REQUISITES OF CONSENSUAL CONTRACTS

Ang Yu Asuncion et al. vs. Court of Appeals and Buen Realty Corp.
Topic: Sales; Contract of sale v. Contract to sell; remedies for violation of right of first refusal
Facts:
Petitioners Ang Yu Asuncion et. al. are lessees of residential and commercial spaces owned by
the Unjiengs. They have been leasing the property and possessing it since 1935 and have been
paying rentals.
In 1986, the Unjiengs informed Petitioners Ang Yu Asuncion that the property was being sold and
that Petitioners were being given priority to acquire them (Right of First Refusal). They agreed on
a price of P5M but they had not yet agreed on the terms and conditions. Petitioners wrote to the
Unjiengs twice, asking them to specify the terms and conditions for the sale but received no reply.
Later, the petitioners found out that the property was already about to be sold, thus they instituted
this case for Specific Performance [of the right of first refusal].
The Trial Court dismissed the case. The trial court also held that the Unjiengs offer to sell was
never accepted by the Petitioners for the reason that they 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.
The Court of Appeals affirmed the decision of the Trial Court.
In the meantime, in 1990, the property was sold to De Buen Realty, Private Respondent in this
case. The title to the property was transferred into the name of De Buen and demanded that the
Petitioners vacate the premises.
Because of this, Petitioners filed a motion for execution of the CA judgement. At first, CA directed
the Sheriff to execute an order directing the Unjiengs to issue a Deed of Sale in the Petitioners
favour and nullified the sale to De Buen Realty. But then, the CA reversed itself when the Private
Respondents Appealed.
Issues:
1.
Whether or not the Contract of Sale is perfected by the grant of a Right of First Refusal.
2.
Whether or not a Right of First Refusal may be enforced in an action for Specific
Performance.
Held:
1.
No. A Right of First Refusal is not a Perfected Contract of Sale under Art. 1458 or an
option under Par. 2 Art 1479 or an offer under Art. 1319. In a Right of First Refusal, only the
object of the contract is determinate. This means that no vinculum juris is created between the
seller-offeror and the buyer-offeree.
2.
No. Since a contractual relationship does not exist between the parties, a Right of First
Refusal may not be enforced through an action for specific performance. Its conduct is governed
by the law on human relations under Art. 19-21 of the Civil Code and not by contract law.
Therefore, the Supreme Court held that the CA could not have decreed at the time the execution
of any deed of sale between the Unjiengs and Petitioners.
Other Rules, Comments and Discussion:
This case is notable because it lays down the rules on options contracts and right of first refusal
as well as promises to buy and sell. First, the Supreme Court discussed the stages of the
formation of a sales contract, these are:
1.
Negotiation covers the period from the time the prospective contracting parties indicate
interest in the contract to the time the contract is concluded (perfected).
2.
Perfection takes place upon the concurrence of the essential elements thereof. In a
sales contract this is governed by Art. 1458
3.
Consummation begins when the parties perform their respective undertakings under
the contract culminating in the extinguishment thereof
Until the contract is perfected (No. 2), it cannot, as an independent source of obligation, serve as
a binding juridical relation. A sales 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 (Art 1458).
Under Art. 1458, there is no perfection of a sale under a Contract to Sell. A Contract to Sell is
characterized as a conditional sale and the breach of the suspensive condition will prevent the
obligation to transfer title from acquiring obligatory force.

Promises to Buy and Sell

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. The Right of First Refusal falls under this classification.
Accepted unilateral promise If it specifies the thing to be sold and the price to be paid and 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. (Par. 2 Art. 1458) Note
however, that the option is a contract separate and distinct from the contract of sale. Once the
option is exercised before it is withdrawn, a bilateral promise to sell and to buy ensues and both
parties are then reciprocally bound to comply with their respective undertakings.
Offers with a Period
Where a period is given to the offeree within which to accept the offer, the following rules
generally govern:
1.
If the period is not itself founded upon or supported by a consideration Offeror may
withdraw offer at any time before its acceptance (or knowledge of its acceptance). However, the
right to withdraw must not be exercised whimsically or arbitrarily otherwise it can give rise to
damages under Art. 19 of the New Civil Code
2.
If period is founded on a separate consideration This is a perfected contract of option.
Withdrawal of the offer within the period of the option is deemed a breach of the contract of option
(not the sale). 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.
3.
Earnest money This is not an offer with a period. Earnest money is distinguished from
the option contract if the consideration given will be considered as a part of the purchase price of
the object of the sale. Earnest money is evidence of a perfected contract of sale. (Art. 1482)
Right of First Refusal
This is an innovative juridical relation because it is neither a perfected contract of sale under Art.
1458 nor an option contract under par. 2 Art 1479. The object might be made determinate, the
exercise of the right, however, is dependent on the offerors eventual intention to enter into a
binding juridical relation with another but also on terms and conditions such as price. There is no
juridical tie or vinculum juris.
Breach of the right cannot justify correspondingly an issuance of a writ of execution under a court
judgement that recognizes its existence, such as in Ang Yu Asuncion. An action for Specific
Performance is not allowed under a Right of First Refusal because doing so would negate the
indispensable element of consensuality in the perfection of contracts.
This right is not inconsequential because it gives right to an action for damages under Art. 19.
Other Acts that Wont Bind
Public advertisements or solicitations Construed as mere invitations to make offers and/or
proposals.
Related Cases
The cases of Equatorial v. Mayfair and Paraaque Kings v. Court of Appeals held that if a sale
happens in violation of a Right of First Refusal where the buyer is aware of the existence of that
right in favor of another (such as when it is written in a lease contract), the sale may be rescinded
and the seller may be forced to offer the property to the party with the Right of First Refusal.
Cavite Development Bank vs. Lim
Tuesday, April 8, 2014
Facts:
Petitioners Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are
banking institutions duly organized and existing under Philippine laws. On or about June 15,
1983, a certain Rodolfo Guansing obtained a loan in the amount of P90,000.00 from CDB, to
secure which he mortgaged a parcel of land situated at No. 63 Calavite Street, La Loma, Quezon
City and covered by TCT No. 300809 registered in his name. As Guansing defaulted in the
payment of his loan, CDB foreclosed the mortgage.
At the foreclosure sale held on March 15, 1984, the mortgaged property was sold to CDB as the
highest bidder. Guansing failed to redeem, and on March 2, 1987, CDB consolidated title to the
property in its name. TCT No. 300809 in the name of Guansing was cancelled and, in lieu thereof,
TCT No. 355588 was issued in the name of CDB.1wphi1.nt

On June 16, 1988, private respondent Lolita Chan Lim, assisted by a broker named Remedios
Gatpandan, offered to purchase the property from CDB.
Pursuant to the foregoing terms and conditions of the offer, Lim paid CDB P30,000.00 as Option
Money, for which she was issued Official Receipt No. 3160, dated June 17, 1988, by CDB.
However, after some time following up the sale, Lim discovered that the subject property was
originally registered in the name of Perfecto Guansing, father of mortgagor Rodolfo Guansing,
under TCT No. 91148.
Aggrieved by what she considered a serious misrepresentation by CDB and its mother-company,
FEBTC, on their ability to sell the subject property, Lim, joined by her husband, filed on August
29, 1989 an action for specific performance and damages against petitioners in the Regional Trial
Court.
On March 10, 1993, the trial court rendered a decision in favor of the Lim spouses. Petitioners
brought the matter to the Court of Appeals, which, on October 14, 1997, affirmed in toto the
decision of the Regional Trial Court.
Issue: WON there was a valid sale.
Held: NO.
In this case, the sale by CDB to Lim of the property mortgaged in 1983 by Rodolfo Guansing
must, therefore, be deemed a nullity for CDB did not have a valid title to the said property. To be
sure, CDB never acquired a valid title to the property because the foreclosure sale, by virtue of
which, the property had been awarded to CDB as highest bidder, is likewise void since the
mortgagor was not the owner of the property foreclosed.
A foreclosure sale, though essentially a "forced sale," is still a sale in accordance with Art. 1458 of
the Civil Code, under which the mortgagor in default, the forced seller, becomes obliged to
transfer the ownership of the thing sold to the highest bidder who, in turn, is obliged to pay
therefor the bid price in money or its equivalent. Being a sale, the rule that the seller must be the
owner of the thing sold also applies in a foreclosure sale. This is the reason Art. 2085 of the Civil
Code, in providing for the essential requisites of the contract of mortgage and pledge, requires,
among other things, that the mortgagor or pledgor be the absolute owner of the thing pledged or
mortgaged, in anticipation of a possible foreclosure sale should the mortgagor default in the
payment of the loan.
There is, however, a situation where, despite the fact that the mortgagor is not the owner of the
mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale
arising therefrom are given effect by reason of public policy. This is the doctrine of "the mortgagee
in good faith" based on the rule that all persons dealing with property covered by a Torrens
Certificate of Title, as buyers or mortgagees, are not required to go beyond what appears on the
face of the title. The public interest in upholding the indefeasibility of a certificate of title, as
evidence of the lawful ownership of the land or of any encumbrance thereon, protects a buyer or
mortgagee who, in good faith, relied upon what appears on the face of the certificate of title.
This principle is cited by petitioners in claiming that, as a mortgagee bank, it is not required to
make a detailed investigation of the history of the title of the property given as security before
accepting a mortgage.
We are not convinced, however, that under the circumstances of this case, CDB can be
considered a mortgagee in good faith. While petitioners are not expected to conduct an
exhaustive investigation on the history of the mortgagor's title, they cannot be excused from the
duty of exercising the due diligence required of banking institutions. In Tomas v. Tomas, we noted
that it is standard practice for banks, before approving a loan, to send representatives to the
premises of the land offered as collateral and to investigate who are real owners thereof, noting
that banks are expected to exercise more care and prudence than private individuals in their
dealings, even those involving registered lands, for their business is affected with public interest.

Serra vs. Court of Appeals, and RCBC

229 SCRA 60
January 1994

FACTS:
Petitioner Federico Serra, who is the owner of a 374 square meter parcel of land located at
Masbate, Masbate, and private respondent Rizal Commercial Banking Corporation (RCBC)
entered into a "Contract of Lease with Option to Buy" in May 25, 1975 which provided that Serra
will lease the subject land to RCBC for a period of 25 years from June 1, 1975 to June 1, 2000,
that the RCBC has the option to purchase the same at P210.00 per square meter within a period
of 10 years from May 25, 1975, the date of the signing of the Contract, and that Serra will have to
register said land under the Torrens System to the Register of Deeds of Province of Masbate
within the same 10-year option period. Pursuant to said contract, RCBC constructed
improvements on the subject land to house its branch office, while the petitioner had the property,
within 3 years from 1975, duly registered with OCT No. 0-232 under the Torrens System. Later,
petitioner alleged that as soon as he had the property registered, he kept on pursuing the branch
manager for the sale of the lot as per their agreement, but it was not until September 4, 1984, that
RCBC decided to exercise the option.
RCBC informed petitioner, through a letter, of its intention to buy the property at the agreed price
of not greater than P210.00 per square meter or a total of P78,430.00, but petitioner replied that
he is no longer selling the property. RCBC then filed an action for specific performance and
damages against Serra in March 1985 alleging that during the negotiations it made clear to
petitioner that it intends to stay permanently on property once its branch office is opened unless
the exigencies of the business requires otherwise.
Although finding that the contract was valid, the lower court ruled that the option to buy is
unenforceable because it lacked a consideration distinct from the price and RCBC did not
exercise its option within the reasonable time. Upon motion for reconsideration, however, the
lower court reversed itself on the 2nd issue, declared the contract as valid, and ordered Serra to
deliver the proper deed of sale to RCBC. The Court of Appeals likewise affirmed said decision.
ISSUE:
Was there a valid contract of lease with option to buy between the parties? Was there a
consideration distinct from the price to support the option given to RCBC?
COURT RULING:
The Supreme Court affirmed the appellate courts decision. A contract of adhesion is one wherein
a party, usually a corporation, prepares the stipulations in the contract, while the other party
merely affixes his signature or his "adhesion" thereto. These types of contracts are as binding as
ordinary contracts because in reality, the party who adheres to the contract is free to reject it
entirely.
In the case at bar, the Supreme Court did not find the situation to be inequitable because
petitioner is a highly educated man, who, at the time of the trial was already a CPA-Lawyer, and
when he entered into the contract, was already a CPA, holding a respectable position with the
Metropolitan Manila Commission. It is evident that a man of his stature should have been more
cautious in transactions he enters into, particularly where it concerns valuable properties. Also, in
the present case, the consideration is even more onerous on the part of the lessee since it entails
transferring of the building and/or improvements on the property to petitioner, should respondent
bank fail to exercise its option within the period stipulated.
Equatorial Realty vs. Mayfair Theater
Doctrine: Rent is a civil fruit that belongs to the owner of the property producing it by right of
accession.
Facts: Carmelo & Bauermann, Inc. (Camelo ) used to own a parcel of land with two 2-storey
buildings constructed thereon, located at Claro M. Recto Avenue, Manila, which it leased to
Mayfair Theater Inc. (Mayfair) for a period of 20 years. The Contract of Lease contained a
provision granting Mayfair a right of first refusal to purchase the subject properties. However, on
July 30, 1978 within the 20-year-lease term the subject properties were sold by Carmelo to
Equatorial Realty Development, Inc. (Equatorial) for the total sum of P11,300,000, without first
offering to Mayfair. Mayfair filed a Complaint before the RTC of Manila for (a) the annulment of
the Deed of Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c)
damages. The lower court rendered a Decision in favor of Carmelo and Equatorial but the CA
reversed such decision rescinding the sale and ordered to allow Mayfair Theater, Inc. to buy the
aforesaid lots for P11,300,000.00. Mayfair bought the property. However, Equatorial filed an
action for the collection of a sum of money against Mayfair, claiming payment of rentals or
reasonable compensation for Mayfairs use of the subject premises after its lease contracts had
expired. Equatorial alleged that representing itself as the owner of the subject premises by reason
of the Contract of Sale; it claimed rentals arising from Mayfairs occupation thereof. The trial court

dismissed the Complaint holding that the rescission of the Deed of Absolute Sale did not confer
on Equatorial any vested or residual proprietary rights.
Issue: Whether Equatorial is entitled to back rentals.
Held: No. In the case, there was no right of ownership transferred from Carmelo to Equatorial in
view of a patent failure to deliver the property to the buyer. By a contract of sale, one of the
contracting parties obligates himself to transfer ownership of and to deliver a determinate thing
and the other to pay therefor a price certain in money or its equivalent. Ownership of the thing
sold is a real right,[ which the buyer acquires only upon delivery of the thing to him in any of the
ways specified in articles 1497 to 1501, or in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee. This right is transferred, not by contract
alone, but by tradition or delivery. And there is said to be delivery if and when the thing sold is
placed in the control and possession of the vendee. From the peculiar facts of this case, it is
clear that petitioner never took actual control and possession of the property sold, in view of
respondents timely objection to the sale and the continued actual possession of the property.
While the execution of a public instrument of sale is recognized by law as equivalent to the
delivery of the thing sold, such constructive or symbolic delivery, being merely presumptive, is
deemed negated by the failure of the vendee to take actual possession of the land sold. In the
case, Mayfairs opposition to the transfer of the property by way of sale to Equatorial was a legally
sufficient impediment that effectively prevented the passing of the property into the latters hands.
Rent is a civil fruit that belongs to the owner of the property producing it by right of accession.
Consequently and ordinarily, the rentals that fell due from the time of the perfection of the sale to
petitioner until its rescission by final judgment should belong to the owner of the property during
that period. Not having been the owner, Equatorial cannot be entitled to the civil fruits of
ownership like rentals of the thing sold.
Southwestern Sugar & Molasses Co. vs. Atlantic Gulf & Pacific Company
FACTS:
On March 24, 1953, defendant-appellant Atlantic granted plaintiff-appellee Southwestern an
option period of ninety days to buy the formers barge No. 10 for the sum of P30,000. On May 11
of the same year, Southwestern Company communicated its acceptance of the option to Atlantic
through a letter, to which the latter replied that their understanding was that the "offer of option" is
to be a cash transaction and to be effected "at the time the lighter is available." On June 25,
Atlantic advised the Southwestern Company that since there is still further work for it, the barge
could not be turned over to the latter company.
On June 27, 1953, the Southwestern Company filed this action to compel Atlantic to sell the
barge in line with the option, depositing with the court a check covering the sum of P30,000, but
said check was later withdrawn with the approval of the court. On June 29, the Atlantic withdrew
its "offer of option" with due notices to Southwestern Company stating that the option was granted
merely as a favor. The Atlantic contended that the option to sell it made to Southwestern
Company is null and void because said option to sell is not supported by any consideration.
The trial court granted herein plaintiff-appellee Southwestern Companys action for specific
performance and ordered herein defendant-appellant Atlantic to pay damages equivalent to 6 per
centum per annum on the sum of P30,000 from the date of the filing of the complaint.
ISSUE:
Is Atlantic liable for specific performance and to pay damages in favor of Southwestern
Company?
COURT RULING:
The Supreme Court reversed the trial courts decision applying Article 1479 of the new Civil Code.
The Court reiterated that "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 said option is not supported by any consideration. The option that Atlantic had
provided was without consideration, hence, can be withdrawn notwithstanding Southwestern
Companys acceptance of said option.
American jurisprudence hold that an offer, once accepted, cannot be withdrawn, regardless of
whether it is supported or not by a consideration, but the specific provisions of Article 1479
commands otherwise. While under the "offer of option" in question appellant Atlantic has
assumed a clear obligation to sell its barge to appellee Southwestern Company and the option
has been exercised in accordance with its terms, and there appears to be no valid or justifiable
reason for the former to withdraw its offer, the Court cannot adopt a different attitude because the
law on the matter is clear.
Sanchez vs. Rigos
FACTS:

In an instrument entitled "Option to Purchase," executed on April 3, 1961, defendant-appellant

Severina Rigos "agreed, promised and committed ... to sell" to plaintiff-appellee Nicolas Sanchez
for the sum of P1,510.00 within two (2) years from said date, a parcel of land situated in the
barrios of Abar and Sibot, San Jose, Nueva Ecija. It was agreed 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. On March 12, 1963, Sanchez deposited the sum of Pl,510.00 with the CFI of
Nueva Ecija and filed an action for specific performance and damages against Rigos for the
latters refusal to accept several tenders of payment that Sanchez made to purchase the subject
land.
Defendant Rigos contended that the contract between them was only a unilateral promise to sell,
and the same being unsupported by any valuable consideration, by force of the New Civil Code,
is null and void." Plaintiff Sanchez, on the other hand, alleged in his compliant that, by virtue of
the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed
and committed to buy" the land described in the option. The lower court rendered judgment in
favor of Sanchez and ordered Rigos to accept the sum Sanchez judicially consigned, and to
execute in his favor the requisite deed of conveyance. The Court of Appeals certified the case at
bar to the Supreme Court for it involves a question purely of law.
ISSUE:
Was there a contract to buy and sell between the parties or only a unilateral promise to sell?
COURT RULING:
The Supreme Court affirmed the lower courts decision. The instrument executed in 1961 is not a
"contract to buy and sell," but merely granted plaintiff an "option" to buy, as indicated by its own
title "Option to Purchase." The option did not impose upon plaintiff Sanchez the obligation to
purchase defendant Rigos' property. Rigos "agreed, promised and committed" herself to sell the
land 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. The lower court relied upon Article 1354 of the
Civil Code when it presumed the existence of said consideration, but the said Article only applies
to contracts in general.
However, it is not Article 1354 but the Article 1479 of the same Code which is controlling in the
case at bar because the latters 2nd paragraph refers to "sales" in particular, and, more
specifically, to "an accepted unilateral promise to buy or to sell." 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.
Upon mature deliberation, the Court reiterates the doctrine laid down in the Atkins case and
deemed abandoned or modified the view adhered to in the Southwestern Company case.
SELWYN F. LAO and EDGAR MANANSALA, Petitioners,
vs.
SPECIAL PLANS, INC., Respondent
Facts:
The Petioners Lao and Manansala entered into a Contract of Lease with Special Plans
Incorporated (SPI). Upon expiration of the contract, it was further renewed for another eight
months. Petitioners did not pay the allotted rental fees which prompted SPI to send a demand
letter asking for full payment of rentals in arrears. Petitioners did not give payment, giving the
reason that SPI failed to deliver the leased premises for their intended use and because of this
they incurred expenses for necessary repairs as well as expenses for the repair of structural
defects.. They counterclaimed SPI to pay the sum of 422,000 pesos as actual damages against
the claim of SPI of 118,000 for accumulated unpaid rentals.
The Metropolitan Court found that the unpaid rentals only amounted to 95,000 pesos and
declared SPI responsible for repairing the structural defects of the leased premises and thus
dismissed SPIs case. SPI then appealed to the Regional Trail Court of Quezon City which then
modified the decision of the lower court, disagreeing on the off-setting of the amount allegedly
spent by the petitioners for the repairs of the structural defects of subject property with their
unpaid rentals and ordered the Petitioners to pay 95,000 for unpaid rentals. The petitioners then
appealed to the Court of Appeals wherein they asserted that the amount of 545,000.00 that they
spent for repairs, P125,000.00 of which was spent on structural repairs, should be judicially
compensated against the said unpaid rentals amounting to 95,000.00.
Issue:

Whether or not the unpaid rentals should be judicially compensated with the expenses
incurred by the Plaintiffs?
Held: Petition Dismissed.
In order that compensation to take place two persons, in their own right, should be
creditors and debtors of each other. In order for compensation to be proper, it is necessary that:
1. Each one of the obligors be bound principally and that he be at the same time a
principal creditor of the other;
2. Both debts consist in a sum of money, or if the things due are consumable, they be of
the same kind, and also of the same quality if the latter has been stated;
3. The two debts are due:
4. The debts are liquidated and demandable;
5. Over neither of them be any retention or controversy, commenced by third parties
and communicated in due time to the debtor.
The Petitioners failed to properly discharge their burden to show that the debts are
liquidated and demandable. A claim is liquidated when the amount and time of payment is fixed. If
acknowledged by the debtor, although not in writing, the claim must be treated as
liquidated. When the defendant, who has an unliquidated claim, sets it up by way of counterclaim,
and a judgment is rendered liquidating such claim, it can be compensated against the plaintiffs
claim from the moment it is liquidated by judgment. Compensation takes place only if both
obligations are liquidated.

Case Digest: Tuazon vs. Suarez

G.R. No. 168325 : December 8, 2010
ROBERTO D. TUAZON, Petitioner, v. LOURDES Q. DEL ROSARIO-SUAREZ, CATALINA R.
SUAREZ-DE LEON, WILFREDO DE LEON, MIGUEL LUIS S. DE LEON, ROMMEL LEE S. DE
LEON, and GUILLERMA L. SANDICO-SILVA, as attorney-in-fact of the defendants, except
Lourdes Q. Del Rosario-Suarez, Respondents.
DELCASTILLO,J.:
FACTS:
Respondent Lourdes Q. Del Rosario-Suarez was the owner of a parcel of land. Petitioner Roberto
D. Tuazon and Lourdes executed a Contract of Lease over the parcel of land for a period of three
years.During the effectivity of the lease,Lourdes sent a letterto Roberto where she offered to sell
to the latter subject parcel of land.She gave him two years from January 2, 1995 to decide on the
said offer. On June 19, 1997, or more than four months after the expiration of the Contract of
Lease, Lourdes sold subject parcel of land to her only child, Catalina Suarez-De Leon, her son-inlaw Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and Rommel S. De Leon
as evidenced by a Deed of Absolute Saleexecuted by the parties.The new owners through their
attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the premises.Roberto refused
hence, the De Leons filed a complaint for Unlawful Detainer before the
MeTCagainsthim.TheMeTC rendered a Decision ordering Roberto to vacate the property for nonpayment of rentals and expiration of the contract. While the ejectment case was on appeal,
Roberto filed with the RTC a Complaintfor Annulment of Deed of Absolute Sale, Reconveyance,
Damages and Application for Preliminary Injunction againstLourdesand the De Leons.On
November 13, 2000, Roberto filed a Notice ofLisPendenswith the Registry of Deeds of Quezon
City. The RTC rendered a Decision declaring the Deed of Absolute Sale made byLourdesin favor
of the De Leons as valid and binding.On appeal, the CA affirmed the Decision of the RTC.
ISSUE: Whether or not Lourdes violated Robertos right to buy the subject property under the
principle of right of first refusal by not giving him notice and the opportunity to buy the property
under the same terms and conditions.
HELD: Court of Appeals decision is affirmed.
CIVIL LAW: contract of a right of first refusal v. option contract

An option contract is entirely different and distinct from a right of first refusal in that in the former,
the option granted to the offeree is for a fixed period and at a determined price.Lacking these two
essential requisites, what is involved is only a right of first refusal.
It is clear from the provision of Article 1324 that there is a great difference between the effect of
an option which is without a consideration from one which is founded upon a consideration. If the
option is without any consideration, the offeror may withdraw his offer by communicating such
withdrawal to the offeree at anytime before acceptance; if it is founded upon a consideration, the
offeror cannot withdraw his offer before the lapse of the period agreed upon. The second
paragraph of Article 1479 declares that an accepted unilateral promise to buy or to sell a
determinate thing for a price certain is binding upon the promissor if the promise is supported by
a consideration distinct from the price.
In this case, it is undisputed that Roberto did not accept the terms stated in the letter ofLourdesas
he negotiated for a much lower price. Robertos act of negotiating for a much lower price was a
counter-offer and is therefore not an acceptance of the offer ofLourdes.Article 1319 of the Civil
Code provides:Consentis 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
theacceptance absolute. A Qualified Acceptance Constitutes A counter-offer.
The counter-offer of Roberto for a much lower price was not accepted byLourdes. There is
therefore no contract that was perfected between them with regard to the sale of subject
property.Roberto, thus, does not have any right to demand that the property be sold to him at the
price for which it was sold to the De Leons neither does he have the right to demand that said
sale to the De Leons be annulled.
Moreover, even if the offer ofLourdeswas accepted by Roberto, still the former is not bound
thereby because of the absence of a consideration distinct and separate from the price.The
argument of Roberto that the separate consideration was the liberality on the part of Lourdes
Cannot Stand.A perusal of the letter-offer of Lourdes would show that what drove her to offer the
property to Roberto was her immediate need for funds as she was already very old.Offering the
property to Roberto was not an act of liberality on the part of Lourdes but was a simple matter of
convenience and practicality as he was the one most likely to buy the property at that time as he
was then leasing the same.
The petition for review on certiorari is DENIED.
Isabelo Apa, Manuel Apa and Leonilo Jacalan, petitioners, vs. Hon. Rumoldo R. Fernandez,
Hon. Celso V. Espinosa, And Sps. Felixberto Tigol, Jr. And Rosita Taghoy
Tigol, respondents
Facts: This is a special civil action of certiorari to set aside orders of respondent Judge Romuldo
Fernandez of RTC, Branch 54 of Lapu-Lapu City denying petitioners motion for suspension of
arraignment and motion for reconsideration in a criminal case filed against them. Petitioners
anchor their claim on a prior case regarding ownership. Petitioners allege that the civil case filed
in 1990 seeking declaration for nullity of land title of the owner which had been filed three years
before May 27, 1993 when the criminal case for squatting was filed against them constitutes a
prejudicial question.
Issue: Whether the question of ownership is a prejudicial question justifying the suspension of
the criminal case against petitioners.

Ruling: Petition to suspend Criminal Case No. 012489 based on the prejudicial question
presented was granted on basis that;
the prejudicial question is a question based on a fact distinct and separate from the crime
but so intimately connected with it that its resolution is determinative of the guilt or innocence of
the accused.

elements of prejudicial question - (1) the civil action involves an issue similar or intimately
related to the issue raised in the criminal action; and (2) the resolution of such issue determines
whether or not the criminal action may proceed.

the criminal case alleges that petitioners squatted without the knowledge and consent of
the owner, which, in 1994 the civil case rendered the nullity of the title of the owner and declared
both petitioners and respondents as co-owners of the land.

respondents argue that owners can be ejected from his property only if for some reason,
that is, he has let it to some other person. However, both case of respondents and petitioners are
based on ownership.
Vda. de Cabalu vs. Spouses Tabu Digest
G.R. No. 188417 : September 24, 2012
MILAGROS DE BELEN VDA. DE CABALU, MELITON CABALU, SPS. ANGELA CABALU and
RODOLFO TALAVERA, and PATRICIO ABUS, Petitioners, v.
SPS. RENATO DOLORES TABU and LAXAMANA, Municipal Trial Court in Cities, Tarlac
City, Branch II,Respondents.
MENDOZA, J.:
FACTS:
Faustina Maslum (Faustina) was the original owner of a parcel of land covered by TCT No.
16776. The land had a total area of 140,211 square meters. On December 8, 1941, Faustina died
without any children. She left a holographic will, assigning and distributing her property to her
nephews and nieces. The said holographic will, however, was not probated.
Benjamin Laxamana was one of Faustinas heirs. He died in 1960. He had two heirs: his wife and
his son, Domingo Laxamana (Domingo). On March 5, 1975, Domingo executed a Deed of Sale in
favor of Laureano Cabalu covering 9,000 square meters of the land inherited by his father from
Faustina.
On August 1, 1994, the legitimate heirs of Faustina executed a Deed of Extra-Judicial Succession
with Partition. The said deed imparted 9,000 square meters of the land covered by TCT No.
16776 to Domingo.
Thereafter, Domingo sold 4,500 square meters of the 9,000 square meters of the land to his
nephew, Eleazar Tabamo. The remaining portion was registered in Domingos name under TCT
No. 281353.
On August 4, 1996, Domingo died. On October 8, 1996, or two (2) months after Domingos death,
Domingo purportedly executed a Deed of Sale of TCT No. 281353 in favor of Renato Tabu
(Tabu). Tabu and his wife Dolores Laxamana subdivided the lot into two which resulted to TCT
Nos. 291338 and 291339.
Consequently, petitioners Milagros de Belen Vda. De Cabalu, Meliton Cabalu, Spouses Angela
Cabalu and Rodolfo Talavera, and Patricio Abus filed a complaint before the RTC seeking to
declare TCT Nos. 291338 and 291339 as null and void. They averred that they were the lawful
owners of the subject property because it was sold to their father, Laureano Cabalu, by Domingo,
through a Deed of Absolute Sale, dated March 5, 1975.
The RTC declared the deeds dated March 5, 1975 and October 8, 1996 null and void. On appeal,
the CA partially granted the petition and deleted the RTCs decision declaring the October 8, 1996
null and void.
ISSUES:
I. Whether or not the Deed of Sale of Undivided Parcel of Land covering the 9,000 square
meter property executed by Domingo in favor of Laureano Cabalu on March 5, 1975, is
valid?
II. Whether or not the Deed of Sale dated October 8, 1996, covering the 4,500 square meter
portion of the 9,000 square meter property, executed by Domingo in favor of Renato Tabu,
is null and void?
HELD: Petition is partially granted.
CIVIL LAW: future inheritance; contractual capacity
FIRST ISSUE:
The CA did not err in declaring the March 5, 1975 Deed of Sale null and void.
Thus, and as correctly found by the RTC, even if Benjamin died sometime in 1960, Domingo in
1975 could not yet validly dispose of the whole or even a portion thereof for the reason that he
was not the sole heir of Benjamin, as his mother only died sometime in 1980. Besides, under
Article 1347 of the Civil Code, "No contract may be entered into upon future inheritance except in
cases expressly authorized by law." Paragraph 2 of Article 1347, characterizes a contract entered
into upon future inheritance as void. The law applies when the following requisites concur: (1) the
succession has not yet been opened; (2) the object of the contract forms part of the inheritance;

and (3) the promissor has, with respect to the object, an expectancy of a right which is purely
hereditary in nature.
In this case, at the time the deed was executed, Faustinas will was not yet probated; the object of
the contract, the 9,000 square meter property, still formed part of the inheritance of his father from
the estate of Faustina; and Domingo had a mere inchoate hereditary right therein.
Domingo became the owner of the said property only on August 1, 1994, the time of execution of
the Deed of Extrajudicial Succession with Partition by the heirs of Faustina, when the 9,000
square meter lot was adjudicated to him.
SECOND ISSUE:
The CA erred in deleting that portion in the RTC decision declaring the Deed of Absolute
Sale, dated October 8, 1996, null and void.
Regarding the deed of sale covering the remaining 4,500 square meters of the subject property
executed in favor of Renato Tabu, it is evidently null and void.The document itself, the Deed of
Absolute Sale, dated October 8, 1996, readily shows that it was executed on August 4, 1996
more than two months after the death of Domingo. Contracting parties must be juristic entities at
the time of the consummation of the contract. Stated otherwise, to form a valid and legal
agreement it is necessary that there be a party capable of contracting and a party capable of
being contracted with. Hence, if any one party to a supposed contract was already dead at the
time of its execution, such contract is undoubtedly simulated and false and, therefore, null and
void by reason of its having been made after the death of the party who appears as one of the
contracting parties therein. The death of a person terminates contractual capacity.
The contract being null and void, the sale to Renato Tabu produced no legal effects and
transmitted no rights whatsoever. Consequently, TCT No. 286484 issued to Tabu by virtue of the
October 8, 1996 Deed of Sale, as well as its derivative titles, TCT Nos. 291338 and 291339, both
registered in the name of Rena to Tabu, married to Dolores Laxamana, are likewise void.
Petition is PARTIALLY GRANTED.
FIRST DIVISION
SPOUSES JOSE and MILAGROS
VILLACERAN and FAR EAST
BANK & TRUST COMPANY,
Petitioners,

- versus -

JOSEPHINE DE GUZMAN,
Respondent.

G.R. No. 169055

Present:
CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
VILLARAMA, JR., and
PERLAS-BERNABE,* JJ.

Promulgated:

February 22, 2012

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari assailing the November 26, 2004 Decision [1] and
June 29, 2005 Resolution[2] of the Court of Appeals (CA) in CA-G.R. CV No. 71831. The CA had
affirmed with modification the Decision[3] of the Regional Trial Court (RTC), Branch 24, of
Echague, Isabela, in Civil Case No. 24-0495 entitled Josephine De Guzman vs. Spouses Jose
and Milagros Villaceran, et al.
The antecedent facts follow:
Josephine De Guzman filed a Complaint [4] with the RTC of Echague, Isabela against the
spouses Jose and Milagros Villaceran and Far East Bank & Trust Company (FEBTC), Santiago
City Branch, for declaration of nullity of sale, reconveyance, redemption of mortgage and
damages with preliminary injunction. The complaint was later amended to include annulment of
foreclosure and Sheriffs Certificate of Sale.
In her Amended Complaint,[5] De Guzman alleged that she is the registered owner of a
parcel of land covered by Transfer Certificate of Title (TCT) No. T-236168, [6]located in Echague,

Isabela, having an area of 971 square meters and described as Lot 8412-B of the Subdivision
Plan Psd-93948. On April 17, 1995, she mortgaged the lot to the Philippine National Bank (PNB)
of Santiago City to secure a loan of P600,000. In order to secure a bigger loan to finance a
business venture, De Guzman asked Milagros Villaceran to obtain an additional loan on her
behalf. She executed a Special Power of Attorney in favor of Milagros. Considering De Guzmans
unsatisfactory loan record with the PNB, Milagros suggested that the title of the property be
transferred to her and Jose Villaceran and they would obtain a bigger loan as they have a credit
line of up toP5,000,000 with the bank.
On June 19, 1996, De Guzman executed a simulated Deed of Absolute Sale [7] in favor of
the spouses Villaceran. On the same day, they went to the PNB and paid the amount
of P721,891.67 using the money of the spouses Villaceran. The spouses Villaceran registered the
Deed of Sale and secured TCT No. T-257416 [8] in their names.Thereafter, they mortgaged the
property with FEBTC Santiago City to secure a loan of P1,485,000. However, the spouses
Villaceran concealed the loan release from De Guzman.Later, when De Guzman learned of the
loan release, she asked for the loan proceeds less the amount advanced by the spouses
Villaceran to pay the PNB loan. However, the spouses Villaceran refused to give the money
stating that they are already the registered owners of the property and that they would reconvey
the property to De Guzman once she returns the P721,891.67 they paid to PNB.[9]
De Guzman offered to pay P350,000 provided that the spouses Villaceran would execute
a deed of reconveyance of the property. In view of the simulated character of their transaction,
the spouses Villaceran executed a Deed of Absolute Sale [10] dated September 6, 1996 in favor of
De Guzman. They also promised to pay their mortgage debt with FEBTC to avoid exposing the
property to possible foreclosure and auction sale. However, the spouses Villaceran failed to settle
the loan and subsequently the property was extrajudicially foreclosed. A Sheriffs Certificate of
Sale was issued in favor of FEBTC for the amount of P3,594,000. De Guzman asserted that the
spouses Villaceran should be compelled to redeem their mortgage so as not to prejudice her as
the real owner of the property.[11]
On the other hand, the spouses Villaceran and FEBTC, in their Amended Answer, [12] averred that
in 1996 De Guzman was introduced to Milagros by a certain Digna Maranan.Not long afterwards,
De Guzman requested Milagros to help her relative who had a loan obligation with the PNB in the
amount of P300,000. As a consideration for the accommodation, De Guzman would convey her
property located at Maligaya, Echague, Isabela which was then being held in trust by her cousin,
Raul Sison. Because of this agreement, Milagros paid De Guzmans obligation with the PNB in
the amount of P300,000.
When Milagros asked for the title of the lot, De Guzman explained that her cousin would not part
with the property unless he is reimbursed the amount of P200,000 representing the amount he
spent tilling the land. Milagros advanced the amount of P200,000 but De Guzmans cousin still
refused to reconvey the property. In order for De Guzman to settle her obligation, she offered to
sell her house and lot in Echague, Isabela. At first, Milagros signified her non-interest in acquiring
the same because she knew that it was mortgaged with the PNB Santiago for P600,000. De
Guzman proposed that they will just secure a bigger loan from another bank using her house and
lot as security. The additional amount will be used in settling De Guzmans obligation with
PNB. Later, De Guzman proposed that she borrow an additional amount from Milagros which she
will use to settle her loan with PNB. To this request, Milagros acceded. Hence, they went to the
PNB and paid in full De Guzmans outstanding obligation with PNB which already
reached P880,000.[13]
Since De Guzmans total obligation already reached P1,380,000, the spouses Villaceran
requested her to execute a deed of absolute sale over the subject property in their favor.Thus, the
Deed of Absolute Sale is supported by a valuable consideration, and the spouses Villaceran
became the lawful owners of the property as evidenced by TCT No. 257416 issued by the Office
of the Register of Deeds of Isabela. Later, they mortgaged the property to FEBTC for P1,485,000.
The spouses Villaceran denied having executed a deed of conveyance in favor of De Guzman
relative to the subject property and asserted that the signatures appearing on the September 6,
1996 Deed of Sale, which purported to sell the subject property back to De Guzman, are not
genuine but mere forgeries.[14]
After due proceedings, the trial court rendered its decision on September 27, 2000.
The RTC ruled that the Deed of Sale dated June 19, 1996 executed by De Guzman in favor of
the spouses Villaceran covering the property located in Echague, Isabela was valid and binding
on the parties. The RTC ruled that the said contract was a relatively simulated contract, simulated
only as to the purchase price, but nonetheless binding upon the parties insofar as their true
agreement is concerned. The RTC ruled that De Guzman executed the Deed of Absolute Sale
dated June 19, 1996 so that the spouses Villaceran may use the property located in Echague,
Isabela as collateral for a loan in view of De Guzmans need for additional capital to finance her
business venture. The true consideration for the sale, according to the RTC, was the P300,000
the spouses Villaceran gave to De Guzman plus the P721,891.67 they paid to PNB in order that
the title to the subject property may be released and used to secure a bigger loan in another
bank.
The RTC also found that although the spouses Villaceran had already mortgaged the subject
property with FEBTC and the title was already in the possession of FEBTC -- which facts were
known to De Guzman who even knew that the loan proceeds amounting to P1,485,000 had been
released -- the spouses Villaceran were nonetheless still able to convince De Guzman that they
could still reconvey the subject property to her if she pays the amount they had paid to PNB. The

RTC found that the Deed of Sale dated September 6, 1996 was actually signed by the spouses
Villaceran although De Guzman was able to pay only P350,000, which amount was stated in said
deed of sale as the purchase price. The RTC additionally said that the spouses Villaceran
deceived De Guzman when the spouses Villaceran mortgaged the subject property with the
understanding that the proceeds would go to De Guzman less the amounts the spouses had paid
to PNB. Hence, according to the RTC, the spouses Villaceran should return to De Guzman (1)
the P350,000 which she paid to them in consideration of the September 6, 1996 Deed of Sale,
which sale did not materialize because the title was in the possession of FEBTC; and (2) the
amount of P763,108.33 which is the net proceeds of the loan after deducting the P721,891.67
that the spouses paid to PNB. Thus, the decretal portion of the RTC decision reads:
WHEREFORE, judgment is hereby rendered as follows:
a) declaring the Deed of Sale, dated June 1996 (Exhibit B) as valid and
binding;
b) ordering defendants Villaceran to pay to plaintiff the amount of P763,108.33
and P350,000.00 or the total amount of P1,113,108.33 plus the legal rate of
interest starting from the date of the filing of this case;
c) declaring the Extrajudicial Foreclosure and the Certificate of Sale as valid;
d) ordering defendants Villaceran to pay attorneys fees in the amount of
P20,000.00 and to pay the costs of suit.
SO ORDERED.[15]
Aggrieved, the spouses Villaceran appealed to the CA arguing that the trial court erred in
declaring the June 19, 1996 Deed of Sale as a simulated contract and ordering them to pay De
Guzman P1,113,108.33 plus legal rate of interest and attorneys fees. [16]
On November 26, 2004, the CA rendered its Decision, the dispositive portion of which
reads as follows:
IN VIEW OF ALL THE FOREGOING, the judgment appealed from is
hereby AFFIRMED with MODIFICATION, to read as follows:
WHEREFORE, judgment is hereby rendered as follows:
1. Declaring the Deed of Sale dated June 16, 1996 (Exh. B) and September 6,
1996, as not reflective of the true intention of the parties, as the same were
merely executed for the purpose of the loan accommodation in favor of the
plaintiff-appellee by the defendants-appellants;
2. Ordering defendants-appellants Villaceran to pay plaintiff-appellee the
difference between the FEBTC loan of P1,485,000.00 less P721,891.67 (used to
redeem the PNB loan), plus legal interest thereon starting from the date of the
filing of this case;
3. Declaring the extrajudicial foreclosure and certificate of sale in favor
of FEBTC, as valid; and
4. For the appellants to pay the costs of the suit.
SO ORDERED.[17]
The CA ruled that the RTC was correct in declaring that there was relative simulation of
contract because the deeds of sale did not reflect the true intention of the parties. It found that the
evidence established that the documents were executed for the purpose of an agency to secure a
higher loan whereby the spouses Villaceran only accommodated De Guzman. However, the CA
did not find any evidence to prove that De Guzman actually parted away with the P350,000 as
consideration of the reconveyance of the property.Thus, it held the trial court erred in ordering the
spouses Villaceran to return the P350,000 to De Guzman.
Furthermore, the CA observed that the spouses Villaceran were the ones who redeemed
the property from the mortgage with PNB by paying P721,891.67 so that De Guzmans title could
be released. Once registered in their name, the spouses Villaceran mortgaged the property with
FEBTC for P1,485,000. With the loan proceeds ofP1,485,000, there was no need for the spouses
Villaceran to demand for the return of the P721,891.67 they paid in releasing the PNB loan before
the property is reconveyed to De Guzman. All they had to do was to deduct the amount
of P721,891.67 from the P1,485,000 FEBTC loan proceeds. Hence, the CA ruled that only the
balance of the P1,485,000 loan proceeds from FEBTC minus the P721,891.67 used to redeem
the PNB loan should be paid by the spouses Villaceran to De Guzman. The CA also deleted the
grant of attorneys fees for lack of factual, legal or equitable justification.
On December 22, 2004, the spouses Villaceran filed a motion for reconsideration of the
foregoing decision. Said motion, however, was denied for lack of merit by the CA in its Resolution
dated June 29, 2005. Hence, this appeal.
In their petition for review on certiorari, the spouses Villaceran allege that:
1.
THE RESPONDENT COURT OF APPEALS ERRED AND
GRAVELY ABUSED ITS DISCRETION IN DECLARING THE DEED OF SALE
DATED JUNE 19, 1996 AS SIMULATED AND THAT THE SAME WAS MERELY
EXECUTED FOR THE PURPOSE OF THE LOAN ACCOMODATION OF
PETITIONERS VILLACERAN IN FAVOR OF THE RESPONDENT DE GUZMAN
INSTEAD OF DECLARING SAID DEED AS A VALID DEED OF ABSOLUTE
SALE, THE CONTENTS OF WHICH ARE CLEARLY REFLECTIVE OF THEIR
TRUE INTENTION TO ENTER INTO A CONTRACT OF SALE AND NOT
OTHERWISE, IN DIRECT CONTRAVENTION OF THE RULES ON EVIDENCE
AND OF THE ADMISSIONS OF THE PARTIES AND THE HONORABLE
COURTS RULINGS OR JURISPRUDENCE ON THE MATTER; AND

2.
THE RESPONDENT COURT OF APPEALS ERRED AND
GRAVELY ABUSED ITS DISCRETION IN ORDERING PETITIONERS
VILLACERAN TO PAY RESPONDENT DE GUZMAN THE DIFFERENCE
BETWEEN THE FAR EAST BANK AND TRUST COMPANY (FEBTC) LOAN OF
PHP1,485,000.00 LESS P721,891.67 (USED TO PAY THE PHILIPPINE
NATIONAL BANK [PNB] LOAN) PLUS LEGAL INTEREST THEREON AND TO
PAY THE COSTS OF SUIT.[18]
Essentially, the issue for our resolution is whether the CA erred in ruling that the Deed of
Sale dated June 19, 1996 is a simulated contract and not a true sale of the subject property.
Petitioners contend that the previous loans they extended to De Guzman in the amounts
of P300,000, P600,000 and P200,000 should have been considered by the CA.When added to
the P721,891.67 used to settle the PNB loan, De Guzmans total loan obtained from them would
amount to P1,821,891.67. Thus, it would clearly show that the Deed of Sale dated June 19, 1996,
being supported by a valuable consideration, is not a simulated contract.
We do not agree.
Article 1345[19] of the Civil Code provides that the simulation of a contract may either be absolute
or relative. In absolute simulation, there is a colorable contract but it has no substance as the
parties have no intention to be bound by it. The main characteristic of an absolute 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. [20] As a result, an absolutely simulated or fictitious
contract is void, and the parties may recover from each other what they may have given under
the contract. However, if the parties state a false cause in the contract to conceal their real
agreement, the contract is only relatively simulated and the parties are still bound by their real
agreement. Hence, where the essential requisites of a contract are present and the simulation
refers only to the content or terms of the contract, the agreement is absolutely binding and
enforceable between the parties and their successors in interest. [21]
The primary consideration in determining the true nature of a contract is the intention of
the parties. If the words of a contract appear to contravene the evident intention of the parties, the
latter shall prevail. Such intention is determined not only from the express terms of their
agreement, but also from the contemporaneous and subsequent acts of the parties. [22] In the case
at bar, there is a relative simulation of contract as the Deed of Absolute Sale dated June 19, 1996
executed by De Guzman in favor of petitioners did not reflect the true intention of the parties.
It is worthy to note that both the RTC and the CA found that the evidence established that
the aforesaid document of sale was executed only to enable petitioners to use the property as
collateral for a bigger loan, by way of accommodating De Guzman. Thus, the parties have agreed
to transfer title over the property in the name of petitioners who had a good credit line with the
bank. The CA found it inconceivable for De Guzman to sell the property for P75,000 as stated in
the June 19, 1996 Deed of Sale when petitioners were able to mortgage the property with
FEBTC for P1,485,000. Another indication of the lack of intention to sell the property is when a
few months later, on September 6, 1996, the same property, this time already registered in the
name of petitioners, was reconveyed to De Guzman allegedly for P350,000.
As regards petitioners assertion that De Guzmans previous loans should have been
considered to prove that there was an actual sale, the Court finds the same to be without
merit. Petitioners failed to present any evidence to prove that they indeed extended loans to De
Guzman in the amounts of P300,000, P600,000 and P200,000. We note that petitioners tried to
explain that on account of their close friendship and trust, they did not ask for any promissory
note, receipts or documents to evidence the loan. But in view of the substantial amounts of the
loans, they should have been duly covered by receipts or any document evidencing the
transaction. Consequently, no error was committed by the CA in holding that the June 19, 1996
Deed of Absolute Sale was a simulated contract.
The issue of the genuineness of a deed of sale is essentially a question of fact. It is
settled that this Court is not duty-bound to analyze and weigh again the evidence considered in
the proceedings below. This is especially true where the trial courts factual findings are adopted
and affirmed by the CA as in the present case. Factual findings of the trial court, affirmed by the
CA, are final and conclusive and may not be reviewed on appeal. [23]
The Court has time and again ruled that conclusions and findings of fact of the trial court
are entitled to great weight and should not be disturbed on appeal, unless strong and cogent
reasons dictate otherwise. This is because the trial court is in a better position to examine the real
evidence, as well as to observe the demeanor of the witnesses while testifying in the case. [24] In
sum, the Court finds that there exists no reason to disturb the findings of the CA.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated November 26,
2004 and Resolution dated June 29, 2005 of the Court of Appeals in CA-G.R. CV No. 71831
are AFFIRMED.
With costs against the petitioners.