SECOND DIVISION Pasig Land Development Corporation (Mid-Pasig) the

latters 3.1-hectare property in Pasig City. This property is

ROCKLAND CONSTRUCTION COMPANY, covered by Transfer Certificate of Title Nos. 469702 and
INC., 337158 under the control of the Presidential Commission on
Petitioner, Good Government (PCGG). Upon instruction of Mid-Pasig
to address the offer to the PCGG, Rockland wrote the PCGG
- versus - on April 15, 2000. The letter,[5] addressed to PCGG
Chairman Magdangal Elma, included Rocklands proposed
MID-PASIG LAND DEVELOPMENT terms and conditions for the lease. This letter was also
CORPORATION, received by Mid-Pasig on April 18, 2000, but Mid-Pasig
Respondent. made no response.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - -x Again, in another letter[6] dated June 8,
2000 addressed to the Chairman of Mid-Pasig, Mr. Ronaldo
DECISION Salonga, Rockland sent a Metropolitan Bank and Trust
Company Check No. 2930050168[7] for P1 million as a sign
QUISUMBING, J.:
of its good faith and readiness to enter into the lease
agreement under the certain terms and conditions stipulated
This petition for review seeks the reversal of the
in the letter. Mid-Pasig received this letter on July 28, 2000.
Decision[1] and Resolution[2] dated February 27,
2004 and July 21, 2004, respectively, of the Court of
In a subsequent follow-up letter[8] dated February 2,
Appeals in CA-G.R. CV No. 76370. The appellate court had
2001, Rockland then said that it presumed that Mid-Pasig
reversed and set aside the Decision[3] dated September 2,
had accepted its offer because the P1 million check it issued
2002 of the Regional Trial Court (RTC), Branch 67 of Pasig
had been credited to Mid-Pasigs account on December 5,
City, in Civil Case No. 68350; dismissed petitioners
2000.[9]
complaint; and held that there was no perfected contract of
lease between the parties.
Mid-Pasig, however, denied it accepted Rocklands
The antecedents facts, culled from the records, are as offer and claimed that no check was attached to the said
follows: letter. It also vehemently denied receiving the P1 million
Rockland Construction Company, Inc. (Rockland), in check, much less depositing it in its account.
a letter[4] dated March 1, 2000, offered to lease from Mid-

In its letter[10] dated February 6, 2001, Mid-Pasig
replied to Rockland that it was only upon receipt of the
latters February 2 letter that the former came to know where
the check came from and what it was for. Nevertheless, it
categorically informed Rockland that it could not entertain
the latters lease application. Mid-Pasig reiterated its refusal
of Rocklands offer in a letter[11] dated February 13, 2001.
Rockland then filed an action for specific performance
docketed as Civil Case No. 68350 in the RTC, Branch 67 of
Pasig City. Rockland sought to compel Mid-Pasig to execute
in Rocklands favor, a contract of lease over a 3.1-hectare
portion[12] of Mid-Pasigs property in Pasig City.
On September 2, 2002, the trial court rendered a
decision, the dispositive portion of which reads in part:
WHEREFORE, judgment is rendered, as
follows:
1. Declaring that the plaintiff and the defendant
have duly agreed upon a valid and enforceable
lease agreement of subject portions of
[defendants] properties designated in Exh. A as
areas A, B and C, comprising an area of 5,000
square meters, 11,000 square meters and 15,000
square meters, or a total of 31,000 square meters;
2. Holding that the principal terms and conditions
of the aforesaid lease agreement are as stated in
plaintiffs June 8, 2000 letter (Exh. D), to wit:
xxxx
3. Ordering the defendant to execute a written lease
contract in favor of the plaintiff containing the
principal terms and conditions mentioned in the
next-preceding paragraph, within sixty (60) days
from finality of this judgment, and likewise
ordering the plaintiff to pay rent to the
defendant as specified in said terms and
conditions;
4. Ordering the defendant to keep and maintain the
plaintiff in the peaceful possession and
enjoyment of the leased premises during the
term of said contract;
5. Ordering the defendant to pay plaintiff
[attorneys] fees in the sum of One Million Pesos
(P1,000,000.00), plus P2,000.00 for every
appearance made by counsel in court;
6. The temporary restraining order dated April 2,
2001 is hereby made PERMANENT;
7. Dismissing defendants counterclaim.
With costs against the defendant.
SO ORDERED.[13]
On appeal, the Court of Appeals reversed and set aside the trial
courts decision on the following grounds: (1) there was no
meeting of the minds as to the offer and acceptance between
the parties; (2) there was no implied acceptance of the P1
million check as Mid-Pasig was not aware of its source at the
time Mid-Pasig discovered the existence of the P1 million in
its account; and (3) Rocklands subsequent acts and/or
omissions contradicted its claim that there was already a
contract of lease, as it neither took possession of the property,
nor did it pay for the corresponding monthly
rentals. Accordingly, the Court of Appeals
dismissed Rocklands complaint, as well as Mid-Pasigs
counterclaim. Rockland sought reconsideration, but it was
denied.
Petitioner Rockland now comes before us raising a
complex issue:
. . . WHETHER OR NOT RESPONDENTS ACT OF
DEPOSITING INTO ITS CORPORATE BANK
ACCOUNT PETITIONERS P1 MILLION CHECK
AND COLLECTING THE PROCEEDS THEREOF:
(A) PRODUCES THE LEGAL EFFECT OF AN
ACCEPTANCE OF PETITIONERS OFFER AND
CONSIDERED AS CONSENT TO THE PAYMENT
FOR WHICH IT WAS INTENDED; AND/OR [(B)]
CONSTITUTES IN LEGAL CONTEMPLATION
ESTOPPEL IN PAIS, SUFFICIENT TO APPRECIATE
RESPONDENTS CONSENT TO THE LEASE.[14]
Simply stated, the issue may be rephrased into two
questions: Was there a perfected contract of
lease? Had estoppel in pais set in?
Rockland contends that the contract of lease had been
perfected and that Mid-Pasig is in estoppel in pais because it
impliedly accepted its offer when the P1 million check was
credited to Mid-Pasigs account.
Mid-Pasig counters that it never accepted Rocklands
offer. It avers it immediately rejected Rocklands offer upon
learning of the mysterious deposit of the P1 million check in
its account.
Since the re-stated issues are intertwined, we shall
discuss them jointly.
A contract has three distinct stages: preparation,
perfection, and consummation. Preparation or negotiation
begins when the prospective contracting parties manifest
their interest in the contract and ends at the moment of their
agreement. Perfection or birth of the contract occurs when
they agree upon the essential
elements thereof. Consummation, the last stage, occurs when
the parties fulfill or perform the terms agreed upon in the
contract, culminating in the extinguishment thereof.[15]
Negotiation is formally initiated by an
offer. Accordingly, an offer that is not accepted, either
expressly or impliedly,[16] precludes the existence of consent,
which is one of the essential elements[17] of a
contract. Consent, under Article 1319 of the Civil Code, is
manifested by the meeting of the offer and acceptance upon
the thing which are to constitute a contract. To produce a
contract, the offer must be certain and the acceptance
absolute.[18]
A close review of the events in this case, in the light
of the parties evidence, shows that there was no perfected
contract of lease between the parties. Mid-Pasig was not
aware that Rockland deposited the P1 million check in its
account. It only learned of Rocklands check when it
received Rocklands February 2, 2001 letter. Mid-Pasig, upon
investigation, also learned that the check was deposited at
the Philippine National Bank (PNB) San Juan Branch,
instead of PNB Ortigas Branch where Mid-Pasig maintains
its account. Immediately, Mid-Pasig
wrote Rockland on February 6, 2001 rejecting the offer, and
proposed that Rockland apply the P1 million to its other
existing lease instead. These circumstances clearly show that
there was no concurrence of Rocklands offer and Mid-Pasigs
acceptance.
had accepted Rocklands offer. Mid-Pasig consistently
rejected Rocklands offer. Further, Rockland never secured
the approval of Mid-Pasigs Board of Directors and the
PCGG to lease the subject property to Rockland. As noted
by the Court of Appeals, if indeed Rocklandbelieved that
Mid-Pasig impliedly accepted the offer, then it should have
taken possession of the property and paid the monthly
rentals. But it did not. For estoppel to apply, the action
giving rise thereto must be unequivocal and intentional
because, if misapplied, estoppel may become a tool of
injustice.[21]

WHEREFORE, the instant petition is DENIED. The

Mid-Pasig is also not in estoppel in pais. The doctrine
Decision and Resolution dated February 27, 2004 and July
of estoppel is based on the grounds of public policy, fair 21, 2004, respectively, of the Court of Appeals in CA-G.R.
dealing, good faith and justice, and its purpose is to forbid CV No. 76370 are AFFIRMED. Costs against the
one to speak against his own act, representations, or petitioner.
commitments to the injury of one to whom they were
directed and who reasonably relied thereon.[19] Since SO ORDERED.
estoppel is based on equity and justice, it is essential that
before a person can be barred from asserting a fact contrary
to his act or conduct, it must be shown that such act or
conduct has been intended and would unjustly cause harm to
those who are misled if the principle were not applied
against him.[20]

From the start, Mid-Pasig never falsely represented its

intention that could lead Rockland to believe that Mid-Pasig
 Before us is a petition for review on certiorari of the
Decision[1] of the Court of Appeals (CA) in CA-G.R. No.
FIRST DIVISION 46153 which affirmed the decision[2] of the Regional Trial
Court (RTC), Branch 71, Pasig City, in Civil Case No.
58551, and its Resolution[3] denying the motion for
MANILA METAL CONTAINER G.R. No. 166862 reconsideration filed by petitioner Manila Metal Container
CORPORATION, Corporation (MMCC).
Petitioner,
Present:
REYNALDO C. TOLENTINO, The Antecedents
Intervenor, PANGANIBAN, C.J.,
Chairper Petitioner was the owner of a 8,015 square meter
son, parcel of land located in Mandaluyong (now a City), Metro
YNARES- Manila. The property was covered by Transfer Certificate of
SANTIA Title (TCT) No. 332098 of the Registry of Deeds of Rizal.
GO, To secure a P900,000.00 loan it had obtained from
respondent Philippine National Bank (PNB), petitioner
AUSTRIA-MARTINEZ,
executed a real estate mortgage over the lot.Respondent
- versus - CALLEJO, SR., and
PNB later granted petitioner a new credit accommodation
CHICO-NAZARIO, JJ.
of P1,000,000.00; and, on November 16, 1973, petitioner
PHILIPPINE NATIONAL BANK,
executed an Amendment[4] of Real Estate Mortgage over its
Respondent,
property. On March 31, 1981, petitioner secured another
DMCI-PROJECT DEVELOPERS, Promulgated:
loan of P653,000.00 from respondent PNB, payable in
INC.,
quarterly installments of P32,650.00, plus interests and other
Intervenor. December 20, 2006
charges.[5]
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
----------x
On August 5, 1982, respondent PNB filed a petition
for extrajudicial foreclosure of the real estate mortgage and
DECISION
sought to have the property sold at public auction
for P911,532.21, petitioners outstanding obligation to
CALLEJO, SR., J.:
respondent PNB as of June 30, 1982,[6] plus interests and
attorneys fees.
 After due notice and publication, the property was
sold at public auction on September 28, 1982 where
respondent PNB was declared the winning bidder
for P1,000,000.00. The Certificate of Sale[7] issued in its
favor was registered with the Office of the Register of Deeds
of Rizal, and was annotated at the dorsal portion of the title
on February 17, 1983. Thus, the period to redeem the
property was to expire on February 17, 1984.
Petitioner sent a letter dated August 25, 1983 to respondent
PNB, requesting that it be granted an extension of time to
redeem/repurchase the property.[8] In its reply dated August
30, 1983, respondent PNB informed petitioner that the
request had been referred to its Pasay City Branch for
appropriate action and recommendation.[9]
In a letter[10] dated February 10, 1984, petitioner reiterated its
request for a one year extension from February 17,
1984 within which to redeem/repurchase the property on
installment basis. It reiterated its request to repurchase the
property on installment.[11] Meanwhile, some
PNB Pasay City Branch personnel informed petitioner that
as a matter of policy, the bank does not accept partial
redemption.[12]
Since petitioner failed to redeem the property, the
Register of Deeds cancelled TCT No. 32098 on June 1,
1984, and issued a new title in favor of respondent PNB.
[13]
Petitioners offers had not yet been acted upon by
respondent PNB.
Meanwhile, the Special Assets Management Department
(SAMD) had prepared a statement of account, and as of June
25, 1984 petitioners obligation amounted to P1,574,560.47.
This included the bid price of P1,056,924.50, interest,
advances of insurance premiums, advances on realty taxes,
registration expenses, miscellaneous expenses and
publication cost.[14] When apprised of the statement of
account, petitioner remitted P725,000.00 to respondent PNB
as deposit to repurchase, and Official Receipt No. 978191
was issued to it.[15]
In the meantime, the SAMD recommended to the
management of respondent PNB that petitioner be allowed
to repurchase the property for P1,574,560.00. In a letter
dated November 14, 1984, the PNB management informed
petitioner that it was rejecting the offer and the
recommendation of
the SAMD. It was suggested that petitioner purchase the
property for P2,660,000.00, its minimum market
value. Respondent PNB gave petitioner until December 15,
1984 to act on the proposal; otherwise, its P725,000.00
deposit would be returned and the property would be sold to
other interested buyers.[16]
Petitioner, however, did not agree to
respondent PNBs proposal. Instead, it wrote another letter
dated December 12, 1984 requesting for a
reconsideration. Respondent PNB replied in a letter
dated December 28, 1984, wherein it reiterated its proposal
that petitioner purchase the property for P2,660,000.00. PNB
again informed petitioner that it would return the deposit
should petitioner desire to withdraw its offer to purchase the
property.[17] On February 25, 1985, petitioner, through
counsel, requested that PNB reconsider its letter
dated December 28, 1984. Petitioner declared that it had
already agreed to the SAMDs offer to purchase the property
for P1,574,560.47, and that was why it had
paid P725,000.00. Petitioner warned respondent PNB that it
would seek judicial recourse should PNB insist on the
position.[18]
On June 4, 1985, respondent PNB informed petitioner
that the PNB Board of Directors had accepted petitioners
offer to purchase the property, but for P1,931,389.53 in cash
less the P725,000.00 already deposited with it.[19] On page
two of the letter was a space above the typewritten name of
petitioners President, Pablo Gabriel, where he was to affix
his signature. However, Pablo Gabriel did not conform to the
letter but merely indicated therein that he had received it.
[20]
Petitioner did not respond, so PNB requested petitioner in
a letter dated June 30, 1988 to submit an amended offer to
repurchase.
Petitioner rejected respondents proposal in a letter
dated July 14, 1988. It maintained that respondent PNB had
agreed to sell the property for P1,574,560.47, and that since
its P725,000.00 downpayment had been accepted,
respondent PNB was proscribed from increasing the
purchase price of the property.[21] Petitioner averred that it
had a net balance payable in the amount of P643,452.34.
Respondent PNB, however, rejected petitioners offer to pay
the balance of P643,452.34 in a letter dated August 1, 1989.
[22]
On August 28, 1989, petitioner filed a complaint
against respondent PNB for Annulment of Mortgage and
Mortgage Foreclosure, Delivery of Title, or Specific
Performance with Damages. To support its cause of action
for specific performance, it alleged the following:
34. As early as June 25, 1984, PNB had accepted the
down payment from Manila Metal in the substantial
amount of P725,000.00 for the
redemption/repurchase price of P1,574,560.47 as
approved by its SMAD and considering the reliance
made by Manila Metal and the long time that has
elapsed, the approval of the higher management of
the Bank to confirm the agreement of its SMAD is
clearly a potestative condition which cannot legally
prejudice Manila Metal which has acted and relied
on the approval of SMAD. The Bank cannot take
advantage of a condition which is entirely
dependent upon its own will after accepting and
benefiting from the substantial payment made by
Manila Metal.
35. PNB approved the repurchase price
of P1,574,560.47 for which it accepted P725,000.00
from Manila Metal. PNB cannot take advantage of
its own delay and long inaction in demanding a
higher amount based on unilateral computation of
interest rate without the consent of Manila Metal.
Petitioner later filed an amended complaint and
supported its claim for damages with the following
arguments:
36. That in order to protect itself against the wrongful
and malicious acts of the defendant Bank, plaintiff
is constrained to engage the services of counsel at
an agreed fee of P50,000.00 and to incur litigation
expenses of at least P30,000.00, which the
defendant PNB should be condemned to pay the
plaintiff Manila Metal.
 37. That by reason of the wrongful and malicious
actuations of defendant PNB, plaintiff Manila Metal
suffered besmirched reputation for which defendant
PNB is liable for moral damages of at
least P50,000.00.
38. That for the wrongful and malicious act of
defendant PNB which are highly reprehensible,
exemplary damages should be awarded in favor of
the plaintiff by way of example or correction for the
public good of at least P30,000.00.[23]
Petitioner prayed that, after due proceedings,
judgment be rendered in its favor, thus:
a) Declaring the Amended Real Estate Mortgage
(Annex A) null and void and without any legal force
and effect.
b) Declaring defendants acts of extra-judicially
foreclosing the mortgage over plaintiffs property
and setting it for auction sale null and void.
c) Ordering the defendant Register of Deeds to cancel
the new title issued in the name of PNB (TCT NO.
43792) covering the property described in
paragraph 4 of the Complaint, to reinstate TCT
No. 37025 in the name of Manila Metal and to
cancel the annotation of the mortgage in question at
the back of the TCT No. 37025 described in
paragraph 4 of this Complaint.
d) Ordering the defendant PNB to return and/or
deliver physical possession of the
TCT No. 37025 described in paragraph 4 of this
Complaint to the plaintiff Manila Metal.
e) Ordering the defendant PNB to pay the plaintiff
Manila Metals actual damages, moral and
exemplary damages in the aggregate amount of not
less than P80,000.00 as may be warranted by the
evidence and fixed by this Honorable Court in the
exercise of its sound discretion, and attorneys fees
of P50,000.00 and litigation expenses of at
least P30,000.00 as may be proved during the trial,
and costs of suit.
Plaintiff likewise prays for such
further reliefs which may be deemed just and equitable
in the premises.[24]
In its Answer to the complaint, respondent PNB
averred, as a special and affirmative defense, that it had
acquired ownership over the property after the period to
redeem had elapsed. It claimed that no contract of sale was
perfected between it and petitioner after the period to
redeem the property had expired.
During pre-trial, the parties agreed to submit the case
for decision, based on their stipulation of facts.[25] The
parties agreed to limit the issues to the following:
1. Whether or not the June 4, 1985 letter of the
defendant approving/accepting plaintiffs offer to
purchase the property is still valid and legally
enforceable.
2. Whether or not the plaintiff has waived its right to
purchase the property when it failed to conform
with the conditions set forth by the defendant in its
letter dated June 4, 1985.
 3. Whether or not there is a perfected contract of sale the P1,206,389.53 which respondent PNB had demanded. It
between the parties.[26] further declared that the P725,000.00 remitted by petitioner
to respondent PNB on June 4, 1985 was a deposit, and not a
downpayment or earnest money.
While the case was pending, respondent PNB
demanded, on September 20, 1989, that petitioner vacate the On appeal to the CA, petitioner made the following
property within 15 days from notice,[27] but petitioners allegations:
refused to do so.
I
On March 18, 1993, petitioner offered to repurchase THE LOWER COURT ERRED IN RULING THAT
the property for P3,500,000.00.[28] The offer was however DEFENDANT-APPELLEES LETTER DATED 4
rejected by respondent PNB, in a letter dated April 13, JUNE 1985 APPROVING/ACCEPTING PLAINTIFF-
APPELLANTS OFFER TO PURCHASE THE
1993. According to it, the prevailing market value of the
SUBJECT PROPERTY IS NOT VALID AND
property was approximately P30,000,000.00, and as a matter ENFORCEABLE.
of policy, it could not sell the property for less than its
market value.[29] On June 21, 1993, petitioner offered to II
purchase the property for P4,250,000.00 in cash.[30] The offer THE LOWER COURT ERRED IN RULING THAT
was again rejected by respondent PNB on September 13, THERE WAS NO PERFECTED CONTRACT
OF SALE BETWEEN PLAINTIFF-APPELLANT
1993.[31]
AND DEFENDANT-APPELLEE.

On May 31, 1994, the trial court rendered judgment III

dismissing the amended complaint and THE LOWER COURT ERRED IN RULING THAT
respondent PNBs counterclaim. It ordered respondent PNB PLAINTIFF-APPELLLANT WAIVED ITS RIGHT TO
to refund the P725,000.00 deposit petitioner had made. PURCHASE THE SUBJECT PROPERTY WHEN IT
[32] FAILED TO CONFORM WITH CONDITIONS
The trial court ruled that there was no perfected contract
SET FORTH BY DEFENDANT-APPELLEE IN ITS
of sale between the parties; hence, petitioner had no cause of LETTER DATED 4 JUNE 1985.
action for specific performance against respondent.The trial
court declared that respondent had rejected petitioners offer IV
to repurchase the property. Petitioner, in turn, rejected the THE LOWER COURT ERRED IN DISREGARDING
terms and conditions contained in the June 4, 1985 letter of THE FACT THAT IT WAS THE DEFENDANT-
APPELLEE WHICH RENDERED IT DIFFICULT IF
the SAMD. While petitioner had offered to repurchase the
NOT IMPOSSIBLE FOR PLAINTIFF-APPELLANT
property per its letter of TO COMPLETE THE BALANCE OF THEIR
July 14, 1988, the amount of P643,422.34 was way below PURCHASE PRICE.
 V The CA rendered judgment on May 11,
THE LOWER COURT ERRED IN DISREGARDING
2000 affirming the decision of the RTC.[37] It declared that
THE FACT THAT THERE WAS NO VALID
RESCISSION OR CANCELLATION OF SUBJECT petitioner obviously never agreed to the selling price
CONTRACT OF REPURCHASE. proposed by respondent PNB (P1,931,389.53) since
petitioner had kept on insisting that the selling price should
VI be lowered to P1,574,560.47. Clearly therefore, there was no
THE LOWER COURT ERRED IN DECLARING meeting of the minds between the parties as to the price or
THAT PLAINTIFF FAILED AND REFUSED TO
consideration of the sale.
SUBMIT THE AMENDED REPURCHASE OFFER.

VII The CA ratiocinated that petitioners original offer to

THE LOWER COURT ERRED IN DISMISSING THE purchase the subject property had not been accepted by
AMENDED COMPLAINT OF PLAINTIFF- respondent PNB. In fact, it made a counter-offer through
APPELLANT. its June 4, 1985 letter specifically on the selling price;
petitioner did not agree to the counter-offer; and the
VIII
THE LOWER COURT ERRED IN NOT AWARDING negotiations did not prosper. Moreover, petitioner did not
PLAINTIFF-APPELLANT ACTUAL, MORAL AND pay the balance of the purchase price within the sixty-day
EXEMPLARY DAMAGES, ATTOTRNEYS FEES period set in the June 4, 1985 letter of respondent
AND LITIGATION EXPENSES.[33] PNB. Consequently, there was no perfected contract of sale,
Meanwhile, on June 17, 1993, petitioners Board of and as such, there was no contract to rescind.
Directors approved Resolution No. 3-004, where it waived,
assigned and transferred its rights over the property covered According to the appellate court, the claim for
by TCT No. 33099 and TCT No. 37025 in favor damages and the counterclaim were correctly dismissed by
of Bayani Gabriel, one of its Directors. the court a quo for no evidence was presented to support
[34]
Thereafter, Bayani Gabriel executed a Deed of it. Respondent PNBs letter dated June 30, 1988 cannot
Assignment over 51% of the ownership and management of revive the failed negotiations between the parties.
the property in favor of Reynaldo Tolentino, who later Respondent PNB merely asked petitioner to submit an
moved for leave to intervene as plaintiff-appellant. On July amended offer to repurchase. While petitioner reiterated its
14, 1993, the CA issued a resolution granting the motion, request for a lower selling price and that the balance of the
[35]
and likewise granted the motion of repurchase be reduced, however, respondent rejected the
Reynaldo Tolentino substituting petitioner MMCC, as proposal in a letter dated August 1, 1989.
plaintiff-appellant, and his motion to withdraw as intervenor.
[36]
 Petitioner filed a motion for reconsideration, which
the CA likewise denied.
Thus, petitioner filed the instant petition for review
on certiorari, alleging that:
I. THE COURT OF APPEALS ERRED ON A
QUESTION OF LAW WHEN IT RULED
THAT THERE IS NO PERFECTED
CONTRACT OF SALE BETWEEN THE
PETITIONER AND RESPONDENT.
II. THE COURT OF APPEALS ERRED ON A
QUESTION OF LAW WHEN IT RULED
THAT THE AMOUNT OF PHP725,000.00
PAID BY THE PETITIONER IS NOT AN
EARNEST MONEY.
III. THE COURT OF APPEALS ERRED ON A
QUESTION OF LAW WHEN IT RULED
THAT THE FAILURE OF THE PETITIONER-
APPELLANT TO SIGNIFY ITS
CONFORMITY TO THE TERMS
CONTAINED IN PNBS JUNE 4, 1985
LETTER MEANS THAT THERE WAS NO
VALID AND LEGALLY ENFORCEABLE
CONTRACT OF SALE BETWEEN THE
PARTIES.
IV. THE COURT OF APPEALS ERRED ON A
QUESTION OF LAW THAT NON-PAYMENT
OF THE PETITIONER-APPELLANT OF THE
BALANCE OF THE OFFERED PRICE IN
THE LETTER OF PNB DATED JUNE 4, 1985,
WITHIN SIXTY (60) DAYS FROM NOTICE
OF APPROVAL CONSTITUTES NO VALID
AND LEGALLY ENFORCEABLE
CONTRACT OF SALE BETWEEN THE
PARTIES.
V. THE COURT OF APPEALS SERIOUSLY ERRED
WHEN IT HELD THAT THE LETTERS OF
PETITIONER-APPELLANT DATED MARCH
18, 1993 AND JUNE 21, 1993, OFFERING TO
BUY THE SUBJECT PROPERTY AT
DIFFERENT AMOUNT WERE PROOF THAT
THERE IS NO PERFECTED CONTRACT
OF SALE.[38]
The threshold issue is whether or not petitioner and
respondent PNB had entered into a perfected contract for
petitioner to repurchase the property from respondent.
Petitioner maintains that it had accepted respondents
offer made through the SAMD, to sell the property
for P1,574,560.00. When the acceptance was made in its
letter dated June 25, 1984; it then deposited P725,000.00
with the SAMD as partial payment, evidenced by
Receipt No. 978194 which respondent had issued. Petitioner
avers that the SAMDs acceptance of the deposit amounted to
an acceptance of its offer to repurchase. Moreover, as
gleaned from the letter of SAMD dated June 4, 1985, the
PNB Board of Directors had approved petitioners offer to
purchase the property. It claims that this was
the suspensive condition, the fulfillment of which gave rise
to the contract. Respondent could no longer unilaterally
withdraw its offer to sell the property for P1,574,560.47,
since the acceptance of the offer resulted in a perfected
contract of sale; it was obliged to remit to respondent the
balance of the original purchase price of P1,574,560.47,
while respondent was obliged to transfer ownership and
deliver the property to petitioner, conformably with Article
1159 of the New Civil Code.
Petitioner posits that respondent was proscribed from
increasing the interest rate after it had accepted respondents
offer to sell the property for P1,574,560.00. Consequently,
respondent could no longer validly make a counter-offer
of P1,931,789.88 for the purchase of the property. It likewise
maintains that, although the P725,000.00 was considered as
deposit for the repurchase of the property in the receipt
issued by the SAMD, the amount constitutes earnest money
as contemplated in Article 1482 of the New Civil
Code. Petitioner cites the rulings of this Court
in Villonco v. Bormaheco[39] and Topacio v. Court of
[40]
Appeals.
Petitioner avers that its failure to append its conformity to
the June 4, 1984 letter of respondent and its failure to pay
the balance of the price as fixed by respondent within the
60-day period from notice was to protest respondents breach
of its obligation to petitioner. It did not amount to a rejection
of respondents offer to sell the property since respondent
was merely seeking to enforce its right to pay the balance
of P1,570,564.47. In any event, respondent had the option
either to accept the balance of the offered price or to cause
the rescission of the contract.
Petitioners letters dated March 18, 1993 and June 21,
1993 to respondent during the pendency of the case in the
RTC were merely to compromise the pending lawsuit, they
did not constitute separate offers to repurchase the
property. Such offer to compromise should not be taken
against it, in accordance with Section 27, Rule 130 of the
Revised Rules of Court.
For its part, respondent contends that the parties never
graduated from the negotiation stage as they could not agree
on the amount of the repurchase price of the property. All
that transpired was an exchange of proposals and counter-
proposals, nothing more. It insists that a definite agreement
on the amount and manner of payment of the price are
essential elements in the formation of a binding and
enforceable contract of sale. There was no such agreement
in this case. Primarily, the concept of suspensive condition
signifies a future and uncertain event upon the fulfillment of
which the obligation becomes effective. It clearly
presupposes the existence of a valid and binding agreement,
the effectivity of which is subordinated to its
fulfillment. Since there is no perfected contract in the first
place, there is no basis for the application of the principles
governing suspensive conditions.
According to respondent, the Statement of Account prepared
by SAMD as of June 25, 1984 cannot be classified as a
counter-offer; it is simply a recital of its total monetary
claims against petitioner.Moreover, the amount stated
therein could not likewise be considered as the counter-offer
since as admitted by petitioner, it was only recommendation
which was subject to approval of the PNB Board of
Directors.
Neither can the receipt by the SAMD of P725,000.00 be
regarded as evidence of a perfected sale contract. As gleaned
from the parties Stipulation of Facts during the proceedings
in the court a quo, the amount is merely an acknowledgment
of the receipt of P725,000.00 as deposit to repurchase the
property. The deposit of P725,000.00 was accepted by
respondent on the condition that the purchase price would
still be approved by its Board of Directors. Respondent
maintains that its acceptance of the amount was qualified by
that condition, thus not absolute. Pending such approval, it
cannot be legally claimed that respondent is already bound
by any contract of sale with petitioner.
According to respondent, petitioner knew that the
SAMD has no capacity to bind respondent and that its
authority is limited to administering, managing and
preserving the properties and other special assets of
PNB. The SAMD does not have the power to sell,
encumber, dispose of, or otherwise alienate the assets, since
the power to do so must emanate from its Board of
Directors. The SAMD was not authorized by respondents
Board to enter into contracts of sale with third persons
involving corporate assets. There is absolutely nothing on
record that respondent authorized the SAMD, or made it
appear to petitioner that it represented itself as having such
authority.
Respondent reiterates that SAMD had informed petitioner
that its offer to repurchase had been approved by the Board
subject to the condition, among others, that the selling price
shall be the total banks claim as of documentation date
x x x payable in cash (P725,000.00 already deposited)
within 60 days from notice of approval. A new Statement of
Account was attached therein indicating the total banks
claim to be P1,931,389.53 less deposit of P725,000.00,
or P1,206,389.00.Furthermore, while respondents Board of
Directors accepted petitioners offer to repurchase the
property, the acceptance was qualified, in that it required a
higher sale price and subject to specified terms and
conditions enumerated therein. This qualified acceptance
was in effect a counter-offer, necessitating petitioners
acceptance in return.
The Ruling of the Court
The ruling of the appellate court that there was no perfected
contract of sale between the parties on June 4, 1985 is
correct.
A contract 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. [41] Under Article 1318
of the New Civil Code, 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;
(3) Cause of the obligation which is established.
Contracts are perfected by mere consent which is manifested
by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract.
[42]
Once perfected, they bind other contracting parties and
the obligations arising therefrom have the form of law
between the parties and should be complied with in good
faith. The parties are bound not only to the fulfillment of
what has been expressly stipulated but also to the
consequences which, according to their nature, may be in
keeping with good faith, usage and law.[43]
By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price
certain in money or its equivalent.[44] The absence of any of
the essential elements will negate the existence of a
perfected contract of sale. As the Court ruled in Boston
Bank of the Philippines v. Manalo:[45]
A definite agreement as to the price is an essential
element of a binding agreement to sell personal or real
property because it seriously affects the rights and
obligations of the parties. Price is an essential element
in the formation of a binding and enforceable contract
of sale. The fixing of the price can never be left to the
decision of one of the contracting parties. But a price
fixed by one of the contracting parties, if accepted by
the other, gives rise to a perfected sale.[46]
A contract of sale is consensual in nature and is perfected
upon mere meeting of the minds. When there is merely an
offer by one party without acceptance of the other, there is
no contract.[47] When the contract of sale is not perfected, it
cannot, as an independent source of obligation, serve as a
binding juridical relation between the parties.[48]
In San Miguel Properties Philippines, Inc. v. Huang,[49] the
Court ruled that the stages of a contract of sale are as
follows: (1) negotiation, covering the period from the time
the prospective contracting parties indicate interest in the
contract to the time the contract is perfected; (2) perfection,
which takes place upon the concurrence of the essential
elements of the sale which are the meeting of the minds of
the parties as to the object of the contract and upon the price;
and (3) consummation, which begins when the parties
perform their respective undertakings under the contract of
sale, culminating in the extinguishment thereof.
A negotiation is formally initiated by an offer, which,
however, must be certain.[50] At any time prior to the
perfection of the contract, either negotiating party may stop
the negotiation. At this stage, the offer may be withdrawn;
the withdrawal is effective immediately after its
manifestation. To convert the offer into a contract, the
acceptance must be absolute and must not qualify the terms
of the offer; it must be plain, unequivocal, unconditional and
without variance of any sort from the
proposal. In Adelfa Properties, Inc. v. Court of Appeals,
[51]
the Court ruled that:
x x x The rule is that except where a formal acceptance
is so required, although the acceptance must be
affirmatively and clearly made and must be evidenced
by some acts or conduct communicated to the offeror, it
may be 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.[52]
A qualified acceptance or one that involves a new proposal
constitutes a counter-offer and a rejection of the original
offer. A counter-offer is considered in law, a rejection of the
original offer and an attempt to end the negotiation between
the parties on a different basis.[53] Consequently, when
something is desired which is not exactly what is proposed
in the offer, such acceptance is not sufficient to guarantee
consent because any modification or variation from the
terms of the offer annuls the offer.[54] The acceptance must
be identical in all respects with that of the offer so as to
produce consent or meeting of the minds.
In this case, petitioner had until February 17,
1984 within which to redeem the property. However, since it
lacked the resources, it requested for more time to
redeem/repurchase the property under such terms and
conditions agreed upon by the parties.[55] The request, which
was made through a letter dated August 25, 1983, was
referred to the respondents main branch for appropriate
action.[56] Before respondent could act on the request,
petitioner again wrote respondent as follows:
1. Upon approval of our request, we will pay
your goodselves ONE HUNDRED & FIFTY
THOUSAND PESOS (P150,000.00);
2. Within six months from date of approval of our
request, we will pay another FOUR HUNDRED
FIFTY THOUSAND PESOS (P450,000.00); and
3. The remaining balance together with the interest and
other expenses that will be incurred will be paid
within the last six months of the one year grave
period requested for.[57]
When the petitioner was told that respondent did not
allow partial redemption,[58] it sent a letter to respondents
President reiterating its offer to purchase the property.
[59]
There was no response to petitioners letters dated
February 10 and 15, 1984.
The statement of account prepared by the SAMD
stating that the net claim of respondent as of June 25,
1984 was P1,574,560.47 cannot be considered an
unqualified acceptance to petitioners offer to purchase the
property. The statement is but a computation of the amount
which petitioner was obliged to pay in case respondent
would later agree to sell the property, including interests,
advances on insurance premium, advances on realty taxes,
publication cost, registration expenses and miscellaneous
expenses.
There is no evidence that the SAMD was authorized
by respondents Board of Directors to accept petitioners offer
and sell the property for P1,574,560.47. Any acceptance by
the SAMD of petitioners offer would not bind
respondent. As this Court ruled in AF Realty Development,
Inc. vs. Diesehuan Freight Services, Inc.:[60]
Section 23 of the Corporation Code expressly
provides that the corporate powers of all corporations
shall be exercised by the board of directors. Just as a
natural person may authorize another to do certain acts
in his behalf, so may the board of directors of a
corporation validly delegate some of its functions to
individual officers or agents appointed by it. Thus,
contracts or acts of a corporation must be made either
by the board of directors or by a corporate agent duly
authorized by the board. Absent such valid
delegation/authorization, the rule is that the declarations
of an individual director relating to the affairs of the
 corporation, but not in the course of, or connected with
the performance of authorized duties of such director,
are held not binding on the corporation.
Thus, a corporation can only execute its powers and
transact its business through its Board of Directors and
through its officers and agents when authorized by a board
resolution or its by-laws.[61]
It appears that the SAMD had prepared a
recommendation for respondent to accept petitioners offer to
repurchase the property even beyond the one-year period; it
recommended that petitioner be allowed to redeem the
property and pay P1,574,560.00 as the purchase
price. Respondent later approved the recommendation that
the property be sold to petitioner. But instead of
the P1,574,560.47 recommended by the SAMD and to
which petitioner had previously conformed, respondent set
the purchase price at P2,660,000.00. In fine, respondents
acceptance of petitioners offer was qualified, hence can be at
most considered as a counter-offer. If petitioner had accepted
this counter-offer, a perfected contract of sale would have
arisen; as it turns out, however, petitioner merely sought to
have the counter-offer reconsidered. This request for
reconsideration would later be rejected by respondent.
We do not agree with petitioners contention that
the P725,000.00 it had remitted to respondent was earnest
money which could be considered as proof of the perfection
of a contract of sale under Article 1482 of the New Civil
Code. The provision reads:
ART. 1482. 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.
This contention is likewise negated by the stipulation
of facts which the parties entered into in the trial court:
8. On June 8, 1984, the Special Assets
Management Department (SAMD) of PNB prepared an
updated Statement of Account showing MMCCs total
liability to PNB as of June 25, 1984 to be
P1,574,560.47 and recommended this amount as the
repurchase price of the subject property.
9. On June 25, 1984, MMCC paid P725,000.00
to PNB as deposit to repurchase the property. The
deposit of P725,000 was accepted by PNB on the
condition that the purchase price is still subject to the
approval of the PNB Board.[62]
Thus, the P725,000.00 was merely a deposit to be
applied as part of the purchase price of the property, in the
event that respondent would approve the recommendation of
SAMD for respondent to accept petitioners offer to purchase
the property for P1,574,560.47. Unless and until the
respondent accepted the offer on these terms, no perfected
contract of sale would arise. Absent proof of the
concurrence of all the essential elements of a contract of
sale, the giving of earnest money cannot establish the
existence of a perfected contract of sale.[63]
It appears that, per its letter to petitioner dated June 4, 1985,
the respondent had decided to accept the offer to purchase
the property for P1,931,389.53. However, this amounted to
an amendment of respondents qualified acceptance, or an
amended counter-offer, because while the respondent
lowered the purchase price, it still declared that its
6.
acceptance was subject to the following terms and
conditions:
be forfeited and the Bank is thenceforth authorized
to sell the property to other interested parties.
That the sale shall be subject to such other terms
and conditions that the Legal Department may
impose to protect the interest of the Bank.[64]

It appears that although respondent requested

petitioner to conform to its amended counter-offer, petitioner
refused and instead requested respondent to reconsider its
1. That the selling price shall be the total Banks
claim as of documentation date (pls. see attached
amended counter-offer.Petitioners request was ultimately
statement of account as of 5-31-85), payable in rejected and respondent offered to refund its P725,000.00
cash (P725,000.00 already deposited) within sixty deposit.
(60) days from notice of approval;
In sum, then, there was no perfected contract of sale
2. The Bank sells only whatever rights, interests and between petitioner and respondent over the subject property.
participation it may have in the property and you
are charged with full knowledge of the nature and
extent of said rights, interests and participation
and waive your right to warranty against eviction.
IN LIGHT OF ALL THE FOREGOING, the
3. All taxes and other government imposts due or to petition is DENIED.
become due on the property, as well as expenses The assailed decision is AFFIRMED. Costs against
including costs of documents and science stamps, petitioner Manila Metal Container Corporation.
transfer fees, etc., to be incurred in connection
with the execution and registration of all covering
documents shall be borne by you; SO ORDERED.

4. That you shall undertake at your own expense and

account the ejectment of the occupants of the
property subject of the sale, if there are any;

5. That upon your failure to pay the balance of the

purchase price within sixty (60) days from receipt
of advice accepting your offer, your deposit shall
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 138018 July 26, 2002
RIDO MONTECILLO, petitioner,
vs.
IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA
ABUCAY, respondents.
CARPIO, J.:
The Case
On March 24, 1993, the Regional Trial Court of Cebu City, Branch 18,
rendered a Decision1 declaring the deed of sale of a parcel of land in
favor of petitioner null and void ab initio. The Court of Appeals,2 in its July
16, 1998 Decision3 as well as its February 11, 1999 Order4 denying
petitioners Motion for Reconsideration, affirmed the trial courts
decision in toto. Before this Court now is a Petition for Review on
Certiorari5 assailing the Court of Appeals decision and order.
The Facts
Respondents Ignacia Reynes ("Reynes" for brevity) and Spouses Abucay
("Abucay Spouses" for brevity) filed on June 20, 1984 a complaint for
Declaration of Nullity and Quieting of Title against petitioner Rido
Montecillo ("Montecillo" for brevity). Reynes asserted that she is the
owner of a lot situated in Mabolo, Cebu City, covered by Transfer
Certificate of Title No. 74196 and containing an area of 448 square
meters ("Mabolo Lot" for brevity). In 1981, Reynes sold 185 square
meters of the Mabolo Lot to the Abucay Spouses who built a residential
house on the lot they bought.
Reynes alleged further that on March 1, 1984 she signed a Deed of Sale
of the Mabolo Lot in favor of Montecillo ("Montecillos Deed of Sale" for
brevity). Reynes, being illiterate,6 signed by affixing her thumb-mark7 on
the document. Montecillo promised to pay the agreed P47,000.00
purchase price within one month from the signing of the Deed of Sale.
Montecillos Deed of Sale states as follows:
"That I, IGNACIA T. REYNES, of legal age, Filipino, widow, with
residence and postal address at Mabolo, Cebu City,
Philippines, for and in consideration of FORTY SEVEN
THOUSAND (P47,000.00) PESOS, Philippine Currency, to me
in hand paid by RIDO MONTECILLO, of legal age, Filipino,
married, with residence and postal address at Mabolo, Cebu City,
Philippines, the receipt hereof is hereby acknowledged, have
sold, transferred, and conveyed, unto RIDO MONTECILLO, his
heirs, executors, administrators, and assigns, forever, a parcel of
land together with the improvements thereon, situated at Mabolo,
Cebu City, Philippines, free from all liens and encumbrances, and
more particularly described as follows:
A parcel of land (Lot 203-B-2-B of the subdivision plan
Psd-07-01-00 2370, being a portion of Lot 203-B-2,
described on plan (LRC) Psd-76821, L.R.C. (GLRO)
Record No. 5988), situated in the Barrio of Mabolo, City of
Cebu. Bounded on the SE., along line 1-2 by Lot 206; on
the SW., along line 2-3, by Lot 202, both of Banilad
Estate; on the NW., along line 4-5, by Lot 203-B-2-A of
the subdivision of Four Hundred Forty Eight (448) square
meters, more or less.
of which I am the absolute owner in accordance with the
provisions of the Land Registration Act, my title being evidenced
by Transfer Certificate of Title No. 74196 of the Registry of Deeds
of the City of Cebu, Philippines. That This Land Is Not Tenanted
and Does Not Fall Under the Purview of P.D. 27."8 (Emphasis
supplied)
Reynes further alleged that Montecillo failed to pay the purchase price
after the lapse of the one-month period, prompting Reynes to demand
from Montecillo the return of the Deed of Sale. Since Montecillo refused
to return the Deed of Sale,9 Reynes executed a document unilaterally
revoking the sale and gave a copy of the document to Montecillo.
Subsequently, on May 23, 1984 Reynes signed a Deed of Sale
transferring to the Abucay Spouses the entire Mabolo Lot, at the same
time confirming the previous sale in 1981 of a 185-square meter portion
of the lot. This Deed of Sale states:
"I, IGNACIA T. REYNES, of legal age, Filipino, widow and
resident of Mabolo, Cebu City, do hereby confirm the sale of a
 portion of Lot No. 74196 to an extent of 185 square meters to
Spouses Redemptor Abucay and Elisa Abucay covered by Deed
per Doc. No. 47, Page No. 9, Book No. V, Series of 1981 of
notarial register of Benedicto Alo, of which spouses is now in
occupation;
That for and in consideration of the total sum of FIFTY
THOUSAND (P50,000) PESOS, Philippine Currency, received in
full and receipt whereof is herein acknowledged from SPOUSES
REDEMPTOR ABUCAY and ELISA ABUCAY, do hereby in these
presents, SELL, TRANSFER and CONVEY absolutely unto said
Spouses Redemptor Abucay and Elisa Abucay, their heirs,
assigns and successors-in-interest the whole parcel of land
together with improvements thereon and more particularly
described as follows:
TCT No. 74196
A parcel of land (Lot 203-B-2-B of the subdivision plan
psd-07-01-002370, being a portion of Lot 203-B-2,
described on plan (LRC) Psd 76821, LRC (GLRO)
Record No. 5988) situated in Mabolo, Cebu City, along
Arcilla Street, containing an area of total FOUR
HUNDRED FORTY EIGHT (448) Square meters.
of which I am the absolute owner thereof free from all liens and
encumbrances and warrant the same against claim of third
persons and other deeds affecting said parcel of land other than
that to the said spouses and inconsistent hereto is declared
without any effect.
In witness whereof, I hereunto signed this 23rd day of May, 1984
in Cebu City, Philippines."10
Reynes and the Abucay Spouses alleged that on June 18, 1984 they
received information that the Register of Deeds of Cebu City issued
Certificate of Title No. 90805 in the name of Montecillo for the Mabolo
Lot.
Reynes and the Abucay Spouses argued that "for lack of consideration
there (was) no meeting of the minds"11between Reynes and Montecillo.
Thus, the trial court should declare null and void ab initio Montecillos
Deed of Sale, and order the cancellation of Certificate of Title No. 90805
in the name of Montecillo.
In his Answer, Montecillo, a bank executive with a B.S. Commerce
degree,12 claimed he was a buyer in good faith and had actually paid
the P47,000.00 consideration stated in his Deed of Sale. Montecillo,
however, admitted he still owed Reynes a balance of P10,000.00. He
also alleged that he paid P50,000.00 for the release of the chattel
mortgage which he argued constituted a lien on the Mabolo Lot. He
further alleged that he paid for the real property tax as well as the capital
gains tax on the sale of the Mabolo Lot.
In their Reply, Reynes and the Abucay Spouses contended that
Montecillo did not have authority to discharge the chattel mortgage,
especially after Reynes revoked Montecillos Deed of Sale and gave the
mortgagee a copy of the document of revocation. Reynes and the
Abucay Spouses claimed that Montecillo secured the release of the
chattel mortgage through machination. They further asserted that
Montecillo took advantage of the real property taxes paid by the Abucay
Spouses and surreptitiously caused the transfer of the title to the Mabolo
Lot in his name.
During pre-trial, Montecillo claimed that the consideration for the sale of
the Mabolo Lot was the amount he paid to Cebu Ice and Cold Storage
Corporation ("Cebu Ice Storage" for brevity) for the mortgage debt of
Bienvenido Jayag ("Jayag" for brevity). Montecillo argued that the release
of the mortgage was necessary since the mortgage constituted a lien on
the Mabolo Lot.
Reynes, however, stated that she had nothing to do with Jayags
mortgage debt except that the house mortgaged by Jayag stood on a
portion of the Mabolo Lot. Reynes further stated that the payment by
Montecillo to release the mortgage on Jayags house is a matter between
Montecillo and Jayag. The mortgage on the house, being a chattel
mortgage, could not be interpreted in any way as an encumbrance on the
Mabolo Lot. Reynes further claimed that the mortgage debt had long
prescribed since the P47,000.00 mortgage debt was due for payment on
January 30, 1967.
The trial court rendered a decision on March 24, 1993 declaring the Deed
of Sale to Montecillo null and void. The trial court ordered the cancellation
of Montecillos Transfer Certificate of Title No. 90805 and the issuance of
a new certificate of title in favor of the Abucay Spouses. The trial court
found that Montecillos Deed of Sale had no cause or consideration
because Montecillo never paid Reynes the P47,000.00 purchase price,
contrary to what is stated in the Deed of Sale that Reynes received the
purchase price. The trial court ruled that Montecillos Deed of Sale
produced no effect whatsoever for want of consideration. The dispositive
portion of the trial courts decision reads as follows:
"WHEREFORE, in view of the foregoing consideration, judgment
is hereby rendered declaring the deed of sale in favor of
defendant null and void and of no force and effect thereby
ordering the cancellation of Transfer Certificate of Title No. 90805
of the Register of Deeds of Cebu City and to declare plaintiff
Spouses Redemptor and Elisa Abucay as rightful vendees and
Transfer Certificate of Title to the property subject matter of the
suit issued in their names. The defendants are further directed to
pay moral damages in the sum of P20,000.00 and attorneys fees
in the sum of P2,000.00 plus cost of the suit.
xxx"
Not satisfied with the trial courts Decision, Montecillo appealed the same
to the Court of Appeals.
Ruling of the Court of Appeals
The appellate court affirmed the Decision of the trial court in toto and
dismissed the appeal13 on the ground that Montecillos Deed of Sale is
void for lack of consideration. The appellate court also denied
Montecillos Motion for Reconsideration14 on the ground that it raised no
new arguments.
Still dissatisfied, Montecillo filed the present petition for review on
certiorari.
The Issues
Montecillo raises the following issues:
1. "Was there an agreement between Reynes and Montecillo that
the stated consideration of P47,000.00 in the Deed of Sale be
paid to Cebu Ice and Cold Storage to secure the release of the
Transfer Certificate of Title?"
2. "If there was none, is the Deed of Sale void from the beginning
or simply rescissible?"15
The Ruling of the Court
The petition is devoid of merit.
First issue: manner of payment of the P47,000.00 purchase price.
Montecillos Deed of Sale does not state that the P47,000.00 purchase
price should be paid by Montecillo to Cebu Ice Storage. Montecillo failed
to adduce any evidence before the trial court showing that Reynes had
agreed, verbally or in writing, that the P47,000.00 purchase price should
be paid to Cebu Ice Storage. Absent any evidence showing that Reynes
had agreed to the payment of the purchase price to any other party, the
payment to be effective must be made to Reynes, the vendor in the sale.
Article 1240 of the Civil Code provides as follows:
"Payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest, or
any person authorized to receive it."
Thus, Montecillos payment to Cebu Ice Storage is not the payment that
would extinguish16 Montecillos obligation to Reynes under the Deed of
Sale.
It militates against common sense for Reynes to sell her Mabolo Lot
for P47,000.00 if this entire amount would only go to Cebu Ice Storage,
leaving not a single centavo to her for giving up ownership of a valuable
property. This incredible allegation of Montecillo becomes even more
absurd when one considers that Reynes did not benefit, directly or
indirectly, from the payment of the P47,000.00 to Cebu Ice Storage.
The trial court found that Reynes had nothing to do with Jayags
mortgage debt with Cebu Ice Storage. The trial court made the following
findings of fact:
"x x x. Plaintiff Ignacia Reynes was not a party to nor privy of the
obligation in favor of the Cebu Ice and Cold Storage Corporation,
the obligation being exclusively of Bienvenido Jayag and wife
who mortgaged their residential house constructed on the land
subject matter of the complaint. The payment by the defendant to
release the residential house from the mortgage is a matter
 between him and Jayag and cannot by implication or deception
be made to appear as an encumbrance upon the land."17
Thus, Montecillos payment to Jayags creditor could not possibly
redound to the benefit18 of Reynes. We find no reason to disturb the
factual findings of the trial court. In petitions for review on certiorari as a
mode of appeal under Rule 45, as in the instant case, a petitioner can
raise only questions of law.19 This Court is not the proper venue to
consider a factual issue as it is not a trier of facts.
Second issue: whether the Deed of Sale is void ab initio or only
rescissible.
Under Article 1318 of the Civil Code, "[T]here 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; (3) Cause of
the obligation which is established." Article 1352 of the Civil Code also
provides that "[C]ontracts without cause x x x produce no effect
whatsoever."
Montecillo argues that his Deed of Sale has all the requisites of a valid
contract. Montecillo points out that he agreed to purchase, and Reynes
agreed to sell, the Mabolo Lot at the price of P47,000.00. Thus, the three
requisites for a valid contract concur: consent, object certain and
consideration. Montecillo asserts there is no lack of consideration that
would prevent the existence of a valid contract. Rather, there is only non-
payment of the consideration within the period agreed upon for payment.
Montecillo argues there is only a breach of his obligation to pay the full
purchase price on time. Such breach merely gives Reynes a right to ask
for specific performance, or for annulment of the obligation to sell the
Mabolo Lot. Montecillo maintains that in reciprocal obligations, the injured
party can choose between fulfillment and rescission, 20or more properly
cancellation, of the obligation under Article 119121 of the Civil Code. This
Article also provides that the "court shall decree the rescission claimed,
unless there be just cause authorizing the fixing of the period." Montecillo
claims that because Reynes failed to make a demand for payment, and
instead unilaterally revoked Montecillos Deed of Sale, the court has a
just cause to fix the period for payment of the balance of the purchase
price.
These arguments are not persuasive.
Montecillos Deed of Sale states that Montecillo paid, and Reynes
received, the P47,000.00 purchase price on March 1, 1984, the date of
signing of the Deed of Sale. This is clear from the following provision of
the Deed of Sale:
"That I, IGNACIA T. REYNES, x x x for and in consideration of
FORTY SEVEN THOUSAND (P47,000.00) PESOS, Philippine
Currency, to me in hand paid by RIDO MONTECILLO xxx,
receipt of which is hereby acknowledged, have sold,
transferred, and conveyed, unto RIDO MONTECILLO, x x x a
parcel of land x x x."
On its face, Montecillos Deed of Absolute Sale22 appears supported by a
valuable consideration. However, based on the evidence presented by
both Reynes and Montecillo, the trial court found that Montecillo never
paid to Reynes, and Reynes never received from Montecillo,
the P47,000.00 purchase price. There was indisputably a total absence of
consideration contrary to what is stated in Montecillos Deed of Sale. As
pointed out by the trial court
"From the allegations in the pleadings of both parties and the oral
and documentary evidence adduced during the trial, the court is
convinced that the Deed of Sale (Exhibits "1" and "1-A") executed
by plaintiff Ignacia Reynes acknowledged before Notary Public
Ponciano Alvinio is devoid of any consideration. Plaintiff Ignacia
Reynes through the representation of Baudillo Baladjay had
executed a Deed of Sale in favor of defendant on the promise
that the consideration should be paid within one (1) month from
the execution of the Deed of Sale. However, after the lapse of
said period, defendant failed to pay even a single centavo of the
consideration. The answer of the defendant did not allege clearly
why no consideration was paid by him except for the allegation
that he had a balance of only P10,000.00. It turned out during the
pre-trial that what the defendant considered as the consideration
was the amount which he paid for the obligation of Bienvenido
Jayag with the Cebu Ice and Cold Storage Corporation over
which plaintiff Ignacia Reynes did not have a part except that the
subject of the mortgage was constructed on the parcel of land in
question. Plaintiff Ignacia Reynes was not a party to nor privy of
the obligation in favor of the Cebu Ice and Cold Storage
Corporation, the obligation being exclusively of Bienvenido Jayag
and wife who mortgaged their residential house constructed on
the land subject matter of the complaint. The payment by the
defendant to release the residential house from the mortgage is a
 matter between him and Jayag and cannot by implication or
deception be made to appear as an encumbrance upon the land.
"23
Factual findings of the trial court are binding on us, especially if the Court
of Appeals affirms such findings.24 We do not disturb such findings unless
the evidence on record clearly does not support such findings or such
findings are based on a patent misunderstanding of facts, 25 which is not
the case here. Thus, we find no reason to deviate from the findings of
both the trial and appellate courts that no valid consideration supported
Montecillos Deed of Sale.
This is not merely a case of failure to pay the purchase price, as
Montecillo claims, which can only amount to a breach of obligation with
rescission as the proper remedy. What we have here is a purported
contract that lacks a cause - one of the three essential requisites of a
valid contract. Failure to pay the consideration is different from lack of
consideration. The former results in a right to demand the fulfillment or
cancellation of the obligation under an existing valid contract 26 while the
latter prevents the existence of a valid contract
Where the deed of sale states that the purchase price has been paid but
in fact has never been paid, the deed of sale is null and void ab initio for
lack of consideration. This has been the well-settled rule as early
as Ocejo Perez & Co. v. Flores,27 a 1920 case. As subsequently
explained in Mapalo v. Mapalo28
"In our view, therefore, the ruling of this Court in Ocejo Perez &
Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that
case we 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."
The Court reiterated this rule in Vda. De Catindig v. Heirs of Catalina
Roque,29 to wit
"The Appellate Courts finding that the price was not paid or that
the statement in the supposed contracts of sale (Exh. 6 to 26) as
to the payment of the price was simulated fortifies the view that
the alleged sales were void. "If the price is simulated, the sale is
void . . ." (Art. 1471, Civil Code)
A contract of sale is void and produces no effect whatsoever
where the price, which appears thereon as paid, has in fact never
been paid by the purchaser to the vendor (Ocejo, Perez & Co. vs.
Flores and Bas, 40 Phil. 921; Mapalo vs. Mapalo, L-21489, May
19, 1966, 64 O.G. 331, 17 SCRA 114, 122). Such a sale is non-
existent (Borromeo vs. Borromeo, 98 Phil. 432) or cannot be
considered consummated (Cruzado vs. Bustos and Escaler, 34
Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28
SCRA 229)."
Applying this well-entrenched doctrine to the instant case, we rule that
Montecillos Deed of Sale is null and void ab initio for lack of
consideration.
Montecillo asserts that the only issue in controversy is "the mode and/or
manner of payment and/or whether or not payment has been
made."30 Montecillo implies that the mode or manner of payment is
separate from the consideration and does not affect the validity of the
contract. In the recent case of San Miguel Properties Philippines, Inc.
v. Huang,31 we ruled that
"In Navarro v. Sugar Producers Cooperative Marketing
Association, Inc. (1 SCRA 1181 [1961]), we laid down the rule
that the manner of payment of the purchase price is an
essential element before a valid and binding contract of sale
can exist. Although the Civil Code does not expressly state that
the minds of the parties must also meet on the terms or manner
of payment of the price, the same is needed, otherwise there is
no sale. As held in Toyota Shaw, Inc. v. Court of Appeals (244
SCRA 320 [1995]), agreement on the manner of payment goes
into the price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the
price." (Emphasis supplied)
One of the three essential requisites of a valid contract is consent of the
parties on the object and cause of the contract. In a contract of sale, the
parties must agree not only on the price, but also on the manner of
payment of the price. An agreement on the price but a disagreement on
the manner of its payment will not result in consent, thus preventing the
existence of a valid contract for lack of consent. This lack of consent is
separate and distinct from lack of consideration where the contract
states that the price has been paid when in fact it has never been paid.
Reynes expected Montecillo to pay him directly the P47,000.00 purchase
price within one month after the signing of the Deed of Sale. On the other
hand, Montecillo thought that his agreement with Reynes required him to
pay the P47,000.00 purchase price to Cebu Ice Storage to settle Jayags
mortgage debt. Montecillo also acknowledged a balance of P10,000.00 in
favor of Reynes although this amount is not stated in Montecillos Deed of
Sale. Thus, there was no consent, or meeting of the minds, between
Reynes and Montecillo on the manner of payment. This prevented the
existence of a valid contract because of lack of consent.
In summary, Montecillos Deed of Sale is null and void ab initio not only
for lack of consideration, but also for lack of consent. The cancellation of
TCT No. 90805 in the name of Montecillo is in order as there was no valid
contract transferring ownership of the Mabolo Lot from Reynes to
Montecillo.
WHEREFORE, the petition is DENIED and the assailed Decision dated
July 16, 1998 of the Court of Appeals in CA-G.R. CV No. 41349 is
AFFIRMED. Costs against petitioner.
SO ORDERED.
FIRST DIVISION
[G.R. No. 123892. May 21, 2001]
JASMIN SOLER, petitioner, vs. COURT OF APPEALS,
COMMERCIAL BANK OF MANILA, and NIDA
LOPEZ, respondents.
DECISION
PARDO, J.:
Appeal via certiorari from a decision of the Court of
Appeals,[1] declaring that there was no perfected contract
between petitioner Jazmin Soler and The Commercial Bank of
Manila (COMBANK FOR BREVITY, formerly Boston Bank
of the Philippines) for the renovation of its Ermita Branch,
thereby denying her claim for payment of professional fees for
services rendered.
The antecedent facts are as follows:
Petitioner Jazmin Soler is a Fine Arts graduate of the
University of Sto. Tomas, Manila. She is a well known
licensed professional interior designer. In November 1986, her
friend Rosario Pardo asked her to talk to Nida Lopez, who was
manager of the COMBANK Ermita Branch for they were
planning to renovate the branch offices.[2]
Even prior to November 1986, petitioner and Nida Lopez
knew each other because of Rosario Pardo, the latters
sister. During their meeting, petitioner was hesitant to accept
the job because of her many out of town commitments, and
also considering that Ms. Lopez was asking that the designs be
submitted by December 1986, which was such a short notice.
Ms. Lopez insisted, however, because she really wanted
petitioner to do the design for renovation.Petitioner acceded to
the request. Ms. Lopez assured her that she would be
compensated for her services. Petitioner even told Ms. Lopez
that her professional fee was ten thousand pesos (P10,000.00),
to which Ms. Lopez acceded.[3]
During the November 1986 meeting between petitioner
and Ms. Lopez, there were discussions as to what was to be
renovated, which included a provision for a conference room,
a change in the carpeting and wall paper, provisions for
bookshelves, a clerical area in the second floor, dressing up the
kitchen, change of the ceiling and renovation of the tellers
booth. Ms. Lopez again assured petitioner that the bank would
pay her fees.[4]
 After a few days, petitioner requested for the blueprint of
the building so that the proper design, plans and specifications
could be given to Ms. Lopez in time for the board meeting in
December 1986. Petitioner then asked her draftsman Jackie
Barcelon to go to the jobsite to make the proper measurements
using the blue print. Petitioner also did her research on the
designs and individual drawings of what the bank
wanted. Petitioner hired Engineer Ortanez to make the
electrical layout, architects Frison Cruz and De Mesa to do the
drafting. For the services rendered by these individuals,
petitioner paid the engineer P4,000.00, architects Cruz and de
Mesa P5,000.00 and architect Barcelon P6,000.00. Petitioner
also contacted the suppliers of the wallpaper and the sash
makers for their quotation. So come December 1986, the lay
out and the design were submitted to Ms. Lopez. She even told
petitioner that she liked the designs.[5]
Subsequently, petitioner repeatedly demanded payment for
her services but Ms. Lopez just ignored the demands. In
February 1987, by chance petitioner and Ms. Lopez saw each
other in a concert at the Cultural Center of the
Philippines. Petitioner inquired about the payment
for her services, Ms. Lopez curtly replied that she was not
entitled to it because her designs did not conform to the banks
policy of having a standard design, and that there was no
agreement between her and the bank.[6]
To settle the controversy, petitioner referred the matter to
her lawyers, who wrote Ms. Lopez on May 20, 1987,
demanding payment for her professional fees in the amount of
P10,000.00 which Ms. Lopez ignored. Hence, on June 18,
1987, the lawyers wrote Ms. Lopez once again demanding the
return of the blueprint copies petitioner submitted which Ms.
Lopez refused to return.[7]
On October 13, 1987, petitioner filed at the Regional Trial
Court of Pasig, Branch 153 a complaint against COMBANK
and Ms. Lopez for collection of professional fees and
damages.[8]
In its answer, COMBANK stated that there was no
contract between COMBANK and petitioner; [9] that Ms. Lopez
merely invited petitioner to participate in a bid for the
renovation of the COMBANK Ermita Branch; that any
proposal was still subject to the approval of the COMBANKs
head office.[10]
After due trial, on November 19, 1990, the trial court
rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff and against defendants, ordering
defendants jointly and severally, to pay plaintiff the following,
to wit:
1. P15,000.00 representing the actual and compensatory
damages or at least a reasonable compensation for the services
rendered based on a quantum meruit;
2. P5,000.00 as attorneys fees, and P2,000.00 as litigation
expenses;
3. P5,000.00 as exemplary damages; and
4. The cost of suit.
SO ORDERED.[11]
On November 29, 1990, COMBANK, and Ms. Nida
Lopez, filed their notice of appeal. [12] On December 5, 1990, the
trial court ordered[13] the records of the case elevated to the
Court of Appeals.[14]
In the appeal, COMBANK reiterated that there was no
contract between petitioner, Nida Lopez and the bank.
[15]
Whereas, petitioner maintained that there was a perfected
contract between her and the bank which was facilitated
through Nida Lopez. According to petitioner there was an offer
and an acceptance of the service she rendered to the bank. [16]
On October 26, 1995, the Court of Appeals rendered its
decision the relevant portions of which state:
After going over the record of this case, including the
transcribed notes taken during the course of the trial, We are
convinced that the question here is not really whether the
alleged contract purportedly entered into between the plaintiff
and defendant Lopez is enforceable, but whether a contract
even exists between the parties.
Article 1318 of the Civil Code provides 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;
(3) cause of the obligation which is established.
xxx
The defendant bank never gave its imprimatur or consent to
the contract considering that the bidding or the question of
renovating the ceiling of the branch office of defendant bank
was deferred because the commercial bank is for sale. It is
under privatization. xxx
At any rate, we find that the appellee failed to prove the
allegations in her complaint. xxx
WHEREFORE, premises considered, the appealed decision
(dated November 19, 1990) of the Regional Trial Court
(Branch 153) in Pasig (now 55238, is hereby REVERSED. No
pronouncement as to costs.
SO ORDERED.[17]
Hence, this petition.[18]
Petitioner forwards the argument that:
1. The Court of Appeals erred in ruling that there was no
contract between petitioner and respondents, in the
absence of the element of consent;
2. The Court of Appeals erred in ruling that respondents
merely invited petitioner to present her proposal;
3. The Court of Appeals erred in ruling that petitioner
knew that her proposal was still subject to bidding and
approval of the board of directors of the bank;
4. The Court of Appeals erred in reversing the decision of
the trial court.
We find the petition meritorious.
We see that the issues raised boil down to whether or not
there was a perfected contract between petitioner Jazmin Soler
and respondents COMBANK and Nida Lopez, and whether or
not Nida Lopez, the manager of the bank branch, had authority
to bind the bank in the transaction.
The discussions between petitioner and Ms. Lopez was to
the effect that she had authority to engage the services of
petitioner. During their meeting, she even gave petitioner
specifications as to what was to be renovated in the branch
premises and when petitioners requested for the blueprints of
the building, Ms. Lopez supplied the same.
Ms. Lopez was aware that petitioner hired the services of
people to help her come up with the designs for the December,
1986 board meeting of the bank. Ms. Lopez even insisted that
the designs be rushed in time for presentation to the
bank. With all these discussion and transactions, it was
apparent to petitioner that Ms. Lopez indeed had authority to
engage the services of petitioner.
The next issue is whether there was a perfected contract
between petitioner and the Bank.
A contract is a meeting of the minds between two persons
whereby one binds himself to give something or to render
some service to bind himself to give something to render some
service to another for consideration. 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]
A contract undergoes three stages:
(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.[20]
In the case at bar, there was a perfected oral contract.
When Ms. Lopez and petitioner met in November 1986, and
discussed the details of the work, the first stage of the contract
commenced. When they agreed to the payment of the ten
thousand pesos (P10,000.00) as professional fees of petitioner
and that she should give the designs before the December 1986
board meeting of the bank, the second stage of the contract
proceeded, and when finally petitioner gave the designs to Ms.
Lopez, the contract was consummated.
Petitioner believed that once she submitted the designs she
would be paid her professional fees. Ms. Lopez assured
petitioner that she would be paid.
It is familiar doctrine that if a corporation knowingly
permits one of its officers, or any other agent, to act within the
scope of an apparent authority, it holds him out to the public as
possessing the power to do those acts; and thus, the
corporation will, as against anyone who has in good faith dealt
with it through such agent, be estopped from denying the
agents authority.[21]
Also, petitioner may be paid on the basis of quantum
meruit. It is essential for the proper operation of the principle
that there is an acceptance of the benefits by one sought to be
charged for the services rendered under circumstances as
reasonably to notify him that the lawyer performing the task
was expecting to be paid compensation therefor. The doctrine
of quantum meruit is a device to prevent undue enrichment
based on the equitable postulate that it is unjust for a person to
retain benefit without paying for it.[22]
We note that the designs petitioner submitted to Ms. Lopez
were not returned. Ms. Lopez, an officer of the bank as branch
manager used such designs for presentation to the board of the
bank. Thus, the designs were in fact useful to Ms. Lopez for
she did not appear to the board without any designs at the time
of the deadline set by the board.
IN VIEW WHEREOF, the decision appealed from is
REVERSED and SET ASIDE.
The decision of the trial court [23] is REVIVED,
REINSTATED and AFFIRMED.
No costs.
SO ORDERED.
FIRST DIVISION
[G.R. No. 131726. May 7, 2002]
YOLANDA PALATTAO, petitioner, vs. THE COURT OF
APPEALS, HON. ANTONIO J. FINEZA, as
Presiding Judge of the Regional Trial Court of
Caloocan City, Branch 131 and MARCELO
CO, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of
Court seeking to set aside the August 29, 1997 decision [1] and
the November 28, 1997 resolution[2] of the Court of
Appeals[3] in CA-G.R. SP No. 40031, affirming the
decision[4] of the Regional Trial Court of Caloocan City, Branch
131, in Civil Case No. C-17033 which reversed the
Decision[5] of the Metropolitan Trial Court of Caloocan, Branch
53, in an ejectment suit docketed as Civil Case No. 21755.
The antecedent facts are as follows: Petitioner Yolanda
Palattao entered into a lease contract whereby she leased to
private respondent a house and a 490-square-meter lot located
in 101 Caimito Road, Caloocan City, covered by Transfer
Certificate of Title No. 247536 and registered in the name of
petitioner. The duration of the lease contract was for three
years, commencing from January 1, 1991, to December 31,
1993, renewable at the option of the parties.The agreed
monthly rental was P7,500.00 for the first year; P8,000.00 for
the second year; and P8,500.00 for the third year. The contract
gave respondent lessee the first option to purchase the leased
property.[6]
During the last year of the contract, the parties began
negotiations for the sale of the leased premises to private
respondent. In a letter dated April 2, 1993, petitioner offered to
sell to private respondent 413.28 square meters of the leased
lot at P7,800.00 per square meter, or for the total amount of
P3,223,548.00.[7] Private respondent replied on April 15, 1993
wherein he informed petitioner that he shall definitely exercise
[his] option [to buy] the leased property.[8] Private respondent,
however, manifested his desire to buy the whole 490-square-
meter leased premises and inquired from petitioner the reason
why only 413.28 square meters of the leased lot were being
offered for sale.In a letter dated November 6, 1993, petitioner
made a final offer to sell the lot at P7,500.00 per square meter
with a downpayment of 50% upon the signing of the contract
of conditional sale, the balance payable in one year with a
monthly lease/interest payment of P14,000.00 which must be
paid on or before the fifth day of every month that the balance
is still outstanding.[9] On November 7, 1993, private respondent
accepted petitioners offer and reiterated his request for
clarification as to the size of the lot for sale. [10] Petitioner
acknowledged private respondents acceptance of the offer in
his letter dated November 10, 1993.
Petitioner gave private respondent on or before November
24, 1993, within which to pay the 50% downpayment in cash
or managers check. Petitioner stressed that failure to pay the
downpayment on the stipulated period will enable petitioner to
freely sell her property to others. Petitioner likewise notified
private respondent that she is no longer renewing the lease
agreement upon its expiration on December 31, 1993.[11]
Private respondent did not accept the terms proposed by
petitioner. Neither was there any documents of sale nor
payment by private respondent of the required
downpayment. Private respondent wrote a letter to petitioner
on November 29, 1993 manifesting his intention to exercise
his option to renew their lease contract for another three years,
starting January 1, 1994 to December 31, 1996. [12] This was
rejected by petitioner, reiterating that she was no longer
renewing the lease. Petitioner demanded that private
respondent vacate the premises, but the latter refused.
Hence, private respondent filed with the Regional Trial
Court of Caloocan, Branch 127, a case for specific
performance, docketed as Civil Case No. 16287, [13] seeking to
compel petitioner to sell to him the leased property.Private
respondent further prayed for the issuance of a writ of
preliminary injunction to prevent petitioner from filing an
ejectment case upon the expiration of the lease contract on
December 31, 1993.
During the proceedings in the specific performance case,
the parties agreed to maintain the status quo. After they failed
to reach an amicable settlement, petitioner filed the instant
ejectment case before the Metropolitan Trial Court of
Caloocan City, Branch 53.[14] In his answer,[15] private
respondent alleged that he refused to vacate the leased
premises because there was a perfected contract of sale of the
leased property between him and petitioner.Private respondent
argued that he did not abandon his option to buy the leased
property and that his proposal to renew the lease was but an
alternative proposal to the sale. He further contended that the
filing of the ejectment case violated their agreement to
maintain the status quo.
On July 28, 1995, the Metropolitan Trial Court rendered a
decision in favor of petitioner. The dispositive portion thereof
states:
WHEREFORE, judgment is hereby rendered in favor of
the plaintiff and against the defendant, ordering the defendant
and all persons claiming right under him to pay the plaintiff as
follows:
1. P12,000.00 per month representing reasonable
monthly rental from January 1, 1994 and months
thereafter until defendants shall vacate the subject
premises;
2. P10,000.00 representing attorneys fee;
 3. To pay the cost of suit.
SO ORDERED.[16]
On appeal, the Regional Trial Court reversed the assailed
decision, disposing as follows:
WHEREFORE, in view of all the foregoing, the assailed
decision of the Metropolitan Trial Court, Branch 53, this City,
rendered on July 28, 1995, is hereby REVERSED and SET
ASIDE, with costs de officio.
SO ORDERED.[17]
Aggrieved, petitioner filed a petition for review with the
Court of Appeals, which dismissed the petition. Likewise, the
motion for reconsideration was denied on August 29,
1997. Hence, the instant petition anchored upon the following
grounds:
I Court
THE COURT OF APPEALS AND RTC, CALOOCAN CITY,
BRANCH 131, ERRED IN DECLARING THAT
PETITIONER IS GUILTY OF ESTOPPEL IN FILING AN
EJECTMENT CASE AGAINST RESPONDENT CO.
II
THE COURT OF APPEALS AND RTC, CALOOCAN CITY,
BRANCH 131, ERRED IN FINDING THAT AN
INJUNCTIVE SUIT WILL BAR THE FILING OF
EJECTMENT CASE AGAINST RESPONDENT CO.
III
THE RTC, CALOOCAN CITY, BRANCH 131, ERRED IN
DECLARING THAT THERE WAS A PERFECTED
CONTRACT OF SALE BETWEEN THE PARTIES OVER
THE LEASED PROPERTY.[18]
The petition is impressed with merit.
The Court of Appeals ruled that petitioner was estopped
from filing the instant ejectment suit against private respondent
by the alleged status quo agreement reached in the specific
performance case filed by private respondent against
petitioner. A reading, however, of the transcript of
stenographic notes taken during the January 21, 1994 hearing
discloses that the agreement to maintain the status
quo pertained only to the duration of the negotiation for an
amicable settlement and was not intended to be operative until
the final disposition of the specific performance case. Thus:
xxxxxxxxx
Before we go into the prayer for preliminary injunction and of the
merit of the case I want to see if I can make the parties settle their
differences.
Atty. Siapan
We will in the meantime maintain the status quo on the matter
pending further negotiation.
Court
As a matter of injunction, are you willing to maintain a status
quo muna [?]
Atty. Mendez
 Yes, your Honor.
Court
How about Atty. Uy are you willing?
Atty. Uy
Yes, your Honor.
Court
I will not issue any injunction but there will be a status quo and we
will concentrate our efforts on letting the parties to (sic) negotiate
and enter into an agreement.[19]
xxxxxxxxx
I will give you the same facts of the case. I want to settle this and not
go into trial because in due time I will not finish the case, my stay
here is only Acting Presiding Judge and there are other judges
nominated for this sala and once the judge will be (sic) appointed
then I go, let us get advantage of settling the matter. I will have your
gentlemans agreement that there will be no adversarial attitude
among you will (sic) never arrive at any agreement.
Atty. Siapan
In the meantime, we will move for a resetting of this case your
Honor.
Court
Anyway, this is a gentlemans agreement that there will be no new
movement but the status quo will be maintained.
Atty. Siapan, Atty. Mendez & Atty. Uy.
Yes, your Honor. (simultaneously (sic) in saying)[20]
The foregoing agreement to maintain the status
quo pending negotiations was noted by the trial court in its
January 21, 1994 Order postponing the hearing to enable the
parties to arrive at an amicable settlement, to wit:
Upon agreement of the parties herein for postponement of
todays schedule as there might be some possibility of settling
the claims herein, let the hearing today be cancelled.
In the meantime this case is set for hearing on February 28,
1994 at 8:30 a.m., should the parties not arrive at any amicable
settlement.[21]
It is beyond cavil therefore that the preservation of
the status quo agreed upon by the parties applied only during
the period of negotiations for an amicable settlement and
cannot be construed to be effective for the duration of the
pendency of the specific performance case. It is a settled rule
that injunction suits and specific performance cases, inter alia,
will not preclude the filing of, or abate, an ejectment
case. Unlawful detainer and forcible entry suits under Rule 70
are designed to summarily restore physical possession of a
piece of land or building to one who has been illegally or
forcibly deprived thereof, without prejudice to the settlement
of the parties' opposing claims of juridical possession in
appropriate proceedings. It has been held that these actions are
intended to avoid disruption of public order by those who
would take the law in their hands purportedly to enforce their
claimed right of possession. In these cases, the issue is pure
physical or de facto possession, and pronouncements made on
questions of ownership are provisional in nature. [22]
In Wilmon Auto Supply Corporation, et al., v. Court of
Appeals, et al.,[23] the issue of whether or not an ejectment case
based on expiration of lease contract should be abated by an
action to enforce the right of preemption or prior purchase of
the leased premises was resolved in the negative. The Court
outlined the following precedents:
1. Injunction suits instituted in the RTC by defendants in ejectment
actions in the municipal trial courts or other courts of the first
level (Nacorda v. Yatco, 17 SCRA 920 [1966]) do not abate the
latter; and neither do proceedings on consignation of rentals
(Lim Si v. Lim, 98 Phil. 868 [1956], citing Pue, et al. v.
Gonzales, 87 Phil. 81 [1950]).
2. An "accion publiciana" does not suspend an ejectment suit
against the plaintiff in the former (Ramirez v. Bleza, 106 SCRA
187 [1981]).
3. A "writ of possession case" where ownership is concededly the
principal issue before the Regional Trial Court does not
preclude nor bar the execution of the judgment in an unlawful
detainer suit where the only issue involved is the material
possession or possession de facto of the premises (Heirs of F.
Guballa, Sr. v. C.A., et al.; etc., 168 SCRA 518 [1988]).
4. An action for quieting of title to property is not a bar to an
ejectment suit involving the same property (Quimpo v. de la
Victoria, 46 SCRA 139 [1972]).
5. Suits for specific performance with damages do not affect
ejectment actions (e.g., to compel renewal of a lease contract)
(Desamito v. Cuyegkeng, 18 SCRA 1184 [1966]; Rosales v.
CFI, 154 SCRA 153 [1987]; Commander Realty, Inc. v. C.A.,
161 SCRA 264 [1988]).
6. An action for reformation of instrument (e.g., from deed of
absolute sale to one of sale with pacto de retro) does not
suspend an ejectment suit between the same parties (Judith v.
Abragan, 66 SCRA 600 [1975]).
7. An action for reconveyance of property or "accion
reivindicatoria" also has no effect on ejectment suits regarding
the same property (Del Rosario v. Jimenez, 8 SCRA 549 [1963];
Salinas v. Navarro, 126 SCRA 167; De la Cruz v. C.A., 133
SCRA 520 [1984]); Drilon v. Gaurana, 149 SCRA 352 [1987];
Ching v. Malaya, 153 SCRA 412 [1987]; Philippine Feeds
Milling Co., Inc. v. C.A., 174 SCRA 108; Dante v. Sison, 174
SCRA 517 [1989]; Guzman v. C.A. [annulment of sale and
reconveyance], 177 SCRA 604 [1989]; Demamay v. C.A., 186
SCRA 608 [1990]; Leopoldo Sy v. C.A., et al., [annulment of
sale and reconveyance], G.R. No. 95818, Aug. 2, 1991).
8. Neither do suits for annulment of sale, or title, or document
affecting property operate to abate ejectment actions respecting
the same property (Salinas v. Navarro [annulment of deed of
sale with assumption of mortgage and/or to declare the same an
equitable mortgage], 126 SCRA 167 [1983]; Ang Ping v. RTC
[annulment of sale and title], 154 SCRA 153 [1987]; Caparros v.
C.A. [annulment of title], 170 SCRA 758 [1989]; Dante v. Sison
[annulment of sale with damages], 174 SCRA 517; Galgala v.
Benguet Consolidated, Inc. [annulment of document], 177
SCRA 288 [1989]).
The underlying reasons for the above ruling were that the
actions in the Regional Trial Court did not involve physical
or de facto possession, and, on not a few occasions, that the
case in the Regional Trial Court was merely a ploy to delay
disposition of the ejectment proceeding, or that the issues
presented in the former could quite as easily be set up as
defenses in the ejectment action and there resolved.
Only in rare instances is suspension allowed to await the
outcome of the pending civil action. In Wilmon, the Court
recognized that Vda. De Legaspi v. Avendao[24] was an
exception to the general rule against suspension of an
ejectment proceeding.[25] Thus:
x x x [A]s regards the seemingly contrary ruling in Vda. de
Legaspi v. Avendano, 89 SCRA 135 (1977), this Court
observed in Salinas v. Navarro, 126 SCRA 167, 172-173
(1983), that the exception to the rule in this case of Vda. de
Legaspi is based on strong reasons of equity not found in the
present petition. The right of the petitioner is not so seriously
placed in issue in the annulment case as to warrant a deviation,
on equitable grounds, from the imperative nature of the rule. In
the Vda. de Legaspi case, execution of the decision in the
ejectment case would also have meant demolition of the
premises, a factor not present in this petition.
In the case at bar, the continued occupation by private
respondent of the leased premises is conditioned upon his right
to acquire ownership over said property. The factual milieu
obtaining here, however, hardly falls within the aforecited
exception as the resolution of the ejectment suit will not result
in the demolition of the leased premises, as in the case of Vda.
De Legaspi v. Avendao. Verily, private respondent failed to
show strong reasons of equity to sustain the suspension or
dismissal of the ejectment case. Argumentum a simili valet in
lege. Precedents are helpful in deciding cases when they are on
all fours or at least substantially identical with previous
litigations.[26] Faced with the same scenario on which the
general rule is founded, and finding no reason to deviate
therefrom, the Court adheres to the settled jurisprudence that
suits involving ownership may not be successfully pleaded in
abatement of an action for ejectment.
Contracts that are consensual in nature, like a contract of
sale, are perfected upon mere meeting of the minds. Once there
is concurrence between the offer and the acceptance upon the
subject matter, consideration, and terms of payment, a contract
is produced. The offer must be certain. To convert the offer
into a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the
proposal. A qualified acceptance, or one that involves a new
proposal, constitutes a counter-offer and is a rejection of the
original offer. Consequently, when something is desired which
is not exactly what is proposed in the offer, such acceptance is
not sufficient to generate consent because any modification or
variation from the terms of the offer annuls the offer.[27]
In the case at bar, while it is true that private respondent
informed petitioner that he is accepting the latters offer to sell
the leased property, it appears that they did not reach an
agreement as to the extent of the lot subject of the proposed
sale. This is evident from the April 15, 1993 reply-letter of
private respondent to petitioner, to wit:
I would like to inform you that I shall definitely exercise my
option as embodied in Provision F (First Option) of our
Contract of Lease dated December 21, 1990. As per
agreement, my first option covers the 490 square meters site
which I am currently leasing from you at 101 Caimito Road,
Caloocan City. Specifically, your Transfer Certificate of Title
#247536 delineates the property sizes as 492 square meters.
Your offer, however, states only 413.28 square meters are for
sale to me. I trust that this is merely an oversight on your
part. Notwithstanding the rumors to the effect that part of the
property have already been sold to other parties, I would like
to believe that you still retain absolute ownership over the
entire property covered by my Contract of Lease. Kindly
enlighten me on this matter so that we can proceed with the
negotiations for the sale of your property to me. [28]
Likewise, in his November 7, 1993 reply-letter, private
respondent stated that:
While it is true that you first offered your property for sale to
me last April 14, 1993, it is also equally true that you only
correspond with me on this matter again on October 27,
1993. I answered your April 14 offer with a registered mail on
April 15, 1993. In it, I stated that I am definitely exercising my
first option to purchase your property in accordance with
Provisions F of our Contract of Lease dated December 21,
1990. Likewise, I requested you to explain the discrepancy
between the size of the property being offered for sale (413.28
square meters) as against the size stated in my option which is
492 square meters. However, I did not get any reply from you
on this matter. Hence the negotiations got stalled. If anybody
should be blamed for the prolonged negotiation, then surely it
is not all mine alone.[29]
The foregoing letters reveal that private respondent did not
give his consent to buy only 413.28 square meters of the leased
lot, as he desired to purchase the whole 490 square-meter-
leased premises which, however, was not what was exactly
proposed in petitioners offer. Clearly, therefore, private
respondents acceptance of petitioners offer was not absolute,
and will consequently not generate consent that would perfect
a contract.
Even assuming that the parties reached an agreement as to
the size of the lot subject of the sale, the records show that
there was subsequently a mutual withdrawal from the contract.
[30]
This is so because in the November 10, 1993 letter of
petitioner, she gave private respondent until November 24,
1993 to pay 50% of the purchase price, with the caveat that
failure to do so would authorize her to sell to others the leased
premises. The period within which to pay the downpayment is
a new term or a counter-offer in the contract which needs
acceptance by private respondent. The latter, however, failed to
pay said downpayment, or to at least manifest his conformity
to the period given by petitioner. Neither did private
respondent ask for an extension nor insist on the sale of the
subject lot. What appears in the record is private respondents
November 29, 1993 letter informing petitioner that he shall
exercise or avail of the option to renew their lease contract for
another three years, starting January 1, 1994 to December 31,
1996. Evidently, there was a subsequent mutual backing out
from the contract of sale. Hence, private respondent cannot
compel petitioner to sell the leased property to him.
Considering that the lease contract was not renewed after
its expiration on December 31, 1991, private respondent has
no more right to continue occupying the leased
premises. Consequently, his ejectment therefrom must be
sustained.
As to the monthly rental to be paid by private respondent
from the expiration of their contract of lease until the premises
is vacated, we find that the P12,000.00 awarded by the
Metropolitan Trial Court must be reduced to P8,500.00, it
being the highest amount of monthly rental stated in the lease
contract.
WHEREFORE, the petition is GRANTED. The August
29, 1997 decision and the November 28, 1997 resolution of the
Court of Appeals in CA-G.R. SP No. 40031 are SET
ASIDE. The Decision of the Metropolitan Trial Court of
Caloocan, Branch 53, in Civil Case No. 21755 is
REINSTATED subject to the modification that the monthly
rental to be paid by private respondent from the date of the
termination of the lease contract until the leased premises is
vacated is reduced to P8,500.00.
SO ORDERED.
FIRST DIVISION
 [G.R. No. 128690. January 21, 1999] however, that such right shall be exercised by ABS-CBN from
the actual offer in writing.

Viva, through defendant Del Rosario, offered ABS-CBN,

ABS-CBN BROADCASTING
CORPORATION, petitioners, vs. HONORABLE
COURT OF APPEALS, REPUBLIC
BROADCASTING CORP., VIVA
PRODUCTIONS, INC., and VICENTE DEL
ROSARIO, respondents.
DECISION
DAVIDE, JR., C.J.:
In this petition for review on certiorari, petitioners ABS-CBN
Broadcasting Corp. (hereinafter ABS-CBN) seeks to reverse and set
aside the decision[1] of 31 October 1996 and the resolution [2] of 10
March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The
former affirmed with modification the decision[3] of 28 April 1993 of
the Regional Trial Court (RTC) of Quezon City, Branch 80, in Civil
Case No. Q-12309. The latter denied the motion to reconsider the
decision of 31 October 1996.
The antecedents, as found by the RTC and adopted by the Court of
Appeals, are as follows:
In 1990, ABS-CBN and VIVA executed a Film Exhibition
Agreement (Exh. A) whereby Viva gave ABS-CBN an
exclusive right to exhibit some Viva films. Sometime in
December 1991, in accordance with paragraph 2.4 [sic] of said
agreement stating that-
1.4 ABS-CBN shall have the right of first refusal to the next
twenty-four (24) Viva films for TV telecast under such terms
as may be agreed upon by the parties hereto, provided,
through its vice-president Charo Santos-Concio, a list of three
(3) film packages (36 title) from which ABS-CBN may
exercise its right of first refusal under the afore-said agreement
(Exhs. 1 par. 2, 2, 2-A and 2-B Viva). ABS-CBN, however
through Mrs. Concio, can tick off only ten (10) titles (from the
list) we can purchase (Exh. 3 Viva) and therefore did not
accept said list (TSN, June 8, 1992, pp. 9-10). The titles ticked
off by Mrs. Concio are not the subject of the case at bar except
the film Maging Sino Ka Man.
For further enlightenment, this rejection letter dated January
06, 1992 (Exh 3 Viva) is hereby quoted:
6 January 1992
Dear Vic,
This is not a very formal business letter I am writing to you as
I would like to express my difficulty in recommending the
purchase of the three film packages you are offering ABS-
CBN.
From among the three packages I can only tick off 10 titles we
can purchase. Please see attached. I hope you will understand
my position. Most of the action pictures in the list do not have
big action stars in the cast. They are not for primetime. In line
with this I wish to mention that I have not scheduled for
telecast several action pictures in our very first contract
because of the cheap production value of these movies as well
as the lack of big action stars. As a film producer, I am sure
you understand what I am trying to say as Viva produces only
big action pictures.
In fact, I would like to request two (2) additional runs for these
movies as I can only schedule them in out non-primetime
slots. We have to cover the amount that was paid for these
movies because as you very well know that non-primetime
advertising rates are very low. These are the unaired titles in
the first contract.
1. Kontra Persa [sic]
2. Raider Platoon
3. Underground guerillas
4. Tiger Command
5. Boy de Sabog
6. lady Commando
7. Batang Matadero
8. Rebelyon
I hope you will consider this request of mine.
The other dramatic films have been offered to us before and
have been rejected because of the ruling of MTRCB to have
them aired at 9:00 p.m. due to their very adult themes.
As for the 10 titles I have choosen [sic] from the 3 packages
please consider including all the other Viva movies produced
last year, I have quite an attractive offer to make.
Thanking you and with my warmest regards.
(Signed)
Charo Santos-Concio
On February 27, 1992, defendant Del Rosario approached
ABS-CBNs Ms. Concio, with a list consisting of 52 original
movie titles (i.e., not yet aired on television) including the 14
titles subject of the present case, as well as 104 re-runs
(previously aired on television) from which ABS-CBN may
choose another 52 titles, as a total of 156 titles, proposing to
sell to ABS-CBN airing rights over this package of 52
originals and 52 re-runs for P60,000,000.00 of
which P30,000,000.00 will be in cash and P30,000,000.00
worth of television spots (Exh. 4 to 4-C Viva; 9 Viva).
On April 2, 1992, defendant Del Rosario and ABS-CBNs
general manager, Eugenio Lopez III, met at the Tamarind Grill
Restaurant in Quezon City to discuss the package proposal of
VIVA. What transpired in that lunch meeting is the subject of
conflicting versions. Mr. Lopez testified that he and Mr. Del
Rosario allegedly agreed that ABS-CBN was granted exclusive
film rights to fourteen (14) films for a total consideration
of P36 million; that he allegedly put this agreement as to the
price and number of films in a napkin and signed it and gave it
to Mr. Del Rosario (Exh. D; TSN, pp. 24-26, 77-78, June 8,
1992). On the other hand. Del Rosario denied having made any
agreement with Lopez regarding the 14 Viva films; denied the
existence of a napkin in which Lopez wrote something; and
insisted that what he and Lopez discussed at the lunch meeting
was Vivas film package offer of 104 films (52 originals and 52
re-runs) for a total price of P60 million. Mr. Lopez promising
[sic]to make a counter proposal which came in the form of a
proposal contract Annex C of the complaint (Exh. 1 Viva; Exh
C ABS-CBN).
On April 06, 1992, Del Rosario and Mr. Graciano Gozon of
RBS Senior vice-president for Finance discussed the terms and
conditions of Vivas offer to sell the 104 films, after the
rejection of the same package by ABS-CBN.
On April 07, 1992, defendant Del Rosario received through his
secretary , a handwritten note from Ms. Concio, (Exh. 5 Viva),
which reads: Heres the draft of the contract. I hope you find
everything in order, to which was attached a draft exhibition
agreement (Exh. C ABS-CBN; Exh. 9 Viva p. 3) a counter-
proposal covering 53 films, 52 of which came from the list
sent by defendant Del Rosario and one film was added by Ms.
Concio, for a consideration of P35 million. Exhibit C provides
that ABS-CBN is granted film rights to 53 films and contains a
right of first refusal to 1992 Viva Films. The said counter
proposal was however rejected by Vivas Board of Directors [in
the] evening of the same day, April 7, 1992, as Viva would not
sell anything less than the package of 104 films for P60
million pesos (Exh. 9 Viva), and such rejection was relayed to
Ms. Concio.
On April 29, 1992, after the rejection of ABS-CBN and
following several negotiations and meetings defendant Del
Rosario and Vivas President Teresita Cruz, in consideration
of P60 million, signed a letter of agreement dated April 24,
1992, granting RBS the exclusive right to air 104 Viva-
produced and/or acquired films (Exh. 7-A - RBS; Exh. 4 RBS)
including the fourteen (14) films subject of the present case. [4]
On 27 May 1992, ABS-CBN filed before the RTC a complaint for
specific performance with a prayer for a writ of preliminary injunction
and/or temporary restraining order against private respondents
Republic Broadcasting Corporation[5] (hereafter RBS), Viva Production
(hereafter VIVA), and Vicente del Rosario. The complaint was
docketed as Civil Case No. Q-92-12309.
On 28 May 1992, the RTC issued a temporary restraining
order[6] enjoining private respondents from proceeding with the airing,
broadcasting, and televising of the fourteen VIVA films subject of the
controversy, starting with the film Maging Sino Ka Man, which was
scheduled to be shown on private respondent RBS channel 7 at seven
oclock in the evening of said date.
On 17 June 1992, after appropriate proceedings, the RTC issued
an order[7] directing the issuance of a writ of preliminary injunction
upon ABS-CBNs posting of a P35 million bond. ABS-CBN moved for
the reduction of the bond,[8] while private respondents moved for
reconsideration of the order and offered to put up a counterbond.[9]
In the meantime, private respondents filed separate answer with
counterclaim.[10] RBS also set up a cross-claim against VIVA.
On 3 August 1992, the RTC issued an order[11] dissolving the writ
of preliminary injunction upon the posting by RBS of a P30 million
counterbond to answer for whatever damages ABS-CBN might suffer
by virtue of such dissolution. However, it reduced petitioners
injunction bond to P15 million as a condition precedent for the
reinstatement of the writ of preliminary injunction should private
respondents be unable to post a counterbond.
At the pre-trial[12] on 6 August 1992, the parties upon suggestion of
the court, agreed to explore the possibility of an amicable
settlement. In the meantime, RBS prayed for and was granted
reasonable time within which to put up a P30 million counterbond in
the event that no settlement would be reached.
As the parties failed to enter into an amicable settlement, RBS
posted on 1 October 1992 a counterbond, which the RTC approved in
its Order of 15 October 1992.[13]
On 19 October 1992, ABS-CBN filed a motion for
reconsideration[14] of the 3 August and 15 October 1992 Orders, which
RBS opposed.[15]
On 29 October, the RTC conducted a pre-trial.[16]
Pending resolution of its motion for reconsideration, ABS-CBN
filed with the Court of Appeals a petition [17] challenging the RTCs
Order of 3 August and 15 October 1992 and praying for the issuance
of a writ of preliminary injunction to enjoin the RTC from enforcing
said orders. The case was docketed as CA-G.R. SP No. 29300.
On 3 November 1992, the Court of Appeals issued a temporary
restraining order[18] to enjoin the airing, broadcasting, and televising of
any or all of the films involved in the controversy.
 On 18 December 1992, the Court of Appeals promulgated a
decision[19] dismissing the petition in CA-G.R. SP No. 29300 for being
premature. ABS-CBN challenged the dismissal in a petition for review
filed with this Court on 19 January 1993, which was docketed s G.R.
No. 108363.
In the meantime the RTC received the evidence for the parties in
Civil Case No. Q-92-12309. Thereafter, on 28 April 1993, it rendered a
decision[20] in favor of RBS and VIVA and against ABS-CBN
disposing as follows:
WHEREFORE, under cool reflection and prescinding from the
foregoing, judgment is rendered in favor of defendants and
against the plaintiff.
(1) The complaint is hereby dismissed;
(2) Plaintiff ABS-CBN is ordered to pay defendant RBS the
following:
a) P107,727.00 the amount of premium paid by RBS to the
surety which issued defendants RBSs bond to lift the
injunction;
b) P191,843.00 for the amount of print advertisement for
Maging Sino Ka Man in various newspapers;
c) Attorneys fees in the amount of P1 million;
d) P5 million as and by way of moral damages;
e) P5 million as and by way of exemplary damages;
(3) For the defendant VIVA, plaintiff ABS-CBN is ordered to
pay P212,000.00 by way of reasonable attorneys fees.
(4) The cross-claim of defendant RBS against defendant VIVA is
dismissed.
(5) Plaintiff to pay the costs.
According to the RTC, there was no meeting of minds on the price
and terms of the offer. The alleged agreement between Lopez III and
Del Rosario was subject to the approval of the VIVA Board of
Directors, and said agreement was disapproved during the meeting of
the Board on 7 April 1992. Hence, there was no basis for ABS-CBNs
demand that VIVA signed the 1992 Film Exhibition
Agreement. Furthermore, the right of first refusal under the 1990 Film
Exhibition Agreement had previously been exercised per Ms. Concios
letter to Del Rosario ticking off ten titles acceptable to them, which
would have made the 1992 agreement an entirely new contract.
On 21 June 1993, this Court denied[21] ABS-CBNs petition for
review in G.R. No. 108363, as no reversible error was committed by
the Court of Appeals in its challenged decision and the case had
become moot and academic in view of the dismissal of the main action
by the court a quo in its decision of 28 April 1993.
Aggrieved by the RTCs decision, ABS-CBN appealed to the Court
of Appeals claiming that there was a perfected contract between ABS-
CBN and VIVA granting ABS-CBN the exclusive right to exhibit the
subject films.Private respondents VIVA and Del Rosario also appealed
seeking moral and exemplary damages and additional attorneys fees.
In its decision of 31 October 1996, the Court of Appeals agreed
with the RTC that the contract between ABS-CBN and VIVA had not
been perfected, absent the approval by the VIVA Board of Directors of
whatever Del Rosario, its agent, might have agreed with Lopez
III. The appellate court did not even believe ABS-CBNs evidence that
Lopez III actually wrote down such an agreement on a napkin, as the
same was never produced in court. It likewise rejected ABS-CBNs
insistence on its right of first refusal and ratiocinated as follows:
As regards the matter of right of first refusal, it may be true
that a Film Exhibition Agreement was entered into between
Appellant ABS-CBN and appellant VIVA under Exhibit A in
1990 and that parag. 1.4 thereof provides:
1.4 ABS-CBN shall have the right of first refusal to the next
twenty-four (24) VIVA films for TV telecast under such terms
as may be agreed upon by the parties hereto, provided,
however, that such right shall be exercised by ABS-CBN
within a period of fifteen (15) days from the actual offer in
writing (Records, p. 14).
[H]owever, it is very clear that said right of first refusal in
favor of ABS-CBN shall still be subjected to such terms as
may be agreed upon by the parties thereto, and that the said
right shall be exercised by ABS-CBN within fifteen (15) days
from the actual offer in writing.
Said parag. 1.4 of the agreement Exhibit A on the right of first
refusal did not fix the price of the film right to the twenty-four
(24) films, nor did it specify the terms thereof. The same are
still left to be agreed upon by the parties.
In the instant case, ABS-CBNs letter of rejection Exhibit 3
(Records, p. 89) stated that it can only tick off ten (10) films,
and the draft contract Exhibit C accepted only fourteen (14)
films, while parag. 1.4 of Exhibit A speaks of the next twenty-
four (24) films.
The offer of VIVA was sometime in December 1991, (Exhibits
2, 2-A, 2-B; Records, pp. 86-88; Decision, p. 11, Records, p.
1150), when the first list of VIVA films was sent by Mr. Del
Rosario to ABS-CBN. The Vice President of ABS-CBN, Mrs.
Charo Santos-Concio, sent a letter dated January 6, 1992
(Exhibit 3, Records, p. 89) where ABS-CBN exercised its right
of refusal by rejecting the offer of VIVA. As aptly observed by
the trial court, with the said letter of Mrs. Concio of January 6,
1992, ABS-CBN had lost its right of first refusal. And even if
We reckon the fifteen (15) day period from February 27, 1992
(Exhibit 4 to 4-C) when another list was sent to ABS-CBN
after the letter of Mrs. Concio, still the fifteen (15) day period
within which ABS-CBN shall exercise its right of first refusal
has already expired.[22]
Accordingly, respondent court sustained the award factual
damages consisting in the cost of print advertisements and the
premium payments for the counterbond, there being adequate proof of
the pecuniary loss which RBS has suffered as a result of the filing of
the complaint by ABS-CBN. As to the award of moral damages, the
Court of Appeals found reasonable basis therefor, holding that RBSs
reputation was debased by the filing of the complaint in Civil Case No.
Q-92-12309 and by the non-showing of the film Maging Sino Ka
Man. Respondent court also held that exemplary damages were
correctly imposed by way of example or correction for the public good
in view of the filing of the complaint despite petitioners knowledge
that the contract with VIVA had not been perfected. It also upheld the
award of attorneys fees, reasoning that with ABS-CBNs act of
instituting Civil Case No. Q-92-12309, RBS was unnecessarily forced
to litigate. The appellate court, however, reduced the awards of moral
damages to P 2 million, exemplary damages to P2 million, and
attorneys fees to P500,000.00.
On the other hand, respondent Court of Appeals denied VIVA and
Del Rosarios appeal because it was RBS and not VIVA which was
actually prejudiced when the complaint was filed by ABS-CBN.
Its motion for reconsideration having been denied, ABS-CBN
filed the petition in this case, contending that the Court of Appeals
gravely erred in
I
RULING THAT THERE WAS NO PERFECTED CONTRACT
BETWEEN PETITIONER AND PRIVATE RESPONDENT
VIVA NOTWITHSTANDING PREPONFERANCE OF
EVIDENCE ADDUCED BY PETITIONER TO THE
CONTRARY.
II
IN AWARDING ACTUAL AND COMPENSATORY
DAMAGES IN FAVOR OF PRIVATE RESPONDENT RBS.
III
IN AWARDING MORAL AND EXEMPLARY DAMAGES IN
FAVOR OF PRIVATE RESPONDENT RBS.
IV
IN AWARDING ATORNEYS FEES OF RBS.
 ABS-CBN claims that it had yet to fully exercise its right of first
refusal over twenty-four titles under the 1990 Film Exhibition
Agreement, as it had chosen only ten titles from the first list. It insists
that we give credence to Lopezs testimony that he and Del Rosario met
at the Tamarind Grill Restaurant, discussed the terms and conditions of
the second list (the 1992 Film Exhibition Agreement) and upon
agreement thereon, wrote the same on a paper napkin. It also asserts
that the contract has already been effective, as the elements thereof,
namely, consent, object, and consideration were established. It then
concludes that the Court of Appeals pronouncements were not
supported by law and jurisprudence, as per our decision of 1 December
1995 in Limketkai Sons Milling, Inc. v. Court of Appeals,[23] which
cited Toyota Shaw, Inc. v. Court of Appeals;[24] Ang Yu Asuncion v.
Court of Appeals,[25] and Villonco Realty Company v. Bormaheco, Inc.
[26]
Anent the actual damages awarded to RBS, ABS-CBN disavows
liability therefor. RBS spent for the premium on the counterbond of its
own volition in order to negate the injunction issued by the trial court
after the parties had ventilated their respective positions during the
hearings for the purpose. The filing of the counterbond was an option
available to RBS, but it can hardly be argued that ABS-CBN
compelled RBS to incur such expense. Besides, RBS had another
available option, i.e., move for the dissolution of the injunction; or if it
was determined to put up a counterbond, it could have presented a
cash bond. Furthermore under Article 2203 of the Civil Code, the party
suffering loss injury is also required to exercise the diligence of a good
father of a family to minimize the damages resulting from the act or
omission. As regards the cost of print advertisements, RBS had not
convincingly established that this was a loss attributable to the non-
showing of Maging Sino Ka Man; on the contrary, it was brought out
during trial that with or without the case or injunction, RBS would
have spent such an amount to generate interest in the film.
ABS-CBN further contends that there was no other clear basis for
the awards of moral and exemplary damages. The controversy
involving ABS-CBN and RBS did not in any way originate from
business transaction between them. The claims for such damages did
not arise from any contractual dealings or from specific acts
committed by ABS-CBN against RBS that may be characterized as
wanton, fraudulent, or reckless; they arose by virtue only of the filing
of the complaint. An award of moral and exemplary damages is not
warranted where the record is bereft of any proof that a party acted
maliciously or in bad faith in filing an action. [27] In any case, free resort
to courts for redress of wrongs is a matter of public policy. The law
recognizes the right of every one to sue for that which he honestly
believes to be his right without fear of standing trial for damages
where by lack of sufficient evidence, legal technicalities, or a different
interpretation of the laws on the matter, the case would lose ground.
[28]
One who, makes use of his own legal right does no injury.[29] If
damage results from filing of the complaint, it is damnum absque
injuria.[30] Besides, moral damages are generally not awarded in favor
of a juridical person, unless it enjoys a good reputation that was
debased by the offending party resulting in social humiliation.[31]
As regards the award of attorneys fees, ABS-CBN maintains that
the same had no factual, legal, or equitable justification. In sustaining
the trial courts award, the Court of Appeals acted in clear disregard of
the doctrine laid down in Buan v. Camaganacan[32] that the text of the
decision should state the reason why attorneys fees are being awarded;
otherwise, the award should be disallowed. Besides, no bad faith has
been imputed on, much less proved as having been committed by,
ABS-CBN. It has been held that where no sufficient showing of bad
faith would be reflected in a partys persistence in a case other than an
erroneous conviction of the righteousness of his cause, attorneys fees
shall not be recovered as cost.[33]
On the other hand, RBS asserts that there was no perfected
contract between ABS-CBN and VIVA absent meeting of minds
between them regarding the object and consideration of the alleged
contract. It affirms that ABS-CBNs claim of a right of first refusal was
correctly rejected by the trial court. RBS insists the premium it had
paid for the counterbond constituted a pecuniary loss upon which it
may recover. It was obliged to put up the counterbond due to the
injunction procured by ABS-CBN. Since the trial court found that
ABS-CBN had no cause of action or valid claim against RBS and,
therefore not entitled to the writ of injunction, RBS could recover from
ABS-CBN the premium paid on the counterbond. Contrary to the
claim of ABS-CBN, the cash bond would prove to be more expensive,
as the loss would be equivalent to the cost of money RBS would
forego in case the P30 million came from its funds or was borrowed
from banks.
RBS likewise asserts that it was entitled to the cost of
advertisements for the cancelled showing of the film Maging Sino Ka
Man because the print advertisements were out to announce the
showing on a particular day and hour on Channel 7, i.e., in its entirety
at one time, not as series to be shown on a periodic basis. Hence, the
print advertisements were good and relevant for the particular date of
showing, and since the film could not be shown on that particular date
and hour because of the injunction, the expenses for the
advertisements had gone to waste.
As regards moral and exemplary damages, RBS asserts that ABS-
CBN filed the case and secured injunctions purely for the purpose of
harassing and prejudicing RBS. Pursuant then to Articles 19 and 21 of
the Civil Code, ABS-CBN must be held liable for such
damages. Citing Tolentino,[34] damages may be awarded in cases of
abuse of rights even if the done is not illicit, and there is abuse of
rights where a plaintiff institutes an action purely for the purpose of
harassing or prejudicing the defendant.
In support of its stand that a juridical entity can recover moral and
exemplary damages, private respondent RBS cited People v. Manero,
[35]
where it was stated that such entity may recover moral and
exemplary damages if it has a good reputation that is debased resulting
in social humiliation. It then ratiocinates; thus:
There can be no doubt that RBS reputation has been debased
by ABS-CBNs acts in this case. When RBS was not able to
fulfill its commitment to the viewing public to show the film
Maging Sino Ka Man on the scheduled dates and times (and
on two occasions that RBS advertised), it suffered serious
embarrassment and social humiliation. When the showing was
cancelled, irate viewers called up RBS offices and subjected
RBS to verbal abuse (Announce kayo ng announce, hindi
ninyo naman ilalabas, nanloloko yata kayo) (Exh. 3-RBS,
par.3). This alone was not something RBS brought upon
itself. It was exactly what ABS-CBN had planted to happen.
The amount of moral and exemplary damages cannot be said
to be excessive. Two reasons justify the amount of the award.
The first is that the humiliation suffered by RBS, is national in
extent. RBS operations as a broadcasting company is [sic]
nationwide. Its clientele, like that of ABS-CBN, consists of
those who own and watch television. It is not an exaggeration
to state, and it is a matter of judicial notice that almost every
other person in the country watches television. The humiliation
suffered by RBS is multiplied by the number of televiewers
who had anticipated the showing of the film, Maging Sino Ka
Man on May 28 and November 3, 1992 but did not see it
owing to the cancellation. Added to this are the advertisers
who had placed commercial spots for the telecast and to whom
RBS had a commitment in consideration of the placement to
show the film in the dates and times specified.
The second is that it is a competitor that caused RBS suffer the
humiliation. The humiliation and injury are far greater in
degree when caused by an entity whose ultimate business
objective is to lure customers (viewers in this case) away from
the competition.[36]
For their part, VIVA and Vicente del Rosario contend that the
findings of fact of the trial court and the Court of Appeals do not
support ABS-CBNs claim that there was a perfected contract. Such
factual findings can no longer be disturbed in this petition for review
under Rule 45, as only questions of law can be raised, not questions of
fact. On the issue of damages and attorneys fees, they adopted the
arguments of RBS.
The key issues for our consideration are (1) whether there was a
perfected contract between VIVA and ABS-CBN, and (2) whether
RBS is entitled to damages and attorneys fees. It may be noted that
that award of attorneys fees of P212,000 in favor of VIVA is not
assigned as another error.
 I met by a counter-offer which substantially varied the terms of the
The first issue should be resolved against ABS-CBN. A contract is
a meeting of minds between two persons whereby one binds himself to
give something or render some service to another [37] for a
consideration. There is no contract unless the following requisites
concur: (1) consent of the contracting parties; (2) object certain which
is the subject of the contract; and (3) cause of the obligation, which is
established.[38] A contract undergoes three stages:
(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.[39]
Contracts that are consensual in nature are perfected upon mere
meeting of the minds. Once there is concurrence between the offer and
the acceptance upon the subject matter, consideration, and terms of
payment a contract is produced. The offer must be certain. To convert
the offer into a contract, the acceptance must be absolute and must not
qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A
qualified acceptance, or one that involves a new proposal, constitutes a
counter-offer and is a rejection of the original offer. Consequently,
when something is desired which is not exactly what is proposed in the
offer, such acceptance is not sufficient to generate consent because any
modification or variation from the terms of the offer annuls the offer.[40]
When Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the
Tamarind Grill on 2 April 1992 to discuss the package of films, said
package of 104 VIVA films was VIVAs offer to ABS-CBN to enter
into a new Film Exhibition Agreement. But ABS-CBN, sent through
Ms. Concio, counter-proposal in the form a draft contract proposing
exhibition of 53 films for a consideration of P35 million. This counter-
proposal could be nothing less than the counter-offer of Mr. Lopez
during his conference with Del Rosario at Tamarind Grill
Restaurant. Clearly, there was no acceptance of VIVAs offer, for it was
offer.
ABS-CBNs reliance in Limketkai Sons Milling, Inc. v. Court of
Appeals[41] and Villonco Realty Company v. Bormaheco, Inc.,[42] is
misplaced. In these cases, it was held that an acceptance may contain a
request for certain changes in the terms of the offer and yet be a
binding acceptance as 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. This ruling was, however, reversed in
the resolution of 29 March 1996,[43] which ruled that the acceptance of
an offer must be unqualified and absolute, i.e., it must be identical in
all respects with that of the offer so as to produce consent or meetings
of the minds.
On the other hand, in Villonco, cited in Limketkai, the alleged
changes in the revised counter-offer were not material but merely
clarificatory of what had previously been agreed upon. It cited the
statement in Stuart v. Franklin Life Insurance Co.[44] that a 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 of a counter-offer.[45]However,
when any of the elements of the contract is modified upon acceptance,
such alteration amounts to a counter-offer.
In the case at bar, ABS-CBN made no unqualified acceptance of
VIVAs offer hence, they underwent period of bargaining. ABS-CBN
then formalized its counter-proposals or counter-offer in a draft
contract. VIVA through its Board of Directors, rejected such counter-
offer. Even if it be conceded arguendo that Del Rosario had accepted
the counter-offer, the acceptance did not bind VIVA, as there was no
proof whatsoever that Del Rosario had the specific authority to do so.
Under the Corporation Code,[46] unless otherwise provided by said
Code, corporate powers, such as the power to enter into contracts, are
exercised by the Board of Directors. However, the Board may delegate
such powers to either an executive committee or officials or contracted
managers. The delegation, except for the executive committee, must be
for specific purposes.[47] Delegation to officers makes the latter agents
of the corporation; accordingly, the general rules of agency as to the
binding effects of their acts would apply.[48] For such officers to be
deemed fully clothed by the corporation to exercise a power of the
Board, the latter must specially authorize them to do so. that Del
Rosario did not have the authority to accept ABS-CBNs counter-offer
was best evidenced by his submission of the draft contract to VIVAs
Board of Directors for the latters approval. In any event, there was
between Del Rosario and Lopez III no meeting of minds. The
following findings of the trial court are instructive:
A number of considerations militate against ABS-CBNs claim
that a contract was perfected at that lunch meeting on April 02,
1992 at the Tamarind Grill.
FIRST, Mr. Lopez claimed that what was agreed upon at the
Tamarind Grill referred to the price and the number of films,
which he wrote on a napkin. However, Exhibit C
contains numerous provisions which were not discussed at the
Tamarind Grill, if Lopez testimony was to be believed nor
could they have been physically written on a napkin. There
was even doubt as to whether it was a paper napkin or cloth
napkin. In short what were written in Exhibit C were not
discussed, and therefore could not have been agreed upon, by
the parties. How then could this court compel the parties to
sign Exhibit C when the provisions thereof were not
previously agreed upon?
SECOND, Mr. Lopez claimed that what was agreed upon as
the subject matter of the contract was 14 films. The complaint
in fact prays for delivery of 14 films. But Exhibit C mentions
53 films as its subject matter. Which is which? If Exhibit C
reflected the true intent of the parties, then ABS-CBNs claim
for 14 films in its complaint is false or if what it alleged in the
complaint is true, then Exhibit C did not reflect what was
agreed upon by the parties.This underscores the fact that there
was no meeting of the minds as to the subject matter of the
contract, so as to preclude perfection thereof. For settled is the
rule that there can be no contract where there is no object
certain which is its subject matter (Art. 1318, NCC).
THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit
testimony (Exh. D) States:
We were able to reach an agreement. VIVA gave us the
exclusive license to show these fourteen (14) films, and we
agreed to pay Viva the amount of P16,050,000.00 as well as
grant Viva commercial slots worth P19,950,000.00. We had
already earmarked this P16,050,000.00.
which gives a total consideration of P36 million
(P19,951,000.00 plus P16,050,000.00 equals P36,000,000.00).
On cross-examination Mr. Lopez testified:
Q What was written in this napkin?
A The total price, the breakdown the known Viva movies, the 7
blockbuster movies and the other 7 Viva movies because the price
was broken down accordingly. The none [sic] Viva and the seven
other Viva movies and the sharing between the cash portion and the
concerned spot portion in the total amount of P35 million pesos.
Now, which is which? P36 million or P35 million? This
weakens ABS-CBNs claim.
FOURTH. Mrs. Concio, testifying for ABS-CBN stated that
she transmitted Exhibit C to Mr. Del Rosario with a
handwritten note, describing said Exhibit C as a draft. (Exh. 5
Viva; tsn pp. 23-24, June 08, 1992). The said draft has a well
defined meaning.
Since Exhibit C is only a draft, or a tentative, provisional or
preparatory writing prepared for discussion, the terms and
conditions thereof could not have been previously agreed upon
by ABS-CBN and Viva. Exhibit C could not therefore legally
bind Viva, not having agreed thereto. In fact, Ms. Concio
admitted that the terms and conditions embodied in Exhibit C
were prepared by ABS-CBNs lawyers and there was no
discussion on said terms and conditions.
As the parties had not yet discussed the proposed terms and
conditions in Exhibit C, and there was no evidence whatsoever
that Viva agreed to the terms and conditions thereof, said
document cannot be a binding contract. The fact that Viva
refused to sign Exhibit C reveals only two [sic] well that it did
not agree on its terms and conditions, and this court has no
authority to compel Viva to agree thereto.
FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del
Rosario agreed upon at the Tamarind Grill was only
provisional, in the sense that it was subject to approval by the
Board of Directors of Viva. He testified:
Q Now, Mr. Witness, and after that Tamarinf meeting the second meeting
wherein you claimed that you have the meeting of the minds between
you and Mr. Vic del Rosario, what happened?
A Vic Del Rosario was supposed to call us up and tell us specifically the
result of the discussion with the Board of Directors.
Q And you are referring to the so-called agreement which you wrote in
[sic] a piece of paper?
A Yes, sir.
Q So, he was going to forward that to the board of Directors for approval?
A Yes, sir (Tsn, pp. 42-43, June 8, 1992)
Q Did Mr. Del Rosario tell you that he will submit it to his Board for
approval?
A Yes, sir. (Tsn, p. 69, June 8, 1992).
The above testimony of Mr. Lopez shows beyond doubt that he
knew Mr. Del Rosario had no authority to bind Viva to a
contract with ABS-CBN until and unless its Board of Directors
approved it. The complaint, in fact, alleges that Mr. Del
Rosario is the Executive Producer of defendant Viva which is a
corporation. (par. 2, complaint). As a mere agent of Viva, Del
Rosario could not bind Viva unless what he did is ratified by
its Directors. (Vicente vs.Geraldez, 52 SCRA 210; Arnold vs.
Willets and Paterson, 44 Phil. 634). As a mere agent,
recognized as such by plaintiff, Del Rosario could not be held
liable jointly and severally with Viva and his inclusion as party
defendant has no legal basis. (Salonga vs. Warner Barnes
[sic],COLTA, 88 Phil. 125; Salmon vs. Tan, 36 Phil. 556).
The testimony of Mr. Lopez and the allegations in the
complaint are clear admissions that what was supposed to have
been agreed upon at the Tamarind Grill between Mr. Lopez
and Del Rosario was not a binding agreement. It is as it should
be because corporate power to enter into a contract is lodged in
the Board of Directors. (Sec. 23, Corporation Code). Without
such board approval by the Viva board, whatever agreement
Lopez and Del Rosario arrived at could not ripen into a valid
binding upon Viva (Yao Ka Sin Trading vs. Court of Appeals,
209 SCRA 763). The evidence adduced shows that the Board
of Directors of Viva rejected Exhibit C and insisted that the
film package for 104 films be maintained (Exh. 7-1 Cica). [49]
The contention that ABS-CBN had yet to fully exercise its right of
first refusal over twenty-four films under the 1990 Film Exhibition
Agreement and that the meeting between Lopez and Del Rosario was a
continuation of said previous contract is untenable. As observed by the
trial court, ABS-CBNs right of first refusal had already been exercised
when Ms. Concio wrote to Viva ticking off ten films. Thus:
 [T]he subsequent negotiation with ABS-CBN two (2)
months after this letter was sent, was for an entirely
different package. Ms. Concio herself admitted on cross-
examination to having used or exercised the right of first
refusal. She stated that the list was not acceptable and was
indeed not accepted by ABS-CBN, (Tsn, June 8, 1992, pp.
8-10). Even Mr. Lopez himself admitted that the right of
first refusal may have been already exercised by Ms.
Concio (as she had). (TSN, June 8, 1992, pp. 71-75). Del
Rosario himself knew and understand [sic] that ABS-CBN
has lost its right of first refusal when his list of 36 titles
were rejected (Tsn, June 9, 1992, pp. 10-11). [50]
II
However, we find for ABS-CBN on the issue of damages. We
shall first take up actual damages. Chapter 2, Title XVIII, Book IV of
the Civil Code is the specific law on actual or compensatory
damages. Except as provided by law or by stipulation, one is entitled
to compensation for actual damages only for such pecuniary loss
suffered by him as he has duly proved.[51] The indemnification shall
comprehend not only the value of the loss suffered, but also that of the
profits that the obligee failed to obtain. [52] In contracts and quasi-
contracts the damages which may be awarded are dependent on
whether the obligor acted with good faith or otherwise. In case of good
faith, the damages recoverable are those which are the natural and
probable consequences of the breach of the obligation and which the
parties have foreseen or could have reasonably foreseen at the time of
the constitution of the obligation. If the obligor acted with fraud, bad
faith, malice, or wanton attitude, he shall be responsible for all
damages which may be reasonably attributed to the non-performance
of the obligation.[53] In crimes and quasi-delicts, the defendants shall be
liable for all damages which are the natural and probable consequences
of the act or omission complained of, whether or not such damages
have been foreseen or could have reasonably been foreseen by the
defendant.[54]
Actual damages may likewise be recovered for loss or impairment
of earning capacity in cases of temporary or permanent personal
injury, or for injury to the plaintiffs business standing or commercial
credit.[55]
The claim of RBS for actual damages did not arise from contract,
quasi-contract, delict, or quasi-delict. It arose from the fact of filing of
the complaint despite ABS-CBNs alleged knowledge of lack of cause
of action. Thus paragraph 12 of RBSs Answer with Counterclaim and
Cross-claim under the heading COUNTERCLAIM specifically
alleges:
12. ABS-CBN filed the complaint knowing fully well that it has no
cause of action against RBS. As a result thereof, RBS suffered
actual damages in the amount of P6,621,195.32.[56]
Needless to state the award of actual damages cannot be
comprehended under the above law on actual damages. RBS could
only probably take refuge under Articles 19, 20, and 21 of the Civil
Code, which read as follows:
ART. 19. Every person must, in the exercise of hid rights and
in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.
ART. 20. Every person who, contrary to law, wilfully or
negligently causes damage to another shall indemnify the latter
for the same.
ART. 21. Any person who wilfully causes loss or injury to
another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage.
It may further be observed that in cases where a writ of
preliminary injunction is issued, the damages which the defendant may
suffer by reason of the writ are recoverable from the injunctive bond.
[57]
In this case, ABS-CBN had not yet filed the required bond; as a
matter of fact, it asked for reduction of the bond and even went to the
Court of Appeals to challenge the order on the matter. Clearly then, it
was not necessary for RBS to file a counterbond.Hence, ABS-CBN
cannot be held responsible for the premium RBS paid for the
counterbond.
Neither could ABS-CBN be liable for the print advertisements for
Maging Sino Ka Man for lack of sufficient legal basis. The RTC issued
a temporary restraining order and later, a writ of preliminary injunction
on the basis of its determination that there existed sufficient ground for
the issuance thereof. Notably, the RTC did not dissolve the injunction
on the ground of lack of legal and factual basis, but because of the plea
of RBS that it be allowed to put up a counterbond.
As regards attorneys fees, the law is clear that in the absence of
stipulation, attorneys fees may be recovered as actual or compensatory
damages under any of the circumstances provided for in Article 2208
of the Civil Code.[58]
The general rule is that attorneys fees cannot be recovered as part
of damages because of the policy that no premium should be placed on
the right to litigate.[59] They are not to be awarded every time a party
wins a suit. The power of the court t award attorneys fees under Article
2208 demands factual, legal, and equitable justification. [60] Even when
a claimant is compelled to litigate with third persons or to incur
expenses to protect his rights, still attorneys fees may not be awarded
where no sufficient showing of bad faith could be reflected in a partys
persistence in a case other than an erroneous conviction of the
righteousness of his cause.[61]
As to moral damages the law is Section 1, Chapter 3, Title XVIII,
Book IV of the Civil Code. Article 2217 thereof defines what are
included in moral damages, while Article 2219 enumerates the cases
where they may be recovered. Article 2220 provides that moral
damages may be recovered in breaches of contract where the
defendant acted fraudulently or in bad faith. RBSs claim for moral
damages could possibly fall only under item (10) of Article 2219,
thereof which reads:
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29,
30, 32, 34 and 35.
Moral damages are in the category of an award designed to
compensate the claimant for actual injury suffered and not to impose a
penalty on the wrongdoer.[62] The award is not meant to enrich the
complainant at the expense of the defendant, but to enable the injured
party to obtain means, diversion, or amusements that will serve to
obviate the moral suffering he has undergone. It is aimed at the
restoration, within the limits of the possible, of the spiritual status quo
ante, and should be proportionate to the suffering inflicted. [63] Trial
courts must then guard against the award of exorbitant damages; they
should exercise balanced restrained and measured objectivity to avoid
suspicion that it was due to passion, prejudice, or corruption or the part
of the trial court.[64]
The award of moral damages cannot be granted in favor of a
corporation because, being an artificial person and having existence
only in legal contemplation, it has no feelings, no emotions, no
senses. It cannot, therefore, experience physical suffering and mental
anguish, which can be experienced only by one having a nervous
system.[65] The statement in People v. Manero[66] and Mambulao
Lumber Co. v. PNB[67] that a corporation may recover moral damages if
it has a good reputation that is debased, resulting in social humiliation
is an obiter dictum. On this score alone the award for damages must be
set aside, since RBS is a corporation.
The basic law on exemplary damages is Section 5 Chapter 3, Title
XVIII, Book IV of the Civil Code. These are imposed by way of
example or correction for the public good, in addition to moral,
temperate, liquidated, or compensatory damages.[68] They are
recoverable in criminal cases as part of the civil liability when the
crime was committed with one or more aggravating circumstances;
[69]
in quasi-delicts, if the defendant acted with gross negligence; [70] and
in contracts and quasi-contracts, if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.[71]
It may be reiterated that the claim of RBS against ABS-CBN is
not based on contract, quasi-contract, delict, or quasi-delict. Hence, the
claims for moral and exemplary damages can only be based on
Articles 19, 20, and 21 of the Civil Code.
The elements of abuse of right under Article 19 are the following:
(1) the existence of a legal right or duty, (2) which is exercised in bad
faith, and (3) for the sole intent of prejudicing or injuring REYNALDO VILLANUEVA, G.R. NO. 154493
another. Article 20 speaks of the general sanction for all provisions of Petitioner,
law which do not especially provide for their own sanction; while
Present:
Article 21 deals with acts contra bonus mores, and has the following
elements: (1) there is an act which is legal, (2) but which is contrary to
morals, good custom, public order, or public policy, and (3) and it is PANGANIBAN, C.J.
done with intent to injure.[72] (Chairperson)
Verily then, malice or bad faith is at the core of Articles 19, 20, YNARES-SANTIAGO,
and 21. Malice or bad faith implies a conscious and intentional design - versus - AUSTRIA-MARTINEZ,
to do a wrongful act for a dishonest purpose or moral obliquity. [73] Such CALLEJO, SR., and
must be substantiated by evidence.[74] CHICO-NAZARIO, JJ.
There is no adequate proof that ABS-CBN was inspired by malice
or bad faith. It was honestly convinced of the merits of its cause after it PHILIPPINE NATIONAL BANK
had undergone serious negotiations culminating in its formal (PNB),
submission of a draft contract. Settled is the rule that the adverse result
Respondent. Promulgated:
of an action does not per se make the action wrongful and subject the
actor to damages, for the law could not have meant impose a penalty December 6, 2006
on the right to litigate. If damages result from a persons exercise of a x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
right, it is damnum absque injuria.[75] ----------------x
WHEREFORE, the instant petition is GRANTED. The
challenged decision of the Court of Appeals in CA-G.R. CV No.
44125 is hereby REVERSED except as to unappealed award of DECISION
attorneys fees in favor of VIVA Productions, Inc.
No pronouncement as to costs. AUSTRIA-MARTINEZ, J.:
SO ORDERED.

Republic of the Philippines The Petition for Review on Certiorari under Rule
45 before this Court assails the January 29,
Supreme Court 2002 Decision[1] and June 27, 2002
Manila Resolution[2] of the Court of Appeals (CA) in CA-
G.R. CV No. 52008[3] which reversed and set
FIRST DIVISION aside the September 14, 1995 Decision[4] of the
Regional Trial Court, Branch 22, General Santos
City (RTC) in Civil Case No. 4553.

As culled from the records, the facts are as
follows:
The Special Assets Management Department
(SAMD) of the Philippine National Bank (PNB)
issued an advertisement for the sale thru
bidding of certain PNB properties
in Calumpang, GeneralSantos City, including Lot
No. 17, covered by TCT No. T-15042, consisting
of 22,780 square meters, with an advertised
floor price of P1,409,000.00, and Lot No. 19,
covered by TCT No. T-15036, consisting of
41,190 square meters, with an advertised floor
price of P2,268,000.00.[5] Bidding was subject to
the following conditions: 1) that cash bids be
submitted not later than April 27, 1989; 2) that
said bids be accompanied by a 10% deposit in
managers or cashiers check; and 3) that all
acceptable bids be subject to approval by PNB
authorities.
In a June 28, 1990 letter[6] to the Manager,
PNB-General Santos Branch, Reynaldo
Villanueva (Villanueva) offered to purchase Lot
Nos. 17 and 19 for P3,677,000.00. He also
manifested that he was depositing P400,000.00
to show his good faith but with the
understanding that said amount may be treated
as part of the payment of the purchase price
only when his offer is accepted by PNB. At the
bottom of said letter there appears an unsigned
marginal note stating that P400,000.00 was
deposited into Villanuevas account (Savings
Account No. 43612) with PNB-General Santos
Branch. [7]
PNB-General Santos Branch forwarded the June
28, 1990 letter of Villanueva to Ramon Guevara
(Guevara), Vice President, SAMD.[8] On July 6,
1990, Guevara informed Villanueva that only Lot
No. 19 is available and that the asking
price therefor is P2,883,300.00.[9] Guevara
further wrote:
If our quoted price is acceptable
to you, please submit a revised offer to
purchase. Sale shall be subject to
our Board of Directors approval
and to other terms and conditions
imposed by the Bank on sale of
acquired assets. [10] (Emphasis ours)
Instead of submitting a revised offer,
Villanueva merely inserted at the bottom of
Guevaras letter a July 11, 1990 marginal note,
which reads:
 and public bidding of Lot No. 19, SAMD is
C O N F O R M E: deferringnegotiations with him over said
property and returning his deposit
PRICE OF P2,883,300.00
(downpayment of P600,000.00 and the of P580,000.00. [15]
Undaunted, Villanueva
balance payable in two (2) years at attempted to deliver postdated checks covering
quarterly amortizations.) [11] the balance of the purchase price but PNB
refused the same.

Villanueva paid P200,000.00 to PNB
which issued O.R. No. 16997 to acknowledge
receipt of the partial payment deposit on offer
to purchase.[12] On the dorsal portion of Official
Receipt No. 16997, Villanueva signed a
typewritten note, stating:
This is a deposit made to show the
sincerity of my purchase offer with the
understanding that it shall be returned
without interest if my offer is not
favorably considered or be forfeited if
my offer is approved but I fail/refuse to
push through the purchase.[13]
Also, on July 24, 1990, P380,000.00 was
debited from Villanuevas Savings Account No.
43612 and credited to SAMD.[14]
On October 11, 1990, however, Guevara
wrote Villanueva that, upon orders of the PNB
Board of Directors to conduct another appraisal
Hence, Villanueva filed with the RTC a
Complaint[16] for specific performance and
damages against PNB. In its September 14,
1995 Decision, the RTC granted the Complaint,
thus:
WHEREFORE, judgment is rendered in
favor of the plaintiff and against the
defendant directing it to do the
following:
1. To execute a deed of sale in favor of
the plaintiff over Lot 19 comprising
41,190 square meters situated
at Calumpang, General Santos City cov
ered by TCT No. T-15036 after payment
of the balance in cash in the amount
of P2,303,300.00;
2. To pay the
plaintiff P1,000,000.00 as moral
damages; P500,000.00 as attorneys
fees, plus litigation expenses and costs
of the suit.

SO ORDERED. [17]
The RTC anchored its judgment on the finding
that there existed a perfected contract of sale
between PNB and Villanueva. It found:
The following facts are either admitted or
undisputed:
xxx
The defendant through Vice-President
Guevara negotiated with the plaintiff in
connection with the offer of the plaintiff
to buy Lots 17 & 19. The offer of
plaintiff to buy, however, was accepted
by the defendant only insofar as Lot 19
is concerned as exemplified by its
letter dated July 6, 1990 where the
plaintiff signified his concurrence after
conferring with the defendants vice-
president. The conformity of the
plaintiff was typewritten by the
defendants own people where the
plaintiff accepted the price
of P2,883,300.00. The defendant also
issued a receipt to the plaintiff on the
same day when the plaintiff paid the
amount of P200,000.00 to complete
the downpayment of P600,000.00
(Exhibit F & Exhibit I). With this
development, the plaintiff was also
given the go signal by the defendant to
improve Lot 19 because it was already
in effect sold to him and because of
that the defendant fenced the lot and
completed his two houses on the
property.[18]
The RTC also pointed out that
Villanuevas P580,000.00 downpayment was
actually in the nature of earnest money
acceptance of which by PNB signified that there
was already a sale.[19] The RTC further cited
contemporaneous acts of PNB purportedly
indicating that, as early as July 25, 1990, it
considered Lot 19 already sold, as shown by
Guevaras July 25, 1990 letter (Exh. H)[20] to
another interested buyer.
PNB appealed to the CA which reversed and set
aside the September 14, 1995 RTC Decision,
thus:
WHEREFORE, the appealed decision is
REVERSED and SET ASIDE and another
rendered DISMISSING the complaint.
SO ORDERED.[21]
According to the CA, there was no
perfected contract of sale because the July 6,
1990 letter of Guevara constituted a qualified
acceptance of the June 28, 1990 offer of
Villanueva, and to which Villanueva replied
on July 11, 1990 with a modified offer. The CA Appellees new proposal, which constitutes a
held: counter-offer, was not accepted by appellant, its
board having decided to have Lot 19
reappraised and sold thru public bidding.
In the case at bench, consent, in respect to the
price and manner of its payment, is lacking. The
record shows that appellant, thru Guevaras July
6, 1990 letter, made a qualified acceptance Moreover, it was clearly stated in Guevaras July
of appellees letter-offer dated June 28, 1990 by 6, 1990 letter that the sale shall be subject to
imposing an asking price of P2,883,300.00 in our Board of Directors approval and to other
cash for Lot 19. The letter dated July 6, 1990 terms and conditions imposed by the Bank on
constituted a counter-offer (Art. 1319, Civil
sale of acquired assets.[22]
Code), to which appellee made a new
proposal, i.e., to pay the amount
of P2,883,300.00 in staggered amounts, that
is, P600,000.00 as downpayment and the
balance within two years in quarterly
amortizations.
Villanuevas Motion for Reconsideration [23] was
denied by the CA in its Resolution of June 27,
A qualified acceptance, or one that involves a 2002.
new proposal, constitutes a counter-offer and a
rejection of the original offer (Art. 1319, id.).
Consequently, when something is desired which
is not exactly what is proposed in the offer, such Petitioner Villanueva now assails before this
acceptance is not sufficient to generate consent
because any modification or variation from the
Court the January 29, 2002 Decision and June
terms of the offer annuls the offer (Tolentino, 27, 2002 Resolution of the CA. He assigns five
Commentaries and Jurisprudence on the Civil issues which may be condensed into two: first,
Code of the Philippines, 6th ed., 1996, p. 450,
whether a perfected contract of sale exists
cited in ABS-CBN Broadcasting Corporation v.
Court of Appeals, et al., 301 SCRA 572). between petitioner and respondent PNB; and
second, whether the conduct and actuation of
respondent constitutes bad faith as to entitle
petitioner to moral and exemplary damages and
attorneys fees.
The Court sustains the CA on both issues.
material but motivating as well. Anything short
of that level of mutuality produces not a
contract but a mere counter-offer awaiting
acceptance.[26] More particularly on the matter
of the consideration of the contract, the offer
and its acceptance must be unanimous both on
the rate of the payment and on its term. An
acceptance of an offer which agrees to the rate
but varies the term is ineffective. [27]

Contracts of sale are perfected by mutual

consent whereby the seller obligates himself,
To determine whether there was mutual consent between the
for a price certain, to deliver and transfer
parties herein, it is necessary to retrace each offer and
ownership of a specified thing or right to the
acceptance they made.
buyer over which the latter agrees.[24] Mutual
consent being a state of mind, its existence may
only be inferred from the confluence of two acts
Respondent began with an invitation to bid issued in
of the parties: an offer certain as to the object
April 1989 covering several of its acquired assets in
of the contract and its consideration, and an
Calumpang, General Santos City, including Lot No. 19 for
acceptance of the offer which is absolute in that
which the floor price was P2,268,000.00. The offer was
it refers to the exact object and consideration
subject to the condition that sealed bids, accompanied by a
embodied in said offer.[25] While it is impossible
10% deposit in managers or cashiers check, be submitted not
to expect the acceptance to echo every nuance
later than 10 oclock in the morning of April 27, 1989.
of the offer, it is imperative that it assents to
those points in the offer which, under the
operative facts of each contract, are not only
 On June 28, 1990, petitioner made an offer to buy Lot
No. 17 and Lot No. 19 for an aggregate price
of P3,677,000.00. It is noted that this offer exactly
corresponded to the April 1989 invitation to bid issued by
respondent in that the proposed aggregate purchase price for
Lot Nos. 17 and 19 matched the advertised floor prices for
the same properties. However, it cannot be said that the June
28, 1990 letter of petitioner was an effective acceptance of
the April 1989 invitation to bid for, by its express terms, said
invitation lapsed on April 27, 1989.[28] More than that, the
April 1989 invitation was subject to the condition that all
sealed bids submitted and accepted be approved by
respondents higher authorities.
Thus, the June 28, 1990 letter of petitioner was an
offer to buy independent of the April 1989 invitation to
bid. It was a definite offer as it identified with certainty the
properties sought to be purchased and fixed the contract
price.
However, respondent replied to the June 28,
1990 offer with a July 6, 1990 letter that only Lot No. 19 is
available and that the price therefor is
now P2,883,300.00. As the CA pointed out, this reply was
certainly not an acceptance of the June 28, 1990 offer but a
mere counter-offer. It deviated from the original offer on
three material points: first, the object of the proposed sale is
now only Lot No. 19 rather than Lot Nos. 17 and 19; second,
the area of the property to be sold is still 41,190 sq. m but an
8,797-sq. m portion is now part of a public road; and third,
the consideration is P2,883,300 for one lot rather
than P3,677,000.00 for two lots. More important, this July 6,
1990 counter-offer imposed two conditions: one, that
petitioner submit a revised offer to purchase based on the
quoted price; and two, that the sale of the property be
approved by the Board of Directors and subjected to other
terms and conditions imposed by the Bank on the sale of
acquired assets.
In reply to the July 6, 1990 counter-offer,
petitioner signed his July 11, 1990 conformity to
the quoted price of P2,883,300.00 but inserted
the term downpayment of P600,000.00 and the
balance payable in two years at quarterly
amortization. The CA viewed this July 11, 1990
conformity not as an acceptance of the July 6,
1990 counter-offer but a further counter-offer
for, while petitioner accepted the P2,883,300.00
price for Lot No. 19, he qualified his acceptance
by proposing a two-year payment term.
Petitioner does not directly impugn such
reasoning of the CA. He merely questions it for
taking up the issue of whether his July 11,
1990 conformity modified the July 6,
1990 counter-offer as this was allegedly never
raised during the trial nor on appeal.[29]
Such argument is not well taken. From
beginning to end, respondent denied that a
contract of sale with petitioner was ever
perfected.[30] Its defense was broad enough to
encompass every issue relating to the
concurrence of the elements of contract,
specifically on whether it consented to the
object of the sale and its consideration. There
was nothing to prevent the CA from inquiring
into the offers and counter-offers of the parties
to determine whether there was indeed a
perfected contract between them.
Moreover, there is merit in the ruling of the
CA that the July 11, 1990 marginal note was a
further counter-offer which did not lead to the
perfection of a contract of sale between the
parties.Petitioners own June 28, 1990 offer
quoted the price of P3,677,000.00 for two lots
but was silent on the term of
payment. Respondents July 6, 1990 counter-
offer quoted the price of P2,833,300.00 and was
also silent on the term of payment. Up to that
point, the term or schedule of payment was not
on the negotiation table. Thus, when petitioner
suddenly introduced a term of payment in
his July 11, 1990 counter-offer, he interjected
into the negotiations a new substantial
matter on which the parties had no prior
discussion and over which they must yet agree.
[31]
Petitioners July 11, 1990 counter-offer,
therefore, did not usher the parties beyond the
negotiation stage of contract making towards its
perfection. He made a counter-offer that
required acceptance by respondent.
As it were, respondent, through its Board
of Directors, did not accept this last counter-
offer. As stated in its October 11, 1990 letter to
petitioner, respondent ordered the reappraisal
of the property, in clear repudiation not only of
the proposed price but also the term of
payment thereof.
Petitioner insists, however, that
the October 11, 1990 repudiation was belated
as respondent had already agreed to his July 11,
1990 counter-offer when it accepted
his downpayment or earnest
money of P580,000.00. [32]
He cites Article 1482
of the Civil Code where it says that acceptance
of downpayment or earnest money presupposes
the perfection of a contract.
Not so. Acceptance of petitioners
payments did not amount to an implied
acceptance of his last counter-offer.
To begin with, PNB-General Santos Branch,
which accepted petitioners P380,000.00
payment, and PNB-SAMD, which accepted
his P200,000.00 payment, had no authority to
bind respondent to a contract of sale with
petitioner.[33] Petitioner is well aware of this. To
recall, petitioner sent his June 28, 1990 offer to
PNB-General Santos Branch. Said branch did not
act on his offer except to endorse it
to Guevarra. Thereafter, petitioner transacted
directly with Guevarra. Petitioner then cannot
pretend that PNB-General Santos Branch had
authority to accept his July 11, 1990 counter-
offer by merely accepting his P380,000.00
payment.
Neither did SAMD have authority to bind
PNB. In its April 1989 invitation to bid, as well as
its July 6, 1990 counter-offer, SAMD was always
careful to emphasize that whatever offer is
made and entertained will be subject to the
approval of respondents higher authorities. This
is a reasonable disclaimer considering the
corporate nature of respondent. [34]
Moreover, petitioners payment of P200,000.00
was with the clear understanding that his July
11, 1990 counter-offer was still subject to
approval by respondent. This is borne out by
respondents Exhibits 2-a and 2-b, which
petitioner never controverted, where it appears
on the dorsal portion of O.R. No. 16997 that
petitioner acceded that the amount he paid was
a mere x x x deposit made to show the sincerity
of [his] purchase offer with the understanding
that it shall be returned without interest if [his]
offer is not favorably considered x x x.[35] This
was a clear acknowledgment on his part that
there was yet no perfected contract with
respondent and that even with the payments he
had advanced, his July 11, 1990 counter-offer
was still subject to consideration by respondent.
Not only that, in the same Exh. 2-a as well as in
his June 28, 1990 offer, petitioner referred to his
payments as mere deposits. Even O.R. No.
16997 refers to petitioners payment as mere
deposit. It is only in the debit notice issued by
PNB-General Santos Branch where petitioners
payment is referred to as downpayment. But
then, as we said, PNB-General Santos Branch
has no authority to bind respondent by its
interpretation of the nature of the payment
made by petitioner.
In sum, the amounts paid by petitioner were not
in the nature of downpayment or earnest money
but were mere deposits or proof of his interest
in the purchase of Lot No. 19. Acceptance of
said amounts by respondent does not
presuppose perfection of any contract. [36]
It must be noted that petitioner has expressly
admitted that he had withdrawn the entire
amount of P580,000.00 deposit from PNB-
General Santos Branch.[37]
With the foregoing disquisition, the Court
foregoes resolution of the second issue as it is
evident that respondent acted well within its
rights when it rejected the last counter-offer of
petitioner.
In fine, petitioners petition lacks merit.
WHEREFORE, the petition is DENIED. The
Decision dated January 29, 2002 and
Resolution dated June 27, 2002 of the Court of
Appeals are AFFIRMED.
No costs.
SO ORDERED.
SECOND DIVISION
[G.R. No. 135929. April 20, 2001]
LOURDES ONG LIMSON, petitioner, vs. COURT OF
APPEALS, SPOUSES LORENZO DE VERA and
ASUNCION SANTOS-DE VERA, TOMAS
CUENCA, JR., and SUNVAR REALTY
DEVELOPMENT CORPORATION, respondents.
DECISION
BELLOSILLO, J.:
Filed under Rule 45 of the Rules of Court this Petition for
Review on Certiorari seeks to review, reverse and set aside
the Decision[1] of the Court of Appeals dated 18 May 1998
reversing that of the Regional Trial Court dated 30 June
1993. The petition likewise assails the Resolution[2] of the
appellate court of 19 October 1998 denying petitioners Motion
for Reconsideration.
Petitioner Lourdes Ong Limson, in her 14 May
1979 Complaint filed before the trial court,[3] alleged that in
July 1978 respondent spouses Lorenzo de Vera and Asuncion
Santos-de Vera, through their agent Marcosa Sanchez, offered
to sell to petitioner a parcel of land consisting of 48,260 square
meters, more or less, situated in Barrio San Dionisio,
Paraaque, Metro Manila; that respondent spouses informed her
that they were the owners of the subject property; that on 31
July 1978 she agreed to buy the property at the price of P34.00
per square meter and gave the sum of P20,000.00 to
respondent spouses as "earnest money;" that respondent
spouses signed a receipt therefor and gave her a 10-day option
period to purchase the property; that respondent Lorenzo de
Vera then informed her that the subject property was
mortgaged to Emilio Ramos and Isidro Ramos; that respondent
Lorenzo de Vera asked her to pay the balance of the purchase
price to enable him and his wife to settle their obligation with
the Ramoses.
Petitioner also averred that she agreed to meet respondent
spouses and the Ramoses on 5 August 1978 at the Office of the
Registry of Deeds of Makati, Metro Manila, to consummate
the transaction but due to the failure of respondent Asuncion
Santos-de Vera and the Ramoses to appear, no transaction was
formalized. In a second meeting scheduled on 11 August 1978
she claimed that she was willing and ready to pay the balance
of the purchase price but the transaction again did not
materialize as respondent spouses failed to pay the back taxes
of subject property. Subsequently, on 23 August 1978
petitioner allegedly gave respondent Lorenzo de Vera three (3)
checks in the total amount of P36,170.00 for the settlement of
the back taxes of the property and for the payment of the
quitclaims of the three (3) tenants of subject land. The amount
was purportedly considered part of the purchase price and
respondent Lorenzo de Vera signed the receipts therefor.
Petitioner alleged that on 5 September 1978 she was
surprised to learn from the agent of respondent spouses that the
property was the subject of a negotiation for the sale to
respondent Sunvar Realty Development Corporation
(SUNVAR) represented by respondent Tomas Cuenca, Jr. On
15 September 1978 petitioner discovered that although
respondent spouses purchased the property from the Ramoses
on 20 March 1970 it was only on 15 September 1978 that TCT
No. S-72946 covering the property was issued to respondent
spouses. As a consequence, she filed on the same day
an Affidavit of Adverse Claim with the Office of the Registry
of Deeds of Makati, Metro Manila, which was annotated on
TCT No. S-72946. She also claimed that on the same day she
informed respondent Cuenca of her "contract" to purchase the
property.
The Deed of Sale between respondent spouses and
respondent SUNVAR was executed on 15 September 1978 and
TCT No. S-72377 was issued in favor of the latter on 26
September 1978 with the Adverse Claim of petitioner
annotated thereon. Petitioner claimed that when respondent
spouses sold the property in dispute to SUNVAR, her valid and
legal right to purchase it was ignored if not
violated. Moreover, she maintained that SUNVAR was in bad
faith as it knew of her "contract" to purchase the subject
property from respondent spouses.
Finally, for the alleged unlawful and unjust acts of
respondent spouses, which caused her damage, prejudice and
injury, petitioner claimed that the Deed of Sale, should be
annuled and TCT No. S-72377 in the name of respondent
SUNVAR canceled and TCT No. S-72946 restored. She also
insisted that a Deed of Sale between her and respondent
spouses be now executed upon her payment of the balance of
the purchase price agreed upon, plus damages and attorneys
fees.
In their Answer[4] respondent spouses maintained that
petitioner had no sufficient cause of action against them; that
she was not the real party in interest; that the option to buy the
property had long expired; that there was no perfected contract
to sell between them; and, that petitioner had no legal capacity
to sue. Additionally, respondent spouses claimed actual, moral
and exemplary damages, and attorneys fees against petitioner.
On the other hand, respondents SUNVAR and Cuenca, in
their Answer,[5] alleged that petitioner was not the proper party
in interest and/or had no cause of action against them. But,
even assuming that petitioner was the proper party in interest,
they claimed that she could only be entitled to the return of any
amount received by respondent spouses. In the alternative,
they argued that petitioner had lost her option to buy the
property for failure to comply with the terms and conditions of
the agreement as embodied in the receipt issued
therefor. Moreover, they contended that at the time of the
execution of the Deed of Sale and the payment of
consideration to respondent spouses, they "did not know nor
was informed" of petitioners interest or claim over the subject
property. They claimed furthermore that it was only after the
signing of the Deed of Sale and the payment of the
corresponding amounts to respondent spouses that they came
to know of the claim of petitioner as it was only then that they
were furnished copy of the title to the property where
the Adverse Claim of petitioner was annotated. Consequently,
they also instituted a Cross-Claim against respondent spouses
for bad faith in encouraging the negotiations between them
without telling them of the claim of petitioner. The same
respondents maintained that had they known of the claim of
petitioner, they would not have initiated negotiations with
respondent spouses for the purchase of the property. Thus, they
prayed for reimbursement of all amounts and monies received
from them by respondent spouses, attorneys fees and expenses
for litigation in the event that the trial court should annul
the Deed of Sale and deprive them of their ownership and
possession of the subject land.
In their Answer to the Cross-Claim[6] of respondents
SUNVAR and Cuenca, respondent spouses insisted that they
negotiated with the former only after the expiration of the
option period given to petitioner and her failure to comply with
her commitments thereunder. Respondent spouses contended
that they acted legally and validly, in all honesty and good
faith. According to them, respondent SUNVAR made a
verification of the title with the Office of the Register of Deeds
of Metro Manila District IV before the execution of the Deed
of Absolute Sale. Also, they claimed that the Cross-Claim was
barred by a written waiver executed by respondent SUNVAR
in their favor. Thus, respondent spouses prayed for actual
damages for the unjustified filing of the Cross-Claim, moral
damages for the mental anguish and similar injuries they
suffered by reason thereof, exemplary damages "to prevent
others from emulating the bad example" of respondents
SUNVAR and Cuenca, plus attorneys fees.
After a protracted trial and reconstitution of the court
records due to the fire that razed the Pasay City Hall on 18
January 1992, the Regional Trial Court rendered its 30 June
1993 Decision[7] in favor of petitioner. It ordered (a) the
annulment and rescission of the Deed of Absolute
Sale executed on 15 September 1978 by respondent spouses in
favor of respondent SUNVAR; (b) the cancellation and
revocation of TCT No. S-75377 of the Registry of Deeds,
Makati, Metro Manila, issued in the name of respondent
Sunvar Realty Development Corporation, and the restoration
or reinstatement of TCT No. S-72946 of the same Registry
issued in the name of respondent spouses; (c) respondent
spouses to execute a deed of sale conveying ownership of the
property covered by TCT No. S-72946 in favor of petitioner
upon her payment of the balance of the purchase price agreed
upon; and, (d) respondent spouses to pay petitioner P50,000.00
as and for attorneys fees, and to pay the costs.
On appeal, the Court of Appeals completely reversed the
decision of the trial court. It ordered (a) the Register of Deeds
of Makati City to lift the Adverse Claim and such other
encumbrances petitioner might have filed or caused to be
annotated on TCT No. S-75377; and, (b) petitioner to pay (1)
respondent SUNVAR P50,000.00 as nominal
damages, P30,000.00 as exemplary damages and P20,000 as
attorneys fees; (2) respondent spouses, P15,000.00 as nominal
damages, P10,000.00 as exemplary damages and P10,000.00
as attorneys fees; and, (3) the costs.
Petitioner timely filed a Motion for Reconsideration which
was denied by the Court of Appeals on 19 October
1998. Hence, this petition.
At issue for resolution by the Court is the nature of the
contract entered into between petitioner Lourdes Ong Limson
on one hand, and respondent spouses Lorenzo de Vera and
Asuncion Santos-de Vera on the other.
The main argument of petitioner is that there was a
perfected contract to sell between her and respondent
spouses. On the other hand, respondent spouses and
respondents SUNVAR and Cuenca argue that what was
perfected between petitioner and respondent spouses was a
mere option.
A scrutiny of the facts as well as the evidence of the parties
overwhelmingly leads to the conclusion that the agreement
between the parties was a contract of option and not a contract
to sell.
An option, as used in the law of sales, is a continuing offer
or contract by which the owner stipulates with another that the
latter shall have the right to buy the property at a fixed price
within a time certain, 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.[8] It is not a
sale of property but a sale of the right to purchase. [9] 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, i.e., the
right or privilege to buy at the election or option of the other
party.[10] 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
the property gives the optionee the right or privilege of
accepting the offer and buying the property on certain terms. [11]
On the other hand, a contract, like a contract to sell,
involves the meeting of minds between two persons whereby
one binds himself, with respect to the other, to give something
or to render some service. [12] Contracts, in general, are perfected
by mere consent,[13] 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.[14]
The Receipt[15] that contains the contract between petitioner
and respondent spouses provides
Received from Lourdes Limson the sum of Twenty Thousand
Pesos (P20,000.00) under Check No. 22391 dated July 31,
1978 as earnest money with option to purchase a parcel of
land owned by Lorenzo de Vera located at Barrio San
Dionisio, Municipality of Paraaque, Province of Rizal with an
area of forty eight thousand two hundred sixty square meters
more or less at the price of Thirty Four Pesos (P34.00)[16] cash
subject to the condition and stipulation that have been agreed
upon by the buyer and me which will form part of the
receipt. Should the transaction of the property not materialize
not on the fault of the buyer, I obligate myself to return the full
amount of P20,000.00 earnest money with option to buy or
forfeit on the fault of the buyer. I guarantee to notify the buyer
Lourdes Limson or her representative and get her conformity
should I sell or encumber this property to a third person.This
option to buy is good within ten (10) days until the absolute
deed of sale is finally signed by the parties or the failure of the
buyer to comply with the terms of the option to buy as herein
attached.
In the interpretation of contracts, the ascertainment of the
intention of the contracting parties 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. [17] The
above Receipt readily shows that respondent spouses and
petitioner only entered into a contract of option; a contract by
which respondent spouses agreed with petitioner that the latter
shall have the right to buy the formers property at a fixed price
of P34.00 per square meter within ten (10) days from 31 July
1978. Respondent spouses did not sell their property; they did
not also agree to sell it; but they sold something, i.e., the
privilege to buy at the election or option of petitioner. The
agreement imposed no binding obligation on petitioner, aside
from the consideration for the offer.
The consideration of P20,000.00 paid by petitioner to
respondent spouses was referred to as "earnest money."
However, a careful examination of the words used indicates
that the money is not earnest money but option
money."Earnest money" and "option money" are not the same
but distinguished thus: (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,[18] but may even forfeit it depending on the
terms of the option.
There is nothing in the Receipt which indicates that
the P20,000.00 was part of the purchase price. Moreover, it
was not shown that there was a perfected sale between the
parties where earnest money was given. Finally, when
petitioner gave the "earnest money," the Receipt did not reveal
that she was bound to pay the balance of the purchase price. In
fact, she could even forfeit the money given if the terms of the
option were not met. Thus, the P20,000.00 could only be
money given as consideration for the option contract. That the
contract between the parties is one of option is buttressed by
the provision therein that should the transaction of the property
not materialize without fault of petitioner as buyer, respondent
Lorenzo de Vera obligates himself to return the full amount
of P20,000.00 "earnest money" with option to buy or
forfeit the same on the fault of petitioner. It is further bolstered
by the provision therein that guarantees petitioner that she or
her representative would be notified in case the subject
property was sold or encumbered to a third person. Finally,
the Receipt provided for a period within which the option to
buy was to be exercised, i.e., "within ten (10) days" from 31
July 1978.
Doubtless, the agreement between respondent spouses and
petitioner was an "option contract" or what is sometimes called
an "unaccepted offer." During the option period the agreement
was not converted into a bilateral promise to sell and to buy
where both respondent spouses and petitioner were then
reciprocally bound to comply with their respective
undertakings as petitioner did not timely, affirmatively and
clearly accept the offer of respondent spouses.
The rule is that except where a formal acceptance is not
required, although the acceptance must be affirmatively and
clearly made and 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 by the accepting party that clearly manifest a present
intention or determination to accept the offer to buy or
sell. But there is nothing in the acts, conduct or words of
petitioner that clearly manifest a present intention or
determination to accept the offer to buy the property of
respondent spouses within the 10-day option period. The only
occasion within the option period when petitioner could have
demonstrated her acceptance was on 5 August 1978 when,
according to her, she agreed to meet respondent spouses and
the Ramoses at the Office of the Register of Deeds of
Makati. Petitioners agreement to meet with respondent spouses
presupposes an invitation from the latter, which only
emphasizes their persistence in offering the property to the
former. But whether that showed acceptance by petitioner of
the offer is hazy and dubious.
On or before 10 August 1978, the last day of the option
period, no affirmative or clear manifestation was made by
petitioner to accept the offer. Certainly, there was no
concurrence of private respondent spouses offer and petitioners
acceptance thereof within the option period. Consequently,
there was no perfected contract to sell between the parties.
On 11 August 1978 the option period expired and the
exclusive right of petitioner to buy the property of respondent
spouses ceased. The subsequent meetings and negotiations,
specifically on 11 and 23 August 1978, between the parties
only showed the desire of respondent spouses to sell their
property to petitioner. Also, on 14 September 1978 when
respondent spouses sent a telegram to petitioner demanding
full payment of the purchase price on even date simply
demonstrated an inclination to give her preference to buy
subject property. Collectively, these instances did not indicate
that petitioner still had the exclusive right to purchase subject
property. Verily, the commencement of negotiations between
respondent spouses and respondent SUNVAR clearly
manifested that their offer to sell subject property to petitioner
was no longer exclusive to her.
We cannot subscribe to the argument of petitioner that
respondent spouses extended the option period when they
extended the authority of their agent until 31 August 1978. The
extension of the contract of agency could not operate to extend
the option period between the parties in the instant case. The
extension must not be implied but categorical and must show
the clear intention of the parties.
As to whether respondent spouses were at fault for the
non-consummation of their contract with petitioner, we agree
with the appellate court that they were not to be blamed. First,
within the option period, or on 4 August 1978, it was
respondent spouses and not petitioner who initiated the
meeting at the Office of the Register of Deeds of
Makati. Second, that the Ramoses failed to appear on 4 August
1978 was beyond the control of respondent spouses. Third, the
succeeding meetings that transpired to consummate the
contract were all beyond the option period and, as declared by
the Court of Appeals, the question of who was at fault was
already immaterial. Fourth, even assuming that the meetings
were within the option period, the presence of petitioner was
not enough as she was not even prepared to pay the purchase
price in cash as agreed upon. Finally, even without the
presence of the Ramoses, petitioner could have easily made the
necessary payment in cash as the price of the property was
already set at P34.00 per square meter and payment of the
mortgage could very well be left to respondent spouses.
Petitioner further claims that when respondent spouses
sent her a telegram demanding full payment of the purchase
price on 14 September 1978 it was an acknowledgment of their
contract to sell, thus denying them the right to claim otherwise.
We do not agree. As explained above, there was no
contract to sell between petitioner and respondent spouses to
speak of. Verily, the telegram could not operate to estop them
from claiming that there was such contract between them and
petitioner. Neither could it mean that
respondent spouses extended the option period. The telegram
only showed that respondent spouses were willing to give
petitioner a chance to buy subject property even if it was no
longer exclusive.
The option period having expired and acceptance was not
effectively made by petitioner, the purchase of subject property
by respondent SUNVAR was perfectly valid and entered into
in good faith. Petitioner claims that in August 1978 Hermigildo
Sanchez, the son of respondent spouses agent, Marcosa
Sanchez, informed Marixi Prieto, a member of the Board of
Directors of respondent SUNVAR, that the property was
already sold to petitioner. Also, petitioner maintains that on 5
September 1978 respondent Cuenca met with her and offered
to buy the property from her at P45.00 per square
meter. Petitioner contends that these incidents, including the
annotation of her Adverse Claim on the title of subject property
on 15 September 1978 show that respondent SUNVAR was
aware of the perfected sale between her and respondent
spouses, thus making respondent SUNVAR a buyer in bad
faith.
Petitioner is not correct. The dates mentioned, at least 5
and 15 September 1978, are immaterial as they were beyond
the option period given to petitioner. On the other hand, the
referral to sometime in August 1978 in the testimony of
Hermigildo Sanchez as emphasized by petitioner in her
petition is very vague. It could be within or beyond the option
period. Clearly then, even assuming that the meeting with
Marixi Prieto actually transpired, it could not necessarily mean
that she knew of the agreement between petitioner and
respondent spouses for the purchase of subject property as the
meeting could have occurred beyond the option period. In
which case, no bad faith could be attributed to respondent
SUNVAR. If, on the other hand, the meeting was within the
option period, petitioner was remiss in her duty to prove
so. Necessarily, we are left with the conclusion that respondent
SUNVAR bought subject property from respondent spouses in
good faith, for value and without knowledge of any flaw or
defect in its title.
The appellate court awarded nominal and exemplary
damages plus attorneys fees to respondent spouses and
respondent SUNVAR. But nominal damages are adjudicated to
vindicate or recognize the right of the plaintiff that has been
violated or invaded by the defendant. [19] In the instant case, the
Court recognizes the rights of all the parties and finds no
violation or invasion of the rights of respondents by
petitioner. Petitioner, in filing her complaint, only seeks relief,
in good faith, for what she believes she was entitled to and
should not be made to suffer therefor. Neither should
exemplary damages be awarded to respondents as they are
imposed only by way of example or correction for the public
good and only in addition to the moral, temperate, liquidated
or compensatory damages.[20] No such kinds of damages were JOSE BASA, MANUEL BASA,
awarded by the Court of Appeals, only nominal, which was not LAURETA BASA, DELIA BASA,
justified in this case. Finally, attorneys fees could not also be JESUS BASA and ROSALINDA
recovered as the Court does not deem it just and equitable BASA, Heirs of the late MERCEDES
under the circumstances. CATALAN,
Respondents. July 31, 2007
WHEREFORE, the petition is DENIED. The Decision of
the Court of Appeals ordering the Register of Deeds of Makati x-----------------------------------------
City to lift the adverse claim and such other encumbrances -------x
petitioner Lourdes Ong Limson may have filed or caused to be
annotated on TCT No. S-75377 is AFFIRMED, with the
MODIFICATION that the award of nominal and exemplary
DECISION
damages as well as attorneys fees is DELETED.

SO ORDERED.
PUNO, C.J.:
FIRST DIVISION
This is a petition for review on certiorari under Rule
45 of the Revised Rules of Court of the Court of Appeals
CORAZON CATALAN, G.R. No. 159567 decision in CA-G.R. CV No. 66073, which affirmed the
LIBRADA CATALAN-LIM, judgment of the Regional Trial Court, Branch 69, Lingayen,
EULOGIO CATALAN, Pangasinan, in Civil Case No. 17666, dismissing the
MILA CATALAN-MILAN,
Complaint for Declaration of Nullity of Documents,
ZENAIDA CATALAN, Present:
ALEX CATALAN, DAISY Recovery of Possession and Ownership, and damages.
CATALAN, FLORIDA PUNO, C.J., Chairperson,
CATALAN and GEMMA SANDOVAL-GUTIERREZ, The facts, which are undisputed by the parties, follow:
CATALAN, Heirs of the late CORONA,
FELICIANO CATALAN, AZCUNA, and On October 20, 1948, FELICIANO CATALAN
Petitioners, GARCIA, JJ. (Feliciano) was discharged from active military service. The
- versus -
Board of Medical Officers of the Department of Veteran
Promulgated:
Affairs found that he was unfit to render military service due
to his schizophrenic reaction, catatonic type, which
incapacitates him because of flattening of mood and affect,
preoccupation with worries, withdrawal, and sparce (sic)
and pointless speech.[1]
On September 28, 1949, Feliciano married Corazon
Cerezo.[2]
On June 16, 1951, a document was executed, titled
Absolute Deed of Donation,[3] wherein Feliciano allegedly
donated to his sister MERCEDES CATALAN(Mercedes)
one-half of the real property described, viz:
A parcel of land located at Barangay Basing,
Binmaley, Pangasinan. Bounded on the North by heirs
of Felipe Basa; on the South by Barrio Road; On the
East by heirs of Segundo Catalan; and on the West by
Roman Basa. Containing an area of Eight Hundred One
(801) square meters, more or less.
The donation was registered with the Register of
Deeds. The Bureau of Internal Revenue then cancelled Tax
Declaration No. 2876, and, in lieu thereof, issued Tax
Declaration No. 18080[4] to Mercedes for the 400.50 square
meters donated to her. The remaining half of the property
remained in Felicianos name under Tax Declaration No.
18081.[5]
On December 11, 1953, Peoples Bank and Trust
Company filed Special Proceedings No. 4563[6] before the
Court of First Instance of Pangasinan to declare Feliciano
incompetent. On December 22, 1953, the trial court issued
its Order for Adjudication of Incompetency for Appointing
Guardian for the Estate and Fixing Allowance[7] of
Feliciano. The following day, the trial court appointed
Peoples Bank and Trust Company as Felicianos guardian.
[8]
Peoples Bank and Trust Company has been subsequently
renamed, and is presently known as the Bank of the
Philippine Islands (BPI).
On November 22, 1978, Feliciano and Corazon
Cerezo donated Lots 1 and 3 of their property, registered
under Original Certificate of Title (OCT) No. 18920, to their
son Eulogio Catalan.[9]
On March 26, 1979, Mercedes sold the property in
issue in favor of her children Delia and Jesus Basa. [10] The
Deed of Absolute Sale was registered with the Register of
Deeds of Pangasinan on February 20, 1992, and Tax
Declaration No. 12911 was issued in the name of
respondents.[11]
On June 24, 1983, Feliciano and Corazon Cerezo
donated Lot 2 of the aforementioned property registered
under OCT No. 18920 to their children Alex Catalan,
Librada Catalan and Zenaida Catalan. On February 14,
1983, Feliciano and Corazon Cerezo donated Lot 4 (Plan
Psu-215956) of the same OCT No. 18920 to Eulogio and
Florida Catalan.[12]
On April 1, 1997, BPI, acting as Felicianos guardian,
filed a case for Declaration of Nullity of Documents,
Recovery of Possession and Ownership,[13] as well as
damages against the herein respondents. BPI alleged that the
Deed of Absolute Donation to Mercedes was void ab initio,
as Feliciano never donated the property to Mercedes. In
addition, BPI averred that even if Feliciano had truly
intended to give the property to her, the donation would still
be void, as he was not of sound mind and was therefore
incapable of giving valid consent. Thus, it claimed that if the
Deed of Absolute Donation was void ab initio, the
subsequent Deed of Absolute Sale to Delia and Jesus Basa
should likewise be nullified, for Mercedes Catalan had no
right to sell the property to anyone.BPI raised doubts about
the authenticity of the deed of sale, saying that its
registration long after the death of Mercedes Catalan
indicated fraud. Thus, BPI sought remuneration for incurred
damages and litigation expenses.
On August 14, 1997, Feliciano passed away. The
original complaint was amended to substitute his heirs in
lieu of BPI as complainants in Civil Case No. 17666.
On December 7, 1999, the trial court found that the
evidence presented by the complainants was insufficient to
overcome the presumption that Feliciano was sane and
competent at the time he executed the deed of donation in
favor of Mercedes Catalan. Thus, the court declared, the
presumption of sanity or competency not having been duly
impugned, the presumption of due execution of the donation
in question must be upheld.[14] It rendered judgment, viz:
WHEREFORE, in view of the foregoing
considerations, judgment is hereby rendered:
1. Dismissing plaintiffs complaint;
2. Declaring the defendants Jesus Basa and
Delia Basa the lawful owners of the land in
question which is now declared in their
names under Tax Declaration No. 12911
(Exhibit 4);
3. Ordering the plaintiff to pay the defendants
Attorneys fees of P10,000.00, and to pay the
Costs.(sic)
SO ORDERED.[15]
Petitioners challenged the trial courts decision before
the Court of Appeals via a Notice of Appeal pursuant to Rule
41 of the Revised Rules of Court.[16] The appellate court
affirmed the decision of the trial court and held, viz:
In sum, the Regional Trial Court did not commit
a reversible error in disposing that plaintiff-appellants
failed to prove the insanity or mental incapacity of late
(sic) Feliciano Catalan at the precise moment when the
property in dispute was donated.
 Thus, all the elements for validity of contracts SO ORDERED.[17]
having been present in the 1951 donation coupled with
compliance with certain solemnities required by the
Civil Code in donation inter vivos of real property
under Article 749, which provides: Thus, petitioners filed the present appeal and raised

xxx the following issues:

1. WHETHER OR NOT THE HONORABLE
Mercedes Catalan acquired valid title of COURT OF APPEALS HAS DECIDED CA-
ownership over the property in dispute. By virtue of her G.R. CV NO. 66073 IN A WAY PROBABLY
ownership, the property is completely subjected to her NOT IN ACCORD WITH LAW OR WITH
will in everything not prohibited by law of the THE APPLICABLE DECISIONS OF THE
concurrence with the rights of others (Art. 428, NCC). HONORABLE COURT IN HOLDING THAT
THE REGIONAL TRIAL COURT DID NOT
The validity of the subsequent sale dated 26 COMMIT A REVERSIBLE ERROR IN
March 1979 (Exhibit 3, appellees Folder of Exhibits) of DISPOSING THAT PLAINTIFF-
the property by Mercedes Catalan to defendant- APPELLANTS (PETITIONERS) FAILED TO
appellees Jesus Basa and Delia Basa must be PROVE THE INSANITY OR MENTAL
upheld.Nothing of the infirmities which allegedly INCAPACITY OF THE LATE FELICIANO
flawed its authenticity is evident much less apparent in CATALAN AT THE PRECISE MOMENT
the deed itself or from the evidence adduced. As WHEN THE PROPERTY IN DISPUTE WAS
correctly stated by the RTC, the fact that the Deed of DONATED;
Absolute Sale was registered only in 1992, after the
death of Mercedes Catalan does not make the sale void 2. WHETHER OR NOT THE CERTIFICATE OF
ab initio. Moreover, as a notarized document, the deed DISABILITY FOR DISCHARGE (EXHIBIT S)
of absolute sale carries the evidentiary weight conferred AND THE REPORT OF A BOARD OF
upon such public document with respect to its due OFFICERS CONVENED UNDER THE
execution (Garrido vs. CA 236 SCRA 450). In a PROVISIONS OF ARMY REGULATIONS
similar vein, jurisprudence has it that documents (EXHIBITS S-1 AND S-2) ARE ADMISSIBLE
acknowledged before a notary public have in their favor IN EVIDENCE;
the presumption of regularity, and to contradict the
same, there must be evidence that is clear, convincing 3. WHETHER OR NOT THE HONORABLE
and more than preponderant (Salame vs. CA, 239 COURT OF APPEALS HAS DECIDED CA-
SCRA 256). G.R. CV NO. 66073 IN A WAY PROBABLY
NOT IN ACCORD WITH LAW OR WITH
WHEREFORE, foregoing premises considered, THE APPLICABLE DECISIONS OF THE
the Decision dated December 7, 1999 of the Regional HONORABLE COURT IN UPHOLDING THE
Trial Court, Branch 69, is hereby affirmed. SUBSEQUENT SALE OF THE PROPERTY
IN DISPUTE BY THE DONEE MERCEDES
 CATALAN TO HER CHILDREN
RESPONDENTS JESUS AND DELIA BASA;
AND-
4. WHETHER OR NOT CIVIL CASE NO.
17666 IS BARRED BY PRESCRIPTION AND
LACHES.[18]
Petitioners aver that the presumption of Felicianos
competence to donate property to Mercedes had been
rebutted because they presented more than the requisite
preponderance of evidence.First, they presented the
Certificate of Disability for the Discharge of Feliciano
Catalan issued on October 20, 1948 by the Board of Medical
Officers of the Department of Veteran Affairs. Second, they
proved that on December 22, 1953, Feliciano was judged an
incompetent by the Court of First Instance of Pangasinan,
and put under the guardianship of BPI. Based on these two
pieces of evidence, petitioners conclude that Feliciano had
been suffering from a mental condition since 1948 which
incapacitated him from entering into any contract thereafter,
until his death on August 14, 1997. Petitioners contend that
Felicianos marriage to Corazon Cerezo on September 28,
1948 does not prove that he was not insane at the time he
made the questioned donation. They further argue that the
donations Feliciano executed in favor of his successors
(Decision, CA-G.R. CV No. 66073) also cannot prove his
competency because these donations were approved and
confirmed in the guardianship proceedings.[19] In addition,
petitioners claim that the Deed of Absolute Sale executed
on March 26, 1979 by Mercedes Catalan and her children
Jesus and Delia Basa is simulated and fictitious. This is
allegedly borne out by the fact that the document was
registered only on February 20, 1992, more that 10 years
after Mercedes Catalan had already died. Since Delia Basa
and Jesus Basa both knew that Feliciano was incompetent to
enter into any contract, they cannot claim to be innocent
purchasers of the property in question.[20] Lastly, petitioners
assert that their case is not barred by prescription or laches
under Article 1391 of the New Civil Code because they had
filed their case on April 1, 1997, even before the four year
period after Felicianos death on August 14, 1997 had begun.
[21]
The petition is bereft of merit, and we affirm the
findings of the Court of Appeals and the trial court.
A donation is an act of liberality whereby a person
disposes gratuitously a thing or right in favor of another,
who accepts it.[22] Like any other contract, an agreement of
the parties is essential. Consent in contracts presupposes the
following requisites: (1) it should be intelligent or with an
exact notion of the matter to which it refers; (2) it should be
free; and (3) it should be spontaneous.[23] The parties'
intention must be clear and the attendance of a vice of
consent, like any contract, renders the donation voidable.[24]
 In order for donation of property to be valid, what is
crucial is the donors capacity to give consent at the time of
the donation. Certainly, there lies no doubt in the fact that
insanity impinges on consent freely given.[25] However, the
burden of proving such incapacity rests upon the person who
alleges it; if no sufficient proof to this effect is presented,
capacity will be presumed.[26]
A thorough perusal of the records of the case at bar
indubitably shows that the evidence presented by the
petitioners was insufficient to overcome the presumption
that Feliciano was competent when he donated the property
in question to Mercedes. Petitioners make much ado of the
fact that, as early as 1948, Feliciano had been found to be
suffering from schizophrenia by the Board of Medical
Officers of the Department of Veteran Affairs. By itself,
however, the allegation cannot prove the incompetence of
Feliciano.
A study of the nature of schizophrenia will show that
Feliciano could still be presumed capable of attending to his
property rights. Schizophrenia was brought to the attention
of the public when, in the late 1800s, Emil Kraepelin, a
German psychiatrist, combined hebrephrenia and catatonia
with certain paranoid states and called the condition
dementia praecox. Eugene Bleuler, a Swiss psychiatrist,
modified Kraepelins conception in the early 1900s to
include cases with a better outlook and in 1911 renamed the
condition schizophrenia. According to medical references, in
persons with schizophrenia, there is a gradual onset of
symptoms, with symptoms becoming increasingly bizarre as
the disease progresses. The condition improves (remission
or residual stage) and worsens (relapses) in
cycles. Sometimes, sufferers may appear relatively normal,
while other patients in remission may appear strange
because they speak in a monotone, have odd speech habits,
appear to have no emotional feelings and are prone to have
ideas of reference. The latter refers to the idea that random
social behaviors are directed against the sufferers.[27] It has
been proven that the administration of the correct medicine
helps the patient. Antipsychotic medications help bring
biochemical imbalances closer to normal in a
schizophrenic. Medications reduce delusions, hallucinations
and incoherent thoughts and reduce or eliminate chances of
relapse.[28] Schizophrenia can result in a dementing illness
similar in many aspects to Alzheimers disease. However, the
illness will wax and wane over many years, with only very
slow deterioration of intellect.[29]
From these scientific studies it can be deduced that a
person suffering from schizophrenia does not necessarily
lose his competence to intelligently dispose his property. By
merely alleging the existence of schizophrenia, petitioners
failed to show substantial proof that at the date of the
donation, June 16, 1951, Feliciano Catalan had lost total
control of his mental faculties. Thus, the lower courts
correctly held that Feliciano was of sound mind at that time
and that this condition continued to exist until proof to the
contrary was adduced.[30] Sufficient proof of his infirmity to
give consent to contracts was only established when the
Court of First Instance of Pangasinan declared him an
incompetent on December 22, 1953.[31]
It is interesting to note that the petitioners questioned
Felicianos capacity at the time he donated the property, yet
did not see fit to question his mental competence when he
entered into a contract of marriage with Corazon Cerezo or
when he executed deeds of donation of his other properties
in their favor. The presumption that Feliciano remained
competent to execute contracts, despite his illness, is
bolstered by the existence of these other contracts.
Competency and freedom from undue influence, shown to
have existed in the other acts done or contracts executed, are
presumed to continue until the contrary is shown.[32]
Needless to state, since the donation was valid,
Mercedes had the right to sell the property to whomever she
chose.[33] Not a shred of evidence has been presented to
prove the claim that Mercedes sale of the property to her
children was tainted with fraud or falsehood. It is of little
bearing that the Deed of Sale was registered only after the
death of Mercedes. What is material is that the sale of the
property to Delia and Jesus Basa was legal and binding at
the time of its execution. Thus, the property in question
belongs to Delia and Jesus Basa.
Finally, we note that the petitioners raised the issue of
prescription and laches for the first time on appeal before
this Court. It is sufficient for this Court to note that even if
the present appeal had prospered, the Deed of Donation was
still a voidable, not a void, contract. As such, it remained
binding as it was not annulled in a proper action in court
within four years.[34]
IN VIEW WHEREOF, there being no merit in the
arguments of the petitioners, the petition is DENIED. The
decision of the Court of Appeals in CA-G.R. CV No. 66073
is affirmed in toto.
SO ORDERED.
SECOND DIVISION
[G.R. No. 127540. October 17, 2001]
EUGENIO DOMINGO, CRISPIN MANGABAT and
SAMUEL CAPALUNGAN, petitioners, vs. HON.
COURT OF APPEALS, FELIPE C. RIGONAN
and CONCEPCION R. RIGONAN, respondents.
EUGENIO DOMINGO, CRISPIN MANGABAT and
SAMUEL CAPALUNGAN, petitioners, vs. HON.
COURT OF APPEALS, THE DIRECTOR OF
 LANDS, and FELIPE C. RIGONAN
CONCEPCION R. RIGONAN, respondents.
DECISION
QUISUMBING, J.:
This petition seeks to annul the decision of the Court of Appeals
[1]
dated August 29, 1996, which set aside the decision of the Regional
Trial Court of Batac, Ilocos Norte, Branch 17, in Civil Case No. 582-
17 for reinvindicacion consolidated with Cadastral Case No. 1. The [2]
petition likewise seeks to annul the resolution dated December 11,
1996, denying petitioners motion for reconsideration.
The facts of this case, culled from the records, are as follows:
Paulina Rigonan owned three (3) parcels of land, located at Batac
and Espiritu, Ilocos Norte, including the house and warehouse on one
parcel. She allegedly sold them to private respondents, the spouses
Felipe and Concepcion Rigonan, who claim to be her relatives. In
1966, herein petitioners Eugenio Domingo, Crispin Mangabat and
Samuel Capalungan, who claim to be her closest surviving relatives,
allegedly took possession of the properties by means of stealth, force
and intimidation, and refused to vacate the same. Consequently, on
February 2, 1976, herein respondent Felipe Rigonan filed a complaint
for reinvindicacion against petitioners in the Regional Trial Court of
Batac, Ilocos Norte. On July 3, 1977, he amended the complaint and
included his wife as co-plaintiff. They alleged that they were the
owners of the three parcels of land through the deed of sale executed
by Paulina Rigonan on January 28, 1965; that since then, they had
been in continuous possession of the subject properties and had
introduced permanent improvements thereon; and that defendants
(now petitioners) entered the properties illegally, and they refused to
leave them when asked to do so.
Herein petitioners, as defendants below, contested plaintiffs
claims. According to defendants, the alleged deed of absolute sale was
void for being spurious as well as lacking consideration. They said that
and Paulina Rigonan did not sell her properties to anyone. As her nearest
surviving kin within the fifth degree of consanguinity, they inherited
the three lots and the permanent improvements thereon when Paulina
died in 1966. They said they had been in possession of the contested
properties for more than 10 years. Defendants asked for damages
against plaintiffs.
During trial, Juan Franco, Notary Public Evaristo P. Tagatag and
[3]
plaintiff Felipe Rigonan testified for plaintiffs (private respondents
now).
Franco testified that he was a witness to the execution of the
questioned deed of absolute sale. However, when cross-examined and
shown the deed he stated that the deed was not the document he signed
as a witness, but rather it was the will and testament made by Paulina
Rigonan.
Atty. Tagatag testified that he personally prepared the deed, he
saw Paulina Rigonan affix her thumbprint on it and he signed it both
as witness and notary public. He further testified that he also notarized
Paulinas last will and testament dated February 19, 1965. The will
mentioned the same lots sold to private respondents. When asked why
the subject lots were still included in the last will and testament, he
could not explain. Atty. Tagatag also mentioned that he registered the
original deed of absolute sale with the Register of Deeds.
Plaintiff Felipe Rigonan claimed that he was Paulinas close
relative. Their fathers were first cousins. However, he could not recall
the name of Paulinas grandfather. His claim was disputed by
defendants, who lived with Paulina as their close kin. He admitted the
discrepancies between the Register of Deeds copy of the deed and the
copy in his possession. But he attributed them to the representative
from the Office of the Register of Deeds who went to plaintiffs house
after that Office received a subpoena duces tecum. According to him,
the representative showed him blanks in the deed and then the
representative filled in the blanks by copying from his (plaintiffs)
copy.
 Counsel for defendants (petitioners herein) presented as witnesses
Jose Flores, the owner of the adjacent lot; Ruben Blanco, then acting
Registrar of Deeds in Ilocos Norte; and Zosima Domingo, wife of
defendant Eugenio Domingo.
Jose Flores testified that he knew defendants, herein petitioners,
who had lived on the land with Paulina Rigonan since he could
remember and continued to live there even after Paulinas death. He
said he did not receive any notice nor any offer to sell the lots from
Paulina, contrary to what was indicated in the deed of sale that the
vendor had notified all the adjacent owners of the sale. He averred he
had no knowledge of any sale between Paulina and private
respondents.
Ruben Blanco, the acting Registrar of Deeds, testified that only
the carbon copy, also called a duplicate original, of the deed of sale
was filed in his office, but he could not explain why this was so.
Zosima Domingo testified that her husband, Eugenio Domingo,
was Paulinas nephew. Paulina was a first cousin of Eugenios
father. She also said that they lived with Paulina and her husband, Jose
Guerson, since 1956. They took care of her, spent for her daily needs
and medical expenses, especially when she was hospitalized prior to
her death. She stated that Paulina was never badly in need of money
during her lifetime.
On March 23, 1994, the trial court rendered judgment in favor of
defendants (now the petitioners). It disposed:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of defendants and against the plaintiffs, and
as prayed for, the Amended Complaint is
hereby DISMISSED.
Defendants are hereby declared, by virtue of intestate
succession, the lawful owners and possessors of the house
including the bodega and the three (3) parcels of land in suit
and a Decree of Registration adjudicating the ownership of the
said properties to defendants is hereby issued.
The alleged deed of sale (Exhs. A, A-1, 1 and 1-a) is hereby
declared null and void and fake and the prayer for the issuance
of a writ of preliminary injunction is hereby denied.
Plaintiffs are hereby ordered to pay defendants:
a) P20,000.00 as moral damages;
b) P10,000.00 as exemplary damages;
c) P10,000.00 attorneys fees and other litigation expenses.
No pronouncement as to costs. [4]
Private respondents herein appealed to the Court of Appeals.
On August 29, 1996, the CA reversed the trial courts decision,
thus:
WHEREFORE, the decision dated March 23, 1994 is
hereby SET ASIDE. The plaintiffs-appellants Felipe Rigonan
and Concepcion Rigonan are declared the owners of the
properties under litigation and the defendants-appellees are
hereby ordered to VACATE the subject properties and
SURRENDER the possession thereof to the heirs of the
plaintiffs-appellants.
Costs against the defendants-appellees. [5]
Hence, this petition assigning the following as errors:
I
THE RESPONDENT COURT OF APPEALS HAS DECIDED
QUESTIONS OF LEGAL SUBSTANCE AND
SIGNIFICANCE NOT IN ACCORDANCE WITH THE
EVIDENCE, LAW AND WITH THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT.
II
THAT THE FINDINGS OF RESPONDENT COURT OF
APPEALS ARE CONTRARY TO THOSE OF THE TRIAL
COURT AND CLEARLY VIOLATES THE RULE THAT THE
FACTUAL FINDINGS OF TRIAL COURTS ARE ENTITLED
TO GREAT WEIGHT AND RESPECT ON APPEAL,
ESPECIALLY WHEN SAID FINDINGS ARE ESTABLISHED
BY UNREBUTTED TESTIMONIAL AND DOCUMENTARY
EVIDENCE.
III
THAT THE FINDINGS AND CONCLUSIONS OF
RESPONDENT COURT OF APPEALS ARE GROUNDED
ENTIRELY ON SPECULATIONS, SURMISES,
CONJECTURES, OR ON INFERENCES MANIFESTLY
MISTAKEN.
IV
THAT THE RESPONDENT COURT OF APPEALS
MANIFESTLY OVERLOOKED CERTAIN RELEVANT
FACTS NOT DISPUTED BY THE PARTIES AND WHICH, IF
PROPERLY CONSIDERED, WOULD JUSTIFY A
DIFFERENT CONCLUSION.
V
THAT THE FINDINGS OF FACT OF RESPONDENT COURT
OF APPEALS ARE PREMISED ON SUPPOSED ABSENCE
OF EVIDENCE BUT IS CONTRADICTED BY THE
EVIDENCE ON RECORD THUS CONSTITUTES GRAVE
ABUSE OF DISCRETION.[6]
The basic issue for our consideration is, did private respondents
sufficiently establish the existence and due execution of the Deed of
Absolute and Irrevocable Sale of Real Property? Marked as Exhibits
A, A-1, 1 and 1-a, this deed purportedly involved nine (9) parcels of
land, inclusive of the three (3) parcels in dispute, sold at the price of
P850 by Paulina Rigonan to private respondents on January 28, 1965,
at Batac, Ilocos Norte. The trial court found the deed fake, being a
[7]
carbon copy with no typewritten original presented; and the court
concluded that the documents execution was tainted with alterations,
defects, tamperings, and irregularities which render it null and void ab
initio.
[8]
Petitioners argue that the Court of Appeals erred in not applying
the doctrine that factual findings of trial courts are entitled to great
weight and respect on appeal, especially when said findings are
established by unrebutted testimonial and documentary evidence. They
add that the Court of Appeals, in reaching a different conclusion, had
decided the case contrary to the evidence presented and the law
applicable to the case. Petitioners maintain that the due execution of
the deed of sale was not sufficiently established by private
respondents, who as plaintiffs had the burden of proving it. First, the
testimonies of the two alleged instrumental witnesses of the sale,
namely, Juan Franco and Efren Sibucao, were dispensed with and
discarded when Franco retracted his oral and written testimony that he
was a witness to the execution of the subject deed. As a consequence,
the appellate court merely relied on Atty. Tagatags (the notary public)
testimony, which was incredible because aside from taking the double
role of a witness and notary public, he was a paid witness. Further his
testimony, that the subject deed was executed in the house of Paulina
Rigonan, was rebutted by Zosima Domingo, Paulinas housekeeper,
who said that she did not see Atty. Tagatag, Juan Franco and Efren
Sibucao in Paulinas house on the alleged date of the deeds execution.
Secondly, petitioners said that private respondents failed to
account for the typewritten original of the deed of sale and that the
carbon copy filed with the Register of Deeds was only a duplicate
which contained insertions and erasures. Further, the carbon copy was
without an affidavit of explanation, in violation of the Administrative
Code as amended, which requires that if the original deed of sale is not
presented or available upon registration of the deed, the carbon copy or
so-called duplicate original must be accompanied by an affidavit of
explanation, otherwise, registration must be denied.[9]
Thirdly, petitioners aver that the consideration of only P850 for
the parcels of land sold, together with a house and a warehouse, was
another indication that the sale was fictitious because no person who
was financially stable would sell said property at such a grossly
inadequate consideration.
Lastly, petitioners assert that there was abundant evidence that at
the time of the execution of the deed of sale, Paulina Rigonan was
already senile. She could not have consented to the sale by merely
imprinting her thumbmark on the deed.
In their comment, private respondents counter that at the outset
the petition must be dismissed for it lacks a certification against
forum-shopping. Nonetheless, even disregarding this requirement, the
petition must still be denied in due course for it does not present any
substantial legal issue, but factual or evidentiary ones which were
already firmly resolved by the Court of Appeals based on records and
the evidence presented by the parties. Private respondents claim that
the factual determination by the trial court lacks credibility for it was
made by the trial judge who presided only in one hearing of the
case. The trial judge could not validly say that the deed of absolute
sale was fake because no signature was forged, according to private
respondents; and indeed a thumbmark, said to be the sellers own,
appears thereon.
In their reply, petitioners said that the copy of the petition filed
with this Court was accompanied with a certification against forum
shopping. If private respondents copy did not contain same
certification, this was only due to inadvertence. Petitioners ask for the
Courts indulgence for anyway there was substantial compliance with
Revised Circular No. 28-91.
On the contention that here only factual issues had been raised,
hence not the proper subject for review by this Court, petitioners reply
that this general rule admits of exceptions, as when the factual findings
of the Court of Appeals and the trial court are contradictory; when the
findings are grounded entirely on speculations, surmises or
conjectures; and when the Court of Appeals overlooked certain
relevant facts not disputed by the parties which if properly considered
would justify a different conclusion. All these, according to
petitioners, are present in this case.
Before proceeding to the main issue, we shall first settle
procedural issues raised by private respondents.
While the trial judge deciding the case presided over the hearings
of the case only once, this circumstance could not have an adverse
effect on his decision. The continuity of a court and the efficacy of its
proceedings are not affected by the death, resignation or cessation
from the service of the presiding judge. A judge may validly render a
decision although he has only partly heard the testimony of the
witnesses. After all, he could utilize and rely on the records of the
[10]
case, including the transcripts of testimonies heard by the former
presiding judge.
On the matter of the certification against forum-shopping,
petitioners aver that they attached one in the copy intended for this
Court. This is substantial compliance. A deviation from a rigid
enforcement of the rules may be allowed to attain their prime objective
for, after all, the dispensation of justice is the core reason for the courts
existence.[11]
While the issues raised in this petition might appear to be mainly
factual, this petition is properly given due course because of the
contradictory findings of the trial court and the Court of
Appeals. Further, the latter court apparently overlooked certain
relevant facts which justify a different conclusion. Moreover, a
[12]
compelling sense to make sure that justice is done, and done rightly in
the light of the issues raised herein, constrains us from relying on
technicalities alone to resolve this petition.
Now, on the main issue. Did private respondents establish the
existence and due execution of the deed of sale? Our finding is in the
negative. First, note that private respondents as plaintiffs below
presented only a carbon copy of this deed. When the Register of Deeds
was subpoenaed to produce the deed, no original typewritten deed but
only a carbon copy was presented to the trial court. Although the Court
of Appeals calls it a duplicate original, the deed contained filled in
blanks and alterations. None of the witnesses directly testified to prove
positively and convincingly Paulinas execution of the original deed of
sale. The carbon copy did not bear her signature, but only her alleged
thumbprint. Juan Franco testified during the direct examination that he
was an instrumental witness to the deed. However, when cross-
examined and shown a copy of the subject deed, he retracted and said
that said deed of sale was not the document he signed as witness. He [13]
declared categorically he knew nothing about it. [14]
We note that another witness, Efren Sibucao, whose testimony
should have corroborated Atty. Tagatags, was not presented and his
affidavit was withdrawn from the court, leaving only Atty. Tagatags
[15]
testimony, which aside from being uncorroborated, was self-serving.
Secondly, we agree with the trial court that irregularities abound
regarding the execution and registration of the alleged deed of sale. On
record, Atty. Tagatag testified that he himself registered the original
deed with the Register of Deeds. Yet, the original was nowhere to be
[16]
found and none could be presented at the trial. Also, the carbon copy
on file, which is allegedly a duplicate original, shows intercalations
and discrepancies when compared to purported copies in
existence. The intercalations were allegedly due to blanks left unfilled
by Atty. Tagatag at the time of the deeds registration. The blanks were
allegedly filled in much later by a representative of the Register of
Deeds. In addition, the alleged other copies of the document bore
different dates of entry: May 16, 1966, 10:20 A.M. and June 10,
[17]
1966, 3:16 P.M., and different entry numbers: 66246, 74389 and
[18] [19]
64369. The deed was apparently registered long after its alleged date
[20]
of execution and after Paulinas death on March 20, 1966.
Admittedly, the alleged vendor Paulina Rigonan was not given a
[21]
copy. [22]
Furthermore, it appears that the alleged vendor was never asked to
vacate the premises she had purportedly sold. Felipe testified that he
had agreed to let Paulina stay in the house until her death. In Alcos v.
[23]
IAC, 162 SCRA 823 (1988), the buyers immediate possession and
occupation of the property was deemed corroborative of the
truthfulness and authenticity of the deed of sale. The alleged vendors
continued possession of the property in this case throws an inverse
implication, a serious doubt on the due execution of the deed of
sale. Noteworthy, the same parcels of land involved in the alleged sale
were still included in the will subsequently executed by Paulina and
notarized by the same notary public, Atty. Tagatag. These [24]
circumstances, taken together, militate against unguarded acceptance
of the due execution and genuineness of the alleged deed of sale.
Thirdly, we have to take into account the element of consideration
for the sale. The price allegedly paid by private respondents for nine
(9) parcels, including the three parcels in dispute, a house and a
warehouse, raises further questions. Consideration is the why of a
contract, the essential reason which moves the contracting parties to
enter into the contract. On record, there is unrebutted testimony that
[25]
Paulina as landowner was financially well off. She loaned money to
several people. We see no apparent and compelling reason for her to
[26]
sell the subject parcels of land with a house and warehouse at a meager
price of P850 only.
In Rongavilla vs. CA, 294 SCRA 289 (1998), private respondents
were in their advanced years, and were not in dire need of money,
except for a small amount of P2,000 which they said were loaned by
petitioners for the repair of their houses roof. We ruled against
petitioners, and declared that there was no valid sale because of lack of
consideration.
In the present case, at the time of the execution of the alleged
contract, Paulina Rigonan was already of advanced age and senile. She
died an octogenarian on March 20, 1966, barely over a year when the
deed was allegedly executed on January 28, 1965, but before copies of
the deed were entered in the registry allegedly on May 16 and June 10,
1966. The general rule is that a person is not incompetent to contract
merely because of advanced years or by reason of physical infirmities.
However, when such age or infirmities have impaired the mental
[27]
faculties so as to prevent the person from properly, intelligently, and
firmly protecting her property rights then she is undeniably
incapacitated. The unrebutted testimony of Zosima Domingo shows CORTES, VICTOR CORTES, MARICEL
that at the time of the alleged execution of the deed, Paulina was CORTES, ALELEI CORTES *
AND
already incapacitated physically and mentally. She narrated that
ANJEI CORTES, petitioners, vs. LEOPOLDO
**

Paulina played with her waste and urinated in bed. Given these
circumstances, there is in our view sufficient reason to seriously doubt
that she consented to the sale of and the price for her parcels of
land. Moreover, there is no receipt to show that said price was paid to
and received by her. Thus, we are in agreement with the trial courts
finding and conclusion on the matter:
The whole evidence on record does not show clearly that the
fictitious P850.00 consideration was ever delivered to the
vendor. Undisputably, the P850.00 consideration for the nine
(9) parcels of land including the house and bodega is grossly
and shockingly inadequate, and the sale is null and void ab
initio.
[28]
SEVILLA, PETER SEVILLA, AND LUZVILLA
SEVILLA, respondents.
DECISION
YNARES-SANTIAGO, J.:
One who alleges defect or lack of valid consent to a
contract by reason of fraud or undue influence must
establish by full, clear and convincing evidence such
specific acts that vitiated a partys consent, otherwise, the
latters presumed consent to the contract prevails. [1]

WHEREFORE, the petition is GRANTED. The decision and The instant petition for review seeks to set aside the
resolution of the Court of Appeals dated August 29, 1996 and September 26, 2000 Decision of the Court of Appeals in
[2]

December 11, 1996, respectively, are CA-G.R. CV No. 48956, affirming in toto the Decision of [3]

REVERSED and SET ASIDE. The decision of the Regional Trial
Court of Batac, Ilocos Norte, Branch 17, dated March 23, 1994, is
REINSTATED.
Costs against private respondents.
the Regional Trial Court of Dipolog City, Branch 6, in Civil
Case No. 4240 which declared, inter alia, the questioned
Deed of Donation Inter Vivos valid and binding on the
parties.

SO ORDERED. The undisputed facts reveal that on December 10,

1973, Filomena Almirol de Sevilla died intestate leaving 8
FIRST DIVISION children, namely: William, Peter, Leopoldo, Felipe, Rosa,
Maria, Luzvilla, and Jimmy, all surnamed Sevilla. William,
[G.R. No. 150179. April 30, 2003] Jimmy and Maria are now deceased and are survived by
their respective spouses and children. Filomena Almirol
[4]

HEIRS OF WILLIAM SEVILLA, NAMELY: WILFREDO de Sevilla left the following properties:
SEVILLA, WILSON SEVILLA, WILMA
SEVILLA, WILLINGTON SEVILLA, AND PARCEL I:
WILLIAM SEVILLA, JR., HEIRS OF MARIA
SEVILLA, NAMELY: AMADOR SEVILLA, JENO
A parcel of land known as Lot No. 653 situated at General
Luna St., Dipolog City, with an area of about 804 square
meters, more or less, duly covered by Transfer Certificate of
Title No. (T-6671)-1448 [in the name of Filomena Almirol de
Sevilla, Honorata Almirol and Felisa Almirol] and assessed at
P31,360.00 according to Tax Dec. No. 018-947;
PARCEL II:
A parcel of land known as Lot No. 3805-B situated at Olingan,
Dipolog City, with an area of about 18,934 square meters,
more or less, duly covered by Transfer Certificate of Title No.
T-6672 and assessed at P5,890 according to Tax Dec. No. 009-
761;
PARCEL III:
A parcel of land known as Lot No. 837-1/4 situated at
Magsaysay Street, Dipolog City, with an area of about 880
square meters more or less, duly covered by Original
Certificate of Title No. 0-6064 and assessed at P12,870.00
according to Tax Dec. No. 020-1078;
PARCEL IV:
A parcel of residential land known as Lot No. 1106-B-3
situated at Sta. Filomena, Dipolog City, with an area of 300
square meters, more or less, assessed at P3,150.00 according to
Tax Dec. No. 006-317;
Commercial building erected on Parcel I above-described; and
residential building erected just at the back of the commercial
building above-described and erected on Parcel I above-
described;[5]
Parcel I, Lot No. 653, is the paraphernal property of
Filomena Almirol de Sevilla which she co-owned with her
sisters, Honorata Almirol and Felisa Almirol, who were
[6]
both single and without issue. Parcels II, II and IV are
conjugal properties of Filomena Almirol de Sevilla and
her late husband Andres Sevilla. When Honorata died in
[7]
1982, her 1/3 undivided share in Lot No. 653 was
transmitted to her heirs, Felisa Almirol and the heirs of
Filomena Almirol de Sevilla, who thereby acquired the
property in the proportion of one-half share each.
During the lifetime of Felisa and Honorata Almirol,
they lived in the house of Filomena Almirol de Sevilla,
together with their nephew, respondent Leopoldo Sevilla
and his family. Leopoldo attended to the needs of his
mother, Filomena, and his two aunts, Honorata and
Felisa.
[8]
Felisa died on July 6, 1988. Previous thereto, on
[9]
November 25, 1985, she executed a last will and
testament devising her 1/2 share in Lot No. 653 to the
spouses Leopoldo Sevilla and Belen Leyson. On [10]
August 8, 1986, Felisa executed another document
denominated as Donation Inter Vivos ceding to Leopoldo
Sevilla her 1/2 undivided share in Lot No. 653, which
was accepted by Leopoldo in the same document. [11]
On September 3, 1986, Felisa Almirol and Peter
Sevilla, in his own behalf and in behalf of the heirs of
Filomena Almirol de Sevilla, executed a Deed of Extra-
judicial Partition, identifying and adjudicating the 1/3
share of Honorata Almirol to the heirs of Filomena Almirol
de Sevilla and to Felisa Almirol.
[12]
 Thereafter, respondents Leopoldo, Peter and Luzvilla
Sevilla obtained the cancellation of Transfer Certificate of
Title No. (T-6671)-1448, over Lot No. 653, and the
issuance of the corresponding titles to Felisa Almirol and
the heirs of Filomena Almirol de Sevilla. However, the
requested titles for Lot Nos. 653-A and 653-B, were left
unsigned by the Register of Deeds of Dipolog City,
pending submission by Peter Sevilla of a Special Power
of Attorney authorizing him to represent the other heirs of
Filomena Almirol de Sevilla. [13]
On June 21, 1990, Felipe Sevilla, Rosa Sevilla, and
the heirs of William, Jimmy and Maria, all surnamed
Sevilla, filed the instant case against respondents
Leopoldo Sevilla, Peter Sevilla and Luzvilla Sevilla, for
annulment of the Deed of Donation and the Deed of
Extrajudicial Partition, Accounting, Damages, with prayer
for Receivership and for Partition of the properties of the
late Filomena Almirol de Sevilla. They alleged that the
[14]
Deed of Donation is tainted with fraud because Felisa
Almirol, who was then 81 years of age, was seriously ill
and of unsound mind at the time of the execution thereof;
and that the Deed of Extra-judicial Partition is void
because it was executed without their knowledge and
consent.[15]
In their answer, respondents denied that there was
[16]
fraud or undue pressure in the execution of the
questioned documents. They alleged that Felisa was of
sound mind at the time of the execution of the assailed
deeds and that she freely and voluntarily ceded her
undivided share in Lot No. 653 in consideration of
Leopoldos and his familys love, affection, and services
rendered in the past. Respondents further prayed that
Parcels II, III, and IV be partitioned among the heirs of
Filomena Almirol de Sevilla in accordance with the law
on intestate succession.
On December 16, 1994, a decision was rendered by
the Regional Trial Court of Dipolog City, Zamboanga del
Norte, Branch 6, upholding the validity of the Deed of
Donation and declaring the Deed of Extra-judicial
Partition unenforceable. The dispositive portion thereof,
reads:
WHEREFORE, IN VIEW OF THE FOREGOING, summing
up the evidence for both the plaintiffs and the defendants, the
Court hereby renders judgment:
1) Declaring the questioned Deed of Donation Inter Vivos
valid and binding, and, therefore, has the full force and effect
of law;
2) Declaring the questioned Deed of Extra-Judicial Partition as
unenforceable as yet as against the other heirs, as it lacks the
legal requisites of Special Power of Attorney or any other
appropriate instrument to be executed by the other heirs who
were not made parties thereto;
3) Finding the parties herein entitled to the partition of Parcel
II, III, IV as designated in the Complaint, in equal shares, and,
as to Lot No. 653 designated as Parcel I, it shall be divided
equally into two, between defendant Leopoldo Sevilla on one
hand, and, collectively, the Heirs of William Sevilla, Heirs of
Jimmy Sevilla, Heirs of Maria Sevilla, Felipe Sevilla,
Leopoldo Sevilla, Peter Sevilla, Luzvilla Sevilla-Tan, on the
other hand, as well as the two buildings thereon in
proportionate values;
4) Directing the parties, if they can agree, to submit herewith a
project of partition, which shall designate the share which
pertains to the heirs entitled thereto, that is, the particular and
specific portions of the properties subject of the partition;
5) Directing defendant Peter Sevilla to pay and/or collect from
the parties the amounts corresponding to each one entitled or
liable thereto, as recorded in the Statement of Accounts, except
for defendant Leopoldo Sevilla who is found by the Court to
have incurred only an overdraft of P5,742.98 and not
P33,204.33 as earlier computed therein.
6) Dismissing the plaintiffs claim for damages, which is not
proved with sufficient evidence, and defendants counterclaim,
on the same ground.
7) With costs de oficio.
IT IS SO ORDERED. [17]
Both parties appealed to the Court of
Appeals. Petitioners contended that the Deed of
Donation should be declared void and that Lot No. 653
should be divided equally among them. Respondents, on
the other hand, posited that the trial court erred in
declaring the Deed of Extra-judicial Partition
unenforceable against the other heirs of Filomena Almirol
de Sevilla who were not parties to said Deed.
On September 26, 2000, the Court of Appeals
affirmed in toto the assailed decision of the trial court.
Petitioners filed a motion for reconsideration but the
[18]
same was denied on August 30, 2001. [19]
Hence, the instant petition based on the following
assignment of errors:
THAT THE HONORABLE COURT OF APPEALS ERRED
IN NOT HOLDING AS VOID AB INITIO THE DEED OF
DONATION EXCUTED BY FELISA ALMIROL IN FAVOR
OF RESPONDENT LEOPOLDO SEVILLA CEDING TO
HIM ONE HALF PORTION OF LOT 653, DIPOLOG
CADASTRE, IT HAVING BEEN EXECUTED WITH
FRAUD, UNDUE PRESSURE AND INFLUENCE;
THAT THE APPELLATE COURT GREATLY ERRED IN
NOT ORDERING THE PARTITION OF LOT 653,
DIPOLOG CADASTRE EQUALLY AMONG THE EIGHT
(8) HEIRS OF FILOMENA, HONORATA AND FELISA,
ALL SURNAMED ALMIROL. [20]
To resolve the issue raised in the instant petition for
review, the validity of the donation inter vivos executed
by Felisa Almirol in favor of Leopoldo Sevilla must first be
determined.
Donation is an act of liberality whereby a person
disposes gratuitously of a thing or right in favor of
another who accepts it. Under Article 737 of the Civil
[21]
Code, the donors capacity shall be determined as of the
time of the making of the donation. Like any other
contract, an agreement of the parties is essential, and
[22]
the attendance of a vice of consent renders the donation
voidable.[23]
In the case at bar, there is no question that at the
time Felisa Almirol executed the deed of donation she
was already the owner of 1/2 undivided portion of Lot No.
653. Her 1/3 undivided share therein was increased by
1/2 when she and Filomena inherited the 1/3 share of
their sister Honorata after the latters death. Hence, the
1/2 undivided share of Felisa in Lot No. 653 is
considered a present property which she can validly
dispose of at the time of the execution of the deed of
donation. [24]
Petitioners, however, insist that respondent Leopoldo
Sevilla employed fraud and undue influence on the
person of the donor. This argument involves appreciation
of the evidence. The settled rule is that factual findings
[25]
of the trial court, if affirmed by the Court of Appeals, are
entitled to great respect. There are exceptional
[26]
circumstances when findings of fact of lower courts may
be set aside but none is present in the case at
[27]
bar. Indeed, neither fraud nor undue influence can be
inferred from the following circumstance alleged by the
petitioners, to wit
A. That Felisa Almirol lived with respondent Leopoldo Sevilla
in the residential house owned by petitioners and respondents;
B. That the old woman Felisa Almirol was being supported out
of the rentals derived from the building constructed on the land
which was a common fund.
C. That when Felisa Almirol was already 82 years old, he
[Leopoldo Sevilla] accompanied her in the Office of Atty. Vic
T. Lacaya, Sr., for the purpose of executing her last will and
testament
D. That in the last will and testament executed by Felisa
Almirol, she had devised in favor of respondent Leopoldo
Sevilla one-half of the land in question;
E. That respondent Leopoldo Sevilla not contented with the
execution by Felisa Almirol of her last will and testament, had
consulted a lawyer as to how he will be able to own the land
immediately;
F. That upon the advice of Atty. Helen Angeles, Clerk of Court
of the Regional Trial Court of Zamboanga del Norte, Dipolog
City, Felisa Almirol executed a Deed of Donation, hence, the
questioned Deed of Donation executed in his favor;
G. That the subject matter of the Deed of Donation was the
one-half portion of Lot 653, Dipolog Cadastre, which was
willed by Felisa Almirol, in favor of respondent Leopoldo
Sevilla in her last will and testament;
H. That at the time of the execution of the Deed of Donation,
Lot No. 653, Dipolog Cadastre, was not yet partitioned
between petitioners and respondents they being heirs of the
late Filomena and Honorata, all surnamed Almirol;
I. That after the execution of the Deed of Donation, respondent
Peter Sevilla and the late Felisa Almirol were the only ones
who executed the Deed of Extra-judicial Partition over Lot
653, Dipolog Cadastre, the petitioners were not made parties in
the said Deed of Extrajudicial Partition;
J. That on the basis of the Deed of Extrajudicial Partition and
Deed of Donation, respondent Leopoldo Sevilla caused the
subdivision survey of Lot 653, Dipolog Cadastre, dividing the
same into two (2) lots, adjudicating one-half of the lot in his
favor and the other half in favor of respondents peter Sevilla
and Luzvilla Sevilla, and to respondent Leopoldo Sevilla
himself;
K. That only two persons knew the actual survey of the land,
petitioner Felipe Sevilla and respondent Leopoldo Sevilla
himself, the rest of the co-owners were not even notified;
L. That on the basis of the Extrajudicial Partition, Deed of
Donation, the approved subdivision plan, respondent Leopoldo
Sevilla filed a petition for issuance of the corresponding titles
for the two lots, but the Register of Deeds of Dipolog City
refused to issue the corresponding titles for the two lots to
respondent Leopoldo Sevilla so that up to this moment the two
tiles were left unsigned by the Register of Deeds.[28]
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. There is undue influence
[29]
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: the 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. [30]
Ei incumbit probatio qui dicit, non qui negat. He who
asserts, not he who denies, must prove. We have
consistently applied the ancient rule that if the plaintiff,
upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner facts on
which he bases his claim, the defendant is under no
obligation to prove his exception or defense. In the [31]
instant case, the self-serving testimony of the petitioners
are vague on what acts of Leopoldo Sevilla constituted
fraud and undue influence and on how these acts vitiated
the consent of Felisa Almirol. Fraud and undue influence
that vitiated a partys consent must be established by full,
clear and convincing evidence, otherwise, the latters
presumed consent to the contract prevails. Neither[32]
does the fact that the donation preceded the partition
constitute fraud. It is not necessary that partition should
first be had because what was donated to Leopoldo was
the 1/2 undivided share of Felisa in Lot No. 653.
Moreover, petitioners failed to show proof why Felisa
should be held incapable of exercising sufficient
judgment in ceding her share to respondent Leopoldo.
As testified by the notary public who notarized the
[33]
Deed of Donation, Felisa confirmed to him her intention
to donate her share in Lot No. 653 to Leopoldo. He
stressed that though the donor was old, she was of
sound mind and could talk sensibly.Significantly, there is
nothing in the record that discloses even an attempt by
petitioners to rebut said declaration of the notary public.
Clearly, therefore, the courts below did not err in
sustaining the validity of the deed of donation.
Anent the Deed of Extra-judicial Partition, we find that
the same is void ab initio and not merely
unenforceable. In Delos Reyes v. Court of Appeals,
which is a case involving the sale of a lot by a person
[34]
who is neither the owner nor the legal representative, we
declared the contract void ab initio. It was held that one
of the requisites of a valid contract under Article 1318 of
the Civil Code is the consent and the capacity to give
consent of the parties to the contract. The legal capacity
of the parties is an essential element for the existence of
the contract because it is an indispensable condition for
the existence of consent. There is no effective consent in
law without the capacity to give such consent. In other
words, legal consent presupposes capacity. Thus, there
is said to be no consent, and consequently, no
contract when the agreement is entered into by one in
behalf of another who has never given him authorization
therefor unless he has by law a right to represent the
latter.
[35]
In the case at bar, at the time Felisa executed the
deed of extra-judicial partition dividing the share of her
deceased sister Honarata between her and the heirs of
Filomena Almirol de Sevilla, she was no longer the
owner of the 1/2 undivided portion of Lot No. 653, having
previously donated the same to respondent Leopoldo
Sevilla who accepted the donation in the same deed. A
donation inter vivos, as in the instant case, is
immediately operative and final. As a mode of acquiring
[36]
ownership, it results in an effective transfer of title over
the property from the donor to the donee and the
donation is perfected from the moment the donor knows
of the acceptance by the donee. And once a donation is
accepted, the donee becomes the absolute owner of the
property donated.
Evidently, Felisa did not possess the capacity to give
consent to or execute the deed of partition inasmuch as
she was neither the owner nor the authorized
representative of respondent Leopoldo to whom she
previously transmitted ownership of her undivided share
in Lot No. 653. Considering that she had no legal
capacity to give consent to the deed of partition, it follows
that there is no consent given to the execution of the
deed, and therefore, there is no contract to speak of. As
such, the deed of partition is void ab initio, hence, not
susceptible of ratification.
Nevertheless, the nullity of the deed of extra-judicial
partition will not affect the validity of the donation inter
vivos ceding to respondent Leopoldo Sevilla the 1/2
undivided share of Felisa Almirol in Lot No. 653.Said lot
should therefore be divided as follows: 1/2 shall go to
respondent Leopoldo Sevilla by virtue of the deed of
donation, while the other half shall be divided equally
among the heirs of Filomena Almirol de Sevilla including
Leopoldo Sevilla, following the rules on intestate
succession.
Finally, we note that the name of Rosa Sevilla,
daughter of Filomena Almirol de Sevilla, and one of the
plaintiffs herein, was omitted in the dispositive portion of
the trial courts decision. Her name should therefore be
[37]
included in the dispositive portion as one of the heirs
entitled to share in the properties of the late Filomena
Almirol de Sevilla.
WHEREFORE, in view of all the foregoing, the
Decision of the Court of Appeals in CA-G.R. CV No.
48956, affirming in toto the Decision of the Regional Trial
Court of Dipolog City, Branch 6, in Civil Case No. 4240,
is AFFIRMED with MODIFICATION. The Deed of Extra-
judicial Partition dated September 3, 1986 is declared
void, and the name of Rosa Sevilla is ordered included in
the dispositive portion of the trial courts judgment.
SO ORDERED.
SECOND DIVISION
[G.R. No. 143370. February 6, 2002]
MARIO J. MENDEZONA and TERESITA M.
MENDEZONA, LUIS J. MENDEZONA and
MARICAR L. MENDEZONA and TERESITA
ADAD VDA. DE MENDEZONA, petitioners,
vs. JULIO H. OZAMIZ, ROBERTO J.
MONTALVAN, JOSE MA. OZAMIZ, CARMEN H.
OZAMIZ, PAZ O. MONTALVAN, MA. TERESA
O.F. ZARRAGA, CARLOS O. FORTICH, JOSE
LUIS O. ROS, PAULITA O. RODRIGUEZ, and
LOURDES O. LON, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the
Decision and the Resolution of the Court of Appeals
[1] [2]
dated July 27, 1998 and May 19, 2000, respectively, in
CA-G.R. CV No. 39752 which reversed and set aside the
Decision dated September 23, 1992 rendered in favor of
[3]
the petitioners by the Regional Trial Court (RTC)
of Cebu City, Branch 6 in Civil Case No. CEB-10766.
Civil Case No. CEB-10766 is a suit for quieting of
title. It was instituted on September 25, 1991 by
petitioner spouses Mario
J. Mendezona and Teresita M. Mendezona as initial
plaintiffs, and in the amended complaint filed on October
[4]
7, 1991, herein co-petitioner spouses Luis
J. Mendezona and Maricar L. Mendezona and Teresita A
dad Vda. de Mendezona joined as co-plaintiffs. [5]
In their complaint, the petitioners, as plaintiffs therein,
alleged that petitioner spouses Mario
J. Mendezona and Teresita M. Mendezona, petitioner
spouses Luis J. Mendezona and Maricar L. Mendezona,
and petitioner Teresita Adad Vda. de Mendezona own a
parcel of land each in
the Banilad Estate, Lahug, Cebu City with almost similar
areas of 3,462 square meters, 3,466 square meters and
3,468 square meters, covered and described in Transfer
Certificate of Title (TCT) Nos. 116834, 116835, and
116836 respectively, of the Registry of Deeds
of Cebu City. [6]
The petitioners ultimately traced their titles of
ownership over their respective properties from a
notarized Deed of Absolute Sale dated April 28, 1989
[7]
executed in their favor by Carmen Ozamiz for and in
consideration of the sum of One Million Forty Thousand
Pesos (P1,040,000.00).
The petitioners initiated the suit to remove a cloud on
their said respective titles caused by the inscription
thereon of a notice of lis pendens, which came about as
a result of an incident in Special Proceeding No. 1250 of
the RTC of Oroquieta City. Special Proceeding No. 1250
is a proceeding for guardianship over the person and
properties of Carmen Ozamiz initiated by the
respondents Julio H. Ozamiz, Jose Ma. Ozamiz, Carmen
H. Ozamiz, Paz O. Montalvan, Ma. Teresa O.F. Zarraga,
[8]
Carlos O. Fortich, Jose Luis O. Ros, Paulita O.
Rodriguez and Lourdes O. Lon. [9]
It appears that on January 15, 1991, the respondents
instituted the petition for guardianship with the Regional
Trial Court of Oroquieta City, alleging therein that
Carmen Ozamiz, then 86 years old, after an illness in
July 1987, had become disoriented and could not
recognize most of her friends; that she could no longer
take care of herself nor manage her properties by reason
of her failing health, weak mind and absent-mindedness.
Mario Mendezona and Luis Mendezona, herein
petitioners who are nephews of Carmen Ozamiz,
and Pilar Mendezona, a sister of Carmen Ozamiz, filed
an opposition to the guardianship petition.
In the course of the guardianship proceeding, the
petitioners and the oppositors thereto agreed that
Carmen Ozamiz needed a guardian over her person and
her properties, and thus respondent Paz
O. Montalvan was designated as guardian over the
person of Carmen Ozamiz while petitioner Mario
J. Mendezona, respondents Roberto J. Montalvan and
Julio H. Ozamiz were designated as joint guardians over
the properties of the said ward.
As guardians, respondents Roberto J. Montalvan and
Julio H. Ozamiz filed on August 6, 1991 with the
guardianship court their inventories and Accounts,
listing therein Carmen Ozamizs properties, cash,
[10]
shares of stock, vehicles and fixed assets, including a
10,396 square meter property known as
the Lahug property. Said Lahug property is the same
property covered by the Deed of Absolute Sale
dated April 28, 1989 executed by Carmen Ozamiz in
favor of the petitioners. Respondents Roberto
J. Montalvan and Julio H. Ozamiz caused the inscription
on the titles of petitioners a notice of lis pendens,
regarding Special Proceeding No. 1250, thus giving
[11]
rise to the suit for quieting of title, Civil Case No. CEB-
10766, filed by herein petitioners.
In their Answer in Civil Case No. CEB-10766 the
[12]
respondents opposed the petitioners claim of ownership
of the Lahug property and alleged that the titles issued in
the petitioners names are defective and illegal, and the
ownership of the said property was acquired in bad faith
and without value inasmuch as the consideration for the
sale is grossly inadequate and unconscionable.
Respondents further alleged that at the time of the sale
on April 28, 1989 Carmen Ozamiz was already ailing and
not in full possession of her mental faculties; and that her
properties having been placed in administration, she was
in effect incapacitated to contract with petitioners.
The issues for resolution were delimited in the pre-
trial to: (a) the propriety of recourse to quieting of title; (b)
the validity or nullity of the Deed of Absolute Sale dated
April 28, 1989 executed by Carmen Ozamiz in favor of
herein petitioners; (c) whether the titles over the subject
parcel of land in plaintiffs names be maintained or should
they be cancelled and the subject parcels of
land reconveyed; and (d) damages and attorneys fees. [13]
Trial on the merits ensued with the parties presenting
evidence to prove their respective allegations. Petitioners
Mario Mendezona, Teresita Adad Vda.
de Mendezona and Luis Mendezona, as plaintiffs therein,
testified on the circumstances surrounding the
sale. Carmencita Cedeno and Martin Yungco,
instrumental witnesses to the Deed of Absolute Sale
dated April 28, 1989, and, Atty. Asuncion Bernades, the
notary public who notarized the said document, testified
that on the day of execution of the said contract that
Carmen Ozamiz was of sound mind and that she
voluntarily and knowingly executed the said deed of sale.
For the defendants, the testimonies of respondent
Paz O. Montalvan, a sister of
Carmen Ozamiz; Concepcion Agac-ac, an assistant of
Carmen Ozamiz; respondent Julio Ozamiz;
Carolina Lagura, a househelper of
Carmen Ozamiz; Joselito Gunio, an appraiser of
land; Nelfa Perdido, a part-time bookkeeper of
Carmen Ozamiz, and the deposition of Dr. Faith Go,
physician of Carmen Ozamiz, were offered in evidence.
The petitioners presented as rebuttal witnesses
petitioners Mario Mendezona and Luis Mendezona, to
rebut the testimony of respondent Julio H. Ozamiz; and,
Dr. William Buot, a doctor of neurology to rebut aspects
of the deposition of Dr. Faith Go on the mental capacity
of Carmen Ozamiz at the time of the sale.
During the trial, the trial court found that the following
facts have been duly established: [14]
(1) On April 28, 1989, Carmen Ozamiz sold to her nephews,
Mario, Antonio and Luis, all surnamed Mendezona, three (3)
parcels of residential land in Cebu City, per a Deed of Absolute
Sale (Exh. D) for a consideration of P1,040,000.00, in which
deed the usufructuary rights were reserved during her lifetime.
(2) The three parcels of land were subsequently transferred to
the names of the three vendees per TCTs Nos. 108729, 108730
and 108731 (Exhs. J, K & L, respectively). A partition
agreement was entered into by the three vendees (Exh. 3) and
the parcels of land are now titled in the names of the plaintiffs.
Mario Mendezona TCT No. 116834 (Exh. A);
Luis Mendezona TCT No. 116835 (Exh. B);
Antonio Mendezona TCT No. 116836 (Exh. C);
(3) The reservation of the usufructuary rights to the vendor
Carmen Ozamiz during her lifetime was confirmed by the
plaintiffs-spouses Mario Mendezona and Teresita Moraza and
plaintiffs spouses Luis Mendezona and MaricarLonga in a
sworn statement (Exh. I) executed on October 15, 1990, which
was duly annotated on the titles of the property;
(4) The capital gains tax was paid (Exh. H) on May
5, 1989 and a certificate (Exh. H-1) was issued by the Bureau
of Internal Revenue authorizing the Register of Deeds to
transfer the property to the vendees;
(5) A petition for guardianship over the person and properties
of Carmen Ozamiz (Exh. E) was filed by all the defendants,
(except the defendant Roberto Montalvan) on January 15,
1991 with the Regional Trial Court of OroquietaCity,
denominated as Spec. Proc. No. 1250 and subsequently, an
Inventories and Accounts (Exh. F) was filed by court-
appointed guardians Roberto Montalvan and Julio Ozamiz, in
which the property was listed (Exh. F-1) and a Notice
of Lis Pendens was filed with the Register of Deeds
of Cebu City on August 13, 1991 by said joint guardians.
Plaintiff Mario Mendezona, as another joint guardian over
Carmen Ozamiz, filed his opposition (Exh. R) to the
Inventories and Accounts, with the Oroquieta Court as to the
inclusion of the property (Exh.R-1).
(6) Prior to his death, the deceased husband of
plaintiff Teresita Adad Mendezona was granted a General
Power of Attorney (Exh. 1) by Carmen Ozamiz on March 23,
1988 and after his demise, Carmen Ozamiz granted
Mario Mendezona a General Power of Attorney (Exh. 2.)
on August 11, 1990. Both powers of attorney relate to the
administration of the property, subject of this action,
in Cebu City.
On September 23, 1992 the trial court rendered its
decision in favor of the petitioners, the dispositive portion
of which reads, to wit:
Wherefore, premises considered, the Court is of the opinion
and so declares that:
1. The property described in the complaint was sold, with
reservation of usufructuary rights by Carmen Ozamiz to the
plaintiffs under a valid contract, voluntarily and deliberately
entered into while she was of sound mind, for sufficient and
good consideration, and without fraud, force, undue influence
or intimidation having been exercised upon her, and
consequently, the Court orders the defendants herein to
acknowledge and recognize the plaintiffs title to
the aforecited property and to refrain from further clouding the
same;
2. That the one-third (1/3) share erroneously titled to
Antonio Mendezona should be titled in the name
of Teresita Adad vda. de Mendezona as
her paraphernal property and the Register of Deeds
of Cebu City is hereby ordered to do so;
3. The Notice of Lis Pendens affecting the property should be
eliminated from the record and the Register of Deeds
of Cebu City is ordered to expunge the same.
No pronouncement as to costs.
SO ORDERED.
On appeal to the Court of Appeals, the appellate
court reversed the factual findings of the trial court and
ruled that the Deed of Absolute Sale dated April 28, 1989
was a simulated contract since the petitioners failed to
prove that the consideration was actually paid, and,
furthermore, that at the time of the execution of the
contract the mental faculties of Carmen Ozamiz were
already seriously impaired. Thus, the appellate court
declared that the Deed of Absolute Sale of April 28,
1989 is null and void. It ordered the cancellation of the
certificates of title issued in the petitioners names and
directed the issuance of new certificates of title in favor
of Carmen Ozamiz or her estate.
Petitioners filed a motion for reconsideration of the
decision of the appellate court. Subsequent thereto, the
petitioners filed a motion for a new trial and/or for
reception of evidence. They contended, among other
things, that the appellate court totally ignored the
testimony of Judge Teodorico Durias regarding the
mental condition of Carmen Ozamiz a month before the
execution of the Deed of Absolute Sale in question. The
said testimony was taken in the Special Proceeding No.
1250 in the Regional Trial Court of Oroquieta City.
However, Judge Durias was not presented as a witness
in Civil Case No. CEB-10766 in
the Regional Trial Court of Cebu City. Petitioners alleged
that Judge Duriass testimony is a newly-discovered
evidence which could not have been discovered prior to
the trial in the court below by the exercise of due
diligence.
The appellate court denied both motions in its
Resolution dated May 19, 2000. Hence, the instant
petition anchored on the following grounds: [15]
I.
THE COURT OF APPEALS GRAVELY ERRED IN RULING
THAT THE APRIL 28, 1989 DEED OF
ABSOLUTE SALE WAS A SIMULATED CONTRACT.
A.
THE COURT OF APPEALS GRAVELY ERRED IN
IGNORING THE STATUTORY PRESUMPTIONS OF
ACTUAL AND SUFFICIENT CONSIDERATION FOR,
AND OF THE REGULARITY AND TRUTHFULNESS OF,
THE NOTARIZED DEED OF ABSOLUTE SALE.
B.
THE COURT OF APPEALS GRAVELY ERRED IN
IMPOSING ON THE PETITIONERS THE BURDEN OF
PROVING PAYMENT, AND IN REFUSING TO
RECOGNIZE AND RULE THAT IT WAS THE
RESPONDENTS - AS THE PARTIES ASSAILING THE
DEED OF ABSOLUTE SALE - WHO HAD FAILED TO
DISCHARGE THEIR BURDEN OF PROVING THAT
THERE WAS NO CONSIDERATION FOR THE
TRANSACTION.
C.
THE COURT OF APPEALS GRAVELY ERRED IN
REFUSING TO RECEIVE IN EVIDENCE THE THREE (3)
CHECKS, WHICH PROVED BEYOND ANY DOUBT THAT
THE PURCHASE PRICE FOR THE LAHUG PROPERTY
HAD BEEN PAID TO CARMEN OZAMIZ, AFTER ASKING
FOR THEM AND HAVING THEM PRESENTED TO IT IN
OPEN COURT, THUS COOPERATING WITH
RESPONDENTS EFFORTS TO SUPPRESS THE CHECKS
(WHICH THE COURT ITSELF AND RESPONDENTS
CHALLENGED PETITIONERS TO PRODUCE).
II.
THE COURT OF APPEALS GRAVELY ERRED IN RULING
THAT CARMEN OZAMIZS MENTAL FACULTIES WERE
SERIOUSLY IMPAIRED WHEN SHE EXECUTED THE
DEED OF ABSOLUTE SALE ON APRIL 28, 1989.
A.
THE COURT OF APPEALS GRAVELY ERRED IN
IGNORING THE STATUTORY PRESUMPTION THAT
CARMEN OZAMIZ WAS OF SOUND MIND AND HAD
THE REQUISITE CAPACITY TO CONTRACT WHEN SHE
EXECUTED THE DEED OF ABSOLUTE SALE, AND IN
REFUSING TO RULE THAT IT WAS THE RESPONDENTS
- AS THE PARTIES ALLEGING MENTAL INCAPACITY-
WHO HAD FAILED TO DISCHARGE THEIR BURDEN OF
REBUTTING THAT PRESUMPTION.
B.
THE COURT OF APPEALS GRAVELY ERRED IN
REFUSING TO ACCEPT AND GIVE DUE AND
PREPONDERANT WEIGHT TO UNREFUTED EVIDENCE,
INCLUDING THE UNREFUTED TESTIMONIES OF THE
INSTRUMENTAL WITNESSES AND OF THE NOTARY
PUBLIC, THAT CARMEN OZAMIZ EXECUTED THE
DEED OF ABSOLUTE SALE FREELY, VOLUNTARILY,
KNOWINGLY, AND INTELLIGENTLY.
C.
THE COURT OF APPEALS GRAVELY ERRED IN GIVING
WEIGHT TO THE HEARSAY TESTIMONY OF DR. FAITH
GO ON THE MENTAL CONDITION OF CARMEN
OZAMIZ ON THE DATE SHE EXECUTED THE DEED OF
ABSOLUTE SALE.
D.
THE COURT OF APPEALS GRAVELY ERRED IN
IGNORING, AND IN REFUSING TO RECEIVE IN
EVIDENCE, JUDGE TEODORICO DURIASS TESTIMONY
(THAT CARMEN OZAMIZ WAS OF SOUND MIND WHEN
SHE EXECUTED ANOTHER CONTRACT BARELY A
MONTH BEFORE SHE EXECUTED THE DEED OF
ABSOLUTE SALE) ON THE GROUND
THAT THAT TESTIMONY WAS FORGOTTEN
EVIDENCE.
We shall first rule on the issue of whether to consider
the testimony of Judge Durias as newly discovered
evidence. A motion for new trial upon the ground of
newly discovered evidence is properly granted only
where there is concurrence of the following requisites,
namely: (a) the evidence had been discovered after trial;
(b) the evidence could not have been discovered and
produced during trial even with the exercise of
reasonable diligence; and (c) the evidence is material
and not merely corroborative, cumulative or impeaching
and is of such weight that if admitted, would probably
alter the result. All three (3) requisites must characterize
the evidence sought to be introduced at the new trial.
We find that the requirement of reasonable diligence
has not been met by the petitioners. As early as the pre-
trial of the case at bar, the name of Judge Durias has
already cropped up as a possible witness for the
defendants, herein respondents. That the respondents
chose not to present him is not an indicia per se of
suppression of evidence, since a party in a civil case is
free to choose who to present as his witness. Neither
can Judge Durias testimony in another case be
considered as newly discovered evidence since the facts
to be testified to by Judge Durias which were existing
before and during the trial, could have been presented
by the petitioners at the trial below. The testimony of
[16]
Judge Durias has been in existence waiting only to be
elicited from him by questioning.[17]
It has been held that a lack of diligence is exhibited
where the newly discovered evidence was necessary or
proper under the pleadings, and its existence must have
occurred to the party in the course of the preparation of
the case, but no effort was made to secure it; there is a
failure to make inquiry of persons who were likely to
know the facts in question, especially where information
was not sought from co-parties; there is a failure to seek
evidence available through public records; there is a
failure to discover evidence that is within the control of
the complaining party; there is a failure to follow leads
contained in other evidence; and, there is a failure to
utilize available discovery procedures. Thus, the
[18]
testimony of Judge Durias cannot be considered as
newly discovered evidence to warrant a new trial.
In this petition at bench, herein petitioners essentially
take exception to two (2) main factual findings of the
appellate court, namely, (a) that the notarized Deed of
Absolute Sale dated April 28, 1989 was a simulated
contract, and (b) that Carmen Ozamizs mental faculties
were seriously impaired when she executed the said
contract on April 28, 1989. The petitioners allege that
both conclusions are contrary or opposed to well-
recognized statutory presumptions of regularity enjoyed
by a notarized document and that a contracting party to a
notarized contract is of sound and disposing mind when
she executes the contract.
The respondents posit a different view. They contend
that clear and convincing evidence refuted the
presumptions on regularity of execution of the Deed of
Absolute Sale and existence of consideration
thereof. Relying upon the testimonies of Paz
O. Montalvan, Concepcion Agac-ac,
Carolina Lagura and Dr. Faith Go, they aver that they
were able to show that Carmen Ozamiz was already
physically and mentally incapacitated since the latter part
of 1987 and could not have executed the said Deed of
Absolute Sale on April 28, 1989 covering the
disputed Lahug property. They also alleged that no error
is ascribable to the appellate court for not considering
the allegedly rehearsed testimonies of the instrumental
witnesses and the notary public.
Factual findings of the appellate court are generally
conclusive on this Court which is not a trier of facts. It is
not the function of the Supreme Court to analyze or
weigh evidence all over again. However, this rule is not
without exception. If there is a showing that the appellate
courts findings of facts complained of are totally devoid
of support in the record or that they are so glaringly
erroneous as to constitute grave abuse of discretion, this
Court must discard such erroneous findings of facts.
We find that the exception applies in the case at
[19]
bench.
Simulation is defined as 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 from what that which was really executed. The
[20]
requisites of 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. None of these were clearly shown to exist in
[21]
the case at bar.
Contrary to the erroneous conclusions of the
appellate court, a simulated contract cannot be inferred
from the mere non-production of the checks. It was not
the burden of the petitioners to prove so. It is significant
to note that the Deed of Absolute Sale dated April 28,
1989 is a notarized document duly acknowledged before
a notary public. As such, it has in its favor the also admitted that not all income of
presumption of regularity, and it carries the evidentiary Carmen Ozamiz passed through her since
weight conferred upon it with respect to its due Antonio Mendezona, as appointed administrator, directly
execution. It is admissible in evidence without further reported to Carmen Ozamiz. With
[24]
respect
proof of its authenticity and is entitled to full faith and to Nelfa Perdido, she testified that most of the
credit upon its face.
[22]
transactions that she recorded refer only to rental income
and expenses, and the amounts thereof were reported to
Payment is not merely presumed from the fact that her by Concepcion Agac-ac only, not by
the notarized Deed of Absolute Sale dated April 28, Carmen Ozamiz. She does not record deposits or
1989 has gone through the regular procedure as withdrawals in the bank accounts of Carmen Ozamiz.
evidenced by the transfer certificates of title issued in Their testimonies hardly deserve any credit and, hence,
[25]

petitioners names by the Register of Deeds. In other
words, whosoever alleges the fraud or invalidity of a
notarized document has the burden of proving the same
by evidence that is clear, convincing, and more than
merely preponderant. Therefore, with this well-
[23]
recognized statutory presumption, the burden fell upon
the respondents to prove their allegations attacking the
validity and due execution of the said Deed of Absolute
Sale. Respondents failed to discharge that burden;
hence, the presumption in favor of the said deed stands.
But more importantly, that notarized deed shows on its
face that the consideration of One Million Forty
Thousand Pesos (P1,040,000.00) was acknowledged to
have been received by Carmen Ozamiz.
Simulation cannot be inferred from the alleged
absence of payment based on the testimonies
the appellate court misplaced reliance thereon.
Considering that Carmen Ozamiz acknowledged, on
the face of the notarized deed, that she received the
consideration at One Million Forty Thousand Pesos
(P1,040,000.00), the appellate court should not have
placed too much emphasis on the checks, the
presentation of which is not really necessary. Besides,
the burden to prove alleged non-payment of the
consideration of the sale was on the respondents, not on
the petitioners. Also, between its conclusion based on
inconsistent oral testimonies and a duly notarized
document that enjoys presumption of regularity, the
appellate court should have given more weight to the
latter. Spoken words could be notoriously unreliable as
against a written document that speaks a uniform
language. [26]

of Concepcion Agac-ac, assistant of Carmen Ozamiz,

and Nelfa Perdido, part-time bookkeeper of Furthermore, the appellate court erred in ruling that at
Carmen Ozamiz. The testimonies of these two (2) the time of the execution of the Deed of Absolute Sale
witnesses are unreliable and inconsistent. on April 28, 1989 the mental faculties of
Carmen Ozamiz were already seriously impaired. It [27]

While Concepcion Agac-ac testified that she was placed too much reliance upon the testimonies of the
aware of all the transactions of Carmen Ozamiz, she
respondents witnesses. However, after a thorough
scrutiny of the transcripts of the testimonies of the
witnesses, we find that the respondents core witnesses
all made sweeping statements which failed to show the
true state of mind of Carmen Ozamiz at the time of the
execution of the disputed document. The testimonies of
the respondents witnesses on the mental capacity of
Carmen Ozamiz are far from being clear and convincing,
to say the least.
Carolina Lagura, a househelper of Carmen Ozamiz,
testified that when Carmen Ozamiz was confronted by
Paz O. Montalvan in January 1989 with the sale of
the Lahug property, Carmen Ozamiz denied the same.
She testified that Carmen Ozamiz understood the
question then. However, this declaration is inconsistent
[28]
with her (Carolinas) statement that since 1988
Carmen Ozamiz could not fully understand the things
around her, that she was physically fit but mentally could
not carry a conversation or recognize persons who
visited her. Furthermore, the disputed sale occurred
[29]
on April 28, 1989 or three (3) months after this alleged
confrontation in January 1989. This inconsistency was
not explained by the respondents.
The revelation of Dr. Faith Go did not also shed light
on the mental capacity of Carmen Ozamiz on the
relevant day - April 28, 1989 when the Deed of Absolute
Sale was executed and notarized. At best, she merely
revealed that Carmen Ozamiz was suffering from certain
infirmities in her body and at times, she was forgetful, but
there was no categorical statement that
Carmen Ozamiz succumbed to what the respondents
suggest as her alleged second childhood as early as
1987. The petitioners rebuttal witness, Dr. William Buot,
a doctor of neurology, testified that no conclusion of
mental incapacity at the time the said deed was
executed can be inferred from Dr. Faith Gos clinical
notes nor can such fact be deduced from the mere
prescription of a medication for episodic memory loss.
It has been held that 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 her mental faculties to such extent as to prevent
her from properly, intelligently, and fairly protecting her
property rights, is she considered incapacitated. The[30]
respondents utterly failed to show adequate proof that at
the time of the sale on April 28, 1989
Carmen Ozamiz had allegedly lost control of her mental
faculties.
We note that the respondents sought to impugn only
one document, namely, the Deed of Absolute Sale
dated April 28, 1989, executed by Carmen Ozamiz.
However, there are nine (9) other important documents
that were, signed by Carmen Ozamiz either before or
after April 28, 1989 which were not assailed by the
respondents. Such is contrary to their assertion of
[31]
complete incapacity of Carmen Ozamizto handle her
affairs since 1987. We agree with the trial courts
assessment that it is unfair for the [respondents] to claim
soundness of mind of Carmen Ozamiz when it benefits
them and otherwise when it disadvantages them. A [32]
person is presumed to be of sound mind at any particular
time and the condition is presumed to continue to exist,
in the absence of proof to the contrary. Competency
[33]
and freedom from undue influence, shown to have
existed in the other acts done or contracts executed, are PUNO, J.:
presumed to continue until the contrary is shown. [34]

This is a petition for review of the Decision of the Court of Appeals in CA-
G.R. No. 51340-R entitled "Mariano T. Lim, et al., vs. Lorenzo O. Tan, et
All the foregoing considered, we find the instant al., dated July 28, 1908. 1
petition to be meritorious and the same should be
granted. The case involves the partition of the properties of the deceased spouse
Tan Quico and Josefa Oraa. The former died on May 11, 1932 and the
latter on August 6, 1932. Both died intestate. They left some ninety six
WHEREFORE, the instant petition is hereby (96) hectares of land located in the municipality of Guinobatan and
GRANTED and the assailed Decision and Resolution of Camalig Albay. 2
the Court of Appeals are hereby REVERSED and SET
ASIDE. The Decision dated September 23, 1992 of The late spouses were survived by four (4) children: Cresencia, Lorenzo,
Hermogenes and Elias. Elias died on May 2, 1935 without issue.
the Regional Trial Court of Cebu City, Branch 6, in Civil Cresencia died on December 20, 1967. 3 She was survived by her
Case No. CEB-10766 is REINSTATED. No husband, Lim Chay Sing, 4 and children, Mariano, Jaime, Jose
pronouncement as to costs. Jovita, Anacoreta, Antonietta, Ruben, Benjamin and Rogelio.
They are the petitioners in the case at bench.
SO ORDERED.
The sad spectacle of the heirs squalling over the properties of their
Republic of the Philippines deceased parents was again replayed in the case at bench. The
SUPREME COURT protagonists were the widower and children of Cresencia on one side,
Manila and Lorenzo and Hermogenes on the other side.

SECOND DIVISION The late Cresencia and Lorenzo had contrasting educational background.
Cresencia only reached the second grade of elementary school. She
could not read or write in English. On the other hand, Lorenzo is a lawyer
and a CPA.
G.R. No. L-55201 February 3, 1994
Petitioners, heirs of Cresencia, alleged that since the demise of the
spouses Tan Quico and Josefa Oraa, the subject properties had been
MARIANO T. LIM, JAIME T. LIM, JOSE T. LIM, JOVITA T. LIM,
administered by respondent Lorenzo. They claimed that before her death,
ANACORITA T. LIM, ANTONIETTA T. LIM, RUBEN T. LIM, BENJAMIN
T. LIM, ET AL., petitioners, Cresencia had demanded their partition from Lorenzo. 5 After
vs. Cresencia's death, they likewise clamored for their
COURT OF APPEALS, LORENZO O. TAN and HERMOGENES O. partition. 6 Their efforts proved fruitless. They failed Civil Case
TAN, respondents. No. 3676.

Eulogio E. Gatdula for petitioners.
Miles L. Ludovice for private respondents.
Respondent Lorenzo and Hermogenes adamant stance against partition
is based on various contentions. Principally, they urge: (1) that the
properties had already been partitioned, albeit, orally; and (2) during her
lifetime, the late Cresencia had sold and conveyed all her interests in
said properties to respondent Lorenzo. They cited as evidence the "Deed
of Confirmation of Extra Judicial Settlement of the Estate of Tan Quico
and Josefa Oraa" 7 and a receipt of payment. 8
The trial court decided in favor of the petitioners. It rejected the alleged
oral petition in light of the contrary testimony of respondent Hermogenes.
It voided the "Deed of Confirmation of Extra Judicial Settlement of the
Estate of Tan Quico and Josefa Oraa and Sale" 9 on the ground that it
was not understood by the late Cresencia when she signed it.
On appeal, the respondent Court of Appeals, voting 4-1, reversed. It held
there was evidence to establish that the subject properties had been
previously partitioned. It ruled that respondent Lorenzo was not shown to
have exercised any undue influence over the late Crescencia when she
signed the said Deed of Confirmation, etc.
Dissatisfied, petitioners filed this petition for review by certiorari. They
submit:
I. THE FINDING OR CONCLUSION DRAWN BY THE
HONORABLE COURT OF APPEALS THAT
THE EVIDENCE ON RECORD ALSO
SHOWS THAT THE TERMS OF EXH. "E"
(ALSO EXH. "1" IN ENGLISH) WERE
READ TO CRESENCIANA O. TAN IN
THE BICOL DIALECT, EXPLAINED TO
AND UNDERSTOOD BY HER, BEFORE
SHE SIGNED THE SAME.
BASED ON THE FACTS STATED IN THE JUDGMENT
QUOTING "THE PERTINENT TESTIMONIES ON THIS
POINT" OR BOTH DEFENDANTS IS MANIFESTLY
INCORRECT, AS THE SAME FALL FAR SHORT OF THE
MANDATORY REQUIREMENT OF ART. 1332, CIVIL
CODE, THAT THE TERMS THEREOF SHOULD BE
FULLY EXPLAINED TO THE ILLITERATE CRESENCIA
O. TAN WHO DID NOT KNOW HOW TO READ AND
WRITE IN ENGLISH.
II. THE CONCLUSION DRAWN BY THE HONORABLE
COURT OF APPEALS THAT THERE WAS NO UNDUE
INFLUENCE EXERTED ON CRESENCIA O. TAN BY
HER (LAWYER-CPA) BROTHER LORENZO O. TAN
BASED ON FACTS STATED IN THE QUESTIONED
JUDGMENT IS CLEARLY INCORRECT, AS IT IS
CONTRARY TO THE PROVISION OF ART. 1337, CIVIL
CODE.
III. THE FINDING AND DECLARATION OF THE
HONORABLE COURT OF APPEALS THAT LORENZO
O. TAN IS THE LAWFUL OWNER OF THE
PROPERTIES PERTAINING TO THE SHARE OF SAID
ILLITERATE OR PARTY AT A DISADVANTAGE,
CRESENCIA O. TAN BY VIRTUE OF SAID DOCUMENT
(EXH. "E"; ALSO EXH. "1") IS CONTRARY TO LAW, AS
THE LATTER'S CONSENT WAS GIVEN BY MISTAKE,
UNDUE INFLUENCE AND/OR FRAUD.
IV. THE FINDING OF THE HONORABLE COURT OF
APPEALS THAT THERE WAS AN ORAL PARTITION BY
AND AMONG CRESENCIA O. TAN AND HER TWO
BROTHERS LORENZO O. TAN AND HERMOGENES O.
TAN IS CONTRARY TO THE ORAL ADMISSION OF
HERMOGENES O. TAN HIMSELF WHO TESTIFIED
THAT
WE DID NOT HAVE EXACTLY A
PARTITION IN 1930.
AS WELL AS SERIOUSLY CONTRADICTED BY CLEAR,
COMPETENT AND CREDIBLE DOCUMENTARY
EVIDENCE AND THEREFORE SHOULD BE
DISREGARDED.
We grant the petition.
The general rule is that factual findings of lower courts are accorded
great respect by this court on review of their decisions. In the petition at
bench, we are constrained to re-examine these findings considering the
contrarieties in the findings made by the appellate court and the trial
court. Indeed, even the Decision of the appellate court is not a
unanimous but a mere majority decision.
The first issue is whether or not the subject properties had already been
partitioned among the heirs of tan Quico and Josefa Oraa. The private
respondents alleged that the properties had been orally partitioned in
1930. 10 Their evidence on this score, however, leaves much to
be desired. It is only respondent Lorenzo who stubbornly
insisted that the said properties had already been divided.
However, brother Hermogenes, the other respondent, gave a
different testimony. We quote his testimony:
xxx xxx xxx
Court:
Q Never mind your sister, we are talking
about your parents. During their lifetime in
1930 you said that the properties would be
divided, so, in 1930, there was no actual
division because it would only be divided?
A We did not have exactly a partition in
1930.
Q You did not have a partition in 1930?
A No, your Honor. 11
The documentary evidence likewise support the conclusion that there
was no such partition. Exhibit "2", the receipt dated April 20, 1966
thumbmarked by the late Crescencia and presented by the petitioners
themselves reads:
RECEIPT FOR P8,970.00
Received from LORENZO O. TAN, on various dates, the total sum of EIGHT
THOUSAND NINE HUNDRED SEVENTY (P8,970.00) PESOS as partial
payment for the sale of my pro-indiviso share on the properties inherited by me
from my deceased parents.
As guarantee for the payment, I put up as security my
pro-indiviso one-third share on the properties inherited by
me from my deceased parents.
Signed this 20th day of April, 1966 at Quezon City,
Philippines.
(SGD.) CRESENCIA O. TAN
Witness: (SGD.) ANTONIETTA T. LIM
Note: Amount of P8,970 includes P6,700 paid to acquire
Lot No. 202-54-41-T from Pedro L. Morada who
transferred his right to Jovita Lim.
The receipt speaks of the late Cresencia's pro-indiviso share of the
subject properties or her share before division. We also note that the
subject lots are still covered by tax declarations 12 in the name of their
parents. If these lots had already been partitioned to the
different heirs and then occupied by them, it appears strange
that their tax declarations have not been adjusted to reflect their
ownership considering the long time that has elapsed since
1930. Respondent Lorenzo testified that he took possession of
the lot supposed to belong to the late Crescencia in 1966, 13 yet,
he himself did not cause any change in its tax declaration.
Similarly corrosive of the claim of private respondents is their
own Exhibit "E" or "1", entitled "Deed of Confirmation of Extra
Judicial Settlement of the Estate of Tan Quico and Josefa Oraa."
Nowhere in the text of this document prepared by no less than
respondent Lorenzo, is there any intimation that the subject why
Exhibit was entitled Deed of Confirmation, respondent Lorenzo
explained; ". . . . we want to put it in black and white, the
separation of the properties which was in existence since 1930
to 1932. . ." (TSN, March 2, 1970, p. 40). To say the least, the
omission buttresses the conclusion that the properties have not
been partitioned.
We now determine the next crucial issue of fact, i. e., whether or not the
above mentioned Deed of Confirmation of Extra Judicial Settlement of
the estate of Tan Quico and Josefa Oraa (Exhibit "E" or "1") is valid. The
respondent court, reversing the trial court, held that the evidence failed to
establish that it was signed by the late Crescencia as a result of fraud,
mistake or undue influence. We hold this ruling erroneous. In calibrating
the credibility of the witnesses on this issue, we take our mandate from
Article 1332 of the Civil Code which provides: "When one of the parties is
unable to read, or if the contract is in language not understood by him,
and mistake or fraud is alleged, the person enforcing the contract must
show that the terms thereof have been fully explained to the former." this
substantive law came into being due to the finding of the Code
Commission that there is still a fairly large number of illiterates in this
country, and documents are usually drawn up in English or Spanish. 14
It A I and my brother.
is also in accord with our state policy of promoting social
justice. 15 It also supplements Article 24 of the Civil Code which Q Who is that brother?
calls on court to be vigilant in the protection of the rights of
those who are disadvantaged in life. in the petition at bench, the A Hermogenes Tan.
questioned Deed is written in English, a language not
COURT:
understood by the late Crescencia, an illiterate. It was prepared
by the respondent Lorenzo, a lawyer and CPA. For reasons
Q Who read that document?
difficult to divine, respondent Lorenzo did not cause the
notarization of the deed. Petitioners alleged that the Deed was A I prepared it.
signed by the late Crescencia due to mistake, fraud or undue
influence. They postulated that respondent Lorenzo took Q You prepared it yourself?
advantage of the late Crescencia's trust and confidence.
Testifying on the trust of the late Crescencia on respondent A Yes, sir.
Lorenzo, petitioner Jose Lim declared: 16
Q Why do you have to prepare the
xxx xxx xxx document?

Q Now, will you tell the Court how the
relation between your mother and your
uncle Lorenzo Tan before September
1967?
A My mother was so close to his brother,
Lorenzo Tan. My mother always asked
him advice because he is considered by
my mother as God to her. . . .
Considering these circumstances, the burden was on private
respondents to prove that the content of the Deed was explained to the
illiterate Crescencia before she signed it. 17 In this regard, the
evidence adduced by the respondents failed to discharge their
burden. On one hand, respondent Lorenzo testified that he and
his brother, respondent Hermogenes, explained in Bicolano, the
meaning of the deed to the late Crescencia, viz: 18
ATTY. LUDOVICE:
A Because I have all the details.
COURT:
All right.
ATTY. LUDOVICE:
Q In what language did you read this
document to Crescencia O. Tan?
A First it was in English then it was in Bicol
so as to clarify things, they were my sister
and my brother and to other persons who
is going to witness the document
Q Did your sister understand the Bicol
dialect when the contents of this was
read?

Q Who read the document to her? A Yes and before that, my sister knows
everything what is going on.
 ATTY. GATDULA:
I moved to strike out the last portion of the
answer.
COURT:
Strike it out.
Respondent Hermogenes, however, gave a different testimony. He
declared it was respondent Lorenzo alone who read the text of the Deed
in Bicolano to the late Crescencia. We quote his testimony, viz: 19
Q You presented this document, EXHIBIT
1 for the defendants, to Crescencia Tan?
A It was presented by my brother Lorenzo
Tan.
Q On what occasion was that on August
15, 1967 was this presented?
A August 16 coincide with the fiesta in our
town, Guinobatan.
Q Was this read to your sister by your
brother Lorenzo?
A Yes, sir, that was read.
Q In what language was it read to her?
A It was read in Bicol.
Q Did your sister understand the contents
of the document?
A Yes, sir.
Q Who read the document to her?
A Lorenzo Tan read the document.
This variance in testimony on a material matter works against the
credibility of private respondents. Nor are we prepared to give full faith
and credit to the testimony that respondent Lorenzo alone explained the
text of the deed to the late Crescencia. Respondent Lorenzo has too
much of a material stake on the dispute. His testimony on the issue is,
therefore, not free from bias and prejudice. Indeed, the preparation and
alleged signing of the said Deed leave a lot of questions unanswered. For
one, the Deed as important as it is, was not caused to be notarized by
respondent Lorenzo. The need for notarization could not have escaped
respondent Lorenzo, a lawyer by profession. Article 1358 of the Civil
Code requires that the Deed should appear in a public document. For
another, respondent Lorenzo prepared the Deed in English language
when he knew all along that the late Cresencia would not be able to
comprehend its meaning. For still another, none of the alleged witnesses
to the Deed was presented to testify on whether it was signed by the late
Crescencia voluntarily and with clear comprehension of its content. Last
but not the least, it is strange that the Crescencia signed the said Deed
with full freedom and complete understanding of its legal significance.
Finally, we come to the issue of whether or not the late Crescencia sold
her inheritance share in favor of the respondent Lorenzo. In taking the
stance that there was indeed a sale, private respondents point to the
receipt, Exh. "2" dated April 20, 1966 as evidence. The significance of
this receipt, Exh. "2" was well analyzed by the trial court and we approve
its ruling, viz:
Said defendant likewise presented in evidence a receipt
(Exhibit 2) purports to show that on April 20, 1966,
Cresencia O. Tan had already received the aggregate
amount of P8,970.00 from defendant Lorenzo O. Tan as
"partial payment for the sale of my (Cresenciana O.
Tan's) pro-indiviso share on the properties inherited by me
from my deceased parents.
It is contended, by these exhibits, that Cresenciana O.
Tan wanted to buy Lot 202-5-41-T at No. 53 Bignay,
Project 2, Quezon City, with the proceeds of the sale to
defendant Lorenzo O. Tan of a portion of Lot 7671 located
in Singtan, Guinobatan, Albay, which is alleged to be the
share of said Cresenciana O. Tan.
However, the same receipt Exhibit 2 recites at the bottom
thereof that the amount of P8,970.00 includes the amount
of P6,700.00 paid to purchase the lot of certain Pedro L.
 Morada who transferred his right to Jovita Lim. This
statement in Exhibit 2 belies defendant's contention that
Cresenciana O. Tan is the buyer of the lot in Quezon City.
IN VIEW WHEREOF, the petition for review on certiorari is granted and
the Decision of the respondent appellate court in Ca-G.R. No. 51340-R
dated July 28, 1980 is reversed and set aside. In its lieu, the Decision of
Antecedent Facts
On 3 February 1984, the spouses Lorenzo and
Lorenza Francisco (petitioners) and Engineer Bienvenido
C. Mercado (respondent) entered into a Contract of
Development (Contract) for the development into a
[4]

the then CFI of Albay, 10th Judicial District, Br. II in Civil Case No. 3676 is
reinstated. Costs against private respondents. subdivision of several parcels of land in Pampanga.

SO ORDERED. Under the Contract, respondent agreed to undertake

at his expense the development work for the Franda
FIRST DIVISION Village Subdivision. Respondent committed to complete
the construction within 27 months.Respondent also
[G. R. No. 118749. April 25, 2003] advanced P200,000.00 for the initial expenses of the
development work. In return, respondent would receive
SPOUSES LORENZO G. FRANCISCO and 50% of the total gross sales of the subdivision lots and
LORENZA D. FRANCISCO, petitioners, vs. other income of the subdivision. Respondent also
HONORABLE COURT OF APPEALS, and enjoyed the exclusive and irrevocable authority to
BIENVENIDO C. MERCADO, respondents. manage, control and supervise the sales of the lots
within the subdivision. The Contract required respondent
DECISION to submit to petitioners, within the first 15 days of every
month, a report on payments collected from lot buyers
CARPIO, J.:
with copies of all the contracts to sell. However,
The Case respondent failed to submit the monthly report.

Before this Court is a petition for review assailing the[1]

Decision of 21 November 1994 as well as the
[2]
Resolution of 17 January 1995 of the Court of Appeals in
CA-G.R. CV No. 34084. The Court of Appeals upheld the
Decision of 10 June 1991 of the Regional Trial Court of
San Fernando, Pampanga, in Civil Case No. 7909
rescinding the subdivision development contract
between the parties and awarding damages to
respondent Bienvenido C. Mercado.
From 16 October 1985 to sometime in March 1986,
within the 27-month period granted to respondent,
petitioners also contracted a certain Nicasio Rosales, Sr.
(Rosales) to undertake the partial development of the
[3]
subdivision. On 16 July 1986, Rosales submitted his
accomplishment report. On the same day, petitioners
demanded that respondent submit within 15 days an
accounting of his operation of the subdivision from the
beginning of the project up to 15 July 1986. Petitioners
also requested for copies of contracts to sell, receipts of
collections and receipts of disbursements for
development expenses.
On 5 August 1986, respondent secured from the
Human Settlements Regulatory Commission (HSRC) an
extension of time to finish the subdivision development
until 30 July 1987. On 8 August 1986, petitioners
instructed respondent to stop selling subdivision lots and
collecting payments from lot buyers. Petitioners also
demanded the turnover to them of all official receipts in
the name of Franda Village Subdivision. Nonetheless,
[5]
respondent continued to collect payments from lot
buyers until September 1986.
On 18 September 1986, petitioners wrote respondent
that their accountant was not satisfied with respondents
report which did not include the necessary supporting
documents. Petitioners required respondent to submit a
proper statement of collections with supporting receipts
and documents, and reiterated that respondent should
stop selling subdivision lots and collecting payments
from lot buyers. For the first time, petitioners also alleged
that respondent violated certain provisions of the
Contract. Petitioners mentioned the complaint of lot
buyers that respondent was not developing the
subdivision within the agreed period. Another complaint
was that respondent issued two kinds of receipts, one in
the name of B. C. Mercado and the other in the name of
Franda Subdivision. [6]
On 7 October 1986, petitioners informed the HSRC
of the lot buyers complaints that respondent completed
only 5% of the development work and that he was
issuing two kinds of receipts. Petitioners also claimed
that respondent was in serious violation of the Contract
because he did not properly remit to petitioners the
proceeds from the lot sales.
In a letter dated 25 November 1986, respondent
[7]
requested petitioners to provide him with the format of
the statement of collections they wanted or, alternatively,
to send an accountant to audit his records.He assured
them that he could account for all the proceeds from the
lot sales. He countered that he could have finished the
development of the subdivision on time had petitioners
not hampered him with their verbal demands to stop the
development and fill up the lots first. Respondent
suggested that he and petitioners settle their differences
either by mutually canceling the Contract and giving to
each party its corresponding share, or by continuing with
the arrangement. In the meantime, respondent informed
petitioners that he would continue the operation of the
subdivision in accordance with the Contract.
On 20 January 1987, petitioners granted respondent
an authority to resume the sale of subdivision lots and
[8]
the collection of payments subject to the following
conditions: (1) all collections shall be deposited in a joint
account with China Banking Corporation, San Fernando,
Pampanga branch; (2) withdrawals shall be limited to
50% of the total collections or to respondent's share,
which can only be used for development expenses, and
any withdrawal shall be subject to the approval of
petitioners; (3) only Franda Village Subdivision receipts,
duly countersigned by petitioners, shall be used; (4)
collections shall be subject to a weekly or monthly audit;
and (5) any violation of these conditions shall result in
the automatic cancellation of the authority.
 On 28 January 1987, respondent informed HSRC
that he had stopped development work on the
subdivision because the conditional authority issued by
petitioners violated the Contract. Specifically, respondent
referred to the following provisions of the Contract that
the conditional authority contravened: (1) his exclusive
and irrevocable right to manage, control, and supervise
the sale of lots; (2) his authority to issue receipts as the
developer without the participation of the landowners;
and (3) his right to withdraw his 50% share without the
approval of the landowners. Respondent attributed the
[9]
delay in the development of the subdivision to petitioners
who contracted the services of another person during the
effectivity of the Contract. Petitioners also stopped
respondent, without justification, from selling the lots and
collecting payments from lot buyers.
On 27 February 1987, respondent filed with the trial
court an action to rescind the Contract with a prayer for
damages. Petitioners countered that respondent
breached the Contract by failing to finish the subdivision
within the 27 months agreed upon, and therefore
respondent was in delay. Petitioners also alleged that
respondent sold one subdivision lot to two different
buyers.
Subsequently, petitioners obtained permission from
the Housing and Land Use Regulatory Board to takeover
the development of the subdivision.
The Ruling of the Trial Court
After trial on the merits, the trial court found for
respondent. The trial court ruled that petitioners
breached the Contract by: (1) hiring Rosales to do
development work on the subdivision within the 27-
month period exclusively granted to respondent; (2)
interfering with the latters development work; and (3)
stopping respondent from managing the sale of lots and
collection of payments.
Because petitioners were the first to breach the
Contract and even interfered with the development work,
the trial court declared that respondent did not incur
delay even if he completed only 28% of the development
work. Further, the HSRC extended the Contract up to
July 1987. Since the Contract had not expired at the time
respondent filed the action for rescission, petitioners
defense that respondent did not finish the development
work on time was without basis.
The trial court also found that respondent did not fail
to pay the 50% share of petitioners from the proceeds of
the lot sales. The trial court viewed respondents failure to
submit the required report as only a slight infraction not
warranting petitioners interference with respondent's
right to sell the lots and collect payments from sales
pursuant to Article X (3) of the Contract. The trial court
noted that petitioners had tolerated the non-submission
of the monthly report until petitioners made the demand
for accounting on 16 July 1986, which respondent readily
complied. The trial court stressed that respondents right
under the Contract to sell lots and collect payments was
exclusive and irrevocable.
The trial court found unproven the charge that
respondent sold one subdivision lot to two buyers. The
trial court considered the issue of a double sale
immaterial, as respondent did not violate any provision of
the Contract and the aggrieved parties in such event
would be the buyers and not petitioners.
In its Decision of 10 June 1991, the trial court
[10]
The Court of Appeals adopted the findings of fact of
the trial court. Declaring that there was no reversible
error, the appellate court in its Decision of 21 November
1994 affirmed the ruling of the trial court in toto.
[11]

decreed the rescission of the Contract and awarded

damages to respondent, as follows: Petitioners filed a motion for reconsideration, which
the Court of Appeals denied in its Resolution of 17
Premises considered, judgement is hereby rendered in favor of January 1995. [12]

plaintiff granting the rescission of the Contract of

Development between him and defendants and ordering On 21 March 1995, petitioners filed with the Supreme
defendants to pay unto plaintiff the following: Court a petition for review assailing the appellate courts
decision and resolution. Petitioners prayed that the
1. Expenses of operation of the subdivision in the total amount Court: (1) reverse the decision of the Court of
of P1,808,756.01 and return of advance payment Appeals; (2) award to petitioners P4,403,895.00 as
of P200,000.00; additional cost of the development of the
subdivision, P57,864.00 as their unremitted
2. Attorneys fees of P25,000.00; share, P304,152.00 to reimburse them for the amounts
paid to Rosales, P50,000.00 as attorneys
3. P50,000.00 and P30,000.00 as temperate and exemplary fees, P10,000.00 as appearance fees, and moral and
damages; and exemplary damages; and (3) other equitable reliefs and
remedies. [13]

4. Cost of suit.
The Issues
SO ORDERED.
Petitioners assign the following errors:
The Ruling of the Court of Appeals
1. THE COURT OF APPEALS ERRED WHEN IT
On appeal to the Court of Appeals, petitioners HELD THAT DELAY IS NOT AN ISSUE IN
presented for the first time a supplemental Memorandum THIS CASE;
of Agreement dated 9 October 1985 allegedly entered
into by petitioners and Rosales with the conformity of 2. THE COURT OF APPEALS ERRED WHEN IT
respondent. However, the appellate court refused to take HELD THAT THE CONTRACT OF
cognizance of the Memorandum of Agreement, as DEVELOPMENT HAS NOT EXPIRED AND
petitioners did not formally offer it in evidence. WAS EXTENDED UP TO JULY 30, 1997 BY
PETITIONER;
3. THE COURT OF APPEALS ERRED WHEN IT
HELD THAT PRIVATE RESPONDENT WAS
ENTITLED TO THE RESCISSION OF THE
CONTRACT OF DEVELOPMENT AND
DAMAGES BECAUSE OF INTERVENTION
OF NICASIO ROSALES, SR. IN THE
DEVELOPMENT OF THE SUBDIVISION
DURING THE EXISTENCE OF THE
CONTRACT, AND THAT THE
MEMORANDUM OF AGREEMENT OR
SUPPLEMENTAL AGREEMENT WHICH
BEARS THE CONFORMITY OF PLAINTIFF
WAS NOT OFFERED OR PRODUCED IN THE
TRIAL COURT AND THEREFORE COULD
NOT BE CONSIDERED ON APPEAL, WHEN
IN FACT IT WAS REFERENCED AND MADE
PART OF THE EVIDENCE OF THE PRIVATE
RESPONDENT;
4. THE COURT OF APPEALS ERRED WHEN IT
HELD THAT PRIVATE RESPONDENT WAS
ENTITLED TO THE RESCISSION OF THE
CONTRACT AND DAMAGES BECAUSE
PRIVATE RESPONDENTS NON-
SUBMISSION OF THE MONTHLY
COLLECTION REPORT WAS NOT A
SERIOUS AND SUBSTANTIAL BREACH OF
THE CONTRACT OF DEVELOPMENT;
5. THE COURT OF APPEALS ERRED WHEN IT
HELD THAT PRIVATE RESPONDENT WAS
ENTITLED TO THE RESCISSION OF THE
CONTRACT AND DAMAGES BECAUSE
PRIVATE RESPONDENTS EXECUTION OF
DOUBLE SALE OF A LOT IN THE
SUBDIVISION SUBJECT OF THE
CONTRACT OF DEVELOPMENT IN FAVOR
OF TWO DIFFERENT PERSONS IS AT BEST
A PERIPHERAL ISSUE TO THE MAIN ISSUE
OF RESCISSION.
6. THE COURT OF APPEALS ERRED WHEN IT
HELD THAT IT AFFIRMED THE DECISION
DATED JUNE 10, 1991 OF THE TRIAL
COURT INSTEAD OF REVERSING THE
SAME AND AWARDING DAMAGES TO
PETITIONERS. [14]
The Ruling of the Court
It is evident from the assigned errors that petitioners
are asking the Court to reexamine certain findings of fact
of the trial court. Petitioners submit that this case
constitutes an exception to Rule 45 of the Rules of Court
limiting to questions of law the issues that may be raised
in an appeal by certiorari to this Court.
To bolster this argument, the petition for review,
prepared by Atty. Pedro D. Diwa as counsel for
petitioners, cited what is supposed to be the Courts
ruling in Misa v. Court of Appeals. However, [15]
petitioners counsel misquoted the ruling in Misa. We
reproduce the erroneous excerpt - which petitioners
counsel even underscored as follows:
And finally, Mr. Justice Medialdea of this COURT in the case
of Misa vs. Court of Appeals, G.R. No. 97291, August 5, 1992,
by way of exception to the settled rule that only questions of
law may be raised in a petition for review on certiorari under
Rule 45 of the Rules of Court, held as follows:
It is firmly settled that only questions of law may be raised in a
petition for review on certiorari under Rule 45 of the Rules of
Court. However, there are several instances when findings of
fact may be passed upon and reviewed by the Supreme Court,
to wit: xxx[16]
Contrary to the quotation made in the petition for
review, the Court in Misa refused to review the factual
findings of the lower court. There the Court merely
acknowledged the exceptional circumstances which may
warrant such a review, thus:
It is readily discernible that petitioners are asking Us to re-
examine all the evidence already presented before the
respondent court and trial court and evaluated by them. These
evidence served as basis in arriving at their findings of
fact. We shall not analyze such evidence all over
again. Instead, We put finis to the factual findings in this
case. It is firmly settled that only questions of law may be
raised in a petition for review on certiorari under Rule 45
of the Rules of Court. Certainly, We recognize exceptions to
this rule. The case of Medina, et. al. v. Asistio, etc., et al., G.R.
No. 75450, November 8, 1990, 191 SCRA 218, 223-224
enumerates several instances when findings of fact may be
passed upon and reviewed by this Court, none of which
obtain herein:
(1) When the conclusion is a finding grounded entirely on
speculation, surmises or conjecture (Joaquin v. Navarro, 93
Phil. 257 [1953]; (2) When the inference made is manifestly
mistaken, absurd or impossible (Luna v. Linatok, 74 Phil. 14
[1942]; (3) Where there is a grave abuse of discretion (Buyco
v. People, 95 Phil. 453 [1955]; (4) When judgment is based on
a misapprehension of facts (Cruz v. Sosing, L-4875, Nov. 27,
1953); (5) When the findings of fact are conflicting (Casica v.
Villaseca, L-9590 Ap. 30, 1957; unrep.);** (6) When the Court
of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both
appellant and appellee (Evangelista v. Alto Surety and
Insurance Co., 103 Phil. 401 [1958]; (7) The findings of the
Court of Appeals are contrary to those of the trial court (Garcia
v. Court of Appeals, 33 SCRA 622 [1970]; Sacay v.
Sandiganbayan, 142 SCRA 593 [1986]) ** (8) When the
findings of fact are conclusions without citation of specific
evidence on which they are based (Ibid.,); (9) When the facts
set forth in the petition as well as in the petitioners main and
reply briefs are not disputed by the respondents (Ibid.,); and
(10) The finding of fact of the Court of Appeals is premised on
the supposed absence of evidence and is contradicted by the
evidence on record (Salazar v. Gutierrez, 33 SCRA 242
[1970]). (Emphasis and underscoring supplied)
[17]
We frown on the obvious carelessness of Atty.
Diwa. Since only decisions of the Court establish
jurisprudence and doctrines in this jurisdiction, it is the
[18]
duty of all officers of the court to cite the rulings and
decisions of the Supreme Court accurately, even word-
for-word and punctuation mark-for-punctuation mark.
Otherwise, if not faithfully and exactly quoted, the
[19]
decisions and rulings of this Court may lose their proper
and correct meaning, to the detriment of other courts,
lawyers and the public who may thereby be misled. [20]
In any event, the issues about the alleged extension
of the Contract, the double sale, the interference with the
development of the subdivision, are matters requiring the
introduction and evaluation of evidence. They are
questions of fact, which arise when doubt or difference
exists about the truth or falsehood of alleged facts. [21]
 As a rule, only questions of law may be appealed to
the Court by certiorari. The Court is not a trier of facts, its
jurisdiction being limited to errors of law. Moreover, [22]
where as in this case the Court of Appeals affirms the
factual findings of the trial court, such findings generally
become conclusive and binding upon the Court. The
Court will not disturb the factual findings of the trial and
appellate courts unless there are compelling or
exceptional reasons, and there is none in the instant
petition.
The trial and appellate courts found that the HSRC
granted respondent an extension of up to 30 July 1987 to
complete the development work under the
Contract. Petitioners did not contest HSRCs extension of
time to respondent. Thus, the Court finds no merit in
petitioners claim that respondent incurred delay in the
performance of his obligation under the Contract. At that
time, the law authorized HSRC to grant extensions of
time for completion of subdivision projects. [24]
The law provides that delay may exist when the
obligor fails to fulfill his obligation within the time
expressly stipulated. In this case, the HSRC extended
[25]
the period for respondent to finish the development work
until 30 July 1987. Respondent did not incur delay since
the period granted him to fulfill his obligation had not
expired at the time respondent filed the action for
rescission on 27 February 1987.
Petitioners argue the Court of Appeals naively
assumed that respondent could complete the
development work in five months when he only finished
28.67% of the work in some 36 months. This argument
[26]
is speculative and deserves scant consideration. It
cannot prevail over the express grant to respondent of a
period within which to fulfill his obligation.
Moreover, as the trial and appellate courts found,
petitioners hampered and interfered with respondents
[23] development work. Petitioners also stopped respondent
from selling lots and collecting payments from lot buyers,
which was the primary source of development funds. In
effect, petitioners rendered respondent incapable, or at
least made it difficult for him, to develop the subdivision
within the allotted period. In reciprocal obligations,
neither party incurs in delay if the other does not comply
or is not ready to comply with what is incumbent upon
him. It is only when one of the parties fulfills his
obligation that delay by the other begins.
[27]
Petitioners argue that the alleged Memorandum of
Agreement may be treated as a judicial admission in
accordance with Geagonia v. Court of Appeals. We [28]
do not agree. In Geagonia, the Court of Appeals
considered a letter written by Geagonia, although not
formally offered in evidence, because it was originally
annexed to Geagonias initial complaint filed with the
Insurance Commissioner. The Court upheld the appellate
courts reversal of the Insurance Commissioners decision
on the ground that the letter constituted a judicial
admission by Geagonia. Findings of the Insurance
Commissioner and the Court of Appeals were divergent
in Geagonia, an exceptional circumstance that allowed
the Court to reexamine the factual findings of the
Insurance Commissioner.
In the instant case, petitioners never presented the
Memorandum of Agreement before the trial
court. Petitioners merely annexed to their petition for
review before the Court of Appeals an unauthenticated
photocopy of the alleged Memorandum of
Agreement. Petitioners argue that this agreement was
"referenced and testified to" by respondent during his
cross-examination on 1 August 1989 before the trial
court.However, in that testimony, respondent merely
admitted to signing an amended or supplemental
agreement, the contents of which he could not recall.
Respondents testimony does not identify or admit that
[29]
the Memorandum of Agreement presented by petitioners
was the agreement or contract respondent had
signed. Atty. Gorospe, then counsel for petitioners, even
manifested during the cross-examination of respondent
that no supplemental agreement or contract was
appended to the complaint. [30]
Further, petitioners failed to explain adequately why
the alleged Memorandum of Agreement was never
presented before the trial court. As succinctly explained
by the Court of Appeals:
Appellants advertence to an alleged supplemental
Memorandum of Agreement (Annex A, Appellants brief) to
prop up their cause deserves scant consideration. The said
document was neither produced nor offered in evidence in the
proceedings below, although it could have been easily
produced in court by compulsory process. This lapse has
not been satisfactorily explained by appellants.
xxx (Emphasis supplied)
[31]
On the fourth assigned error, we find no reversible
error in the ruling of the trial and appellate courts that
respondents non-submission of the monthly report was
merely a slight infraction of the Contract.Respondents
failure to submit the monthly report cannot serve as
sufficient basis for the cancellation of the Contract. The
cancellation of a contract will not be permitted for a slight
or casual breach. Only a substantial and fundamental
breach, which defeats the very object of the parties in
making the contract, will justify a cancellation. In the
[32]
instant case, the development work continued for more
than two years despite the lack of a monthly report.
Petitioners further contend that, considering
respondents non-submission of collection reports, they
were merely enforcing their rights under Article X (3) of
the Contract in demanding that respondent stop selling
[33]
the subdivision lots and collecting payments from lot
buyers.
Whether petitioners could have justifiably invoked
Article X (3) of the Contract based on respondents failure
to submit the required reports is beside the point. It is
clear from the records that petitioners did not seek to
stop respondents activities due to the latters failure to
submit the required reports. The non-submission of the
required reports was never mentioned in any of
petitioners letters. Indeed, petitioners letter of 8 August
1986, which first instructed respondent to stop selling the
lots and collecting payments, did not mention any
violation at all, while the subsequent letters referred
[34]
only to the complaints of lot buyers. Article X (3) of the
Contract required the innocent party to serve a written
notice of a violation of the terms and conditions of this
contract. Absent such written notice, this provision
[35]
cannot be invoked, much less enforced.
On the fifth assigned error, it is unnecessary for this
Court to rule on the materiality of the alleged double sale
in the face of the trial and appellate courts' finding that no
double sale took place.
On the award of damages, however, we find some
modification is in order. The trial court
awarded P50,000.00 in temperate damages to
respondent for his besmirched reputation on his goodwill
and image as a good and able engineer and contractor.
Under the law, however, moral and not temperate
[36]
damages may be awarded for besmirched reputation
and similar injury. Temperate damages may be
[37]
awarded only when pecuniary loss has been suffered but
the amount cannot be proved with certainty from the
nature of the case. Hence, the award of P50,000.00 in
[38]
temperate damages should be deleted for lack of legal
basis.
We likewise find without basis the trial courts award
of exemplary damages. In contracts, exemplary
damages may be awarded if the defendant acted in a
wanton, fraudulent, reckless, oppressive or malevolent
manner. Nothing in the trial and appellate courts
[39]
decisions indicates that petitioners behaved in such
manner as to warrant the grant of exemplary damages.
On the award of attorneys fees, the general rule is
that attorney's fees cannot be recovered as part of
damages because no premium should be placed on the
right to litigate. Article 2208 of the Civil Code provides
[40]
that attorneys fees and expenses of litigation should not
be granted unless stipulated, except in certain cases
where the defendant acted in gross and evident bad faith
in refusing to satisfy the plaintiffs plainly valid, just and
demandable claim. [41]
That petitioners required respondent to submit a
statement of collection on the same day that Rosales
submitted his accomplishment report does not sufficiently
show, by itself, gross and evident bad faith.The Contract
itself required the submission of a collection report.
Although early on petitioners may have tolerated the
non-submission of the report, they should not be
penalized for demanding later on that respondent comply
with a condition of the Contract.
WHEREFORE, the Decision of 21 November 1994 of
the Court of Appeals in CA-G.R. CV No. 34084
upholding the Decision of 10 June 1991 of the Regional
Trial Court of San Fernando, Pampanga, Branch XLV, in
Civil Case No. 7909 is AFFIRMED, with the
MODIFICATION that the award of attorneys fees,
temperate and exemplary damages is DELETED.
SO ORDERED.
FIRST DIVISION
[G.R. No. 163770. February 17, 2005]
EPIFANIA DELA CRUZ, substituted by LAUREANA
V. ALBERTO, petitioner, vs. SPS. EDUARDO
C. SISON and EUFEMIA S.
SISON, respondents.
DECISION
YNARES-SANTIAGO, J.:
Before us is a petition for review on certiorari under
Rule 45 of the Rules of Court, assailing the Decision
dated April 20, 2004, of the Court of Appeals in CA-G.R.
[1]
CV No. 55006, which reversed and set aside the
Decision dated March 20, 1996, of the Regional Trial
[2]
Court of Lingayen, Pangasinan, Branch 38, declaring as
valid the Deed of Absolute Sale dated November 24,
1989, executed by the deceased petitioner in favor of the
respondents.
Initially, the complainant in this case was Epifania S.
Dela Cruz (Epifania), but she died on November 1, 1996,
while the case was pending in the Court of Appeals.
Upon her demise, she was substituted by her niece,
Laureana V. Alberto.
Epifania claimed that sometime in 1992, she
discovered that her rice land in Salomague Sur,
Bugallon, Pangasinan, has been transferred and
registered in the name of her nephew, Eduardo C. Sison,
without her knowledge and consent, purportedly on the
strength of a Deed of Sale she executed on November
24, 1989.
Epifania thus filed a complaint before the Regional
Trial Court of Lingayen, Pangasinan, to declare the deed
of sale null and void. She alleged that Eduardo tricked
her into signing the Deed of Sale, by inserting the deed
among the documents she signed pertaining to the
transfer of her residential land, house and camarin, in
favor of Demetrio, her foster child and the brother of
Eduardo.
Respondents, spouses Eduardo and Eufemia Sison
(Spouses Sison), denied that they employed fraud or
trickery in the execution of the Deed of Sale. They
claimed that they purchased the property from Epifania
for P20,000.00. They averred that Epifania could not
have been deceived into signing the Deed of Absolute
Sale because it was duly notarized before Notary Public
Maximo V. Cuesta, Jr.; and they have complied with all
requisites for its registration, as evidenced by the
Investigation Report by the Department of Agrarian
Reform (DAR), Affidavit of Seller/Transferor, Affidavit of
[3] [4]
Buyer/Transferee, Certification issued by the Provincial
[5]
Agrarian Reform Officer (PARO), Letter for the
[6]
Secretary of Agrarian Reform, Certificate Authorizing
[7]
Payment of Capital Gains Tax, and the payment of the
[8]
registration fees. Some of these documents even bore
the signature of Epifania, proof that she agreed to the
transfer of the property.
Respondents asserted that they have been in open,
continuous, and peaceful possession of the land since
November 24, 1989; in fact, they have been receiving
the fruits and produce of the land since they purchased
the same, as corroborated by Manuel C. Rafon, the
caretaker of the property. [9]
On March 20, 1996, the trial court rendered judgment
in favor of Epifania, the dispositive portion of which
reads:
Wherefore, in view of the considerations discussed
above, the court hereby renders judgment in favor of the
plaintiff and against the defendants.
1. Declaring the deed of sale marked exhibit A not valid
and without legal force and effect;
2. Ordering and enjoining the defendants from disturbing
the plaintiffs possession over the land covered by exhibit
A;
3. Ordering the defendants to pay the plaintiff the sum of
Three Thousand (P3,000.00) Pesos as attys fee and Two
Thousand (P2,000.00) Pesos as litigation expenses and
to further pay the costs of the proceedings.
All other claims are denied for lack of basis.
SO ORDERED. [10]
The trial court found that Eduardo deceived Epifania
into signing the assailed deed by interspersing the same
with the documents executed by the latter in favor of her
foster son, Demetrio Sison. The trial court noted that
[11]
two sets of residence certificates were used by Epifania
for the year 1989, for which the respondents gave no
explanation. It also observed that there was no reason
for Epifania to sell her properties as she was not
financially hard-up at the time of the sale.
Dissatisfied with the trial courts decision, the spouses
Sison appealed to the Court of Appeals, which disposed
of the appeal as follows:
WHEREFORE, premises considered, the appealed
judgment is REVERSED and SET ASIDE, and a new
one entered DECLARING as valid the Deed of Absolute
Sale dated November 24, 1989 executed by the plaintiff-
appellee in favor of the defendants-appellants.
SO ORDERED. [12]
In reversing the trial court, the Court of Appeals
declared that Epifanias allegation of trickery and fraud in
the execution of the questioned deed of sale, was bare
and unsupported. Taken alone, it did not constitute the
required convincing proof as would overcome the
presumption that a private document duly acknowledged
before a notary public, except a last will and testament,
is a public instrument which will also serve as evidence
of the fact which gave rise to its execution as well as its
date.[13]
Hence, this petition, raising the following errors:
I.
THE COURT OF APPEALS GRAVELY ERRED IN
SUSTAINING THE PRESUMPTION OF DUE
EXECUTION OF THE QUESTIONED DEED OF SALE.
II.
THE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT THE QUESTIONED DEED OF SALE IS
VALID.
III.
THE COURT OF APPEALS GRAVELY ERRED IN NOT
UPHOLDING THE CONCLUSIONS AND FINDINGS OF
FACT BY THE TRIAL COURT. [14]
The sole issue for resolution is whether the deed of
absolute sale is valid.
The issue of whether fraud attended the execution of
a contract is factual in nature. Normally, this Court is
bound by the appellate courts findings, unless they are
contrary to those of the trial court, in which case we may
wade into the factual dispute to settle it with finality.
After a careful perusal of the records, we sustain the
[15]
Court of Appeals ruling that the Deed of Absolute Sale
dated November 24, 1989 is valid.
Petitioner asserts that the presumption of due
execution of the questioned deed of sale does not apply
in the instant case, Epifania being 79 years old at the
time she signed the questioned deed of sale and unable
to read and understand the English language used
therein. Petitioner cites Article 1332 of the Civil Code,
which states:
ART. 1332. When one of the parties is unable to read, or
if the contract is in a language not understood by him,
and mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been
fully explained to the former.
During her testimony, Epifania insisted that she
cannot read, and yet, her avowal is inconsistent with
[16]
her own complaint where she alleged:
7. She only read the document on top of the other
several copies and found the same to be the deed in
favor of Demetrio C. Sison and being made to believe by
Eduardo C. Sison that the other copies are the same as
the deed in favor of Demetrio C. Sison, she signed all the
other copies which Eduardo made her sign; (Emphasis
[17]
supplied)
To us, these contradictory statements do not
establish the fact that Epifania was unable to read and
understand the English language. There being no
evidence adduced to support her bare allegations, thus,
Epifania failed to satisfactorily establish her inability to
read and understand the English language. It is well
settled that a party who alleges a fact has the burden of
proving it. Consequently, the provisions of Art. 1332
[18]
does not apply.
Although Epifania was 79 years old at the time of the
execution of the assailed contract, her age did not impair
her mental faculties as to prevent her from properly and
intelligently protecting her rights. Even at 83 years, she
exhibited mental astuteness when she testified in court.
It is, therefore, inconceivable for her to sign the assailed
documents without ascertaining their contents, especially
if, as she alleges, she did not direct Eduardo to prepare
the same.
A comparison of the deed of sale in favor of Demetrio
and the deed of sale in favor Eduardo, draws out the
conclusion that there was no trickery employed. One can
readily see that the first deed of sale is in all significant
respects different from the second deed of sale. A casual
perusal, even by someone as old as Epifania, would
enable one to easily spot the differences. Epifania could
not have failed to miss them. The Court of Appeals
observed, thus:
Exhibit 14 was prepared using a different type writer with
much bigger font, lending weight to the claim that it was
executed on a later date, December 14, 1989. That it
bore a different residence certificate number, 14416455J,
may be said to have caused by an inadvertent error, but
which error was likely committed in the earlier deed in
favor of Eduardo itself, which shows the number
14416456J hand-printed along with the date of issue of
November 23, 1989. The error in the date of the
certificate, November 23, 1989 instead of January 23,
1989, may likely be because the deed of sale to Eduardo
was executed in November. Surely any deliberate
trickery by Eduardo could not have gone as far as
creating these differences and errors, which could not
conceivably have helped him conceal his alleged
surreptitious insertion of copies of the deed in his favor
into the sheaves of documents he presented for signing
by appellee.[19]
Indeed, if the intention was to deceive, both deeds of
sale should have been mirror images as to mislead
Epifania into thinking that she was signing what
appeared to be the same document.
In addition, the questioned deed of sale was duly
notarized. It is a settled rule that one who denies the due
execution of a deed where ones signature appears has
the burden of proving that, contrary to the recital in the
jurat, one never appeared before the notary public and
acknowledged the deed to be a voluntary act. Epifania
[20]
never claimed her signatures as forgeries. In fact,
Epifania never questioned the deed of sale in favor of
Demetrio, accepting it as a valid and binding document.
It is only with respect to the deed of sale in favor of
Eduardo that she denies knowledge of affixing her
signature. Unfortunately, for both parties, the notary
public, Atty. Maximo V. Cuesta, Jr. before whom they
appeared, died prior to the filing of the case.
Hence, we apply the rule that documents
acknowledged before notaries public are public
documents which are admissible in evidence without
necessity of preliminary proof as to their authenticity and
due execution. They have in their favor the presumption
of regularity, and to contradict the same, there must be
evidence that is clear, convincing and more than merely
preponderant. The burden of proof to overcome the
[21]
presumption of due execution of a notarial document lies
on the one contesting the same. Petitioner failed to
discharge this burden.
It does not follow that since Epifania maintained bank
deposits, that she never intended to sell the rice land. As
respondents have pointed out, Epifania had stopped
making bagoong at the time of the execution of the deed
of sale. It is thus logical for a 79-year old woman with
[22]
no means of income to find other ways to support
herself. Notably, petitioner herself pointed out that as of
August 16, 1990, her deposit decreased from
P1,005,857.66 to P346,760.58, which only shows that
she needed money between 1988-1990. The possibility
[23]
that she sold her property to acquire additional cash is
therefore not remote, especially if we take into account
that, twenty days after the sale to Eduardo, Epifania also
sold to Demetrio her residential land, house and
camarin.
We uphold the findings of the Court of Appeals that
the series of official acts and processes leading to the
transfer of the tax declaration in the name of Eduardo
lend credence to the due execution of the questioned
deed of sale, thus:
Defendants then have every reason to maintain that they
are now the absolute owners of the subject land. The
series of subsequent official acts and processes
pertinent to the transfer thereof to appellant can only
lend credence to the due execution of the questioned
deed of sale. By virtue of said deed, Tax Declaration No.
57 in plaintiff-appellees name was cancelled and Tax
Declaration No. 4754 was issued in the names of
defendants-spouses (Exh. 2). As to whether defendants
are now the possessors of the land and have been
receiving their share of the produce since 1989 up to the
present, there is the affidavit to that effect of Manuel
Rafon, a long-time tenant of the land in question (Exh.
3), as well as an earlier affidavit by him also dated
November 24, 1989 that he continued to till the subject
land as tenant (Exh.13). We also cannot ignore the
investigation report of the DAR (Exh. 4) in regard to
appellants application for transfer of ownership, wherein
the MARO, Erlinda R. Lomibao, found that the appellant
was entitled to the necessary certification or clearance.
Significantly, it must also be mentioned that the appellee
also contemporaneously executed a notarized Affidavit of
Seller/Transferor (Exh. 5), acknowledging that she has
sold 1.45 hectares of her OLT retention area to appellant
Eduardo Sison. Said instrument is also a public
document, to overcome which appellee failed also to
adduce convincing evidence. Then there is the
certification or clearance issued by the Provincial
Agrarian Reform Office for purposes of registration of the
lot in the name of the defendants-appellants (Exh. 6).
The Revenue District Officer Dante Canullas also
approved the transfer to appellant when he issued a
certificate authorizing registration (Exh. 7). There is even
the letter of the appellee to the Secreatry of Agrarian
Reform that the area from which she sold a portion to
Eduardo came from her retention limit under PD 27. The
obvious purpose of her letter was to facilitate the transfer
to Eduardo. [24]
The testimony of Municipal Agrarian Reform Officer
Erlinda Lomibao demonstrates the intent of Epifania to
sell her land to the former. According to Lomibao, both
Epifania and Eduardo appeared before her twice, to
facilitate the issuance of the clearance over the transfer
of the property. The DAR visitors logbook showed the
names and signatures of both parties written one after
the other.
[25]
These overwhelming documentary evidence
presented by the respondents prove that the spouses
Sison bought the property from Epifania. These
documents are too varied from each other to have been
accomplished through trickery and fraud. She could not
have signed all these documents, including that of
Demetrios and not inquire as to the contents thereof, if
as she alleged, the questioned deed of sale was
surreptitiously inserted with that intended for Demetrio.
Incidentally, even Demetrio himself admitted that the
subject property was sold by Epifania to Eduardo and
that the latter had been in open and continuous
possession thereof since November 1989.
WHEREFORE, in view of the foregoing, the petition
is DENIED. The decision dated April 20, 2004 of the
Court of Appeals in CA-G.R. CV No. 55006, reversing
the March 20, 1996 decision of the Regional Trial Court,
Branch 38 of Lingayen, Pangasinan, in Civil Case No.
17245, is AFFIRMED.
SO ORDERED.
THIRD DIVISION
[G.R. No. 110672. September 14, 1999]
RURAL BANK OF STA. MARIA, PANGASINAN, petiti
oner vs. THE HONORABLE COURT OF APPEA
LS, ROSARIO R. RAYANDAYAN, CARMEN R.
ARCEO, respondents.
[G.R. No. 111201. September 14, 1999]
ROSARIO R. RAYANDAYAN and CARMEN R. ARCE
O, petitioners vs. COURT OF APPEALS, HALSE
MA INC. and RURAL BANK OF STA. MARIA, P
ANGASINAN, INC.,respondents.
DECISION
GONZAGA_REYES, J.:
Before us are two consolidated[1] petitions for review
on certiorari under Rule 45 of the Revised Rules of Court. In G.R. No.
110672, petitioner Rural Bank of Sta. Maria, Pangasinan, assails
portions of the Decision dated March 17, 1993, and the Resolution
dated January 25, 1993, of the Court of Appeals [2] in CA-G.R. CV No.
21918, which affirmed with modification the Decision of the Regional
Trial Court (Branch 6, Baguio City)[3] in Civil Case No. 890-R
entitled Rosario R. Rayandayan and Carmen R. Arceo versus Rural
Bank of Sta. Maria, Pangasinan and Halsema, Inc. In G.R. No.
111201, petitioners Rosario R. Rayandayan and Carmen R. Arceo
likewise assail portions of said Decision adverse to it.
The facts as found by the trial court and adopted by the Court of
Appeals insofar as pertinent to the instant petitions are as follows:
xxx, the Court Finds that a parcel of land of about 49,969
square meters, located in Residence Section J, Camp 7, Baguio
City, covered by TCT T-29817 (land for short) is registered in
the name of Manuel Behis, married to Cristina Behis (Exhibit
B). Said land originally was part of a bigger tract of land
owned by Behis (one name), father of Manuel Behis, covered
by OCT-0-33 (Exhibit 26, Halsema, for history of the
land). And upon the latters death on September 24, 1971, his
children, namely: Saro Behis, Marcelo Behis, Manuel Behis,
Lucia Behis, Clara Behis and Arana Behis, in an extrajudicial
settlement with Simultaneous Sale of Inheritance
dated September 28, 1978, agreed to sell the land to Manuel
Behis, married to Cristina Behis (Exhibit `2, Halsema) but
which subsequently was explained as only an arrangement
adopted by them to facilitate transactions over the land in a
Confirmation of Rights of Co-Ownership over real Property
dated September 26, 1983, showing that the Behis brothers and
sisters, including Manuel Behis, are still co-owners thereof
(Exhibit `30, Halsema, Exhibit `AA).
Manuel Behis mortgaged said land in favor of the Bank in a
Real Estate Mortgage dated October 23, 1978 (Exhibit `Q-1)
as security for loans obtained, covered by six promissory notes
and trust receipts under the Supervised Credit Program in the
total sum of P156,750.00 (Exhibit `Q-2 to `Q-7, Exhibits `4-A
to `4-F, Halsema) and annotated at the back of the title on
February 13, 1979 as Entry No. 85538-10-231 (Exhibit 1-A-1,
Halsema). The mortgage, the promissory notes and trust
receipts bear the signatures of both Manuel Behis and Cristina
Behis.
Unfortunately thereafter, Manuel Behis was delinquent in
paying his debts.
On January 9, 1985, Manuel Behis sold the land to the
plaintiffs[4] in a Deed of Absolute Sale with Assumption of Mortgage for the sum
of P250,000.00 (Exhibit `A) which bears the signature of his wife Cristina
Behis. Manuel Behis took it upon himself to secure the signature of his wife and
came back with it. On the same date of January 9, 1985, plaintiffs and Manuel
Behis simultaneously executed another Agreement (Exhibit `15) whereby plaintiffs
are indebted to Manuel Behis for the sum of P2,400,000.00 payable in installments
with P10,000.00 paid upon signing and in case of default in the installments, Manuel
Behis shall have legal recourse to the portions of the land equivalent to the unpaid
balance of the amounts in installments. Obviously, the real consideration of
the sale of the land of Manuel Behis to the plaintiffs is contained in this
Agreement (Exhibit `15).
Plaintiffs did not present to the Register of Deeds of Baguio
said two contracts and ask that the title, TCT T-29817 in the
name of Manuel Behis be cancelled and a new one issued in
their name which normally a buyer does. Neither did plaintiffs
annotate at the back of the title the aforesaid two
contracts. Nor did they immediately go to the Bank and
present said two contracts. Thus, the title to the land, TCT No.
T-29817, remained in the name of Manuel Behis.
Pursuant to their two contracts with Manuel Behis, plaintiffs
paid him during his lifetime the sum of P10,000.00 plus
P50,000.00 plus P145,800.00 (Exhibit `U as stipulated in the
hearing), and the sum of P21,353.75 for the hospitalization,
medical and burial expenses of Manuel Behis when he died on
June 21, 1985 (Exhibit `II, `JJ, `KK, `LL, `PP, `OO, and
`RR). Obviously, from the above payments, the plaintiffs
were unable to complete their full payment to Manuel Behis of
the sale of the land as it is nowhere near P2,400,000.00.
Meantime, the loan in the name of Manuel Behis with the
Bank secured by the Real Estate Mortgage on the land
continued to accumulate being delinquent. By May 30, 1985,
in a Statement of Account (Exhibit `D) sent to Manuel Behis
by the Bank thru the Paredes Law Office for collection, the
debt of P150,750.00 has ballooned into P316,368.13, with
interest and other charges. In fact, the Bank, thru its President,
Vicente Natividad, initiated foreclosure proceedings. But after
the usual publication, the same was discontinued since many
parties were interested to buy the land outside the said
procedure but none materialized.
On June 19, 1985, Atty. William Arceo, in behalf of Manuel
Behis, wrote a letter asking for a more detailed Statement of
Account from the Bank broken down as to principal, interest
and other charges (Exhibit `E).
Thereafter, plaintiffs finally presented the Deed of Absolute
Sale with Assumption of Mortgage (Exhibit `A) to the Bank
when negotiating with its principal stockholder, Engr.
Edilberto Natividad, in Manila, but did not show to the latter
the Agreement (Exhibit `15) with Manuel Behis providing for
the real consideration of P2,400,000.00. And thus, on August
1, 1985, a Memorandum of Agreement (Exhibit `F) was
entered into between plaintiffs, as assignees of Manuel Behis,
and the Bank, the salient features of which are:
`x x x x x x x x x
`3. That during the lifetime of Manuel Behis he had executed a
Deed of Absolute Sale with Assumption of Mortgage in favor
of Carmen Arceo and Rosario Rayandayan;
`4. That the total obligation of the late Manuel Behis to the
Bank amounts to P343,782.22;
`5. That the assignees hereby offer to redeem the aforesaid real
property and the Bank hereby agrees to release the mortgage
thereon under the following terms and conditions:
(a). That the amount of P35,000.00 shall be paid by the
assignees to the Bank upon execution of this Agreement;
(b). That the amount of P108,000.00 shall be paid by the
assignees to the Bank at the rate of P36,000.00 a month
payable on September 15, 1985, October 15, 1985 and
November 15, 1985;
(c). That the balance of P200,000.00 shall be renewed for one
year and shall be secured by another mortgage over the same
property which is renewable every year upon payment of
interests and at least 10 percent of the principal;
(d). That the bank shall release the mortgage of Manuel Behis
and a new mortgage shall be executed by the assignees and the
bank shall give its consent for the transfer of the title under the
name of the assignees.
x x x.
Plaintiffs did not annotate the Memorandum of Agreement in the
title, TCT T-29817.
Pursuant to the Memorandum of Agreement, plaintiffs paid the
Bank the following:
(1) P35,000.00 on August 1, 1985 as initial deposit when the
Agreement was signed (Exhibits `G and `H);
(2) P15,000.00 on September 16, 1985 (Exhibit `I) and P21,000.00
on September 20, 1985 (Exhibit `J) to cover the obligation of
P36,000.00 on September 15, 1985;
(3) P20,000.00 on October 17, 1985 (Exhibit `K) and P16,000.00
on October 25, 1985 (Exhibit `L) to cover the obligation to pay
P36,000.00 on October 15, 1985;
(4) P36,000.00 in the form of dollars remitted to Engr. Edilberto
Natividad on December 18, 1985 (Exhibit `N) to cover the
obligation to pay P36,000.00 on November 15, 1985.
After the last payment of P36,000.00 on December 18, 1985,
received in dollars (Exhibit `N) which completed the
P143,000.00 under paragraphs 5 (a) and 5 (b) of the
Memorandum of Agreement Engr. Edilberto Natividad, wrote
a letter (Exhibit M) to Vicente Natividad, with instructions that
payment be duly credited and Atty. Arceo will communicate
about the transfer of title to them and to consult the Banks
counsel on the matter, and with instructions also to Ana Acosta
of the Rural Bank of Tuba to debit said amount from the
savings of Edilberto Natividad. xxx.
From the above payments made, the total amount of
P143,000.00 as required by paragraphs 5 (a) and 5 (b) of the
Memorandum of Agreement was fully paid by plaintiffs
although they were not paid on time.
Meanwhile, on September 5, 1985, Cristina Behis, widow of
Manuel Behis, wrote a letter to the Bank (Exhibit `3, Halsema)
claiming the Real Estate mortgage was without her
signature. And in another letter dated October 28, 1985 to the
Bank (Exhibit 4, Halsema), Cristina Behis stressed she did not
authorize anybody to redeem the property in her behalf as one
of the mortgagors of the land.
On January 7, 1986, plaintiffs demanded in a letter (Exhibit
`O) that the Bank comply with its obligation under the
Memorandum of Agreement to (1) release the mortgage of
Manuel Behis, (2) give its consent for the transfer of title in the
name of the plaintiffs, and (3) execute a new mortgage with
plaintiffs for the balance of P200,000.00 over the same land.
Meanwhile on January 18, 1986, Cristina Behis went to the
Bank inquiring about her protest about her signature. The Bank
told her it did not receive her two letters and instead advised
her to write the Bank again as well as the plaintiffs about her
objections.
In a reply letter dated February 11, 1986, (Exhibit `B) to the
demand of the plaintiffs, the Bank said it cannot comply
because of supervening circumstances, enclosing the two
letters of Cristina Behis dated September 5, 1985 and October
28, 1985 which they said were both self explanatory, and
suggested that plaintiffs take up the matter with Mrs. Cristina
Behis.
On February 15, 1986, as suggested by the Bank, Cristina
Behis wrote another letter to the Bank claiming this time that
she was not a party to the Deed of Absolute Sale with
Assumption of Mortgage and her signature was forged
(Exhibit 5, Halsema) and requesting the Bank not to release
the title with copy furnished to the plaintiffs (Exhibit `5-B,
Halsema).
Then, months passed, and nothing was heard from the
plaintiffs by the Bank. On the first week of July, 1986, Teodoro
Verzosa, President of Halsema, Inc., heard about the land and
got interested and had preliminary talks with Vicente
Natividad, President of the Bank, and with Edilberto
Natividad, the principal stockholder of the bank.
x x x.
xxx, upon suggestion of the lawyer of Halsema,
an Assignment of Mortgage was entered into on July 28, 1986
between Halsema and the Bank for the consideration of
P520,765.45 (Exhibit `1, Bank) which amount was the total
indebtedness of Manuel Behis with the Bank at the time
(Exhibit `7-A, Halsema). Note however, that what was
assigned was the Mortgage made originally by Manuel Behis
and not the Mortgage as assumed by plaintiffs under a
restructured and liberalized terms.
As explained by Halsema lawyer, she suggested the
Assignment of Mortgage as the cheapest and fastest way for
Halsema to acquire the property of Manuel Behis as (1) they
assume the role of the Bank as Mortgagee with the assignment
of mortgage credit, (2) they acquire the property for the
amount only of the mortgage debt at the time, (3) after
execution thereof, the Bank is out of the picture, and (4) in
case of foreclosure, Halsema controls the foreclosure
proceedings and is assured of its legality.
In turn, the Bank explained it entered into the Assignment of
Mortgage because at the time it considered the Memorandum
of Agreement cancelled as first, plaintiffs failed to settle the
objections of Cristina Behis aforesaid on her signature being
forged in the Deed of Sale with Assumption of Mortgage
despite the lapse of time from February, 1986 to July,
1986. Second, the terms of the Memorandum of Agreement
have not been fully complied with as the payments were not
made on time on the dates fixed therein; and third, their
consent to the Memorandum of Agreement was secured by the
plaintiffs thru fraud as the Bank was not
shown the Agreement containing the real consideration of
P2,400,000.00 of the sale of the land of Manuel Behis to
plaintiffs.
On the same date of July 28, 1986, Vicente Natividad of the
Bank sent notice of the Assignment of Mortgage to the debtor
mortgagor, Manuel Behis (already dead at the time) and
Cristina Behis. Notice of the Assignment of Mortgage was not
sent to plaintiffs for as aforesaid what was assigned was the
Mortgage originally made by Manuel Behis and not the
Mortgage as assumed by plaintiffs under the restructured and
liberalized terms in the Memorandum of Agreement which was
considered by the Bank as cancelled.
xxx xxx xxx.
After the assignment of mortgage, the Bank returned the
P143,000.00 to plaintiffs (Exhibit `13, Bank). But the latter
rejected the same maintaining the Memorandum of Agreement
is valid until annulled by Court Action.Subsequently, however,
the Bank paid plaintiffs P143,000.00 and P90,000.00 interest
in settlement of the criminal case of Estafa against Edilberto
Natividad and Vicente Natividad (Exhibit `14, Bank).
In the meantime, since the account of the late Manuel Behis
has been delinquent and his widow, Cristina Behis, and his
brothers and sisters could not pay as in fact they have already
assigned their rights to redeem, Halsema as Mortgage Creditor
in place of the Bank instituted foreclosure proceedings by
filing an Application for Foreclosure of Real Estate Mortgage
in the Office of the Sheriff on July 31, 1986 (Exhibit `37,
Halsema) setting the public auction sale on September 2, 1986
and was published and posted as required by law. A Notice of
Foreclosure was sent directly to the mortgagor (Exhibit `38,
Halsema) and the public auction sale was held on September 2,
1986 at 10:00 a.m. at the City Hall, Baguio City, with Halsema
as the only bidder to whom accordingly the Sheriffs Certificate
of Sale was issued (Exhibit `8, Halsema).
At the auction sale, the lawyer of Halsema was approached by
the plaintiff Rosario Rayandayan who told the former that the
land foreclosed was also sold to the plaintiffs. Since plaintiffs
could not do anything anymore, they registered and annotated
on the title, TCT T-29817, their adverse claim on September 3,
1986.[5]
Since the Bank could not comply with the Memorandum of
Agreement, petitioners Rayandayan and Arceo instituted Civil Case
No. 890-R before the Regional Trial Court of Baguio City (Branch 6)
against the Rural Bank of Sta. Maria, Pangasinan and Halsema, Inc.
for Specific Performance, Declaration of Nullity and/or Annulment of
Assignment of Mortgage and Damages on September 5, 1986, and
caused a notice of lis pendens annotated at the back of the title, TCT T-
29817, on the same date. On March 6, 1989, judgment was rendered,
the dispositive portion of the decision pertinent to this case reads:
WHEREFORE, in view of All the Foregoing, Judgment is From the decision, plaintiffs Rayandayan and Arceo and
hereby rendered, as follows: defendant Halsema, Inc. appealed. Defendant Rural Bank of Sta.
Maria, Pangasinan did not appeal.[7] The Court of Appeals rendered
1. xxx xxx xxx; herein assailed decision, the dispositive portion insofar as pertinent to
this case reads:
2. Declaring the Deed of Sale with assumption of Mortgage
(Exhibit A) and the Agreement (Exhibit 15) taken together valid WHEREFORE, premises considered, decision is hereby
until annulled or cancelled; rendered:
3. Ordering the Bank to pay the plaintiffs the sum of P30,000.00 as 1. xxx xxx xxx;
Moral Damages, P10,000.00 as Exemplary Damages,
P20,000.00 as Attorneys fees and P5,000.00 as litigation
2. xxx xxx xxx;
expenses for their bad faith in violating the Memorandum of
Agreement which took place while the Memorandum of
3. xxx xxx xxx;
Agreement was still valid there being no court action first filed
to nullify it before entering into the Assignment of Mortgage;
4. Declaring the Deed of Absolute Sale with Assumption of
Mortgage, Exhibit A and the Memorandum of Agreement,
4. Ordering the plaintiffs to pay the Bank the sum of P30,000.00 as
Exhibit F, valid as between the parties thereto;
Moral Damages, P10,000.00 as Exemplary Damages,
P20,000.00 as Attorneys fees and P5,000.00 as litigation
expenses for plaintiffs bad faith in deceiving the Bank to enter 5. Ordering and sentencing defendant Rural Bank of Sta. Maria,
into the Memorandum of Agreement; Pangasinan to pay plaintiffs-appellant the sum of P229,135.00
as actual damages, the sum of P30,000.00 as moral damages,
P10,000.00 as exemplary damages, P20,000.00 as attorneys fees
5. Ordering the setting off in compensation the Damages awarded
and P5,000.00 as litigation expenses;
to plaintiffs and the Bank.
6. Affirming the dismissal of all other counterclaims for damages;
6. xxx xxx xxx;
7. Reversing and setting aside all other dispositions made by the
7. Declaring the Memorandum of Agreement as annulled due to the
trial court inconsistent with this decision;
fraud of plaintiffs;
8. There is no pronouncement as to costs.
8. xxx xxx xxx;

9. xxx xxx xxx; SO ORDERED.[8]

10. xxx xxx xxx, In sum, the Court of Appeals in its assailed decision: (1) affirmed
the validity of the Memorandum of Agreement between the parties
Without pronouncement as to costs. thereto; (2) reversed and set aside the finding of the trial court on the
bad faith of Rayandayan and Arceo in concealing the real purchase
SO ORDERED.[6] price of the land sold to them by Manuel Behis during negotiations
with the bank on the assumption of the mortgage debt; (3) modified
the trial courts finding as to the damages due Rayandayan and Arceo
from the bank by adding P229,135.00 as actual damages; (4) dismissed
the counterclaim for damages by the bank and deleted the portion on
the set-off of damages due between the bank on the one hand, and
Rayandayan and Arceo on the other.
Motions for reconsideration were filed by plaintiffs-appellants
Rayandanan and Arceo and defendant Rural Bank of Sta. Maria,
Pangasinan which were denied for lack of merit.[9]
Hence, the instant consolidated petitions.
In a Resolution dated August 25, 1993, this Court denied the
petition for review on certiorari (G.R. No. 111201) filed by
Rayandayan and Arceo for having been filed out of time and for late
payment of docket fees.[10]Petitioners Rayandayan and Arceo moved to
reconsider; this Court in a Resolution dated November 22, 1993,
resolved to deny the same with finality considering petitioners failed to
show any compelling reason and to raise any substantial argument
which would warrant a modification of the said resolution.[11]
What remains for resolution then is G.R. No. 110672, wherein
petitioner Rural Bank of Sta. Maria, Pangasinan, contends that:
I the bank agreed to release the mortgage of Manuel Behis; to give its
THE MEMORANDUM OF AGREEMENT (EXH. F)
ENTERED INTO BETWEEN PRIVATE RESPONDENTS,
AS ALLEGED ASSIGNEES OF MANUEL BEHIS, AND
PETITIONER BANK IS VOIDABLE AND MUST BE
ANNULLED.
II
PRIVATE RESPONDENTS ARE IN BAD FAITH, HENCE,
THEY ARE NOT ENTITLED TO THE SUMS OF P30,000.00
AS MORAL DAMAGES; P10,000.00 AS EXEMPLARY
DAMAGES; P20,000.00 AS ATTORNEYS FEES; AND
P5,000.00 AS LITIGATION EXPENSES.[12]
The petition is devoid of merit.
Briefly, the antecedents material to this appeal are as follows: A
Deed of Absolute Sale with Assumption of Mortgage was executed
between Manuel Behis as vendor/assignor and Rayandayan and Arceo
as vendees/assignees for the sum of P250,000.00. On the same day,
Rayandayan and Arceo together with Manuel Behis executed another
Agreement embodying the real consideration of the sale of the land in
the sum of P2,400,000.00. Thereafter, Rayandayan and Arceo
negotiated with the principal stockholder of the bank, Engr. Edilberto
Natividad in Manila, for the assumption of the indebtedness of Manuel
Behis and the subsequent release of the mortgage on the property by
the bank. Rayandayan and Arceo did not show to the bank the
Agreement with Manuel Behis providing for the real consideration of
P2,400,000.00 for the sale of the property to the former. Subsequently,
the bank consented to the substitution of plaintiffs as mortgage debtors
in place of Manuel Behis in a Memorandum of Agreement between
private respondents and the bank with restructured and liberalized
terms for the payment of the mortgage debt. Instead of the bank
foreclosing immediately for non-payment of the delinquent account,
petitioner bank agreed to receive only a partial payment of
P143,000.00 by installment on specified dates. After payment thereof,
consent to the transfer of title to the private respondents; and to the
payment of the balance of P200,000.00 under new terms with a new
mortgage to be executed by the private respondents over the same
land.
This brings us to the first issue raised by petitioner bank that the
Memorandum of Agreement is voidable on the ground that its consent
to enter said agreement was vitiated by fraud because private
respondents withheld from petitioner bank the material information
that the real consideration for the sale with assumption of mortgage of
the property by Manuel Behis to Rayandayan and Arceo is
P2,400,000.00, and not P250,000.00 as represented to petitioner
bank. According to petitioner bank, had it known of the real
consideration for the sale, i.e. P2.4 million, it would not have
consented into entering the Memorandum of Agreement with
Rayandayan and Arceo as it was put in the dark as to the real capacity
and financial standing of private respondents to assume the mortgage
from Manuel Behis. Petitioner bank pointed out that it would not have
assented to the agreement, as it could not expect the private
respondents to pay the bank the approximately P343,000.00 mortgage
debt when private respondents have to pay at the same
time P2,400,000.00 to Manuel Behis on the sale of the land.
The kind of fraud that will vitiate a contract refers to those
insidious words or machinations resorted to by one of the contracting
parties to induce the other to enter into a contract which without them
he would not have agreed to.[13] Simply stated, the fraud must be the
determining cause of the contract, or must have caused the consent to
be given. It is believed that the non-disclosure to the bank of the
purchase price of the sale of the land between private respondents and
Manuel Behis cannot be the fraud contemplated by Article 1338 of the
Civil Code.[14] From the sole reason submitted by the petitioner bank
that it was kept in the dark as to the financial capacity of private
respondent, we cannot see how the omission or concealment of the real
purchase price could have induced the bank into giving its consent to
the agreement; or that the bank would not have otherwise given its
consent had it known of the real purchase price.
First of all, the consideration for the purchase of the land between
Manuel Behis and herein private respondents Rayandayan and Arceo
could not have been the determining cause for the petitioner bank to
enter into the memorandum of agreement. To all intents and purposes,
the bank entered into said agreement in order to effect payment on the
indebtedness of Manuel Behis. As correctly ruled by the Court of
Appeals:
xxx. The real consideration for the sale with assumption of
mortgage, or the non-disclosure thereof, was not the
determining influence on the consent of the bank.
The bank received payments due under the Memorandum of
Agreement, even if delayed. It initially claimed that the sale
with assumption of mortgage was invalid not because of the
concealment of the real consideration of P2,400,000.00 but
because of the information given by Cristina Behis, the widow
of the mortgagor Manuel Behis that her signature on the deed
of absolute sale with assumption of mortgage was
forged. Thus, the alleged nullity of the Memorandum of
Agreement, Exhibit F, is a clear aftertought. It was raised by
defendant bank, by way of counterclaim only after it was sued.
The deceit which avoids the contract exists where the party
who obtains the consent does so by means of concealing or
omitting to state material facts, with intent to deceive, by
reason of which omission or concealment the other party was
induced to give a consent which he would not otherwise have
given (Tolentino, Commentaries and Jurisprudence on the
Civil Code, Vol. IV, p. 480). In this case, the consideration for
the sale with assumption of mortgage was not the inducement
to defendant bank to give a consent which it would not
otherwise have given.
Indeed, whether the consideration of the sale with assumption
of mortgage was P250,000.00 as stated in Exhibit A, or
P2,400,000.00 as stated in the Agreement, Exhibit 15, should
not be of importance to the bank. Whether it was P250,000.00
or P2,400.000.00 the banks security remained unimpaired.
The stipulation in Exhibit 15, reading in case of default in all
of the above, Manuel Behis shall have legal recourse to the
portion of the parcel of land under TCT No. T-29817
equivalent to the unpaid balance of the amount subject of this
Agreement, obviously even if revealed would not have
induced defendant bank to withhold its consent. The legal
recourse to TCT No. T-29817 given to Manuel Behis, under
the Agreement, is subordinate and inferior to the mortgage to
the bank.
We are, therefore, constrained to uphold the validity of the
Memorandum of Agreement, Exhibit F, and reverse and set
aside the ruling declaring the same annulled allegedly due to
fraud of plaintiffs-appellants (paragraph 7, dispositive portion).
With the above conclusion reached, the award of moral and
exemplary damages, attorneys fees and expenses of litigation
in favor of defendant bank and against plaintiffs-appellants in
paragraph 4 of the dispositive portion of the decision of the
trial court must likewise be reversed and set aside; and
similarly, paragraph 5. The basis for the award, which we
quote for plaintiffs bad faith in deceiving the Bank to enter
into the Memorandum of Agreement is not correct as we have
discussed.[15]
Secondly, pursuant to Article 1339 0f the Civil Code,[16] silence or
concealment, by itself, does not constitute fraud, unless there is a
special duty to disclose certain facts, or unless according to good faith
and the usages of commerce the communication should be
made. Verily, private respondents Rayandayan and Arceo had no duty,
and therefore did not act in bad faith, in failing to disclose the real
consideration of the sale between them and Manuel Behis.
Thirdly, the bank had other means and opportunity of verifying
the financial capacity of private respondents and cannot avoid the
contract on the ground that they were kept in the dark as to the
financial capacity by the non-disclosure of the purchase price. As
correctly pointed out by respondent court, the bank security remained
unimpaired regardless of the consideration of the sale. Under the terms
of the Memorandum of Agreement, the property remains as security
for the payment of the indebtedness, in case of default of
payment. Thus, petitioner bank does not and can not even allege that
the agreement was operating to its disadvantage. If fact, the bank
admits that no damages has been suffered by it. [17]
Consequently, not all elements of fraud vitiating consent for
purposes of annulling a contract concur, to wit: (a) It was employed by
a contracting party upon the other; (b) It induced the other party to
enter into the contract; (c) It was serious; and; (d) It resulted in
damages and injury to the party seeking annulment. [18] Petitioner bank
has not sufficiently shown that it was induced to enter into the
agreement by the non-disclosure of the purchase price, and that the
same resulted in damages to the bank. Indeed, the general rule is that
whosoever alleges fraud or mistake in any transaction must
substantiate his allegation, since it is presumed that a person takes
ordinary care for his concerns and that private transactions have been
fair and regular. Petitioner bank's allegation of fraud and deceit have
not been established sufficiently and competently to rebut the
presumption of regularity and due execution of the agreement.
Based on the foregoing, the second issue raised by petitioner bank
must likewise fail. Petitioner bank's imputation of bad faith to private
respondents premised on the same non-disclosure of the real purchase
price of the sale so as to preclude their entitlement to damages must
necessarily be resolved in the negative. Petitioner bank does not
question the actual damages awarded to private respondents in the
amount of P229,135.00, but only the moral damages of P30,000.00,
exemplary damages of P10,000.00, attorney's fees of P20,000.00 and
litigation expenses of P5,000.00. We may no longer examine the
amounts awarded by the trial court and affirmed by the appellate court
as petitioner bank did not appeal from the decision of the trial court. It
is well-settled that a party who does not appeal from the decision may
not obtain any affirmative relief from the appellate court other than
what he has obtained from the lower court, if any, whose decision is
brought up on appeal.[19]
WHEREFORE, the petition is hereby DENIED and the decision
of the Court of Appeals, dated March 17, 1993 is AFFIRMED. No
cost.
SO ORDERED.