza v. Iloilo City [G.R. No. L-24732. April 30, 1968.]
En Banc, Bengzon JP (J): 8 concur, 1 on leave
Facts: Juliana Melliza during her lifetime owned, among other properties, 3 parcels of
residential land in
Iloilo City (OCT 3462). Said parcels of land were known as Lots Nos. 2, 5 and 1214. The
total area of Lot
Sales, 2003 ( 216 )
1214 was 29,073 sq. m. On 27 November 1931 she donated to the then Municipality of
Iloilo, 9,000 sq. m. of Lot 1214, to serve as site for the municipal hall. The donation
was however revoked by the parties for the reason that the area donated was found
inadequate to meet the requirements of the development plan of the municipality, the
so- called Arellano Plan. Subsequently, Lot 1214 was divided by Certeza Surveying
Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into
Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of Lands, Lot
1214-B-1, with 4,562 sq. m., became known as Lot 1214-B; Lot 1214-B-2, with 6,653 sq.
m., was designated as Lot 1214-C; and Lot 1214-B-3, with 4,135 sq. m., became Lot
1214-D. On 15 November 1932, Juliana Melliza executed an instrument without any
caption providing for the absolute sale involving all of lot 5, 7669 sq. m. of Lot 2
(sublots 2-B and 2-C), and a portion of 10,788 sq. m. of Lot 1214 (sublots 1214-B2 and
1214-B3) in favor of the Municipal Government of Iloilo for the sum of P6,422; these lots
and portions being the ones needed by the municipal government for the construction
of avenues, parks and City hall site according the Arellano plan.
On 14 January 1938, Melliza sold her remaining interest in Lot 1214 to Remedios Sian
Villanueva (thereafter
TCT 18178). Remedios in turn on 4 November 1946 transferred her rights to said
portion of land to Pio Sian
Melliza (thereafter TCT 2492). Annotated at the back of Pio Sian Mellizas title certificate
was the following that a portion of 10,788 sq. m. of Lot 1214 now designated as Lots
1412-B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as
per instrument dated 15 November 1932. On 24 August 1949 the City of Iloilo, which
succeeded to the Municipality of Iloilo, donated the city hall site together with the
building thereon, to the University of the Philippines (Iloilo branch). The site donated
consisted of Lots 1214-B, 1214-C and 1214-D, with a total area of 15,350 sq. m., more
or less. Sometime in 1952, the University of the Philippines enclosed the site donated
with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer,
with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery
was obtained, because as alleged by Pio Sian Melliza, the City did not have funds. The
University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152
covering the three lots, Nos. 1214-B, 1214-C and 1214-D.
On 10 December 1955 Pio Sian Melizza filed an action in the CFI Iloilo against Iloilo City
and the University of the Philippines for recovery of Lot 1214-B or of its value. After
stipulation of facts and trial, the CFI rendered its decision on 15 August 1957,
dismissing the complaint. Said court ruled that the instrument executed by Juliana
Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B, and thus it
held that Iloilo City had the right to donate Lot 1214-B to UP. Pio Sian Melliza appealed
to the Court of Appeals. On 19 May 1965, the CA affirmed the interpretation of the CFI
that the portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square
Sales, 2003 ( 217 )
meters specifically mentioned but included whatever was needed for the construction
of avenues, parks and the city hall site. Nonetheless, it ordered the remand of the case
for reception of evidence to determine the area actually taken by Iloilo City for the
construction of avenues, parks and for city hall site. Hence, the appeal by Pio San
Melliza to the Supreme Court.
The Supreme Court affirmed the decision appealed from insofar as it affirms that of the
CFI, and dismissed the complaint; without costs.
1.
Interpretation of contract involves question of law

The interpretation of the public instrument dated 15 November 1932 involves a
question of law, since the contract is in the nature of law as between the parties and
their successors in interest.
2.
Intent of the parties as to the object of the public instrument

The paramount intention of the parties was to provide Iloilo municipality with lots
sufficient or adequate in area for the construction of the Iloilo City hall site, with its
avenues and parks. For this matter, a previous donation for this purpose between the
same parties was revoked by them, because of inadequacy of the area of the lot
donated. Said instrument described 4 parcels of land by their lot numbers and area;
and then it goes on to further describe, not only those lots already mentioned, but the
lots object of the sale, by stating that said lots were the ones needed for the
construction of the city hall site, avenues and parks according to the Arellano plan. If
the parties intended merely to cover the specified lots (Lots 2, 5, 1214-C and 1214-D),
there would scarcely have been any need for the next paragraph, since these lots were
already plainly and very clearly described by their respective lot number and areas.
Said next paragraph does not really add to the clear description that was already given
to them in the previous one. It is therefore the more reasonable interpretation to view it
as describing those other portions of land contiguous to the lots that, by reference to
the Arellano plan, will be found needed for the purpose at hand, the construction of the
city hall site.
3.
Requirement, that sale must have a determinate thing as object, is fulfilled if

object of sale is capable of being made determinate at the time of the
contract
The requirement of the law that a sale must have for its object a determinate
thing, is fulfilled as long as, at the time the contract is entered into, the object of the
sale is capable of being made determinate without the necessity of a new or further
agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code).
The specific mention of some of the lots plus the statement that the lots object of the
sale are the ones needed for city hall site; avenues and parks, according to the Arellano
plan, sufficiently provides a basis, as of the time of the execution of the contract, for
Sales, 2003 ( 218 )
rendering determinate said lots without the need of a new and further agreement of the
parties.
4.
Arellano plan in existence since 1928; Area of land needed for the city hall
site known
The Arellano plan was in existence as early as 1928. Tthe previous donation of
land for city hall site on 27 November 1931 was revoked on 6 March 1932 for being
inadequate in area under said Arellano plan. The area needed under that plan for city
hall site was then already known; that the specific mention of some of the lots covered
by the sale in effect fixed the corresponding location of the city hall site under the plan;
that, therefore, considering the said lots specifically mentioned in the public
instrument, and the projected city hall site, with its area, as then shown in the Arellano
plan (Exhibit 2), it could be determined which, and how much of the portions of land
contiguous to those specifically named, were needed for the construction of the city
hall site.
5.
Lot 1214-B is contiguous to Lot 1214-C and 1214-D, and is in the heart of the
city hall site
Lot 1214-B is contiguous to Lots 1214-C and 1214-D, admittedly covered by the
public instrument. It is stipulated that, after execution of the contract, the Municipality
of Iloilo possessed it together with the other lots sold. It sits practically in the heart of
the city hall site.
6.
Pio Sian Melliza a notary public and thus aware of the terms of the public
instrument
Pio Sian Melliza, from the stipulation of facts, was the notary public of the public
instrument. As such, he was aware of its terms. Said instrument was also registered
with the Register of Deeds and such registration was annotated at the back of the
corresponding title certificate of Juliana Melliza. From these stipulated facts, it can be
inferred that Pio Sian Melliza knew of the aforesaid terms of the instrument or is
chargeable with knowledge of them; that knowing so, he should have examined the
Arellano plan in relation to the public instrument; that furthermore, he should have
taken notice of the possession first by the Municipality of Iloilo, then by the City of Iloilo
and later by the University of the Philippines of Lot 1214-B as part of the city hall site
conveyed under that public instrument, and raised proper objections thereto if it was
his position that the same was not included in the same.
7.
Principles of civil law, as well as laches, estoppel and equity applied; Lot
included in conveyance
For 20 long years, Pio Sian Melliza and his predecessors-in-interest, did not object
to said possession, nor exercise any act of possession over Lot 1214-B. Applying,
Sales, 2003 ( 219 )
therefore, principles of civil law, as well as laches, estoppel, and equity, said lot must
necessarily be deemed included in the conveyance in favor of Iloilo municipality, now
Iloilo City.
[65]
Mendoza vs. Kalaw [G.R. No. 16420. October 12, 1921.]
Second Division, Johnson (J): 4 concur
Facts: On 24 September 1919, Federico Caet sold, under a conditional sale, the parcel
of land in question to the Primitivo Kalaw. On 8 November 1919, Caet made an
absolute sale of said parcel of land to Agripino Mendoza. On 12 November 1919,
Mendoza entered upon, and took actual possession of, said parcel of land, enclosed it
with a fence, and began to clean the same. After doing so, a representative of Kalaw
claimed and attempted to obtain possession of said lot, but Mendoza, who was then in
possession, refused to deliver the possession, upon the ground that he was the owner.
On 17 November (18 November) 1919, Kalaw attempted to have his title registered in
the registry of deeds of the City of Manila, but such registration was denied by the
register of deeds for the reason that there existed some defect in the description of the
property, and for the reason that the title of the vendor had not theretofore been
registered. The register of deeds, however, did make an anotacion preventiva.
On 26 November 1919, Agripino Mendoza filed a petition in the CFI Manila for the
registration, under the Torrens system, of a piece or parcel of land, particularly
described in paragraph A of the petition. The said lot is alleged to have an area of 371.6
square meters. Mendoza alleged that he was the owner in fee simple of said parcel of
land for the reason that he had purchased the same of Federico Caet on 8 November
1919. Accompanying the petition, there was united a plan containing a technical
description of the metes and bounds of said parcel of land. To the registration of said
parcel of land the oppositor, Primitivo Kalaw, presented his opposition, alleging that he
was the owner of the same and that he had acquired it from the said
Federico Caet. Upon the issue thus presented by the petition and opposition, and on
23 January 1920, the Court reached the conclusion that Mendoza was the owner in fee
simple of said parcel of land, and ordered it registered in his name in accordance with
the provisions of the Land Registration Act. From that decree the oppositor appealed to
the Supreme Court.
The Supreme Court affirmed the judgment ordering the registration of the parcel of
land in question in Mendozas name; with costs.
1.
Lot sold to Mendoza in absolute sale; Mendoza first in possession; Mendoza

actually paid purchase price
Sales, 2003 ( 220 )
Federico Caet made two sales of the same property one to Kalaw and the
other to Mendoza. The first was but a conditional sale while the latter was an absolute
sale. While the absolute sale to Mendoza was subsequent to the conditional sale to
Kalaw, the former obtained the actual possession of the property first. Reading Exhibits
1 and B, it may be found that Mendoza actually paid to his vendor the purchase price of
the property in question, while the payment by Kalaw depended upon the performance
of certain conditions mentioned in the contract of sale.
2.
Conditional sale hardly said to be a sale of property; Article 1473 of the Civil
Code does not apply
While there were two sales of the parcel of land in question, that is hardly the
fact, because a conditional sale, before the performance of the condition, can hardly be
said to be a sale of property, especially where the condition has not been performed or
complied with. Thus, article 1473 of the Civil Code can hardly be said to be applicable.
3.
Anotacion preventiva creates no advantage; protects rights of person

securing it for 30 days
The anotacion preventiva obtained by Kalaw does not created any advantage
in his favor, for the reason that a preventative precautionary notice on the records of
the registry of deeds only protects the rights of the person securing it for a period of
thirty days. (Par. 2, art. 17, Mortgage Law.) A preventative precautionary notice only
protects the interests and rights of the person who secures it against those who acquire
an interest in the property subsequent thereto, and then, only for a period of 30 days. It
cannot affect the rights or interests of persons who acquired an interest in the property
theretofore. (Veguillas vs. Jaucian, 25 Phil., 315; Samson vs. Garcia and Ycalina, 34
Phil., 805.)
4.
Anotacion preventiva does not affect right and or interests of persons

Mendoza had acquired an absolute deed to the land in question, and had actually
entered into the possession of the same, before the preventative precautionary notice
was noted in the office of the registry of deeds. Therefore, under the provisions of the
Mortgage Law, it could in no way affect the rights or interests of persons, acquired
theretofore.
[66]
Mindanao Academy vs. Yap [G.R. No. L-17681. February 26, 1965.]
De Nuqui vs. Yap [G.R. No. L-17682. February 26, 1965]
En Banc, Makalintal (J): 6 concur, 4 took no part
Facts: By deed entitled Mutual Agreement, executed on 10 May 1964, Rosenda A. de
Nuqui (widow of
Sales, 2003 ( 221 )
Sotero Dionisio) and her son Sotero Dionisio, Jr. sold 3 parcels of residential land in
Oroquieta, Misamis Occidental, and another parcel in Ozamis City in favor of Ildefonso
D. Yap. Included in the sale were certain buildings situated on said lands as well as
laboratory equipment, books, furniture and fixtures used by 2 schools established in the
respective properties: the Mindanao Academy in Oroquieta and the Misamis Academy in
Ozamis City. The aggregate price stated in the deed was P100,700.00, to be paid
according to the terms and conditions specified in the contract. Besides Rosenda and
her son Sotero, Jr., both of whom signed the instrument, Adelaida Dionisio Nuesa (a
daughter of Rosenda, and married to Wilson Nuesa) is also named therein as co-vendor,
but actually did not take part either personally or through her uncle and supposed
attorney-in-fact, Restituto Abuton. These three (mother and children) are referred to in
the deed as the owners pro-indiviso of the properties sold. The truth, however, was that
there were other co-owners of the lands, namely, Erlinda D. Diaz (and Antolin Diaz),
Ester Aida D. Bas (and Mauricio O. Bas), Rosalinda D. Belleza (and Apolinario Belleza)
and Luz Minda D. Dajao (and Elifio C. Dajao), children also of Rosenda by her deceased
husband Sotero Dionisio, Sr., and that as far as the school buildings, equipment, books,
furniture and fixtures were concerned, they were owned by the Mindanao Academy,
Inc., a corporation operating both the Mindanao Academy in Oroquieta and the Misamis
Academy in Ozamis City. The buyer, Ildefonso D. Yap, obtained possession of the
properties by virtue of the sale, took over the operation of the two schools and even
changed their names to Harvardian Colleges.
Two actions were commenced in the CFI Misamis Occidental; one for annulment of the
sale and recovery of rents and damages (Civil Case 1774, filed 3 May 1955) with the
Mindanao Academy, Inc., the five children of Rosenda Nuqui who did not take part in
the deed of sale, and several other persons who were stockholders of the said
corporation (Pedro N. Abuton, Sy Paoco, Josefa Dignum and Perfecto Velasquez), as
plaintiffs, and the parties who signed the deed of sale as defendants; and another for
rescission (Civil Case 1907, filed 17 July 1956) with Rosenda Nuqui, Sotero Dionisio, Jr.
and Erlinda D. Diaz (and the latters husband Antolin Diaz) as plaintiffs, and Ildefonso D.
Yap as lone defendant. The other 4 children of Rosenda did not join, having previously
ceded and quitclaimed their shares in the litigated properties in favor of their sister
Erlinda D. Diaz. The actions were tried jointly and on 31 March 1960 the court rendered
judgment, declaring the Mutual Agreement null and void ab initio and ordering
Ildefonso Yap to pay the costs of the proceedings in both cases. The Court also ordered
Yap, in Civil Case 1907, to restore to the plaintiffs in said case all the buildings and
grounds described in the Mutual Agreement together with all the permanent
improvements thereon; and to pay to the plaintiffs therein the amount of P300.00
monthly from 31 July 1956 up to the time he shall have surrendered the properties in
question to the plaintiffs therein, plus P1,000.00 as attorneys fees to plaintiffs Antolin
and Erlinda D. Diaz. The Court ordered Yap, in Civil Case 1774, to restore to the
Mindanao Academy, Inc., all the books, laboratory apparatus, furniture and other
equipments described in the Mutual Agreement and specified in the Inventory attached
Sales, 2003 ( 222 )
to the Records of this case; or in default thereof, their value in the amount of
P23,500.00; to return all the Records of the Mindanao Academy and Misamis Academy;
and to pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the amount of
P10,000.00 as nominal damages; P3,000.00 as exemplary damages; and P2,000.00 as
attorneys fees. These damages being apportioned to each of the plaintiff-stockholders
in proportion to their respective interests in the corporation. Ildefonso D. Yap appealed
from the judgment.
The Supreme Court affirmed the judgment appealed from but modified it by eliminating
therefrom the award of attorneys fees of P1,000.00 in favor of Erlinda D. Diaz and her
husband, and the award of nominal and exemplary damages in Civil Case 1774; and
making the award of attorneys fees in the sum of P2,000.00 payable to counsel for the
account of the Mindanao Academy, Inc. instead of the plaintiff stockholders; without
1.
Mutual Agreement entirely void and non-existent; Question on rescission not

categorically ruled on
The mutual agreement dated 10 May 1954 is entirely void and legally nonexistent in that the vendors therein ceded to Yap not only their interest, rights, shares
and participation in the property sold but also those that belonged to persons who were
not parties thereto. This conclusion is premised on two grounds: (a) the contract
purported to sell properties of which the sellers were not the only owners, since of the
four parcels of land mentioned in the deed their shares consisted only of 7/12, (6/12:
Rosenda Nuqui and 1/12 for Sotero, Jr.), while in the buildings, laboratory equipment,
books, furniture and fixtures they had no participation at all, the owner being the
Mindanao Academy, Inc.; and (b) the prestation involved in the sale was indivisible, and
therefore incapable of partial annulment, inasmuch as Yap would not have entered into
the transaction except to acquire all of the properties purchased by him.
2.
No bad faith committed by co-owners who did not take part in sale
The quitclaim, in the form of an extrajudicial partition, was made on 6 May 1956,
after the action for annulment was filed, wherein, the plaintiffs were not only Erlinda
but also the other co-owners who took no part in the sale and to whom there has been
no imputation of bad faith. Further, the trial courts finding of bad faith is an erroneous
conclusion induced by a manifest oversight of an undisputed fact, namely, that on 10
June 1954, just a month after the deed of sale in question, Erlinda D. Diaz did file an
action against Ildefonso
D. Yap and Rosenda Nuqui, among others, asserting her rights as co-owner of the
properties (Case 1646). Finally, bad faith on the part of Erlinda would not militate
against the nullity of the sale, considering that it included not only the lands in common
by Rosenda Nuqui and her six children but also the buildings and school facilities owned
Sales, 2003 ( 223 )
by the Mindanao Academy, Inc., an entity which had nothing to do with the transaction
and which could be represented solely by its Board of Trustees.
3.
Vendor and vendee both in bad faith; treated to have acted in good faith vis-vis each other
Both vendors and vendee in the sale acted in bad faith and therefore must be
treated, vis-a-vis each other, as having acted in good faith. The return of the properties
by the vendee is a necessary consequence of the decree of annulment. No part of the
purchase price having been paid, as far as the record shows, the trial court correctly
made no corresponding order for the restitution thereof. Rosenda Nuqui and her son
Sotero, it is true, acted in bad faith when they sold the properties as theirs alone; but so
did the defendant Yap when he purchased them with knowledge of the fact that there
were other co-owners. Although the bad faith of one party neutralizes that of the other
and hence as between themselves their rights would be as if both of them had acted in
good faith at the time of the transaction, this legal fiction of Yaps good faith ceased
when they sold the properties as theirs alone.
4.
Erlinda Diaz entitled to recover share of rents in proportion to her own

interest; Possessor in good faith entitled to fruits as long as possession is not
legally interrupted
Prior to the sale, the Mindanao Academy Inc. was paying P300.00 monthly for its
occupancy of the lands on which the buildings are situated. This is the amount the
defendant has been ordered to pay to the plaintiffs in Civil Case 1907, beginning 31 July
1956, when he filed his first pleading in the case. There can be no doubt that Erlinda
D. Diaz is entitled to recover a share of the said rents in proportion to her own interest
in the lands and the interest of her four co-owners which she had acquired. A possessor
in good faith is entitled to the fruits only so long as his possession is not legally
interrupted, and such interruption takes place upon service of judicial summons (Arts.
544 and 1123, Civil Code).
5.
Award of attorneys fees to Erlinda Diaz erroneous; Erlinda had no cause of

action for rescission in Civil Case 1907 as she was not party to the agreement
The award of attorneys fees to Erlinda D. Diaz and her husband is erroneous.
Civil Case 1907, in which said fees have been adjudged, is for rescission (more properly
resolution) of the so-called mutual agreement on the ground that Yap failed to comply
with certain undertakings specified therein relative to the payment of the purchase
price. Erlinda Diaz was not a party to that agreement and hence had no cause of action
for rescission. The trial court did not decide the matter of rescission because of the
decree of annulment it rendered in the other case (Civil Case 1774), wherein the
defendants are not only Ildefonso D. Yap but also Rosenda Nuqui and her son Sotero.
Erlinda D. Diaz could just as well have refrained from joining as plaintiff in the action for
rescission, not being a part to the contract sought to be rescinded and being already
one of the plaintiffs in the other action. In other words, it cannot be said with
Sales, 2003 ( 224 )
justification that she was constrained to litigate, in Civil Case 1907, because of some
cause attributable to the appellant.
6.
Builder in bad faith not entitled to reimbursement (New building)

Yap claims reimbursement for the value of the improvements he allegedly
introduced in the schools, consisting of new building worth P8,000.00 and a toilet
costing P800.00, besides laboratory equipment, furniture, fixtures and books for the
libraries. It should be noted that the judgment of the trial court specifies, for delivery to
the plaintiffs (in Civil Case 1907), only the buildings and grounds described in the
mutual agreement together with all the permanent improvements thereon. If Yap
constructed a new building, he cannot recover its value because the construction was
done after the filing of the action for annulment, thus rendering him a builder in bad
faith who is denied by law any right of reimbursement.
7.
Equipment, books, furniture and fixture brought in by him may be retained by

him as they are outside the scope of the judgment
In connection with the equipment, books, furniture and fixtures brought in by
him, he is not entitled to reimbursement either, because the judgment does not award
them to any of the plaintiffs in the two actions. What is adjudged (in Civil Case 1774) is
for Yap to restore to the Mindanao Academy, Inc. all the books, laboratory apparatus,
furniture and other equipment described in the Mutual Agreement and specified in the
Inventory attached to the records of this case; or in default thereof, their value in the
amount of P23,500.00. In other words, whatever has been brought in by the defendant
is outside the scope of the judgment and may be retained by him.
8.
Stockholders not entitled to nominal and exemplary damages

According to the second amended complaint the stockholders were joined merely
pro forma, and for the sole purpose of the moral damage which has been all the time
alleged in the original complaint. Indeed the interests of the said stockholders, if any,
were already represented by the corporation itself, which was the proper party plaintiff;
and no cause of action accruing to them separately from the corporation is alleged in
the complaint, other than that for moral damages due to extreme mental anguish,
serious anxiety and wounded feelings. The trial court, however, ruled out the claim for
moral damages and no appeal from such ruling has taken. The award for nominal and
exemplary damages should be eliminated in toto.
9.
Award for attorneys fees upheld for the corporation but not to stockholders
The award for attorneys fees in the amount of P2,000.00 was upheld, although
the same should be for the account of the corporation and not of the plaintiff
stockholders of the Mindanao Academy, Inc.; and payable to their common counsel as
prayed for in the complaint.
Sales, 2003 ( 225 )
10.
Nullity of contract precludes enforcement of its stipulation

A warranty clause in the deeds provides that if any claim shall be filed against
the properties or any right, share or interest which are in the possession of the party of
the vendors which had been hereby transferred, ceded and conveyed unto the vendee
the vendor assumes as it hereby holds itself answerable. It is unnecessary to pass upon
the question in view of the total annulment of the sale on grounds concerning which
both parties thereto were at fault. The nullity of the contract precludes enforcement of
any of its stipulations. [67]
Montilla vs. CA [G.R. No. L-47968. May 9, 1988.]
First Division, Narvasa (J): 3 concur
Facts: On 27 April 1972, Emilio Aragon Jr. filed an action before the CFI Iloilo to compel
Lina Montilla to comply with a verbal contract to sell to him a piece of land situated at
Poblacion, Iloilo City, known as Lot 4 of the Consolidated Subdivision plan (LRC) Psc11605. In his complaint, Aragon claimed that in the last week of June 1969, Montilla had
orally offered to sell the lot to him at a price of P57,650.00 (at the rate of P50 per sq.
m.), the price being payable at any time within a 3-year period from June, 1969
provided that Aragon constructed on the lot a house of strong materials and paid a
nominal monthly rental in the meantime; but despite Aragons acceptance of the offer,
fulfillment by him of the specified conditions, and his seasonable tender of the
purchase price, Montilla had refused to comply with her obligation. In her answer
Montilla categorically denied ever having entered into such an agreement, and set up
the affirmative defenses of (1) unenforceability of the alleged agreement under the
Statute of Frauds; and (2) failure of the complaint to state a cause of action, no
allegation having been made therein of any consideration for the promise to sell
distinct and separate from the price, as required by Article 1479 of the Civil Code. At
Montillas instance, a preliminary hearing was had on her affirmative defenses in
accordance with Section 6, Rule 16 of the Rules of Court, as if a motion to dismiss had
been filed. By Order dated 5 December 1972, the Court denied the implicit motion to
dismiss. After trial, the Court rendered judgment on 22 August 1974 sentencing Montilla
to execute the requisite deed of conveyance of Lot 4, covered by TCT T-29976 in favor
of Aragon upon full payment by him to Montilla of the total consideration thereof in the
aggregate sum of P57,650.00; to pay to Montilla P2,000.00 as attorneys fees, and to
pay the costs.
The decision was affirmed by the Court of Appeals. The latters adjudgment has, in turn,
been duly brought up to the Supreme Court by Montilla, on appeal by certiorari under
Rule 45 of the Rules of Court.
The Supreme Court reversed and set aside the Decision of the Court of Appeals dated
18 January 1978 and that of the CFI dated 22 August 1974 thereby affirmed, and
entered a new one dismissing Aragons complaint, with costs against him.
Sales, 2003 ( 226 )
1.
No admission by Montilla on the claimed verbal contract to sell; Affirmative

defense could not be taken as unconditional and irretrievably binding factual
admission
It is difficult to see by what process of ratiocination the Trial Court arrived at the
conclusion that Montillas answer had admitted the offer to sell as any such
admission is absolutely precluded by the specific and unequivocal denial by Montilla of
the claimed verbal contract to sell. She in fact branded the allegations to that effect in
the complaint as outrageously false, fantastically ridiculous and despicable
fabrications of plaintiff . Nor may any admission be inferred from the circumstance
that Montilla, apart from unqualifiedly denying the contract to sell, had also asserted in
her responsive pleading that the contract was unenforceable because violative of the
Statute of Frauds and because not supported by any consideration distinct from the
price. For while those defenses imply an acceptance by the pleader of the truth of the
agreement at which the defenses are directed, the acceptance is at best hypothetical,
assumed only for purposes of determining the validity of the defenses, but cannot in
any sense be taken as an unconditional and irretrievably binding factual admission. The
import of the answer, couched in language that could not be made any plainer, is that
there was no verbal contract to sell ever agreed to by Montilla, but that, even assuming
hypothetically, or for the sake of argument that there was, the agreement was
unenforceable because in breach of the Statute of Frauds.
2.
Res judicata does not apply to interlocutory orders as these cannot become
final and executory
The Courts interlocutory order of 5 December 1972 cannot become conclusive, i.e.,
conclusive on Montilla with respect to the matter directly adjudged or as to any other
matter that could have been raised in relation thereto, as the doctrine of res judicata or
bar by prior judgment (or, for that matter, conclusiveness of judgment or estoppel by
judgment) has relevance to, and will become operative only on the basis of a final
judgment or final order, the qualifying term final being used in the sense of final and
executory, i.e., not only final because finally disposing of the case and leaving
nothing more to be done by the adjudging court relative to its merits, but also
executory because the period for appeal has expired without an appeal having been
taken, or an appeal having been perfected, the judgment or order has otherwise
attained finality. An order such as that rendered on 5 December 1972, being
interlocutory, cannot become final and executory in the sense described, and cannot
bring the doctrine of res adjudicata into play at all. Indeed, the correctness of such an
interlocutory order may subsequently be impugned on appeal by any party adversely
affected thereby, regardless of whether or not he had presented a motion for the
reconsideration thereof, if he has otherwise made of record his position thereon.
3.
Identification of identity of alleged vendor
Sales, 2003 ( 227 )
Montillas acknowledgment of being the defendant in the case can not in any
manner whatsoever be considered an admission that she had gone to see Aragon to
offer her property for sale. Non sequitur. Aragons disconcerting failure to identify
Montilla is cogent confutation of his allegation that he personally knew Montilla and had
negotiated with her for his purchase of the property in question, and strongly indicative
of the inaccuracy of the testimony of the witnesses who corroborated his dubious tale.
4.
Basis of dismissal: Statute of Frauds in relation to Rule 16 of the Rules of

Court
There being therefore no admission whatever on Montillas part of the existence
or ratification of the claimed contract to sell, and taking account of her disavowal in her
pleadings and in her evidence of that contract, and necessarily of any fulfillment of the
terms thereof, it is clear that the action for its enforcement should have been dismissed
pursuant to the Statute of Frauds, in relation to Rule 16 of the Rules of Court.
5.
Basis of dismissal: Article 1479

The action is also dismissible upon another legal ground. Assuming arguendo
veritability of the oral promise to sell by Montilla, the promise was nevertheless not
binding upon her in view of the absence of any consideration therefor distinct from the
stipulated price. This is the principle laid down by the second paragraph of Article 1479:
An accepted unilateral promise to . . sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from
the price.
6.
Document executed by Aragon as to lease; Absent any mention of alleged

promise to sell
A document, executed by Aragon on 9 July 1969 (some 9 or 10 days after Montilla
had supposedly promised to sell the lot in question to him), reveals several
things. For one, the lot on which Aragons house was being built was obviously
part of the Montilla estate, and did not as yet belong to any particular heir or
person entitled thereto. For another, Aragon had been given permission by the
representative of the estate, Mr. Manaloto, to stay on the lot in consideration of a
prescribed rental, and he was imploring said Mr. Manaloto and the owners for
leave to stay in the premises until his children could finish their schooling,
promising to meet the prescribed rental obligations. Again, and this is quite
significant as regards his claim of a promise to sell by one of the Montillas, since
that promise is not referred to or even hinted at in any manner whatsoever, the
genuineness of the claim is strongly suspect; for surely, Aragon would never
have implored for consideration of the owners and Mr. Manaloto to stay in
the premises until his children could finish their schooling, as lessee, if it be true
that he had accepted a promise for the sale thereof to him. The document
cannot therefore be interpreted otherwise than as denoting the concession to
him of the privilege to build a house on a lot belonging to the Montillas, and a
Sales, 2003 ( 228 )
solicitation by him of the owners permission to lease the lot to him for a longer,
and more or less determinable term, and as an implied, though nonetheless
clear, negation of any right on his part to purchase the property.
7.
Lot 4 adjudicated to Lina Montilla pursuant to settlement of the Montilla

Estate 2 years after her alleged offer to sell
A Court Order issued on 17 June 1971 in the judicial proceedings for the settlement
of the Montilla Estate, obviously the same Montilla estate referred to by
Aragon in his certification of 9 July 1969 just described, approved the project of
partition of said estate, presented on 5 May 1971; and it states that Lot 4 was
adjudicated to Lina Montilla on 17 June 1971, more than 2 years after she had
supposedly offered to sell the property to Aragon. At the time of the alleged
promise to sell, Lot 4 still formed part of the amorphous mass of property
constituting the Montilla estate; at any rate, that particular lot had not been
allotted to Lina Montilla yet. The uncertainty of the eventual ownership of said
Lot 4, considered conjointly with the ostensible status of Aragon as a mere
supplicant of favors from the owners of the Montilla estate, make it very
improbable indeed that Montilla would personally go to him and promise to sell
the lot to him.
[68]
National Grains Authority v. IAC [G.R. No. 74470.
March 8, 1989.] Third Division, Medialdea (J): 4 concur
Facts: National Grains Authority (now National Food Authority, NFA) is a government
agency created under
PD 4. One of its incidental functions is the buying of palay grains from qualified farmers.
On 23 August 1979, Leon Soriano offered to sell palay grains to the NFA, through the
Provincial Manager (William Cabal) of NFA in Tuguegarao, Cagayan. He submitted the
documents required by the NFA for pre-qualifying as a seller, which were processed and
accordingly, he was given a quota of 2,640 cavans of palay. The quota noted in the
Farmers Information Sheet represented the maximum number of cavans of palay that
Soriano may sell to the NFA. On 23 and 24 August 1979, Soriano delivered 630 cavans
of palay. The palay delivered were not rebagged, classified and weighed. When Soriano
demanded payment of the 630 cavans of palay, he was informed that its payment will
be held in abeyance since Mr. Cabal was still investigating on an information he
received that Soriano was not a bona fide farmer and the palay delivered by him was
not produced from his farmland but was taken from the warehouse of a rice trader, Ben
de Guzman. On 28 August 1979, Cabal wrote Soriano advising him to withdraw from
the NFA warehouse the 630 cavans stating that NFA cannot legally accept the said
Sales, 2003 ( 229 )
delivery on the basis of the subsequent certification of the BAEX technician (Napoleon
Callangan) that Soriano is not a bona fide farmer.
Instead of withdrawing the 630 cavans of palay, Soriano insisted that the palay grains
delivered be paid. He then filed a complaint for specific performance and/or collection
of money with damages on 2 November 1979, against the NFA and William Cabal (Civil
Case 2754). Meanwhile, by agreement of the parties and upon order of the trial court,
the 630 cavans of palay in question were withdrawn from the warehouse of NFA. On 30
September 1982, the trial court found Soriano a bona fide farmer and rendered
judgment ordering the NFA, its officers and agents to pay Soriano the amount of
P47,250.00 representing the unpaid price of the 630 cavans of palay plus legal interest
thereof (12% per annum, from the filing of complaint on 20 November 1979 until fully
paid). NFA and Cabal filed a motion for reconsideration, which was denied by the court
on 6 December 1982.
Appeal was filed with the Intermediate Appellate Court. On 23 December 1986, the
then IACupheld the findings of the trial court and affirmed the decision ordering NFA
and its officers to pay Soriano the price of the 630 cavans of rice plus interest. The
motion for reconsideration of the appellate courts decision was denied in a resolution
dated 17 April 1986. Hence, the present petition for review with the sole issue of
whether or not there was a contract of sale in the present case.
The Supreme Court dismissed the instant petition for review, and affirmed the assailed
decision of the then IAC (now Court of Appeals) is affirmed; without costs.
1.
Sale defined
Article 1458 of the Civil Code of the Philippines defines sale as a contract
whereby one of the contracting parties obligates himself to transfer the ownership of
and to deliver a determinate thing, and the other party to pay therefore a price certain
in money or its equivalent.
2.
Contract defined; requisites

A contract, on the other hand, is a meeting of minds between two (2) persons
whereby one binds himself, with respect to the other, to give something or to render
some service (Art. 1305, Civil Code of the Philippines). The essential requisites of
contracts are: (1) consent of the contracting parties, (2) object certain which is the
subject matter of the contract, and (3) cause of the obligation which is established (Art.
1318, Civil Code of the Philippines.)
3.
Present case involves a perfected contract of sale

In the present case, Soriano initially offered to sell palay grains produced in his
farmland to NFA. When the latter accepted the offer by noting in Sorianos Farmers
Information Sheet a quota of 2,640 cavans, there was already a meeting of the minds
Sales, 2003 ( 230 )
between the parties. The object of the contract, being the palay grains produced in
Sorianos farmland and the NFA was to pay the same depending upon its quality. The
contention that since the delivery were not rebagged, classified and weighed in
accordance with the palay procurement program of NFA, there was no acceptance of
the offer thus this is a clear case of policitation or an unaccepted offer to sell, is
untenable.
4.
Quantity being indeterminate does not affect perfection of contract; No need

to create new contract
The fact that the exact number of cavans of palay to be delivered has not been
determined does not affect the perfection of the contract. Article 1349 of the New Civil
Code provides that the fact that the quantity is not determinate shall not be an
obstacle to the existence of the contract, provided it is possible to determine the same,
without the need of a new contract between the parties. In the present case, there
was no need for NFA and Soriano to enter into a new contract to determine the exact
number of cavans of palay to be sold. Soriano can deliver so much of his produce as
long as it does not exceed 2,640 cavans.
5.
Sale a consensual contract; Acceptance is on the offer and not the goods
delivered
Sale is a consensual contract, there is perfection when there is consent upon
the subject matter and price, even if neither is delivered. (Obana vs. C.A., L-36249,
March 29, 1985, 135 SCRA 557, 560) Article 1475 of the Civil Code provides that 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. The acceptance referred to
which determines consent is the acceptance of the offer of one party by the other and
not of the goods delivered.
6.
Compliance of mutual obligations once a contract of sale is perfected

From the moment the contract of sale is perfected, it is incumbent upon the
parties to comply with their mutual obligations or the parties may reciprocally demand
performance thereof. (Article 1475, Civil Code, 2nd par.)
[69]
Navera vs. CA [G.R. No. L-56838. April 26, 1990.]
First Division, Medialdea (J): 4 concur
Facts: Leocadio Navera has 5 children, namely: Elena, Mariano, Basilio, Eduarda and
Felix, all surnamed Navera. Mariano Navera is the father of petitioner Genaro Navera
(married to Emma Amador). Elena Navera, on the other hand has three children by
Sales, 2003 ( 231 )
Antonio Nares. Two of them are respondent Arsenio Nares and Felix Nares. The other
child, Dionisia is already deceased and has left children. Petitioner and respondents are
therefore, first cousins. Way back in 1916, Leocadio Navera donated to Fausto Mustar in
a private instrument a certain property in consideration of the marriage of the formers
son, Mariano Navera, to the daughter of Fausto Mustar by the name of Restituta Mustar.
On 19 July 1927, OCT RO-154(NA) was issued in the name of Elena Navera, et al.,
covering the land in dispute, namely Lot 1460, situated in the Municipality of Camalig,
Albay. Sometime in 1924, Elena Navera died. On 14 May 1947, Eduarda Navera, by
means of a public instrument, sold to her nephew, Arsenio Nares, all of her share in Lot
1460, which is titled in the name of Elena Navera, et al.. Eduarda Naveras share in
the lot is 1/2 of the total area of Lot 1460 (The other half allegedly owned by Lina
Navera, the deceased mother of the buyer, who was the administrator of said half.
Arsenio Nares thus take care of the whole property). On 26 June 1948, Eduarda Navera
sold for the second time a portion of Lot 1460 to Mariano Navera (50 meters long and
59 meters wide). On 30 January 1953, Arsenio Nares sold to Perpetua Dacillo a portion
of Lot 4167 containing an area of 5,726 sq. ms. Perpetua Dacillo thereafter donated the
said property to Francisco Dacillo. On 13 August 1955, Mariano Navera, sold to his
brother-in-law, Serapio Mustar, the lot which he bought from Eduarda Navera. On 11
February 1956, a deed of sale was supplemented by the following stipulation (b) as to
the property under paragraph (2) thereof, the same pertains to Cadastral Lot No. 1460,
containing an area of 1-99-69 square meters, more or less, (in the said document there
was clerical error of the area, as previously stated in the total area of 00-0916, which is
hereto corrected as 1-90-71 square meters, as the total area sold). On 7 April 1959,
Serapio Mustar later sold to Genaro Navera Lot 1460 which he bought from the latters
father, Mariano Navera, containing an area of 19,969 sq. ms. more or less. On 3
September 1971, Francisco Dacillo sold to Genaro Navera the land which the former
received by way of donation from Perpetua Dacillo. All of the foregoing transfers of Lot
1460 were not annotated and inscribed in the OCT.
[Nares complaint] In their complaint dated 14 March 1971 filed with the then CFI
Albay (now RTC; Civil
Case 4359), Arsenio and Felix Nares, alleged inter alia: that they are the absolute
owners of the whole of Lot 1460 covered by OCT No. RO-154(NA), and are entitled to
the possession of the same; that Lot 1460 is registered in the name of Elena Navera,
et al., the et al. being Eduarda Navera; that they acquired the property by
inheritance from their deceased mother Elena Navera; that a portion thereof which had
been adjudicated to Eduarda Navera was later sold to Arsenio Nares; that sometime in
August, 1955, Mariano Navera, without any legal right whatsoever and under the
pretense of ownership sold the said property to his brother-in-law Serapio Mustar, who
in turn sold the same to Genaro Navera, son of Mariano. They also claimed that all the
foregoing sales were sham and manipulated transactions and that Mariano Navera
knew fully well that he had no right to sell the property. They admitted however, that
they sold a portion of the property containing 6,726 square meters to Perpetua Dacillo,
Sales, 2003 ( 232 )
so that the remaining portion still belongs to them. They further contended that Genaro
Navera entered the land after the sale to him by Mustar and took possession of the
same and acquired the produce thereof since 1957 up to the present time; and that
they have exerted earnest efforts toward a compromise but Navera instead challenged
them to go to court. [Naveras counterclaim] Genaro Navera and Emma Amador
filed their answer with counterclaim, denying Nares claims, and alleging inter alia: that
Leocadio Navera is the father of five children, namely, Elena, Mariano,
Eduarda, Basilio and Felix; that after deducting 12,415 square meters which Leocadio
Navera donated to Fausto Mustar in 1916, the remaining area of Lot 1460 was divided
in equal shares among Elena, Mariano and Eduarda, to the extent of 4,860 square
meters each; that Basilio and Felix were given their shares in other parcels of land.
They also submitted that the et al. appearing in the title of the property refers to
Fausto Mustar (12,415 sq. ms.), Eduarda Navera (4,860 sq. ms.), Mariano Navera (4,860
sq. ms.) and Elena Navera
(4,860 sq. ms.); that Eduarda Navera sold 2,695 sq. ms. of her share to Mariano Navera
while the remaining 2,166 sq sq. ms. of her share was sold to Arsenio Nares; that
Arsenios property totalled 7,026 sq. ms. which he later sold to Perpetua Dacillo. They
further contended that they are presently in possession of Lot 1460 and their
possession tacked to that of their predecessor-in-interest as early as 1916; that the
complaint states no cause of action and that if Nares had any, the same has long
prescribed. [Courts ruling] On 28 February 1978, the trial court rendered a decision
declaring Nares owners of the lot described in the OCT RO-15480, except 5,726 sq. ms.
which rightfully belongs to Genaro Navera.
Not satisfied with the decision of the trial court, Navera appealed to the Court of
Appeals (CA-GR 63926-R). On 16 December 1980, the appellate court rendered
judgment affirming in toto the decision of the trial court. Hence the petition for review
on certiorari.
The Supreme Court denied the petition but modified the decision of the Court of
Appeals dated 16 December 1980 to the effect that as against Genaro Navera and
Emma Amador, Arsenio Nares and Felix Nares are declared the rightful owners of the
disputed Lot 1460, except with respect to 5,726 square meters thereof which belongs
to Genaro Navera, without prejudice however, to whatever rights and interests that the
other compulsory heirs of Elena Navera may have in the one-half portion of Lot 1460.
The respective rights of respondents to Lot 1460 as between themselves is a matter
outside of the controversy and is therefore, beyond the jurisdiction of the Court to pass
upon.
1.
Et. al refer only to Eduarda; Factual finding of courts conclusive upon the
Supreme Court
Sales, 2003 ( 233 )
The whole of Lot 1460 is titled in the name of Elena Navera, et al., the phrase
et al. referring only to Eduarda, sister of Elena since the other brothers of Elena and
Eduarda namely, Mariano, Basilio and Felix had received their shares from the other
properties of their father Leocadio Navera. These factual findings are conclusive upon
the Supreme Court. Thus, when Elena Navera died sometime in 1924, her compulsory
heirs including Arsenio Nares and Felix Nares acquired Elenas shares in Lot 1460 by
inheritance, which is 1/2of Lot 1460. As to the other half of Lot 1460 owned by Eduarda
Navera, the latter sold the same to two vendees, one in favor of Arsenio Nares and the
other in favor of Mariano Navera, Genaro Naveras predecessor-ininterest.
2.
Double Sale; Eduarda Navera had no existing right anymore to convey portion
of property in a subsequent sale to Mariano Navera
On this matter of double sale, all the transfers or conveyances are not inscribed
in the OCT RO15480(NA). It would not be amiss to state that the sale of Eduarda
Navera to Arsenio Nares, and the sale of Eduarda Navera to Mariano Navera, the
property referred to in both sales is the very same property covered by reconstituted
title. The sale of Eduarda Navera to Arsenio Nares covered all her portion to the
property, thus, she could not possibly sell on 26 June 1948, another portion of the same
property to Mariano Navera. Thus, the portion referred to in the sale to Mariano Navera
by Eduarda Navera may not be validly transferred by Mariano Navera to Serapio
Mustar. It likewise follow that Serapio Mustar may not effectively convey the same to
Genaro Navera. It is irremissible to state that the alleged conveyance made by Serapio
Mustar in favor of Genaro Navera have no legal effect whatsoever, for the simple
reason that Serapio Mustar could not properly convey the portion referred to in the sale
of 26 June 1948, by Eduarda Navera in favor of Mariano Navera. In the first place,
Eduarda Navera has no existing right to convey another portion of the property
because she had already sold all her portion to Arsenio Nares. Thus at the time Eduarda
Navera conveyed a portion of the property which she already conveyed to appellee
Arsenio Nares, she has no right on the property and the power to dispose it. Mariano
Navera therefore never acquired that portion subject of the sale on 26 June 948. Having
acquired that portion of the property subject of the sale on 26 June 1948 from Mariano
Navera, Serapio Mustar has likewise no existing right and power to dispose of that
portion of the property to Genaro Navera.
3.
Navera not possessors in good faith; Knowledge of flaw of title

Article 526 of the New Civil Code provides that a possessor in good faith is one
who is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it and a possessor in bad faith is one who possesses in any case contrary to
the foregoing. Every possessor in good faith becomes a possessor in bad faith from
the moment he becomes aware that what he believed to be true is not so. His
possession is legally interrupted when he is summoned to trial according to Article
1123 of the New Civil Code (Tacas v.
Tabon, 53 Phil. 356).
Sales, 2003 ( 234 )
4.
Conclusions and finding of facts by trial court given great weight

The conclusions and findings of facts by the trial court are entitled to great
weight and will not be disturbed on appeal unless for strong and cogent reasons
because the trial court is in a better position to examine real evidence as well as to
observe the demeanor of witnesses while testifying on the ease. (Macua vs.
Intermediate Appellate Court, No. L-70810, October 26, 1987, 155 SCRA 29).
5.

Article 1544 of the Civil Code provides that 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
possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
6.
Sales not registered; Ownership vested upon first possessor in good faith
The first sale of Eduarda Naveras share in the said lot to Arsenio Nares was
made in a public instrument on 14 May 1947. The second sale of the same property
was executed also in a public instrument in favor of Mariano Navera, who is the
predecessor in interest of Genaro Navera, on 26 June 1948, or more than a year after
the first sale. Since the records show that both sales were not recorded in the Registry
of Property, the law clearly vests the ownership upon the person who in good faith was
first in possession of the disputed lot.
7.
Possession of vendor includes not only the material but also symbolic
possession; Vendor does not transmit anything to second vendee
The possession mentioned in Article 1544 for determining who has better right
when the same piece of land has been sold several times by the same vendor includes
not only the material but also the symbolic possession, which is acquired by the
execution of a public instrument. This means that after the sale of a realty by means of
a public instrument, the vendor, who resells it to another, does not transmit anything to
the second vendee, and if the latter, by virtue of this second sale, takes material
possession of the thing, he does it as mere detainer, and it would be unjust to protect
this detention against the rights of the thing lawfully acquired by the first vendee
(Quimson vs. Rosete, 87 Phil. 159; Sanchez vs. Ramos, 40 Phil. 614; Florendo vs. Foz,
20 Phil. 388).
8.
Constructive delivery in the execution of public instrument
Sales, 2003 ( 235 )
The prior sale of the land to Arsenio Nares by means of a public instrument is
clearly tantamount to a delivery of the land resulting in the material and symbolic
possession thereof by the latter. Further, actual evidence points to the prior actual
possession by Nares before he was evicted from the land by Navera and their
predecessors in 1957 when the latter entered the disputed property. No other evidence
exists on record to show the contrary.
9.
Prior est in tempore, potior est in jure

Prior est in tempore, potior est in jure (he who is first in time is preferred in right).
The priority of possession stands good in favor of Nares. Ownership should therefore be
recognized in favor of the first vendee, Arsenio Nares.
10.
Prescription must be expressly relied upon in the pleadings; One asserting

ownership through adverse possession must prove essential elements of
acquisitive prescription
Navera alleged that they have been in possession of the lot for more than 46
years. Prescription, as a defense, must be expressly relied upon in the pleadings. It
cannot be availed of, unless it is specially pleaded in the answer; and it must be
proved or established with the same degree of certainty as any essential allegation in
the civil action (Hodges vs. Salas, 63 Phil. 567; Corporacion de PP. Augustinus
Recolectos vs. Crisostomo, 32 Phil. 427). In the present case, Navera did not claim
acquisitive prescription in their answer in the lower court, and even if they did, it
cannot be given judicial sanction on mere allegations. The law requires one who
asserts ownership by adverse possession to prove the presence of the essential
elements of acquisitive prescription (Morales vs. CFI, et al., No. L-52278, May 29, 1980,
97 SCRA 872).
11.
Nares evicted, thus Navera is in bad faith; 30-year requirement in adverse

possession not met
(suit filed 1971, 14 years after dispossession)
There is lack of sufficient proof to establish clearly and positively Naveras claim
of acquisitive prescription. The Court is more inclined to believe Nares version that he
was evicted from the property by Navera sometime in 1957, thereby showing the
latters bad faith in acquiring the possession of the property until 1971 when the action
against Navera was filed. Thus, the ordinary acquisitive prescription of 10 years cannot
be considered in favor of Navera in the absence of good faith. Neither is Navera entitled
to extraordinary acquisitive prescription, in the absence of sufficient proof of
compliance with the thirty-year requirement of possession in case of bad faith.
12.
Navera has knowledge of right and interest of cousins in disputed land

The law clearly states that possession has to be in the concept of an owner,
public, peaceful and uninterrupted (Article 1118, Civil Code). A reading of the demand
letter from Nares dated 27 May 1970, submitted in evidence by Navera, shows that the
Sales, 2003 ( 236 )
dispute over Lot 1460 had been going on for a number of years among them and their
families. During the time when Navera bought the land in 1959 and the following years
thereafter when the latter possessed the property, they have known or should have
known of the rights and interests of their cousins over the disputed land.
13.
Naveras predecessor-in-interest did not declare themselves owner of land

for taxation purposes
Moreover, the tax declarations for the years 1951 and 1965 showed that Arsenio
and Felix Nares were the declared owners. Naveras predecessors in interest, namely,
Mariano Navera and the subsequent purchasers of the lot, had not bothered to declare
the land in their own names for purposes of taxation during the time that they were
allegedly in possession of the land. It was only in the year 1966 when Genaro Navera
started to declare himself owner of the land for taxation purposes.
14.
Nares not bound by alleged donation propter nuptias in favor of Mustar; No

evidence that donated property was transferred to Mariano Navera
Arsenio and Felix Nares are not bound by their alleged knowledge of the previous
donation propter nuptias by their ancestor, Leocadio Navera in favor of Fausto Mustar.
The donation propter nuptias made by Leocadio Navera sometime in October 1916,
should have been at least recorded in the registry of property or inscribed in the
Original Certificate of Title or the donee shall have titled the property in his name. The
alleged donee Fausto Mustar is not a party to the case nor had he transferred the said
donated property to the spouses Mariano Navera in a public instrument or conveyance.
Nowhere in the evidence on record would show that the said donated property was ever
transferred to Mariano Navera, father of Genaro Navera.
15.
Knowledge of alleged donation immaterial; OCT clear without mention of any

previous donation of any portion of the land
The knowledge of Nares concerning the alleged previous donation is immaterial.
The facts are clear that the original certificate of title itself covers the whole of 26,995
square meters of the disputed Lot 1460 in the name of Elena Navera, et al., without
any mention of any previous donation of a portion of the said lot to the alleged donee.
[70]
Nietes v. CA, 46 SCRA 654
[71]
Noel v. CA [G.R. No. 59550. January 11, 1995.]
Mercado v. CA [G.R. No. 60636. January 11, 1995.]
First Division, Quiason (J): 4 concur
Sales, 2003 ( 237 )
Facts: Gregorio Nanaman and Hilaria Tabuclin were a childless, legally-married couple.
Gregorio, however, had a child named Virgilio Nanaman by another woman. Virgilio was
reared by the Nanaman spouses since he was two years old. During their marriage,
Gregorio and Hilaria acquired certain property including a 34.7hectare land in Tambo,
Iligan City on which they planted sugarcane, corn and bananas; where they lived with
Virgilio and 15 tenants. On 2 October 1945, Gregorio died. Hilaria then administered the
property with the help of Virgilio. Through their tenants, Hilaria and Virgilio enjoyed the
produce of the land to the exclusion of Juan Nanaman, the brother of Gregorio, and
Esperanza and Caridad Nanaman, Gregorios daughters by still another woman. In
1953, Virgilio declared the property in his name for taxation purposes under Tax
Declaration 5534. On 1 November 1952, Hilaria and Virgilio, mortgaged the 34.7hectare land in favor of Jose C. Deleste, in consideration of the amount of P4,800.00. On
16 February 1954, Hilaria and Virgilio executed a deed of sale over the same tract of
land also in favor of Deleste in consideration of the sum of P16,000.00. Witnesses to
the sale were the wife of Virgilio, Rosita S. Nanaman, Rufo C. Salas (Delestes driver),
and Remedios Pilotan. The document was notarized on 17 February 1954 and was
registered with the Register of Deeds of Iligan City on 2 March 1954. Having discovered
that the property was in arrears in the payment of taxes from 1952, Deleste paid the
taxes for 1952, 1953 and 1954. From then on, Deleste has paid the taxes on the
property.
On 15 May 1954, Hilaria died. On 27 October 1954, Esperanza and Caridad Nanaman
filed intestate estate proceedings concerning the estate of their father, Gregorio. As
only Esperanza, Caridad and Virgilio Nanaman were named as heirs of Gregorio in the
petition, Juan Nanaman opposed it. On 26 November 1954, the petition was amended
to include the estate of Hilaria with Alejo Tabuclin, Hilarias brother, and Julio Tabuclin, a
son of Hilarias deceased brother, Jose, as additional petitioners. Having been
appointed special administrator of the estate of the Nanaman couple, Juan Nanaman
included the 34.7-hectare land in the list of the assets of the estate. On 16 June 1956,
when Edilberto Noel took over as regular administrator of the estate, he was not able to
take possession of the land in question because it was in the possession of Deleste and
some heirs of Hilaria. On 18 July 1957, Deleste and the heirs of the Nanaman spouses
executed an amicable settlement of the Nanaman estate. In the document, Deleste
agreed to relinquish his rights to of the entire parcel of land in Tambo, Iligan City
sold to him by Hilaria Tabuclin, in favor of all the heirs of the intestate estate for the
reason that not all of the heirs of Gregorio Nanaman have signed and agreed. The court
approved the amicable settlement but when it was questioned by some heirs, the court
set aside its approval and declared it null and void.
The court thereafter ordered Noel, as regular administrator, to file an action to recover
the 34.7-hectare land from Deleste. Consequently, on 30 April 1963, Noel filed an
action against Deleste for the reversion of title over the 34.7-hectare land to the
Nanaman estate and to order Deleste to pay the rentals and attorneys fees to the
Sales, 2003 ( 238 )
estate. On 14 December 1973, the trial court rendered a decision, holding that the
action for annulment of the deed of sale had prescribed in 1958 inasmuch as the sale
was registered in 1954 and that Gregorios heirs had slept on their rights by allowing
Hilaria to exercise rights of ownership over Gregorios share of the conjugal property
after his death in 1945. Noel appealed to the Court of Appeals. On 18 February 1980,
the appellate court ruled that the transaction between Hilaria and Virgilio, and Deleste,
was indeed a sale. It found that no fraud, mistake or misrepresentation attended in the
execution of the deed of sale and that no proof was shown that the contract was merely
a mortgage. The appellate court, however, agreed with Noel that Hilaria could not
validly sell the 37.7-hectare land because it was conjugal property, and Hilaria could
sell only her share thereof. The Court also ruled that the prescriptive period of 10
years had not yet elapsed when the action to recover the property was filed in 1963.;
and held that in the absence of proof of adverse possession by
Hilaria, she should be considered as holding the property pursuant to her usufructuary
rights over the same under the provisions of the Spanish Civil Code of 1889, the law in
force at the time of the death of Gregorio. The Court further ordered Deleste to return
the land in question to the administrator of the estate, to pay the sum of P2,500 as
rental of the interest of the estate from 1957 until the land is returned, and to pay
the expenses of litigation and the sum of P3,000 as attorneys fees.
Deleste filed a motion for the reconsideration of said decision praying for the total
affirmance of the decision of the trial court. On 14 May 1981, the Court of Appeals
promulgated an amended decision. It affirmed its previous decision regarding the due
execution of the deed of sale adding that since no fraud attended its execution, there
was no basis for the action to annul the sale and therefore there was no starting point
in reckoning the prescriptive period of four years. It reconsidered the Decision of 18
February 1980 insofar as it declared Deleste and the estate of Gregorio as co-owners of
the 34.7-hectare land.
Pinito W. Mercado, as new administrator of the estate, appealed to the Supreme Court,
questioning the Court of Appeals Amended Decision applying the doctrine of laches
and equating the said doctrine with acquisitive prescription (GR 59550). Subsequently,
another petition for certiorari to declare the sale to Deleste as an equitable mortgage,
was filed by Atty. Bonifacio Legaspi, representing the heirs of Hilaria (GR 60636). The
two cases, arising from the same decision of the Court of Appeals, were consolidated in
the resolution of 2 September 1991 and were jointly considered.
The Supreme Court reversed and set aside the amended decision dated 14 May 1981 of
the Court of Appeals, and reinstated and affirmed in toto the Decision dated 18
February 1980.
Sales, 2003 ( 239 )
1.
Seemingly inadequate consideration does not render a contract of sale as

one of mortgage
The contract involving the 34.7-hectare property was one of sale and not of
mortgage in the absence of a showing that the findings complained of are totally
devoid of support in the record or that they are so glaringly erroneous as to constitute
serious abuse of discretion (Andres v. Manufacturers Hanover & Trust Corporation, 177
SCRA 618 [1989]). It should be noted that two contracts had been executed involving
said property (the 1 November 1952 mortgage and the 16 February 1954 sale). In the
absence of proof of gross inadequacy of the price, that the sale was made with what
might appear as an inadequate consideration does not make the contract one of
mortgage (Askay v. Cosalan, 46 Phil. 179 [1924]).
2.
Succession in the present case governed by the Civil Code of 1889

Gregorio died in 1945 long before the effectivity of the Civil Code of the
Philippines on 30 August 1950. Under Article 2263 of the said Code, rights to the
inheritance of a person who died, with or without a will, before the effectivity of this
Code, shall be governed by the Civil Code of 1889, by other previous laws, and by the
Rules of Court. Thus, succession to the estate of Gregorio was governed primarily by
the provisions of the Spanish Civil Code of 1889.
3.
1889 Civil Code; Wife has full ownership of undivided half-interest and the
usufruct over the other; Right to alienate half-interest
Under Article 953 thereof, a spouse like Hilaria, who is survived by brothers or
sisters or children of brothers or sisters of the decedent was entitled to receive in
usufruct the part of the inheritance pertaining to said heirs. Hilaria, however, had full
ownership, not merely usufruct, over the undivided half of the estate (Spanish Civil
Code of 1889, Art. 493). It is only this undivided half-interest that she could validly
alienate. Under the law in force in 1945, the surviving spouse was given the
management of the conjugal property until the affairs of the conjugal partnership were
terminated. The surviving spouse became the owner of one-half interest of the conjugal
estate in his own right. He also became a trustee with respect to the other half for the
benefit of whoever may be legally entitled to inherit the said portion.
4.
1889 Civil Code; Virgilio is not a heir of Gregorio, being illegitimate; No right
to transfer ownership
Virgilio was not an heir of Gregorio under the Spanish Civil Code of 1889.
Although he was treated as a child by the Nanaman spouses, illegitimate children who
were not natural were disqualified to inherit under the said Code (Cid v. Burnaman, 24
SCRA 434 [1968]). Article 998 of the Civil Code of the Philippines, which gave an
illegitimate child certain hereditary rights, could not benefit Virgilio because the right of
ownership of the collateral heirs of Gregorio had become vested upon his death (Civil
Code of the Philippines, Art. 2253; Uson v. Del Rosario, 92 Phil. 530 [1953]). Therefore,
Virgilio had no right at all to transfer ownership over which he did not own.
Sales, 2003 ( 240 )
5.
Contract of sale; essential that seller is the owner of the property

In a contract of sale, it is essential that the seller is the owner of the property he
is selling. The principal obligation of a seller is to transfer the ownership of the
property sold (Civil Code of the Philippines, Art. 1458). This law stems from the principle
that nobody can dispose of that which does not belong to him (Azcona v. Reyes, 59
Phil. 446 [1934]; Coronel v. Ona, 33 Phil. 456 [1916]). NEMO DAT QUAD NON HABET .
6.
Mistake attended sale of undivided interest in property belonging to the

collateral heirs of
Gregorio
While it cannot be said that fraud attended the sale to Deleste, clearly there was
a mistake on the part of Hilaria and Virgilio in selling an undivided interest in the
property which belonged to the collateral heirs of Gregorio.
7.
Purchaser is a trustee of an implied trust if property is acquired by mistake

or fraud
The sale, having been made in 1954, was governed by the Civil Code of the
Philippines. Under Article 1456 of said Code, an implied trust was created on the onehalf undivided interest over the 34.7hectare land in favor of the real owners. Said
Article provides that if the 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. In Diaz v. Gorricho, 103 Phil. 261 (1958),
the Court said that Article 1456 merely expresses a rule recognized in Gayondato v.
Insular Treasurer, 49 Phil. 244 (1926). Applying said rule, the Gayondato court held
that the buyer of a parcel of land at a public auction to satisfy a judgment against a
widow acquired only one-half interest on the land corresponding to the share of the
widow and the other half belonging to the heirs of her husband became impressed with
a constructive trust in behalf of said heirs.
8.
Surviving spouse cannot acquire a title by prescription over said

administered half
Being a trustee with respect to the other half for the benefit of whoever may be
legally entitled to inherit the said portion, the surviving spouse could therefore no
more acquire a title by prescription against those for whom he was administering the
conjugal estate than could a guardian against his ward or a judicial administrator
against the heirs of an estate. The surviving husband as the administrator and
liquidator of the conjugal estate occupies the position of a trustee of the highest order
and is not permitted by the law to hold that estate or any portion thereof adversely to
those for whose benefit the law imposes upon him the duty of administration and
liquidation (Pamittan v. Lasam, 60 Phil. 908 [1934]).
Sales, 2003 ( 241 )
9.
Virgilios possession not under the claim of ownership

The possession of Virgilio, his registration of the land in his name for tax
purposes, his hiring of tenants to till the land, and his enjoyment of the produce of the
tenants, appear more as acts done to help Hilaria in managing the conjugal property.
There is no evidence to prove indubitably that Virgilio asserted a claim of ownership
over the property in his own right and adverse to all including Hilaria.
10.
Laches do not apply; Doctrine cannot prejudice the rights of an owner or

original transferee
The doctrine of laches does not apply. Upon orders of the court in the intestate
proceedings, Noel, the administrator of the estate of the Nanaman spouses,
immediately filed an action to recover possession and ownership of the property. There
is no evidence showing any failure or neglect on his part, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence, could or
should have been done earlier (Cristobal v. Melchor, 78 SCRA 175 [1977]). The doctrine
of stale demands would apply only where by reason of the lapse of time, [i]t would be
inequitable to allow a party to enforce his legal rights (Z.E. Lotho, Inc. v. Ice and Cold
Storage Industries of the Philippines, Inc., 3 SCRA 744 [1961]). Moreover, this Court,
except for very strong reasons, is not disposed to sanction the application of the
doctrine of laches to prejudice or defeat the rights of an owner or original transferee
(Raneses v. Intermediate Appellate Court, 187 SCRA 397 [1990]).
11.
Prescription is ten years in an action to recover the undivided half-interest

The action to recover the undivided half-interest of the collateral heirs of
Gregorio prescribes in 10 years. The cause of action is based on Article 1456 of the Civil
Code of the Philippines, which made Deleste a trustee of an implied trust in favor of the
said heirs. Under Article 1144 of the Civil Code of the Philippines, actions based upon
an obligation created by law, can be brought within ten years from the time the right of
action accrues (Rosario v. Auditor General, 103 Phil. 1132 [1958]). The 10-year
prescriptive period within which the collateral heirs of Gregorio could file an action to
recover their share in the property sold to Deleste (prescripcion extintiva) accrued only
on 2 March 1954, when the deed of sale was registered with the Register of Deeds (Cf.
Arradaza v. Court of Appeals, 170 SCRA 12 [1987]). From 2 March 1954 to 30 April
1963, when the complaint for the recovery of the property was filed, less than 10 years
had elapsed. Therefore, the action had not been barred by prescription. The 10-year
prescriptive period before title to real estate shall vest by adverse possession
(prescripcion adquisitiva) is also reckoned in the case of Deleste from 2 March 1954
(Corporacion de PP. Agustinos Recoletos v. Crisostomo, 32 Phil. 427 [1915]).
[72]
Spouses Nonato vs. IAC [G.R. No. L-67181. November
22, 1985.] Second Division, Escolin (J): 4 concur
Sales, 2003 ( 242 )
Facts: On 28 June 1976, spouses Restituto Nonato and Ester Nonato purchased 1 unit
of Volkswagen Sakbayan from the Peoples Car, Inc., on installment basis. To secure
complete payment, they executed a promissory note and a chattel mortgage in favor of
Peoples Car, Inc. Peoples Car, Inc., assigned its rights and interests over the note and
mortgage in favor of Investors Finance Corporation (IFC). For failure of the spouses to
pay two or more installments, despite demands, the car was repossessed by IFC on 20
March 1978. Despite repossession, IFC demanded from the spouses that they pay the
balance of the price of the car.
On 9 June 1978, IFC filed before the CFI Negros Occidental a complaint against the
spouses for the latter to pay the balance of the price of the car, with damages and
attorneys fees. In their answer, the spouses alleged by way of defense that when the
company repossessed the vehicle, it had, by that act, effectively cancelled the sale of
the vehicle. It is therefore barred from exacting recovery of the unpaid balance of the
purchase price, as mandated by the provisions of Article 1484 of the Civil Code. The
trial court, however, after due hearing, rendered a decision in favor of IFC, ordering the
spouses to pay IFC the amount of P17,537.60 with interest at the rate of 14% per
annum from 28 July 1976 until fully paid, 10% of the amount due as attorneys fees,
litigation expenses in the amount of P133.05 plus the costs of the suit; without any
pronouncement as to other charges and damages, the same not having been proven to
the satisfaction of the Court.
On appeal, the appellate court affirmed the judgment. Hence, the petition for review on
certiorari.
1.
2.
The Supreme Court set aside the judgment of the appellate court in CA-GR 69276-R
and dismissed the complaint filed by Investors Finance Corporation against the Nonato
spouses in Civil Case 13852; without costs.
Article 1484 of the Civil Code; Remedies available to vendor of personal
property in sale payable in installments
Article 1484 of the Civil Code (on sale of personal property on installment)
provides that In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies: (1) Exact
fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should
the vendees failure to pay cover two or more installments; (3) Foreclose the chattel
mortgage on the thing sold, if one has been constituted, should the vendees failure to
pay cover two or more installments. In this case, he shall have no further action against
the purchaser to recover any unpaid balance of the price. Any agreement to the
contrary shall be void.
Meaning of Article 1484
Sales, 2003 ( 243 )
The meaning of the provision has been repeatedly enunciated in a long line of
cases. Thus; Should the vendee or purchaser of a personal property default in the
payment of two or more of the agreed installments, the vendor or seller has the option
to avail of any of these three remedies either to exact fulfillment by the purchaser of
the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased
personal property, if one was constituted. These remedies have been recognized as
alternative, not cumulative, that the exercise of one would bar the exercise of the
others.
3.
Repossession an exercise of canceling the contract of sale not merely to

appraise the cars value
It is not disputed that the company had taken possession of the car purchased by
the Nonatos on installments. While the Nonatos maintain that the company had, by
that act, exercised its option to cancel the contract of sale, the company contends that
the repossession of the vehicle was only for the purpose of appraising its value and for
storage and safekeeping pending full payment by the Nonatos of the purchasing price.
The records show otherwise. The receipt issued by the company to the Nonatos when it
took possession of the vehicle states that the vehicle could be redeemed within 15
days. This could only mean that should the spouses fail to redeem the car within the
period by paying the balance of the purchase price, the company would retain
permanent possession of the vehicle. The assertion that the company repossessed the
vehicle merely for the purpose of appraising its current value is untenable, for even
after it had notified the Nonatos that the value of the car was not sufficient to cover the
balance of the purchase price, there was no attempt at all on the part of the company
to return the repossessed car.
4.
Cancellation of contract bars company from exacting payment of balance

The acts performed by the corporation are wholly consistent with the conclusion
that it had opted to cancel the contract of sale of the vehicle. It is thus barred from
exacting payment from petitioners of the balance of the price of the vehicle which it
had already repossessed. It cannot have its cake and eat it too.
[73]
Nool v. CA [G.R. No. 116635. July 24, 1997.]
Third Division, Panganiban (J): 4 concur
Facts: One lot formerly owned by Victorio Nool (TCT T-74950) has an area of 1 hectare.
Another lot previously owned by Francisco Nool (TCT T-100945) has an area of 3.0880
hectares. Both parcels are situated in San Manuel, Isabela. Spouses Conchita Nool and
Gaudencio Almojera (plaintiffs) alleged that they are the owners of the subject land
as they bought the same from Victorio and Francisco Nool, and that as they are in dire
need of money, they obtained a loan from the Ilagan Branch of the DBP (Ilagan,
Sales, 2003 ( 244 )
Isabela), secured by a real estate mortgage on said parcels of land, which were still
registered in the names of Victorino and Francisco Nool, at the time, and for the failure
of the plaintiffs to pay the said loan, including interest and surcharges, totaling
P56,000.00, the mortgage was foreclosed; that within the period of redemption, the
plaintiffs contacted Anacleto Nool for the latter to redeem the foreclosed properties
from DBP, which the latter did; and as a result, the titles of the 2 parcels of land in
question were transferred to Anacleto; that as part of their arrangement or
understanding, Anacleto agreed to buy from Conchita the 2 parcels of land under
controversy, for a total price of P100,000.00, P30,000.00 of which price was paid to
Conchita, and upon payment of the balance of P14,000.00, the plaintiffs were to regain
possession of the 2 hectares of land, which amounts spouses Anacleto Nool and Emilia
Nebre (defendants) failed to pay, and the same day the said arrangement was made;
another covenant was entered into by the parties, whereby the defendants agreed to
return to plaintiffs the lands in question, at anytime the latter have the necessary
amount; that latter asked the defendants to return the same but despite the
intervention of the Barangay Captain of their place, defendants refused to return the
said parcels of land to plaintiffs; thereby impelling the plaintiffs to come to court for
relief. On the other hand, defendants theorized that they acquired the lands in
question from the DBP, through negotiated sale, and were misled by plaintiffs when
defendant Anacleto Nool signed the private writing, agreeing to return subject lands
when plaintiffs have the money to redeem the same; defendant Anacleto having been
made to believe, then, that his sister, Conchita, still had the right to redeem the said
properties.
It should be stressed that Manuel S. Mallorca, authorized officer of DBP, certified that
the 1-year redemption period (from 16 March 1982 up to 15 March 1983) and that the
mortgagors right of redemption was not exercised within this period. Hence, DBP
became the absolute owner of said parcels of land for which it was issued new
certificates of title, both entered on 23 May 1983 by the Registry of Deeds for the
Province of Isabela. About 2 years thereafter, on 1 April 1985, DBP entered into a Deed
of Conditional Sale involving the same parcels of land with Anacleto Nool as vendee.
Subsequently, the latter was issued new certificates of title on 8 February 1988.
The trial court ruled in favor of the defendants, declaring the private writing to be an
option to sell, not binding and considered validly withdrawn by the defendants for want
of consideration; ordering the plaintiffs to return to the defendants the sum of
P30,000.00 plus interest thereon at the legal rate, from the time of filing of defendants
counterclaim until the same is fully paid; to deliver peaceful possession of the 2
hectares; and to pay reasonable rents on said 2 hectares at P5,000.00 per annum or at
P2,500.00 per cropping from the time of judicial demand until the said lots shall have
been delivered to the defendants; and to pay the costs. The plaintiffs appealed to the
Sales, 2003 ( 245 )
Court of Appeals (CA GR CV 36473), which affirmed the appealed judgment in toto on
20 January 1993. Hence, the petition before the Supreme Court.
The Supreme Court denied the petition, and affirmed the assailed decision of the Court
of Appeals.
1.
Contract of repurchase arising out of a contract of sale where the seller does
not have title not valid
A contract of repurchase arising out of a contract of sale where the seller did not
have any title to the property sold is not valid. Since nothing was sold, then
there is also nothing to repurchase.
2.
Article 1370 NCC applicable only to valid and enforcement contracts

Article 1370 of the Civil Code, which provides that if the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control, is applicable only to valid and enforceable
contracts.
3.
A void contract cannot give rise to a valid one

A void contract cannot give rise to a valid one. Article 1422 of the Civil Code
provides that a contract which is the direct result of a previous illegal contract,
is also void and inexistent. In the present case. the alleged contract of
repurchase being dependent on the validity of the contract of sale, it is itself
void. Thus, the principal contract of sale and the auxiliary contract of repurchase
are both void.
4.
Clarification of sale of property, when seller is no longer the owner, null and
void; Sale possible even if owner is not owner at time of sale, provided that
he acquires title to the property at time of delivery
In the case of Dignos v. CA, the Court did not cite its basis for ruling that a sale
is null and void where the sellers were no longer the owners of the property. Such a
situation (where the sellers were no longer owners) does not appear to be one of the
void contracts enumerated in Article 1409 of the Civil Code. Moreover, the Civil Code
itself recognizes a sale where the goods are to be acquired by the seller after the
perfection of the contract of sale, clearly implying that a sale is possible even if the
seller was not the owner at the time of sale, provided he acquires title to the property
later on.
5.
Void contracts (Article 1409 [5]); those which contemplates an impossible

service
Article 1459 of the Civil Code provides that the vendor must have a right to
transfer the ownership thereof [object of the sale] at the time it is delivered. Here,
delivery of ownership is no longer possible. The sellers can no longer deliver the object
Sales, 2003 ( 246 )
of the sale to the buyers, as the buyers themselves have already acquired title and
delivery thereof from the rightful owner, the DBP. Thus, such contract may be deemed
to be inoperative and may thus fall, by analogy, under item 5 of Article 1409 of the Civil
Code: Those which contemplate an impossible service.
6.
Nono dat quod non habet, No one can give what he does not have; Contract
of repurchase inoperative thus void
Article 1505 of the Civil Code provides that where goods are sold by a person
who is not the owner thereof, and who does not sell them under authority or with
consent of the owner, the buyer acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct precluded from denying the
sellers authority to sell. Jurisprudence, on the other hand, teaches us that a person
can sell only what he owns or is authorized to sell; the buyer can as a consequence
acquire no more than what the seller can legally transfer. No one can give what he
does not have nono dat quod non habet. In the present case, there is no allegation at
all that petitioners were authorized by DBP to sell the property to the private
respondents. Further, the contract of repurchase that the parties entered into
presupposes that petitioners could repurchase the property that they sold to private
respondents. As petitioners sold nothing, it follows that they can also repurchase
nothing. In this light, the contract of repurchase is also inoperative and by the same
analogy, void.
7.
Right to repurchase presupposes a valid contract of sale

One repurchases only what one has previously sold. In other words, the right to
repurchase presupposes a valid contract of sale between the same parties.
Undisputedly, private respondents acquired title to the property from DBP, and not from
petitioners.
8.
Arguendo, Scenario where the Contract of repurchase distinct from that of

sale; Petitions still do not acquire a right to repurchase the property;
Unilateral promise to pay only binding if supported by consideration distinct
from price
Assuming arguendo that the contract of repurchase is separate and distinct from
the contract of sale and is not affected by the nullity of the latter, still petitioners do not
thereby acquire a right to repurchase the property. In that scenario, the contract of
repurchase ceases to be a right to repurchase ancillary and incidental to the contract
of sale; rather, it becomes an accepted unilateral promise to sell. Article 1479 of the
Civil Code, however, provides that an accepted unilateral promise to buy or sell a
supported by a consideration distinct from the price. In the present case, the alleged
Sales, 2003 ( 247 )
written contract of repurchase is bereft of any consideration distinct from the price.
Accordingly, as an independent contract, it cannot bind private respondents.
9.
10.
Conventional redemption; Compliance with Article 1616 and other agreed

stipulations
Article 1601 of the Civil Code provides that conventional redemption shall take
place when the vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of Article 1616 and other stipulations which
may have been agreed upon.
Right of repurchase a right granted by vendor in the same instrument of sale,
not in a subsequent instrument
In Villarica v. CA (29 November 1968), the Court ruled that the right of
repurchase is not a right granted the vendor by the vendee is a subsequent instrument,
but is a right reserved by the vendor in the same instrument of sale as one of the
stipulations of the contract. Once the instrument of absolute sale is executed, the
vendor can no longer reserve the right to repurchase, and any right thereafter granted
the vendor by the vendee in a separate instrument cannot be a right of repurchase but
some other right (like the option to buy).
11.
Sale, without agreement to repurchase, absolute

In Ramos, et al. vs. Icasiano, et al. (1927) the Court ruled that an agreement
to repurchase becomes a promise to sell when made after the sale, because when the
sale is made without such an agreement, the purchaser acquires the thing sold
absolutely. and if he afterwards grants the vendor the right to repurchase, it is a new
contract entered into by the purchaser, as absolute owner already of the object. In that
case the vendor has not reserved to himself the right to repurchase.
12.
Option to repurchase a promise to sell, governed by Article 1479

The Option to Repurchase executed by private respondent in the present case,
was merely a promise to sell, which must be governed by Article 1479 of the Civil Code
which provides that a promise to buy and sell a determinate thing for a price certain is
reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the promise is supported by a
consideration distinct from the price.
13.
Arguendo, Section 119 of Public Land Act

The brothers Victorino and Francisco Noel, together with Conchita Nool and
Anacleto Nool, were all siblings and heirs qualified to repurchase the two parcels of land
under Section 119 of the Public Land Act which provides that (e)very conveyance of
land acquired under the free patent or homestead provisions, when proper, shall be
subject to repurchase by the applicant, his widow or legal heirs, within a period of 5
years from the date of conveyance. Assuming the applicability of this statutory
provision to the present case, it is indisputable that Anacleto Nool already repurchased
Sales, 2003 ( 248 )
from DBP the contested properties. Hence, there was no more right of repurchase that
his sister Conchita or brothers Victorino and Francisco could exercise. The properties
were already owned by an heir of the homestead grantee and the rationale of the
provision to keep homestead lands within the family of the grantee was thus fulfilled.
14.
Action/Defense for the declaration of an inexistent contract does not

prescribe; Validity of a contract cannot be acquired through estoppel
The private respondents cannot be estopped from raising the defense of nullity
of contract, specially in this case where they acted in good faith, believing that indeed
petitioners could sell the two parcels of land in question. Article 1410 of the Civil Code
mandates that the action or defense for the declaration of the inexistence of a
contract does not prescribe. It is a well-settled doctrine that as between parties to a
contract, validity cannot be given to it by estoppel if it is prohibited by law or it is
against public policy. It is not within the competence of any citizen to barter away what
public policy by law seeks to preserve. Thus, it is immaterial that private respondents
initially acted to implement the contract of sale, believing in good faith that the same
was valid. A contract void at inception cannot be validated by ratification or
prescription and certainly cannot be binding on or enforceable against private
respondents.
15.
Petitioners required to return sum of P30,000 with interest and to pay rent
The balance of P14,000.00 under the void contract of sale may not be enforced.
Petitioners are the ones who have an obligation to return what they unduly and
improperly received by reason of the invalid contract of sale. Since they cannot legally
give title to what they sold, they cannot keep the money paid for the object of the
sale. It is basic that every person who through an act of performance by another, or
any other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same. Thus, if a void contract has
already been performed, the restoration of what has been given is in order.
16.
Interest runs from the time tolerance ceased upon counterclaim

Interest to the amount will run only from the time of private respondents
demand for the return of this amount in their counterclaim, for the petitioners
possession and cultivation of the two hectares are anchored on private respondents
tolerance. The latters tolerance ceased upon their counterclaim and demand on the
former to vacate. Hence, their right to posses and cultivate the land ipso facto ceased.
[74]
Northern Motors vs. Sapinoso [G.R. No. L-28074. May 29, 1970.]
En Banc, Villamor (J): 7 concur, 1 concur in result, 1 on leave of absence
Sales, 2003 ( 249 )
Facts: On 4 June 1965, Casiano Sapinoso purchased from Northern Motors, Inc. an Opel
Kadett car for the price of P12,171.00, making a down payment and executing a
promissory note for the balance of P10,540.00 payable in installments with interest at
12% per annum, as follows: P361.00 on 5 July 1965, and P351.00 on the 5th day of
each month beginning August 1965, up to and including December, 1967. To secure the
payment of the promissory note, Sapinoso executed in favor of Northern Motors, Inc. a
chattel mortgage on the car. The mortgage contract provided, among others, that upon
default by the mortgagor in the payment of any part of the principal or interest due, the
mortgagee may elect any of the following remedies: (a) sale of the car by the
mortgagee; (b) cancellation of the contract of sale; (c) extrajudicial foreclosure; (d)
judicial foreclosure; (e) ordinary civil action to exact fulfillment of the mortgage
contract. It was further stipulated that [w]hichever remedy is elected by the
mortgagee, the mortgagor expressly waives his right to reimbursement by the
mortgagee of any and all amounts on the principal and interest already paid by him.
Sapinoso failed to pay the first installment of P361.00 due on 5 July 1965, and the
second, third, fourth and fifth installments of P351.00 each due on the 5th day of
August, September, October and November, 1965, respectively. Several payments
were, however, made by Sapinoso, to wit: P530.52 on 21 November 1965, P480.00 on
21 December 1965, and P400.00 on 30 April 1966. The first and third payments
aforesaid were applied to accrued interest up to 17 April 1966, while the second
payment was applied partly (P158.10) to interest, and partly (P321.90) to the principal,
thereby reducing the balance unpaid to P10,218.10.
Sapinoso having failed to make further payments, Northern Motors, Inc. filed a
complaint on 22 July 1966, against Sapinoso and a certain person whose name, identity
and address were still unknown to Northern Motors, hence denominated in the
complaint as John Doe. In its complaint, Northern Motors, Inc. stated that it was
availing itself of the option given it under the mortgage contract of extrajudicially
foreclosing the mortgage, and prayed that a writ of replevin be issued upon its filing of
a bond for the seizure of the car and for its delivery to it; that after hearing, it be
adjudged to have the rightful possession and ownership of the car; that in default of
delivery, Sapinoso and Doe be ordered to pay Northern Motors the sum of P10,218.10
with interest at 12% per annum from 18 April 1966, until full payment of the said sum,
as well as an amount equivalent to 25% of the sum due as and for attorneys fees and
expenses of collection, and the costs of the suit. Northern Motors also prayed for such
other remedy as might be deemed just and equitable in the premises. Subsequent to
the commencement of the action, but before the filing of his answer, Sapinoso made 2
payments on the promissory note, the first on 22 August 1966, for P500.00, and the
second on 27 September 1966, for P750.00. In the meantime, on 9 August 1966, upon
Northern Motors filing of a bond, a writ of replevin was issued by the court. On 20
October 1966, copies of the summons, complaint and annexes thereto were served on
Sapinoso by the sheriff who executed the seizure warrant by seizing the car from
Sapinoso on the same date, and turning over its possession to the plaintiff on 25
Sales, 2003 ( 250 )
October 1966. After trial and on 4 April 1967, the trial court held that Sapinoso having
failed to pay more than 2 installments, Northern Motors acquired the right to foreclose
the chattel mortgage, which it could avail of by filing an action of replevin to secure
possession of the mortgaged car as a preliminary step to the foreclosure sale
contemplated in the Chattel Mortgage Law; and that the foreclosure of the chattel
mortgage and the recovery of the unpaid balance of the price are alternative remedies
which may not be pursued conjunctively, so that in availing itself of its right to foreclose
the chattel mortgage, Northern Mortors thereby renounced whatever claim it may have
had on the promissory note, and, therefore, it has no more right to the collection of the
attorneys fees stipulated in the promissory note, and should return to Sapinoso the
sum of P1,250.00 which Northern Motors had received from the latter after having filed
the present case on 22 July 1966, and elected to foreclose the chattel mortgage.
Direct appeal was made by Northern Motors on questions of law from the portion of the
judgment of the CFI Manila, Branch XXII (Civil Case 66199), ordering Northern Motors to
pay Sapinoso the sum of P1,250.00.
The Supreme Court modified the judgment appealed from by setting aside the portion
thereof which orders Northern Motors to pay Sapinoso the sum of P1,250.00, with costs
in this instance against Sapinoso.
1.
Replevin as a preliminary step to the foreclosure sale

In issuing a writ of replevin, and, after trial, in upholding Northern Motors right to
the possession of the car, and ratifying and confirming its delivery to the
aforementioned, the trial court correctly considered the action as one of replevin to
secure possession of the mortgaged vehicle as a preliminary step to the foreclosure
sale contemplated in Section 14 of Act 1508 (Bachrach Motor Co. vs. Summers, 42 Phil.,
3; Seo vs. Pestolante, G.R. No. L-11755, April 23, 1958).
2.
Replevin does not bar seller from accepting further payments on the
promissory note
The trial court erred in concluding that the legal effect of the filing of the action
was to bar Northern Motors from accepting further payments on the promissory note.
3.
Fact of foreclosure and actual sale of mortgage chattel one that bars
recovery of outstanding balance
That the ultimate object of the action is the foreclosure of the chattel mortgage,
is of no moment, for it is the fact of foreclosure and actual sale of the mortgaged
chattel that bar further recovery by the vendor of any balance on the purchasers
outstanding obligation not satisfied by the sale (Manila Motor Co., Inc. vs. Fernandez,
99 Phil., 782, 786; Bachrach Motor Co. vs. Millan, 61 Phil., 409; Manila Trading & Suppy
Sales, 2003 ( 251 )
Co. vs. Reyes, 62 Phil. 461, 471; Cruz et al. vs. Filipinas Investment & Finance
Corporation, G.R. No. L-24772, May 27, 1968 [23 SCRA 791, 796].)
4.
Article 1484 (3); Further action to recover unpaid balance prohibited;

Prohibition does not preclude voluntary payments
What Article 1484(3) prohibits is further action against the purchaser to recover
any unpaid balance of the price. Although the Court has construed the word action
in said Article 1484 to mean any judicial or extrajudicial proceeding by virtue of which
the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied
balance of the purchase price from the purchaser or his privy (Cruz, et al. vs. Filipinas
Investment & Finance Corporation, supra), there is no occasion at this stage to apply
the restrictive provision of the said article, because there has not yet been a foreclosure
sale resulting in a deficiency. The payment of the sum of P1,250.00 by Sapinoso was a
voluntary act on his part and did not result from a further action instituted by
Northern Motors. If the mortgage creditor, before the actual foreclosure sale, is not
precluded from recovering the unpaid balance of the price although he has filed an
action of replevin for the purpose of extra-judicial foreclosure, or if a mortgage creditor
who has elected to foreclose but who subsequently desists from proceeding with the
auction sale, without gaining any advantage or benefit, and without causing any
disadvantage or harm to the vendee-mortgagor, is not barred from suing on the unpaid
account (Radiowealth, Inc. vs. Lavin, et al., G.R. No. L-18563, April 27, 1963 [7 SCRA
804, 807]), there is no reason why a mortgage creditor should be barred from
accepting, before a foreclosure sale, payments voluntarily tendered by the debtormortgagor who admits a subsisting indebtedness.
[75]
Odyssey Park Inc. v. CA, 280 SCRA 253 (1997)
[76]
Ong v. CA [G.R. No. 97347. July 6, 1999.]
First division, Ynares-Santiago (J): 4 concur
Facts: On 10 May 1983, Jaime Ong and spouses Miguel and Alejandra Robles executed
an Agreement of Purchase and Sale respecting 2 parcels of land situated at Barrio
Puri, San Antonio, Quezon (agricultural including rice mill, piggery) for P2M (initial
payment of P600,000 broken into P103,499.91 directly paid to seller on 22 March 1983
and P496,500.09 directly paid to BPI to answer for part of sellers loan with the bank;
and balance of 1.4M to be paid in 4 equal quarterly installments of P350,000 the first of
which due and demandable on 15 June 1983); binding themselves that upon the
payment of the total purchase price the seller delivers a good and sufficient deed of
sale and conveyance for the parcels of land free and clear from liens and
encumbrances, that seller delivers, surrenders and transfers the parcels of land
Sales, 2003 ( 252 )
including all improvements thereon and to transfer the operations of the piggery and
rice mill to the buyer; and that all payments due and demandable under the contract
effected in the residence of the seller unless otherwise designated by the parties in
writing. On 15 May 1983, Ong took possession of the subject parcels of land together
with the piggery, building, ricemill, residential house and other improvements thereon.
Pursuant to the contract, Ong paid the spouses the sum of P103,499.91 2 by depositing
it with the UUCPB. Subsequently, Ong deposited sums of money with the BPI, in
accordance with their stipulation that petitioner pay the loan of the spouses with BPI.
To answer for his balance of P 1.4M, Ong issued 4 post-dated Metro Bank checks
payable to the spouses in the amount of P350,000.00 each (Check 137708-157711).
When presented for payment, however, the checks were dishonored due to insufficient
funds. Ong promised to replace the checks but failed to do so. To make matters worse,
out of the P496,500.00 loan of the spouses with BPI, which ong, as per agreement,
should have paid, Ong only managed to dole out no more than P393,679.60. When the
bank threatened to foreclose the spouses mortgage, they sold 3 transformers of the
rice mill worth P51,411.00 to pay off their outstanding obligation with said bank, with
the knowledge and conformity of Ong. Ong, in return, voluntarily gave the spouses
authority to operate the rice mill. He, however, continued to be in possession of the two
parcels of land while the spouses were forced to use the rice mill for residential
purposes.
On 2 August 1985, the spouses, through counsel, sent Ong a demand letter asking for
the return of the properties. Their demand was left unheeded, so, on 2 September
1985, they filed with the RTC Lucena City, Branch 60, a complaint for rescission of
contract and recovery of properties with damages. Later, while the case was still
pending with the trial court, Ong introduced major improvements on the subject
properties by constructing a complete fence made of hollow blocks and expanding the
piggery. These prompted the spouses to ask for a writ of preliminary injunction; which
the trial court granted, and thus enjoined Ong from introducing improvements on the
properties except for repairs. On 1 June 1989, the trial court rendered a decision in
favor of the spouses: ordering the contract entered into by the parties set aside,
ordering the delivery of the parcels of land and the improvements thereon to the
spouses, ordering the return of the sum of P497,179.51 to Ong by the spouses, ordering
Ong to pay the spouses P100,000 for exemplary damages and
P20,000 as attorneys fees and litigation expenses. From this decision, petitioner
appealed to the Court of Appeals, which affirmed the decision of the RTC but deleted
the award of exemplary damages. In affirming the decision of the trial court, the Court
of Appeals noted that the failure of petitioner to completely pay the purchase price is a
substantial breach of his obligation which entitles the private respondents to rescind
their contract under Article 1191 of the New Civil Code. Hence, the petition for review
on certiorari.
Sales, 2003 ( 253 )
The Supreme Court affirmed the decision rendered by the Court of Appeals with the
modification that the spouses are ordered to return to Ong the sum P48,680.00 in
addition to the amounts already awarded; with costs against petitioner Ong.
1.
Reevaluation of evidence not the function of the Supreme Court

It is not the function of the Supreme Court to assess and evaluate all over again
the evidence, testimonial and documentary, adduced by the parties to an appeal,
particularly where the findings of both the trial court and the appellate court on the
matter coincide. There is no cogent reason shown that would justify the court to discard
the factual findings of the two courts below and to superimpose its own.
2.
Rescission as a remedy to secure the reparation of damages caused by a

contract; Article 1380
Rescission, as contemplated in Articles 1380, et seq., of the New Civil Code, is a
remedy granted by law to the contracting parties and even to third persons, to secure
the reparation of damages caused to them by a contract, even if this should be valid,
by restoration of things to their condition at the moment prior to the celebration of the
contract. It implies a contract, which even if initially valid, produces a lesion or a
pecuniary damage to someone.
3.
Rescission applicable to reciprocal obligations under Article 1191

Article 1191 of the New Civil Code refers to rescission applicable to reciprocal
obligations. 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. They are to be performed simultaneously
such that the performance of one is conditioned upon the simultaneous fulfillment of
the other.
4.
Rescission of reciprocal obligations under Article 1191 distinguished from

rescission of contract under Article 1383
Rescission of reciprocal obligations under Article 1191 of the New Civil Code
should be distinguished from rescission of contracts under Article 1383. Although both
presuppose contracts validly entered into and subsisting and both require mutual
restitution when proper, they are not entirely identical. While Article 1191 uses the
term rescission, the original term which was used in the old Civil Code, from which
the article was based, was resolution. Resolution is a principal action which is based
on breach of a party, while rescission under Article 1383 is a subsidiary action limited to
cases of rescission for lesion under Article 1381 of the New Civil Code.
5.
Rescissible contract under Article 1381

Article 1381 of the New Civil Code enumerates rescissible contracts as (1) those
which are entered into by guardians whenever the wards whom they represent suffer
lesion by more than one fourth of the value of the things which are the object thereof;
Sales, 2003 ( 254 )
(2) those agreed upon in representation of absentees, if the latter suffer the lesion
stated in the preceding number; (3) those undertaken in fraud of creditors when the
latter cannot in any manner collect the claims due them; (4) those which refer to things
under litigation if they have been entered into by the defendant without the knowledge
and approval of the litigants or of competent judicial authority; (5) all other contracts
specially declared by law to be subject to rescission. In the present case, the contract
entered into by the parties obviously does not fall under any of those mentioned by
Article 1381. Consequently, Article 1383 is inapplicable.
6.
7.
8.
Contract to sell distinguished from contract of sale

In a contract of sale, the title to the property passes to the vendee upon the
delivery of the thing sold; while in a contract to sell, ownership is, by agreement,
reserved in the vendor and is not to pass to the vendee until full payment of the
purchase price. In a contract to sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring an
obligatory force.
Agreement of Purchase and Sale is in the nature of contract to sell
A careful reading of the parties Agreement of Purchase and Sale shows that it
is in the nature of a contract to sell. The spouses bound themselves to deliver a deed of
absolute sale and clean title covering the two parcels of land upon full payment by the
buyer of the purchase price of P2M. This promise to sell was subject to the fulfillment of
the suspensive condition of full payment of the purchase price by the Ong. The nonfulfillment of the condition of full payment rendered the contract to sell ineffective and
without force and effect. It must be stressed that the breach contemplated in Article
1191 of the New Civil Code is the obligors failure to comply with an obligation already
extant, not a failure of a condition to render binding that obligation. Failure to pay, in
this instance, is not even a breach but merely an event which prevents the vendors
obligation to convey title from acquiring binding force. Hence, the agreement of the
parties the present case may be set aside, but not because of a breach on the part of
Ong for failure to complete payment of the purchase price. Rather, his failure to do so
brought about a situation which prevented the obligation of the spouses to convey title
from acquiring an obligatory force.
Contract was not novated as to the manner and time of payment; Novation
not presumed
Article 1292 of the New Civil Code states that, In order that an obligation may
be extinguished by another which substitutes the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new obligations be on every
point incompatible with each other. Novation is never presumed, it must be proven as
a fact either by express stipulation of the parties or by implication derived from an
Sales, 2003 ( 255 )
irreconcilable incompatibility between the old and the new obligation. In the present
case, the parties never even intended to novate their previous agreement. It is true
that Ong paid the spouses small sums of money amounting to P48,680.00, in
contravention of the manner of payment stipulated in their contract. These installments
were, however, objected to by the spouses, and ong replied that these represented the
interest of the principal amount which he owed them. Records further show that Ong
agreed to the sale of MERALCO transformers by the spousess to pay for the balance of
their subsisting loan with BPI. Although the parties agreed to credit the proceeds from
the sale of the transformers to petitioners obligation, he was supposed to reimburse
the same later to respondent spouses. This can only mean that there was never an
intention on the part of either of the parties to novate petitioners manner of payment.
9.
Requisites of novation
In order for novation to take place, the concurrence of the following requisites is
indispensable: (1) there must be a previous valid obligation; (2) there must be an
agreement of the parties concerned to a new contract; (3) there must be the
extinguishment of the old contract; and (4) there must be the validity of the new
contract. In the present case, the requisites are not found. The subsequent acts of the
parties hardly demonstrate their intent to dissolve the old obligation as a consideration
for the emergence of the new one. Novation is never presumed, there must be an
express intention to novate.
10.
Builder in bad faith

As regards the improvements introduced by Ong to the premises and for which
he claims reimbursement, the Court found no reason to depart from the ruling of the
trial court and the appellate court that petitioner is a builder in bad faith. He introduced
the improvements on the premises knowing fully well that he has not paid the
consideration of the contract in full and over the vigorous objections of respondent
spouses. Moreover, Ong introduced major improvements on the premises even while
the case against him was pending before the trial court.
11.
Deletion of award of exemplary damages correct

The award of exemplary damages was correctly deleted by the Court of Appeals
inasmuch as no moral, temperate, liquidated or compensatory damages in addition to
exemplary damages were awarded. [77]
Ong v. Ong [G.R. No. L-67888. October 8, 1985.]
First Division, Relova (J): 5 concur, 1 concur in result
Facts: On 25 February 1976, Imelda Ong for and in consideration of P1 and other
valuable considerations, executed in favor of Sandra Maruzzo, then a minor, a
Quitclaim Deed whereby she transferred, released, assigned and forever quitclaimed to
Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and participation in
Sales, 2003 ( 256 )
1/2 undivided portion of a parcel of land (Lot 10-B of the subdivision plan (LRC)
Psd157841, a portion of lot 10 Block 18 of PSD-13288 LCR (GLRC) Record 2029,
situated in Makati, containing 125 square meters. On 19 November 1980, Imelda Ong
revoked the aforesaid Deed of Quitclaim and, thereafter, on 20 January 1982 donated
the whole property to her son, Rex Ong Jimenez.
On 20 June 1983, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed with
the RTC Makati an action against Imelda Ong, for the recovery of ownership/possession
and nullification of the Deed of Donation over the portion belonging to her and for
accounting. Imelda Ong claimed that the Quitclaim Deed is null and void inasmuch as it
is equivalent to a Deed of Donation, acceptance of which by the donee is necessary to
give it validity. Further, it is averred that the donee, Sandra Maruzzo, being a minor,
had no legal personality and therefore incapable of accepting the donation. Upon
admission of the documents involved, the parties filed their responsive memoranda and
submitted the case for decision. On 12 December 1983, the trial court rendered
judgment in favor of Maruzzo and held that the Quitclaim Deed is equivalent to a Deed
of Sale and, hence, there was a valid conveyance in favor of the latter.
Imelda Ong appealed to the Intermediate Appellate Court. On 20 June 1984, IAC
promulgated its Decision affirming the appealed judgment and held that the Quitclaim
Deed is a conveyance of property with a valid cause or consideration; that the
consideration is P1 which is clearly stated in the deed itself; that the apparent
inadequacy is of no moment since it is the usual practice in deeds of conveyance to
place a nominal amount although there is a more valuable consideration given. Hence,
the petition for review on certiorari.
On 15 March 1985, Sandra Maruzzo, through her guardian ad litem Alfredo Ong, filed an
Omnibus Motion informing this Court that she has reached the age of majority as
evidenced by her Birth Certificate and she prays that she be substituted as private
respondent in place of her guardian ad litem. On 15 April 1985, the Court issued a
resolution granting the same.
The Supreme Court affirmed the appealed decision of the IAC, with costs against Imelda
Ong.
1.
Consideration or cause is not P1 alone but also other valuable considerations

The subject deed reveals that the conveyance of the 1/2 undivided portion of the
property was for and in consideration of P1 and the other valuable considerations paid
by Sandra Maruzzo, through her representative, Alfredo Ong, to petitioner Imelda Ong.
Stated differently, the cause or consideration is not P1 alone but also the other valuable
considerations.
Sales, 2003 ( 257 )
2.
Cause not stated in contract is presumed existing unless proven to the

contrary; Execution of deed a prima facie evidence of existence of valuable
consideration
Although the cause is not stated in the contract it is presumed that it is existing
unless the debtor proves the contrary (Article 1354 of the Civil Code). One of the
disputable presumptions is that there is a sufficient cause of the contract (Section 5,
(r), Rule 131, Rules of Court). It is a legal presumption of sufficient cause or
consideration supporting a contract even if such cause is not stated therein (Article
1354, New Civil Code) This presumption cannot be overcome by a simple assertion of
lack of consideration especially when the contract itself states that consideration was
given, and the same has been reduced into a public instrument with all due formalities
and solemnities. To overcome the presumption of consideration the alleged lack of
consideration must be shown by preponderance of evidence in a proper action.
(Samanilla vs. Cajucom, et al., 107 Phil. 432). The execution of a deed purporting to
convey ownership of a realty is in itself prima facie evidence of the existence of a
valuable consideration, the party alleging lack of consideration has the burden of
proving such allegation. (Caballero, et al. vs. Caballero, et al., (CA), 45 O.G. 2536).
3.
Acceptance by legal representatives of minor applies to onerous and

conditional donations
Granting that the Quitclaim deed is a donation, Article 741 of the Civil Code
provides that the requirement of the acceptance of the donation in favor of minor by
parents of legal representatives applies only to onerous and conditional donations
where the donation may have to assume certain charges or burdens (Article 726, Civil
Code). The acceptance by a legal guardian of a simple or pure donation does not seem
to be necessary (Perez vs. Calingo, CA-40 O.G. 53). Thus, Supreme Court ruled in
Kapunan vs. Casilan and CA (109 Phil. 889) that the donation to an incapacitated donee
does not need the acceptance by the lawful representative if said donation does not
contain any condition. In simple and pure donation, the formal acceptance is not
important for the donor requires no right to be protected and the donee neither
undertakes to do anything nor assumes any obligation. The Quitclaim in question does
not impose any condition.
4.
Bad faith and inadequacy of monetary consideration does not render

conveyance inexistent, assignors liberality may be sufficient cause for a valid
contract
It is not unusual in deeds of conveyance adhering to the Anglo-Saxon practice of
stating that the consideration given is the sum of P1, although the actual consideration
may have been much more. Moreover, assuming that said consideration of P1 is
suspicious, this circumstance, alone, does not necessarily justify the inference that the
vendees were not purchasers in good faith and for value. Neither does this inference
warrant the conclusion that the sales were null and void ab initio. Indeed, bad faith and
inadequacy of the monetary consideration do not render a conveyance inexistent, for
Sales, 2003 ( 258 )
the assignors liberality may be sufficient cause for a valid contract (Article 1350, Civil
Code), whereas fraud or bad faith may render either rescissible or voidable, although
valid until annulled, a contract concerning an object certain entered into with a cause
and with the consent of the contracting parties(See Morales Development v. CA, 27
SCRA 484).
[78]
Pangilinan v. CA, 279 SCRA 590 (1997)
[79]
Pasagui vs. Villablanca [G.R. No. L-21998. November 10, 1975.]
Second Division, Antonio (J): 4 concur, 1 on leave, 1 designated to sit in the Second
Division
Facts: On 4 February 1963, Calixto Pasagui and Fausta Mosar filed a complaint with the
CFI Tacloban City, alleging that on 15 November 1962, for and in consideration of
P2,800, they bought from Eustaquia Bocar and Catalina Bocar a parcel of agricultural
land with an area of 2.6814 hectares, situated in Hamindangon, Pastrana, Leyte; that
the corresponding document of sale was executed, notarized on the same date, and
recorded in the Registry of Deeds of Tacloban, Leyte on 16 November 1962; that during
the first week of February 1963, spouses Ester T. Villablanca and Zosimo Villablanca,
illegally and without any right, whatsoever, took possession of the property harvesting
coconuts from the coconut plantation thereon, thus depriving Pasaqui and Mosar of its
possession; that despite demands made by Pasagui and Mosar upon the Villablancas
to surrender to them the property and its possession the latter failed or refused to
return said parcel of land to the former, causing them damage; and that Eustaquia and
Catalina Bocar, vendors of the property, are included defendants in the complaint by
virtue of the warranty clause contained in the document of sale.
On 13 May 1963, the trial court issued an order dismissing the complaint for lack of
jurisdiction, it appearing from the allegations in the complaint that the case is one for
forcible entry, which belongs to the exclusive jurisdiction of the Justice of the Peace
(now Municipal Court) of Pastrana, Leyte. The first Motion for Reconsideration was
denied on 27 May 1963 and the second was likewise denied on 5 July 1963. From the
orders, appeal on a pure question of law was interposed to the Supreme Court.
The Supreme Court set aside the order of dismissal, and remanded the case to the
court a quo for further proceedings; with costs against the Villablancas and the Bocars.
Sales, 2003 ( 259 )
1.
Averments of complaint and character of relief determines jurisdiction of

municipal court in a forcible entry case
What determines the jurisdiction of the municipal court in a forcible entry case is
the nature of the action pleaded as appears from the allegations in the complaint. In
ascertaining whether or not the action is one of forcible entry within the original
exclusive jurisdiction of the municipal court, the averments of the complaint and the
character of the relief sought are the ones to be consulted. In the present case, the
complaint does not allege that Pasagui and Mosar were in physical possession of the
land and have been deprived of that possession through force, intimidation, threat,
strategy, or stealth.
In order that an action may be considered as one for forcible entry, it is not only
necessary that the plaintiff should allege his prior physical possession of the property
but also that he was deprived of his possession by any of the means provided in section
1, Rule 70 of the Revised Rules of Court, namely: force, intimidation, threats, strategy
and stealth. For, if the dispossession did not take place by any of these means, the
courts of first instance, not the municipal courts, have jurisdiction. The bare allegation
in the complaint that the plaintiff has been deprived of the land of which he is and
has been the legal owner for a long period has been held to be insufficient. Though it is
true that the mere act of a trespasser in unlawfully entering the land, planting himself
on the ground and excluding therefrom the prior possessor would imply the use of
force, no such inference could be made as Pasagui and Mosar had not claimed that they
were in actual physical possession of the property prior to the entry of the Villablancas.
2.
Execution of deed of absolute sale in public instrument equivalent to delivery

of land, unless there is impediment
The execution of the deed of absolute sale in a public instrument is equivalent to
delivery of the land subject of the sale. This presumptive delivery only holds true when
there is no impediment that may prevent the passing of the property from the hands of
the vendor into those of the vendee. It can be negated by the reality that the vendees
actually failed to obtain material possession of the land subject of the sale. In the
present case, Pasagui and Mosar had not acquired physical possession of the land since
its purchase on 12 November 1962. As a matter of fact, their purpose in filing the
complaint in Civil Case 3285 is precisely to get the possession of the property.
3.
Case is not an action of forcibly entry

The case is, not the summary action of forcible entry within the context of the
Rules; as Pasagui and Mosar are not only seeking to get the possession of the property,
but as an alternative cause of action, they seek the return of the price and payment of
damages by the vendors in case of eviction or loss of ownership of the said property.
[80]
Paulmitan vs. CA [G.R. No. 61584. November 25, 1992.]
Sales, 2003 ( 260 )
Third Division, Romero (J): 4 concur

Facts: From her marriage with Ciriaco Paulmitan, deceased, Agatona Sagario Paulmitan
begot two legitimate children, Pascual and Donato Paulmitan. Agatona Sagario
Paulmitan died sometime in 1953 and left the 2 parcels of land located in the Province
of Negros Occidental (Lot 757 with an area of 1,946 sq.ms., OCT RO8376; and Lot 1091
with an area of 69,080 sq.ms., OCT RO-11653). Pascual Paulmitan also died in 1953,
apparently shortly after his mother passed away, leaving his children, namely: Alicio,
Elena, Abelino, Adelina, Anita, Baking and Anito, all surnamed Paulmitan. Until 1963,
the estate of Agatona Sagario Paulmitan remained unsettled and the titles to the two
lots remained in the name of Agatona. However, on 11 August 1963, Donato Paulmitan
executed an Affidavit of Declaration of Heirship, extrajudicially adjudicating unto
himself Lot 757 based on the claim that he is the only surviving heir of Agatona
Sagario. The affidavit was filed with the Register of Deeds of Negros Occidental who, on
20 August 1963, cancelled OCT RO-8376 in the name of Agatona Sagario and issued
TCT 35979 in Donatos name. As regards Lot 1091, Donato executed on 28 May 1974 a
Deed of Sale over the same in favor of Juliana P. Fanesa, his daughter (married to
Rodolfo Fanesa). In the meantime, sometime in 1952, for non-payment of taxes, Lot
1091 was forfeited and sold at a public auction, with the Provincial Government of
Negros Occidental being the buyer. A Certificate of Sale over the land was executed by
the Provincial Treasurer in favor of the Provincial Board of Negros Occidental. On 29 May
1974, Juliana P. Fanesa redeemed the property from the Provincial Government of
Negros Occidental for the amount of P2,959.09.
On learning of these transactions, the children of the Late Pascual Paulmitan filed on 18
January 1975 with th the CFI Negros Occidental (12 Judicial District, Branch IV, Bacolod
City, Civil Case 11770) a Complaint against Donato and Juliana to partition the
properties plus damages. Donato and Juliana set up the affirmative defense of
prescription (complaint being filed 11 years after the issuance of the title) with respect
to Lot 757. The trial court issued an order dated 22 April 1976 dismissing the complaint
as to the said property upon finding merit in Donatos and Julianas affirmative defense.
This order became final after Pascuals children failed to appeal therefrom.
Trial proceeded with respect to Lot 1091. In a decision dated 20 May 1977, the trial
court decided in favor of
Pascuals children as to Lot 1091. According to the trial court, the respondents, as
descendants of Agatona
Sagario Paulmitan were entitled to of Lot 1091, pro indiviso. The sale by Donato
Paulmitan to his daughter,
Juliana Fanesa, did not prejudice their rights; and the repurchase by Juliana of the land
from the Provincial Government of Negros Occidental did not vest in Juliana exclusive
Sales, 2003 ( 261 )
ownership over the entire land but only gave her the right to be reimbursed for the
amount paid to redeem the property. The trial court ordered the partition of the land
and directed Donato and Juliana to pay pascuals Children certain amounts representing
the latters share in the fruits of the land. On the other hand, the children were directed
to pay P1,479.55 to Juliana as their share in the redemption price paid by Fanesa to the
Provincial Government of Negros Occidental.
On appeal and on 14 July 1982 (CA-GR 62255-R), the Court of Appeals affirmed the trial
courts decision. Hence the petition for review on certiorari.
The Supreme Court denied the petition and affirmed the decision of the Court of
Appeals.
1.
Pascual predecease mother, precludes operation of provisions on right of

representation
Pascual did not predecease his mother, decedent Agatona Sagario Paulmitan,
thus precluding the operation of the provisions in the Civil Code on the right of
representation with respect to his seven children.
2.
Rights of succession transmitted at the moment of the decedents death;

Both Pascual and
Donato entitled to ownership
When Agatona Sagario Paulmitan died intestate in 1952, her two (2) sons Donato
and Pascual were still alive. Since it is well-settled by virtue of Article 777 of the Civil
Code that [t]he rights to the succession are transmitted from the moment of the death
of the decedent, the right of ownership, not only of Donato but also of Pascual, over
their respective shares in the inheritance was automatically and by operation of law
vested in them in 1953 when their mother died intestate. At that stage, the children of
Donato and Pascual did not yet have any right over the inheritance since [i]n every
inheritance the relative nearest in degree excludes the more distant ones. Donato and
Pascual excluded their children as to the right to inherit from Agatona Sagario
Paulmitan, their mother.
3.
Heirs own in common the estate of the decedent before its partition
From the time of the death of Agatona Sagario Paulmitan to the subsequent
passing away of her son Pascual in 1953, the estate remained unpartitioned. Donato
and Pascual Paulmitan were co-owners of the estate left by their mother as no partition
was ever made, pursuant to Article 1078 of the Civil Code, which provides that where
there are two or more heirs, the whole estate of the decedent is, before its partition,
owned in common by such heirs, subject to the payment of debts of the deceased.
4.
Pascuals children succeeded him in the co-ownership of the property when

he died intestate
Sales, 2003 ( 262 )
When Pascual Paulmitan died intestate in 1953, his children succeeded him in the
co-ownership of the disputed property. Pascual Paulmitans right of ownership over an
undivided portion of the property passed on to his children, who, from the time of
Pascuals death, became co-owners with their uncle Donato over the disputed decedent
estate.
5.
Fanesas claim of ownership

Juliana P. Fanesa, Donatos daughter, claims ownership over Lot 1091 by virtue of
two transactions, namely: (a) the sale made in her favor by her father Donato
Paulmitan; and (b) her redemption of the land from the Provincial Government of
Negros Occidental after it was forfeited for non-payment of taxes.
6.
Sale of Lot 1091 by Donato to Juliana did not prejudice rights of Pascuals
children over the undivided share
When Donato Paulmitan sold on 28 May 1974 Lot 1091 to his daughter Juliana P.
Fanesa, he was only a co-owner with Pascuals children and as such, he could only sell
that portion which may be allotted to him upon termination of the co-ownership. The
sale did not prejudice the rights of the children to undivided share of the land which
they inherited from their father. It did not vest ownership in the entire land with the
buyer but transferred only the sellers pro indiviso share in the property and
consequently made the buyer a co-owner of the land until it is partitioned.
7.
Effect of sale of property by one co-owner without the consent of all coowners; Article 493: Only the rights of the seller are transferred, buyer
becomes co-owner
In Bailon-Casilao v. Court of Appeals, the Court outlined the effects of a sale
by one co-owner without the content of all the co-owners. The rights of a co-owner of a
certain property are clearly specified in Article 493 of the Civil Code which provides that
each co-owner shall have the full ownership of his part and of the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it and even
substitute another person in its enjoyment, except when personal rights are involved.
But the effect of the alienation or mortgage, with respect to the co owners, shall be
limited to the portion which may be allotted to him in the division upon the termination
of the co-ownership. Even if a co-owner sells the whole property as his, the sale will
affect only his own share but not those of the other co-owners who did not consent to
the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is because under the codal
provision, the sale or other disposition affects only his undivided share and the
transferee gets only what would correspond to his grantor in the partition of the thing
owned in common. [Ramirez v. Bautista, 14 Phil. 528 (1909)]. Thus, it may be deduced
that since a co-owner is entitled to sell his undivided share, a sale of the entire property
by one coowner without the consent of the other co-owners is not null and void.
Sales, 2003 ( 263 )
However, only the rights of the coowner-seller are transferred, thereby making the
buyer a co-owner of the property. Thus, in the present case, the sale by Donato
Paulmitan of the land to his daughter did not give to the latter ownership over the
entire land but merely transferred to her the undivided share of her father, thus
making her the co-owner of the land in question with her first cousins.
8.
Redemption does not terminate the co-ownership nor give her title to the
entire land
The redemption of the land made by Fanesa did not terminate the co-ownership nor
give her title to
the entire land subject of the co-ownership. Speaking on the same issue, the Court, in
Adille v. Court of Appeals, resolved the same by holding that the right of repurchase
may be exercised by a co-owner with respect to his share alone (CIVIL CODE, art. 1612;
CIVIL CODE (1889), art. 1514.). While the records show that the property was redeemed
in its entirety, the plaintiff shouldering the expenses therefor, that did not make him
the owner of all of it. In other words, it did not put to end the existing state of coownership (Supra, art. 489). There is no doubt that redemption of property entails a
necessary expense.
9.
Right to compel other co-owners to contribute to expenses of preservation of

thing owned in common; Payer in redemption holds lien upon the subject
property until reimbursed
Article 488 of the Civil Code provides that each co-owner shall have a right to
compel the other coowners to contribute to the expenses of preservation of the thing or
right owned in common and to the taxes. Any one of the latter may exempt himself
from this obligation by renouncing so much of his undivided interest as may be
equivalent to his share of the expenses and taxes. No such waiver shall be made if it is
prejudicial to the co-ownership. Thus, although Fanesa did not acquire ownership over
the entire lot by virtue of the redemption she made, nevertheless, she did acquire the
right to be reimbursed for half of the redemption price she paid to the Provincial
Government of Negros Occidental on behalf of her co-owners. Until reimbursed, Fanesa
holds a lien upon the subject property for the amount due her.
10.
Lease issue not passed on as it is a factual issue; Factual findings of lower

courts final and conclusive upon the Supreme Court
Donato and Juliana dispute the order of the trial court, which the Court of Appeals
affirmed, for them to pay Pascuals children P5,000.00 per year from 1966 until the
partition of the estate which represents the latters share in the fruits of the land.
According to the former, the land is being leased for P2,000.00 per year only. This
assigned error, however, raises a factual question. The settled rule is that only
questions of law may be raised in a petition for review. As a general rule, findings of
fact made by the trial court and the Court of Appeals are final and conclusive and
cannot be reviewed on appeal.
Sales, 2003 ( 264 )
[81]
Philippine Trust Company vs. PNB [G.R. No. 16483.
December 7, 1921.] First Division, Johns (J): 7 concur
Facts: The Philippine Trust company and the Philippine National Banks are corporations
organized under the laws of the Philippine Islands and domiciled in the city of Manila.
Salvador Hermanos was a copartnership and during the month of January 1919,
executed to PNB 8 promissory notes aggregating P156,000, payable on demand, and
each secured by a quedan, or warehouse receipt, issued by the firm of Nieva, Ruiz &
Company. Each note recites that it is payable on demand after date, for value received,
and that the firm has deposited with the said bank as collateral security for the
payment of this note, or any note given in extension or renewal thereof, as well as for
the payment of any other liability or liabilities of the undersigned to the said bank, due
or to become due, whether now existing or hereafter arising, the following property
owned by the undersigned. The note then specifies the number of the quedan and the
amount of copra in piculs, and states that the quedan was issued by Nieva, Ruiz &
Company. The note for P8,000, dated 18 January 1919, was secured by warehouse
Receipt 30; for P20,000, dated 22 January 1919, was secured by
Receipt 35; for P20,000, dated 24 January 1919, was secured by Receipt 38; for
P20,000, dated 27 January
1919, was secured by Receipt 41; for P14,000, dated 28 January 1919, was secured by
Receipt 42; for P18,000, dated 21 January 1919, was secured by Receipt 33; for
P18,000, dated 23 January 1919, was secured by Receipt 36; and for P18,000, dated 25
January 1919, was secured by Receipt 39, making a total of 16,051.10 piculs of copra,
covered by the warehouse receipts of the firm of Nieva, Ruiz & Company issued to the
firm of Salvador Hermanos, and by that firm pledged as collateral to PNB to secure the
payment of the eight notes. Each of them further recites that on the nonperformance
of this promise, or upon the nonpayment of any of the liabilities above-mentioned, or
upon the failure of the undersigned forthwith, with or without notice, to furnish
satisfactory additional securities in case of decline, as aforesaid, then and in either such
case, this note and all liabilities of the undersigned, or any of them, shall forthwith
become due and payable, without demand or notice, and full power and authority are
hereby given to said bank to sell, assign transfer and deliver the whole of the said
securities, or any part thereof, or any substitutes therefor or any additions thereto, or
any other securities or property given unto or left in the possession of or hereafter
given unto or left in the possession of the said bank by the undersigned for safe
keeping or otherwise, at any brokers board or at public or private sale, at the option of
said bank or of its president or secretary, without either demand, advertise mentor
notice of any kind, which are hereby expressly waived. At any such sale, the said bank
may itself purchase the whole or any part of the property sold, free from any right of
Sales, 2003 ( 265 )
redemption on the part of the undersigned, which is hereby waived and released.
Stamped in red ink across the face of each quedan are the words Negotiable Warrant,
and each of them was in the usual form of warehouse receipts. On 10 February 1919,
the firm of Salvador Hermanos withdrew from the bank, by and with its consent,
warehouse receipts 33, 36, and 39, which the bank was holding as collateral security
for each of the 3 18,000peso notes amounting to P54,000. The total amount of copra
evidenced by the receipts withdrawn was 6,024.55 piculs, the declared value of which,
shown on the face of such receipts, was P90,368.25. At the time of the withdrawal, the
firm executed a writing, promising to return to the bank the warehouse receipts on or
before the 27 January, the receipts being guaranteed by the attached certificate of
existence of the effects issued by the firm on 8 February 1919. Neither writing was in
any manner authenticated by a notary or by a competent public official. The writing of
February 10 is in form a receipt from the firm of Salvador Hermanos to the PNB of the
quedans, or warehouse receipts, for the copra. The one of February 8 is, in legal effect,
the certificate of Salvador Hermanos that there exist the following articles in our
bodegas as follows: That is to say, that the firm certifies that the property described is
in the warehouse of the firm.
On 21 April 1919, Salvador Hermanos filed a petition of insolvency in the CFI Manila. On
3 May 1919, Gregorio Salvador, a member of the firm of Salvador Hermanos, delivered
certain goods, wares, and merchandise to and in the warehouse of Nieva, Ruiz &
Company, and requested that firm to issue its receipt therefor to and in favor of the
PNB, and that, pursuant to such request, that firm did issue 8 quedans to the bank (161
for 32 bales of hemp; 162 for 953 bundles of rattan; 165 for 72 bundles of empty sacks;
167 for 136 sacks of gum; 168 for 1,461 bales of kapok; 175 for 288 packages of
Talcum Powder; 176 for 35 packages of cardboard; and 185 for 134 bundles of empty
sacks). On and between 6 May 1919 and 7 August 1919, acting under the terms and
provisions of its respective notes, the bank sold all of the personal property for which it
held warehouse receipts, or which had been surrendered to it by the Hermanos firm,
save and except the property described in the three warehouse receipts, which were
released and surrendered to that firm on 10 February 1919. Based upon its insolvency
petition, and in the ordinary course of business, the firm of Salvador Hermanos was
adjudged insolvent, and on 19 July 1919, the Philippine Trust Company was elected
assignee of said firm and duly qualified. On 13 September 1919, as such assignee, it
made a demand upon the bank for the surrender and delivery of the property described
in all of the above receipts.
Upon the banks refusal, Philippine Trust Company commenced this action to recover its
value alleged to be P242,579.61, claiming that on 21 April 1919, the firm of Salvador
Hermanos was the sole and exclusive owner of the property, and that, as to the copra,
about 28 June 1919, and after the filing of the insolvency petition, the bank unlawfully
seized and converted the copra to its own use, the value of which was P192,260. For a
second cause of action, Philippine Trust alleged that, as such assignee, it was the owner
Sales, 2003 ( 266 )
of the remaining personal property, and that, after the insolvency petition was filed, the
bank unlawfully seized and converted such property to its own use, and that it was of
the value of P50,319.61. For answer, the bank makes a general denial, as to each cause
of action, of all of the material allegations of the complaint.
The Supreme Court, on the first cause of action, held that in January 1919, the bank
became and remained the owner of the 5 quedans 30, 35, 38, 41, and 42; that they
were in form negotiable, and that, as such owner, it was legally entitled to the
possession and control of the property therein described at the time the insolvency
petition was filed and had a right to sell it and apply the proceeds of the sale to its
promissory notes, including the 3 notes of P18,000 each, which were formerly secured
by the 3 quedans 33, 36, and 39, which the bank surrendered to the firm. That is to
say, the bank had a legal right to apply the Proceeds from the property described in the
five remaining quedans to the payment of its eight promissory notes. The Court,
however reversed the judgment of the lower court as to the second cause of action,
and one entered in favor of the Philippine Trust Company and against the PNB, for
P40,742.62, the declared value of the property described in quedans Nos. 161 to 185,
inclusive, and for the further sum of P7,631.40, the value of the gasoline sold in May,
1919, or a total of P48,374.02, with interest thereon from September 22, 1919, at the
rate of 6 per cent per annum, and for the costs and disbursements in the Courts.
1.
Purpose of Act 1956 or the Insolvency Law

Act 1956 of the Philippine Legislature provides for the suspension of payments,
the relief of insolvent debtors, the protection of creditors, and the punishment of
fraudulent debtors.
2.
Section 1 of Act 1956

Section 1 provides that this Act shall be known and may be cited as The
Insolvency Law, and in accordance with its provisions every insolvent debtor may be
permitted to suspend payments or be discharged from his debts and liabilities.
3.

Section 2 provides that debtor who possesses sufficient property to cover the
debts, be it an individual, firm or corporation, and who is unable to meet them at
maturity, may petition that he be declared in the state of suspension of payments by
the court, or the judge thereof in vacation.
4.

Section 3 enacts that upon the filing of the petition, the court shall make an order
calling a meeting of creditors specifying the time and place; that notice thereof shall be
published in a newspaper, and that said order shall further contain an absolute
Sales, 2003 ( 267 )
injunction forbidding the petitioning debtor from disposing in any manner of his
property, except in so far as concerns the ordinary operations of commerce or of
industry in which the petitioner is engaged, and, furthermore, from making any
payments outside of the necessary or legitimate expenses of his business or industry,
so long as the proceedings relative to the suspension of payments are pending, and
said proceedings for the purposes of this Act shall be considered to have been
instituted from the date of the filing of the petition.
5.

Section 14, chapter 3, provides that any person owing debts exceeding P1,000
may apply to be discharged from his debts and liabilities by petition to the Court of First
Instance in which he has resided for six months preceding the filing of the petition.
6.

Section 18 enacts that upon receiving and filing of the petition, schedule, and
inventory, the court, or the judge, shall make an order declaring the petitioner
insolvent, and shall further forbid the payment to the debtor of any debts due to him
and the delivery to the debtor, or to any person for him, of any property belonging to
him, and the transfer of any property by him, and shall further appoint a time and place
for a meeting of the creditors to choose an assignee of the estate.
7.
Quedans recognized to be owned by PNB

At the time the eight promissory notes were executed, a given quedan, or
warehouse receipt, was described and incorporated in the note as to its number, when
and by whom issued, and the property it represented, and each receipt was then
delivered by the firm to the defendant bank, all of which was during the month of
January, 1919. The bank never had the manual possession or the physical control of
any of this property until after the insolvency petition was filed, and it is for such reason
that the plaintiff claims that it was the property of the firm, and that the defendant
should account to the assignee. Each quedan, or warehouse receipt, was specifically
described in a given note, and was made a part of it, and the note recites that, for any
breach of its terms or conditions, the bank has full power and authority to sell, assign,
transfer and deliver the whole of the said security, or any part thereof, etc., and that
at any such sale, the said bank may itself purchase the whole or any part of the
property sold, free from any right of redemption on the part of the undersigned, which
is hereby waived and released. In addition, the quedan itself was delivered to and held
by the bank, and the warehouseman recognized the bank as the owner of the property.
Legally speaking, the owner of the quedans, or warehouse receipts, was the owner of
the property described in them, and the quedans were given as collateral to secure
promissory notes, which, for value received, were executed to the bank.
8.
The execution of the notes, the physical possession of the negotiable

quedan, or warehouse receipt, and the recognition of ownership by the
Sales, 2003 ( 268 )
warehouseman, legally carries with it both the title to, and the possession of,
the property
The execution of the notes, the physical possession of the negotiable quedan, or
warehouse receipt, and the recognition of ownership by the warehouseman, legally
carries with it both the title to, and the possession of, the property. In such a case, title
is not founded on a public instrument which should be authenticated by a notary or by
a competent public official. Legally speaking, the execution of the promissory notes and
the pledging of the quedans, or warehouse receipts, as collateral, and the describing of
them in the notes, and the manual delivery of the quedan, or warehouse receipt itself,
carries with it not only the title, but the legal possession of the property. In other words,
as to the property described in the quedans, or warehouse receipts, which were
pledged, as collateral, in January, 1919, to secure the eight respective promissory
notes, both the title and the possession of that property were delivered to and vested in
PNB in January 31919. Three of those quedans, or warehouse receipts, were returned
to the firm by the bank on 10 February 1919, but the bank still owned and held the
notes, which were secured but those warehouse receipts, and no part of the debt itself
was paid by or through the surrender of the receipts.
9.
Legal effect of the 10 February receipt; Statement of 8 February merely a

representation of property inside its warehouse; Writing does not vest
ownership of warehoused items to PNB
The legal effect of this receipt is a promise on the part of the firm to return the
three quedans on or before 27 January 1919, and a statement that such receipts are
guaranteed by the attached certificate of the existence in the warehouse of the
property described in the certificate. The statement of February 8, recites we hereby
certify that there exist the following articles in our bodegas. Then follows a description
of the property. This is nothing but a statement or representation to the effect that the
firm has the property in its warehouse. Nothing more. After describing the property, the
certificate then says: And promise that none of the above articles would be removed
without consulting first with the Philippine National Bank. There is no statement or
representation of any kind showing when or from whom the property was received, or
how it was held, or who was the owner, or when or to whom it would be delivered.
When analyzed, this writing is nothing more than a certificate of the firm that the
described property was then in its warehouse, and a promise that none of the articles
would be removed without consulting first with the Philippine National Bank. Such a
writing would not transfer the title of the property to the bank, or give it possession,
either actual or constructive. It will be noted that both the receipt of February 10 and
the certificate and promise of February 8, are signed by the firm of Salvador Hermanos,
and that the certificate says that the property was then in the firms warehouse, and
that neither instrument was in any manner authenticated by a notary or a competent
Sales, 2003 ( 269 )
public official, as provided by article 1216 of the Civil Code, and that the property was
in the warehouse of the firm.
10.
Article 1863 of the Civil Code; Property not left to the possession of the bank;
thus it cannot sell, transfer and deliver the whole or part of said securities
Article 1863 of the Civil Code provides In addition to the requisites mentioned in
article 1857, it shall be necessary, in order to constitute the contract of pledge, that the
pledge be placed in the possession of the creditor or of a third person appointed by
common consent. It appears in the present case however that from the certificate that
the property was then in the possession of the firm, who made the certificate, and that
it was in the possession of that firm when its insolvency petition was filed on 21 April
1919. It will be noted that the promissory notes executed by the firm to the bank recite
that Full power and authority are hereby given to said bank to sell, assign, transfer and
deliver the whole of the said securities, or any part thereof, or any substitutes therefor
or any additions thereto, or any other securities or property given unto or left in the
possession of or hereafter given unto or left in the possession of the said Bank by the
undersigned. Thus, the power and authority of the bank to sell, assign, or transfer is
confined to property which was given unto or left in its possession. None of the property
described in the certificate of February 8 was ever given unto or left in the possession
of the bank.
11.
Capacity of Philippine Trust Company; Although appointed July 19, power and
authority was vested on it 21 April 1919 when the insolvency petition was
filed
The insolvency petition was filed 21 April 1919, and the Philippine Trust Co was
duly elected and qualified, as assignee, on 19 July 1919, and, as such, it represents
both the creditors and the firm. Although it was not appointed until July 1919, yet when
it did qualify its right and title to all the property of the firm related back and became
vested as of 21 April 1919, when the insolvency petition was filed, and from that time it
alone had the power and authority to act for and represent the firm. Under the terms
and provisions of Act 1956 of the Philippine Legislature, after it was filed, the power of
the firm or any member of it to deliver possession of the property to secure a
preexisting debt was suspended pending final adjudication. That is to say, if the debt
was not legally secured before the insolvency petition was filed, no member of the firm
had any legal right to secure it after the petition was filed, and any attempt to do so
would be null and void.
[82]
Philippine Trust Co. v. Roldan [G.R. No. L-8477.
May 31, 1956.] En Banc, Bengzon (J): 8 concur
Sales, 2003 ( 270 )
Facts: 17 parcels located in Guiguinto, Bulacan, were part of the properties inherited
by Mariano L. Bernardo from his father, the late Marcelo Bernardo. In view of his
minority, guardianship proceedings were instituted, wherein Socorro Roldan, surviving
spouse of Bernardo and stepmother to Mariano, was appointed his guardian. On 27 July
1947, Roldan filed in said guardianship proceedings (Special Proceeding 2485, Manila),
a motion asking for authority to sell as guardian the 17 parcels for the sum of P14,700
to Dr. Fidel C. Ramos, her brother-in-law, the purpose of the sale being allegedly to
invest the money in a residential house, which the minor desired to have on Tindalo
Street, Manila. The motion was granted. On 5 August 1947, Roldan, as guardian,
executed the proper deed of sale in favor of Ramos, and on 12 August 1947 obtained a
judicial confirmation of the sale. On 13 August 1947, Ramos executed in favor of
Roldan, a deed of conveyance covering the same 17 parcels, for the sum of P15,000.
On 21 October 1947, Roldan sold 4 parcels out of the 17 to Emilio Cruz for P3,000,
reserving to herself the right to repurchase.
The Philippine Trust Company replaced Roldan as guardian on 10 August 1948. Two
months later, the
Company, as guardian, filed before the CFI Manila a complaint against Roldan to annul
2 contracts regarding 17 parcels of land claiming that the step-mother in effect, sold to
herself, the properties of her ward, and the sale should be annulled for violating Article
1459 of the Civil Code prohibiting the guardian from purchasing the property of her
ward. The trial court upheld the contracts but allowing the minor to repurchase all the
parcels by paying P15,000, within 1 year. The CA affirmed the judgment. Hence, the
appeal.
The Supreme Court annulled the 3 contracts of sale in question; declared the minor as
the owner of the 17 parcels of land, with the obligation to return to Roldan the price of
P14,700 with legal interest from 12 August 1947; ordered Roldan and Emilio Cruz to
deliver said parcels of land to the minor; required Roldan to pay him beginning with
1947 the fruits, which her attorney admits, amounted to P1,522 a year; authorized the
minor to deliver directly to Emilio Cruz, out of the price of P14,700 above mentioned,
the sum of P3,000; and charged appellees with the costs.
1.
Guardianship is a trust of the highest order; Article 1459 applies

Remembering the general doctrine that guardianship is a trust of the highest
order, and the trustee cannot be allowed to have any inducement to neglect his wards
interest and in line with the courts suspicion whenever the guardian acquires the
wards property, the Court has no hesitation to declare that, in the eyes of the law, the
guardian (Roldan) took by purchase her wards parcels (thru Dr. Ramos), and that
Article 1459 of the Civil Code applies.
Sales, 2003 ( 271 )
2.
Annulment of the transaction, even if no collusion is proved, would uphold

equity and justice
The guardian may have acted without malice; there may have been no previous
agreement between her and Dr. Ramos to the effect that the latter would buy the lands
for her but the fact remains that she acquired her proteges properties, through her
brother-in-law. That she planned to get them for herself at the time of selling them to
Dr. Ramos, may be deduced from the very short time between the two sales. The
temptation which naturally besets a guardian so circumstanced, necessitates the
annulment of the transaction, even if no actual collusion is proved (so hard to prove)
between such guardian and the intermediate purchaser. This would uphold a sound
principle of equity and justice.
3.
Rodriguez v. Mactal does not apply; length of time different, sufficient to

dispel suspicion
In Rodrigues v. Mactal, where the guardian Mactal sold in January 1926 the
property of her ward to Silverio Chioco, and in March 1928 she bought it from Chioco,
the Court declared the in order to bring the sale in this case within the part of Article
1459, quoted above, it is essential that the proof submitted establish some agreement
between Silverio Chioco and Trinidad Mactal to the effect that Chioco should buy the
property for the benefit of Mactal. If there was no such agreement, either express or
implied, then the sale cannot be set aside. The subsequent purchase of Mactal, in said
case, cannot be annulled as there was no proof of a previous agreement between
Chioco and her. Two years had elapsed between the sales, and such period of time was
sufficient to dispel the natural suspicion of the guardians motives or actions. In the
present case, only 1 week had elapsed. And if we were technical, only 1 day had
elapsed from the judicial approval of the sale (August 12), to the purchase by the
guardian (August 13).
4.
Minor on losing end in the transaction

The calculation, that the investment in the Tindalo Street house produces to the
minor the rentals of P2,400 yearly while the parcels of land yield for the stepmother an
average o P1,522 yearly, does not include the price of the lot on which the house was
erected. Estimating such lot at P14,700 only, (ordinarily the city lot is more valuable
than the building) the result is that the price paid for the 17 parcels gave the minor an
income of only P1,200 a year, whereas the harvest from the seventeen parcels netted
his step-mother a yearly profit of P1,522.00. The minor was on the losing end.
5.
Three Sales void

From both the legal and equitable standpoints these three sales should not be
sustained: the first two for violation of article 1459 of the Civil Code; and the third
because Roldan could pass no title to Emilio Cruz. The annulment carries with is (Article
1303 Civil Code) the obligation of Roldan to return the 17 parcels together with their
Sales, 2003 ( 272 )
fruits and the duty of the minor, through his guardian to repay P14,700 with legal
interest.
[83]
Pichel v. Alonzo [G.R. No. L-36902. January 30, 1982.]
First Division, Guerrero (J): 5 concur
Facts: Prudencio Alonzo was awarded by the Government that parcel of land
designated as Lot 21 of Subdivision Plan Psd-32465 of Balactasan, Lamitan, Basilan City
in accordance with RA 477. The award was cancelled by the Board of Liquidators on 27
January 1965 on the ground that, previous thereto, Alonzo was proved to have
alienated the land to another, in violation of law. In 1972, Alonzos rights to the land
were reinstated. On 14 August 1968, Alonzo and his wife sold to Pichel through a deed
of sale all the fruits of the coconut trees which may be harvested in the land for the
period, from 15 September 1968 to 1 January 1976, in consideration of P4,200.00. It
was further stipulated that the vendors right, title, interest and participation herein
conveyed is of his own exclusive and absolute property, free from any liens and
encumbrances and he warrants to the Vendee good title thereto and to defend the
same against any and all claims of all persons whomsoever. Even as of the date of sale,
however, the land was still under lease to one Ramon Sua, and it was the agreement
that part of the consideration of the sale, in the sum of P3,650.00, was to be paid by
Pichel directly to Ramon Sua so as to release the land from the clutches of the latter.
Pending said payment Alonzo refused to allow the Pichel to make any harvest. In July
1972, Pichel for the first time since the execution of the deed of sale in his favor,
caused the harvest of the fruit of the coconut trees in the land.
Alonzo filed an action for the annulment of a Deed of Sale before the CFI Basilan City.
On 5 January 1973, the lower court rendered its decision holding that although the
agreement in question is denominated by the parties as a deed of sale of fruits of the
coconut trees found in the vendors land, it actually is, for all legal intents and
purposes, a contract of lease of the land itself; an encumbrance prohibited under RA
477. The court thus held that the deed of sale is null and void, and ordered Alonzo to
pay back Pichel the consideration of the sale in the sum of P4,200 with interests from
the date of the filing of the complaint until paid, and Pichel to pay the sum of P500.00
as attorneys fees; with costs against Pichel. Hence, the petition to review on certiorari
was raised before the Supreme Court.
The Supreme Court set aside the judgment of the lower court and entered another
dismissing the complaint; without costs.
Sales, 2003 ( 273 )
1.
Vendor grantee under RA 477, and could exercise all the rights pertaining
thereto, following ruling in Ras v. Sua
In Ras vs. Sua, it was categorically stated that a cancellation of an award granted
pursuant to the provisions of RA 477 does not automatically divest the awardee of his
rights to the land. Such cancellation does not result in the immediate reversion of the
property subject of the award, to the State. Until and unless an appropriate proceeding
for reversion is instituted by the State, and its reacquisition of the ownership and
possession of the land decreed by a competent court, the grantee cannot be said to
have been divested of whatever right that he may have over the same property. In the
present case, there is nothing in the record to show that at any time after the supposed
cancellation of the award on 27 January 1965, reversion proceedings against Lot 21
were instituted by the State. Instead, the admitted fact is that the award was reinstated
in 1972. Applying the doctrine announced in the Ras case, therefore, Alonzo is not
deemed to have lost any of his rights as grantee of Lot 21 under RA 477 during the
period material to the present case, i.e., from the cancellation of the award in 1965 to
its reinstatement in 1972. Within said period, Alonzo could exercise all the rights
pertaining to a grantee with respect to Lot 21.
2.
Court to apply the contract according to its express terms

The first and fundamental duty of the courts is the application of the contract
according to its express terms, interpretation being resorted to only when such literal
application is impossible.
3.
Contract clear and unequivocal; Construction or interpretation of document

not called for
Construction or interpretation of the document in question is not called for. A
perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is
there doubt as to the real intention of the contracting parties. The terms of the
agreement are clear and unequivocal, hence the literal and plain meaning thereof
should be observed. Such is the mandate of the Civil Code of the Philippines which
provides that if the terms of a contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of its stipulation shall control. In the
present case, the Deed of Sale dated 14 August 1968 is precisely what it purports to
be. It is a document evidencing the agreement of herein parties for the sale of coconut
fruits of Lot 21, and not for the lease of the land itself. In clear and express terms, the
document defines the object of the contract thus: the herein sale of coconut fruits are
for all the fruits on the aforementioned parcel of land during the years from 15
September 1968; up to 1 January 1976.
4.
Contract of sale valid, essential elements valid

The document in question expresses a valid contract of sale as it has the
essential elements of a contract of sale as defined under Article 1458 of the New Civil
Code. Article 1458 provides that by the contract of sale one of the contracting parties
Sales, 2003 ( 274 )
obligates himself to transfer the ownership of and to deliver a determinate thing, and
the other to pay therefor a price certain in money or its equivalent, and that a
contract of sale may be absolute or conditional. The subject matter of the contract of
sale are the fruits of the coconut trees on the land during the years from 15 September
1968 up to 1 January 1976, which subject matter is a determinate thing.
5.
Things having potential existence may be the object of the contract of sale
Under Article 1461 of the New Civil Code, things having a potential existence
may be the object of the contract of sale. A valid sale may be made of a thing, which
though not yet actually in existence, is reasonably certain to come into existence as the
natural increment or usual incident of something already in existence, and then
belonging to the vendor, and the title will vest in the buyer the moment the thing
comes into existence (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs.
Packers Exchange, 21 Am. St. Rep., 63). Things of this nature are said to have a
potential existence. A man may sell property of which he is potentially and not actually
possessed. He may make a valid sale of the wine that a vineyard is expected to
produce; or the grain a fieldmay grow in a given time; or the milk a cow may yield
during the coming year; or the wool that shall thereafter grow upon sheep; or what may
be taken at the next case of a fishermans net; or fruits to grow; or young animals not
yet in existence; or the good will of a trade and the like. The thing sold, however, must
be specific and identified. They must be also owned at the time by the vendor (Hull vs.
Hull, 48 Conn., 250; 40 Am. Rep., 165) pp. 522-523). Thus, pending crops which have
potential existence may be the subject matter of sale (Sibal vs. Valdez, 50 Phil. 512).
6.
Contract of sale and lease of things distinguished

The essential difference between a contract of sale and a lease of things is that
the delivery of the thing sold transfers ownership, while in lease no such transfer of
ownership results as the rights of the lessee are limited to the use and enjoyment of
the thing leased. In the present case, the lower courts holding that the contract in
question fits the definition of a lease of things wherein one of the parties binds himself
to give to another the enjoyment or use of a thing for a price certain and for a period
which may be definite or indefinite (Art. 1643, Civil Code of the Philippines) is
erroneous.
7.
Contract of lease, enjoyment of property

Article 1543 of the Civil Code defines the contract of lease as the giving or the
concession of the enjoyment or use of a thing for a specified time and fixed price, and
since such contract is a form of enjoyment of the property, it is evident that it must be
regarded as one of the means of enjoyment referred to in said Article 398, inasmuch as
the terms enjoyment, use, and benefit involve the same and analogous meaning
Sales, 2003 ( 275 )
relative to the general utility of which a given thing is capable. (104 Jurisprudencia
Civil, 443; Rodriguez vs. Borromeo, 43 Phil. 479, 490).
8.
Transfer of accessory does not transfer principal

The possession and enjoyment of the coconut trees cannot be said to be the
possession and enjoyment of the land itself because these rights are distinct and
separate from each other, the first pertaining to the accessory or improvements
(coconut trees) while the second, to the principal (the land). A transfer of the accessory
or improvement is not a transfer of the principal. It is the other way around, the
accessory follows the principal. In the present case, the sale of the nuts cannot be
interpreted nor construed to be a lease of the trees, much less extended further to
include the lease of the land itself. In cannot be said that the possession and enjoyment
of the coconut trees to be the possession and enjoyment of the land itself because the
lessee in order to enjoy his right under the contract, he actually takes possession of the
land, at least during harvest time, gathers all of the fruits of the coconut trees in the
land, and gains exclusive use thereof without the interference or intervention of the
lessor.
9.
Grantee under RA 477 not prohibited to sell the natural/industrial fruits of

the land awarded to him
The grantee of a parcel of land under RA 477 is not prohibited from alienating or
disposing of the natural and/or industrial fruits of the land awarded to him, pursuant to
the terms of the first paragraph of Section 8. What the law expressly disallows is the
encumbrance or alienation of the land itself or any of the permanent improvements
thereon. Permanent improvements on a parcel of land are things incorporated or
attached to the property in a fixed manner, naturally or artificially. They include
whatever is built, planted or sown on the land which is characterized by fixity,
immutability or immovability. Houses, buildings, machinery, animal houses, trees and
plants would fall under the category of permanent improvements, the alienation or
encumbrance of which is prohibited by RA 477. While coconut trees are permanent
improvements of a land, their nuts are natural or industrial fruits which are meant to be
gathered or severed from the trees, to be used, enjoyed, sold or otherwise disposed of
by the owner of the land. Hence, the grantee of Lot 21 had the right and prerogative to
sell the coconut fruits of the trees growing on the property.
10.
Purpose of RA 477, and Section 8 thereof

By virtue of RA 477, bona fide occupants, veterans, members of guerilla
organizations and other qualified persons were given the opportunity to acquire
government lands by purchase, taking into account their limited means. It was intended
for these persons to make good and productive use of the lands awarded to them, not
only to enable them to improve their standard of living, but likewise to help provide for
the annual payments to the Government of the purchase price of the lots awarded to
them. Section 8 was included to protect the grantees from themselves and the
Sales, 2003 ( 276 )
incursions of opportunists who prey on their misery and poverty. It is there to insure
that the grantees themselves benefit from their respective lots, to the exclusion of
other persons.
11.
Legislature does not intend to prohibit the grantee from selling natural and
industrial fruits of his land
The purpose of the law is not violated when a grantee sells the produce or fruits
of his land. On the contrary, the aim of the law is thereby achieved, for the grantee is
encouraged and induced to be more industrious and productive, thus making it possible
for him and his family to be economically self-sufficient and to lead a respectable life.
At the same time, the Government is assured of payment on the annual installments on
the land. It could not have been the intention of the legislature to prohibit the grantee
from selling the natural and industrial fruits of his land, for otherwise, it would lead to
an absurd situation wherein the grantee would not be able to receive and enjoy the
fruits of the property in the real and complete sense.
12.
Party cannot impugn the validity of the contract after receiving the
consideration for the sale
The vendor-grantee, after having received the consideration for the sale of his
coconut fruits, cannot be allowed to impugn the validity of the contracts he entered
into, to the prejudice of petitioner who contracted in good faith and for a consideration.
The vendor cannot claim that he has the privilege to change his mind and claim it as
(an) implied lease, and he has the legitimate right to file an action for annulment
which no law can stop as there is a perfected and valid contract.
13.
Grant of attorneys fees not justified

Article 2208 of the Civil Code provides that in the absence of stipulation, attorneys
fees and expenses of litigation, other than judicial costs, cannot be recovered, except
(1) When exemplary damages are awarded; (2) When the defendants act or omission
has compelled the plaintiff to litigate with third persons or to incur expenses to protect
his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In
case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where
the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs
plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions
for the recovery of wages of household helpers, laborers and skilled workers; (8) In
actions for indemnity under workmens compensation and employers liability laws; (9)
In a separate civil action to recover civil liability arising from a crime; (10) When at
least double judicial costs are awarded; (11) In any other case where the court deems it
just and equitable that attorneys fees and expenses of litigation should be recovered.
In all cases, the attorneys fees and expenses of litigation must be reasonable. None of
Sales, 2003 ( 277 )
the legal grounds enumerated exists to justify or warrant the grant of attorneys fees.
[84]
PNB v. CA, 262 SCRA 464 (1995)
[85]
Power Commercial and Industrial Corp. vs. CA [G.R. No. 119745.
June 20, 1997.] Third Division, Panganiban (J): 3 concur, 1 on leave
Facts: Power Commercial & Industrial Development Corporation (PCID), an industrial
asbestos manufacturer, needed a bigger office space and warehouse for its products.
For this purpose, on 31 January 1979, it entered into a contract of sale with the spouses
Reynaldo and Angelita R. Quiambao. The contract involved a 612 sq. m. parcel of land
covered by TCT S-6686 located at the corner of Bagtican and St Paul Streets, San
Antonio Village, Makati City. The parties agreed that PCID would pay the spouses
P108,000.00 as down payment, and the balance of P295,000.00 upon the execution of
the deed of transfer of the title over the property. Further, PCID assumed, as part of the
purchase price, the existing mortgage on the land. In full satisfaction thereof, he paid
P79,145.77 to PNB, the mortgagee. On 1 June 1979, the spouses mortgaged again said
land to PNB to guarantee a loan of P145,000.00, P80,000.00 of which was paid to the
spouses. PCID agreed to assume payment of the loan. On 26 June 1979, the parties
executed a Deed of Absolute Sale With Assumption of Mortgage (P295,000 payment,
with assumption of PNB mortgage worth P145,000, pending consent by PNB. The Deed
of Sale also provides a clause stating that We hereby also warrant that we are the
lawful and absolute owners of the above described property, free from any lien and/or
encumbrance, and we hereby agree and warrant to defend its title and peaceful
possession thereof in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of any and all
third persons; subject, however, to the provisions hereunder provided to wit.). On the
same date, Mrs. C.D. Constantino, then PCIDs General Manager, submitted to PNB said
deed with a formal application for assumption of mortgage. On 15 February 1980, PNB
informed the spouses that, for PCIDs failure to submit the papers necessary for
approval pursuant to the the spouses letter dated 15 January
1980, the application for assumption of mortgage was considered withdrawn; that the
outstanding balance of P145,000.00 was deemed fully due and demandable; and that
said loan was to be paid in full within 15 days from notice. PCID paid PNB P41,880.45
on 24 June 1980 and P20,283.14 on 23 December 1980, payments which were to be
applied to the outstanding loan. On 23 December 1980, PNB received a letter from PCID
requesting that its assumption of mortgage be given favorable consideration, and that
the title be transferred to its name so that it may undertake the necessary procedures
to make use of the lot, in exclusion of people currently in physical occupation of the lot.
On 19 February 1982, PNB sent PCID a letter informing PCID that the loan is past due
Sales, 2003 ( 278 )
from last maturity with interest arrearages amounting to P25,826.08 as of 19 February

1982, and requesting PCID to remit payments to cover interest, charges, and at least
part of the principal in order to place PCIDs account in current form.
On 17 March 1982, PCID filed Civil Case 45217 against the spouses for rescission and
damages before the RTC Pasig, Branch 159. Then, in its reply to PNBs letter of 19
February 1982, PCID demanded the return of the payments it made on the ground that
its assumption of mortgage was never approved. On 31 May 1983, while the case was
pending, the mortgage was foreclosed. The property was subsequently bought by PNB
during the public auction. Thus, an amended complaint was filed impleading PNB as
party defendant. On 12 July 1990, the trial court ruled that the failure of respondent
spouses to deliver actual possession to petitioner entitled the latter to rescind the sale,
and in view of such failure and of the denial of the latters assumption of mortgage, the
spouses and PNB was obliged to return the payments made by PCID (P187,144.77 with
legal interest of 12% per annum from the date of the filing of the complaint until fully
paid by the spouses; and P62,163.59 with 12% from date of judgment until fully paid by
the bank). No award of other damages and attorneys fees were made. The
counterclaim of the spouses and PNB were dismissed for lack of merit.
On appeal by the spouses and PNB, and on 27 March 1995, the Court of Appeals (in CAGR CV 32298) reversed the trial court. It held that the deed of sale between the
spouses and PCID did not obligate the former to eject the lessees from the land in
question as a condition of the sale, nor was the occupation thereof by said lessees a
violation of the warranty against eviction. Hence, there was no substantial breach to
justify the rescission of said contract or the return of the payments made. Hence, the
petition for review on certiorari.
The Supreme Court denied the petition, and affirmed the assailed decision.
1.
Alleged failure to eject lessee from lot not substantial breach

The alleged failure of the spouses to eject the lessees from the lot in question
and to deliver actual and physical possession thereof cannot be considered a
substantial breach of a condition for two reasons: first, such failure was not stipulated
as a condition whether resolutory or suspensive in the contract; and second, its
effects and consequences were not specified either. The provision adverted to does not
impose a condition or an obligation to eject the lessees from the lot. By his own
admission, Anthony Powers, PCIDs General Manager, did not ask its lawyers to
stipulate in the contract that the spouses were guaranteeing the ejectment of the
occupants, because there was already a proviso in said deed of sale that the sellers
were guaranteeing the peaceful possession by the buyer of the land.
2.
Obscurity in a contract construed against party causing it
Sales, 2003 ( 279 )
Any of obscurity in a contract, if the above-quoted provision can be described,

must be construed against the party who caused it. PCID itself caused the obscurity
because it omitted this alleged condition when its lawyer drafted said contract.
3.
Stipulation similar to Romero vs. CA required in ejecting tenants; What was

not intended by parties cannot be a ground for rescission
If the parties intended to impose on the spouses the obligation to eject the
tenants from the lot sold, it should have included in the contract a provision similar to
that referred to in Romero vs. Court of Appeals, where the ejectment of the
occupants of the lot sold was the operative act which set into motion the period of
buyers compliance with his own obligation, i.e., to pay the balance of the purchase
price. Failure to remove the squatters within the stipulated period gave the other party
the right to either refuse to proceed with the agreement or to waive that condition of
ejectment in consonance with Article 1545 of the Civil Code. In the case cited, the
contract specifically stipulated that the ejectment was a condition to be fulfilled;
otherwise, the obligation to pay the balance would not arise. This is not so in the
present case. Absent a stipulation therefor, the parties could not have intended to
make its nonfulfillment a ground for rescission. If they did intend this, their contract
should have expressly stipulated so.
4.
Rescission also not allowed if breach is not substantial and fundament to

fulfillment of obligation to sell
In Ang vs. C.A., rescission was sought on the ground that the seller had failed to fulfill
their obligation to remove and clear the lot sold, the performance of which would
have given rise to the payment of the consideration by buyer. Rescission was not
allowed, however, because the breach was not substantial and fundamental to the
fulfillment by the petitioners of the obligation to sell.
5.
Warranty and not condition; Terms of contract clear

The provision adverted to in the contract pertains to the usual warranty against
eviction, and not to a condition that was not met. The terms of the contract are so clear
as to leave no room for any other interpretation.
6.
Delivery an indispensable requisite; Actual or constructive; Symbolic delivery

Although most authorities consider transfer of ownership as the primary purpose
of sale; delivery remains an indispensable requisite as the law does not admit the
doctrine of transfer of property by mere consent. The Civil Code provides that delivery
can either be (1) actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic
delivery (Article 1498), as species of constructive delivery, effects the transfer of
ownership through the execution of a public document. Its efficacy can, however, be
prevented if the vendor does not possess control over the thing sold, in which case this
legal fiction must yield to reality.
Sales, 2003 ( 280 )
7.
Requisites for symbolic delivery to produce effect of tradition

In order that this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the thing sold that . . . its
material delivery could have been made. It is not enough to confer upon the purchaser
the ownership and the right of possession. The thing sold must be placed in his control.
When there is no impediment whatever to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the execution of
the instrument, the purchaser cannot have the enjoyment and material tenancy of the
thing and make use of it himself or through another in his name, because such tenancy
and enjoyment are opposed by the interposition of another will, then fiction yields to
reality the delivery has not been effected.
8.
Delivery effected through execution of deed, allowing PCID to file ejectment

suit against occupants
Considering that the deed of sale between the parties did not stipulate or infer
otherwise, delivery was effected through the execution of said deed. The lot sold had
been placed under the control of PCID; thus, the filing of the ejectment suit was
subsequently done. It signified that its new owner intended to obtain for itself and to
terminate said occupants actual possession thereof. Prior physical delivery or
possession is not legally required and the execution of the deed of sale is deemed
equivalent to delivery. This deed operates as a formal or symbolic delivery of the
property sold and authorizes the buyer to use the document as proof of ownership.
Nothing more is required.
9.
Requisites of Breach of Warranty Against Eviction

A breach of this warranty requires the concurrence of the following
circumstances: (1) The purchaser has been deprived of the whole or part of the thing
sold; (2) This eviction is by a final judgment; (3) The basis thereof is by virtue of a right
prior to the sale made by the vendor; and (4) The vendor has been summoned and
made co-defendant in the suit for eviction at the instance of the vendee. In the absence
of these requisites, a breach of the warranty against eviction under Article 1547 cannot
be declared.
10.
Presence of lessee does not constitute encumbrance of land nor deprives

control thereof
The presence of lessees does not constitute an encumbrance of the land, nor
does it deprive PCID of its control thereof. It should be noted that PCIDs deprivation of
ownership and control finally occurred when it failed and/or discontinued paying the
amortizations on the mortgage, causing the lot to be foreclosed and sold at public
auction. But this deprivation is due to PCIDs fault, and not to any act attributable to the
spouses.
Sales, 2003 ( 281 )
11.
Contract presumed to be valid and subsisting

Because PCID failed to impugn its integrity, the contract is presumed, under the
law, to be valid and subsisting.
12.
Application of Solutio Indebiti

The doctrine of Solutio Indebiti applies where: (1) a payment is made when there
exists no binding relation between the payor, who has no duty to pay, and the person
who received the payment, and (2) the payment is made through mistake, and not
through liberality or some other cause. Solutio indebiti does not apply in the present
case.
13.
PCID has duty to pay amortizations

PCID was under obligation to pay the amortizations on the mortgage under the
contract of sale and the deed of real estate mortgage. Under the deed of sale, both
parties agreed to abide by any and all the requirements of PNB in connection with the
real estate mortgage. PCID was aware that the deed of mortgage made it solidarily,
and, therefore, primarily liable for the mortgage obligation. It was stipulated that the
Mortgagor shall neither lease the mortgaged property nor sell or dispose of the same in
any manner, without the written consent of the Mortgagee. However, if not
withstanding this stipulation and during the existence of this mortgage, the property
herein mortgaged, or any portion thereof, is sold, it shall be the obligation of the
Mortgagor to impose as a condition of the sale, alienation or encumbrance that the
vendee, or the party in whose favor the alienation or encumbrance is to be made,
should take the property subject to the obligation of this mortgage in the same terms
and condition under which it is constituted, it being understood that the Mortgagor is
not in any manner relieved of his obligation to the Mortgagee under this mortgage by
such sale, alienation or encumbrance; on the contrary both the vendor and the vendee,
or the party in whose favor the alienation or encumbrance is made shall be jointly and
severally liable for said mortgage obligations.
14.
No mistake in the payment of amortization to PNB

Even if PCID was a third party in regard to the mortgage of the land purchased
(on the insistence that PNB disapproved PCIDs assumption of mortgage after it failed
to submit the necessary papers for the approval of such assumption), the payment of
the loan by PCID was a condition clearly imposed by the contract of sale. This fact alone
disproves PCIDs insistence that there was a mistake in payment. On the contrary,
such payments were necessary to protect its interest as a the buyer(s) and new
owner(s) of the lot.
15.
No unjust enrichment
The quasi-contract of solutio indebiti is one of the concrete manifestations of the
ancient principle that no one shall enrich himself unjustly at the expense of another.
The payment of the mortgage was an obligation PCID assumed under the contract of
Sales, 2003 ( 282 )
sale. There is no unjust enrichment where the transaction, as in the present case, is
quid pro quo, value for value.
[86]
Puyat & Sons v. Arco Amusement [G.R. No. 47538.
June 20, 1941.] First Division, Laurel (J): 4 concur
Facts: In the year 1929, the Teatro Arco, was engaged in the business of operating
cinematographs. In 1930, its name was changed to Arco Amusement Company. About
the same time, Gonzalo Puyat & Sons, Inc., in addition to its other business, was acting
as exclusive agents in the Philippines for the Starr Piano Company of Richmond,
Indiana, USA, which dealt in cinematograph equipment and machinery. Arco, desiring to
equip its cinematograph with sound reproducing devices, approached Puyat. After some
negotiations, it was agreed between the parties, Puyat would, on behalf of Arco
Amusement, order sound reproducing equipment from the Star Piano Company and
that Arco Amusement would pay Puyat, in addition to the price of the equipment, 10%
commission, plus all expenses, such as, freight, insurance, banking charges, cables,
etc. At the expense of the Arco, Puyat sent a cable to the Starr Piano Company,
inquiring about the equipment desired and making the said company to quote its price
of $1,700 FOB factory Richmond, Indiana. Puyat informed the plaintiff of the price of
$1,700, and being agreeable to the price, Arco, in a letter dated 19 November 1929,
formally authorized the order. The equipment arrived about the end of the year 1929,
and upon delivery of the same to Arco and the presentation of necessary papers, the
price of $1,700, plus the 10% commission agreed upon the plus all the expenses and
charges, was duly paid by the Arco to Puyat. he following year, another order for sound
reproducing equipment was placed by Arco with Puyat, on the same terms as the first
order. The equipment under the second order arrived in due time, and the defendant
was duly paid the price of $1,600 with its 10 per cent commission, and $160, for all
expenses and charges. This amount of $160 does not represent actual out-of-pocket
expenses paid by Puyat, but a mere flat charge and rough estimate made by Puyat
equivalent to 10% of the price of $1,600 of the equipment.
Three years later, in connection with a civil case in Vigan, filed by one Fidel Reyes
against Puyat, the officials of the Arco discovered that the price quoted to them by
Puyat with regard to their two orders was not the net price but rather the list price, and
that the defendant had obtained a discount from the Starr Piano Company. Moreover,
by reading reviews and literature on prices of machinery and cinematograph
equipment, said officials of Arco were convinced that the prices charged them by the
defendant were much too high including the charges for out-of-pocket expenses. For
Sales, 2003 ( 283 )
these reasons, they sought to obtain a reduction from Puyat or rather a reimbursement.
Failing in this they brought an action with the CFI Manila.
The trial court held that the contract between the parties was one of the outright
purchase and sale, and absolved Puyat from the complaint. The appellate court,
however, held that the relation between the parties was that of agent and principal,
Puyat acting as agent of Arco in the purchase of the equipment in question, and
sentenced Puyat to pay Arco alleged overpayments in the total sum of $1,335.52 or
P2,671.04, together with legal interest thereon from the date of the filing of the
complaint until said amount is fully paid, as well as to pay the costs of the suit in both
instances. Hence, the petition for the issuance of a writ of certiorari to the Court of
Appeals for the purposed of reviewing its decision in civil case GR 1023.
The Supreme Court granted the writ of certiorari, reversed the decision of the appellate
court, and absolved Puyat & Sons from the complaint in GR 1023, without
pronouncement regarding costs.
1.
Contract, and those agreed upon, is the law between the parties; What does
not appear are regarded as dealers or traders not binding the parties
The contract is the law between the parties and should include all the things they
are supposed to have been agreed upon. What does not appear on the face of the
contract should be regarded merely as dealers or traders talk, which can not bind
either party. (Nolbrook v. Conner, 56 So., 576, 11 Am. Rep., 212; Bank v. Brosscell, 120
Ill., 161; Bank v. Palmer, 47 Ill., 92; Hosser v. Copper, 8 Allen, 334; Doles v. Merrill, 173
Mass., 411.) The letters which Arco accepted the prices of $1,700 and $1,600,
respectively, for the sound reproducing equipment subject of its contract with Puyat,
are clear in their terms and admit of no other interpretation than that Arco agreed to
purchase from Puyat the equipment in question at the prices indicated which are fixed
and determinate.
2.
Agency; Agent exempt from all liability in discharge of commission if in

accordance with instructions received from principal
In agency, the agent is exempted from all liability in the discharge of his
commission provided he acts in accordance with the instructions received from his
principal (section 254, Code of Commerce), and the principal must indemnify the agent
for all damages which the latter may incur in carrying out the agency without fault or
imprudence on his part (article 1729, Civil Code). The fact that whatever unforseen
events might have taken place unfavorable to the defendant (petitioner), such as
change in prices, mistake in their quotation, loss of the goods not covered by insurance
or failure of the Starr Piano Company to properly fill the orders as per specifications, the
plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices
fixed of $1,700 and $1,600 is incompatible with the pretended relation of agency
between the parties.
Sales, 2003 ( 284 )
3.
Commission does not necessarily make one the agent of the other
While the letters state that Puyat was to receive 10% commission, this does not
necessarily make the petitioner an agent of the respondent, as this provision is only an
additional price which the respondent bound itself to pay, and which stipulation is not
incompatible with the contract of purchase and sale. (See Quiroga vs. Parsons
Hardware Co., 38 Phil., 501.)
4.
Puyat & Sons already the agent of Starr Piano Company of Richmond,
Indiana, in the
Philippines
To hold the petitioner an agent of Arco in the purchase of equipment and
machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with
the admitted fact that Puyat is the exclusive agent of Starr Piano in the Philippines. It is
out of the ordinary for one to be the agent of both the vendor and the purchaser. The
facts and circumstances indicated to not point to anything but plain ordinary
transaction where Arco enters into a contract transaction, a contract of purchase and
sale, with Puyat, the latter as exclusive agent of the Starr Piano Company in the United
States.
5.
Vendor not bound to reimburse difference of cost and sales price

A vendor is not bound to the vendee for any difference between the cost price
and the sales price which represents the profit realized by the vendor out of the
transaction. This is the very essence of commerce without which merchants or
middleman would not exist.
6.
Not every concealment is fraud, maybe business acumen; Buyer estopped

when it agreed to conditions and price
It is well known that local dealers acting as agents of foreign manufacturers,
aside from obtaining a discount from the home office, sometimes add to the list price
when they resell to local purchasers. It was apparently to guard against an exhorbitant
additional price that Arco sought to limit it to 10%t. Arco is estopped from questioning
that additional price. If the respondent later on discovers itself at the short end of a bad
bargain. it alone must bear the blame, and it cannot rescind the contract, much less
compel a reimbursement of the excess price, on that ground alone. The fact that Puyat
obtained more or less profit than Arco calculated before entering into the contract of
purchase and sale, is no ground for rescinding the contract of purchase and sale, is no
ground for rescinding the contract or reducing the price agreed upon between the
parties. Puyat was not duty bound to reveal the private arrangement it had with the
Starr Piano Company relative to such discount to its prospective customers. Not every
concealment is fraud; and short of fraud, it were better that, within certain limits,
Sales, 2003 ( 285 )
business acumen permit of the loosening of the sleeves and of the sharpening of the
intellect of men and women in the business world.
[87]
Quijada v. CA [G.R. No. 126444. December 4, 1998.]
Second Division, Martinez (J): 3 concur
Facts: Petitioners (Alfonso, Cresente, Reynalda, Demetrio, Eliuteria, Eulalio, and
Warlito) are the children of the late Trinidad Corvera Vda. de Quijada. Trinidad was one
of the heirs of the late Pedro Corvera and inherited from the latter the 2-hectare parcel
of land subject of the case, situated in the barrio of San Agustin, Talacogon, Agusan del
Sur. On 5 April 1956, Trinidad Quijada together with her sisters Leonila Corvera Vda. de
Sequea and Paz Corvera Cabiltes and brother Epapiadito Corvera executed a
conditional deed of donation of the 2-hectare parcel of land in favor of the Municipality
of Talacogon, the condition being that the parcel of land shall be used solely and
exclusively as part of the campus of the proposed provincial high school in Talacogon.
Apparently, Trinidad remained in possession of the parcel of land despite the donation.
On 29 July 1962, Trinidad sold 1 hectare of the subject parcel of land to Regalado
Mondejar. Subsequently, Trinidad verbally sold the remaining 1 hectare to Mondejar
without the benefit of a written deed of sale and evidenced solely by receipts of
payment. In 1980, the heirs of Trinidad, who at that time was already dead, filed a
complaint for forcible entry against Mondejar, which complaint was, however, dismissed
for failure to prosecute. In 1987, the proposed provincial high school having failed to
materialize, the Sangguniang Bayan of the municipality of Talacogon enacted a
resolution reverting the 2 hectares of land donated back to the donors. In the
meantime, Mondejar sold portions of the land to Fernando Bautista, Rodolfo Goloran,
Efren Guden, and Ernesto Goloran.
On 5 July 1988, the petitioners filed a complaint against private respondents (Mondejar,
Rodulfo and Ernesto Goloran, Asis, Ras, Abiso, Bautista, Macasero and Maguisay) for
quieting of title, recovery of possession and ownership of parcels of land with claim for
attorneys fees and damages. The trial court rendered judgment in favor of the
petitioners, holding that Trinidad Quijada did not have legal title or right to sell the land
to
Mondejar as it belongs to the Municipality of Talacogon at that time, and that the deed
of sale in favor of
Mondejar did not carry the conformity and acquiescence of her children considering
that Trinidad was already 63 years old and a widow. The trial court ordered the
defendants (private respondents), and any person acting in defendants behalf to return
and vacate the 2 hectares of land to the plaintiff, and to remove their improvements
constructed on the lot; ordered the cancellation of the deed of sale executed by
Trinidad to Mondejar, as well as the deeds of sale/relinquishments executed by
Sales, 2003 ( 286 )
Mondejar to the other defendants; and ordered the defendants to pay the plaintiffs, in
solidum, the amount of P10,000, P8,000, and P30,000 as attorneys fees, expenses of
litigation and moral damages, respectively.
On appeal, the Court of Appeals reversed and set aside the judgment a quo ruling that
the sale made by Trinidad Quijada to respondent Mondejar was valid as the former
retained an inchoate interest on the lots by virtue of the automatic reversion clause in
the deed of donation. Thereafter, petitioners filed a motion for reconsideration. When
the CA denied their motion, petitioners instituted a petition for review to the Supreme
Court.
The Supreme Court affirmed the assailed decision of the Court of Appeals.
1.
Condition valid in donation if not contrary to law, morals, good customs,

public order or public policy
The donation made on April 5, 1956 by Trinidad Quijada and her brother and
sisters was subject to the condition that the donated property shall be used solely and
exclusively as a part of the campus of the proposed Provincial High School in
Talacogon. The donation further provides that should the proposed Provincial High
School be discontinued or if the same shall be opened but for some reason or another,
the same may in the future be closed the donated property shall automatically revert
to the donor. Such condition, not being contrary to law, morals, good customs, public
order or public policy was validly imposed in the donation.
2.
Donation as mode of acquiring ownership

When the Municipalitys acceptance of the donation was made known to the
donor, the former became the new owner of the donated property, donation being a
mode of acquiring and transmitting ownership, notwithstanding the condition imposed
by the donee. The donation is perfected once the acceptance by the donee is made
known to the donor. Accordingly, ownership is immediately transferred to the latter and
that ownership will only revert to the donor if the resolutory condition is not fulfilled.
3.
Condition to construct school is a resolutory condition

The resolutory condition, in the present case, is the construction of the school. It
has been ruled that when a person donates land to another on the condition that the
latter would build upon the land a school, the condition imposed is not a condition
precedent or a suspensive condition but a resolutory one. So long as the resolutory
condition subsists and is capable of fulfillment, the donation remains effective and the
donee continues to be the owner subject only to the rights of the donor or his
successors-in-interest under the deed of donation. Since no period was imposed by the
donor on when must the donee comply with the condition, the latter remains the owner
Sales, 2003 ( 287 )
so long as he has tried to comply with the condition within a reasonable period. Such
period, however, became irrelevant herein when the donee manifested that it cannot
comply with the condition and the same was made known to the donor. Only then,
when the non-fulfillment of the resolutory condition was brought to the donors
knowledge, that ownership of the donated property reverted to the donor as provided
in the automatic reversion clause of the deed of donation.
4.
Inchoate interest may be subject of contract including a contract of sale;

Interest over property under conditional deed of donation, not the land itself
The donor may have an inchoate interest in the donated property during the time
that ownership of the land has not reverted to her. Such inchoate interest may be the
subject of contracts including a contract of sale. In the present case, however, what the
donor sold was the land itself which she no longer owns. It would have been different if
the donor-seller sold her interests over the property under the deed of donation which
is subject to the possibility of reversion of ownership arising from the non-fulfillment of
the resolutory condition.
5.
Laches, elements
Laches presupposes failure or neglect for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should have been
done earlier; it is negligence or omission to assert a right within a reasonable time,
thus, giving rise to a presumption that the party entitled to assert it either has
abandoned or declined to assert it. Its essential elements of (a) Conduct on the part of
the defendant, or of one under whom he claims, giving rise to the situation complained
of; (b) Delay in asserting complainants right after he had knowledge of the defendants
conduct and after he has an opportunity to sue; (c) Lack of knowledge or notice on the
part of the defendant that the complainant would assert the right on which he bases his
suit; and, (d) Injury or prejudice to the defendant in the event relief is accorded to the
complainant are absent in this case. In the present case, petitioners cause of action to
quiet title commenced only when the property reverted to the donor and/or his
successors-in-interest in 1987, not in the 1960s when they had no interest over the
property at that time except under the deed of donation to which private respondents
were not privy. Moreover, petitioners had previously filed an ejectment suit against
private respondents only that it did not prosper on a technicality.
6.
Sale, being a consensual contract, is perfected by mere consent; Seller need

not own property when sold but when delivered
Sale, being a consensual contract, is perfected by mere consent, which is
manifested the moment there is a meeting of the minds as to the offer and acceptance
thereof on three (3) elements: subject matter, price and terms of payment of the price.
Ownership by the seller on the thing sold at the time of the perfection of the contract of
sale is not an element for its perfection. What the law requires is that the seller has the
right to transfer ownership at the time the thing sold is delivered. Perfection per se
Sales, 2003 ( 288 )
does not transfer ownership which occurs upon the actual or constructive delivery of
the thing sold. A perfected contract of sale cannot be challenged on the ground of nonownership on the part of the seller at the time of its perfection; hence, the sale is still
valid.
7.
Sellers title passes by operation of law to the buyer

The consummation of the perfected contract is another matter. It occurs upon
the constructive or actual delivery of the subject matter to the buyer when the seller or
her successors-in-interest subsequently acquires ownership thereof. In the present
case, such circumstance happened in this case when petitioners (Trinidads heirs)
became the owners of the subject property upon the reversion of the ownership of the
land to them. Consequently, ownership is transferred to Mondejar and those who claim
their right from him.
Article 1434 of the New Civil Code supports the ruling that the sellers title passes by
operation of law to the buyer. This rule applies not only when the subject matter of
the contract of sale is goods, but also to other kinds of property, including real
property.
8.
Article 1409 (4) does not provide that the properties of a municipality are
outside the commerce of man; Objects outside of the commerce of man are
those which cannot be appropriated
Nowhere in Article 1409 (4) is it provided that the properties of a municipality,
whether it be those for public use or its patrimonial property, are outside the commerce
of men; so as to render the contract involving the same inexistent and void from the
beginning when sold. In the present case, the lots were conditionally owned by the
municipality. To rule that the donated properties are outside the commerce of men
would render nugatory the unchallenged reasonableness and justness of the condition
which the donor has the right to impose as owner thereof. Moreover, the objects
referred to as outside the commerce of man are those which cannot be appropriated,
such as the open seas and the heavenly bodies.
9.
No factual or legal basis for the award of fees and damages

There is neither factual nor legal basis for the trial courts award of attorneys
fees, litigation expenses and moral damages. Attorneys fees and expenses of litigation
cannot, following the general rule in Article 2208 of the New Civil Code, be recovered in
the present case, there being no stipulation to that effect and the case does not fall
under any of the exceptions. It cannot be said that private respondents had compelled
petitioners to litigate with third persons. Neither can it be ruled that the former acted in
gross and evident bad faith in refusing to satisfy the latters claims considering that
private respondents were under an honest belief that they have a legal right over the
property by virtue of the deed of sale. Moral damages cannot likewise be justified as
Sales, 2003 ( 289 )
none of the circumstances enumerated under Articles 2219 27 and 2220 28 of the New
Civil Code concur in this case.
[88]
Quimson v. Rosete [G.R. No. L-2397.
August 9, 1950.] En Banc, Tuason (J): 5
concur
Facts: The property, i.e. the land, originally belonged to the late Dionisio Quimson,
who, on 7 June 1932, executed a deed Exhibit A transferring the same in favor of his
daughter Tomasa Quimson, but remaining in continuous possession and enjoyment. It
was sold to the spouses Magno Agustin and Paulina Manzano on 3 May 1935, with right
to repurchase within the term of six years; and two years after, on 5 April 1937, again
was sold to Francisco Rosete, also with pacto de retro within five years, thereafter
having verified its repurchase of Agustin and Manzano, with money furnished to him by
Rosete, executing in the end the deed Exhibit 1. Since then, Rosete was the one in
possession and who enjoys, in a peaceful manner even after the death of Dionisio
Quimson, which occurred on 6 June 1939, until January 1943, when Tomasa Quimson
filed with the Justice of Peace of San Marcelino, Zambales, intervening in the agreement
with Rosete over the said property, whose failure was the reason for the race toward
Iba, the capital of Zambales, to acquire priority in the registration and inscription of the
deeds of sale Exhibits A and 1 which Dionisio Quimson executed in favor of Tomasa
Quimson and Francisco Rosete, respectively, the former arriving one hour earlier, at
9:30 a.m. of 17 February 1943, whereas the latter arrived at 10:30 a.m. of the same
day.
The Court of First instance of Zambales ruled in favor of Tomasa Quimson and Marcos
Santos; the decision being reversed later by the Court of Appeals. Hence, the appeal by
certiorari.
1.
The Supreme Court set aside the decision of the Court of Appeals, and accepted the
trial courts appraisal of the damages (assessed damages of P180 for the occupation of
the land for the agricultural years 1943-44, 1944-45 and 1945-46, and P60 a year
thereafter until the possession of the property was restituted); with costs against
Rosete.
Article 1462 and 1473 of the Civil Code
Articles 1462 of the Civil Code provides that The thing sold shall be deemed
delivered, when it is placed in the control and possession of the vendee. When the sale
is made by means of 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 said instrument
the contrary does not appear or may not be clearly inferred. Article 1473 provides, on
the other hand, that If the same thing should have been sold to different vendees, the
Sales, 2003 ( 290 )
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 first recorded it in the
registry. Should there be no inscription, the ownership shall belong to the person who in
good faith was first in the possession; and, in the absence of this, to the person who
presents the oldest title, provided there is good faith.
2.
Buencamino vs. Viceo; Execution of notarial document of sale sufficient

delivery
In the case of Buencamino vs. Viceo (13 Phil., 97), Article 1462 was cited. The
provision provides that Upon a sale of real estate the execution of a notarial document
of sale is a sufficient delivery of the property sold.
3.
Florendo vs. Foz: Execution of sale thru public instrument tantamount to

conveyance
In the case of Florendo vs. Foz (20 Phil., 388), it was ruled that When the sale is
made by means of a public instrument, the execution thereof is tantamount to
conveyance of the subject matter, unless the contrary clearly follows or be deduced
from such instrument itself, and in the absence of this condition such execution by the
vendor is per se a formal or symbolical conveyance of the property sold, that is, the
vendor in the instrument itself authorizes the purchaser to use the title of ownership as
proof that the latter is thenceforth the owner of the property.
4.
Sanchez vs. Ramos almost on all fours

In the case of Sanchez vs. Ramos (40 Phil., 614), it appeared that one Fernandez
sold a piece of land to Marcelino Gomez and Narcisa Sanchez under pacto de retro in a
public instrument. The purchasers neither recorded their deed in the registry of
property nor ever took material possession of the land. Later, Fernandez sold the same
property by means of a private document to Ramos who immediately entered upon the
possession of it. It was held that, according to article 1473 of the Civil Code, Gomez and
Sanchez were the first in possession and, consequently, that the sale in their favor was
superior.
5.
Interpretation of Article 1473; Material and symbolic possession

Possession is acquired by the material occupancy of the thing or right possessed,
or by the fact that the latter is subjected to the action of our will, or by the appropriate
acts and legal formalities established for acquiring possession (art. 438, Civil Code). By
a simple reasoning, it appears that, because the law does not mention to which of
these kinds of possession the article (1473) refers, it must be understood that it refers
to all of these kinds. The possession mentioned in article 1473 (for determining who
has better right when the same piece of land has been sold several times by the
Sales, 2003 ( 291 )
vendor) includes not only the material but also the symbolic possession, which is
acquired by the execution of a public instrument.
6.
Interpretation of Article 1473: in consonance with the principles of justice

The Courts interpretation of article 1473 is more in consonance with the
principles of justice. The execution of a public instrument is equivalent to the delivery
of the realty sold (art.1462, Civil Code) and its possession by the vendee (art. 438).
Under these conditions the sale is considered consummated and completely transfers
to the vendee all of the vendors rights of ownership including his real right over the
thing. The vendee by virtue of this sale has acquired everything and nothing, absolutely
nothing, is left to the vendor. From this moment the vendor is a stranger to the thing
sold like any other who has never been its owner. As the thing is considered delivered,
the vendor has no longer the obligation of even delivering it. If he continues taking
material possession of it, is simply on account of vendees tolerance and, in this sense,
his possession is vendors possession. And if the latter should have to ask him for the
delivery of this material possession, it would not be by virtue of the sale, because this
has been already consummated and has produced all its effects, but by virtue of the
vendees ownership, in the same way as said vendee could require of another person
although same were not the vendor. This means that after the sale of a realty by means
of a public instrument, the vendor, who resells it to another, does not transmit anything
to the second vendee and if the latter, by virtue of this second sale, takes material
possession of the thing, he does it as mere detainer, and it would be unjust to protect
this detention against the rights to the thing lawfully acquired by the first vendee.
7.
Spirit or intent of law prevails over its letter

The statement of Sr. Manresa (pp. 157, 158, Vol. X, of his treatise on the Spanish
Civil Code) expresses the literal meaning of article 1473, for the decision of 24
November 1894 reflects, according to the learned author, the intention of the lawmaker
and is in conformity with the principles of justice. Now, under both the Spanish and the
Philippine rules of interpretation, the spirit, the intent, of the law prevails over its letter.
8.
Deed of conveyance means land was sold, in absence of any qualifying

statement
The finding that a deed of conveyance was made by Dionisio Quimson in favor of
his daughter could have no other meaning, in the absence of any qualifying statement,
than that the land was sold by the father to his daughter. The trial courts explicit
finding which was not reversed by the Court of Appeals and stands as the fact of the
case. Looking into the document itself, Exhibit A states categorically that the vendor
received from the vendee the consideration of sale, P250, and acknowledged before the
notary public having executed the instrument of his own free will.
9.
Cruzado vs. Escaler, obiter dictum; Prescription
Sales, 2003 ( 292 )
The expression in thedecision in the case of Cruzado vs. Escaler (34 Phil., 17),
apparently to the effect that physical possession by the purchaser is essential to the
consummation of a sale of real estate, is at best obiter dictum; for the court distinctly
found that the sale to Cruzados father was a sham, executed with the sole purpose of
enabling the senior Cruzado to mortgage the property and become procurador. And
with reference to the failure of the second vendee, Escaler, to register his purchase, the
court disregarded the omission as well as the entry of the first sale in the registry
because that entry was made by the son and heir of the first supposed vendee, more
than a score years after the alleged transaction, when Cruzado was no longer or had
any right therein (in the land), because it already belonged to the Escaler, its lawful
owner. When Escaler, the second purchaser was sued, he had become the owner of
the land by prescription. In the present case, Rosetes possession fell far short of having
ripened into title by prescription when the Quimson commenced her action.
[89]
Quiroga v. Parsons Hardware [G.R. No. 11491.
August 23, 1918.] En Banc, Avancena (J): 5 concur
Facts: On 24 January 1911, in Manila, a contract was entered into by and between the
Quiroga and J. Parsons (to whose rights and obligations Parsons Hardware later
subrogated itself) for the exclusive sale of Quiroga Beds in the Visayan Islands. Quiroga
was to furnish the Parson with the beds (which the latter might order, at the price
stipulated) and that Parson was to pay the price in the manner stipulated. The price
agreed upon was the one determined by Quiroga for the sale of these beds in Manila,
with a discount of from 20 to 25 per cent, according to their class. Payment was to be
made at the end of sixty days, or before, at Quirogas request, or in cash, if Parson so
preferred, and in these last two cases an additional discount was to be allowed for
prompt payment.
<The case facts are bereft of details regarding the event that led to the controversy of
the case, the litigation in the lower courts, up to appeal>
Quiroga alleges that Parson violated its obligation not to sell the beds at higher prices
than those of the invoices; to have an open establishment in Iloilo; itself to conduct the
agency; to keep the beds on public exhibition, and to pay for the advertisement
expenses for the same; and to order the beds by the dozen and in no other manner.
None of these, except the obligation to order the beds by the dozen and in no other
manner, are expressly set forth in the contract. Quiroga maintains that Parsons is his
agent for the sale of his bed in Iloilo, and such obligations implied in a contract of
commercial agency.
Sales, 2003 ( 293 )
The Supreme Court held that the contract by and between the plaintiff and the
defendant was one of purchase and sale, and that the obligations the breach of which is
alleged as a cause of action are not imposed upon the defendant, either by agreement
or by law. The Court thus affirmed the judgment appealed from, with costs against the
appellant.
1.
Essential clauses given due regard to classify a contract; Contract of

purchase and sale
In order to classify a contract, due regard must be given to its essential clauses.
In the contract in question, the clauses, constituting its cause and subject matter, are
precisely the essential features of a contract of purchase and sale. There was the
obligation on the part of Quiroga to supply the beds, and, on the part of Parson, to pay
their price. These features exclude the legal conception of an agency or order to sell
whereby the mandatory or agent received the thing to sell it, and does not pay its
price, but delivers to the principal the price he obtains from the sale of the thing to a
third person, and if he does not succeed in selling it, he returns it. By virtue of the
contract between Quiroga and Parson, the latter, on receiving the beds, was necessarily
obliged to pay their price within the term fixed, without any other consideration and
regardless as to whether he had or had not sold the beds.
2.
Commission on sale merely a discount, other clauses are not incompatible

with contract of purchase and sale
The contract by and between the defendant and the plaintiff is one of purchase
and sale. Besides the clause made in the basis of a commission on sales, none of the
other clauses of the contract is found to substantially support Quirogas contention.
None of these conveys the idea of an agency. The words commission on sales used in
clause (A) of article 1 mean nothing else than a mere discount on the invoice price. The
word agency, also used in articles 2 and 3, only expresses that the defendant was the
only one that could sell Quirogas beds in the Visayan Islands. With regard to the
remaining clauses, the least that can be said is that they are not incompatible with the
contract of purchase and sale.
3.
Classification of a contract defined by law, and not one called by the parties
The agreements contained in the document that has been drafted, constitute a
contract of purchase and sale, and not one of commercial agency. In the classification
of the contract, it must be understood that a contract is what the law defines it to be,
and not what it is called by the contracting parties.
4.
Acts subsequent to contract suppletory, not considered when essential

agreements are set forth in the contract
The acts of the parties merely show that, on the part of each of them, there was
mutual tolerance in the performance of the contract in disregard of its terms; and it
gives no right to have the contract considered, not as the parties stipulated it, but as
Sales, 2003 ( 294 )
they performed it. Only the acts of the contracting parties, subsequent to, and in
connection with, the execution of the contract, must be considered for the purpose
interpreting the contract, when such interpretation is necessary, but not when, as in the
instant case, its essential agreements are clearly set forth and plainly show that the
contract belongs to a certain kind and not to another.
5.
Effect of breach, and effect of subsequent consent to such breach

In respect to the defendants obligation to order by the dozen, the only one
expressly imposed by the contract, the effect of its breach would only entitle the
plaintiff to disregard the orders which the defendant might place under other
conditions; but if the plaintiff consents to fill them, he waives his right and cannot
complain for having acted thus at his own free will.
[90]
Radiowealth Finance vs. Palileo [G.R. No. 83432.
May 20, 1991.] First Division, Gancayco (J): 4 concur
Facts: On 13 April 1970, spouses Enrique Castro and Herminia R. Castro sold to
Manuelito Palileo, a parcel of unregistered coconut land situated in Candiis, Mansayaw,
Mainit, Surigao del Norte. The sale is evidenced by a notarized Deed of Absolute Sale.
The deed was not registered in the Registry of Property for unregistered lands in the
province of Surigao del Norte. Since the execution of the deed of sale, Manuelito Palileo
who was then employed at Lianga, Surigao del Sur, exercised acts of ownership over
the land through his mother Rafaela Palileo, as administratrix or overseer. He has
continuously paid the real estate taxes on said land from 1971 until the present.
On 29 November 1976, a judgment was rendered against Enrique T. Castro, in Civil
Case 0103145 by the then CFI Manila, Branch XIX, to pay Radiowealth Finance
Company, the sum of P22,350.35 with interest thereon at the rate of 16% per annum
from 2 November 1975 until fully paid, and the for the sum of P2,235.03 as attorneys
fees, and to pay the costs. Upon the finality of the judgment, a writ of execution was
issued. Pursuant to said writ, the provincial Sheriff Marietta E. Eviota, through Deputy
Provincial Sheriff Leopoldo Risma, levied upon and finally sold at public auction the
subject land that Castro had sold to
Palileo. A certificate of sale was executed by the Provincial Sheriff in favor of
Radiowealth Finance Company, being the only bidder. After the period of redemption
had expired, a deed of final sale was also executed by the same Provincial Sheriff. Both
the certificate of sale and the deed of final sale were registered with the Registry of
Deeds.
Sales, 2003 ( 295 )
Learning of what happened to the land, Palileo filed an action for quieting of title over
the same. After a trial on the merits, the court a quo rendered a decision in his favor.
On appeal (CA-GR CV 10788), the decision of the trial court was affirmed. Hence, the
petition for review on certiorari.
The Supreme Court affirmed the decision of the Court of Appeals; without costs.
1.
Article 1544; No ambiguity with respect to lands registered under the Torrens
System
Article 1544 of the Civil Code provides that in case of double sale of an
immovable property, ownership shall be transferred: (1) to the person acquiring it who
in good faith first recorded it in the Registry of Property; (2) in default thereof, to the
person who in good faith was first in possession; and (3) in default thereof, to the
person who presents the oldest title, provided there is good faith. There is no ambiguity
regarding the application of the law with respect to lands registered under the Torrens
System.
2.
Section 51 of PD 1529; Registration an operative act to convey or affect

registered lands insofar as third persons are concerned
Section 51 of Presidential Decree No. 1529 (amending Section 50 of Act No. 496
clearly provides that the act of registration is the operative act to convey or affect
registered lands insofar as third persons are concerned. Thus, a person dealing with
registered land is not required to go behind the register to determine the condition of
the property. He is only charged with notice of the burdens on the property which are
noted on the face of the register or certificate of title.
3.
Purchaser in good faith of registered land under the Torrens system acquires
good title
A purchaser in good faith of registered land (covered by a Torrens Title) acquires
a good title as against all the transferees thereof whose right is not recorded in the
registry of deeds at the time of the sale.
4.
Finding of fact by Court of Appeals conclusive upon the Supreme Court;

Notarized deed of sale presumed authentic
The findings of fact of the Court of Appeals are conclusive on this Court and will
not be disturbed unless there is grave abuse of discretion. The finding of the Court of
Appeals that the property in question was already sold to Palileo by its previous owner
before the execution sale is evidenced by a deed of sale. Said deed of sale is notarized
and is presumed authentic. There is no substantive proof to support petitioners
allegation that the document is fictitious or simulated. There is no reason to reject the
conclusion of the Court of Appeals that Palileo was not a mere administrator of the
property. It is undisputed that he exercised acts of ownership through his mother.
Sales, 2003 ( 296 )
5.
Levy on land previously sold to Palileo contrary to directive in writ of

execution
The execution is contrary to the directive contained in the writ of execution which
commanded that the lands and buildings belonging to Enrique Castro be sold to satisfy
the execution. What the Provincial Sheriff levied upon and sold to Radiowealth Finance
is a parcel of land that does not belong to Enrique Castro, the judgment debtor.
6.
Bona fide purchaser of registered land at auction sale acquires good title
There is no doubt that had the property in question been a registered land, this
case would have been decided in favor of Radiowealth Finance since it was Radiowealth
that had its claim first recorded in the Registry of Deeds. Therefore, a bona fide
purchaser of a registered land at an execution sale acquires a good title as against a
prior transferee, if such transfer was unrecorded.
7.
Registration affecting unregistered lands without prejudice to third party

with a better right
Under Act 3344, registration of instruments affecting unregistered lands is
without prejudice to a third party with a better right. The mere registration of a sale in
ones favor does not give him any right over the land if the vendor was not anymore
the owner of the land having previously sold the same to somebody else even if the
earlier sale was unrecorded.
8.
Carumba vs. CA a case in point

The case of Carumba vs. Court of Appeals
6 is a case in point. It was held
therein that Article 1544 of the Civil Code has no application to land not registered
under Act 496. Similar to the present case, Carumba dealt with a double sale of the
same unregistered land. The first sale was made by the original owners and was
unrecorded while the second was an execution sale that resulted from a complaint for a
sum of money filed against the said original owners. Applying Section 35, Rule 39 of the
Revised Rules of Court, it was held that Article 1544 of the Civil Code cannot be invoked
to benefit the purchaser at the execution sale though the latter was a buyer in good
faith and even if this second sale was registered. It was explained that this is because
the purchaser of unregistered land at a sheriff s execution sale only steps into the
shoes of the judgment debtor, and merely acquires the latters interest in the property
sold as of the time the property was levied upon. Applying the principle to the present
case, the Court of Appeals correctly held that the execution sale of the unregistered
land in favor of petitioner is of no effect because the land no longer belonged to the
judgment debtor as of the time of the said execution sale.
[91]
Sales, 2003 ( 297 )
Republic v. Philippine Development Corp. [G.R. No. L-10141.

January 31, 1958.] En Banc, Padilla (J): 10 concur
Facts: On 6 May 1955, the Republic of the Philippines in representation of the Bureau
of Prisons instituted against Macario Apostol and the Empire Insurance Co. a complaint
with the CFI Manila (Civil Case 26166). The complaint alleges that Apostol submitted
the highest bid in the amount of P450.00 per ton for the purchase of 100 tons of
Palawan Almaciga from the Bureau of Prisons; that a contract therefor was drawn and
by virtue of which, Apostol obtained goods from the Bureau of Prisons valued
P15,878.59; that of said account, Apostol paid only P691.10 leaving a balance
obligation of P15, 187.49. The complaint further avers that Apostol submitted the best
bid with the Bureau of Prisons for the purchase of 3 million board feet of logs at P88.00
per 1,000 board feet; that a contract was executed between the Director of Prisons and
Apostol pursuant to which contract Apostol obtained deliveries of logs valued at
P65,830.00; and that Apostol failed to pay a balance account of P18,827.57. All told,
the total demand set forth in complaint against Apostol is for P34,015.06 with legal
interests thereon from 8 January 1952. The Empire Insurance Company was included in
the complaint having executed a performance bond of P10,000.00 in favor of Apostol.
In his answer, Apostol interposed payment as a defense and sought the dismissal of the
complaint. On 19 July 1955, the Philippine Resources Development Corp. moved to
intervene, appending to its motion, the complaint in intervention of even date. The
complaint recites that for sometime prior to Apostols transactions the corporate had
some goods deposited in a warehouse at 1201 Herran, Manila; that Apostol, then the
president of the corporation but without the knowledge or consent of the stockholders
thereof, disposed of said goods by delivering the same to the Bureau of Prisons in an
attempt to settle his personal debts with the latter entity; that upon discovery of
Apostols act, the corporation took steps to recover said goods by demanding from the
Bureau of Prisons the return thereof; and that upon the refusal of the Bureau to return
said goods, the corporation sought leave to intervene in Civil Case 26166. The Judge
(Magno Gatmaitan) denied the motion for intervention and thereby issued an order to
this effect on 23 July 1955. A motion for the reconsideration of said order was filed by
the corporation and the same was likewise denied on 18 August 1955.
On 3 September 1955, the corporation filed a petition for a writ of certiorari with the
Court of Appeals by. On 12 December 1955 the Court of Appeals set aside the order
denying the motion to intervene and ordered the trial court to admit the corporations
complaint-in-intervention, with costs against Macario Apostol. On 9 January 1956 the
Government filed a petition under Rule 46 to review the judgment rendered by the
appellate court (CA-GR 15767-R) with the Supreme Court. The Government contends
that the intervenor has no legal interest in the matter in litigation, because the action
brought in the CFI Manila against Macario Apostol and the Empire Insurance Company
(Civil Case 26166) is just for the collection from the defendant Apostol of a sum of
Sales, 2003 ( 298 )
money, the unpaid balance of the purchase price of logs and almaciga bought by him
from the Bureau of Prisons, whereas the intervenor seeks to recover ownership and
possession of G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes that it
claims it owns an intervention which would change a personal action into one ad rem
and would unduly delay the disposition of the case.
The Supreme Court affirmed the judgment under review, without pronouncement as to
costs.
1.
Intervenor has legal capacity as it stands to be adversely affected by the

judgment of the court
It is true that the very subject matter of the original case is a sum of money, but
it is likewise true as borne out by the records, that the materials purportedly belonging
to the corporation have been assessed and evaluated and their price equivalent in
terms of money have been determined; and that said materials for whatever price they
have been assessed, have been assigned by Apostol as tokens of payment of his
private debts with the Bureau of Prisons. In view of these considerations, it becomes
enormously plain in the event the judge decides to credit Macario Apostol with the
value of the goods delivered by the latter to the Bureau of Prisons, the corporation
stands to be adversely affected by such judgment. The conclusion is inescapable that
the corporation possesses a legal interest in the matter in litigation and that such
interest is of an actual, material, direct and immediate nature as to entitle the
corporation to intervene.
2.
Lower court has discretion to allow or disapprove a motion for intervention;

Principle
Section 3 of Rule 13 of the Rules of Court endows the lower court with discretion
to allow or disapprove a motion for intervention (Santarromana et al. vs. Barrios, 63
Phil. 456); and that in the exercise of such discretion, the court shall consider whether
or not the intervention will unduly delay or prejudice the adjudication of the rights of
the original parties and whether or not the intervenors rights may be fully protected in
a separate proceeding. In the present case, the corporation is positively authorized to
file a separate action against any of all the respondents; but considering that the
resolution of the issues raised in and joined by the pleadings in the main case, would
vitally affect the rights not only of the original parties but also of the corporation; that
far from unduly delaying or prejudicing the adjudication of the rights of the original
parties or bringing about confusion in the original case, the admission of the complaint
in intervention would help clarify the vital issue of the true and real ownership of the
materials involved, besides preventing an abhorrent multiplicity of suits. The motion to
intervene should be given due course.
Sales, 2003 ( 299 )
3.
Article 1458 admits purchaser may pay a price certain in money or its
equivalent
The Government argues that Price is always paid in terms of money and the
supposed payment being in kind, it is no payment at all, citing article 1458 of the new
Civil Code. However, the same article provides that the purchaser may pay a price
certain in money or its equivalent, which means that payment of the price need not be
in money. Whether the G.I. sheets, black sheets, M.S. plates, round bars and G.I. pipes
claimed by the corporation to belong to it and delivered to the Bureau of Prisons by
Apostol in payment of his account is sufficient payment therefor, is for the Court to pass
upon and decide after hearing all the parties in the case. Should the trial court hold that
it is as to credit Apostol with the value or price of the materials delivered by him,
certainly the corporation would be affected adversely if its claim of ownership of such
sheets, plates, bars and pipes is true.
4.
Authority of corporate counsel presumed

By virtue of Section 20 of Rule 127, the authority of corporations counsel is
presumed. Withal, the claim of the counsel for the petitioner that a resolution to
proceed against Apostol, had been unanimously adopted by the stockholders of the
corporation, has not been refuted. It cannot be said that the counsel is acting merely in
an individual capacity without the benefit of a corporate act authorizing him to bring
suit. As counsels authority to appear for the corporation was never questioned in the
CFI, it is to be presumed that he was properly authorized to file the complaint-in
intervention and appear for his client. It was only in the Court of Appeals where his
authority to appear was questioned. As the Court of Appeals was satisfied that counsel
was duly authorized by his client to file the complaint-in-intervention and to appear in
its behalf, the resolution of the Court of Appeals should not be disturbed.
5.
Corporation has separate personality from president or stockholder; Power to

sue lodged in the board of directors and not the president
Philippine Resource Corporation is a duly organized corporation with offices at
the Samanillo Building and that as such, it is endowed with a personality distinct and
separate from that of its president or stockholders. It has the right to bring suit to
safeguard its interests and ordinarily, such right is exercised at the instance of the
president. However, under the circumstance, such right properly devolves upon the
other officers of the corporation as said right is sought to be exercised against the
president himself who is the very object of the intended suit. The power of a
corporation to sue and be sued in any court is lodged in the board of directors which
exercises its corporate powers, and not in the president.
6.
Counsel is the secretary-treasurer of the corporation

Granting that counsel has not been actually authorized by the board of directors
to appear for and in behalf of the corporation, the fact that counsel is the secretarytreasurer of the corporation and a member of the board of directors; and that the other
Sales, 2003 ( 300 )
members of the board, namely, Macario Apostol, the president, and his wife Pacita R.
Apostol, who should normally initiate the action to protect the corporate properties and
interests are the ones to be adversely affected thereby, a single stockholder under such
circumtances may sue in behalf of the corporation. Counsel as a stockholder and
director of the corporation may sue in its behalf and file the complaint-in-intervention in
the proper court.
[92]
Ridad vs. Filipinas Investment [G.R. No. L-39806.
January 27, 1983.] Second Division, de Castro (J): 6 concur
Facts: On 14 April 1964, Luis and Lourdes Ridad purchased from the Supreme Sales
and Development Corporation 2 brand new Ford Consul Sedans complete with
accessories, for P26,887 payable in 24 monthly installments. To secure payment
thereof, the Ridads executed on the same date a promissory note covering the
purchase price and a deed of chattel mortgage not only on the 2 vehicles purchased
but also on another car (Chevrolet) and their franchise or certificate of public
convenience granted by the defunct Public Service Commission for the operation of a
taxi fleet. Then, with the conformity of the Ridads, the vendor assigned its rights, title
and interest to the promissory note and chattel mortgage to Filipinas Investment and
Finance Corporation. Due to the failure of the Ridads to pay their monthly installments
as per promissory note, the corporation foreclosed the chattel mortgage extrajudicially,
and at the public auction sale of the 2 Ford Consul cars, of which the Ridads were not
notified, the corporation was the highest bidder and purchaser. Another auction sale
was held on 16 November 1965, involving the remaining properties subject of the deed
of chattel mortgage since the Ridads obligation was not fully satisfied by the sale of
the aforesaid vehicles, and at the public auction sale, the franchise of the Ridads to
operate 5 units of taxicab service was sold for P8,000 to the highest bidder, the
corporation, which subsequently sold and conveyed the same to Jose D. Sebastian, who
then filed with the Public Service Commission an application for approval of said sale in
his favor.
On 21 February 1966, plaintiffs filed an action for annulment of contract before the CFI
Rizal (Branch I, Civil
Case 9140) with Filipinas Investment and Finance Corporation, Jose D. Sebastian and
Sheriff Jose San Agustin, as party-defendants. By agreement of the parties, the case
was submitted for decision in the lower court on the basis of the documentary evidence
adduced by the parties during the pre-trial conference. Thereafter, the lower court
rendered judgment declaring the chattel mortgage null and void insofar as the taxicab
franchise and the used Chevrolet car of the plaintiffs are concerned, that the public
Sales, 2003 ( 301 )
auction conducted concerning said franchise to be of no legal effect, that the certificate
of sale issued by the sheriff concerning the franchise is cancelled and set aside, and
that the assignment made by Filipinas Investment in favor of Sebastian was declared
void and of no legal effect.
Appeal was filed with the Court of Appeals but was subsequently certified to the
Supreme Court pursuant to Section 3 of Rule 50 of the Rules of Court, there being no
issue of fact involved in the appeal.
The Supreme Court affirmed the judgment appealed from, with costs against Filipinas
Investment, et. al.
1.

Article 1484 of the Civil Code provides that In a contract of sale of personal
property the price of which is payable in installments, the vendor may exercise any of
the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to
pay; (2) Cancel the sale, should the vendees failure to pay cover two or more
installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been
2.
Remedies of vendor alternative, not cumulative; If vendor elects tight to

foreclose mortgage, law prohibits him from bringing further action to recover
balance of debt
Under Article 1484 of the Civil Code, the vendor of personal property the
purchase price of which is payable in installments, has the right, should the vendee
default in the payment of two or more of the agreed installments, to exact fulfillment by
the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on
the purchased personal property, if one was constituted. Whichever right the vendor
elects, he cannot avail of the other, these remedies being alternative, not cumulative.
Furthermore, if the vendor avails himself of the right to foreclose his mortgage, the law
prohibits him from further bringing an action against the vendee for the purpose of
recovering whatever balance of the debt secured not satisfied by the foreclosure sale.
The precise purpose of the law is to prevent mortgagees from seizing the mortgaged
property, buying it at foreclosure sale for a low price and then bringing suit against the
mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find
himself without the property and still owing practically the full amount of his original
indebtedness.
3.
FIFC barred from further action as to payment of unpaid balance

FIFC elected to foreclose its mortgage upon default by the plaintiffs in the
payment of the agreed installments. Having chosen to foreclose the chattel mortgage,
Sales, 2003 ( 302 )
and bought the purchased vehicles at the public auction as the highest bidder, it
submitted itself to the consequences of the law as specifically mentioned, by which it is
deemed to have renounced any and all rights which it might otherwise have under the
promissory note and the chattel mortgage as well as the payment of the unpaid
balance.
4.
Vendors right to foreclose chattel mortgage only of the thing sold; not other
mortgages; Levy Hermanos case applies
The chattel mortgage in question is a nullity insofar as the taxicab franchise and
the used Chevrolet car of the Ridads are concerned, under the authority of the ruling in
the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71 Phil. 587, the facts
of which are similar to those in the present case. There, the same situation occurred
wherein the vendees offered as security for the payment of the purchase price not only
the motor vehicles which were bought on installment, but also a residential lot and a
house of strong materials. This Court sustained the pronouncement made by the lower
court on the nullity of the mortgage in so far as it included the house and lot of the
vendees, holding that under the law, should the vendor choose to foreclose the
mortgage, he has to content himself with the proceeds of the sale at the public auction
of the chattels which were sold on installment and mortgaged to him, and having
chosen the remedy of foreclosure, he cannot nor should he be allowed to insist on the
sale of the house and lot of the vendees, for to do so would be equivalent to obtaining a
writ of execution against them concerning other properties which are separate and
distinct from those which were sold on installment. This would indeed be contrary to
public policy and the very spirit and purpose of the law, limiting the vendors right to
foreclose the chattel mortgage only on the thing sold.
5.
Cruz vs. FIFC; Additional mortgaged cancelled as it indirectly subverts

protection given by
Article 1484
In the case of Cruz v. Filipinas Investment & Finance Corporation, 23 SCRA 791,
the Court ruled that the vendor of personal property sold on the installment basis is
precluded, after foreclosing the chattel mortgage on the thing sold, from having a
recourse against the additional security put up by a third party to guarantee the
purchasers performance of his obligation on the theory that to sustain the same would
overlook the fact that if the guarantor should be compelled to pay the balance of the
purchase price, said guarantor will in turn be entitled to recover what he has paid from
the debtor-vendee, and ultimately it will be the latter who will be made to bear the
payment of the balance of the price, despite the earlier foreclosure of the chattel
mortgage given by him, thereby indirectly subverting the protection given the latter.
Consequently, the additional mortgage was ordered cancelled.
Sales, 2003 ( 303 )
6.
Ruling in Cruz vs. FIFC reiterated in Pascual vs. United Motors; Vendor
precluded from further extrajudicial foreclose of additional security
The ruling in Cruz vs. FIFC was reiterated in the case of Pascual v. Universal
Motors Corporation, 61 SCRA 121. If the vendor under such circumstance is prohibited
from having a recourse against the additional security for reasons therein stated, there
is no ground why such vendor should not likewise be precluded from further
extrajudicially foreclosing the additional security put up by the vendees themselves, it
being tantamount to a further action that would violate Article 1484 of the Civil Code,
for there is actually no difference between an additional security put up by the vendee
himself and such security put up by a third party insofar as how the burden would
ultimately fall on the vendee himself is concerned.
7.
Southern Motors vs. Moscoso does not apply as remedy availed of if that case
is the fulfillment of the obligation and not the foreclosure of the chattel
mortgage
The ruling in Southern Motors, Inc. v. Moscoso, 2 SCRA 168 that in sales on
installments, where the action instituted is for specific performance and the mortgaged
property is subsequently attached and sold, the sale thereof does not amount to a
foreclosure of the mortgage, hence, the seller-creditor is entitled to a deficiency
judgment does not fortify the stand of the appellants for that case is entirely different
from the present case. In that case, the vendor has availed of the first remedy provided
by Article 1484 of the Civil Code, i.e., to exact fulfillment of the obligation; whereas in
the present case, the remedy availed of was foreclosure of the chattel mortgage.
8.
Issue on the validity of auction sale superfluous

The disposition of the Court renders superfluous a determination of the other
issue raised by the parties as to the validity of the auction sale, insofar as the Ridads
franchise is concerned, which sale had been admittedly held without any notice to
them.
[93]
Rillo vs. CA [G.R. No. 125347. June 19, 1997.]
Second Division, Puno (J): 4 concur
Facts: On 18 June 1985, Emiliano Rillo signed a Contract To Sell of Condominium Unit
with Corb Realty Investment Corporation. Under the contract, Corb Realty agreed to sell
to Rillo a 61.5 sq. m. condominium unit located in Mandaluyong, Metro Manila. The
contract price was P150,000.00, of which was paid upon its execution, while the
balance of P75,000.00 was to be paid in 12 equal monthly installments of P7,092.00
beginning 18 July 1985. It was also stipulated that all outstanding balance would bear
an interest of 24% per annum; the installment in arrears would be subject to liquidated
penalty of 1.5% for every month of default from due date. It was further agreed that
should the buyer default in the payment of 3 or 4 monthly installments, forfeiture
Sales, 2003 ( 304 )
proceedings would be governed by existing laws, particularly the Condominium Act. On

18 July 1985, Rillo failed to pay the initial monthly amortization. On 18 August 1985, he
again defaulted in his payment. On 20 September 1985, he paid the first monthly
installment of P7,092.00. On 2 October 1985, he paid the second monthly installment
of P7,092.00. His third payment was on 2 February 1986 but he paid only P5,000.00
instead of the stipulated P7,092.00. On 20 July 1987 or 17 months after Rillos last
payment, Corb Realty informed him by letter that it is cancelling their contract due to
his failure to settle his accounts on time. Corb Realty also expressed its willingness to
refund Rillos money. Corb Realty, however, did not cancel the contract for on 28
September 1987, it received P60,000.00 from Rillo. Rillo defaulted again in his monthly
installment payment. Consequently, Corb Realty informed Rillo through letter that it
was proceeding to rescind their contract. In a letter dated 29 August 1988, it requested
Rillo to come to its office and withdraw P102,459.35 less the rentals of the unit from 1
July 1985 to 28 February 1989. Again the threatened rescission did not materialize. A
compromise was entered into by the parties on 12 March 1989 (Restructure
Outstanding Balance Down to P50,000.00; Payment @ P2,000.00/Month @ 18%
-Monthly- To
Compute No. of Installments; To Pay Titling Plus Any Real Estate Tax Due; Installments
to start 15 April
1989). Rillo once more failed to honor their agreement. Rillo was able to pay P2,000.00
on 25 April 1989 and P2,000.00 on 15 May 1989. On 3 April 1990, Corb Realty sent Rillo
a statement of accounts which fixed his total arrears, including interests and penalties,
to P155,129.00.
When Rillo failed to pay the amount, Corb Realty filed a complaint for cancellation of
the contract to sell with the RTC Pasig. In his answer to the complaint, Rillo averred,
among others, that while he had already paid a total of P149,000.00, Corb Realty could
not deliver to him his individual title to the subject property; that Corb Realty could not
claim any right under their previous agreement as the same was already novated by
their new agreement for him to pay P50,000.00 representing interest charges and other
penalties spread through 25 months beginning April 1989; and that Corb Realtys claim
of P155,129.99 over and above the amount he already paid has no legal basis. After
trial, the RTC held that Corb Realty cannot rescind the Contract to Sell because Rillo
did not commit a substantial breach of its terms. It found that Rillo substantially
complied with the Contract to Sell by paying a total of P154,184.00. It ruled that the
remedy of Corb Realty is to file a case for specific performance to collect the
outstanding balance of the purchase price.
Corb Realty appealed the decision to the Court of Appeals (CA GR CV 39108), which
reversed the decision. It ruled that rescission does not apply as the contract between
the parties is not an absolute conveyance of real property but is a contract to sell; that
Sales, 2003 ( 305 )
the Condominium Act (RA 4726, as amended by RA 7899) does not provide anything on
forfeiture proceedings in cases involving installment sales of condominium units, hence,
it is PD 957 (Subdivision and Condominium Buyers Protective Decree) which should be
applied to the present case. Under PD 957, the rights of a buyer in the event of failure
to pay installment due, other than the failure of the owner or developer to develop the
project, shall be governed by RA 6552 or the Realty Installment Buyer Protection Act
also known as the Maceda Law (enacted on 14 September 1972). The Court thus
declared the contract to sell cancelled and rendered ineffective and ordered Corb
Realty to return 50% of P158,184.00 (or P79,092.00) to Rillo who was ordered to vacate
the subject premises. Rillo appealed pursuant to Rule 45 of the Rules of Court.
The Supreme Court affirmed with modification the decision appealed from, in the sense
that the refund of 50% P158,184.00 or P79,092.00 made in favor of Rillo is deleted;
without costs.
1.
Article 1191 and 1592 do not apply as contract is not an absolute conveyance
of real property but a contract to sell; Payment is a positive suspensive
condition and not a breach; No rescission of an obligation which is still not
existent
The appellate court did not err when it did not apply Articles 1191 and 1592 of
the Civil Code on rescission to the present case. The contract between the parties is not
an absolute conveyance of real property but a contract to sell. In a contract to sell real
property on installments, the full payment of the purchase price is a positive
suspensive condition, the failure of which is not considered a breach, casual or serious,
but simply an event which prevented the obligation of the vendor to convey title from
acquiring any obligatory force. The transfer of ownership and title would occur after
full payment of the purchase price. It was held in Luzon Brokerage Co., Inc. v. Maritime
Building Co., Inc. that there can be no rescission of an obligation that is still nonexistent, the suspensive condition not having happened.
2.
RA 6552, or Maceda Law, applies

Given the nature of the contract of the parties, the appellate court correctly
applied RA 6552, also known as the Maceda Law. TA 6552 recognizes in conditional
sales of all kinds of real estate (industrial, commercial, residential) the right of the seller
to cancel the contract upon non-payment of an installment by the buyer, which is
simply an event that prevents the obligation of the vendor to convey title from
acquiring binding force. It also provides the right of the buyer on installments in case
he defaults in the payment of succeeding installments, i.e. (1) Where he has paid at
least 2 years of installments, (a) To pay, without additional interest, the unpaid
installments due within the total grace period earned by him, which is hereby fixed at
the rate of 1 month grace period for every year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in every 5 years of
the life of the contract and its extensions, if any; or (b) If the contract is cancelled, the
Sales, 2003 ( 306 )
seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to 50% of the total payments made and, after 5 years of
installments, an additional 5% every year but not to exceed 90% of the total payments
made: Provided, That the actual cancellation of the contract shall take place after
cancellation or the demand for rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer. Down payments, deposits or options
on the contract shall be included in the computation of the total number of installments
made; (2) Where he has paid less than two years in installments, (Sec. 4) the seller
shall give the buyer a grace period of not less than 60 days from the date the
installment became due. If the buyer fails to pay the installments due at the expiration
of the grace period, the seller may cancel the contract after 30 days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act.
3.
Rillo not entitled to grace period of 60 days; Corb Realty has right to cancel
contract after 30 days of Rillos receipt of cancellation
Rillo paid less than two years in installment payments, hence, he is only entitled
to a grace period of not less than 60 days from the due date within which to make his
installment payment. Corb Realty, on the other hand, has the right to cancel the
contract after 30 days from receipt by Rillo of the notice of cancellation. The appellate
court did not err when it upheld Corb Realtys right to cancel the subject contract upon
repeated defaults in payment by Rillo.
4.
Novation not presumed; In absence of express agreement, novation occurs

when old and new obligations are incompatible on every point; Contract in
present case not novated
Article 1292 of the Civil Code provides that In order that an obligation may be
extinguished by another which substitutes the same, it is imperative that it be so
declared in unequivocal terms, or that the old and the new obligations be on every
point incompatible with each other. Novation is never presumed. Parties to a contract
must expressly agree that they are abrogating their old contract in favor of a new one.
In the absence of an express agreement, novation takes place only when the old and
the new obligations are incompatible on every point. In the present case, the parties
executed their 12 May 1989 compromise agreement precisely to give life to their
Contract to Sell. It merely clarified the total sum owed by Rillo to Corb Realty with the
view that the former would find it easier to comply with his obligations under the
Contract to Sell. In fine, the compromise agreement can stand together with the
Contract to Sell.
5.
Rillo not entitled to refund of 50% of payments
Sales, 2003 ( 307 )
Under RA 6552, the right of the buyer to a refund accrues only when he has paid
at least 2 years of installments. In the present case, Rillo has paid less than 2 years in
installments, hence, he is not entitled to a refund.
[94]
Romero v. CA [G.R. No. 103577. October 7, 1996.]
Third division, Vitug (J): 4 concur
Facts: Virgilio R. Romero, a civil engineer, was engaged in the business of production,
manufacture and exportation of perlite filter aids, permalite insulation and process
perlite ore. In 1988, Romero and his foreign partners decided to put up a central
warehouse in Metro Manila on a land area of approximately 2,000 sq. m. The project
was made known to several freelance real estate brokers. A day or so after the
announcement, Alfonso Flores and his wife, accompanied by a broker, offered a parcel
of land measuring 1,952 sq. m. Located in Barangay San Dionisio, Paraaque, Metro
Manila, the lot was covered by TCT 361402 in the name of Enriqueta Chua Vda. de
Ongsiong. Romero visited the property and, except for the presence of squatters in the
area, he found the place suitable for a central warehouse. Later, the Flores spouses
called on Romero with a proposal that should he advance the amount of P50,000.00
which could be used in taking up an ejectment case against the squatters, Ongsiong
would agree to sell the property for only P800.00 per sq. m. Romero expressed his
concurrence. On 09 June 1988, a contract, denominated Deed of Conditional Sale,
was executed between Romero and Ongsiong. Flores, in behalf of Ongsiong, forthwith
received and acknowledge a check for P50,000.00 from Romero.
Pursuant to this agreement, Ongsiong filed a complaint for ejectment (Civil Case 7579)
against Melchor Musa and 29 other squatter families with the MTC Paraaque. A few
months later, or on 21 February 1989, judgment was rendered ordering the defendants
to vacate the premises. The decision was handed down beyond the 60-day period
(expiring 09 August 1988) stipulated in the contract. The writ of execution of the
judgment was issued, still later, on 30 March 1989.
In a letter, dated 07 April 1989, Ongsiong sought to return the P50,000.00 she received
from Romero since, she said, she could not get rid of the squatters on the lot. Atty.
Sergio A.F. Apostol, counsel for Romero, refused the tender, citing the favorable
decision and the writ of execution issued pursuant thereto, and expressed Romeros
willingness to underwrite the expenses for the execution of the judgment and
ejectment of the occupants chargeable to the purchase price of the land.
Meanwhile, the Presidential Commission for the Urban Poor (PCUD), through its
Regional Director for Luzon (Viloria), asked the MTC Paraaque for a grace period of 45
days from 21 April 1989 within which to relocate and transfer the squatter families.
Sales, 2003 ( 308 )
Acting favorably on the request, the court suspended the enforcement of the writ of
execution accordingly.
On 08 June 1989, Atty. Apostol reminded Ongsiong on the expiry of the 45-day grace
period and reiterated his clients willingness to underwrite the expenses for the
execution of the judgment and ejectment of the occupants. On 19 June 1989, Atty.
Joaquin Yuseco, Jr., counsel for Ongsion, advised Atty. Apostol that the Deed of
Conditional Sale had been rendered null and void by virtue of his clients failure to evict
the squatters from the premises within the agreed 60-day period. He added that private
respondent had decided to retain the property.
Meanwhile, on 25 August 1989, the MTC issued an alias writ of execution in Civil Case
7579 on motion of Ongsiong but the squatters apparently still stayed on.
On 27 June 1989, Ongsiong prompted by Romeros continued refusal to accept the
return of the P50,000.00 advance payment, filed with the RTC Makati (Branch 133, Civil
Case 89-4394) for a rescission of the deed of conditional sale, plus damages, and for
the consignation of P50,000.00 cash. On 26 June 1990, the RTC rendered decision
holding that Ongsiong had no right to rescind the contract since it was she who
violated her obligation to eject the squatters from the subject property and that
Romero, being the injured party, was the party who could, under Article 1191 of the
Civil Code, rescind the agreement. The lower court, thus dismissed the complaint and
ordered Ongsiong to eject or cause the ejectment of the squatters from the property
and to execute the absolute deed of conveyance upon payment of the full purchase
price by Romero.
Ongsiong appealed to the Court of Appeals. On 29 May 1992, the appellate court
rendered its decision, reversed and set aside the decision appealed from and entered
another declaring he contract of conditional sale of 9 June 1988 cancelled and ordering
Romero to accept the return of the downpayment in the amount of P50,000 deposited
with the trial court; without pronouncement as to cost. Failing to obtain a
reconsideration, Romero filed his petition for review on certiorari before the Supreme
Court.
The Supreme Court reversed and set aside the questioned decision of the Court of
Appeals, and entered another ordering Romero to pay Ongsiong the balance of the
purchase price and the latter to execute the deed of absolute sale in favor of petitioner;
without costs.
1.
Perfected contract of sale, absolute or conditional
Sales, 2003 ( 309 )
A perfected contract of sale may either be absolute or conditional depending on

whether theagreement is devoid of, or subject to, any condition imposed on the
passing of title of the thing to be conveyed or on the obligation of party thereto.
When ownership is retained until the fulfillment of a positive condition the
breach of the condition will simply prevent the duty to convey title from
acquiring an obligatory force. If the condition is imposed on an obligation of a
party which is not complied with, the other party may either refuse to proceed
or waive said condition (Art. 1545, Civil Code). Where, of course, the condition is
imposed upon the perfection of the contract itself, the failure of such condition
would prevent the juridical relation itself from coming into existence.
2.
Real character of a contract, substance more significant than title given to it

by parties
In determining the real character of the contract, the title given to it by the
parties is not as much as significant as its substance. For example, a deed of sale,
although denominated as a deed of conditional sale, may be treated as absolute in
nature, if title to the property sold is not reserved in the vendor or if the vendor is not
granted the right to unilaterally rescind the contract predicated on the fulfillment or
non-fulfillment, as the case may be, of the prescribed condition.
3.
Condition in the context of a perfected contract of sale

The term condition in the context of a perfected contract of sale pertains, in
reality, to the compliance by one party of an undertaking the fulfillment of which would
beckon, in turn, the demandability of the reciprocal prestation of the other party. The
reciprocal obligations referred to would normally be, in the case of vendee, the
payment of the agreed purchase price and, in the case of the vendor, the fulfillment of
certain express warranties (which, in the present case is the timely eviction of the
squatters on the property).
4.
Perfection of a sale; Parties bound to fulfill what is expressly stipulated and

all consequences in keeping with good faith, usage and law
A sale is at once perfected where a person (the seller) obligates himself, for a
price certain, to deliver and to transfer ownership of a specified thing or right to
another (the buyer) over which the latter agrees. From the moment the contract
is perfected, 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. In the present cas,
under the agreement, Ongsiong is obligated to evict the squatters on the
property. The ejectment of the squatters is a condition the operative act of
which sets into motion the period of compliance by Romero of his own
obligation, i.e., to pay the balance of the purchase price.
5.
Options available under Article 1545 belongs to injured party

Sales, 2003 ( 310 )
Ongsiongs failure to remove the squatters from the property within the stipulated
period gives
Romero the right to either refuse to proceed with the agreement or waive that condition
in consonance with Article 1545 of the Civil Code. This option clearly belongs to
petitioner (Romero) and not to private respondent (Ongsiong).
In contracts of sale particularly, Article 1545 of the Civil Code allows the obligee
to choose between proceeding with the agreement or waiving the performance of the
condition. Evidently, Romero has waived the performance of the condition imposed on
Ongsiong to free the property from squatters.
6.
Potestative condition is mixed, and not dependent on the sole will of the
debtor; If condition is imposed on the fulfillment of the obligation and not the
birth thereof, only the condition is avoided and does not affect obligation
itself
The undertaking required of private respondent does not constitute a
potestative condition dependent solely on his will that might, otherwise, be void in
accordance with Article 1182 of the Civil Code but a mixed condition dependent not
on the will of the vendor alone but also of third persons like the squatters and
government agencies and personnel concerned. However, where the so-called
potestative condition is imposed not on the birth of the obligation but on its
fulfillment, only the condition is avoided, leaving unaffected obligation itself.
7.
Rescission by non-injured party not warranted; Article 1191

The right of resolution of a party to an obligation under Article 1191 of the Civil Code is
predicated
on a breach of faith by the other party violates the reciprocity between them. In the
present case, Ongsiongs action for rescission was not warranted as she was not the
injured party. It was Ongsiong who has failed in her obligation under the contract.
Romero did not breach the agreement. He has agreed, in fact, to shoulder the expenses
of the execution of the judgment in the ejectment case and to make arrangement with
the sheriff to effect such execution. Parenthetically, this offer to pay, hiring been made
prior to the demand for rescission, assuming for the sake of argument that such a
demand is proper under Article 1592 of the Civil Code, would likewise suffice to defeat
Ongsiongs prerogative to rescind thereunder.
8.
Petitioner, opting to proceed with sale, may not demand the reimbursement
of the advance payment
When petitioner having opted to proceed with the sale, neither may petitioner
demand its reimbursement from private respondent. Further, private respondent may
not subject it to forfeiture.
Sales, 2003 ( 311 )
[95]
Roque v. Lapuz, 96 SCRA 741 (1980)
[96]
Rubias v. Batiller [G.R. No. L-35702. May 29, 1973.]
First Division, Teehankee (J): 8 concur
Facts: Francisco Militante claimed ownership of a parcel of land located in the Barrio
General Luna, Barotac
Viejo, Iloilo, which he caused to be surveyed on 18-31 July 1934, whereby he was
issued a plan Psu-99791 (containing an area of 171.3561 hectares.) Before the war with
Japan, Militante filed with the CFI Iloilo an application for the registration of title of the
land technically described in Psu-99791 opposed by the Director of Lands, the Director
of Forestry and other oppositors. However, during the war with Japan, the record of the
case was lost before it was heard, so after the war Militante petitioned the Court to
reconstitute the record of the case. The record was reconstituted in the CFI Iloilo (Land
Case R-695, GLRO Rec. 54852). The CFI heard the land registration case on 11
November 1952, and after trial the Court dismissed the application for registration.
Militante appealed to the Court of Appeals (CA-GR 13497-R). Pending the disposal of
the appeal or on 18 June 1956, Militante sold to Domingo Rubias, his son-in-law and a
lawyer by profession, the land technically described in Psu-99791. The sale was duly
recorded in the Office of the Register of Deeds for the Province of Iloilo (Entry 13609) on
14 July 1960. On 22 September 1958, the CA promulgated its judgment confirming the
decision of the trial court dismissing the Application for Registration filed by Militante.
Domingo Rubias declared the land for taxation purposes under Tax Declaration (TD)
8585 for 1957; TD 9533 and TD 10019 for 1961; TD 9868 for 1964, paying the land
taxes under TD 8585 and TD 9533. Militante has also declared the land for taxation
purposes under TD 5172 in 1940, under TD T-86 for 1945, under TD 7122 for 1948, and
paid the land taxes for 1940, for 1945-46, for 1947, for 1947 & 1948, for 1948, and for
1948 and 1949. TD 2434 in the name of Liberato Demontao for the land described
therein was cancelled by TD 5172 of Militante. Demontao paid the land tax under TD
2434 on 20 December 1939 for the years 1938 and 1959. Isaias Batiller had declared
for taxation purposes Lot 2 of Psu-144241 under TD 8583 for 1957 and a portion of Lot
2 under TD 8584 for 1945. TD 8483 was revised by TD 9498 while TD 9584 was
cancelled by TD 9584 both in the name of Batiller. Batiller paid the land taxes for Lot 2
on 9 November 1960 for the year 1945 and 1946, 1950 and 1960 as shown by the
certificate of the treasurer.The land claimed by Batiller as his own was surveyed on 6-7
June 1956, and a plan approved by Director of Lands on 15 November 1956 was issued,
identified as Psu 155241.
Sales, 2003 ( 312 )
On 22 April 1960, Rubias filed a forcible Entry and Detainer case against Batiller in the
Justice of the Peace Court of Barotac Viejo, Iloilo. On May 1961 and after trial, the
Municipal Court of Barotac Viejo decided the case in favor of the Batiller. Rubias
appealed from the decision of the Municipal Court of Barotac Viejo to the CFI Iloilo. On
26 November 1964 and after the trial, the CFI decided the case likewise in favor of
Batiller, holding that he has better right to possess the land in question having been in
the actual possession thereof under a claim of title many years before Militante sold the
land to Rubias.
On 31 August 1964, Rubias filed a suit to recover the ownership and possession of
certain portions of lot under Psu-99791, bought from his father-in-law, Francisco
Militante in 1956, against its present occupant Batiller, who allegedly entered said
portions of the lot in 1945 and in 1959. Rubias prayed also for damages and attorneys
fees. On 17 August 1965, the CFI dismissed the case, the court therein practically
agreeing that the contract between Rubias and Militante was null and void. Rubias filed
a motion for reconsideration, which was likewise denied by the lower court on 14
January 1966. Thereafter, Rubias filed an appeal before the Court of Appeals, which
certified said appeal to the Supreme as involving purely legal questions.
The Supreme Court affirmed the order of dismissal appealed, with costs against Rubias.
1.
Pre-trial practically amounted to a full dress trial when parties agreed and
stipulated on facts and submitted their respective documentary exhibits
The pre-trial conference held by the trial court at which the parties with their
counsel agreed and stipulated on the material and relevant facts and submitted their
respective documentary exhibits as referred to in the pre-trial order, practically
amounted to a full dress trial which placed on record all the facts and exhibits
necessary for adjudication of the case. Rubias evidence dealing with the source of the
alleged right and title of Militantes predecessors are already made of record. The chain
of Militantes alleged title and right to the land allegedly tracing back to Demontano in
the land registration case and was rejected by the Iloilo land registration court, the
decision of which was affirmed by final judgment by the Court of Appeals. Batillers
evidence dealing with his and his ancestors continuous, open, public and peaceful
possession in the concept of owner of the land and the Director of Lands approval of
his survey plan thereof, are likewise already duly established facts of record, in the land
registration case as well as in the ejectment case wherein the Iloilo CFI recognized the
superiority of Batillers right to the land as against Rubias. Therefore, the lower court
did not err in dismissing Rubias complaint upon Batillers motion after the pre-trial.
2.
Rubias had no cause of action
Sales, 2003 ( 313 )
Rubias complaint, to be declared absolute owner of the land and to be restored

to possession thereof with damages, was bereft of any factual or legal basis. The CAs
final judgment affirming the dismissal of Militantes application of registration made it
conclusive that Militante lack rightful claim or title to the land. There was no right or
title to the land that could be transferred or sold by Militantes purported sale in favor
of Rubias in 1956.
3.
4.
Purchase of a lawyer of a property in litigation prohibited; Contract void and

cannot be ratified
The purchase by a lawyer of the property in litigation from his client is
categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code (The
following persons cannot acquire any purchase, even at a public or judicial auction,
either in person or through the mediation of another xxx [5] Justices, judges,
prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within whose jurisdiction or
territory their exercise their respective functions; this prohibition includes the act of
acquiring by assignment and shall apply to lawyers, with respect to the property and
rights which may be the object of any litigation in which they may take part by virtue of
their profession.) and that consequently, Rubias purchase of the property in litigation
from his client(and fatherin-law) was void and could produce no legal effect, by virtue
of Article 1409, paragraph (7) of our Civil Code which provides that contracts expressly
prohibited or declared void by law are inexistent and void from the beginning and
that (T)hese contracts cannot be ratified. Neither can the right to set up the defense of
illegality be waived.
Wolfson v. Estate of Martinez superceded by case of Director of Lands v.
Abagat
The 1911 case of Wolfson v. Estate of Martinez which held that a sale of property
in litigation to the party litigants lawyer its not void but voidable at the election of the
vendor has been superseded by the 1929 case of Director of Lands vs. Abagat. In this
later case of Abagat, the Court expressly cited two antecedent cases involving the
same transaction of purchase of property in litigation by the lawyer which was
expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article
1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not
by the vendor-client but by the adverse parties against whom the lawyer was seeking
to enforce his rights as vendee thus acquired. Thus, the Court in Abagat affirmed the
invalidity and nullity of the lawyers purchase of the land in litigation from his client,
ordered the issuance of a writ of possession for the return of the land by the lawyer to
the adverse parties without reimbursement of the price paid by him and other
expenses, and ruled that the purchaser-lawyer is a lawyer and is presumed to know the
law. He must, therefore, from the beginning, have been well aware of the defect in his
title and is, consequently, a possessor in bad faith.
Sales, 2003 ( 314 )
5.
Prohibitions under Article 1491 NCC (Article 1459 Spanish Civil Code)
Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code)
prohibits in its six paragraphs certain persons, by reason of the relation of trust or their
peculiar control over the property, from acquiring such property in their trust or control
either directly or indirectly and even at a public or judicial auction, as follows: (1)
guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial
officers and employees, prosecuting attorneys, and lawyers; and (6) others especially
disqualified by law.
6.
Wolfson case decided in line with Manresas view

In Wolfson, the Court expressly reserved decision on whether or not the
judgment in question actually falls within the prohibition of the article and held only
that the sales voidability can not be asserted by one not a property to the transaction
or his representative, citing from Manresa that (C)onsidering the question from the
point of view of the civil law, the view taken by the code, the Court must limit ourselves
to classifying as void all acts done contrary to the express prohibition of the statute.
Now then: As the code does not recognize such nullity by the mere operation of law,
the nullity of the acts hereinbefore referred to must be asserted by the person having
the necessary legal capacity to do so and decreed by a competent court.
7.
Manresas view not applicable under the NCC; Spanish Supreme Court and
modern authors have veered away from Manresa on this point
The reason given by Manresa in considering such prohibited acquisitions under
Article 1459 of the Spanish Civil Code as merely voidable at the instance and option of
the vendor and not void is that the Code does not recognize such nullity de pleno
derecho. This is no longer true and applicable to the Philippine Civil Code which does
recognize the absolute nullity of contracts whose cause, object, or purpose is contrary
to law, morals, good customs, public order or public policy or which are expressly
prohibited or declared void by law and declares such contracts inexistent and void
from the beginning.
The Supreme Court of Spain and modern authors have likewise veered from Manresas
view of the Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme
Court of Spain ruled that the prohibition of Article 1459 of the Spanish Civil Code is
based on public policy, that violation of the prohibition contract cannot be validated by
confirmation or ratification. The criterion of nullity of such prohibited contracts under
Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) as a matter of
public order and policy as applied by the Supreme Court of Spain to administrators and
agents should certainly apply with greater reason to judges, judicial officers, fiscals and
lawyers under paragraph 5 of the codal article. [also see viewpoints of Gullon
Ballesteros in Curso de Derecho Civil (Contratos Especiales 1968), of Perez Gonzales,
and of Castan]
Sales, 2003 ( 315 )
8.
Nullity of prohibited contracts definite and permanent and cannot be cured

by ratification; If object has subsequently become legal, such may be subject
to second contract
The nullity of prohibited contracts is definite and permanent and cannot be cured
by ratification. The public interest and public policy remain paramount and do not
permit of compromise or ratification. In this aspect, the permanent disqualification of
public and judicial officers and lawyers grounded on public policy differs from the first
three cases of guardians, agents and administrators (Article 1491, Civil Code), as to
whose transactions, it has been opined that they may be ratified by means of and in
the form of a new contract, in which case its validity shall be determined only by the
circumstances at the time of execution of such new contract. The causes of nullity
which have ceased to exist cannot impair the validity of the new contract. Thus, the
object which was illegal at the time of the first contract, may have already become
lawful at the time of the ratification or second contract; or the service which was
impossible may have become possible; or the intention which could not be ascertained
may have been clarified by the parties. The ratification or second contract would then
be valid from its execution; however, it does not retroact to the date of the first
contract.
9.
Who may invoke the inexistence of contract; Proper action to be filed

Tolentino, in his treaties on the Civil Code, stated that (as to persons affected)
any person may invoke the inexistence of the contract whenever juridical effects
founded thereon are asserted against him. Thus, if there has been a void transfer of
property, the transferor can recover it by the accion reivindicatoria; and any possessor
may refuse to deliver it to the transferee, who cannot enforce the contract. Creditors
may attach property of the debtor which has been alienated by the latter under a void
contract; a mortgagee can allege the inexistence of a prior encumbrance; a debtor can
assert the nullity of an assignment of credit as a defense to an action by the assignee.
He further stated that (as to action on contract) even when the contract is void
or inexistent, an action is necessary to declare its inexistence, when it has already been
fulfilled. Nobody can take the law into his own hands; hence, the intervention of the
competent court is necessary to declare the absolute nullity of the contract and to
decree the restitution of what has been given under it. The judgment, however, will
retroact to the very day when the contract was entered into. If the void contract is still
fully executory, no party need bring an action to declare its nullity; but if any party
should bring an action to enforce it, the other party can simply set up the nullity as a
defense.
[97]
Sanchez vs. Rigos [G.R. No. L-25494. June 14, 1972.]
En Banc, Concepcion (J): 7 concur, 1 took no part, 1 concurs in separate opinion
Sales, 2003 ( 316 )
Facts: On 3 April 1961, Nicolas Sanchez and Severina Rigos executed an instrument,
entitled Option to
Purchase, whereby Mrs. Rigos agreed, promised and committed . . . to sell to
Sanchez, for the sum of
P1,510.00, a parcel of land situated in the barrios of Abar and Sibot, municipality of San
Jose, province of Nueva Ecija, and more particularly described in TCT NT-12528 of said
province, within two (2) years from said date with the understanding that said option
shall be deemed terminated and elapsed, if Sanchez shall fail to exercise his right to
buy the property within the stipulated period. Inasmuch as several tenders of payment
of the sum of P1,510.00, made by Sanchez within said period, were rejected by Mrs.
Rigos, on 12 March 1963, the former deposited said amount with the CFI Nueva Ecija
and commenced against the latter the present action, for specific performance and
damages. On 11 February 1964, after the filing of defendants answer, both parties,
assisted by their respective counsel, jointly moved for a judgment on the pleadings.
Accordingly, on 28 February 1964, the lower court rendered judgment for Sanchez,
ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his
favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay
P200.00, as attorneys fees, and the costs. Hence, the appeal by Mrs. Rigos to the Court
of Appeals, which case was the certified by the latter court to the Supreme Court upon
the ground that it involves a question purely of law.
1.
2.
The Supreme Court affirmed the decision appealed from, with costs against Severina
Rigos.
Option to purchase not a contract to buy and sell
The option did not impose upon Sanchez the obligation to purchase Rigos
property. The contract denominated as Option to Purchase is not a contract to buy
and sell, it merely granted Sanchez an option to buy, and both parties so understood
it, as indicated by the caption given by them to said instrument. Under the provisions
thereof, Rigos agreed, promised and committed herself to sell the land therein
described to Sanchez for P1,510.00, but there is nothing in the contract to indicate that
her aforementioned agreement, promise and undertaking is supported by a
consideration distinct from the price stipulated for the sale of the land.
Article 1354 applicable to contracts in general, Article 1479 refers to sales in
particular
Relying upon Article 1354 of the Civil Code, which provides that when the offerer
has allowed the offeree a certain period to accept, the offer may be withdrawn at any
time before acceptance by communicating such withdrawal, except when the option is
founded upon consideration, as something paid or promised, the lower court
presumed the existence of a consideration distinct from the price. It must be noted
however that Article 1354 applies to contracts in general, whereas the second
Sales, 2003 ( 317 )
paragraph of Article 1479 refers to sales in particular, and, more specifically, to an

accepted unilateral promise to buy or to sell. In other words, Article 1479 is controlling
in the present case. Article 1479 provides that A promise to buy and sell a determinate
thing for a price certain is reciprocally demandable. An accepted unilateral promise to
buy or to sell a determinate thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
3.
Article 1479 imposes condition for a unilateral promise to be binding; Burden

of proof
In order that a unilateral promise may be binding upon the promisor, Article
1479 requires the concurrence of a condition, namely, that the promise be supported
by a consideration distinct from the price. Accordingly, the promisee can not compel
the promisor to comply with the promise, unless the former establishes the existence of
said distinct consideration. In other words, the promisee has the burden of proving such
consideration. In the present case, Sanchez has not even alleged the existence thereof
in his complaint.
4.
Implied admission of the truth of the other partys averment if party joins in
the petition for a judgment based on the pleadings without introducing
evidence
In the case of Bauermann v. Casas (14 March 1908), it was held that one who
prays for judgment on the pleadings without offering proof as to the truth of hie own
allegations, and without giving the opposing party an opportunity to introduce
evidence, must be understood to admit the truth of all the material and relevant
allegations of the opposing party, and to rest his motion for judgment on those
allegations taken together with such of his own as are admitted in the pleading. (La
Yebana Company vs. Sevilla, 9 Phil. 210). This view was reiterated in Evangelista
V. De la Rosa and Mercys Incorporated v. Herminia Verde. In the present case,
Rigos explicitly averred in her answer, and pleaded as a special defense, the absence of
said consideration for her promise to sell and, by joining in the petition for a judgment
on the pleadings, Sanchez has impliedly admitted the truth of said averment in Rigos
answer.
5.
Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. case
The Court in the Southwestern Sugar case held that under article 1479 of the
new Civil Code an option to sell, or a promise to buy or to sell, as used in said article,
to be valid must be supported by a consideration distinct from the price. This is clearly
inferred from the context of said article that a unilateral promise to buy or to sell, even
if accepted, is only binding if supported by a consideration. In other words, an
accepted unilateral promise can only have a binding effect if supported by a
consideration, which means that the option can still be withdrawn, even if accepted, if
the same is not supported by any consideration. Here it is not disputed that the option
is without consideration. It can therefore be withdrawn notwithstanding the acceptance
Sales, 2003 ( 318 )
made of it by appellee. The Court held that the general rule regarding offer and
acceptance under Article 1324 must be interpreted as modified by the provision of
article 1479, which applies to a promise to buy and sell specifically. In short, the rule
requires that a promise to sell to be valid must be supported by a consideration distinct
from the price.
6.
Atkins, Kroll and Co. v. Cua Hian Tek

In the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, decided later than
Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., the Court saw no
distinction between Articles 1324 and 1479 of the Civil Code and applied the former
where a unilateral promise to sell similar to the one sued upon here was involved,
treating such promise as an option which, although not binding as a contract in itself for
lack of a separate consideration, nevertheless generated a bilateral contract of
purchase and sale upon acceptance.
7.
Option is unilateral
Furthermore, an option is unilateral: a promise to sell at the price fixed whenever
the offeree should decide to exercise his option within the specified time. After
accepting the promise and before he exercises his option, the holder of the option is not
bound to buy. He is free either to buy or not to buy later. In the present case, however,
upon accepting Rigos offer a bilateral promise to sell and to buy ensued, and Sanchez
ipso facto assumed the obligation of a purchaser. He did not just get the right
subsequently to buy or not to buy. It was not a mere option then; it was bilateral
contract of sale.
8.
Option without consideration is a mere offer of a contract of sale, which is

not binding until accepted
If the option is given without a consideration, it is a mere offer of a contract of
sale, which is not binding until accepted. If, however, acceptance is made before a
withdrawal, it constitutes a binding contract of sale, even though the option was not
supported by a sufficient consideration. . . . (77 Corpus Juris Secundum p. 652. See
also 27 Ruling Case Law 339 and cases cited.) It can be taken for granted that the
option contract was not valid for lack of consideration. But it was, at least, an offer to
sell, which was accepted by latter, and of the acceptance the offerer had knowledge
before said offer was withdrawn. The concurrence of both acts the offer and the
acceptance could at all events have generated a contract, if none there was before
(arts. 1254 and 1262 of the Civil Code; Zayco vs. Serra, 44 Phil. 331.) In other words,
since there may be no valid contract without a cause or consideration, the promisor is
not bound by his promise and may, accordingly, withdraw it. Pending notice of its
withdrawal, his accepted promise partakes, however, of the nature of an offer to sell
which, if accepted, results in a perfected contract of sale.
Sales, 2003 ( 319 )
9.
Proper construction of conflicting provisions of the same law; Harmonize to

implement the same principle rather than to create exceptions
In line with the cardinal rule of statutory construction that, in construing different
provisions of one and the same law or code, such interpretation should be favored as
will reconcile or harmonize said provisions and avoid a conflict between the same.
Indeed, the presumption is that, in the process of drafting the Code, its author has
maintained a consistent philosophy or position. Moreover, the decision in Southwestern
Sugar & Molasses Co. v. Atlantic Gulf & pacific Co., holding that Art. 1324 (on the
general principles on contracts) is modified by Art. 1479 (on sales) of the Civil Code, in
effect, considers the latter as an exception to the former, and exceptions are not
favored, unless the intention to the contrary is clear, and it is not so, insofar as said 2
articles are concerned. What is more, the reference, in both the second paragraph of
Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a
consideration, strongly suggests that the 2 provisions intended to enforce or implement
the same principle.
10.
Atkins, Kroll & Co. case modifies or abandons Southwestern Sugar case
insofar as to inconsistencies
Upon mature deliberation, the Court is of the considered opinion that it should,
as it hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that,
insofar all inconsistent therewith, the view adhered to in the South western Sugar &
Molasses Co. case should be deemed abandoned or modified.
[98]
Siy Cong Bieng and Co. vs. Hongkong and Shanghai Banking Corp. [G.R. No.
34655. March 5, 1932.] En Banc, Ostrand (J): 6 concur
Facts: Siy Cong Bieng & Co., a corporation engaged in business generally, and
Hongkong & Shanghai Banking Corporation, a foreign bank authorized to engage in the
banking business in the Philippines, are domiciled in the City of Manila. On 25 June
1926, certain negotiable warehouse receipts were pledged by Otto Ranft to the bank to
secure the payment of his preexisting debts to the latter (Siy Cong Bieng as depositor:
1707, Public Warehouse Co., 27 bales; 133, W.F. Stevenson Co, 67 bales; 1722, Public
Warehouse Co., 60 bales; 1723, W.F. Stevenson Co, 4 bales; 1634, The Philippine
Warehouse Company, 99 bales; 1702, The Philippine Warehouse Company, 39 bales. O.
Ranft as depositor: 1918, Public Warehouse Co, 166 bales;
2, Siy Cong Bieng & Co. Inc., 2 bales). The baled hemp covered by the warehouse
receipts was worth
P31,635; receipts numbers 1707, 133, 1722, 1723, 1634, and 1702 being endorsed in
blank by Siy Cong Bieng and Otto Ranft, and numbers 1918 and 2, by Otto Ranft alone.
On 25 June 1926, Ranft called at the office of Siy Cong Bieng to purchase hemp (abaca),
and he was offered the bales of hemp as described in the quedans. The parties agreed
to the price (P31,645), and on the same date the quedans, together with the covering
Sales, 2003 ( 320 )
invoice, were sent to Ranft, without having been paid for the hemp, but Siy Cong
Biengs understanding was that the payment would be made against the same
quedans, and it appears that in previous transactions of the same kind between the
bank and Siy Cong Bieng, quedans were paid one or two days after their delivery to
them. In the evening of the day upon which the quedans in question were delivered to
the bank, Ranft died suddenly at his home in the city of Manila, and when Siy Cong
Bieng found that such was the case, it immediately demanded the return of the
quedans, or the payment of the value, but was told that the quedans had been sent to
the bank as soon as they were received by Ranft.
Siy Cong Bieng filed a claim for the sum of P31,645 (the value of 464 bales of hemp
deposited in certain bonded warehouses) in the intestate proceedings of the estate of
the deceased Otto Ranft, which on an appeal from the decision of the committee on
claims, was allowed by the CFI in case 31372 (City of Manila). In the meantime,
demand had been made by Siy Cong Bieng on the bank for the return of the quedans
(warehouse receipts), or their value, which demand was refused by the bank on the
ground that it was a holder of the quedans in due course. Thereupon Siy Cong Bieng
filed its first complaint against the bank, wherein it alleged that it had sold the
quedans in question to the deceased Ranft for cash, but that the said Ranft had not
fulfilled the conditions of the sale. Later on, Siy Cong Bieng filed an amended
complaint, wherein they changed the word sold referred to in the first complaint to
the words attempted to sell. Upon trial the judge of the lower court rendered
judgment in favor of Siy Cong Bieng.
The Supreme Court reversed the appealed judgment and absolved the bank from the
complaint; Without costs.
1.
Circumstances involving the quedans

The quedans in question were negotiable in form. They were pledged by Otto
Ranft to the bank to secure the payment of his preexisting debts to said bank. Such of
the quedans as were issued in the name of Siy Cong Bieng were duly endorsed in blank
by Siy Cong Bieng and by Otto Ranft. The two remaining quedans which were issued
directly in the name of Otto Ranft were also duly endorsed in blank by him.
2.
Quedans were received by the bank to secure the payment of Ranfts

preexisting debts
When the quedans were negotiated, Otto Ranft was indebted to the Hongkong &
Shanghai Banking Corporation in the sum of P622,753.22, which indebtedness was
partly covered by quedans. He was also being pressed to deposit additional payments
as a further security to the bank.
Sales, 2003 ( 321 )
3.
No evidence that bank is bound to pay back Ranft the amount of the
quedans; On the delivery of the quedans, indorser does not own property
anymore unless he liquidated his debt with the bank
It has been the practice of the bank in its transactions with Ranft that the value
of the quedans has been entered in the current accounts between Ranft and the bank,
but there is no evidence to the effect that the bank was at any time bound to pay back
to Ranft the amount of any of the quedans. There is also nothing in the record to show
that the bank has promised to pay the value of the quedans neither to Ranft nor to Siy
Cong Bieng. On the contrary, as stated in the stipulation of facts, the negotiable
warehouse receipts were pledged by Otto Ranft to the Hongkong & Shanghai
Banking Corporation to secure the payment of his preexisting debts to the latter, and
taking into consideration that the quedans were negotiable in form and duly endorsed
in blank by Siy Cong Bieng and by Otto Ranft, it follows that on the delivery of the
quedans to the bank they were no longer the property of the indorser unless he
liquidated his debt with the bank.
4.
No compelling reason to compel bank to investigate indorser

There is nothing in the record which in any manner would have compelled the
bank to investigate the indorser, especially as to his authority to negotiate the
quedans. The bank had a perfect right to act as it did, and its action is in accordance
with sections 47, 38, and 40 of the Warehouse Receipts Act (Act 2137).
5.
Section 47 of the Warehouse Receipts Act; When negotiation not impaired by

fraud, mistake or duress
Section 47 (When negotiation not impaired by fraud, mistake, or duress) provides
that the validity of the negotiation of a receipt is not impaired by the fact that such
negotiation was a breach of duty on the part of the person making the negotiation, or
by the fact that the owner of the receipt was induced by fraud, mistake, or duress to
intrust the possession or custody of the receipt to such person, if the person to whom
the receipt was negotiated, or a person to whom the receipt was subsequently
negotiated, paid value therefor, without notice of the breach of duty, or fraud, mistake,
or duress.
6.
Section 38 of the Warehouse Receipts Act; Negotiation of negotiable receipts

by indorsement
Section 38 (Negotiation of negotiable receipts by indorsement) provides that a
negotiable receipt may be negotiated by the indorsement of the person to whose order
the goods are, by the terms of the receipt, deliverable. Such indorsement may be in
blank, to bearer or to a specified person. . . Subsequent negotiation may be made in
like manner.
7.
Section 40 of the Warehouse Receipts Act; Who may negotiate a receipt
Sales, 2003 ( 322 )
Section 40 (Who may negotiate a receipt) provides that a negotiable receipt

may be negotiated (a) By the owner thereof, or (b) By any person to whom the
possession or custody of the receipt has been entrusted by the owner, if, by the terms
of the receipt, the warehouseman undertakes to deliver the goods to the order of the
person to whom the possession or custody of the receipt has been entrusted, or if at
the time of such entrusting the receipt is in such form that it may be negotiated by
delivery.
8.
Rights of bank over the quedans after indorsement; Section 41 of the

Warehouse Receipts Act
The rights the bank acquired over the quedans after indorsement and delivery to
it by Ranft are covered by Section 41 of the Warehouse Receipt Act. Section 41 (Rights
of person to whom a receipt has been negotiated) provides that a person to whom a
negotiable receipt has been duly negotiated acquires thereby: (a) Such title to the
goods as the person negotiating the receipt to him had or had ability to convey to a
purchaser in good faith for value, and also such title to the goods as the depositor of
person to whose order the goods were to be delivered by the terms of the receipt had
or had ability to convey to a purchaser in good faith for value.
9.
Use of warehouse receipts as documents of title; Intrusting receipts more

than delivery, it is to intrust title to the goods; Purchasers for value entitled
to rely on representation despite breach of trust and agreement
In the case of the Commercial National Bank of New Orleans vs. CanalLouisiana Bank & Trust
Co. (239 U. S., 520), it was observed that one who takes by trespass or a finder is not
included within the description of those who may negotiate. (Report of Commissioner
on Uniform State Laws, January 1, 1910, p. 204.) Aside from this, the intention is plain
to facilitate the use of warehouse receipts as documents of title. Under Section 40, the
person who may negotiate the receipt is either the owner thereof, or a person to
whom the possession or custody of the receipt has been intrusted by the owner if the
receipt is in the form described. The warehouse receipt represents the goods, but the
intrusting of the receipt, as stated, is more than the mere delivery of the goods; it is a
representation that the one to whom the possession of the receipt has been so
intrusted has the title to the goods. By Section 47, the negotiation of the receipt to a
purchaser for value without notice is not impaired by the fact that it is a breach of duty,
or that the owner of the receipt was induced by fraud, mistake, or duress to intrust
the receipt to the person who negotiated it. And, under Section 41, one to whom the
negotiable receipt has been duly negotiated acquires such title to the goods as the
person negotiating the receipt to him, or the depositor or person to whose order the
goods were deliverable by the terms of the receipt, either had or had ability to convey
to a purchaser in good faith for value. The clear import of these provisions is that if the
Sales, 2003 ( 323 )
owner of the goods permits another to have the possession or custody of negotiable
warehouse receipts running to the order of the latter, or to bearer, it is a representation
of title upon which bona fide purchasers for value are entitled to rely, despite breaches
of trust or violations of agreement on the part of the apparent owner.
10.
Siy Cong Bieng estopped to deny bank had valid title to the quedans
Siy Cong Bieng is estopped to deny that the bank had a valid title to the quedans
for the reason that Siy Cong Bieng had voluntarily clothed Ranft with all the attributes
of ownership and upon which the bank relied.
11.
Equitable estoppel; Where one or two innocent persons must suffer a loss, he
who by his conduct made the loss possible must bear it
In the National Safe Deposit vs. Hibbs (229 U. S., 391), certain certificates of
stock were pledged as collateral by the defendant in error to the bank, which
certificates were converted by one of the trusted employees of the bank to his own use
and sold by him. The stock certificates were unqualifiedly endorsed in blank by the
defendant when delivered to the bank. The Supreme Court of the United States applied
the familiar rule of equitable estoppel that where one of two innocent persons must
suffer a loss he who by his conduct made the loss possible must bear it. Thus, when the
broker obtained the stock certificates, containing all the indicia of ownership and
possible of ready transfer, from one who had possession with the banks consent, and
who brought the certificates to him, apparently clothed with the full ownership thereof
by all the tests usually applied by business men to gain knowledge upon the subject
before making a purchase of such property. On the other hand, the bank, for a
legitimate purpose, with confidence in one of its own employees, instrusted the
certificates to him, with every evidence of title and transferability upon them. The
banks trusted agent, in gross breach of his duty, whether with technical criminality or
not is unimportant, took such certificates, thus authenticated with evidence of title, to
one who, in the ordinary course of business, sold them to parties who paid full value for
them. In such case we think the principles which underlie equitable estoppel place the
loss upon him whose misplaced confidence has made the wrong possible.
12.
No remedy available to Siy Cong Bieng

Siy Cong Bieng has suffered the loss of the quedans, but there is now no remedy
available to it. The bank is not responsible for the loss; the negotiable quedans wee
duly negotiated to the bank and as far as the record shows, there has been no fraud on
the part of the bank.
[99]
Soriano, et. al. v. Bautista, et. al. [G.R. No. L-15752. December 29, 1962.]
Bautista, et. al. v. Soriano, et. al. [G.R. No. L-17457.
December 29, 1962.] En Banc, Makalintal (J): 9 concur
Sales, 2003 ( 324 )
Facts: Spouses Basilio Bautista and Sofia de Rosas are the absolute and registered
owners of a parcel of land, situated in Teresa, Rizal (OCT 3905, Register of Deeds of
Rizal). On 30 May 1956, the said spouses for and in consideration on the sum of P1,800,
signed a document entitled Kasulatan Ng Sanglaan in favor of Ruperto Soriano and
Olimpia de Jesus. Simultaneously with the signing of the deed, the spouses Bautista
and de Rosas transferred the possession of the said land to Soriano and de Jesus who
have been and are still in possession of the said property and have since that date
been and are cultivating the said land and have enjoyed and are still enjoying the
produce thereof to the exclusion of all other persons. Sometimes after 30 May 1956,
the spouses Bautista and de Rosas received from Soriano and de Jesus, the sum of
P450.00 pursuant to the conditions agreed upon in the document for which no receipt
was issued and which was returned by the spouses sometime on 31 May 1958. On 13
May 1958, a certain Atty. Angel O. Ver wrote a letter to the spouses Bautista informing
the said spouses that his clients Soriano and de Jesus have decided to buy the parcel of
land in question pursuant to paragraph 5 of the document in question (That it has
likewise been agreed that if the financial condition of the mortgagees will permit, they
may purchase said land absolutely on any date within the two-year term of this
mortgage at the agreed price of P3,900.00.). The spouses in spite of the receipt of the
letter refused to comply with the demand contained therein.
On 31 May 1958, Soriano and de Jesus filed before the Trial Court Civil Case 5023,
praying that they be allowed to consign or deposit with the Clerk of Court the sum of
P1,650.00 as the balance of the purchase price of the parcel of land in question. After
due hearing, judgment be rendered ordering Bautista and de Rosas to execute an
absolute deed of sale of the said property in their favor, plus damages.
On 9 June 1958, spouses Bautista and de Rosas filed a complaint against Soriano and
de Jesus, which case after hearing was dismissed for lack of jurisdiction. On 5 August
1959, the spouses Bautista and de Rosas again filed a case in the CFI against Soriano
and de Jesus asking the Court to order Soriano and de Jesus to accept the payment of
the principal obligation and release the mortgage and to make an accounting of the
harvest for the two harvest seasons (1956-1957). The two cases, were by agreement of
the parties assigned to one branch so that they can be tried jointly. On 10 March 1959,
the CFI Rizal, after a joint trial of both cases, ordered Bautista and de Rosas to execute
a deed of sale covering the property in question in favor of Soriano and de Jesus upon
payment by the latter of P1,650.00 which is the balance of the price agreed upon, i.e.
P3,900.00, and the amount previously received by way of loan by the said spouses from
Soriano and de Jesus, to pay the sum of P500.00 by way of attorneys fees, and to pay
the costs.
The Supreme Court affirmed the judgment appealed from, with costs.
Sales, 2003 ( 325 )
1.
Mortgagors right to redeem defeasible due to stipulation on option to buy

While the transaction is undoubtedly a mortgage and contains the customary
stipulation concerning redemption, it carries the added special provision, which renders
the mortgagors right to redeem defeasible at the election of the mortgagees. There is
nothing illegal or immoral in this. It is simply an option to buy, sanctioned by Article
1479 of the Civil Code, which states: A promise to buy and sell a determinate thing for
a price certain is reciprocally demandable. An accepted unilateral promise to buy or to
sell a determinate thing for a price certain is binding upon the promisor if the promise is
supported by a consideration distinct from the price.
2.
Promise to sell supported by same consideration of the mortgage, which is

distinct from which would support the sale; Continuing offer
In the present case, the mortgagors promise to sell is supported by the same
consideration as that of the mortgage itself, which is distinct from that which would
support the sale, an additional amount having been agreed upon, to make up the entire
price of P3,900.00, should the option be exercised. The mortgagors promise was in the
nature of a continuing offer, non-withdrawable during a period of two years, which upon
acceptance by the mortgagees gave rise to a perfected contract of purchase and sale.
Inigo vs. CA case affirms right of appellees for specific performance for the
execution of deed of sale
In the case of Iigo vs. Court of Appeals (96 Phil., 37; 50 O.G. 11 5281), it was
held that a stipulation in a contract of mortgage to sell the property to the mortgagee
does not bind the same but creates only a personal obligation on the part of the
mortgagor. The citation, confirms the position of the appellees, who are not enforcing
any real right to the disputed land but are rather seeking to obtain specific performance
of a personal obligation, namely, the execution of a deed of sale for the price agreed
upon, the corresponding amount to cover which was duly deposited in court upon the
filing of the complaint.
3.
4.
Tender ineffective as preemptive right to purchase by other party has been

exercised
The tender of the sum of P1,800 to redeem the mortgage by Bautista and de
Rosas was ineffective for other purpose intended. Such tender must have been made
after the option to purchase had been exercised by Soriano and de Jesus (Civil Case 99
was filed on 9 June 1958, only to be dismissed for lack of jurisdiction). Bautistas and de
Rosas offer to redeem could be defeated by Sorianos and de Jesus preemptive right to
purchase within the period of 2 years from 30 May 1956. Such right was availed of and
Bautista and de Rosas were accordingly notified by letter dated 13 May 1958, which
was received by them on the following May 22. Offer and acceptance converged and
gave rise to a perfected and binding contract of purchase and sale.
[100]
Sales, 2003 ( 326 )
Sta. Ana vs. Hernandez [G.R. No. L-16394. December 17, 1966.]
En Banc, Reyes JBL (J): 8 concur, 1 took no part
Facts: Spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, owned a 115,850-sq.m.
parcel of land situated in barrio Balasing, Sta. Maria, Bulacan, and covered by TCT T3598. On 28 May 1954, they sold two (2) separate portions of the land for P11,000.00
to Rosa Hernandez. These portions were described in the deed of sale as the northern
lot (N: Maria Perez and Aurelio Perez, S: adjoining lot [Sta. Ana], E: Mariano Flores and
Emilio Ignacio, W: Cornelio Ignacio; 12,500 sq.m.) and eastern lot (N: Rosa Hernandez,
E: Domingo and Antonio Hernandez, S: Sta. Maria-Tigbi Road; W: adjoining lot [Sta.
Ana]; 26,500 sq.m.) After the sale (there were 2 other previous sales to different
vendees of other portions of the land), the spouses caused the preparation of a
subdivision plan, of the entire land by a surveyor, whole subdivision plan Psd-43187,
was approved on 13 January 1955 by the Director of Lands. Rosa Hernandez, however,
unlike the previous vendees, did not conform to the plan and refused to execute an
agreement of subdivision and partition for registration with the Register of Deeds of
Bulacan; and she, likewise, refused to vacate the areas that she had occupied. Instead,
she caused the preparation of a different subdivision plan, which was approved by the
Director of Lands on 24 February 1955. This plan, Psd-42844, tallied with the areas that
Rosa Hernandez had actually occupied.
On 28 February 1955, the spouses filed suit against Rosa Hernandez in the CFI Bulacan
(Civil Case 1036), claiming that Hernandez was occupying an excess of 17,000 sq. m. in
area of what she had bought from them. Hernandez, on the other hand, claimed that
the alleged excess was part of the areas that she bought. The only question determined
is whether or not the spouses had sold two portions without clear boundaries but with
exact areas (12,500 sq. m. and 26.000 sq. m.) at the rate of P0.29 per square meter or
two portions, the areas of which were not definite but which were well defined on the
land and with definite boundaries and sold for the lump sum of P11,000.00. Finding for
the spouses, the said court ordered Hernandez, among other things, to vacate the
excess partitions actually occupied by her and to confine her occupation only to Lots 4a and 4b as shown in the plan of the spouses.
Not satisfied with the judgment, Hernandez appealed to the Court of Appeals. The Court
of Appeals (CA-GR 20582-R) dismissed the complaint and declared Rosa Hernandez the
owner of lots 4-a and 4-b in her plan, Psd-42844; in effect reversing the decision of the
CFI Bulacan. Hence, the appeal.
The Supreme Court affirmed the decision of the Court of Appeals, with costs against
Jose Santa Ana, Jr. and Lourdes Sto. Domingo.
1.
Witness testimony: Boundaries prevail over area
Sales, 2003 ( 327 )
Gonzalo V. Ignacio, the notarial officer before whom the contract of sale was
executed, testified that Hernandez complained to him and Sta. Ana to the effect that
the areas stated in the contract were less than the actual areas of the parcels of land
being sold. Ignacio assured her that the area stated in the document will not be the
one to prevail but the one to prevail is the boundary of the land which you already
know. Sta. Ana being the nephew of Hernandez, and the formers assurance probably
appeased the latter against insisting in the correction of the areas stated in the
contract of sale.
2.
Witness testimony: Purchase price always lump sums

Two witnesses testified for Hernandez. Jesus Policarpio divulged that the same
parcels of land involved in this case were previously offered to him by Sta. Ana for the
single purchase price of P12,000.00. Julio Hernandez stated that his sister, Rosa
Hernandez, had offered P10,000.00 as against Sta. Anas price of P12,000.00, end that
he was able to persuade the parties to meet halfway on the price. Furthermore, the
previous conveyances made by Sta. Ana for other portions of the same property are
also for lump sums.
3.
Parcels of land sold are identified by conspicuous boundaries

Sta. Ana admitted the lands in question were separated from the rest of their
property by a long and continuous pilapil or dike, and there is convincing proof to
show that the bigger lot (Lot 4-a) was wholly tenanted for Sta. Ana by Ciriaco Nicolas
and Santiago Castillo and the smaller lot (Lot 4-b) was wholly tenanted for Sta. Ana by
Gregorio Gatchalian. These facts support the theory that the two parcels of land sold to
Hernandez were identified by the conspicuous boundaries and the extent or area each
tenant used to till or the vendors. Sta. Ana should not be heard to complain about the
deficiency in the area (17,000 sq. m. or total are of two parcels of land) because
registered owners and possessors of the entire land since 1949 they can rightly be
presumed to have acquired a good estimate of the value and areas of the portions they
subsequently sold. From the facts, the difference in the lot area does not infer gross
mistake on the part of Sta. Ana.
4.
Article 1542 applied

Article 1542 of the new Civil Code provides that In the sale of real estate, made
for a lump sum and not at the rate of a certain sum for a unit of measure or number,
there shall be no increase or decrease of the price, although there be greater or less
area or number than that stated in the contract. The same rule shall be applied when
two or more immovables are sold for a single price; but if, besides mentioning the
boundaries, which is indispensable in every conveyance of real estate, its area or
number should be designated in the contract, the vendor shall be bound to deliver all
that is included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer a reduction
in the price, in proportion to what is lacking in the area or number, unless the contract
Sales, 2003 ( 328 )
is rescinded because the vendee does not accede to the failure to deliver what has
been stipulated.
5.
Jurisdiction of the Courts

The credibility of witnesses and the weighing of conflicting evidence are matters
within the exclusive authority of the Court of Appeals, and it is not necessarily bound by
the conclusions of the trial court. Both the Judiciary Act (R.A. 296, section 29) and the
Rules of Court (Rule 45, section 2) only allow a review of decisions of the Court of
Appeals on question of law; and numerous decisions of this Court have invariably and
repeatedly held that findings of fact by the Court of Appeals are conclusive and not
reviewable by the Supreme Court (Galang vs. Court of Appeals, L-17248, 29 January
1962; Fonnacier vs. Court of Appeals, 96 Phil. 418, 421; and cases therein cited;
Onglengco vs. Ozaeta, 70 Phil. 43; Nazareno vs. Magwagi, 71 Phil.
101). Barring, therefore, a showing that the findings complained of are totally devoid of
support in the record, or that they are so glaringly erroneous as to constitute serious
abuse of discretion, such findings must stand, for the Supreme Court is not expected or
required to examine and correct the oral and documentary evidence submitted by the
parties. As pointed out by former Chief Justice Moran in his Comments on the Rules of
Court (1963 Ed., Vol. 2, p. 412), the law creating the Court of Appeals was intended
mainly to take away from the Supreme Court the work of examining the evidence, and
confine its task for the determination of questions which do not call for the reading and
study of transcripts containing the testimony of witnesses.
6.
Corpus centum
The two parcels of land sold to Rosa Hernandez were identified by the
conspicuous boundaries, consisting in a long and continuous pilapil or dike that
separated the lands in question from the rest of the property. On the basis of such
findings, it is unquestionable that the sale made was of a definite and identified tract, a
corpus certum, that obligated the vendors to deliver to the buyer all the land within the
boundaries, irrespective of whether its real area should be greater or smaller than what
is recited in the deed (Goyena vs. Tambunting, I Phil. 490; Teran vs. Villanueva, 56 Phil.
677; Azarraga vs. Gay, 52 Phil. 599; Mondragon vs.
Santos, 87 Phil. 471). And this is particularly true where the area given is qualified to be
approximate only humigit kumulang, i.e., more or less. It cannot be said that the
boundaries are indefinite just because the deed of sale provides boundaries given as
lupang kasanib.
7.
Requisites to hold buyer to no more than the area recited

To hold the buyer to no more than the area recited on the area, it must be made
clear therein that the sale was made by unit of measure at a definite price for each
Sales, 2003 ( 329 )
unit. If the defendant intended to buy by the meter he should have so stated in the
contract (Goyena vs. Tambunting, supra).
8.
La venta a cuerpo cierto; Sale of a certain thing

The ruling of the Supreme Court of Spain, in construing Article 1471 of the
Spanish Civil Code (copied verbatim in Article 1542 of the Civil Code) is highly
persuasive that as between the absence of a recital of a given price per unit of
measurement, and the specification of the total area sold, the former must prevail and
determines the applicability of the norms concerning sales for a lump sum.
? The sale of a certain thing is doubtlessly verified when in the contract there is
no single nor precise price by unit of measurement, without neither indicating the
global dimensions of the immovable, but it also verified when even having not
indicated a singular price by unit of measurement, nevertheless the total dimension of
immovable, in which ultimately entered contrasting indices, constituted a [by] the lack
of a singular price for a unit of measure, and another by the concretion of the global
dimensions of the immovable, the prevailing law is the first, and presumes that the
individualization does not speak of the parts of essential value that constitutes an
overprice, and does not mean that the parts have been agreed that the global price of
the immovable is for the total dimensions, considering that this is an absolute
presumption, against any proof presented by either the buyer or the seller.
? Therefore, neither the buyer nor the seller can try to reduce or provide a price
supplement, when the global dimensions of a larger or smaller immovable results
therefrom from the ones indicated in the contract, unless it can be adduced that they
have agreed upon precisely are the dimensions of the thing in the contract. (Supreme
Court of Spain, Decision of 26, June 1956; Rep. Jurisp. Aranzadi, 2729)
9.
Section 58 of Act 496 merely a procedure directive to Registers of Deeds and

does not modify
Civil Code Rule as to sales a cuerpo cierto
The Civil Codes rule as to sales a cuerpo cierto was not modified by Act 496,
section 58 prohibiting the issuance of a certificate of title to a grantee of part of a
registered tract until a subdivision plan and technical description are duly approved by
the Director of Lands, and authorizing only the entry of a memorandum on the
grantors certificate of title in default of such plan. The latter provision is purely a
procedural directive to Registers of Deeds that does not attempt to govern the rights of
vendor and vendee inter se, that remain controlled by the Civil Code of the Philippines.
It does not even bar the registration of the contract itself to bind the land.
[101]
Suria v. IAC, 151 SCRA 661(1987)
[102]
Sales, 2003 ( 330 )
Tagatac v. Jimenez, 53 OG 3792 (1957)

[103]
Tajanlangit vs. Southern Motors [G.R. No. L-10789.
May 28, 1957.] Second Division, Bengzon (J): 8 concur
Facts: In April 1953 Amador Tajanlangit and his wife Angeles, bought from the
Southern Motors Inc. of Iloilo two tractors and a thresher. In payment for the same, they
executed the promissory note whereby they undertook to satisfy the total purchase
price of P24,755.75 in several installments (with interest) payable on stated dates from
18 May 1953 to 10 December 1955. The note stipulated that if default be made in the
payment of interest or of any installment, then the total principal sum still unpaid with
interest shall at once become demandable etc. The spouses failed to meet any
installment.
The spouses were sued (Civil Case 2942), for the amount of the promissory note. The
spouses defaulted, and the court, after listening to the Southern Motors evidence
entered judgment for it in the total sum of P24,755.75 together with interest at 12%,
plus 10% of the total amount due as attorneys fees and costs of collection. Carrying
out the order of execution, the sheriff levied on the same machineries and farm
implements which had been bought by the spouses; and later sold them at public
auction to the highest bidder, which turned out to be the Southern Motors itself, for the
total sum of P10,000. As its judgment called for much more, the Southern Motors
subsequently asked and obtained, an alias writ of execution; and pursuant thereto, the
provincial sheriff levied attachment on the Tajanlangits rights and interests in certain
real properties, with a view to another sale on execution.
To prevent such sale, the Tajanlangits instituted the action in the CFI Iloilo for the
purpose among others, of annulling the alias writ of execution and all proceedings
subsequent thereto. They alleged that (1) they had returned the machineries and farm
implements to the Southern Motors Inc., the latter accepted them, and had thereby
settled their accounts; for that reason, said spouses did not contest the action in Civil
Case 2942; and (2) as the Southern Motors Inc. had repossessed the machines
purchased on installment (and mortgaged) the buyers were thereby relieved from
further responsibility, in view of the Recto Law, now article 1484 of the New Civil Code.
For answer, the company denied the alleged settlement and understanding during
the pendency of Civil Case 2942. It also denied having repossessed the machineries,
the truth being that they were attached by the sheriff and then deposited by the latter
in its shop for safekeeping, before the sale at public auction. The case was submitted
for decision mostly upon a stipulation of facts. Additional testimony was offered
Sales, 2003 ( 331 )
together with documentary evidence. The lower court dismissed the complaint, holding
that it has no authority and jurisdiction to declare null and void the order directing the
issuance of alias writ of execution because it was made by another court of equal rank
and category.
The spouses reasonably brought the matter to the Court of Appeals, but the latter
forwarded the expediente, being of the opinion that the appeal involved questions of
jurisdiction and/or law.
The Supreme Court affirmed the decision dismissing the complaint, with costs against
the appellants.
1.

Article 1484 of the Civil Code provides that in a contract of sale of personal
property the price of which is payable in installments, the vendor may exercise any of
the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to
pay; (2) Cancel the sale, should the vendees failure to pay cover two or more
installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been
2.
Article 1484 (3) does not apply

The spouses invoked the last paragraph of Article 1484, but there has been no
foreclosure of the chattel mortgage nor a foreclosure sale in the present case.
Therefore the prohibition against further collection does not apply.
3.
Sale of mortgage chattel

It is the actual sale of the mortgaged chattel in accordance with section 14 Act
1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid
balance. (Pacific Com. Co. vs. De la Rama, 72 Phil. 380; Manila Motor Co. vs. Fernandez,
99 Phil., 782.)
4.
Option exercised by Southern Motors

It is true that there was a chattel mortgage on the goods sold, but the Southern
Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the obligation
to pay. It had a right to select among the three remedies established in Article 1484. In
choosing to sue on the note, it was not thereby limited to the proceeds of the sale, on
execution, of the mortgaged good.
5.
Similar situation in Southern Motors vs. Magbanua

In Southern Motors Inc. vs. Magbanua, (100 Phil., 155) a similar situation arose in
connection with the purchase on installment of a Chevrolet truck by Magbanua. Upon
Sales, 2003 ( 332 )
the latters default, suit on the note was filed, and the truck levied on together with
other properties of the debtor. Contending that the seller was limited to the truck, the
debtor obtained a discharge of the other properties. This court said that by praying
that the defendant be ordered to pay the sum of P4,690 together with the stipulated
interest at 12% per annum from 17 March 1954 until fully paid, plus 10% of the total
amount due as attorneys fees and cost of collection, the plaintiff elected to exact the
fulfillment of the obligation and not to foreclose the mortgage on the truck.As the
plaintiff has chosen to exact the fulfillment of the defendants obligation, the former
may enforce execution of the judgment rendered in its favor on the personal and real
properties of the latter not exempt from execution sufficient to satisfy the judgment.
That part of the judgment depriving the plaintiff of its right to enforce judgment against
the properties of the defendant except the mortgaged truck and discharging the writ of
attachment on his other properties is erroneous.
6.
7.
Cancellation and settlement theory of spouses not heeded as it would

contravene decision in
Civil Case 2942
The argument of the spouses (that upon the return of the same chattels and
due acceptance of the same by the vendor-mortgagee, the conditional sale is ipso facto
cancelled, with the right of the vendormortgagee to appropriate whatever downpayment and posterior monthly installments made by the purchaser) assumes that
acceptance of the goods by the Southern Motors Co. with a view to cancellation of the
sale. The company denies such acceptance and cancellation, asserting the goods were
deposited in its shop when the sheriff attached them in pursuance of the execution. Its
assertion is backed up by the sheriff, of whose credibility there is no reason to doubt.
The cancellation or settlement theory may not be heeded, because it would contravene
the decision in Civil Case 2942 (it would show the Tajanlangits owned nothing to
Southern Motors Inc.). Such decision is binding upon them, unless and until they
manage to set it aside in a proper proceeding, which is not the present case.
Procedural aspect not necessary to deal with as spouses are not entitled to
relief demanded
The Court deemed it unnecessary to deal with the procedural aspect, such as the
authority of the judge of one branch of the CFI to enjoin proceedings in another branch
of the same court, inasmuch as that, on the merits, the spouses are not entitled to the
relief demanded.
[104]
Tanedo vs. CA [G.R. No. 104482. January 22, 1996.]
Third Division, Panganiban (J): 4 concur
Sales, 2003 ( 333 )
Facts: On 20 October 1962, Lazardo Taedo executed a notarized deed of absolute

sale in favor of his eldest brother, Ricardo Taedo, and the latters wife, Teresita Barera,
whereby he conveyed to the latter in consideration of P1,500, 1 hectare of whatever
share he shall have over Lot 191 of the cadastral survey of Gerona, Tarlac (TCT T-1389
of the Register of Deeds of Tarlac), the said property being his future inheritance from
his parents. Upon the death of his father Matias, Lazaro executed an Affidavit of
Conformity dated 28 February 1980 to re-affirm respect, acknowledge and validate the
sale he made in 1962. On 13 January 1981, Lazaro executed another notarized deed of
sale in favor of Ricardo Tanedo and his wife covering his undivided 1/12 of a parcel of
land known as Lot 191. He acknowledged therein his receipt of P10,000 as
consideration therefor. In February 1981, Ricardo learned that Lazaro sold the same
property to his children, through a deed of sale dated 29 December 1980. On 7 June
1982, Ricardo Tanedo and his wife recorded the Deed of Sale in their favor in the
Registry of Deeds and the corresponding entry was made in TCT16645.
Belinda Tanedo, for herself and in representation of her brothers and sisters, and Teofila
Corpuz Tanedo, representing her minor daughter, Verna Tanedo, on 16 July 1982 filed a
complaint for rescission (plus damages) of the deeds of sale executed by Lazaro in
favor of Ricardo Tanedo and his wife covering the property inherited by Lazaro from his
father with the Regional Trial Court Tarlac (Branch 63, Third Judicial Region, Tarlac,
Tarlac; Civil Case 6328). They claimed that their father, Lazaro, executed an Absolute
Deed of Sale dated 29 December 1980, conveying to his 10 children his allotted
portion under the extrajudicial partition executed by the heirs of Matias, which deed
included the land in litigation (Lot 191). Ricardo Tanedo, on the other hand, presented
in evidence a Deed of Revocation of a Deed of Sale dated 12 March 1981, wherein
Lazaro revoked the sale in favor of petitioners for the reason that it was simulated or
fictitious without any consideration whatsoever. Lazaro however executed a sworn
statement which virtually repudiated the contents of the Deed of Revocation of a Deed
of Sale and the Deed of Sale in favor of Ricardo Tenedo, but testified that he sold the
property to Ricardo, and that it was a lawyer who induced him to execute a deed of sale
in favor of his children after giving him P5 to buy a drink. The trial court decided in
favor of Ricardo Tanedo and his wife, holding that his children failed to adduce a
preponderance of evidence to support (their) claim.
On appeal and on 26 September 1991, the Court of Appeals (CA-GR CV 24987) affirmed
the decision of the trial court, ruling that the Deed of Sale dated 13 January 1981 was
valid and that its registration in good faith vested title in Ricardo Tanedo and his wife.
The motion for reconsideration was denied on 27 May 1992. Hence, the petition for
review on certiorari under Rule 45 of the Rules of Court by the children.
The Supreme Court denied the petition and affirmed the assailed Decision of the Court
of Appeals; without costs.
Sales, 2003 ( 334 )
1.
Errors reviewable by Supreme Court are those committed by the Court of

Appeals; Issues delved into to give parties substantial justice
The errors which are reviewable by the Court in the petition for review on
certiorari are only those allegedly committed by the Court of Appeals and not directly
those of the trial court, which is not a party. The assignment of errors in the petition
are totally misplaced, and for that reason, the petition should be dismissed. But in order
to give the parties substantial justice, the Court decided to delve into the issues as
rephrased. The errors attributed to the trial court would be discussed only insofar as
they are relevant to the appellate courts assailed Decision and Resolution.
2.
Contract upon a future inheritance void unless authorized by law

Pursuant to Article 1347 of the Civil Code, (n)o contract may be entered into
upon a future inheritance except in cases expressly authorized by law. The contract
made in 1962 is not valid and cannot be the source of any right nor the creator of any
obligation between the parties.
3.
Validating contract also useless

The affidavit of conformity dated 28 February 1980, insofar as it sought to
validate or ratify the 1962 sale, is also useless and suffers from the same infirmity.
4.
Critical documents in the resolution of the case; documents not infected with
infirmities of 1962 sale
The documents that are critical to the resolution of this case are: (a) the deed of
sale of 13 January 1981 in favor of Ricardo Tanedo covering Lazaros undivided
inheritance of 1/12 share in Lot 191, which was subsequently registered on 7 June
1982; and (b) the deed of sale dated 29 December 1980 in favor of Lazaros children
covering the same property. These two documents were executed after the death of
Matias (and his spouse) and after a deed of extra-judicial settlement of his (Matias)
estate was executed, thus vesting in Lazaro actual title over said property. These
dispositions, though conflicting, were no longer infected with the infirmities of the 1962
sale.
5.
Subject matter of sale is the Lazaros entire undivided 1/12 share in Lot 191
The subject matter of the 13 January 1981 sale to be the entire undivided 1/12
share of Lazaro in Lot 191 and which is the same property disposed of on 29 December
1980 in favor of Lazaros children.
6.

Article 1544 of the Civil Code governs the preferential rights of vendees in cases
of multiple sales. It provides that If the same thing should have been sold to different
Sales, 2003 ( 335 )

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.
7.
Immovable property; First to register has better right

The property in question is land, an immovable. Ownership therefore shall belong
to the buyer who in good faith registers it first in the registry of property. Thus,
although the deed of sale in favor of Ricardo Tanedo was later than the one in favor of
the children, ownership would vest in the former because of the undisputed fact of
registration. On the other hand, the Children have not registered the sale to them at all.
8.
Registration preferred, even if one without his title registered actually

possesses the property
As between two purchasers, the one who registered the sale in his favor has a
preferred right over the other who has not registered his title, even if the latter is in
actual possession of the immovable property.
9.
Allegation of bad faith a question of fact; Supreme Court not trier of facts
Lazaros children (petitioners) alleged that the respondent Court allegedly
ignored the claimed fact that respondent Ricardo by fraud and deceit and with
foreknowledge that the property in question had already been sold to petitioners,
made Lazaro execute the deed of 13 January 1981; that there is allegedly adequate
evidence to show that only 1/2 of the purchase price of P10,000 was paid at the time
of the execution of the deed of sale, contrary to the written acknowledgment, thus
showing bad faith; that there is allegedly sufficient evidence showing that the deed of
revocation of the sale in favor of petitioners was tainted with fraud or deceit; that
there is allegedly enough evidence to show that private respondents took undue
advantage over the weakness and unschooled and pitiful situation of Lazaro Taedo
and that Ricardo Taedo exercised moral ascendancy over his younger brother he
being the eldest brother and who reached fourth year college of law and at one time a
former Vice-Governor of Tarlac, while his younger brother only attained first year high
school; and that the respondent Court erred in not giving credence to petitioners
evidence, especially Lazaro Taedos Sinumpaang Salaysay dated 27 July 1982 stating
that Ricardo Taedo deceived the former in executing the deed of sale in favor of
private respondents. There are indeed many conflicting documents and testimonies
as well as arguments over their probative value and significance. All the contentions
involve questions of fact, appreciation of evidence and credibility of witnesses, which
are not proper in the present review. The Supreme Court is not a trier of facts. Suffice
that the appellate court, in reviewing the trial courts findings, refused to overturn the
latters assessment of the testimonial evidence, declaring that it was not prepared to
Sales, 2003 ( 336 )
set aside the finding of the lower court upholding Ricardo Taedos testimony, as it
involves a matter of credibility of witnesses which the trial judge, who presided at the
hearing, was in a better position to resolve.
10.
Only questions of law may be raised in petition for review under Rule 45
In petitions for review under Rule 45 of the Revised Rules of Court, only questions
of law may be raised and passed upon. Absent any whimsical or capricious exercise of
judgment, and unless the lack of any basis for the conclusions made by the lower
courts be amply demonstrated, the Supreme Court will not disturb their findings. At
most, it appears that Lazaros children have shown that their evidence was not believed
by both the trial and the appellate courts, and that the said courts tended to give more
credence to the evidence presented by Ricardo Tanedo. But this in itself is not a reason
for setting aside such findings. The Court is far from convinced that both courts gravely
abused their respective authorities and judicial prerogatives.
11.
Factual findings of trial court as well as Court of Appeals are final and
conclusive; Exceptions As held in Chua Tiong Tay vs. Court of Appeals and
Goldrock Construction and Development
Corp.: the Court has consistently held that the factual findings of the trial court, as
well as the Court of Appeals, are final and conclusive and may not be reviewed on
appeal. Among the exceptional circumstances where a reassessment of facts found by
the lower courts is allowed are when the conclusion is a finding grounded entirely on
speculation, surmises or conjectures; when the inference made is manifestly absurd,
mistaken or impossible; when there is grave abuse of discretion in the appreciation of
facts; when the judgment is premised on a misapprehension of facts; when the findings
went beyond the issues of the case and the same are contrary to the admissions of
both appellant and appellee.
12.
Reassessment and reevaluation of evidence not the function of the Supreme

Court
In South Sea Surety and Insurance Company, Inc. vs. Hon. Court of Appeals, et
al., it was held that It is not the function of the Supreme Court to assess and evaluate
all over again the evidence, testimonial and documentary, adduced by the parties,
particularly where the findings of both the trial court and the appellate court on the
matter coincide.
[105]
Torres v. CA [G.R. No. 134559. December 9, 1999.]
Third division, Panganiban (J): 4 concur
Sales, 2003 ( 337 )
Facts: Sisters Antonia Torres and Emeteria Baring entered into a joint venture
agreement with Manuel
Torres for the development of a parcel of land into a subdivision. Pursuant to the
contract, they executed a Deed of Sale covering the said parcel of land in favor of
Manuel, who then had it registered in his name. By mortgaging the property, Manuel
obtained from Equitable Bank a loan of P40,000 which, under the Joint Venture
Agreement, was to be used for the development of the subdivision. All 3 of them also
agreed to share the proceeds from the sale of the subdivided lots. The project did not
push through, and the land was subsequently foreclosed by the bank. Antonia and
Emeteria alleged that the project failed because of Manuels lack of funds or means
and skills. They add that Manuel used the loan not for the development of the
subdivision, but in furtherance of his own company, Universal Umbrella Company.On
the other hand, Manuel alleged that he used the loan to implement the Agreement.
With the said amount, he was able to effect the survey and the subdivision of the lots.
He secured the Lapu Lapu City Councils approval of the subdivision project which he
advertised in a local newspaper. He also caused the construction of roads, curbs and
gutters. Likewise, he entered into a contract with an engineering firm for the building of
60 low-cost housing units and actually even set up a model house on one of the
subdivision lots. He did all of these for a total expense of P85,000. He further claimed
that the subdivision project failed because Antonia and Emeteria and their relatives had
separately caused the annotations of adverse claims on the title to the land, which
eventually scared away prospective buyers. Despite his requests, Antonia and Emeteria
refused to cause the clearing of the claims, thereby forcing him to give up on the
project.
Antonia and Emeteria filed a criminal case for estafa against Manuel and his wife, who
were however acquitted. Thereafter, they filed the present civil case which, upon
Manuels motion, was later dismissed by the trial court in an Order dated 6 September
1982. On appeal, however, the appellate court remanded the case for further
proceedings. Thereafter, the RTC Cebu City (Civil Case R-21208) issued its assailed
Decision, which was affirmed by the CA on 5 March 1998 (CA-GR CV 42378).
Reconsideration was denied by the Court of Appeals through its Resolution of 5 March
The Supreme Court denied the petition and affirmed the challenged decision; with costs
against Antonia and Emeteria.
1.
Partnership exists
A reading of the terms embodied in the Agreement indubitably shows the
existence of a partnership pursuant to Article 1767 of the Civil Code, which provides
that By the contract of partnership two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the
profits among themselves. In the present case, Antonia and Emeteria would contribute
Sales, 2003 ( 338 )
property to the partnership in the form of land which was to be developed into a
subdivision; while Manuel would give, in addition to his industry, the amount needed for
general expenses and other costs. Furthermore, the income from the said project would
be divided according to the stipulated percentage. Clearly, the contract manifested the
intention of the parties to form a partnership.
2.
Parties implemented contract; Partners may contribute not only money or

property but also industry
The parties implemented the contract. Antonia and Emeteria transferred the title
to the land to facilitate its use in the name of Manuel. On the other hand, Manuel
caused the subject land to be mortgaged, the proceeds of which were used for the
survey and the subdivision of the land. He developed the roads, the curbs and the
gutters of the subdivision and entered into a contract to construct low-cost housing
units on the property. Manuels actions clearly belie Antonias and Emeterias
contention that he made no contribution to the partnership. Under Article 1767 of the
Civil Code, a partner may contribute not only money or property, but also industry.
3.
Contract binds party to stipulations and all necessary consequences thereof

Under Article 1315 of the Civil Code, contracts bind the parties not only to what
has been expressly stipulated, but also to all necessary consequences thereof. Article
1315 provides that Contracts are perfected by mere consent, and from that 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. It is undisputed that Antonia and Emeteria are
educated and are thus presumed to have understood the terms of the contract they
voluntarily signed. If it was not in consonance with their expectations, they should
have objected to it and insisted on the provisions they wanted.
4.
Courts may not extricate parties from the necessary consequences of their
acts
Courts may not extricate parties from the necessary consequences of their acts,
and the fact that the terms of a contract turn out to be financially disadvantageous to
them will not relieve them of their obligations therein. They cannot now disavow the
relationship formed from such agreement due to their supposed misunderstanding of
its terms.
5.
Article 1773 must be interpreted in relation to Article 1771; Present case

does not prejudice third parties
The lack of an inventory of real property will not ipso facto release the
contracting partners from their respective obligations to each other arising from acts
executed in accordance with their agreement. Article 1773 providing that a contract of
Sales, 2003 ( 339 )
partnership is void, whenever immovable property is contributed thereto, if an

inventory of said property is not made, signed by the parties, and attached to the
public instrument was intended primarily to protect third persons. Tolentino states that
under the provision which is a complement of Article 1771, the execution of a public
instrument would be useless if there is no inventory of the property contributed,
because without its designation and description, they cannot be subject to inscription in
the Registry of Property, and their contribution cannot prejudice third persons. This will
result in fraud to those who contract with the partnership in the belief [in] the efficacy
of the guaranty in which the immovables may consist. Thus, the contract is declared
void by the law when no such inventory is made. The present case does not involve
third parties who may be prejudiced.
6.
Parties cannot adopt inconsistent positions in regard to a contract

Antonia and Emeteria invoke the allegedly void contract as basis for their claim
that Manuel should pay them 60% of the value of the property. They cannot in one
breath deny the contract and in another recognize it, depending on what momentarily
suits their purpose. Parties cannot adopt inconsistent positions in regard to a contract
and courts will not tolerate, much less approve, such practice.
7.
Nullity of partnership does not prevent courts from considering Joint Venture
Agreement as an ordinary contract
The alleged nullity of the partnership will not prevent courts from considering the
Joint Venture Agreement an ordinary contract from which the parties rights and
obligations to each other may be inferred and enforced.
8.
Joint Venture Agreement states consideration

The Joint Venture Agreement clearly states that the consideration for the sale
was the expectation of profits from the subdivision project. Its first stipulation states
that Antonia and Emeteria did not actually receive payment for the parcel of land sold
to Manuel. Thus, it cannot be contended that the Joint Venture Agreement is void under
Article 1422 of the Civil Code, because it is the direct result of an earlier illegal
contract, which was for the sale of the land without valid consideration.
9.
Consideration or cause may take many forms

Consideration, more properly denominated as cause, can take different forms,
such as the prestation or promise of a thing or service by another. In the present case,
the cause of the contract of sale consisted not in the stated peso value of the land, but
in the expectation of profits from the subdivision project, for which the land was
intended to be used. The land was in effect given to the partnership as Antonias and
Emeterias participation therein. There was therefore a consideration for the sale,
Antonia and Emeteria acting in the expectation that, should the venture come into
fruition, they would get 60% of the net profits.
Sales, 2003 ( 340 )
10.
Factual issues cannot be resolved on a petition of review under Rule 45;

Damages not due Factual issues cannot be resolved in a petition for review under
Rule 45, as in the present case. Antonia and Emeteria have not alleged, not to say
shown, that their petition constitutes one of the exceptions to this doctrine. The Court
of Appeals held that the acts of Antonia and Emeteria did not cause the failure of the
project, nor was Manuel responsible therefore. In imputing the blame solely to him,
Antonia and Emeteria failed to give any reason why the Court should disregard the
factual findings of the appellate court relieving him of fault. Antonia and Emeteria,
thus, are not entitled to damages.
[106]
Toyota Shaw v. CA [G.R. No. 116650. May 23, 1995.]
First Division, Davide Jr (J): 3 concur, 1 on leave
Facts: Sometime in June 1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It
was then a sellers market and Sosa had difficulty finding a dealer with an available unit
for sale. But upon contracting Toyota Shaw, Inc., he was told that there was an
available unit. So on 14 June 1989, Sosa and his son, Gilbert, went to the Toyota Shaw
Boulevard, Pasig, Metro Manila. They met Popong Bernardo, a sales representative of
Toyota. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17
June 1989 because he, his family, and a balikbayan guest would use it on 18 June 1989
to go Marinduque, his home province, where he would celebrate his birthday on 19
June. He added that if he does not arrive in his hometown with the new car, he would
become a laughing stock. Bernardo assured Sosa that a unit would be ready for pick
up at
10:00 a.m. on 17 June 1989. Bernardo then signed a document entitled Agreements
Between Mr. Sosa &
Popong Bernardo of Toyota Shaw, Inc, stipulating that all necessary documents will be
submitted to Toyota Shaw (Popong Bernardo) a week after, upon arrival of Mr. Sosa
from the Province (Marinduque) where the unit will be used on the 19 June; that the
downpayment of P100,000.00 will be paid by Mr. Sosa on 15 June 1989; and that the
Toyota Shaw, Inc. will be released a yellow Lite Ace unit. It was also agreed upon by the
parties that the balance of the purchase price would be paid by credit financing through
B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents of
Toyota and B.A. Finance pertaining to the application for financing. The next day, Sosa
and Gilbert went to Toyota to deliver the downpayment of P100,000.00. They met
Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) 928, on which
Gilbert signed under the subheading conforme. This document shows that the
customers name is Mr. Luna Sosa with home address at 2316 Guijo Street, United
Paraaque II; that the model series of the vehicle is a Lite Ace 1500 described as 4
Sales, 2003 ( 341 )
Dr minibus; that payment is by installment, to be financed by B.A., with the initial

cash outlay of P100,000.00 (downpayment: P53,148.00; insurance: P13,970.00; BLT
registration fee: P1,067.00; CHMO fee: P2,715.00; Service fee: P500.00; and
accessories: P29,000.00) and the balance to be financed is P274,137.00. The spaces
provided for delivery terms were not filled-up. It also contains conditions of sales
providing that the sale is subject to the availability of the unit, and that the stated price
is subject to change without prior notice, and that the price prevailing and in effect at
time of selling will apply. Rodrigo Quirante, the Sales Supervisor of Bernardo, checked
and approved the VSP.
On 17 June (9:30 a.m.), Bernardo called Gilbert to inform him that the vehicle would not
be ready for pick up at 10:00 a.m. as previously agreed upon but at 2:00 p.m. that
same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latters office. According
to Sosa, Bernardo informed them that the Lite Ace was being readied for delivery. After
waiting for about an hour, Bernardo told them that the car could not be delivered
because it was acquired by a more influential person. Toyota contends, however, that
the Lite Ace was not delivered to Sosa because of the disapproval of B.A. Finance of the
credit financing application of Sosa. It further alleged that a particular unit had already
been reversed and earmarked for Sosa but could not be released due to the uncertainty
of payment of the balance of the purchase price. Toyota then gave Sosa the option to
purchase the unit by paying the full purchase price in cash but Sosa refused. After it
became clear that the Lite Ace would not be delivered to him, Sosa asked that his
downpayment be refunded. Toyota did so on the very same day by issuing a Far East
Bank check for the full amount of P100,000.00, the receipt of which was shown by a
check voucher of Toyota, which Sosa signed with the reservation, without prejudice to
our future claims for damages. Thereafter, Sosa sent two letters to Toyota: one on 27
June 1989 demanding the refund, within 5 days from receipt, of the downpayment of
P100,000.00 plus interest from the time he paid it and the payment of damages with a
warning that in case of Toyotas failure to do so he would be constrained to take legal
action; and the other on 4 November 1989 (signed by M.O. Caballes, Sosas counsel)
demanding P1M representing interest and damages, again, with a warning that legal
action would be taken if payment was not made within 3 days. Toyotas counsel
answered through as letter dated 27 November 1989 8 refusing to accede to the
demands of Sosa.
But even before the answer was made and received by Sosa, the latter filed on 20
November 1989 with the
RTC Marinduque (Branch 38) a complaint against Toyota for damages under Articles 19
and 21 of the Civil Code in the total amount of P1,230,000.00. After trial on the issue
agreed upon during the pre-trial session, the trial court rendered on 18 February 1992 a
decision in favor of Sosa. It ruled that the Agreement between Mr. Sosa and Popong
Bernardo, was a valid perfected and contract of sale between Sosa and Toyota which
bound Toyota to deliver the vehicle to Sosa, and further agreed with Sosa that Toyota
Sales, 2003 ( 342 )
acted in bad faith in selling to another the unit already reserved for him; that Bernardo,
as an authorized sales executive of Toyota Shaw, was the latters agent and thus bound
Toyota Shaw; that Luna Sosa proved his social standing in the community and suffered
besmirched reputation, wounded feelings and sleepless nights for which he ought to be
compensated; and thus rendered judgment ordering Toyota Shaw to pay Sosa the sum
of P75,000 as moral damages, P10,000 as exemplary damages, P30,000 as attorneys
fees plus P2,000 lawyers transportation fare per trip in attending to the hearing of the
case, P2,000 for Sosas transportation fare per trip in attending the hearing of the case,
and to pay the cost of the suit.
Dissatisfied with the trial courts judgment, Toyota appealed to the Court of Appeals
(CA-GR CV 40043). In its decision promulgated on 29 July 1994, the Court of Appeals
affirmed in toto the appealed decision. Hence the petition for review by certiorari by
Toyota Shaw.
The Supreme Court granted the petition, and dismissed the challenged decision of the
Court of Appeals and that of Branch 38 of the Regional Trial Court of Marinduque, and
the counterclaim therein; without pronouncement as to costs.
1.
Contract of sale defined; Kinds

Article 1458 of the Civil Code defines a contract of sale as By the contract of the
sale one of the contracting parties obligates himself to transfer the ownership of and to
deliver a determinate thing, and the other to pay therefor a price certain in money or
its equivalent. A contract of sale may be absolute or conditional.
2.
Contract of sale, when perfected; Effect

Article 1475 of the Civil Code specifically provides when the contract of sale is
deemed perfected, i.e. 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.
3.
Agreement between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc. not a
contract of sale The Agreements between Mr. Sosa & Popong Bernardo of Toyota
Shaw, Inc. executed on 4 June 1989, is not a contract of sale. No obligation on the part
of Toyota to transfer ownership of a determinate thing to Sosa and no correlative
obligation on the part of the latter to pay therefor a price certain appears therein. The
provision on the downpayment of P100,000.00 made no specific reference to a sale, it
could only refer to a sale on installment basis, as the VSP executed the following day
confirmed. But nothing was mentioned about the full purchase price and the manner
Sales, 2003 ( 343 )
the installments were to be paid. Neither logic nor recourse to ones imagination can
lead to the conclusion that such agreement is a perfected contract of sale.
4.
Definitive price is an essential element in the formation of a binding and

enforceable contract of sale
A definite agreement on the manner of payment of the price is an essential
element in the formation of a binding and enforceable contract of sale. This is so
because the agreement as to the manner of payment goes into the price such that a
disagreement on the manner of payment is tantamount to a failure to agree on the
price. Definiteness as to the price is an essential element of a binding agreement to sell
personal property.
5.
No meeting of the minds

The Agreements between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc.
shows the absence of a meeting of minds between Toyota and Sosa. Sosa did not even
sign it. Further, Sosa was well aware from its title, written in bold letters, and thus knew
that he was not dealing with Toyota but with Popong Bernardo and that the latter did
not misrepresent that he had the authority to sell any Toyota vehicle.
6.
Prudence and reasonable diligence in inquiring authority of agent

Sosa knew that Bernardo was only a sales representative of Toyota and hence a
mere agent of the latter. It was incumbent upon Sosa to act with ordinary prudence and
reasonable diligence to know the extent of Bernardos authority as an agent in respect
of contracts to sell Toyotas vehicles. A person dealing with an agent is put upon inquiry
and must discover upon his peril the authority of the agent.
7.
Three stages in the contract of sale

There are three stages in the contract of sale, namely (a) preparation,
conception, or generation, which is the period of negotiation and bargaining, ending at
the moment of agreement of the parties; (b) perfection of 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. In the present case, the Agreements between Mr. Sosa & Popong
Bernardo of Toyota Shaw, Inc. may be considered as part of the initial phase of the
generation of negotiation stage of a contract sale. The second phase of the generation
or negotiation stage was the execution of the VSP (the downpayment of the purchase
price was P53,148.00 while the balance to be paid on installment should be financed by
B.A. Finance. It is assumed that B.A Finance was acceptable to Toyota).
8.
Financing companies defined

Financing companies are defined in Section 3(a) of RA 5980, as amended by PDs 1454
and 1793, as
Sales, 2003 ( 344 )
corporations or partnerships, except those regulated by the Central Bank of the

Philippines, the Insurance Commission and the and the Cooperatives Administration
Office, which are primarily organized for the purpose of extending credit facilities to
consumers and to industrial, commercial, or agricultural enterprises, either by
discounting or factoring commercial papers or accounts receivable, or by buying and
selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by
leasing of motor vehicles, heavy equipment and industrial machinery, business and
office machines and equipment, appliances and other movable property.
9.
10.
Parties in a sale on installment basis financed by a financing company; No

meeting of minds as financing application was disapproved
In a sale on installment basis which is financed by a financing company, 3 parties
are thus involved: (1) the buyer who executes a note or notes for the unpaid balance of
the price of the thing purchased on installment, (2) the seller who assigns the notes or
discounts them with a financing company, and (3) the financing company which is
subrogated in the place of the seller, as the creditor of the installment buyer. Since B.A.
Finance did not approve Sosas application, there was then no meeting of minds on the
sale on installment basis.
Toyotas version of circumstances leading to non-release of vehicle more
credible
Toyotas version that B.A. Finance disapproved Sosas application for which
reason it suggested to Sosa that he pay the full purchase price is more credible. When
the latter refused, Toyota cancelled the VSP and returned to him his P100,000.00.
Sosas version, that the VSP was cancelled because the vehicle was delivered to
another because of a more influential client, is contradicted by paragraph 7 of his
complaint which states that Bernardo for reasons known only to its representatives,
refused and/or failed to release the vehicle to the plaintiff . Plaintiff demanded for an
explanation, but nothing was given.
11.
VSP mere proposal and did not create demandable right in favor of Sosa
when it was aborted
The VSP was a mere proposal which was aborted in lieu of subsequent events.
Thus, the VSP created no demandable right in favor of Sosa for the delivery of the
vehicle to him, and its non-delivery did not cause any legally indemnifiable injury.
12.
Award of moral damages without legal basis

The award of moral damages is without legal basis. The only ground upon which
Sosa claimed moral damages is that since it was known to his friends, townmates, and
relatives that he was buying a Toyota Lite Ace which they expected to see on his
birthday, he suffered humiliation, shame, and sleepless nights when the van was not
delivered. The van became the subject matter of talks during his celebration that he
Sales, 2003 ( 345 )
may not have paid for it, and this created an impression against his business standing
and reputation created an impression against his business standing and reputation. At
the bottom of this claim is nothing but misplaced pride and ego. He should not have
announced his plan to buy Toyota Lite Ace knowing that he might not be able to pay the
full purchase price. It was he who brought embarrassment upon himself by bragging
about a thing which he did not own yet.
13.
Award of exemplary damages without basis; Purpose of exemplary damages

Since Sosa is not entitled to moral damages and there being no award for
temperate, liquidated, or compensatory damages, he is likewise not entitled to
exemplary damages. Under Article 2229 of the Civil Code, exemplary or corrective
damages are imposed by way of example or correction for the public good, in addition
to moral, temperate, liquidated, or compensatory damages.
14.
Award of attorneys fees without basis

For attorneys fees to be granted the court must explicitly state in the body of
the decision, and not only in the dispositive portion thereof, the legal reason for the
award of attorneys fees. No such explicit determination thereon was made in the body
of the decision of the trial court. Thus, no reason exists for such award.
[107]
Universal Food Corp. v. CA, 33 SCRA 1 (1970)
[108]
Uy v. CA [G.R. No. 120465. September 9, 1999.]
First Division, Kapunan (J): 3 concur, 1 on leave
Facts: William Uy and Rodel Roxas are agents authorized to sell 8 parcels of land by
the owners thereof. By virtue of such authority, they offered to sell the lands, located in
Tuba, Tadiangan, Benguet to National Housing Authority (NHA) to be utilized and
developed as a housing project. On 14 February 1989, the NHA Board passed
Resolution 1632 approving the acquisition of said lands, with an area of 31.8231
hectares, at the cost of P23.867 million, pursuant to which the parties executed a series
of Deeds of Absolute Sale covering the subject lands. Of the 8 parcels of land, however,
only 5 were paid for by the NHA because of the report it received from the Land
Geosciences Bureau of the Department of Environment and Natural Resources (DENR)
that the remaining area is located at an active landslide area and therefore, not
suitable for development into a housing project. On 22 November 1991, the NHA issued
Resolution 2352 cancelling the sale over the 3 parcels of land. The NHA, through
Resolution 2394, subsequently offered the amount of P1.225 million to the landowners
as daos perjuicios.
Sales, 2003 ( 346 )
On 9 March 1992, petitioners Uy and Roxas filed before the RTC Quezon City a
Complaint for Damages against NHA and its General Manager Robert Balao. After trial,
the RTC rendered a decision declaring the cancellation of the contract to be justified.
The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million,
the same amount initially offered by NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court
and entered a new one dismissing the complaint. It held that since there was sufficient
justifiable basis in cancelling the sale, it saw no reason for the award of damages.
The Court of Appeals also noted that petitioners were mere attorneys-in-fact and,
therefore, not the real parties-in-interest in the action before the trial court. Their
motion for reconsideration having been denied, petitioners seek relief from the
Supreme Court.
The Supreme Court denied the petition.
1.
Real party-in-interest defined; Action to be prosecuted in the name of a party

whose right is sought to be enforced
Section 2, Rule 3 of the Rules of Court requires that every action must be
prosecuted and defended in the name of the real party-in-interest. The real party-ininterest is the party who stands to be benefited or injured by the judgment or the party
entitled to the avails of the suit. Interest, within the meaning of the rule, means
material interest, an interest in the issue and to be affected by the decree, as
distinguished from mere interest in the question involved, or a mere incidental interest.
Cases construing the real party-in-interest provision can be more easily understood if it
is borne in mind that the true meaning of real party-in-interest may be summarized as
follows: An action shall be prosecuted in the name of the party who, by the substantive
law, has the right sought to be enforced.
2.
Action brought by an attorney-in-fact in his name and not in the name of his
principal dismissed
Where the action is brought by an attorney-in-fact of a land owner in his name,
(as in our present action) and not in the name of his principal, the action was properly
dismissed (Ferrer vs. Villamor, 60 SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil.
1175) because the rule is that every action must be prosecuted in the name of the real
parties-in-interest (Section 2, Rule 3, Rules of Court).
3.

Article 1311 of the Civil Code, provides that Contracts take effect only between
the parties, their assigns, and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or by stipulation, or by
Sales, 2003 ( 347 )
provision of law. If a contract should contain some stipulation in favor of a third person,
he may demand its fulfillment provided he communicated his acceptance to the obligor
before its revocation. A mere incidental benefit or interest of a person is not sufficient.
The contracting parties must have clearly and deliberately conferred a favor upon a
third person.
4.
Agents rendering service in behalf of parties do not render them parties to

the contract of sale
Petitioners are not parties to the contract of sale between their principals and
NHA. They are mere agents of the owners of the land subject of the sale. As agents,
they only render some service or do something in representation or on behalf of their
principals. The rendering of such service did not make them parties to the contracts of
sale executed in behalf of the latter. Since a contract may be violated only by the
parties thereto as against each other, the real parties-in-interest, either as plaintiff or
defendant, in an action upon that contract must, generally, either be parties to said
contract. Neither has there been any allegation, much less proof, that petitioners are
the heirs of their principals.
5.
Assignment of rights
In McMicking vs. Banco Espaol-Filipino, it was held that the rule requiring
every action to be prosecuted in the name of the real party-in-interest recognizes the
assignments of rights of action and also recognizes that when one has a right of action
assigned to him he is then the real party in interest and may maintain an action upon
such claim or right. The purpose is to require the plaintiff to be the real party in
interest, or, in other words, he must be the person to whom the proceeds of the action
shall belong, and to prevent actions by persons who have no interest in the result of the
same. Thus, an agent, in his own behalf, may bring an action founded on a contract
made for his principal, as an assignee of such contract.
6.
Section 372 (1) of the Restatement of the Law on Agency

Section 372 (1) of the Restatement of the Law on Agency [Agent as Owner of
Contract Right] declares that Unless otherwise agreed, an agent who has or who
acquires an interest in a contract which he makes on behalf of his principal can,
although not a promisee, maintain such action thereon as might a transferee having a
similar interest.
7.
Agent-transferee; Section 372 (1) explained

One who has made a contract on behalf of another may become an assignee of
the contract and bring suit against the other party to it, as any other transferee. The
customs of business or the course of conduct between the principal and the agent may
indicate that an agent who ordinarily has merely a security interest is a transferee of
the principals rights under the contract and as such is permitted to bring suit. If the
agent has settled with his principal with the understanding that he is to collect the
Sales, 2003 ( 348 )
claim against the obligor by way of reimbursing himself for his advances and
commissions, the agent is in the position of an assignee who is the beneficial owner of
the chose in action. He has an irrevocable power to sue in his principals name. And,
under the statutes which permit the real party in interest to sue, he can maintain an
action in his own name. This power to sue is not affected by a settlement between the
principal and the obligor if the latter has notice of the agents interest. Even though the
agent has not settled with his principal, he may, by agreement with the principal, have
a right to receive payment and out of the proceeds to reimburse himself for advances
and commissions before turning the balance over to the principal. In such a case,
although there is no formal assignment, the agent is in the position of a transferee of
the whole claim for security; he has an irrevocable power to sue in his principals name
and, under statutes which permit the real party in interest to sue, he can maintain an
action in his own name.
8.
Petitioners not assignees

Petitioners have not shown that they are assignees of their principals to the
subject contracts. While they alleged that they made advances and that they suffered
loss of commissions, they have not established any agreement granting them the right
to receive payment and out of the proceeds to reimburse themselves for advances and
commissions before turning the balance over to the principals. Further, it does not
appear that petitioners are beneficiaries of a stipulation pour autrui under the second
paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the
Deeds of Absolute Sale clearly and deliberately conferring a favor to any third person.
9.
Section 372 (2) of the Restatement of the Law on Agency

Section 372 (2) of the Restatement of the Law on Agency (Second) provides that
An agent does not have such an interest in a contract as to entitle him to maintain an
action at law upon it in his own name merely because he is entitled to a portion of the
proceeds as compensation for making it or because he is liable for its breach. The fact
that an agent who makes a contract for his principal will gain or suffer loss by the
performance or nonperformance of the contract by the principal or by the other party
thereto does not entitle him to maintain an action on his own behalf against the other
party for its breach. An agent entitled to receive a commission from his principal upon
the performance of a contract which he has made on his principals account does not,
from this fact alone, have any claim against the other party for breach of the contract,
either in an action on the contract or otherwise. An agent who is not a promisee cannot
maintain an action at law against a purchaser merely because he is entitled to have his
compensation or advances paid out of the purchase price before payment to the
principal.
Sales, 2003 ( 349 )
10.
Failure to obtain commissions due non-performance of contract does not

entitle petitioners to file action against NHA
In Hopkins vs. Ives, the Supreme Court of Arkansas, citing Section 372 (2)
above, denied the claim of a real estate broker to recover his alleged commission
against the purchaser in an agreement to purchase property. In Goduco vs. Court of
Appeals, it was held that granting that appellant had the authority to sell the
property, the same did not make the buyer liable for the commission she claimed. At
most, the owner of the property and the one who promised to give her a commission
should be the one liable to pay the same and to whom the claim should have been
directed. Similarly, in the present case, that petitioners did not obtain their
commissions or recoup their advances because of the non-performance of the contract
did not entitle them to file the action below against NHA. As petitioners are not parties,
heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale,
they do not, under substantive law, possess the right they seek to enforce.
11.
Decision pointless if petitioners are not real parties-in-interest

Petitioners not being the real parties-in-interest, any decision rendered would be
pointless since the same would not bind the real parties-in-interest.
12.
Cancellation of contract in present case not rescission under Article 1191

The right of rescission or, more accurately, resolution, of a party to an obligation
under Article 1191 is predicated on a breach of faith by the other party that violates the
reciprocity between them. The power to rescind, therefore, is given to the injured party.
Article 1191 states that 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. In the present case, the
NHA did not rescind the contract. Indeed, it did not have the right to do so for the other
parties to the contract, the vendors, did not commit any breach, much less a
substantial breach, of their obligation. Their obligation was merely to deliver the parcels
of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by
the performance thereof.
13.
Cancellation based on the negation of cause

The cancellation was based on the negation of the cause arising from the
realization that the lands, which were the object of the sale, were not suitable for
housing.
14.
Cause defined; Distinguished from motive

Cause is the essential reason which moves the contracting parties to enter into
it. The cause is the immediate, direct and proximate reason which justifies the creation
of an obligation through the will of the contracting parties. Cause, which is the essential
Sales, 2003 ( 350 )
reason for the contract, should be distinguished from motive, which is the particular
reason of a contracting party which does not affect the other party. For example, in a
contract of sale of a piece of land, such as in this case, the cause of the vendor in
entering into the contract is to obtain the price. For the vendee, it is the acquisition of
the land. The motive of the NHA, on the other hand, is to use said lands for housing.
15.
Motives ordinarily affects the contract, unless if it predetermines the cause;

motive thus may be regarded as the cause
Ordinarily, a partys motives for entering into the contract do not affect the contract.
However, when
the motive predetermines the cause, the motive may be regarded as the cause. In
Liguez vs. Court of Appeals, it was noted that Manresa himself (Vol. 8, pp. 641642), while maintaining the distinction and upholding the inoperativeness of the
motives of the parties to determine the validity of the contract, expressly excepts from
the rule those contracts that are conditioned upon the attainment of the motives of
either party. The same view is held by the Supreme Court of Spain, in its decisions of 4
February 1941, and 4 December 1946, holding that the motive may be regarded as
causa when it predetermines the purpose of the contract. In the present case, it is clear
that NHA would not have entered into the contract were the lands not suitable for
housing. The quality of the land was an implied condition for the NHA to enter into the
contract. On the part of the NHA, therefore, the motive was the cause for its being a
party to the sale.
16.
Report of Land Geosciences Bureau is sufficient basis for the cancellation of

the sale
The findings contained in the report of the Land Geosciences Bureau dated 15
July 1991 sufficient basis for the cancellation of the sale. The report stated that In
Tadiangan, Tuba, the housing site is situated in an area of moderate topography. There
are more areas of less sloping ground apparently habitable. The site is underlain by
thick slide deposits (4-45m) consisting of huge conglomerate boulders mixed with silty
clay materials. These clay particles when saturated have some swelling characteristics
which is dangerous for any civil structures especially mass housing development.
17.
Assessment preliminary only insofar as to the ascertainment of geological

attributes; otherwise conclusive
The portion stating that there is a need to conduct further geottechnical [sic]
studies in the NHA property. Standard Penetration Test (SPT) must be carried out to give
an estimate of the degree of compaction (the relative density) of the slide deposit and
also the bearing capacity of the soil materials. Another thing to consider is the
vulnerability of the area to landslides and other mass movements due to thick soil
cover. Preventive physical mitigation methods such as surface and subsurface drainage
Sales, 2003 ( 351 )
and regrading of the slope must be done in the area mean only that further tests are
required to determine the degree of compaction, the bearing capacity of the soil
materials, and the vulnerability of the area to landslides, since the tests already
conducted were inadequate to ascertain such geological attributes. It is only in this
sense that the assessment was preliminary.
18.
Vendee justified in canceling contract; Requisites of contract

NHA was justified in cancelling the contract. The realization of the mistake as
regards the quality of the land resulted in the negation of the motive/cause thus
rendering the contract inexistent. Article 1318 of the Civil Code states that There is no
contract unless the following requisites concur: (1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract; and (3) Cause of the
obligation which is established.
19.
Petitioners not entitled to damages

Assuming that petitioners are parties, assignees or beneficiaries to the contract
of sale, they would not be entitled to any award of damages, as the cancellation of the
contract is justified.
[109]
Vallarta vs. CA [G.R. No. L-40195. May 29, 1987.]
En Banc, Cortes (J): 11 concur, 1 on leave
Facts: Rosalinda Cruz and Victoria Vallarta are long time friends and business
acquaintances. On 20 November 1968, Cruz entrusted to Vallarta 7 pieces of jewelry.
In December 1968, Vallarta decided to buy some items, exchanged one item with
another, and issued a post-dated check in the amount of P5,000 dated 30 January
1969. Cruz deposited said check with the bank. However, upon presentment, the
check was dishonored and Cruz was informed that Vallartas account had been closed.
Cruz apprised Vallarta of the dishonor and the latter promised to give another check.
Later, Vallarta pleaded for more time. Still later, she started avoiding Cruz. Hence, the
criminal action was instituted.
Based on the foregoing facts, both the trial court and the Court of Appeals found
Vallarta guilty beyond reasonable doubt of the crime of estafa. Vallarta seeks reversal
of the CAs decision of 13 December 1974. The Supreme Court denied the petition
initially but granted a motion for reconsideration and gave the petition due course.
The Supreme Court affirmed the assailed decision of the Court of Appeals, with costs
against Vallarta.
1.
Estafa: Article 315 (2d) as amended by RA 4885
Sales, 2003 ( 352 )
Vallarta is charged under Art. 315 (2) (d) as amended by RA 4885, of the Revised
Penal Code, which penalizes any person who shall defraud another by postdating a
check, or issuing a check in payment of an obligation when the offender had no funds
in the bank, or his funds deposited therein were not sufficient to cover the amount of
the check. By virtue of RA 4885, the failure of the drawer of the check to deposit the
amount necessary to cover his check within 3 days from receipt of notice from the bank
and or the payee or holder that said check has been dishonored for lack or insufficiency
of funds is deemed prima facie evidence of deceit constituting false pretense or
fraudulent act. To constitute estafa under this provision the act of postdating or issuing
a check in payment of an obligation must be the efficient cause of defraudation, and as
such it should be either prior to, or simultaneous with the act of fraud. The offender
must be able to obtain money or property from the offended party because of the
issuance of a check whether postdated or not. That is, the latter would not have parted
with his money or other property were it not for the issuance of the check. Likewise, the
check should not be, issued in payment of a pre-existing obligation (People v. Lilius, 59
Phil. 339 [1933]).
2.
Sale perfected December 1968 and not 20 November 1968

Vallarta changed the ruby ring because it was not acceptable to her, and chose
another ring. Likewise, the price to be paid for the jewelry was finally agreed upon only
in December 1968. Thus, there was a meeting of the minds between the parties as to
the object of the contract and the consideration therefore only in December 1968, the
same time that the check was issued. The delivery made on 20 November 1968 was
only for the purpose of enabling Vallarta to select what jewelry she wanted.
3.
Sale on approval and not a sale or return

The transaction entered into by Cruz and Vallarta was not a sale or return but a sale
on approval
(also called sale on acceptance, sale on trial, or sale on satisfaction [CIVIL CODE,
art. 1502]). In a sale or return, the ownership passes to the buyer on delivery (CIVIL
CODE, art. 1502). (The subsequent return of the goods reverts ownership in the seller
[CIVIL CODE, art. 1502]). Delivery, or tradition, as a mode of acquiring ownership must
be in consequence of a contract (CIVIL CODE, art, 712), e.g. sale. It was a sale on
approval since ownership passed to the buyer on December 1967, the date when the
check was issued, when Vallarta signified her approval or acceptance to the seller,
Cruz, and the price was agreed upon.
4.
Check was not payment of a pre-existing obligation

When the check which later bounced was issued, it was not in payment of a preexisting obligation. Instead the issuance of the check was simultaneous with the
transfer of ownership over the jewelry. There was no meeting of the minds on 20
Sales, 2003 ( 353 )
November 1968, and thus, as of that date, there was yet no contract of sale which
could be the basis of delivery or tradition. The delivery made on 20 November 1968
was not a delivery for purposes of transferring ownership the prestation incumbent
on the vendor. Ownership passed to the buyer on December 1967, the date when the
check was issued, when Vallarta signified her approval or acceptance to the seller,
Cruz, and the price was agreed upon.
5.
Prima facie evidence of deceit established in RA 4885

RA 4885, amending Art. 315 (2) (d), Revised Penal Code, establishes a prima facie
evidence of deceit upon proof that the drawer of the check failed to deposit the amount
necessary to cover his check within three (3) days from receipt of notice of dishonor for
lack or insufficiency of funds. Admittedly, (1) the check was dishonored as Vallartas
account had been earlier closed; (2) she was notified by Cruz of the dishonor: and, (3)
Vallarta failed to make it good within three days. Deceit is therefore presumed.
6.
Absence of deceit cannot be based on social position

It cannot be suggested that in light of a persons social standing, he or she
cannot be guilty of deceit, at least in so far as issuing bouncing checks is concerned.
This reasoning does not merit serious consideration for if accepted, it could result in a
law that falls unequally on persons depending on their social position.
7.
Jewelry obtained because of issuance of check

Vallarta was able to obtain the jewelry because she issued the check, not solely
because Cruz knew Vallarta to be rich. Her failure to deposit the necessary amount to
cover it within three days from notice of dishonor created the prima facie presumption
established by the amendatory law, RA 4885, which she failed to rebut.
8.
Presumption of deceit under RA 4885 rebuttable

The presumption of deceit under RA 4885 is not conclusive. It is rebuttable. For
instance, in the case of People v. Villapando (56 Phil. 31[1931]), good faith is a
defense to a charge of estafa by postdating a check, as when the drawer, foreseeing
his inability to pay the check at maturity, made an arrangement with his creditor as to
the manner of payment of the debt. RA 4885 is not unconstitutional as it does not
violate the constitutional presumption of innocence.
9.
Constitutionality of laws providing contrary presumption on innocence

There is no constitutional objection to the passage of a law providing that the
presumption of innocence may be overcome by a contrary presumption founded upon
the experience of human conduct, and enacting what evidence shall be sufficient to
overcome such presumption of innocence (People v. Mingoa, 92 Phil. 856 [1953] at
858-59, citing I Cooley, A Treatise on the Constitutional Limitations, 639-641). The
legislature may enact that when certain facts have been proved they shall be prima
facie evidence of the existence of the guilt of the accused and shift the burden of proof
Sales, 2003 ( 354 )
provided there be a rational connection between the facts proved and the ultimate fact
presumed so that the inference of the one from proof of the others is not unreasonable
and arbitrary because of lack of connection between the two in common experience
(People v. Mingoa, supra. See also US v. Luling, 34 Phil. 725 [1916]).
10.
Art. 315 (2d) characterize fraudulent act or false pretense

Postdating or issuing of a check in payment of an obligation when the offender
had no funds in the bank, or his funds deposited therein were not sufficient to cover the
amount of the check, is a false pretense or a fraudulent act. It is so characterized by
Art. 315 (2) (d), Revised Penal Code. RA 4885 does nothing more than limit the period
within which the drawer/issuer must pay the creditor.
11.
RA 4885 still pursues criminal fraud or deceit in the issuance of a check and
not the nonpayment of the debt
In People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA 568), the Court
ruled that RA 4885 has not changed the rule established in Art. 315 (2) (d) prior to the
amendment; that RA 4885 merely established the prima facie evidence of deceit, and
eliminated the requirement that the drawer inform the payee that he had no funds in
the bank or the funds deposited by him were not sufficient to cover the amount of the
check. Thus, even with the amendment introduced by RA 4885 it is still criminal fraud
or deceit in the issuance of a check which is made punishable under the Revised Penal
Code, and not the non-payment of the debt.
[110]
Vasquez vs. CA [G.R. No. 83759. July 12, 1991.]
Third Division, Gutierrez Jr. (J): 4 concur
Facts: On 21 September 1964, Vallejera and Olea sold the lot to Vasquez and Gayaleno
under a Deed of Sale for the amount of P9,000.00. The Deed of Sale was duly ratified
and notarized. On the same day and along with the execution of the Deed of Sale, a
separate instrument, denominated as Right to Repurchase, was executed by the parties
granting the Vallejera and Olea the right to repurchase the lot for P12,000.00, said
document was likewise duly ratified and notarized. By virtue of the sale, the Vasquez
and Gayaleno secured TCT T-58898 in their name. On 2 January 1969, Vallejera and
Olea sold the same lot to Benito Derrama, Jr., after securing Vasquez and Gayalenos
title, for the sum of P12,000.00. Upon the protestations of Vasquez and Gayaleno,
assisted by counsel, the said second sale was cancelled after the payment of
P12,000.00 by Vasquez and Gayaleno to Derrama.
On 15 January 1975, Spouses Martin Vallejera and Apolonia Olea filed an action against
Spouses Cirpriano Vasquez and Valeriana Gayaleno seeking to redeem Lot 1860 of the
Sales, 2003 ( 355 )
Himamaylan Cadastre which was previously sold by the former to the latter on 21
September 1964. Said lot was registered in the name of Vallejera and Olea. On October
1959, the same was leased by them to Vasquez and Gayalleno up to crop year 1966-67,
which was extended to crop year 1968-69. After the execution of the lease, Vasquez
and Gayaleno took possession of the lot, up to now and devoted the same to the
cultivation of sugar. Vasquez and Gayeleno resisted the action for redemption on the
premise that the Right to Repurchase is just an option to buy since it is not embodied in
the same document of sale but in a separate document, and since such option is not
supported by a consideration distinct from the price, said deed for right to repurchase is
not binding upon th them. After trial, the RTC Himamaylan, Negros Occidental (6 Judicial
Region, Branch 56, Civil Case 839) rendered judgment against Vasquez and Gayeleno,
ordering them to resell lot 1860 of the Himamaylan Cadastre to Vallejera and Olea for
the repurchase price of P24,000.00, which amount combines the price paid for the first
sale and the price paid by the former to Benito Derrama, Jr. Vallejera and Gayeleno
moved for, but were denied reconsideration. Excepting thereto, they appealed.
The Court of Appeals affirmed the decision of the RTC Himamaylan, Negros Occidental
in Civil Case 839. In addition, the appellate court ordered Vasquez and Gayeleno to pay
the amount of P5,000.00 as necessary and useful expenses in accordance with Article
1616 of the Civil Code. Hence, the petition.
The Supreme Court granted the petition, reversed and set aside the questioned
decision and resolution of the Court of Appeals , and dismissed the complaint in Civil
Case 839 of the then CFI Negros Occidental 12th Judicial District Branch 6; without
costs.
1.
Right of repurchase not supported by a consideration distinct from the price;

Burden of proof
In the present case, it is clear that the right to repurchase was not supported by
a consideration distinct from the price. The rule is that the promisee has the burden of
proving such consideration. Unfortunately, the promises (Vallejera) in the right to
repurchase failed to prove such consideration. They did not even allege the existence
thereof in their complaint. (See Sanchez v. Rigos supra).
2.
Application of Sanchez vs. Rigos case

In order that the Sanchez case can be applied, the evidence must show that the
Vallejera and Olea accepted the right to repurchase. The record, however, does not
show that they accepted the Right to Repurchase the land in question.
3.
Annotation and registration of right to repurchase not an acceptance but for

the purpose of binding purchasers of such registered land
The annotation and registration of the right to repurchase at the back of the
certificate of title of Vasquez and Gayeleno can not be considered as acceptance of the
right to repurchase. Annotation at the back of the certificate of title of registered land is
Sales, 2003 ( 356 )
for the purpose of binding purchasers of such registered land. In the case of Bel Air
Village Association, Inc. v. Dionisio (174 SCRA 589 [1989]), citing Tanchoco v. Aquino
(154 SCRA 1 [1987]), and Constantino v. Espiritu (45 SCRA 557 [1972]), it was ruled
that purchasers of a registered land are bound by the annotations found at the back of
the certificate of title covering the subject parcel of land. In effect, the annotation of the
right to repurchase found at the back of the certificate of title over the subject parcel of
land of Vasquez and Gayeleno only served as notice of the existence of such unilateral
promise of Vasquez and Gayeleno to resell the same to Vallejera and Olea. This,
however, can not be equated with acceptance of such right to repurchase.
4.
Signature in the document called right to repurchase does not signify

acceptance of right to repurchase
Neither can the signature of Vasquez and Gayeleno in the document called right
to repurchase signify acceptance of the right to repurchase, as Vallejera and Olea did
not sign the offer. Acceptance should be made by the promisee and not the promisors.
It would be absurd to require the promisor of an option to buy to accept his own offer
instead of the promisee to whom the option to buy is given.
4.
Actions of Vallejera and Olea cannot be considered as acceptance; Sending of

letters without tender of redemption price falls short of requirement to
repurchase
The actions of the private respondents (a) filing a complaint to compel re-sale
and their demands for resale prior to filing of the complaint cannot be considered
acceptance. As stated in Vda. de Zulueta v. Octaviano (121 SCRA 314 [1983]), mere
sending of letters by the vendor expressing his desire to repurchase the property
without accompanying tender of the redemption price fell short of the requirements of
law. (Lee v. Court of Appeals, 68 SCRA 197 [1972]). Neither did a judicial consignation
of the repurchase price made within the agreed period.
5.
Contract of sale with right of repurchase

In a contract of sale with a right of repurchase, the redemptioner who may offer
to make the repurchase on the option date of redemption should deposit the full
amount in court . . . (Rumbaoa v. Arzaga, 84 Phil. 812 [1949]).
6.
Right of vendor a retro to repurchase

To effectively exercise the right to repurchase the vendor a retro must make an
actual and simultaneous tender of payment or consignation. (Catangcatang v.
Legayada, 84 SCRA 51 [1978]).
7.
Refusal to sell parcel of land a withdrawal of the option to buy
Sales, 2003 ( 357 )
The ineffectual acceptance of the option to buy validated the vendors refusal to
sell the parcel which can be considered as a withdrawal of the option to buy.
8.
Conventional redemption, when occurs

Conventional redemption takes place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article
1616 and other stipulations which may have been agreed upon. (Article 1601, Civil
Code).
9.
Right of repurchase not granted in a subsequent document but in the same

instrument of sale
As held in Villarica v. Court of Appeals (26 SCRA 189 [1968]), The right of
repurchase is not a right granted the vendor by the vendee in a subsequent instrument,
but is a right reserved by the vendor in the same instrument of sale as one of the
stipulations of the contract. Once the instrument of absolute sale is executed, the
vendor can no longer reserve the right to repurchase, and any right thereafter granted
the vendor by the vendee in a separate instrument cannot be a right of repurchase but
some other right like the option to buy.
10.
Applicability of the Zulueta case as to the transaction being not a option to

repurchase but an option to buy
As in the present case, the option to repurchase involved in the Zulueta case was
executed in a separate document but on the same date that the deed of definite sale
was executed. While it is true that the Court in the Zulueta case found Zulueta guilty of
laches, this, however, was not the primary reason why the
Court disallowed the redemption of the property by Zulueta. It is clear from the decision
that the ruling in the Zulueta case was based mainly on the finding that the transaction
between Zulueta and Octaviano was not a sale with right to repurchase and that the
option to repurchase was but an option to buy or a mere promise on the part of
Octaviano to resell the property to Zulueta. In the present case, since the transaction
between the petitioners and private respondents was not a sale with right to
repurchase, the private respondents cannot avail of Article 1601 of the Civil Code which
provides for conventional redemption.
[111]
Vda. De Gordon v. CA [G.R. No. L-37831. November 23, 1981.]
First Division, Teehankee (J): 4 concur, 1 took no part
Facts: Two parcels of land belong to Restituta V. Vda. De Gordon (covered by TCT
12204 and 12205). For the years 1953 to 1963, inclusive, the taxes against said parcels
of land remained unpaid. The combined assessed value of the parcels of land is
P16,800 and the residential house on the land was assessed at P45,580. The City
Sales, 2003 ( 358 )
Treasurer of Quezon City, upon warrant of a certified copy of the record of such
delinquency, advertised for sale the parcels of land to satisfy the taxes, penalties and
costs for a period of 30 days prior to the sale on 3 December 1964, by keeping a notice
of sale posted at the main entrance on the City Hall and in a public and conspicuous
place in the district where the same is located and by publication of said notice once a
week for 3 weeks in the Daily Mirror, a newspaper of general circulation in Quezon
City, the advertisement stating the amount of taxes and penalties due, time and place
of sale, name of the taxpayer against whom the taxes are levied, approximate area, lot
and block number, location by district, street and street number of the property. The
public sale on 3 December 1964, the parcels of land were sold to Rosario Duazo for the
amount of P10,500.00 representing the tax, penalty and costs. The certificate of sale
executed by the City Treasurer was duly registered on 28 December 1964 in the office
of the Register of Deeds of Quezon City. Upon the failure of the registered owner to
redeem the parcels of land within the 1-year period prescribed by law, the City
Treasurer of Quezon City executed on 4 January 1966 a final deed of sale of said lands
and the improvements thereon. Said final deed of sale was also registered in the Office
of the Register of Deeds of Quezon City on 18 January 1966.
Later on, Duazo filed a petition for consolidation of ownership. <Case facts involving
proceedings in lower court absent; It may be implied however that lower court denied
the petition as it cited the case of Director of Lands v. Abarca in its decision>
The appellate court upheld the tax sale of the real properties at which Duazo acquired
the same and her ownership upon vda. de Gordons failure to redeem the same, having
found the sale to have been conducted under the direction and supervision of the City
Treasurer of Quezon City after the proper procedure and legal formalities had been duly
accomplished. <It appears that the appellate court reversed the lower courts
decision, with Gordon appealing therefrom>
The Supreme Court affirmed the appellate courts decision under review; Without costs.
1.
(CA Decision) Material averments admitted

The opposition [to Duazos petition for consolidation of ownership] has not controverted
by specific
denials the material averments in the petition. Hence, the material averments in the
petition are deemed admitted. (Section 1, Rule 9, Revised Rules of Court)
2.
(CA Decision) Issue on the irregularity of public sale of parcels of land waived
The opposition has not raised the issue of irregularity in the public sale of the two
parcels of land in question. This defense is deemed waived. (Section 2, Rule 9, id.)
Sales, 2003 ( 359 )
3.
(CA Decision) Price in auction sale not grossly inadequate to be shocking to

the conscience of court
Noting that the 1961 assessment of the combined value of the two parcels of
land is P16,800, and the residential house on the land is P45,580; that the present
value of the house would be much less considering the depreciation for over 10 years;
and that while the price of P10,500 is less than the total assessed value of the land and
the improvement thereon, said price cannot be considered so grossly inadequate as to
be shocking to the conscience of the court.
4.
(CA Decision) Director of Lands v. Abarca: Price inadequate to shock

conscience of court
In Director of Lands vs. Abarca (61 Phil. 70), the Supreme Court considered the
price of P877.25 as so inadequate to shock the conscience of the court because the
assessed value of the property in question was P60,000.00. The assessed value of the
land was more than 60 times the price paid at the auction sale. In the present case, the
price of P10,500.00 is about 1/6 of the total assessed value of the two parcels of land in
question and the residential house thereon. The finding of the lower court that the
house and land in question have a fair market value of not less than P200,000.00 has
no factual basis. It cannot be said, therefore, that the price of P10,500.00 is so
inadequate as to be shocking to the conscience of the court.
5.
(CA Decision) Mere inadequacy of price not ground to annul public sale,
unlike in ordinary sale; Inadequacy of price an advantage in relation to
owners right to redeem
Mere inadequacy of the price alone is not sufficient ground to annul the public
sale. (Barrozo vs. Macaraeg, 83 Phil. 378) In Velasquez vs. Coronel (5 SCRA 985,
988), it was held that while in ordinary sales for reasons of equity a transaction may
be invalidated on the ground of inadequacy of price, or when such inadequacy shocks
ones conscience as to justify the courts to interfere, such does not follow when the law
gives to the owner the right to redeem, as when a sale is made at public auction, upon
the theory that the lesser the price the easier it is for the owner to effect the
redemption. And so it was aptly said: When there is the right to redeem, inadequacy of
price should not be material, because the judgment debtor may reacquire the property
or also sell his right to redeem and thus recover the loss he claims to have suffered by
reason of the price obtained at the auction sale.
6.
(CA Decision) Public Sale governed by Section 40 of CA 470

The public sale is governed by Section 40 of Commonwealth Act 470 which gives
the delinquent taxpayer a period of 1 year from the date of the sale within which to
repurchase the property sold. In case the delinquent taxpayer does not repurchase the
property sold within the period of 1 year from the date of the sale, it becomes a
mandatory duty of the provincial treasurer to issue in favor of the purchaser a final
deed of sale. (Velasquez vs. Coronel)
Sales, 2003 ( 360 )
7.
No lack of personal notice of tax sale

The alleged lack of personal notice of the tax sale is negated by her own
averments in her own opposition filed in the lower court a quo that the Oppositor in
the petition is a woman 80 years of age. She was not aware of the auction sale
conducted by the City Treasurer of Quezon City on 3 December 1964 or if there was any
notice sent to her, the same did not reach her or it must have escaped her mind
considering her age.
8.
Quezon City Charter (CA 502), not RA 1275, controlling on length of

redemption period; Special law prevails over general law
The period for redemption is not the 2-year period provided in RA 1275, since the
specific law governing tax sales of properties in Quezon City is the Quezon City Charter,
Commonwealth Act 502 which provides in section 31 thereof for a 1-year redemption
period. The special law covering Quezon City necessarily prevails over the general law.
In the present case, since the filing of Duazos brief in 1974, Vda. De Gordon had not
sought to exercise her alleged right of redemption or make an actual tender thereof.
9.
Gross inadequacy of purchase price not material if owner has right to redeem
As held in Velasquez vs. Coronel, alleged gross inadequacy of price is not
material when the law gives the owner the right to redeem as when a sale is made at
public auction, upon the theory that the lesser the price the easier it is for the owner to
effect the redemption.
10.
Laws on tax sales for delinquent taxes necessary as taxes essential to life of
Government
As stressed in Tajonera vs. Court of Appeals, the law governing tax sales for
delinquent taxes may be harsh and drastic, but it is a necessary means of insuring the
prompt collection of taxes so essential to the life of the Government.
[112]
Vda. De Jomoc vs. CA [G.R. No. 92871. August 2, 1991.]
Lim Leong Hong vs. So [G.R. No. 92860. August 2, 1991.]
Third Division, Gutierrez Jr. (J): 4 concur
Facts: The subject lot in Cagayan de Oro City forms part of the estate of the late
Pantaleon Jomoc. Because it was fictiously sold and transferred to third persons, Maria
P. Vda. Jomoc, as administratrix of the estate and in behalf of all the heirs, filed suit to
recover the property before the trial court of Misamis Oriental in Civil Case 4750.
Mariano So, the last of the transferees and the husband of Maria So, intervened. The
case was decided in favor of Jomoc and was accordingly appealed by Mariano So and
Sales, 2003 ( 361 )
one Gaw Sur Cheng to the Court of Appeals. In February 1979, pending the appeal,
Jomoc executed a Deed of Extrajudicial Settlement and Sale of Land with Maria So for
P300,000. The document was not yet signed by all the parties nor notarized but in the
meantime, Maura So had made partial payments amounting to P49,000. In 1983,
Mariano So, the appellant in the recovery proceeding, agreed to settle the case by
executing a Deed of Reconveyance of the land in favor of the heirs of Pantaleon Jomoc.
The reconveyance was in compliance with the decision in the recovery case and
resulted in the dismissal of his appeal. On 28 February 1983, the heirs of Jomoc
executed another extrajudicial settlement with absolute sale in favor of intervenors Lim
Leong Kang and Lim Pue King. Later, Maura So demanded from the Jomoc family the
execution of a final deed of conveyance. They ignored the demand.
Maria So sued the heirs for specific performance to compel them to execute and deliver
the proper registrable deed of sale over the lot (Civil Case 8983). So then filed a notice
of lis pendens with the Register of Deeds on 28 February 1983. It was on the same
date, allegedly upon the Jomocs belief that Maura So had backed out from the
transaction that the Jomocs executed the other extrajudicial settlement with sale of
registered land in favor of the spouses Lim for a consideration of P200,000.00 part of
which amount was allegedly intended to be returned to Maura So as reimbursement.
The spouses Lim, however, registered their settlement and sale only on 27 April 1983.
The lower court, finding that there was no sufficient evidence to show
complainantrespondents withdrawal from the sale, concluded that: (1) the case is one
of double sale; (2) the spousesintervenors are registrants in bad faith who registered
their questioned deed of sale long after the notice of lis pendens of Civil Case 8983 was
recorded.
On appeal, the trial court decision was affirmed except for the award of moral and
exemplary damages and attorneys fees and expenses for litigation. Hence, the
petitions.
The Supreme Court dismissed the petitions, and affirmed the decision of the Court of
Appeals dated 13 September 1989 and its resolution dated 2 April 1990.
1.
Valid and existent, and partially executed (thus enforceable) contract

The heirs do not deny the existence of Exhibit A; including its terms and
contents, notwithstanding the incompleteness in form. The meeting of the minds and
the delivery of sums as partial payment is clear and this is admitted by both parties to
the agreement. Hence, there was already a valid and existing contract, not merely
perfected as the trial court saw it, but partly executed. It is of no moment whether or
not it is enforceable under the Statute of Frauds, which rule is not applicable because of
partial payment of the vendees obligation and its acceptance by the vendors-heirs.
The contract of sale of real property even if not complete in form, so long as the
essential requisites of consent of the contracting parties, object, and cause of the
obligation concur and they were clearly established to be present, is valid and effective
Sales, 2003 ( 362 )
as between the parties. Under Article 1357 of the Civil Code, its enforceability is
recognized as each contracting party is granted the right to compel the other to
execute the proper public instrument so that the valid contract of sale of registered
land can be duly registered and can bind third persons. The complainant-respondent
correctly exercised such right simultaneously with a prayer for the enforcement of the
contract in one complaint.
2.
Continuing interest by Maura So; Parole evidence cannot reform intention of

parties
Maura So did not subsequently abandon her intention of purchasing the subject
lot. The facts reveal an agreement between the contracting parties to Exhibit A to the
effect that the consideration of P300,000 or whatever balance remains after deducting
the advanced payments thereon, shall be paid upon the termination of (Mariano Sos)
appeal in the case involving the property in question. (GR 92871). Even if the sums
paid by Maura So were allegedly intended to expedite the dismissal of the appeal of
Mariano So, such payment only indicates interest in acquiring the subject lot. In
addition, the claim by the defendantspetitioners that the payments were for the
gathering of the several heirs from far places to sign Exhibit A confirms Maura Sos
continuing interest. The terms of Exhibit A and the actual intention of the parties are
clear and no reform requiring parole evidence is being sought to elucidate the intention
further. The oral evidence offered by defendants-petitioners to show a subsequent
refusal to proceed with the sale cannot be considered to reverse the express intention
in the contract.
3.
Issue of double sale material to determination whether So is entitled to

reliefs prayed for
The issue of double sale had to be resolved to determine whether or not
complainant Maura So was entitled to the reliefs prayed for. There was no hard
evidence to show that the vinculum or contractual relation between petitioners-heirs
and Maura So had been cut-off. Yet, petitioners-heirs sold the same lot to spouses Lim.
The case requires the discernment of who has the better right to the property.
4.
Article 1544, NCC; So has better right of ownership

Article 1544 of the Civil Code provides that 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. In view of this provision, the spouses Lim do not have a better
right. They purchased the land with full knowledge of a previous sale to Maura So and
without requiring from the vendors-heirs any proof of the prior vendees revocation of
her purchase.
5.
Lim spouses not buyers in good faith
Sales, 2003 ( 363 )
The spouses Lim cannot be said to be buyers in good faith as they should have
exercised extra caution in their purchase especially if at the time of the sale, the land
was still covered by TCT 19648 bearing the name of Mariano So and was not yet
registered in the name of the heirs of Pantaleon Jomoc, although it had been
reconveyed to said heirs. When they registered the sale on 27 April 1983 after having
been charged with notice of lis pendens annotated as early as 28 February 1983, they
did so in bad faith or on the belief that a registration may improve their position being
subsequent buyers of the same lot. Under Article 1544, mere registration is not enough
to acquire new title. Good faith must concur. (Bergado v. Court of Appeals, 173 SCRA
497 [1989]; Concepcion v. Court of Appeals, G.R. No. 83208, February 6, 1991) [113]
Vda. De Quiambao vs. Manila Motor Company [G.R. No. L-17384.
October 31, 1961.] En Banc, Reyes JBL (J): 8 concur, 1 took no part
Facts: On 7 March 1940, Gaudencio R. Quiambao, deceased husband of Nestora Rigor
Vda. de Quiambao and father of the other petitioners, bought from Manila Motor
Company, Inc. 1 Studebaker car on the installment plan. Upon default in the payment
of a number of installments, the company sued Gaudencio Quiambao in Civil Case
58043 of the CFI Manila. On 4 December 1940, judgment was entered in said case,
awarding in favor of the company the sum of P3,054.32, with interest thereon at 12%
per annum, and P300.00 attorneys fees. On 14 July 1941, the court issued a writ of
execution directed to the Provincial Sheriff of Tarlac, who thereupon levied on and
attached two parcels of land covered by TCT 18390 of the Office of the
Register of Deeds for Tarlac. On 27 August 1941, Attorney Felix P. David, then counsel
for the Manila Motor Company, accompanied by the sheriff, personally apprised
Gaudencio Quiambao of the levy. The latter pleaded to have the execution sale
suspended and begged for time within which to satisfy the judgment debt, proposing
that in the meanwhile, he would surrender to the company the Studebaker car. This
proposition was accepted; accordingly, Gaudencio Quiambao delivered the car to the
company, and Attorney David issued a receipt therefore. On 16 October 1941,
Gaudencio Quiambao remitted to the company, on account of the judgment, the sum of
P500.00; he, however, failed to make further payments, thus leaving a balance still
unsettled of P1,952.47, with interest thereon at 12% per annum from 6 March 1940.
In the meantime, the Pacific war broke out, and when the Japanese forces occupied the
country shortly thereafter, the invaders seized all the assets of the Manila Motor
Company, Inc. as enemy property. After the war, the company filed with the Philippine
War Damage Commission, among other things, a claim for its mortgage lien on the car
of Gaudencio Quiambao and was awarded the sum of P780.47, P409.75 of which
amount had already been paid. On 12 October 1949, the company addressed a letter to
Gaudencio Quiambao asking him to fill a blank form relative to the lost car. Quiambao
having since died, his widow, Nestora Rigor Vda. de Quiambao, returned the form with
the statement that the questioned car was surrendered to the company for storage. On
Sales, 2003 ( 364 )
18 May 1953, a demand was made on the widow to settle the deceaseds unpaid
accounts, but in view of her refusal, the company urged the Provincial Sheriff of Tarlac
to carry out the prewar writ of execution issued in Civil Case 58043. Although the
records of that case had been lost during the war, and have not been reconstituted, a
copy of said writ of execution kept on file by the provincial sheriff was saved.
Accordingly, the latter advertised for sale at public auction the properties levied upon.
Notified of the sheriffs action, the heirs of the deceased Quiambao filed the suit to
annul and set aside the writ of execution and to recover damages. Judgment was
rendered by the CFI in favor of the Quiambaos, but on appeal to the Court of Appeals
(CA-GR 17031-R), the decision was reversed and another entered dismissing the
complaint. Hence, the appeal by writ of certiorari.
The Supreme Court affirmed the judgment of the Court of Appeals appealed from, with
costs against the Quiambaos.
1.
Heacock case does not apply; Delivery of car to company did not produce
effect of rescinding or annulling the contract of sale; Buyer surrendered car
to postpone satisfaction of the judgment amount
Unlike the situation that arose in the H. E. Heacock Company case (66 PHIL 245246) wherein the vendor demanded the return of the thing sold, and thereby indicated
an unequivocal desire on its part to rescind its contract with the vendee, here it was
the buyer (deceased Gaudencio Quiambao) who offered indeed pleaded, to surrender
his car only in order that he might be given more time within which to satisfy the
judgment debt, and suspend the impending execution sale of the properties levied
upon. The very receipt issued then by the company, and accepted without objection by
the deceased (Gaudencio Quiambao), indicated that the car was received pending
settlement of the judgment in Civil Case 58043. Other circumstances that militate
against the Quiambaos theory of rescission or annulment of the contract of sale and
waiver of the judgment debt and, conversely, strengthen the proposition that the
delivery of the car to the company was merely to postpone the satisfaction of the
judgment amount, are that the deceased still paid the further sum of P500.00 on
account of his indebtedness about two months after the car was surrendered, and that
despite the companys acceptance of the car, the company made repeated demands
against the petitioners to settle the deceaseds unpaid accounts.
2.
Receipt of car not for appropriation but as security to satisfaction of

judgment credit; Does not amount to foreclosure of chattel mortgage
Since the company did not receive the car for the purpose of appropriating the
same, but merely as security for the ultimate satisfaction of its judgment credit, the
Sales, 2003 ( 365 )
situation under consideration could not have amounted to a foreclosure of the chattel
mortgage.
3.
Payment of war damage compensation does not produce same and equal
legal effect as formal foreclosure
Having been the party who was last in possession of the lost car, the company
was well within its rights, or better still, under obligation, to protect the interest of the
car owner, as well as its own, by claiming, as it did, the corresponding war damage
compensation for the car. Such action of the company cannot reasonably be construed
as a constriction of its rights under the pre-war judgment.
4.
Scenario barring recovery of any unpaid balance

In Manila Motor Company, Inc., vs. Fernandez (52 OG 16, 6883, 6885), it was held
that it is the actual sale of the mortgaged chattel in accordance with section 14 of Act
1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid
balance (Pacific Commercial Company vs. De la Rama, 72 Phil, 380).
5.
Suit filed was for specific performance and not for rescission or cancellation
of contract of sale
The best reason why respondent company may not be construed as having
rescinded or cancelled the contract of sale or foreclosed the mortgage on the
automobile is precisely because it brought suit for specific performance, and won, in
the pre-war Civil Case 58043.
6.
Pre-war judgment has not prescribed; Period covered by moratorium law and
closure of regular courts at the outbreak of war deducted
The pre-war judgment was entered on 4 December 1940, and on 14 July 1941, a
writ of execution was issued. The company took no further step to enforce the
judgment until 19 May 1954, on which date, Manila Motors scheduled 2 parcels of land
owned by the Quiambaos for sale at public auction pursuant to the writ of 14 July 1941.
From the entry of the judgment to 19 May 1954, a period of 13 years, 5 months and 15
days had elapsed.
From this term, the period covered by the debt moratorium under Executive
Order 32 (which applied to all debts payable within the Philippines), from the time the
order took effect on 10 March 1945, until it was partially lifted by RA 342 on 26 July
1948 must be deducted. Deducting the period during which EO 32 was in force, which
is 3 years, 4 months and 16 days, from 13 years, 5 months and 15 days, the period
covered from the entry of the pre-war judgment to the time the company attempted to
sell the levied properties at auction, there is still left a period of 10 years and 29 days.
But as held in Talens vs. Chuakay & Co., G.R. No. L-10127, June 30, 1958, the
Court took judicial notice of the fact that regular courts in Luzon were closed for months
during the early part of the Japanese occupation until they were reconstituted by order
of the Chairman of the Executive Commission on 30 January 1942. This interruption in
Sales, 2003 ( 366 )
the functions of the courts has also been held to interrupt the running of the
prescriptive period (see also Palma vs. Celda, 81 Phil. 416). That being the case,
respondent company could not be barred by prescription from proceeding with the
execution sale pursuant to the levy and writ of execution issued under the pre-war
judgment, considering that even the minimum period of from 8 December 1941, the
outbreak of the Pacific War, to 30 January 1942 is already a term of 1 month and 23
days.
7.
Pre-war writ of execution and levy may still be enforced by sale of the levied
property after the lapse of the 5-year period within which a judgment may be
executed by motion
A valid execution issued and levy made within the period provided by law may be
enforced by a sale thereafter. The sale of the property by the sheriff and the application
of the proceeds are simply the carrying out of the writ of execution and levy which
when issued were valid. This rests upon the principle that the levy is the essential act
by which the property is set apart for the satisfaction of the judgment and taken into
custody of the law, and that after it has been taken from the defendant, his interest is
limited to its application to the judgment, irrespective of the time when it may be sold
(Southern Cal. L. Co. vs. Hotel Co., 94 Cal. 217, 222; Government of P.I. vs. Echaus, 71
Phil. 318). Thus, a valid judgment may be enforced by motion within 5 years after its
entry, and by action after the lapse of said period but before the same shall have been
barred by any statute of limitations, and that a valid execution issued and levy made
within the 5-year period after entry of the judgment may be enforced by sale of the
property levied upon thereafter, provided the sale is made within 10 years after the
entry of the judgment.
8.
Ansaldo vs. Fidelity not in point

The case of Ansaldo vs. Fidelity and Surety Company of the Philippine Islands,
G.R. No. L-2378, April 27, 1951, is not in point, for there the judgment creditor
attempted to carry out the writ of execution 10 years after the entry of judgment.
9.
Amount received from the Philippine War Damage Commission must be

credited to the Quiambaos account
The Quiambaos should be credited the amount of P409.75 which the Manila
Motors actually received from the Philippine War Damage Commission on account of
the car of Gaudencio Quiambao that had been seized from it by the enemy occupant
during the war. This should reduce the principal amount still due Manila Motors from the
Quiambaos to the sum of P1,542.72.
[114]
Sales, 2003 ( 367 )
Velasco v. CA [G.R. No. L-31018. June 29, 1973.]

First Division, Castro (J):3 concur, 1 concurs with reservation, 2 dissents, 1 concurring
with a dissent, 1 took no part
Facts: A suit for specific performance filed by Lorenzo Velasco against the Magdalena
Estate (Civil Case 7761) on the allegation that on 29 November 1962, Velasco and the
Magdalena Estate had entered into a contract of sale by virtue of which Magdalena
Estate offered to sell Velasco, to which the latter agreed to buy, a parcel of land with an
area of 2,059 sq.ms. (Lot 15, Block 7, Psd-6129,) located at No. 39 corner 6th Street
and Pacific Avenue, New Manila, Quezon City, for the total purchase price of
P100,000.00. Velasco alleged that he was to give a down payment of P10,000.00 to
be followed by P20,000.00 and the balance of P70,000.00 would be paid in
installments, the equal monthly amortization of which was to be determined as soon as
the P30,000.00 down payment had been completed. He further alleged that he paid the
downpayment on 29 November 1962 (Receipt 207848) and that when on 8 January
1964 he tendered to the payment of the additional P20,000.00 to complete the
P30,000.00, Magdalena Estate refused to accept and that eventually it likewise refused
to execute a formal deed of sale obviously agreed upon. Velasco demanded P25,000.00
exemplary damages, P2,000.00 actual damages and P7,000.00 attorneys fees.
Magdalena Estate denied that it has had any direct-dealings, much less, contractual
relations with the Lorenzo Velasco regarding the property in question, and contends
that the alleged contract described in the document attached to the complaint is
entirely unenforceable under the Statute of Frauds; that the truth of the matter is that a
portion of the property in question was being leased by a certain Socorro Velasco who,
on 29 November 1962, went to the office of Magdalena Estate indicated her desire to
purchase the lot; that the latter indicated its willingness to sell the property to her at
the price of P100,000.00 under the condition that a down payment of P30,000.00 be
made, P20,000.00 of which was to be paid on 31 November 1962, and that the balance
of P70,000.00 including interest at 9% per annum was to be paid on installments for a
period of 10 years at the rate of P5,381.32 on June 30 and December of every year until
the same shall have been fully paid; that on 29
November 1962, Socorro Velasco offered to pay P10,000.00 as initial payment instead
of the agreed P20,000.00 but because the amount was short of the alleged P20,000.00
the same was accepted merely as deposit and upon request of Socorro Velasco the
receipt was made in the name of her brother-in-law ,Lorenzo Velasco; that Socorro
Velasco failed to complete the down payment of P30,000.00 and neither has she paid
any installments on the balance of P70,000.00 up to the present time; that it was only
on 8 January 1964 that Socorro Velasco tendered payment of P20,000.00, which offer
Magdalena Estate refused to accept because it had considered the offer to sell
rescinded on account of her failure to complete the down payment on or before 31
December 1962. On 3 November 1968, the CFI Quezon City rendered a decision,
dismissing the complaint filed by Lorenzo and Socorro Velasco against the Magdalena
Estate, Inc. for the purpose of compelling specific performance by Magdalena Estate of
Sales, 2003 ( 368 )
an alleged deed of sale of a parcel of residential land in favor of the Velascos. The basis
for the dismissal of the complaint was that the alleged purchase and sale agreement
was not perfected.
On 18 November 1968, after the perfection of their appeal to the Court of Appeals, the
Velascos received a notice from the said court requiring them to file their printed record
on appeal within 60 days from receipt of said notice. This 60-day term was to expire on
17 January 1969. Allegedly on 15 January 1969, the Velascos allegedly sent to the CA
and to counsel for Magdalena Estate, by registered mail allegedly deposited personally
by its mailing clerk, one Juanito D. Quiachon, at the Makati Post Office, a Motion For
Extension of Time To File Printed Record on Appeal. The extension of time was sought
on the ground of mechanical failures of the printing machines, and the voluminous
printing job now pending with the Vera Printing Press. On 10 February 1969, the
Velascos filed their printed record on appeal in the CA. Thereafter, the Velascos
received from Magdalena Estate a motion filed on 8 February 1969 praying for the
dismissal of the appeal on the ground that the Velascos had failed to file their printed
record on appeal on time. The CA, on 25 February 1969, denied the Magdalena Estates
motion to dismiss, granted the Velascos motion for 30-day extension from 15 January
1969, and admitted the latters printed record on appeal. On 11 March 1969,
Magdalena Estate prayed for a reconsideration of said resolution. The Velascos opposed
the motion for reconsideration and submitted to the CA the registry receipts (0215 and
0216), both stamped 15 January 1969, which were issued by the receiving clerk of the
registry section of the Makati Post Office covering the mails for the disputed motion for
extension of time to file their printed record on appeal and the affidavit of its mailing
clerk. After several other pleadings and manifestations relative to the motion for
reconsideration and on 28 June 1969, the CA promulgated a resolution granting the
motion for reconsideration and ordered Atty. Patrocinio Corpuz (Velascos counsel) to
show cause within 10 days from notice why he should not be suspended from the
practice of his profession for deceit, falsehood and violation of his sworn duty to the
Court, and directed the Provincial Fiscal of Rizal to conduct the necessary investigation
against Juanito D. Quiachon of the Salonga, Ordoez, Yap, Sicat & Associates Law Office
and Flaviano O. Malindog, a letter carrier at the Makati Post Office, and to file the
appropriate criminal action against them (it appears that Malindog postmark the letters
15 January 1969 on 7 February 1969 at the request of Quiachon). On 5
September 1969, the CA promulgated another resolution, denying the motion for
reconsideration of the Velascos but, at the same time, accepting as satisfactory the
explanation of Atty. Corpuz why he should not be suspended from the practice of the
legal profession.
On 20 September 1969, the First Assistant Fiscal of Rizal notified the Court of Appeals
that he had found a prima facie case against Malindog and would file the corresponding
Sales, 2003 ( 369 )
information for falsification of public documents against him, but dismissed the
complaint against Quiachon for lack of sufficient evidence.
A petition for certiorari and mandamus was filed by the Velascos against the resolution
of the Court of Appeals dated 28 June 1969 in CA-GR 42376, which ordered the
dismissal of the appeal interposed by them from a decision of the CFI Quezon City on
the ground that they had failed seasonably to file their printed record on appeal.
The Supreme Court denied the instant petition; without pronouncement as to costs.
1.
Issues raised by Velascos; Some issues are subject of appeal on certiorari

under Rule 45 rather than that of certiorari under Rule 65
The Velascos contend that the Court of Appeals acted without or in excess of
jurisdiction, or with such whimsical and grave abuse of discretion as to amount to lack
of jurisdiction, because (a) it declared that the motion for extension of time to file the
printed record on appeal was not mailed on 15 January 1969, when, in fact, it was
mailed on the said date as evidenced by the registry receipts and the post office stamp
of the Makati Post Office; (b) it declared that the record on appeal was filed only on 10
February 1969, beyond the time authorized by the appellate court, when the truth is
that the said date of filing was within the 30-day extension granted by it; (c) the
adverse conclusions of the appellate court were not supported by the records of the
case, because the said court ignored the affidavit of the mailing clerk of the petitioners
counsel, the registry receipts and postmarked envelopes and, instead, chose to rely
upon the affidavit of the mail carrier Malindog, which affidavit was prepared by counsel
for Magdalena Estate at the affiant himself so declared at the preliminary investigation
at the Fiscals office which absolved the Velascos counsel mailing clerk Quiachon from
any criminal liability; (d) section 1, Rule 50 of the Rules of Court, which enumerates the
grounds upon which the Court of Appeals may dismiss an appeal, does not include as a
ground the failure to file a printed record on appeal; (e) the said section does not state
either that the mismailing of a motion to extend the time to file the printed record on
appeal, assuming this to be the case, may be a basis for the dismissal of the appeal; (f)
the Court of Appeals has no jurisdiction to revoke the extension of time to file the
printed record on appeal it had granted to the petitioners based on a ground not
specified in section 1, Rule 50 of the Rules of Court; and (g) the objection to an appeal
may be waived as when the appellee has allowed the record on appeal to be printed
and approved. Some of the objections raised by the Velascos to the questioned
resolution of the Court of Appeals are obviously matters involving the correct
construction of our rules of procedure and, consequently, are proper subjects of an
appeal by way of certiorari under Rule 45 of the Rules of Court, rather than a special
civil action for certiorari under Rule 65. The petitioners, however, have correctly
appreciated the nature of its objections and have asked this Court to treat the instant
petition as an appeal by way of certiorari under Rule 45 in the event that the Supreme
Court should deem that an appeal is an adequate remedy The nature of the present
case permits a disquisition of both types of assignments.
Sales, 2003 ( 370 )
2.
Date stamped on receipts and envelopes; Henning and Caltex cases do not
apply
While it is true that stamped on the registry receipts 0215 and 0216 as well as on
the envelopes covering the mails in question is the date 15 January 1969, this, by itself,
does not establish an unrebuttable presumption of the fact or date of mailing. The
Henning and Caltex cases are not in point because the specific adjective issue resolved
in those cases was whether or not the date of mailing a pleading is to be considered as
the date of its filing, The issue in the present case is whether or not the motion of the
petitioners for extension of time to file the printed record on appeal was, in point of
fact, mailed (and, therefore, filed) on 15 January 1969.
3.
Certification of postmasters and Malindogs sworn declaration believable;

Malindog induced to issue false registry receipts for the Velascos counsel
The certifications issued by the two postmasters of Makati, Rizal and the sworn
declaration of the mail carrier Malindog describing how the said registry receipts came
to be issued, are worthy of belief. It will be observed that the said certifications explain
clearly and in detail how it was improbable that the registry receipts in question could
have been issued to Velascos counsel in the ordinary course of official business, while
Malindogs sworn statement, which constitutes a very grave admission against his own
interest, provides ample basis for a finding that where official duty was not performed
it was at the behest of a person interested in the Velascos side of the action below.
That at the preliminary investigation at the Fiscals office, Malindog failed to identify
Quiachon as the person who induced him to issue falsified receipts, contrary to what
he declared in his affidavit, is of no moment since the findings of the inquest fiscal as
reflected in the information for falsification filed against Malindog indicate that
someone did induce Malindog to make and issue false registry receipts to the counsel
for the Velascos.
4.
Right to appeal a statutory privilege and not a natural right nor a part of due
process
In Bello vs. Fernando, it was held that the right to appeal is not a natural right nor
a part of due process; it is merely a statutory privilege. and may he exercised only in
the manner provided by law.
5.
Duty of appellant to file printed record on appeal with CA within 60 days from
receipt of notice
The Rules of Court expressly makes it the duty of an appellant to file a printed
record on appeal with the Court of Appeals within 60 days from receipt of notice from
the clerk of that court that the record on appeal approved by the trial court has already
been received by the said court. Section 5 of Rule 46 (Duty of appellant upon receipt of
notice) states that It shall be the duty of the appellant within 15 days from the date of
Sales, 2003 ( 371 )
the notice referred to in the preceding section, to pay the clerk of the Court of Appeals
the fee for the docketing of the appeal, and within 60 days from such notice to submit
to the court 40 printed copies of the record on appeal, together with proof of service of
15 printed copies thereof upon the appellee.
6.
Appellate court did not abuse its discretion

After a careful study and appraisal of the pleadings, admissions and denials
respectively adduced and made by the parties, it is clear that the Court of Appeals did
not gravely abuse its discretion and did not act without or in excess of its jurisdiction.
As the Velascos failed to comply with the duty to file the printed record on appeal
within 60 days from receipt of notice which the Rules of Court enjoins, and considering
that there was a deliberate effort on their part to mislead the said Court in granting
them an extension of time within which to file their printed record on appeal, it stands
to reason that the appellate court cannot be said to have abused its discretion or to
have acted without or in excess of its jurisdiction in ordering the dismissal of their
appeal.
7.
Jurisprudence replete with cases where Court dismissed appeal on grounds

not mentioned specifically in Rule 50, Section 1
Jurisprudence is replete with cases in which this Court dismissed an appeal on
grounds not mentioned specifically in Section 1, Rule 50 of the Rules of Court. (See, for
example, De la Cruz vs. Blanco, 73 Phil. 596 (1942); Government of the Philippines vs.
Court of Appeals. 108 Phil. 86 (1960); Ferinion vs. Sta. Romana, L-25521, February 28,
66, 16 SCRA 370, 375).
8.
Motion for extension of period must be made before the expiration of the
period to be extended
Inasmuch as the motion for extension of the period to file the printed record on
appeal was belatedly filed, then, it is as though the same were non-existent. In
Baquiran vs. Court of Appeals, it was stated that the motion for extension of the
period for filing pleadings and papers in court must be made before the expiration of
the period to be extended. The soundness of this dictum in matters of procedure is
self-evident. For, were the doctrine otherwise, the uncertainties that would follow when
litigants are left to determine and redetermine for themselves whether to seek further
redress in court forthwith or take their own sweet time will result in litigations becoming
more unbearable than the very grievances they are intended to redress.
9.
Objection to appeal not waived

Magdalena Estate did file a motion in the Court of Appeals on 8 February 1969
praying for the dismissal of the appeal on the ground that up to the said date the
Velascos had not yet filed their record on appeal and, therefore, must be considered to
have abandoned their appeal. The objection to an appeal was thus not waived, contrary
Sales, 2003 ( 372 )
to Velascos argument that it was waived when the appellee allows the record on
appeal to be printed and approved/
10.
No contract of sale perfected because the minds of the parties did not meet
in regard to the manner of payment
No contract of sale was perfected because the minds of the parties did not meet
in regard to the manner of payment. The material averments contained in Velascos
complaint themselves disclose a lack of complete agreement in regard to the manner
of payment of the lot in question. The complaint states pertinently that plaintiff and
defendant further agreed that the total down payment shall be P30,000.00, including
the P10,000.00 partial payment mentioned in paragraph 3 hereof, and that upon
completion of the said down payment of P30,000.00, the balance of P70,000.00 shall be
paid by the plaintiff to the defendant in 10 years from November 29, 1962; and that the
time within which the full down payment of the P30,000.00 was to be completed was
not specified by the parties but the defendant was duly compensated during the said
time prior to completion of the down payment of P30,000.00 by way of lease rentals on
the house existing thereon which was earlier leased by defendant to the plaintiffs
sister-in-law, Socorro J. Velasco, and which were duly paid to the defendant by checks
drawn by plaintiff. The Velascos themselves admit that they and Magdalena Estate still
had to meet and agree on how and when the down payment and the installment
payments were to be paid. Such being the situation, it cannot be said that a definite
and firm sales agreement between the parties had been perfected over the lot in
question.
11.
Definite agreement on the matter of payment of purchase price an essential

element to form binding and enforceable contract of sale
A definite agreement on the manner of payment of the purchase price is an
essential element in the formation of a binding and enforceable contract of sale. In the
present case, the Velascos delivered to Magdalena Estate the sum of P10,000 as part of
the downpayment that they had to pay cannot be considered as sufficient proof of the
perfection of any purchase and sale agreement between the parties under article 1482
of the new Civil Code, as the Velascos themselves admit that some essential matter
(the terms of payment) still had to be mutually covenanted.
[115]
Villaflor v. CA [G.R. No. 95694. October 9, 1997.]
Third Division, Panganiban (J): 3 concur, 1 took no part
Facts: On 16 January 1940, Cirilo Piencenaves, in a Deed of Absolute Sale, sold to
Vicente Villafor, a parcel of agricultural land (planted to Abaca) containing an area of 50
Sales, 2003 ( 373 )
hectares, more or less. The deed states that the land was sold to Villaflor on 22 June
1937, but no formal document was then executed, and since then until the present
time, Villaflor has been in possession and occupation of the same. Before the sale of
said property, Piencenaves inherited said property form his parents and was in adverse
possession of such without interruption for more than 50 years. On the same day,
Claudio Otero, in a Deed of Absolute Sale sold to
Villaflor a parcel of agricultural land (planted to corn), containing an area of 24
hectares, more or less; Hermogenes Patete, in a Deed of Absolute Sale sold to Villaflor,
a parcel of agricultural land (planted to abaca and corn), containing an area of 20
hectares, more or less. Both deed state the same details or circumstances as that of
Piencenaves. On 15 February 1940, Fermin Bocobo, in a Deed of Absolute Sale sold to
Villaflor, a parcel of agricultural land (planted with abaca), containing an area of 18
hectares, more or less.
On 8 November 1946, Villaflor leased to Nasipit Lumber Co., Inc. a parcel of land,
containing an area of 2 hectares, together with all the improvements existing thereon,
for a period of 5 years (from 1 June 1946) at a rental of P200.00 per annum to cover the
annual rental of house and building sites for 33 houses or buildings. The lease
agreement allowed the lessee to sublease the premises to any person, firm or
corporation; and to build and construct additional houses with the condition the lessee
shall pay to the lessor the amount of 50 centavos per month for every house and
building; provided that said constructions and improvements become the property of
the lessor at the end of the lease without obligation on the part of the latter for
expenses incurred in the construction of the same. On 7 July 1948, in an Agreement to
Sell Villaflor conveyed to Nasipit Lumber, 2 parcels of land. Parcel 1 contains an area of
112,000 hectares more or less, divided into lots
5412, 5413, 5488, 5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859,
5858, 5857, 5853, and
5852; and containing abaca, fruit trees, coconuts and thirty houses of mixed materials
belonging to the Nasipit
Lumber Company. Parcel 2 contains an area of 48,000 more or less, divided into lots
5411, 5410, 5409, and 5399, and containing 100 coconut trees, productive, and 300
cacao trees. From said day, the parties agreed that Nasipit Lumber shall continue to
occupy the property not anymore in concept of lessee but as prospective owners.
On 2 December 1948, Villaflor filed Sales Application V-807 with the Bureau of Lands,
Manila, to purchase under the provisions of Chapter V, XI or IX of CA 141 (The Public
Lands Act), as amended, the tract of public lands. Paragraph 6 of the Application,
states: I understand that this application conveys no right to occupy the land prior to
its approval, and I recognize that the land covered by the same is of public domain and
any and all rights I may have with respect thereto by virtue of continuous occupation
and cultivation are hereby relinquished to the Government. On 7 December 1948,
Villaflor and Nasipit Lumber executed an Agreement, confirming the Agreement to
Sales, 2003 ( 374 )
Sell of 7 July 1948, but with reference to the Sales Application filed with the Bureau of
Land. On 31 December 1949, the Report by the public land inspector (District Land
Office, Bureau of Lands, in Butuan) contained an endorsement of the said officer
recommending rejection of the Sales Application of Villaflor for having leased the
property to another even before he had acquired transmissible rights thereto. In a letter
of Villaflor dated 23 January 1950, addressed to the Bureau of Lands, he informed the
Bureau Director that he was already occupying the property when the Bureaus Agusan
River Valley Subdivision Project was inaugurated, that the property was formerly
claimed as private property, and that therefore, the property was segregated or
excluded from disposition because of the claim of private ownership. Likewise, in a
letter of Nasipit Lumber dated 22 February 1950 addressed to the Director of Lands, the
corporation informed the Bureau that it recognized Villaflor as the real owner, claimant
and occupant of the land; that since June 1946, Villaflor leased 2 hectares inside the
land to the company; that it has no other interest on the land; and that the Sales
Application of Villaflor should be given favorable consideration. On 24 July 1950, the
scheduled date of auction of the property covered by the Sales Application, Nasipit
Lumber offered the highest bid of P41.00 per hectare, but since an applicant under CA
141, is allowed to equal the bid of the highest bidder, Villaflor tendered an equal bid,
deposited the equivalent of 10% of the bid price and then paid the assessment in full.
On 16 August 1950, Villaflor executed a document, denominated as a Deed of
Relinquishment of Rights, in favor on Nasipit Lumber, in consideration of the amount
of P5,000 that was to be reimbursed to the former representing part of the purchase
price of the land, the value of the improvements Villaflor introduced thereon, and the
expenses incurred in the publication of the Notice of Sale; in light of his difficulty to
develop the same as Villaflor has moved to Manila. Pursuant thereto, on 16 August
1950, Nasipit Lumber filed a Sales Application over the 2 parcels of land, covering an
area of 140 hectares, more or less. This application was also numbered V-807. On 17
August 1950 the Director of Lands issued an Order of Award in favor of Nasipit
Lumber; and its application was entered in the record as Sales Entry V-407.
On 27 November 1973, Villafor wrote a letter to Nasipit Lumber, reminding the latter of
their verbal agreement in 1955; but the new set of corporate officers refused to
recognize Villaflors claim. In a formal protest dated 31 January 1974 which Villaflor filed
with the Bureau of Lands, he protested the Sales Application of Nasipit Lumber,
claiming that the company has not paid him P5,000.00 as provided in the Deed of
Relinquishment of Rights dated 16 August 1950. On 8 August 1977, the Director of
Lands found that the payment of the amount of P5,000.00 in the Deed and the
consideration in the Agreement to Sell were duly proven, and ordered the dismissal of
Villaflors protest.
Sales, 2003 ( 375 )
On 6 July 1978, Villaflor filed a complaint in the trial court for Declaration of Nullity of
Contract (Deed of
Relinquishment of Rights), Recovery of Possession (of two parcels of land subject of the
contract), and
Damages at about the same time that he appealed the decision of the Minister of
Natural Resources to the Office of the President. On 28 January 1983, he died. The trial
court ordered his widow, Lourdes D. Villaflor, to be substituted as petitioner. After trial
in due course, the then CFI Agusan del Norte and Butuan City, Branch III, dismissed the
complaint on the grounds that: (1) petitioner admitted the due execution and
genuineness of the contract and was estopped from proving its nullity, (2) the verbal
lease agreements were unenforceable under Article 1403 (2)(e) of the Civil Code, and
(3) his causes of action were barred by extinctive prescription and/or laches. It ruled
that there was prescription and/or laches because the alleged verbal lease ended in
1966, but the action was filed only on 6 January 1978. The 6-year period within which to
file an action on an oral contract per Article 1145 (1) of the Civil Code expired in 1972.
Nasipit Lumber was declared the lawful owner and actual physical possessor of the 2
parcels of land (containing a total area of 160 hectares). The Agreements to Sell Real
Rights and the Deed of Relinquishment of Rights over the 2 parcels were likewise
declared binding between the parties, their successors and assigns; with double costs
against Villaflor.
The heirs of petitioner appealed to the Court of Appeals which, however, rendered
judgment against them via the assailed Decision dated 27 September 1990 finding
petitioners prayers (1) for the declaration of nullity of the deed of relinquishment,
(2) for the eviction of private respondent from the property and (3) for the declaration
of petitioners heirs as owners to be without basis. Not satisfied, petitioners heirs
filed the petition for review dated 7 December 1990. In a Resolution dated 23 June
1991, the Court denied this petition for being late. On reconsideration, the Court
reinstated the petition.
The Supreme Court dismissed the petition.
1.
Doctrine of primary jurisdiction; Court does not interfere if question is within

jurisdiction of an administrative tribunal
Underlying the rulings of the trial and appellate courts is the doctrine of primary
jurisdiction; i.e., courts cannot and will not resolve a controversy involving a question
which is within the jurisdiction of an administrative tribunal, especially where the
question demands the exercise of sound administrative discretion requiring the special
knowledge, experience and services of the administrative tribunal to determine
technical and intricate matters of fact. In cases where the doctrine of primary
jurisdiction is clearly applicable, the court cannot arrogate unto itself the authority to
resolve a controversy, the jurisdiction over which is initially lodged with an
administrative body of special competence.
Sales, 2003 ( 376 )
2.
Doctrine of primary jurisdiction; may apply even to questions which are

judicial character
It has been the jurisprudential trend to apply the doctrine to cases involving
matters that demand the special competence of administrative agencies even if the
question involved is also judicial in character. It applies where a claim is originally
cognizable in the courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme, have been placed
within the special competence of an administrative body; in such case, the judicial
process is suspended pending referral of such issues to the administrative body for its
view.
3.
Doctrine of primary jurisdiction; cases

In Machete vs. Court of Appeals, the Court upheld the primary jurisdiction of
the Department of Agrarian Reform Adjudicatory Board (DARAB) in an agrarian dispute
over the payment of back rentals under a leasehold contract. In Concerned Officials
of the Metropolitan Waterworks and Sewerage System vs. Vasquez, the Court
recognized that the MWSS was in the best position to evaluate and to decide which bid
for a waterworks project was compatible with its development plan. In the present case,
the questions on the identity of the land in dispute and the factual qualification of
private respondent as an awardee of a sales application require a technical
determination by the Bureau of Lands as the administrative agency with the expertise
to determine such matters. Because these issues preclude prior judicial determination,
it behooves the courts to stand aside even when they apparently have statutory power
to proceed, in recognition of the primary jurisdiction of the administrative agency.
4.
Interpretation of contracts and determination of private rights no longer

uniquely judicial function
One thrust of the multiplication of administrative agencies is that the
interpretation of contracts and the determination of private rights thereunder is no
longer a uniquely judicial function, exercisable only by our regular courts.
5.
Primary jurisdiction of director of lands and minister or natural resources

regarding identity of disputed land and qualification of awardee of a sales
patent
The primary jurisdiction of the director of lands and the minister of natural
resources over the issues regarding the identity of the disputed land and the
qualification of an awardee of a sales patent is established by Sections 3 and 4 of CA
141, also known as the Public Land Act. Section 3 of said act provides that the
Secretary of Agriculture and Commerce (now Secretary of Natural Resources) shall be
the executive officer charged with carrying out the provisions of this Act through the
Director of Lands, who shall act under his immediate control. Section 4 provides that
Sales, 2003 ( 377 )
subject to said control, the Director of Lands shall have direct executive control of the
survey, classification, lease, sale or any other form of concession or disposition and
management of the lands of the public domain, and his decision as to questions of fact
shall be conclusive when approved by the Secretary of Agriculture and Commerce.
Sections 3 and 4 of the Public Land Law mean that the Secretary of Agriculture and
Natural Resources shall be the final arbiter on questions of fact in public land conflicts
(Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442). The Supreme
Court has recognized that the Director of Lands is a quasi-judicial officer who passes on
issues of mixed facts and law (Ortua vs. Bingson Encarnacion, 59 Phil 440).
6.
Finding of fact by administrative agency accorded great respect

Reliance by the trial and the appellate courts on the factual findings of the
Director of Lands and the Minister of Natural Resources is not misplaced. By reason of
the special knowledge and expertise of said administrative agencies over matters
falling under their jurisdiction, they are in a better position to pass judgment thereon;
thus, their findings of fact in that regard are generally accorded great respect, if not
finality, by the courts. The findings of fact of an administrative agency must be
respected as long as they are supported by substantial evidence, even if such evidence
might not be overwhelming or even preponderant. It is not the task of an appellate
court to weigh once more the evidence submitted before the administrative body and
to substitute its own judgment for that of the administrative agency in respect of
sufficiency of evidence.
7.
Finding of fact by administrative agency accorded great respect ; Exception

to the rule
The rule that factual findings of an administrative agency are accorded respect
and even finality by courts admits of exceptions. This is true also in assessing factual
findings of lower courts. It is incumbent on the petitioner to show that the resolution of
the factual issues by the administrative agency and/or by the trial court falls under any
of the exceptions. Otherwise, this Court will not disturb such findings.
8.
Public land; Lack of Technical description does not prove that the findings
lacked substantial evidence
The lack of technical description did not prove that the finding of the Director of
Lands lacked substantial evidence. The evidence adduced by petitioner to establish his
claim of ownership over the subject area consists of deeds of absolute sale executed in
his favor. However, an examination of the technical descriptions of the tracts of land
subject of the deeds of sale will disclose that said parcels are not identical to, and do
not tally with, the area in controversy.
9.
Public land; Property admitted to be public, cannot now be claimed otherwise

The provision of the law is specific that public lands can only be acquired in the
manner provided for therein and not otherwise (Sec. 11, CA. No. 141, as amended). In
Sales, 2003 ( 378 )
his sales application, petitioner expressly admitted that said property was public land.
This is formidable evidence as it amounts to an admission against interest. The records
show that Villaflor had applied for the purchase of lands in question with this Office
(Sales Application V-807) on 2 December 948. There is a condition in the sales
application to the effect that he recognizes that the land covered by the same is of
public domain and any and all rights he may have with respect thereto by virtue of
continuous occupation and cultivation are relinquished to the Government of which
Villaflor is very much aware. It also appears that Villaflor had paid for the publication
fees appurtenant to the sale of the land. He participated in the public auction where he
was declared the successful bidder. He had fully paid the purchase price thereof. It
would be a height of absurdity for Villaflor to be buying that which is owned by him if
his claim of private ownership thereof is to be believed. The area in dispute is not the
private property of the petitioner.
10.
Lands belong to the state, unless alienated

It is a basic assumption of public policy that lands of whatever classification belong to
the state.
Unless alienated in accordance with law, it retains its rights over the same as dominus.
(Santiago vs. de los Santos, L-20241, November 22, 1974, 61 SCRA 152). No public land
can be acquired by private persons without any grant, express or implied from the
government. It is indispensable then that there be showing of title from the state or any
other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L30389, December 27, 1972, 48 SCRA 379).
11.
Filing of sales application acknowledges that the land is not the private
property of the applicant
As such sales applicant manifestly acknowledged that he does not own the land
and that the same is a public land under the administration of the Bureau of Lands, to
which the application was submitted, all of its acts prior thereof, including its real
estate tax declarations, characterized its possessions of the land as that of a sales
applicant. And consequently, as one who expects to buy it, but has not as yet done so,
and is not, therefore, its owner. (Palawan Agricultural and Industrial Co., Inc. vs.
Director of Lands, L-25914, March 21, 1972, 44 SCRA 15).
12.
Rule on the interpretation of contracts is used in affirming, not negating,

their validity
The rule on the interpretation of contracts (Article 1371) is used in affirming, not
negating, their validity. Article 1373, which is a conjunct of Article 1371, provides that,
if the instrument is susceptible of two or more interpretations, the interpretation which
will make it valid and effectual should be adopted. In this light, it is not difficult to
Sales, 2003 ( 379 )
understand that the legal basis urged by petitioner does not support his allegation that
the contracts to sell and the deed of relinquishment are simulated and fictitious.
13.
Simulation not existing in the present case

Simulation occurs when an apparent contract is a declaration of a fictitious will,
deliberately made by agreement of the parties, in order to produce, for the purpose of
deception, the appearance of a juridical act which does not exist or is different from
that which was really executed. Such an intention is not apparent in the agreements.
The intent to sell, on the other hand, is as clear as daylight. The fact, that the
agreement to sell (7 December 1948) did not absolutely transfer ownership of the land
to private respondent, does not show that the agreement was simulated. Petitioners
delivery of the Certificate of Ownership and execution of the deed of absolute sale were
suspensive conditions, which gave rise to a corresponding obligation on the part of the
private respondent, i.e., the payment of the last installment of the consideration
mentioned in the Agreement. Such conditions did not affect the perfection of the
contract or prove simulation.
14.
Nonpayment of the consideration does not prove simulation

Nonpayment, at most, gives the vendor only the right to sue for collection.
Generally, in a contract of sale, payment of the price is a resolutory condition and the
remedy of the seller is to exact fulfillment or, in case of a substantial breach, to rescind
the contract under Article 1191 of the Civil Code. However, failure to pay is not even a
breach, but merely an event which prevents the vendors obligation to convey title from
acquiring binding force.
15.
Burden of proof rests upon the party who asserts the affirmative of an issue
Prior to the amendment of the rules on evidence on March 14, 1989, Section 1,
Rule 131, states that each party must prove his or her own affirmative allegations.
Thus, the burden of proof in any cause rested upon the party who, as determined by
the pleadings or the nature of the case, asserts the affirmative of an issue and remains
there until the termination of the action. Although nonpayment is a negative fact which
need not be proved, the party seeking payment is still required to prove the existence
of the debt and the fact that it is already due. Petitioner showed the existence of the
obligation with the presentation of the contracts, but did not present any evidence that
he demanded payment from private respondent. The demand letters dated January 2
and 5, 1974, adduced in evidence by petitioner, were for the payment of back rentals,
damages to improvements and reimbursement of acquisition costs and realty taxes,
not payment arising from the contract to sell.
16.
Lack of Notice of the Award not a suppression of evidence

The lack of notice for petitioner (not listed as one of the parties to furnished a
copy by the Director of Lands) can be easily explained. Petitioner was not entitled to
said notice of award from the Director of Lands, because by then, he had already
Sales, 2003 ( 380 )
relinquished his rights to the disputed land in favor of private respondent. In the
heading of the order, he was referred to as sales applicant-assignor. In paragraph
number 4, the order stated that, on 16 August 1950, he relinquished his rights to the
land subject of the award to private respondent. From such date, the sales application
was considered to be a matter between the Bureau of Lands and private respondent
only. Considering these facts, the failure to give petitioner a copy of the notice of the
award cannot be considered as suppression of evidence. Furthermore, this order was in
fact available to petitioner and had been referred to by him since 31 January 1974
when he filed his protest with the Bureau of Lands.
17.
Requirement for a sales application under CA 141

The requirements for a sales application under the Public Land Act are: (1) the
possession of the qualifications required by said Act (under Section 29) and (2) the lack
of the disqualifications mentioned therein (under Sections 121, 122, and 123). Section
121 of the Act pertains to acquisitions of public land by a corporation from a grantee:
The private respondent, not the petitioner, was the direct grantee of the disputed land.
Sections 122 and 123 disqualify corporations, which are not authorized by their charter,
from acquiring public land; the records do not show that private respondent was not so
authorized under its charter.
18.
Determination of qualification of applicant included in the powers to dispose

public lands
In Espinosa vs. Makalintal, the Court ruled that, by law, the powers of the
Secretary of Agriculture and Natural Resources regarding the disposition of public lands
including the approval, rejection, and reinstatement of applications are of
executive and administrative nature. (Such powers, however, do not include the judicial
power to decide controversies arising from disagreements in civil or contractual
relations between the litigants.) Consequently, the determination of whether private
respondent is qualified to become an awardee of public land under CA 141 by sales
application is included therein.
19.
Prohibition of 1973 Constitution against the holding of public alienable lands

by corporation not retroactive
In Ayog vs. Cusi, Jr., the Court ruled that the constitutional prohibition of the
1973 Constitution against the holding of alienable lands of the public domain by
corporations had no retroactive effect and could not prevail over a vested right to the
land. Vested rights have to be respected. It could not be abrogated by the new
Constitution. Section 2, Article XIII of the 1935 Constitution allowed private corporations
to purchase public agricultural lands not exceeding 1,024 hectares. Action for
prohibition is barred by the doctrine of vested rights in constitutional law.
Sales, 2003 ( 381 )
20.
Vested right
A right is vested when the right to enjoyment has become the property of some
particular person orpersons as a present interest. It is the privilege to enjoy
property legally vested, to enforce contracts, and enjoy the rights of property
conferred by existing law or some right or interest in property which has become
fixed and established and is no longer open to doubt or controversy (Downs vs.
Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51 Phil, 498, 502).
Generally, the term vested right expresses the concept of present fixed
interest, which in right reason and natural justice should be protected against
arbitrary State action, or an innately just and imperative right which an
enlightened free society, sensitive to inherent and irrefragable individual rights,
cannot deny (16 C.J.S. 1174, Note 71, No. 5, citing Pennsylvania Greyhound
Lines, Inc. vs. Rosenthal, 192 At. 2nd 587).
21.
Due process prohibits annihilation of vested rights

The due process clause prohibits the annihilation of vested rights. A state may
not impair vested rights by legislative enactment, by the enactment or by the
subsequent repeal of a municipal ordinance, or by a change in the constitution of the
State, except in a legitimate exercise of the police power.
22.
Vested interest in sales application; Opinions of the Secretary of Justice

In Opinion 64, series of 1973, the Secretary of Justice held that where the
applicant, before the Constitution took effect, had fully complied with all his obligations
under the Public Land Act in order to entitle him to a sales patent, there would seem to
be no legal or equitable justification for refusing to issue or release the sales patent. In
Opinion 140, series of 1974, the Secretary of Justice held that as soon as the applicant
had fulfilled the construction or cultivation requirements and has fully paid the
purchase price, he should be deemed to have acquired by purchase the particular tract
of land and to him the area limitation in the new Constitution would not apply. In
Opinion 185, series of 1976, the Secretary of Justice held that where the cultivation
requirements were fulfilled before the new Constitution took effect but the full payment
of the price was completed after 17 January 1973, the applicant was, nevertheless,
entitled to a sales patent.
23.
Executive construction given great respect

A contemporaneous construction of the constitutional prohibition by a high
executive official carries great weight and should be accorded much respect. It is
a correct interpretation of section 11 of Article XIV.
24.
Implementation of DOJ Opinion 64, s. 1973; Sales application for fishponds

and for agricultural use
Implementing Opinion 64, the then Secretary of Agriculture and Natural
Resources issued a memorandum, dated 18 February 1974, providing that sales
Sales, 2003 ( 382 )
application of private individuals covering areas in excess of 24 hectares and those of

corporations, associations, or partnership which fall under any of the following
categories shall be given due course and issued patents, to wit: Sales application for
fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to 17 January
1973, the land covered thereby was awarded; cultivation requirements of law were
complied with as shown by investigation reports submitted prior to 17 January 1973;
land was surveyed and survey returns already submitted to the Director of Lands for
verification and approval; and purchase price was fully paid.
[116]
Villamor vs. CA [G.R. No. 97332. October 10, 1991.]
First Division, Medialdea (J): 2 concur, 1 took no part
Facts: Macaria Labingisa Reyes was the owner of a 600-square meter lot located at
Baesa, Caloocan City
(TCT [18431] 18938, Register of Deeds of Rizal). In July 1971, Macaria sold a portion of
300 sq. ms. of the lot to the Spouses Julio and Marina Villamor for the total amount of
P21,000.00. Earlier, Macaria borrowed P2,000.00 from the spouses which amount was
deducted from the total purchase price of the 300 sq. m. lot sold. The portion sold to
the Villamor spouses is now covered by TCT 39935 while the remaining portion which is
still in the name of Macaria Labingisa- is covered by TCT 39934. On 11 November 1971,
Macaria executed a Deed of option in favor of Villamor in which the remaining 300 sq.
m. portion (TCT No. 39934) of the lot would be sold to Villamor under the conditions
stated therein. According to Macaria, when her husband, Roberto Reyes, retired in
1984, they offered to repurchase the lot sold by them to the Villamor spouses but
Marina Villamor refused and reminded them instead that the Deed of Option in fact
gave them the option to purchase the remaining portion of the lot. The Villamors, on
the other hand, claimed that they had expressed their desire to purchase the remaining
300 sq. m. portion of the lot but the Reyes had been ignoring them.
On 13 July 1987, after conciliation proceedings in the barangay level failed, the
Villamors filed a complaint for specific performance against the Reyes before the RTC
Caloocan City (Branch 121, Civil Case C-12942). On 26 July 1989, judgment was
rendered by the trial court in favor of the Villamor spouses, ordering the Reyeses to sell
the land to the Villamors, to pay the the latter the sum of P3,000 as attorneys fees,
and to pay the cost of suit. The court dismissed the counterclaim for lack of merit.
Not satisfied with the decision of the trial court, the Reyes spouses appealed to the
Court of Appeals (CA-GR CV 24176). On 12 February 1991, the Court of Appeals
rendered a decision reversing the decision of the trial court and dismissing the
Sales, 2003 ( 383 )
complaint. The reversal of the trial courts decision was premised on the finding of
respondent court that the Deed of Option is void for lack of consideration. The Villamor
spouses brought the petition for review on certiorari before the Supreme Court.
The Supreme Court denied the petition, affirmed the decision of the appellate court for
reasons cited in the decision, and dismissed the complaint in Civil Case C-12942 on the
ground of prescription and laches.
1.
Consideration defined
As expressed in Gonzales v. Trinidad (67 Phil. 682), consideration is the why
of the contracts, the essential reason which moves the contracting parties to enter into
the contract. In the present case, the cause or the impelling reason on the part of
private respondent in executing the deed of option as appearing in the deed itself is the
Villamors having agreed to buy the 300 sq. m. portion of Reyes spouses land at
P70.00 per sq. m. which was greatly higher than the actual reasonable prevailing
price. This cause or consideration is clear from the deed which stated that the only
reason why the spouses-vendees Julio Villamor and Marina V Villamor agreed to buy the
said one-half portion at the above stated price of about P70.00 per square meter, is
because I, and my husband Roberto Reyes, have agreed to sell and convey to them the
remaining one-half portion still owned by me . . . It must be noted that in 1969 the
Villamor spouses bought an adjacent lot from the brother of Macaria Labing-isa for only
P18.00 per square meter, such fact not being rebutted by Macaria. Thus, expressed in
terms of money, the consideration for the deed of option is the difference between the
purchase price of the 300 sq. m. portion of the lot in 1971 (P70.00 per sq. m.) and the
prevailing reasonable price of the same lot in 1971. Whatever it is, (P25.00 or P18.00)
though not specifically stated in the deed of option, was ascertainable. Villamors
allegedly paying P52.00 per square meter for the option may, as opined by the
appellate court, be improbable but improbabilities does not invalidate a contract freely
entered into by the parties.
2.
Option contract defined

An optional contract is a privilege existing in one person, for which he had paid
a consideration and which gives him the right to buy, for example, certain
merchandise or certain specified property, from another person, if he chooses, at any
time within the agreed period at a fixed price (Enriquez de la Cavada v. Diaz, 37 Phil.
982).
Deed of option unique; grants option to sell to both the Villamors and the
Reyeses
The deed of option entered into by the parties in the present case had unique
features. The first part covered the statement on the sale of the 300 sq. m. portion of
the lot to Spouses Villamor at the price of P70 per sq. m. which was higher than the
actual reasonable prevailing value of the lands in that place at that time (of sale). The
second part stated that the only reason why the Villamor spouses agreed to buy the
said lot at a much higher price is because the vendor (Reyes) also agreed to sell to the
3.
Sales, 2003 ( 384 )
Villamors the other half-portion of 300 square meters of the land. Had the deed stopped
there, there would be no dispute that the deed is really an ordinary deed of option
granting the Villamors the option to buy the remaining 300 sq. m.-half portion of the lot
in consideration for their having agreed to buy the other half of the land for a much
higher price. But, the deed of option went on and stated that the sale of the other half
would be made whenever the need of such sale arises, either on our (Reyes) part or on
the part of the Spouses Julio Villamor and Marina V. Villamor. It was not only the
Villamors who were granted an option to buy for which they paid a consideration. The
Reyes as well were granted an option to sell should the need for such sale on their part
arise.
4.
Offer and Acceptance

In the present case, the option offered by the Reyeses had been accepted by the
Villamors, the promises, in the same document. The acceptance of an offer to sell for a
price certain created a bilateral contract to sell and buy and upon acceptance, the
offered, ipso facto assumes obligations of a vendee (See Atkins, Kroll & Co. v. Cua Mian
Tek, 102 Phil. 948).
5.
Perfection of contract of sale; Demandability

A contract of sale is, under Article 1475 of the Civil Code, perfected at the
moment there is a meeting of minds upon the thing which is the object of the contract
and upon the price. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the form of contracts.
Since there was, between the parties, a meeting of minds upon the object and the
price, there was already a perfected contract of sale. What was, however, left to be
done was for either party to demand from the other their respective undertakings
under the contract. In Sanchez v. Rigos, No. L-25494, June 14, 1972, 45 SCRA 368, 376,
it was held that since there may be no valid contract without a cause of consideration,
the promisor is not bound by his promise and may, accordingly withdraw it. Pending
notice of its withdrawal, his accepted promise partakes, however, of the nature of an
offer to sell which, if accepted, results in a perfected contract of sale. In the present
case, demandability may be exercised at any time after the execution of the deed. The
Reyeses may compel the Villamors to pay for the property or that the latter may
compel the former to deliver the property.
6.
Deed of Option does not provide for period for both parties to demand
performance of undertaking, renders contract ineffective
The Deed of Option did not provide for the period within which the parties may
demand the performance of their respective undertakings in the instrument. The
parties could not have contemplated that the delivery of the property and the payment
thereof could be made indefinitely and render uncertain the status of the land. The
Sales, 2003 ( 385 )
failure of either parties to demand performance of the obligation of the other for an
unreasonable length of time renders the contract ineffective.
7.
8.
Prescription of actions upon written contracts

Under Article 1144 (1) of the Civil Code, actions upon a written contract must be
brought within 10 years. The Deed of Option was executed on 11 November 1971. The
acceptance, as already mentioned, was also accepted in the same instrument. The
complaint in this case was filed by the Villamors on 13 July 1987, 17 years from the
time of the execution of the contract. Hence, the right of action had prescribed. There
were allegations by the Villamors that they demanded from the Reyeses as early as
1984 the enforcement of their rights under the contract. Still, it was beyond the 10 year
period prescribed by the Civil Code. (See also
Santos vs. Genayo, L-31854, 9 September 1982, 116 SCRA 431: bar by laches)
Court in exercise of its equity jurisdiction
It is of judicial notice that the price of real estate in Metro Manila is continuously
on the rise. To allow the petitioner to demand the delivery of the property subject 13
years or 17 years after the execution of the deed at the price of only P70 per sq. m. is
inequitous. For reasons also of equity and in consideration of the fact that the Reyeses
have no other decent place to live, the Court, in the exercise of its equity jurisdiction is
not inclined to grant Villamors prayer.
[117]
Villonco Realty vs. Bormaheco Inc. [G.R. No. L-26872.
July 25, 1975.] En Banc, Aquino (J): 9 concur, 1 on leave
Facts: Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the
owners of Lots 3, 15 and
16 located at 245 Buendia Avenue, Makati, Rizal with a total area of 3,500 sq.ms. (TCTs
43530, 43531 and 43532). The lots were mortgaged to the Development Bank of the
Philippines (DBP) on 21 April 1959 as security for a loan of P441,000. The mortgage
debt was fully paid on 10 July 1969. Cervantes is the president of Bormaheco, Inc., a
dealer and importer of industrial and agricultural machinery. The entire three lots are
occupied by the building, machinery and equipment of Bormaheco, Inc. and are
adjacent to the property of Villonco Realty Company situated at 219 Buendia Avenue.
[Negotiations] In the early part of February 1964 there were negotiations for the sale
of the said lots and the improvements thereon between Romeo Villonco of Villonco
Realty Company and Bormaheco, Inc., represented by its president, Francisco N.
Cervantes, through the intervention of Edith Perez de Tagle, a real estate-broker. In the
course of the negotiations, the brothers Romeo and Teofilo Villonco conferred with
Cervantes in his office to discuss the price and terms of the sale. Later, Cervantes
went to see Villonco for the same reason until some agreement was arrived at. On a
subsequent occasion, Cervantes, accompanied by Edith Perez de Tagle, discussed again
Sales, 2003 ( 386 )
the terms of the sale with Villonco. During the negotiations, Villonco Realty Company
assumed that the lots belonged to Bormaheco and that Cervantes was duly authorized
to sell the same. Cervantes did not disclose to the broker and to Villonco Realty that the
lots were conjugal properties of himself and his wife and that they were mortgaged to
the DBP. Bormaheco, through Cervantes, made a written offer dated 12 February 1964,
to Romeo Villonco for the sale of the property (stipulating price at P400/sq.m., deposit
of P100,000 in earnest money, consummation pending Bormahecos purchase of
property in Sta. Ana Manila, the final negotiations on both properties known after 45
days). The property mentioned in Bormahecos letter was the land of the National
Shipyards & Steel Corporation (Nassco), with an area of 20,000 sq.ms., located at
Punta, Sta. Ana, Manila. At the bidding held on 17 January 1964 that land was awarded
to Bormaheco, the highest bidder, for the price of P552,000. The Nassco Board of
Directors in its resolution of 18 February 1964 authorized the General Manager to sign
the necessary contract. On 28 February 1964, the Nassco Acting General Manager
wrote a letter to the Economic Coordinator, requesting approval of that resolution. The
Acting Economic Coordinator approved the resolution on 24 March 1964. Meanwhile,
Bormaheco and Villonco Realty continued their negotiations for the sale of the Buendia
Avenue property. Cervantes and Teofilo Villonco had a final conference on 27 February
1964. As a result of that conference Villonco Realty, in its letter of 4 March 1964 made a
revised counter-offer (Romeo Villoncos first counter-offer was dated 24 February 1964)
for the purchase of the property. [Perfection] The counter-offer was accepted by
Cervantes (stipulating interest of 10% of the amount tendered in case the Sta. Ana
purchase does not push through, downpayment at P650,000 and the balance payable
every 3 months in 4 payments [P100,000, P125,000, P212,500, and P212,500]).
Enclosed to it was a MBTC Check worth P100,000 as earnest money. The check for
P100,000 was delivered by Perez de Tagle to Bormaheco on 4 March 1964 and was
received by Cervantes. In the voucher-receipt evidencing the delivery the broker
indicated in her handwriting that the earnest money was subject to the terms and
conditions embodied in Bormahecos letter of February 12 and Villonco Realty
Companys letter of 4 March 1964. [Rescission] Unexpectedly, in a letter dated 30
March 1964, Cervantes returned the earnest money, with interest amounting to
P694.24 (at 10% per annum). Cervantes cited as an excuse the circumstance that
despite the lapse of 45 days from 12 February 1964 there is no certainty yet for the
acquisition of the Punta property. Villonco Realty Company refused to accept the letter
and the checks of Bormaheco. Cervantes sent them by registered mail. When he
rescinded the contract, he was already aware that the Punta lot had been awarded to
Bormaheco. Edith Perez de Tagle, the broker, in a letter to Cervantes dated 31 March
1964 articulated her shock and surprise at Bormahecos turnabout. Cervantes in his
letter of 6 April 1964, a reply to Miss Tagles letter, alleged that the 45 day period had
already expired and the sale to Bormaheco, Inc. of the Punta property had not been
consummated. Cervantes said that his letter was a manifestation that we are no
Sales, 2003 ( 387 )
longer interested to sell the Buendia Avenue property to Villonco Realty. The latter was
furnished with a copy of that letter. In a letter dated 7 April 1964 Villonco Realty
Company returned the two checks to Bormaheco, Inc., stating that the condition for the
cancellation of the contract had not arisen and at the same time announcing that an
action for breach of contract would be filed against Bormaheco.
On that same date, 7 April 1964 Villonco Realty filed the complaint (dated April 6) for
specific performance against Bormaheco. A notice of lis pendens was annotated on the
titles of the said lots. Bormaheco in its answers dated 5 May and 25 May 1964 pleaded
the defense that the perfection of the contract of sale was subject to the conditions
that final acceptance or not shall be made after 45 days and that Bormaheco
acquires the Sta. Ana property.
On 2 June 1964 or during the pendency of this case, the Nassco Acting General
Manager wrote to Bormaheco, Inc., advising it that the Board of Directors and the
Economic Coordinator had approved the sale of the Punta lot to Bormaheco and
requesting the latter to send its duly authorized representative to the Nassco for the
signing of the deed of sale. The deed of sale for the Punta land was executed on 26
June 1964. Bormaheco was represented by Cervantes.
In view of the disclosure in Bormahecos amended answer that the 3 lots were
registered in the names of the Cervantes spouses and not in the name of Bormaheco,
Villonco Realty on 21 July 1964 filed an amended complaint impleading the said
spouses as defendants. Bormaheco and the Cervantes spouses filed separate answers.
As of 15 January 1965 Villonco Realty had paid to the Manufacturers Bank & Trust
Company the sum of P8,712.25 as interests on the overdraft line of P100,000 and the
sum of P27.39 as interests daily on the same loan since 16 January 1965. (That
overdraft line was later settled by Villonco Realty on a date not mentioned in its
manifestation of 19 February 1975). Villonco Realty had obligated itself to pay the sum
of P20,000 as attorneys fees to its lawyers. It claimed that it was damaged in the sum
of P10,000 a month from 24 March 1964 when the award of the Punta lot to Bormaheco
was approved. On the other hand, Bormaheco claimed that it had sustained damages
of P200,000 annually due to the notice of lis pendens which had prevented it from
constructing a multistory building on the 3 lots. Miss Tagle testified that for her services
Bormaheco, through Cervantes, obligated itself to pay her a 3% commission on the
price of P1,400,000 or the amount of P42,000. After trial, the lower court rendered a
decision ordering the Cervantes spouses to execute in favor of Bormaheco a deed of
conveyance for the 3 lots and directing Bormaheco to convey the same lots to Villonco
Realty, to pay the latter, as consequential damages, the sum of P10,000 monthly from
24 March 1964 up to the consummation of the sale, to pay Edith Perez de Tagle the sum
of P42,000 as brokers commission and to pay P20,000 as attorneys fees
Sales, 2003 ( 388 )
Bormaheco, Inc. and the Cervantes spouses appealed. The Supreme Court took
cognizance of the appeal because the amount involved is more than P200,000 and the
appeal was perfected before RA 5440 took effect on 9 September 1968.
The Supreme court modified the trial courts decision by ordering the spouses
Cervantes, within 10 days from the date they receive notice from the clerk of the lower
court that the records of the case have been received from the Supreme Court, to
execute a deed conveying to Bormaheco their 3 lots covered by TCT 43530, 43531 and
43532 of the Registry of Deeds of Rizal; ordering Bormaheco, within 5 days from the
execution of such deed of conveyance, to execute in favor of Villonco Realty a
registerable deed of sale for the said 3 lots and all the improvements thereon, free from
all lien and encumbrances, at the price of P400 per sq.m., deducting from the total
purchase price the sum of P100,000 previously paid by Villonco Realty Company to
Bormaheco, Inc.; and obligating Villonco Realty, upon the execution of such deed of
sale, to pay Bormaheco the balance of the price in the sum of P1,300,000; and ordering
Bormaheco to pay Villonco Realty P20,000 as attorneys fees and to pay Edith Perez de
Tagle the sum of P42,000 as commission; with costs against Villonco Realty.
1.
Contract of sale
By the contract of sale one of the contracting parties obligates himself to transfer
the ownership of and to deliver a determining thing, and the other to pay therefor a
price certain in money or its equivalent. A contract of sale may be absolute or
conditional (Art. 1458, Civil Code).
2.
Perfection of a contract of sale; Present case

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.). In the present case, Bormahecos
acceptance of Villonco Realtys offer to purchase the Buendia Avenue property, as
shown in Teofilo Villoncos letter dated 4 March 1964 indubitably proves that there was
a meeting of minds upon the subject matter and consideration of the sale. Therefore,
on that date the sale was perfected. (Compare with McCullough vs. Aenlle & Co., 3 Phil.
285; Goyena vs. Tambunting, 1 Phil. 490)
3.
Perfection of contracts; Effect

Contracts are perfected by mere consent, and from that 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 (Art. 1315, Civil Code).
Sales, 2003 ( 389 )
4.
Consent: Offer, counter-offer, acceptance

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).
5.
Present contract conditionally consummated or partly executed

Bormahecos acceptance of the part payment of P100,000 shows that the sale
was conditionally consummated or partly executed subject to the purchase by
Bormaheco, Inc. of the Punta property. The nonconsummation of that purchase would
be a negative resolutory condition (Taylor vs. Uy Tieng Piao, 43 Phil. 873).
6.
Borhamecos bid already accepted by Nassco

On 18 February 1964 Bormahecos bid for the Punta property as already
accepted by the Nassco which had authorized its General Manager to sign the
corresponding deed of sale. What was necessary only was the approval of the sale by
the Economic Coordinator and a request for that approval was already pending in the
office of that functionary on 4 March 1964.
7.
Revised counter offer not material but are merely clarifications of what was
agreed upon
There is no evidence as to what changes were made by Cervantes in Villoncos
revised offer, and there is no evidence that Villonco Realty did not assent to the
supposed changes and that such assent was never made known to Cervantes. The
alleged changes or qualifications made by Cervantes were approved by Villonco Realty
and that such approval was duly communicated to Cervantes or Bormaheco by the
broker as shown by the fact that Villonco Realty paid, and Bormaheco accepted, the
sum of P100,000 as earnest money or down payment. That crucial fact implies that
Cervantes was aware that Villonco Realty had accepted the modifications which he had
made in Villoncos counter-offer. Had Villonco Realty not asserted to those insertions
and annotations, then it would have stopped payment on its check for P100,000. The
fact that Villonco Realty allowed its check to be cashed by Bormaheco signifies that the
company was in conformity with the changes made by Cervantes and that Bormaheco
was aware of that conformity. Had those insertions not been binding, then Bormaheco
would not have paid interest at the rate of 10% per annum on the earnest money of
P100,000. The truth is that the alleged changes or qualifications in the revised counteroffer are not material or are mere clarifications of what the parties had previously
agreed upon.
8.
Amendment of another instead of Nassco in paragraph 3 of counter-offer

is trivial
Cervantes allegedly crossed out the word Nassco in paragraph 3 of Villoncos
revised counter-offer and substituted for it the word another so that the original
Sales, 2003 ( 390 )
phrase Nasscos property in Sta. Ana, was made to read as another property in Sta.
Ana. That change is trivial. What Cervantes did was merely to adhere to the wording of
paragraph 3 of Bormahecos original offer which mentions another property located at
Sta. Ana His obvious purpose was to avoid jeopardizing his negotiation with the
Nassco for the purchase of its Sta. Ana property by unduly publicizing it. It is
noteworthy that Cervantes, in his letter to the broker dated 6 April 1964 or after the
Nassco property had been awarded to Bormaheco alluded to the Nassco property. At
that time, there was no more need of concealing from the public that Bormaheco was
interested in the Nassco property.
9.
Insertion of letters PA not a major alteration, alternative contemplation to

be monthly or semi-annually would be usurious
Cervantes alleged insertion of the letters PA (per annum) after the word
interest in that same paragraph 3 of the revised counter-offer could not be
categorized as a major alteration of that counter-offer that prevented a meeting of the
minds of the parties. It was understood that the parties had contemplated a rate of
10% per annum since 10% a month or semi-annually would be usurious.
10.
Revised counter-offer merely amplifies original offer; acceptance is not

qualified and conditional
The stipulation subject to the terms and conditions embodied in Bormahecos
letter of February 12, 1964 and your (Villoncos) letter of March 4, 1964" does not make
Bormahecos acceptance qualified and conditional. There is no incompatibility
between Bormahecos offer of February 12, 1964 and Villoncos counter-offer of March
4, 1964 (Exh. D). The revised counter-offer merely amplified Bormahecos original offer.
11.
Payment of earnest money proof of perfection of contract

The controlling fact is that there was agreement between the parties on the
subject matter, the price and the mode of payment and that part of the price was paid.
Whenever earnest money is given in a contract of sale, it shall be considered as part
of the price and as proof of the perfection of the contract (Art. 1482, Civil Code).
12.
Non-essential changes in terms does not reject offer nor tender a counter
offer
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.,
165 Fed. 2nd 965, citing Sec. 79, Williston on Contracts). Thus, it was held that the
vendors change in a phrase of the offer to purchase, which change does not essentially
Sales, 2003 ( 391 )
change the terms of the offer, does not amount to a rejection of the offer, and the
tender of a counter-offer (Stuart vs. Franklin Life Ins. Co., supra).
13.
Beaumont vs. Prieto and Zayco vs. Serra do not apply

The present case is not governed by the rulings laid down in Beaumont vs. Prieto, 41
Phil. 670, 985,
63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In those two cases the acceptance
radically altered the offer and, consequently, there was no meeting of the minds of the
parties.
14.
Zayco Case: Facts

In the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar
central for P1,000,000 on condition that the price be paid in cash, or, if not paid in cash,
the price would be payable within 3 years provided security is given for the payment of
the balance within three years with interest. Zayco, instead of unconditionally
accepting those terms, countered that he was going to make a down payment of
P100,000, that Serras mortgage obligation to the PNB of P600,000 could be transferred
to Zaycos account and that he (plaintiff) would give a bond to secure the payment of
the balance of the price. It was held that the acceptance was conditional or was a
counter-offer which had to be accepted by Serra. There was no such acceptance. Serra
revoked his offer. Hence, there was no perfected contract.
15.
Beaumont case: Facts

In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan
Hacienda owned by Benito Legarda, who had empowered Valdes to sell it. Borck was
given three months from December 4, 1911 to buy the hacienda for P307,000. On 17
January 1912 Borck wrote to Valdes, offering to purchase the hacienda for P307,000
payable on 1 May 1912. No reply was made to that letter. Borck wrote other letters
modifying his proposal. Legarda refused to convey the property. It was held that Borcks
January 17th letter plainly departed from the terms of the offer as to the time of
payment and was a counter-offer which amounted to a rejection of Valdes original
offer. A subsequent unconditional acceptance could not revive that offer.
16.
Laudico and Harden vs. Arias Rodriguez does not apply

The present case is different from Laudico and Harden vs. Arias Rodriguez, 43
Phil. 270 where the written offer to sell was revoked by the offeror before the offerees
acceptance came to the offerors knowledge.
17.
45-day period merrely an estimate and forecast, not a condition or deadline

set for corporation to decide to pursue transaction
The 45-day period was merely an estimate or a forecast of how long it would take
Bormaheco to acquire the Nassco property and it was not a condition or a deadline set
for the defendant corporation to decide whether or not to go through with the sale of its
Sales, 2003 ( 392 )
Buendia property. The statement that final negotiations on both property can be
definitely known after 45 days does not and cannot mean that Bormaheco should
acquire the Nassco property within 45 days from 12 February 1964 as pretended by
Cervantes. It is simply a surmise that after 45 days (in fact when the 45 day period
should be computed is not clear) it would be known whether Bormaheco would be able
to acquire the Nassco property and whether it would be able to sell the Buendia
property. Paragraph 5 does not even specify how long after the 45 days the outcome of
the final negotiations would be known. Still, the condition that Bormaheco should
acquire the Nassco property was fulfilled. Assuming that had Cervantes been more
assiduous in following up the transaction, the Nassco property could have been
transferred to Bormaheco by 28 March 1964, the supposed last day of the 45-day
period.
18.
Cervantes misled parties as to ownership of the lots; Opposition of wife was

not raised during rescission
Cervantes, in rescinding the contract of sale and in returning the earnest money,
cited as an excuse the circumstance that there was no certainty in Bormahecos
acquisition of the Nassco property. He did not say that Mrs. Cervantes was opposed to
the sale of the three lots. He did not tell Villonco Realty that he could not bind the
conjugal partnership. In truth, he concealed the fact that the three lots were registered
in the name of Francisco Cervantes, Filipino, of legal age, married to Rosario P.
Navarra, as owner thereof in fee simple. He certainly led the Villonco brothers to
believe that as president of Bormaheco he could dispose of the said lots.
He inveigled the Villoncos into believing that he had untrammelled control of
Bormaheco, that Bormaheco owned the lots and that he was invested with adequate
authority to sell the same. The pleadings disclose that Bormaheco and Cervantes
deliberately and studiously avoided making the allegation that Cervantes was not
authorized by his wife to sell the 3 lots or that he acted merely as president of
Bormaheco. That defense was not interposed so as not to place Cervantes in the
ridiculous position of having acted under false pretenses when he negotiated with the
Villoncos for the sale of the 3 lots. Bormaheco in its 3 answers, which were verified by
Cervantes, never pleaded as an affirmative defense that Mrs. Cervantes opposed the
sale of the 3 lots or that she did not authorize her husband to sell those lots. Likewise, it
should he noted that in their separate answer the Cervantes spouses never pleaded as
a defense that Mrs. Cervantes was opposed to the sale of 3 lots or that Cervantes could
not bind the conjugal partnership. The appellants were at first hesitant to make it
appear that Cervantes had committed the skullduggery of trying to sell property which
he had no authority to alienate.
19.
Defense waived for not having pleaded
Sales, 2003 ( 393 )
The defense, that Mrs. Cervantes opposed to the sale, must have been an
afterthought or was evolved post litem motam since it was never disclosed in
Cervantes letter of rescission and in his letter to Miss Tagle. Moreover, Mrs. Cervantes
did not testify at the trial to fortify that defense which had already been waived for not
having been pleaded (See sec. 2, Rule 9, Rules of Court).
20.
Plea that Cervantes has no authority to sell the lots strain the rives of
credibility
Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his
wife and the fact that the three lots were entirely occupied by Bormahecos building,
machinery and equipment and were mortgaged to the DBP as security for its obligation,
and considering that appellants vague affirmative defenses do not include Mrs.
Cervantes alleged opposition to the sale, the plea that Cervantes had no authority to
sell the lots strains the rivets of credibility (Cf. Papa and Delgado vs. Montenegro, 54
Phil. 331; Riobo vs. Hontiveros, 21 Phil. 31).
21.
Contract is the law between parties

Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith (Art. 1159, Civil Code). Inasmuch as
the sale was perfected and even partly executed, Bormaheco, Inc. and the Cervantes
spouses, as a matter of justice and good faith, are bound to comply with their
contractual commitments.
22.
The necessity of a lawyer in drafting contract to sell

Much misunderstanding could have been avoided had the broker and the buyer
taken the trouble of making some research in the Registry of Deeds and availing
themselves of the services of a competent lawyer in drafting the contract to sell.
23.
Damages not specifically pleaded and proven

Stipulation of facts simply means that Villonco Realty Company speculates that it
has suffered damages but it does not mean that the parties have agreed that Villonco
Realty Company is entitled to those damages. The damages in question were not
specifically pleaded and proven and were clearly conjectural and speculative.
24.
Attorneys fees due

Under the facts of the case, it is evident that Bormaheco acted in gross and
evident bad faith in refusing to satisfy the valid and just demand of Villonco Realty for
specific performance. It compelled Villonco Realty to insure expenses to protect its
interest. Moreover, this is a case where it is just and equitable that the Villonco Realty
should recover attorneys fees (Art. 2208, Civil Code).
25.
Tagle is entitled to brokers commission

Paragraph 3 of the stipulation of facts and by the documentary evidence proves
that Bormaheco engaged Tagles services as a broker in the projected sale of the 3 lots
Sales, 2003 ( 394 )
and the improvements thereon. It was stipulated that Miss Tagle intervened in the
negotiations for the sale of the 3 lots. Cervantes in his original offer of 12 February
1964 apprised Villonco Realty that the earnest money should be delivered to Miss Tagle,
the bearer of the letter-offer.
[118]
Yao Ka Sin Trading v. CA, 209 SCRA 763
[119]
Yu Tek v. Gonzales [G.R. No. 9935. February 1, 1915.]
First Division, Trent (J): 4 concur, 1 dissents
Facts: A written contract was executed between Basilio Gonzalez and Yu Tek and Co.,
where Gonzales was st
nd obligated to deliver 600 piculs of sugar of the 1 and 2
grade to Yu Tek, within the period of 3 months (1 January-31 March 1912) at any place
within the municipality of Sta. Rosa, which Yu Tek & Co. or its representative may
designate; and in case, Gonnzales does not deliver, the contract will be rescinded and
Gonzales shall be obligated to return the P3,000 received and also the sum of P1,200
by way of indemnity for loss and damages. No sugar had been delivered to Yu Tek & Co.
under this contract nor had it been able to recover the P3,000. Yu Tek & Co. filed a
complaint against Gonzales, and prayed for judgment for the P3,000 and the additional
P1,200. Judgment was rendered for P3,000 only, and from this judgment both parties
appealed.
The Supreme Court affirmed the judgment appealed from with the modification
allowing the recovery of P1,200 under paragraph 4 of the contract, without costs.
1.
Rights determined by the writing itself

Parties are presumed to have reduced to writing all the essential conditions of
their contract. The rights of the parties must be determined by the writing itself.
2.
Parol evidence not admissible as it should not serve to incorporate additional

conditions into a contract
While parol evidence is admissible in a variety of ways to explain the meaning of
written contracts, it cannot serve the purpose of incorporating into the contract
additional contemporaneous conditions which are not mentioned at all in the writing,
unless there has been fraud or mistake. In the present case, Gonzales alleged that the
court erred in refusing to permit parol evidence showing that the parties intended that
the sugar was to be secured from the crop which the defendant raised on his
plantation, and that he was unable to fulfill the contract by reason of the almost total
Sales, 2003 ( 395 )
failure of his crop. The case appears to be one to which the rule which excludes parol
evidence to add to or vary the terms of a written contract is decidedly applicable. There
is not the slightest intimation in the contract that the sugar was to be raised by
Gonzales. In the contract, Gonzales undertook to deliver a specified quantity of sugar
within a specified time. The contract placed no restriction upon him in the matter of
obtaining the sugar, as he was at liberty to purchase it on the market or raise it himself,
notwithstanding that he owned a plantation himself.
3.
Cases where parol evidence was denied by the Court

In Pastor v. Gaspar (2 Phil 592) the Court declined to allow parol evidence
showing that a party to a written contract was to become a partner in a firm instead of
a creditor of the firm. In Eveland vs. Eastern Mining Co. (14 Phil 509) a contract of
employment provided that the plaintiff should receive from the defendant a stipulated
salary and expenses The defendant in said case sought to interpose as a defense to
recovery that the payment of the salary was contingent upon the plaintiffs
employment redounding to the benefit of the defendant company. The contract
contained no such condition and the court declined to receive parol evidence thereof.
4.
Perfected contract of sale defined; Relief for non-delivery

Article 1450 defines a perfected sale as follows: The sale shall be perfected
between vendor and vendee and shall be binding on both of them, if they have agreed
upon the thing which is the object of the contract and upon the price, even when
neither has been delivered. Article 1452 provides that the injury to or the profit of the
thing sold shall, after the contract has been perfected, be governed by the provisions of
articles 1096 and 1182. There is a perfected sale with regard to the thing whenever
the article of sale has been physically segregated from all other articles.
5.
Perfected sale; Cases

In McCullough vs. Aenlle & Co. (3 Phil 285), a particular tobacco factory with
its contents was held sold under a contract which did not provide for either delivery of
the price or of the thing until a future time. In Barretto vs. Santa Marina (26 Phil
200), specified shares of stock in a tobacco factory were held sold by a contract which
deferred delivery of both the price and the stock until the latter had been appraised by
an inventory of the entire assets of the company. In Borromeo vs. Franco (5 Phil.
Rep., 49) a sale of a specific house was held perfected between the vendor and vendee,
although the delivery of the price was withheld until the necessary documents of
ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep.,
531) the plaintiff had delivered a quantity of hemp into the warehouse of the
defendant. The defendant drew a bill of exchange in the sum of P800, representing the
price which had been agreed upon for the hemp thus delivered. Prior to the
presentation of the bill for payment, in said case, the hemp was destroyed. Whereupon,
the defendant suspended payment of the bill. It was held that the hemp having been
Sales, 2003 ( 396 )
already delivered, the title had passed and the loss was the vendees. It is our purpose
to distinguish the case at bar from all these cases.
6.
Contract in present case merely an executory agreement: a promise of sale

and not a sale The contract in the present case was merely an executory agreement;
a promise of sale and not a sale. As there was no perfected sale, it is clear that articles
1452, 1096, and 1182 are not applicable. The agreement upon the thing which was
the object of the contract was not within the meaning of article 1450. Sugar is one of
the staple commodities of this country. For the purpose of sale its bulk is weighed, the
customary unit of weight being denominated a picul. There was no delivery under
the contract. If called upon to designate the article sold, it is clear that Gonzales could
only say that it was sugar. He could only use this generic name for the thing sold.
There was no appropriation of any particular lot of sugar. Neither party could point to
any specific quantity of sugar.
7.
Present case different from cases cited with perfected contracts

The contract in the present case is different from the contracts discussed in the
cases referred to. In the McCullough case, for instance, the tobacco factory which the
parties dealt with was specifically pointed out and distinguished from all other tobacco
factories. So, in the Barretto case, the particular shares of stock which the parties
desired to transfer were capable of designation. In the Tan Leonco case, where a
quantity of hemp was the subject of the contract, it was shown that quantity had been
deposited in a specific warehouse, and thus set apart and distinguished from all other
hemp.
8.
American jurisprudence; Executory contracts

In Witt Shoe Co. vs. Seegars & Co. (122 La., 145; 47 Sou., 444), a contract
was entered into by a traveling salesman for a quantity of shoes, the sales having been
made by sample. Since Mitchell was offering to sell by sample shoes, part of which had
not been manufactured and the rest of which were incorporated in
Witt Shoe Co.s stock in Lynchburg, Va., it was impossible that he and Seegars & Co.
should at that time have agreed upon the specific objects, the title to which was to
pass, and hence there could have been no sale. In State vs. Shields, et al. (110 La.,
547, 34 Sou., 673), it was held that in receiving an order for a quantity of goods, of a
kind and at a price agreed on, to be supplied from a general stock, warehoused at
another place, the agent receiving the order merely enters into an executory contract
for the sale of the goods, which does not divest or transfer the title of any determinate
object, and which becomes effective for that purpose only when specific goods are
thereafter appropriated to the contract; and, in the absence of a more specific
agreement on the subject, that such appropriation takes place only when the goods as
ordered are delivered to the public carriers at the place from which they are to be
Sales, 2003 ( 397 )
shipped, consigned to the person by whom the order is given, at which time and place,
therefore, the sale is perfected and the title passes.
9.
American jurisprudence: Recovery of payment; Applicability to present case

In Larue & Prevost vs. Rugely, Blair & Co. (10 La. Ann., 242), the defendants
therein had made a contract for the sale, by weight, of a lot of cotton, had received
$3,000 on account of the price, and had given an order for its delivery, which had been
presented to the purchaser, and recognized by the press in which the cotton was
stored, but that the cotton had been destroyed by fire before it was weighed. It was
held that it was still at the risk of the seller, and that the buyer was entitled to recover
the $3,000 paid on account of the price. Similarly, in the present case, Gonzales having
defaulted in his engagement, Yu Tek & Co. is entitled to recover the P3,000 which it
advanced to Gonzales.
10.
Contracting parties free to stipulate; Stipulation clear, no room for

interpretation; Liquidated damage
The contract plainly states that if Gonzales fails to deliver the 600 piculs of sugar
within the time agreed on, the contract will be rescinded and he will be obliged to
return the P3,000 and pay the sum of P1,200 by way of indemnity for loss and
damages. There cannot be the slightest doubt about the meaning of this language or
the intention of the parties. There is no room for either interpretation or construction.
Under the provisions of article 1255 of the Civil Code contracting parties are free to
execute the contracts that they may consider suitable, provided they are not in
contravention of law, morals, or public order. In our opinion there is nothing in the
contract under consideration which is opposed to any of these principles. Thus, this is a
clear case of liquidated damages.
[120]
Yuviengco v. Dacuycuy, 104 SCRA 668 (1981)
[121]
Zayas vs. Luneta Motor Company [G.R. No. L-30583.
October 23, 1982.] First Division, Gutierrez Jr. (J): 5 concur
Facts: Eutropio Zayas, Jr. purchased on installment basis a Ford Thames Freighter with
PUH Body (Engine
400E-127738 and Chassis 400E-127738) from Mr. Roque Escao of the Escao
Enterprises in Cagayan de
Oro City, dealer of Luneta Motor Company (Conditions: Selling price, P 7,500.00;
Financing charge, 1,426.82; Total Selling Price, 8,926.82; Payable on Delivery, 1,006.82;
Payable in 24 months at 12 % interest per annum, 7,920.00) The motor vehicle was
Sales, 2003 ( 398 )
delivered to the Zayas who paid the initial payment in the amount of P1,006.82, and
executed a promissory note in the amount of P7,920.00, the balance of the total selling
price, in favor of Luneta Motor Company. The promissory note stated the amounts and
dates of payment of 26 installments covering the P7,920.00 debt. Simultaneously with
the execution of the promissory note and to secure its payment, Zayas executed a
chattel mortgage on the subject motor vehicle in favor of Luneta Motors. After paying a
total amount of P3,148.00, Zayas was unable to pay further monthly installments
prompting the Luneta Motors to extrajudicially foreclose the chattel mortgage. The
motor vehicle was sold at public auction with the Luneta Motors represented by Atty.
Leandro B. Fernandez as the highest bidder in the amount of P5,000.00.
Since the payments made by Zayas plus the P5,000.00, realized from the foreclosure of
the chattel mortgage could not cover the total amount of the promissory note executed
by Zayas in favor of the respondent Luneta Motors, the latter filed Civil Case 165263
with the City Court of Manila for the recovery of the balance of P1,551.74 plus interests.
After several postponements, the case was set for hearing. As a result of Luneta
Motors and its counsels non-appearance on the date set for hearing, Zayas, Jr. moved
to have the case dismissed for lack of interest on the part of Luneta Motors. He also
asked the court to allow him to discuss the merits of his affirmative defense as if a
motion to dismiss had been filed. The issue raised and argued by Zayas was whether or
not a deficiency amount after the motor vehicle, subject of the chattel mortgage, has
been sold at public auction could still be recovered. Zayas cited the case of Ruperto
Cruz v. Filipinas Investment (23 SCRA 791). Acting on the motion, the case was
dismissed without pronouncement as to costs. Luneta Motor Company filed an Urgent
Motion for Reconsideration, which the court denied for lack of merit.
Luneta Motor Company appealed the case to the CFI Manila (Branch XXXI, presided by
Judge Juan O. Reyes; Civil Case 74381). After various incidents, the CFI issued an order
remanding the case to the court of origin for further proceedings at it is in the opinion
that the City Court should have not decided the case merely on the question of law
since the presentation of evidence is necessary to adjudicate the questions involved.
Hence, the petition for review by certiorari filed by Zayas.
The Supreme Court granted the petition, annulled the orders remanding the case to the
court of origin and denying the motion for reconsideration of the CFI Manila, directed
the CFI to dismiss the appeal in Civil Case 74381, and affirmed the order of the City
Court of Manila dismissing the complaint in Civil Case 165263.
1.
Escano Enterprises an agent of Luneta Motor Company

The Escao Enterprises of Cagayan de Oro City was an agent of Luneta Motor
Company. A very significant evidence which proves the nature of the relationship
Sales, 2003 ( 399 )
between Luneta Motor Company and Escao Enterprises is a certification from the
cashier of Escao Enterprises on the monthly installments paid by Mr. Eutropio Zayas,
Jr. In the certification, the promissory note in favor of Luneta Motor Company was
specifically mentioned. There was only one promissory note executed by Eutropio
Zayas, Jr. in connection with the purchase of the motor vehicle. The promissory note
mentioned in the certification refers to the promissory note executed by Eutropio
Zayas, Jr. in favor of Luneta Motor Company. Thus, Escao Enterprises, a dealer of
Luneta Motor Company, was merely a collecting-agent as far as the purchase of the
subject motor vehicle was concerned. The principal and agent relationship is clear.
Luneta Motors argument that Escano Enterprises is a distinct and different entity, that
its role in the said transaction was only to finance the purchase price of the motor
vehicle; that in order to protect its interest as regards the promissory note executed in
its favor, a chattel mortgage covering the same motor vehicle was executed by Zayas;
and thus that the contract between the parties was only an ordinary loan removed from
the coverage of Article 1484 of the New Civil Code; is without merit.
2.
Nature of transaction remains to be a sale of personal property in installment

covered by Article 1484
Even assuming that the distinct and independent entity theory of Luneta
Motors is valid, the nature of the transaction as a sale of personal property on
installment basis remains. When, therefore, Escao Enterprises, assigned its rights visa-vis the sale to Luneta Motors, the nature of the transaction involving Escao
Enterprises and Eutropio Zayas, Jr. did not change at all. As assignee, Luneta Motors
had no better rights than assignor Escao Enterprises under the same transaction. The
transaction would still be a sale of personal property in installments covered by Article
1484 of the New Civil Code.
3.

Article 1484 of the New Civil Code, on the foreclosure of chattel mortgages over
personal property sold on installment basis, provides that In a contract of sale of
personal property the price of which is payable in installments, the vendor may
exercise any of the following remedies: (3) Foreclose the chattel ,mortgage on the thing
sold, if one has been constituted, should the vendees failure to pay cover two or more
installments. In this case, he shall have no further action against the purchaser to
recover any unpaid balance of the price. Any agreement to the contrary shall be void.
4.
Foreclosure and actual sale of a mortgaged chattel bars further recovery of

balance by vendor
The foreclosure and actual sale of a mortgaged chattel bars further recovery by
the vendor of any balance on the purchasers outstanding obligation not so satisfied by
the sale. The reason for the doctrine was aptly stated in the case of Bachrach Motor Co.
vs. Millan, thus the principal object of the amendment was to remedy the abuses
committed in connection with the foreclosure of chattel mortgages. This amendment
Sales, 2003 ( 400 )
prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale
for a low price and then bringing suit against the mortgagor for a deficiency judgment.
The almost invariable result of this procedure was that the mortgagor found himself
minus the property and still owing practically the full amount of his original
indebtedness. Under this amendment the vendor of personal property, the purchase
price of which is payable in installments, has the right to cancel the sale or foreclose
the mortgage if one has been given on the property. Whichever right the vendor elects
he need not return to the purchaser the amount of the installments already paid, if
there be an agreement to that effect. Furthermore, if the vendor avails himself of the
right to foreclose the mortgage this amendment prohibits him from bringing an action
against the purchaser for the unpaid balance. (Cruz v. Filipinas Investment & Finance
Corporation 23 SCRA 791)
5.
No need for remand of records to city court

The Courts findings and conclusions are borne out by the records available to
the appellate court. There was no necessity for the remand of records to the city court
for the presentation of evidence on the issue raised in the case.
Sales, 2003 ( 401 )

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Haystacks

Michael Vernon Guerrero Mendiola

Some Rights Reserved.

Filinvest Credit vs. CA [GR 82508, 29 September 1989] .........

Pichel vs. Alonzo [GR L-36902, 30 January 1982] ......... 199

Suria vs. IAC, 151 SCRA 661(1987) ......... [unavailable]

Vda, De Gordon vs. CA [GR L-37831, 23 November 1981] ......... 258

This collection contains one hundred three (103)

Haystacks (Berne Guerrero)

Haystacks (Berne Guerrero)

Asserted right or claim to ownership not sufficient per se to give rise to

Classes of modes of acquiring ownership

Contract of Sale; Declaration of Heirship and Waiver of Rights an

Sale of hereditary rights and waiver of hereditary rights distinguished

Haystacks (Berne Guerrero)

Summon of Ministry of Agrarian Reform does not conclude actuality of sale

No unjustified or deliberate refusal to pay the lease rentals to the

Haystacks (Berne Guerrero)

Sanction of forfeiture of tenants preferred right and possession of

Haystacks (Berne Guerrero)

Haystacks (Berne Guerrero)

Haystacks (Berne Guerrero)

No acts of parties justifies radical change of Palancas posture; No legal basis

No legal rationalizing can sanction Palancas arbitrary breach of contract

Palanca and tenants estopped

Subsequent sale clearly made in bad faith

Haystacks (Berne Guerrero)

Refusal of tenants from vacating property not a valid justification to renege

Haystacks (Berne Guerrero)

Cross Complaint not founded on conventional rescission but on the failure to

Fulfillment of condition impossible for reason imputable to party not

Tradition / Delivery by the vendor of the thing sold

Haystacks (Berne Guerrero)

Delivery, according to Dalloz

Execution of a public instrument, when sufficient

Rescission of sale and return of price due to non-delivery of thing sold

No agreement for vendee to take steps to obtain material possession of thing

Haystacks (Berne Guerrero)

Legal interest due as rescission is made by virtue of provisions of law

Haystacks (Berne Guerrero)

Haystacks (Berne Guerrero)

Agreement between parties a contract to sell and not an option contract or a

Intent not to transfer ownership need not be expressed

Haystacks (Berne Guerrero)

No actual or constructive delivery of property to indicate contract of sale;

Perfected contract to sell

Contract interpreted to ascertain intent of parties; Title not controlling if text

Haystacks (Berne Guerrero)

Distinction between an option and a contract of sale

Acceptance; formal or informal

Contract clear, only performance of obligations required of parties

Haystacks (Berne Guerrero)

Test to determine contract as a contract of sale or purchase or mere

Contract not an option contract; Balance

Haystacks (Berne Guerrero)

When earnest money given in a contract of sale

Adelfa Properties justified in suspending payment of balance by reason of

Jimenezes may no longer be compelled to sell and deliver subject property

Tender and consignation required in discharge of obligation (eg. Contract to

Haystacks (Berne Guerrero)

Resolution of reciprocal contracts may be made extrajudicially, unless

Haystacks (Berne Guerrero)

Haystacks (Berne Guerrero)

Preferential right of first to register