THIRD DIVISION
00, but the mortgage was later foreclosed
[G.R. No. 112212. March 2, 1998]
GREGORIO FULE, petitioner, vs. COURT OF APPEALS, NINEVETCH CRUZ and
JUAN BELARMINO, respondents.
DECISION
ROMERO, J.:
This petition for review on certiorari questions the affirmance by the Court
of Appeals of the decision[1] of the Regional Trial Court of San Pablo City,
Branch 30, dismissing the complaint that prayed for the nullification of a
contract of sale of a 10-hectare property in Tanay, Rizal in consideration of
the amount of P40,000.00 and a 2.5 carat emerald-cut diamond (Civil Case
No. SP-2455). The lower courts decision disposed of the case as follows:
WHEREFORE, premises considered, the Court hereby renders judgment
dismissing the complaint for lack of merit and ordering plaintiff to pay:
1. Defendant Dra. Ninevetch M. Cruz the sum of P300,000.00 as and for
moral damages and the sum of P100,000.00 as and for exemplary damages;
2. Defendant Atty. Juan Belarmino the sum of P250,000.00 as and for moral
damages and the sum of P150,000.00 as and for exemplary damages;
3. Defendant Dra. Cruz and Atty. Belarmino the sum of P25,000.00 each as
and for attorneys fees and litigation expenses; and
4. The costs of suit.
SO ORDERED.
As found by the Court of Appeals and the lower court, the antecedent facts
of this case are as follows:
Petitioner Gregorio Fule, a banker by profession and a jeweler at the same
time, acquired a 10-hectare property in Tanay, Rizal (hereinafter Tanay
property), covered by Transfer Certificate of Title No. 320725 which used to
be under the name of Fr. Antonio Jacobe. The latter had mortgaged it
earlier to the Rural Bank of Alaminos (the Bank), Laguna, Inc. to secure a
loan in the amount of P10,000.
and the property offered for public auction upon his default.
In July 1984, petitioner, as corporate secretary of the bank, asked Remelia
Dichoso and Oliva Mendoza to look for a buyer who might be interested in
the Tanay property. The two found one in the person of herein private
respondent Dr. Ninevetch Cruz. It so happened that at the time, petitioner
had shown interest in buying a pair of emerald-cut diamond earrings owned
by Dr. Cruz which he had seen in January of the same year when his mother
examined and appraised them as genuine. Dr. Cruz, however, declined
petitioners offer to buy the jewelry for P100,000.00. Petitioner then made
another bid to buy them for US$6,000.00 at the exchange rate of $1.00 to
P25.00. At this point, petitioner inspected said jewelry at the lobby of the
Prudential Bank branch in San Pablo City and then made a sketch thereof.
Having sketched the jewelry for twenty to thirty minutes, petitioner gave
them back to Dr. Cruz who again refused to sell them since the exchange
rate of the peso at the time appreciated to P19.00 to a dollar.
Subsequently, however, negotiations for the barter of the jewelry and the
Tanay property ensued. Dr. Cruz requested herein private respondent Atty.
Juan Belarmino to check the property who, in turn, found out that no sale or
barter was feasible because the one-year period for redemption of the said
property had not yet expired at the time.
In an effort to cut through any legal impediment, petitioner executed on
October 19, 1984, a deed of redemption on behalf of Fr. Jacobe purportedly
in the amount of P15,987.78, and on even date, Fr. Jacobe sold the property
to petitioner for P75,000.00. The haste with which the two deeds were
executed is shown by the fact that the deed of sale was notarized ahead of
the deed of redemption. As Dr. Cruz had already agreed to the proposed
barter, petitioner went to Prudential Bank once again to take a look at the
jewelry.
In the afternoon of October 23, 1984, petitioner met Atty. Belarmino at the
latters residence to prepare the documents of sale.[2] Dr. Cruz herself was
not around but Atty. Belarmino was aware that she and petitioner had
previously agreed to exchange a pair of emerald-cut diamond earrings for
the Tanay property. Atty. Belarmino accordingly caused the preparation of a
deed of absolute sale while petitioner and Dr. Cruz attended to the
safekeeping of the jewelry.

The following day, petitioner, together with Dichoso and Mendoza, arrived
at the residence of Atty. Belarmino to finally execute a deed of absolute
sale. Petitioner signed the deed and gave Atty. Belarmino the amount of
P13,700.00 for necessary expenses in the transfer of title over the Tanay
property. Petitioner also issued a certification to the effect that the actual
consideration of the sale was P200,000.00 and not P80,000.00 as indicated
in the deed of absolute sale. The disparity between the actual contract price
and the one indicated on the deed of absolute sale was purportedly aimed
at minimizing the amount of the capital gains tax that petitioner would have
to shoulder. Since the jewelry was appraised only at P160,000.00, the
parties agreed that the balance of P40,000.00 would just be paid later in
cash.
As pre-arranged, petitioner left Atty. Belarminos residence with Dichoso and
Mendoza and headed for the bank, arriving there at past 5:00 p.m. Dr. Cruz
also arrived shortly thereafter, but the cashier who kept the other key to
the deposit box had already left the bank. Dr. Cruz and Dichoso, therefore,
looked for said cashier and found him having a haircut. As soon as his
haircut was finished, the cashier returned to the bank and arrived there at
5:48 p.m., ahead of Dr. Cruz and Dichoso who arrived at 5:55 p.m. Dr. Cruz
and the cashier then opened the safety deposit box, the former retrieving a
transparent plastic or cellophane bag with the jewelry inside and handing
over the same to petitioner. The latter took the jewelry from the bag, went
near the electric light at the banks lobby, held the jewelry against the light
and examined it for ten to fifteen minutes. After a while, Dr. Cruz asked,
Okay na ba iyan? Petitioner expressed his satisfaction by nodding his head.
For services rendered, petitioner paid the agents, Dichoso and Mendoza,
the amount of US$300.00 and some pieces of jewelry. He did not, however,
give them half of the pair of earrings in question which he had earlier
promised.
Later, at about 8:00 oclock in the evening of the same day, petitioner
arrived at the residence of Atty. Belarmino complaining that the jewelry
given to him was fake. He then used a tester to prove the alleged fakery.
Meanwhile, at 8:30 p.m., Dichoso and Mendoza went to the residence of Dr.
Cruz to borrow her car so that, with Atty. Belarmino, they could register the
Tanay property. After Dr. Cruz had agreed to lend her car, Dichoso called up
Atty. Belarmino. The latter, however, instructed Dichoso to proceed
immediately to his residence because petitioner was there. Believing that
petitioner had finally agreed to give them half of the pair of earrings,
Dichoso went posthaste to the residence of Atty. Belarmino only to find
petitioner already demonstrating with a tester that the earrings were fake.
Petitioner then accused Dichoso and Mendoza of deceiving him which they,
however, denied. They countered that petitioner could not have been
fooled because he had vast experience regarding jewelry. Petitioner
nonetheless took back the US$300.00 and jewelry he had given them.
Thereafter, the group decided to go to the house of a certain Macario
Dimayuga, a jeweler, to have the earrings tested. Dimayuga, after taking
one look at the earrings, immediately declared them counterfeit. At around
9:30 p.m., petitioner went to one Atty. Reynaldo Alcantara residing at
Lakeside Subdivision in San Pablo City, complaining about the fake jewelry.
Upon being advised by the latter, petitioner reported the matter to the
police station where Dichoso and Mendoza likewise executed sworn
statements.
On October 26, 1984, petitioner filed a complaint before the Regional Trial
Court of San Pablo City against private respondents praying, among other
things, that the contract of sale over the Tanay property be declared null
and void on the ground of fraud and deceit.
On October 30, 1984, the lower court issued a temporary restraining order
directing the Register of Deeds of Rizal to refrain from acting on the
pertinent documents involved in the transaction. On November 20, 1984,
however, the same court lifted its previous order and denied the prayer for
a writ of preliminary injunction.
After trial, the lower court rendered its decision on March 7, 1989.
Confronting the issue of whether or not the genuine pair of earrings used as
consideration for the sale was delivered by Dr. Cruz to petitioner, the lower
court said:
The Court finds that the answer is definitely in the affirmative. Indeed, Dra.
Cruz delivered (the) subject jewelries (sic) into the hands of plaintiff who
even raised the same nearer to the lights of the lobby of the bank near the
door. When asked by Dra. Cruz if everything was in order, plaintiff even
nodded his satisfaction (Hearing of Feb. 24, 1988). At that instance, plaintiff
did not protest, complain or beg for additional time to examine further the
jewelries (sic). Being a professional banker and engaged in the jewelry
business plaintiff is conversant and competent to detect a fake diamond
from the real thing. Plaintiff was accorded the reasonable time and
opportunity to ascertain and inspect the jewelries (sic) in accordance with
Article 1584 of the Civil Code. Plaintiff took delivery of the subject jewelries
(sic) before 6:00 p.m. of October 24, 1984. When he went at 8:00 p.m. that
same day to the residence of Atty. Belarmino already with a tester
complaining about some fake jewelries (sic), there was already undue delay
because of the lapse of a considerable length of time since he got hold of
subject jewelries (sic). The lapse of two (2) hours more or less before
plaintiff complained is considered by the Court as unreasonable delay.[3]
The lower court further ruled that all the elements of a valid contract under
Article 1458 of the Civil Code were present, namely: (a) consent or meeting
of the minds; (b) determinate subject matter, and (c) price certain in money
or its equivalent. The same elements, according to the lower court, were
present despite the fact that the agreement between petitioner and Dr.
Cruz was principally a barter contract. The lower court explained thus:
x x x. Plaintiffs ownership over the Tanay property passed unto Dra. Cruz
upon the constructive delivery thereof by virtue of the Deed of Absolute
Sale (Exh. D). On the other hand, the ownership of Dra. Cruz over the
subject jewelries (sic) transferred to the plaintiff upon her actual personal
delivery to him at the lobby of the Prudential Bank. It is expressly provided
by law that the thing sold shall be understood as delivered, when it is placed
in the control and possession of the vendee (Art. 1497, Civil Code; Kuenzle &
Straff vs. Watson & Co. 13 Phil. 26). The ownership and/or title over the
jewelries (sic) was transmitted immediately before 6:00 p.m. of October 24,
1984. Plaintiff signified his approval by nodding his head. Delivery or
tradition, is one of the modes of acquiring ownership (Art. 712, Civil Code).
Similarly, when Exhibit D was executed, it was equivalent to the delivery of
the Tanay property in favor of Dra. Cruz. The execution of the public
instrument (Exh. D) operates as a formal or symbolic delivery of the Tanay
property and authorizes the buyer, Dra. Cruz to use the document as proof
of ownership (Florendo v. Foz, 20 Phil. 399). More so, since Exhibit D does
not contain any proviso or stipulation to the effect that title to the property
is reserved with the vendor until full payment of the purchase price, nor is
there a stipulation giving the vendor the right to unilaterally rescind the
contract the moment the vendee fails to pay within a fixed period (Taguba
v. Vda. De Leon, 132 SCRA 722; Luzon Brokerage Co. Inc. vs. Maritime
Building Co. Inc. 86 SCRA 305; Froilan v. Pan Oriental Shipping Co. et al. 12
SCRA 276).[4]
Aside from concluding that the contract of barter or sale had in fact been
consummated when petitioner and Dr. Cruz parted ways at the bank, the
trial court likewise dwelt on the unexplained delay with which petitioner
complained about the alleged fakery. Thus:
x x x. Verily, plaintiff is already estopped to come back after the lapse of
considerable length of time to claim that what he got was fake. He is a
Business Management graduate of La Salle University, Class 1978-79, a
professional banker as well as a jeweler in his own right. Two hours is more
than enough time to make a switch of a Russian diamond with the real
diamond. It must be remembered that in July 1984 plaintiff made a sketch
of the subject jewelries (sic) at the Prudential Bank. Plaintiff had a tester at
8:00 p.m. at the residence of Atty. Belarmino. Why then did he not bring it
out when he was examining the subject jewelries (sic) at about 6:00 p.m. in
the banks lobby? Obviously, he had no need for it after being satisfied of the
genuineness of the subject jewelries (sic). When Dra. Cruz and plaintiff left
the bank both of them had fully performed their respective prestations.
Once a contract is shown to have been consummated or fully performed by
the parties thereto, its existence and binding effect can no longer be
disputed. It is irrelevant and immaterial to dispute the due execution of a
contract if both of them have in fact performed their obligations thereunder
and their respective signatures and those of their witnesses appear upon
the face of the document (Weldon Construction v. CA G.R. No. L-35721, Oct.
12, 1987).[5]
Finally, in awarding damages to the defendants, the lower court remarked:
The Court finds that plaintiff acted in wanton bad faith. Exhibit 2-Belarmino
purports to show that the Tanay property is worth P25,000.00. However,
also on that same day it was executed, the propertys worth was magnified
at P75,000.00 (Exh. 3-Belarmino). How could in less than a day (Oct. 19,
1984) the value would (sic) triple under normal circumstances? Plaintiff,
with the assistance of his agents, was able to exchange the Tanay property
which his bank valued only at P25,000.00 in exchange for a genuine pair of
emerald cut diamond worth P200,000.00 belonging to Dra. Cruz. He also
retrieved the US$300.00 and jewelries (sic) from his agents. But he was not
satisfied in being able to get subject jewelries for a song. He had to file a
malicious and unfounded case against Dra. Cruz and Atty. Belarmino who
are well known, respected and held in high esteem in San Pablo City where
everybody practically knows everybody. Plaintiff came to Court with
unclean hands dragging the defendants and soiling their clean and good
name in the process. Both of them are near the twilight of their lives after
maintaining and nurturing their good reputation in the community only to
be stunned with a court case. Since the filing of this case on October 26,
1984 up to the present they were living under a pall of doubt. Surely, this
affected not only their earning capacity in their practice of their respective
professions, but also they suffered besmirched reputations. Dra. Cruz runs
her own hospital and defendant Belarmino is a well respected legal
practitioner.
The length of time this case dragged on during which period their
reputation were (sic) tarnished and their names maligned by the pendency
of the case, the Court is of the belief that some of the damages they prayed
for in their answers to the complaint are reasonably proportionate to the
sufferings they underwent (Art. 2219, New Civil Code). Moreover, because
of the falsity, malice and baseless nature of the complaint defendants were
compelled to litigate. Hence, the award of attorneys fees is warranted
under the circumstances (Art. 2208, New Civil Code).[6]
From the trial courts adverse decision, petitioner elevated the matter to the
Court of Appeals. On October 20, 1992, the Court of Appeals, however,
rendered a decision[7]affirming in toto the lower courts decision. His
motion for reconsideration having been denied on October 19, 1993,
petitioner now files the instant petition alleging that:
I. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFFS COMPLAINT AND IN
HOLDING THAT THE PLAINTIFF ACTUALLY RECEIVED A GENUINE PAIR OF
EMERALD CUT DIAMOND EARRING(S) FROM DEFENDANT CRUZ x x x;
II. THE TRIAL COURT ERRED IN AWARDING MORAL AND EXEMPLARY
DAMAGES AND ATTORNEYS FEES IN FAVOR OF DEFENDANTS AND AGAINST
THE PLAINTIFF IN THIS CASE; and
III.THE TRIAL COURT ERRED IN NOT DECLARING THE DEED OF SALE OF THE
TANAY PROPERTY (EXH. `D) AS NULL AND VOID OR IN NOT ANNULLING THE
SAME, AND IN FAILING TO GRANT REASONABLE DAMAGES IN FAVOR OF
THE PLAINTIFF.[8]
As to the first allegation, the Court observes that petitioner is essentially
raising a factual issue as it invites us to examine and weigh anew the facts
regarding the genuineness of the earrings bartered in exchange for the
Tanay property. This, of course, we cannot do without unduly transcending
the limits of our review power in petitions of this nature which are confined
merely to pure questions of law. We accord, as a general rule,
conclusiveness to a lower courts findings of fact unless it is shown, inter alia,
that: (1) the conclusion is a finding grounded on speculations, surmises or
conjectures; (2) the inference is manifestly mistaken, absurd and
impossible; (3) when there is a grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of
fact are conflicting; and (6) when the Court of Appeals, in making its
findings, went beyond the issues of the case and the same is contrary to the
admission of both parties.[9] We find nothing, however, that warrants the
application of any of these exceptions.
Consequently, this Court upholds the appellate courts findings of fact
especially because these concur with those of the trial court which, upon a
thorough scrutiny of the records, are firmly grounded on evidence
presented at the trial.[10] To reiterate, this Courts jurisdiction is only limited
to reviewing errors of law in the absence of any showing that the findings
complained of are totally devoid of support in the record or that they are
glaringly erroneous as to constitute serious abuse of discretion.[11]
Nonetheless, this Court has to closely delve into petitioners allegation that
the lower courts decision of March 7, 1989 is a ready-made one because it
was handed down a day after the last date of the trial of the case.[12]
Petitioner, in this regard, finds it incredible that Judge J. Ausberto Jaramillo
was able to write a 12-page single-spaced decision, type it and release it on
March 7, 1989, less than a day after the last hearing on March 6, 1989. He
stressed that Judge Jaramillo replaced Judge Salvador de Guzman and heard
only his rebuttal testimony.
This allegation is obviously no more than a desperate effort on the part of
petitioner to disparage the lower courts findings of fact in order to convince
this Court to review the same. It is noteworthy that Atty. Belarmino clarified
that Judge Jaramillo had issued the first order in the case as early as March
9, 1987 or two years before the rendition of the decision. In fact, Atty.
Belarmino terminated presentation of evidence on October 13, 1987, while
Dr. Cruz finished hers on February 4, 1989, or more than a month prior to
the rendition of the judgment. The March 6, 1989 hearing was conducted
solely for the presentation of petitioner's rebuttal testimony.[13] In other
words, Judge Jaramillo had ample time to study the case and write the
decision because the rebuttal evidence would only serve to confirm or verify
the facts already presented by the parties.
The Court finds nothing anomalous in the said situation. No proof has been
adduced that Judge Jaramillo was motivated by a malicious or sinister intent
in disposing of the case with dispatch. Neither is there proof that someone
else wrote the decision for him. The immediate rendition of the decision
was no more than Judge Jaramillos compliance with his duty as a judge to
dispose of the courts business promptly and decide cases within the
required periods.[14] The two-year period within which Judge Jaramillo
handled the case provided him with all the time to study it and even write
down its facts as soon as these were presented to court. In fact, this Court
does not see anything wrong in the practice of writing a decision days
before the scheduled promulgation of judgment and leaving the dispositive
portion for typing at a time close to the date of promulgation, provided that
no malice or any wrongful conduct attends its adoption.[15] The practice
serves the dual purposes of safeguarding the confidentiality of draft
decisions and rendering decisions with promptness. Neither can Judge
Jaramillo be made administratively answerable for the immediate rendition
of the decision. The acts of a judge which pertain to his judicial functions are
not subject to disciplinary power unless they are committed with fraud,
dishonesty, corruption or bad faith.[16] Hence, in the absence of sufficient
proof to the contrary, Judge Jaramillo is presumed to have performed his
job in accordance with law and should instead be commended for his close
attention to duty.
Having disposed of petitioners first contention, we now come to the core
issue of this petition which is whether the Court of Appeals erred in
upholding the validity of the contract of barter or sale under the
circumstances of this case.
The Civil Code provides that contracts are perfected by mere consent. From
this moment, the parties are bound not only to the fulfillment of what has
been expressly stipulated but also to all the consequences which, according
to their nature, may be in keeping with good faith, usage and law.[17] A
contract of sale is perfected at the moment there is a meeting of the minds
upon the thing which is the object of the contract and upon the price.[18]
Being consensual, a contract of sale has the force of law between the
contracting parties and they are expected to abide in good faith by their
respective contractual commitments. Article 1358 of the Civil Code which
requires the embodiment of certain contracts in a public instrument, is only
for convenience,[19] and registration of the instrument only adversely
affects third parties.[20] Formal requirements are, therefore, for the benefit
of third parties. Non-compliance therewith does not adversely affect the
validity of the contract nor the contractual rights and obligations of the
parties thereunder.
It is evident from the facts of the case that there was a meeting of the
minds between petitioner and Dr. Cruz. As such, they are bound by the
contract unless there are reasons or circumstances that warrant its
nullification. Hence, the problem that should be addressed in this case is
whether or not under the facts duly established herein, the contract can be
voided in accordance with law so as to compel the parties to restore to each
other the things that have been the subject of the contract with their fruits,
and the price with interest.[21]
Contracts that are voidable or annullable, even though there may have been
no damage to the contracting parties are: (1) those where one of the parties
is incapable of giving consent to a contract; and (2) those where the consent
is vitiated by mistake, violence, intimidation, undue influence or fraud.[22]
Accordingly, petitioner now stresses before this Court that he entered into
the contract in the belief that the pair of emerald-cut diamond earrings was
genuine. On the pretext that those pieces of jewelry turned out to be
counterfeit, however, petitioner subsequently sought the nullification of
said contract on the ground that it was, in fact, tainted with fraud[23] such
that his consent was vitiated.
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.[24] The records, however, are
bare of any evidence manifesting that private respondents employed such
insidious words or machinations to entice petitioner into entering the
contract of barter. Neither is there any evidence showing that Dr. Cruz
induced petitioner to sell his Tanay property or that she cajoled him to take
the earrings in exchange for said property. On the contrary, Dr. Cruz did not
initially accede to petitioners proposal to buy the said jewelry. Rather, it
appears that it was petitioner, through his agents, who led Dr. Cruz to
believe that the Tanay property was worth exchanging for her jewelry as he
represented that its value was P400,000.00 or more than double that of the
jewelry which was valued only at P160,000.00. If indeed petitioners
property was truly worth that much, it was certainly contrary to the nature
of a businessman-banker like him to have parted with his real estate for half
its price. In short, it was in fact petitioner who resorted to machinations to
convince Dr. Cruz to exchange her jewelry for the Tanay property.
Moreover, petitioner did not clearly allege mistake as a ground for
nullification of the contract of sale. Even assuming that he did, petitioner
cannot successfully invoke the same. To invalidate a contract, mistake must
refer to the substance of the thing that is the object of the contract, or to
those conditions which have principally moved one or both parties to enter
into the contract.[25] An example of mistake as to the object of the contract
is the substitution of a specific thing contemplated by the parties with
another.[26] In his allegations in the complaint, petitioner insinuated that
an inferior one or one that had only Russian diamonds was substituted for
the jewelry he wanted to exchange with his 10-hectare land. He, however,
failed to prove the fact that prior to the delivery of the jewelry to him,
private respondents endeavored to make such substitution.
Likewise, the facts as proven do not support the allegation that petitioner
himself could be excused for the mistake. On account of his work as a
banker-jeweler, it can be rightfully assumed that he was an expert on
matters regarding gems. He had the intellectual capacity and the business
acumen as a banker to take precautionary measures to avert such a
mistake, considering the value of both the jewelry and his land. The fact
that he had seen the jewelry before October 24, 1984 should not have
precluded him from having its genuineness tested in the presence of Dr.
Cruz. Had he done so, he could have avoided the present situation that he
himself brought about. Indeed, the finger of suspicion of switching the
genuine jewelry for a fake inevitably points to him. Such a mistake caused
by manifest negligence cannot invalidate a juridical act.[27] As the Civil
Code provides, (t)here is no mistake if the party alleging it knew the doubt,
contingency or risk affecting the object of the contract.[28]
Furthermore, petitioner was afforded the reasonable opportunity required
in Article 1584 of the Civil Code within which to examine the jewelry as he in
fact accepted them when asked by Dr. Cruz if he was satisfied with the
same.[29] By taking the jewelry outside the bank, petitioner executed an act
which was more consistent with his exercise of ownership over it. This gains
credence when it is borne in mind that he himself had earlier delivered the
Tanay property to Dr. Cruz by affixing his signature to the contract of sale.
That after two hours he later claimed that the jewelry was not the one he
intended in exchange for his Tanay property, could not sever the juridical tie
that now bound him and Dr. Cruz. The nature and value of the thing he had
taken preclude its return after that supervening period within which
anything could have happened, not excluding the alteration of the jewelry
or its being switched with an inferior kind.
Both the trial and appellate courts, therefore, correctly ruled that there
were no legal bases for the nullification of the contract of sale. Ownership
over the parcel of land and the pair of emerald-cut diamond earrings had
been transferred to Dr. Cruz and petitioner, respectively, upon the actual
and constructive delivery thereof.[30] Said contract of sale being absolute in
nature, title passed to the vendee upon delivery of the thing sold since
there was no stipulation in the contract that title to the property sold has
been reserved in the seller until full payment of the price or that the vendor
has the right to unilaterally resolve the contract the moment the buyer fails
to pay within a fixed period.[31] Such stipulations are not manifest in the
contract of sale.
While it is true that the amount of P40,000.00 forming part of the
consideration was still payable to petitioner, its nonpayment by Dr. Cruz is
not a sufficient cause to invalidate the contract or bar the transfer of
ownership and possession of the things exchanged considering the fact that
their contract is silent as to when it becomes due and demandable.[32]
Neither may such failure to pay the balance of the purchase price result in
the payment of interest thereon. Article 1589 of the Civil Code prescribes
the payment of interest by the vendee for the period between the delivery
of the thing and the payment of the price in the following cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or income;
(3) Should he be in default, from the time of judicial or extrajudicial demand
for the payment of the price.
Not one of these cases obtains here. This case should, of course, be
distinguished from De la Cruz v. Legaspi,[33] where the court held that
failure to pay the consideration after the notarization of the contract as
previously promised resulted in the vendees liability for payment of
interest. In the case at bar, there is no stipulation for the payment of
interest in the contract of sale nor proof that the Tanay property produced
fruits or income. Neither did petitioner demand payment of the price as in
fact he filed an action to nullify the contract of sale.
All told, petitioner appears to have elevated this case to this Court for the
principal reason of mitigating the amount of damages awarded to both
private respondents which petitioner considers as exorbitant. He contends
that private respondents do not deserve at all the award of damages. In
fact, he pleads for the total deletion of the award as regards private
respondent Belarmino whom he considers a mere nominal party because no
specific claim for damages against him was alleged in the complaint. When
he filed the case, all that petitioner wanted was that Atty. Belarmino should
return to him the owners duplicate copy of TCT No. 320725, the deed of
sale executed by Fr. Antonio Jacobe, the deed of redemption and the check
alloted for expenses. Petitioner alleges further that Atty. Belarmino should
not have delivered all those documents to Dr. Cruz because as the lawyer
for both the seller and the buyer in the sale contract, he should have
protected the rights of both parties. Moreover, petitioner asserts that there
was no firm basis for damages except for Atty. Belarminos uncorroborated
testimony.[34]
Moral and exemplary damages may be awarded without proof of pecuniary
loss. In awarding such damages, the court shall take into account the
circumstances obtaining in the case and assess damages according to its
discretion.[35] To warrant the award of damages, it must be shown that the
person to whom these are awarded has sustained injury. He must likewise
establish sufficient data upon which the court can properly base its estimate
of the amount of damages.[36] Statements of facts should establish such
data rather than mere conclusions or opinions of witnesses.[37] Thus:
x x x. For moral damages to be awarded, it is essential that the claimant
must have satisfactorily proved during the trial the existence of the factual
basis of the damages and its causal connection with the adverse partys acts.
If the court has no proof or evidence upon which the claim for moral
damages could be based, such indemnity could not be outrightly awarded.
The same holds true with respect to the award of exemplary damages
where it must be shown that the party acted in a wanton, oppressive or
malevolent manner.[38]
In this regard, the lower court appeared to have awarded damages on a
ground analogous to malicious prosecution under Article 2219(8) of the Civil
Code[39] as shown by (1) petitioners wanton bad faith in bloating the value
of the Tanay property which he exchanged for a genuine pair of emerald-cut
diamond worth P200,000.00; and (2) his filing of a malicious and unfounded
case against private respondents who were well known, respected and held
in high esteem in San Pablo City where everybody practically knows
everybody and whose good names in the twilight of their lives were soiled
by petitioners coming to court with unclean hands, thereby affecting their
earning capacity in the exercise of their respective professions and
besmirching their reputation.
For its part, the Court of Appeals affirmed the award of damages to private
respondents for these reasons:
The malice with which Fule filed this case is apparent. Having taken
possession of the genuine jewelry of Dra. Cruz, Fule now wishes to return a
fake jewelry to Dra. Cruz and, more than that, get back the real property,
which his bank owns. Fule has obtained a genuine jewelry which he could
sell anytime, anywhere and to anybody, without the same being traced to
the original owner for practically nothing. This is plain and simple, unjust
enrichment.[40]
While, as a rule, moral damages cannot be recovered from a person who
has filed a complaint against another in good faith because it is not sound
policy to place a penalty on the right to litigate,[41] the same, however,
cannot apply in the case at bar. The factual findings of the courts a quo to
the effect that petitioner filed this case because he was the victim of fraud;
that he could not have been such a victim because he should have examined
the jewelry in question before accepting delivery thereof, considering his
exposure to the banking and jewelry businesses; and that he filed the action
for the nullification of the contract of sale with unclean hands, all deserve
full faith and credit to support the conclusion that petitioner was motivated
more by ill will than a sincere attempt to protect his rights in commencing quilt, they would sufficiently demonstrate that his acts were not merely
suit against respondents. negligent but rather studied and deliberate.

As pointed out earlier, a closer scrutiny of the chain of events immediately We do not have here, therefore, a situation where petitioners complaint
prior to and on October 24, 1984 itself would amply demonstrate that was simply found later to be based on an erroneous ground which, under
petitioner was not simply negligent in failing to exercise due diligence to settled jurisprudence, would not have been a reason for awarding moral
assure himself that what he was taking in exchange for his property were and exemplary damages.[42] Instead, the cause of action of the instant case
genuine diamonds. He had rather placed himself in a situation from which it appears to have been contrived by petitioner himself. In other words, he
preponderantly appears that his seeming ignorance was actually just a ruse. was placed in a situation where he could not honestly evaluate whether his
Indeed, he had unnecessarily dragged respondents to face the travails of cause of action has a semblance of merit, such that it would require the
litigation in speculating at the possible favorable outcome of his complaint expertise of the courts to put it to a test. His insistent pursuit of such case
when he should have realized that his supposed predicament was his own then coupled with circumstances showing that he himself was guilty in
making. We, therefore, see here no semblance of an honest and sincere bringing about the supposed wrongdoing on which he anchored his cause of
belief on his part that he was swindled by respondents which would entitle action would render him answerable for all damages the defendant may
him to redress in court. It must be noted that before petitioner was able to suffer because of it. This is precisely what took place in the petition at bar
convince Dr. Cruz to exchange her jewelry for the Tanay property, petitioner and we find no cogent reason to disturb the findings of the courts below
took pains to thoroughly examine said jewelry, even going to the extent of that respondents in this case suffered considerable damages due to
sketching their appearance. Why at the precise moment when he was about petitioners unwarranted action.
to take physical possession thereof he failed to exert extra efforts to check
their genuineness despite the large consideration involved has never been WHEREFORE, the decision of the Court of Appeals dated October 20, 1992 is
explained at all by petitioner. His acts thus failed to accord with what an hereby AFFIRMED in toto. Dr. Cruz, however, is ordered to pay petitioner
ordinary prudent man would have done in the same situation. Being an the balance of the purchase price of P40,000.00 within ten (10) days from
experienced banker and a businessman himself who deliberately skirted a the finality of this decision. Costs against petitioner.
legal impediment in the sale of the Tanay property and to minimize the
capital gains tax for its exchange, it was actually gross recklessness for him SO ORDERED.
to have merely conducted a cursory examination of the jewelry when every
opportunity for doing so was not denied him. Apparently, he carried on his
person a tester which he later used to prove the alleged fakery but which he
did not use at the time when it was most needed. Furthermore, it took him
two more hours of unexplained delay before he complained that the jewelry
he received were counterfeit. Hence, we stated earlier that anything could
have happened during all the time that petitioner was in complete
possession and control of the jewelry, including the possibility of
substituting them with fake ones, against which respondents would have a
great deal of difficulty defending themselves. The truth is that petitioner
even failed to successfully prove during trial that the jewelry he received
from Dr. Cruz were not genuine. Add to that the fact that he had been
shrewd enough to bloat the Tanay propertys price only a few days after he
purchased it at a much lower value. Thus, it is our considered view that if
this slew of circumstances were connected, like pieces of fabric sewn into a
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 78903 February 28, 1990
SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, petitioners,
vs.
THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, JR.,
respondents.
Francisco A. Puray, Sr. for petitioners.
Gabriel N. Duazo for private respondent.
MEDIALDEA, J.:
This is a petition to annul and set aside the decision of the Court of Appeals
rendered on May 26, 1987, upholding the validity of the sale of a parcel of
land by petitioner Segundo Dalion (hereafter, "Dalion") in favor of private
respondent Ruperto Sabesaje, Jr. (hereafter, "Sabesaje"), described thus:
A parcel of land located at Panyawan, Sogod, Southern Leyte, declared in
the name of Segundo Dalion, under Tax Declaration No. 11148, with an area
of 8947 hectares, assessed at P 180.00, and bounded on the North, by
Sergio Destriza and Titon Veloso, East, by Feliciano Destriza, by Barbara
Bonesa (sic); and West, by Catalino Espina. (pp. 36-37, Rollo)
The decision affirms in toto the ruling of the trial court 1 issued on January
17, 1984, the dispositive portion of which provides as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby renders
judgment.
(a) Ordering the defendants to deliver to the plaintiff the parcel of land
subject of this case, declared in the name of Segundo Dalion previously
under Tax Declaration No. 11148 and lately under Tax Declaration No. 2297
(1974) and to execute the corresponding formal deed of conveyance in a
public document in favor of the plaintiff of the said property subject of this
case, otherwise, should defendants for any reason fail to do so, the deed
shall be executed in their behalf by the Provincial Sheriff or his Deputy;
(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as
attorney's fees and P 500.00 as litigation expenses, and to pay the costs;
and
(c) Dismissing the counter-claim. (p. 38, Rollo)
The facts of the case are as follows:
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land,
based on a private document of absolute sale, dated July 1, 1965 (Exhibit
"A"), allegedly executed by Dalion, who, however denied the fact of sale,
contending that the document sued upon is fictitious, his signature thereon,
a forgery, and that subject land is conjugal property, which he and his wife
acquired in 1960 from Saturnina Sabesaje as evidenced by the "Escritura de
Venta Absoluta" (Exhibit "B"). The spouses denied claims of Sabesaje that
after executing a deed of sale over the parcel of land, they had pleaded with
Sabesaje, their relative, to be allowed to administer the land because Dalion
did not have any means of livelihood. They admitted, however,
administering since 1958, five (5) parcels of land in Sogod, Southern Leyte,
which belonged to Leonardo Sabesaje, grandfather of Sabesaje, who died in
1956. They never received their agreed 10% and 15% commission on the
sales of copra and abaca, respectively. Sabesaje's suit, they countered, was
intended merely to harass, preempt and forestall Dalion's threat to sue for
these unpaid commissions.
From the adverse decision of the trial court, Dalion appealed, assigning
errors some of which, however, were disregarded by the appellate court,
not having been raised in the court below. While the Court of Appeals duly
recognizes Our authority to review matters even if not assigned as errors in
the appeal, We are not inclined to do so since a review of the case at bar
reveals that the lower court has judicially decided the case on its merits.
As to the controversy regarding the identity of the land, We have no reason
to dispute the Court of Appeals' findings as follows:
To be sure, the parcel of land described in Exhibit "A" is the same property
deeded out in Exhibit "B". The boundaries delineating it from adjacent lots
are identical. Both documents detail out the following boundaries, to wit:
On the North-property of Sergio Destriza and Titon Veloso;
On the East-property of Feliciano Destriza;
On the South-property of Barbara Boniza and
On the West-Catalino Espina.
(pp. 41-42, Rollo)
The issues in this case may thus be limited to: a) the validity of the contract
of sale of a parcel of land and b) the necessity of a public document for
transfer of ownership thereto.
The appellate court upheld the validity of the sale on the basis of Secs. 21
and 23 of Rule 132 of the Revised Rules of Court.
SEC. 21. Private writing, its execution and authenticity, how proved.-Before
any private writing may be received in evidence, its due execution and
authenticity must be proved either:
(a) By anyone who saw the writing executed;
(b) By evidence of the genuineness of the handwriting of the maker; or
(c) By a subscribing witness
xxx xxx xxx
SEC. 23. Handwriting, how proved. The handwriting of a person may be
proved by any witness who believes it to be the handwriting of such person,
and has seen the person write, or has seen writing purporting to be his upon
which the witness has acted or been charged, and has thus acquired
knowledge of the handwriting of such person. Evidence respecting the
handwriting may also be given by a comparison, made by the witness or the
court, with writings admitted or treated as genuine by the party against
whom the evidence is offered, or proved to be genuine to the satisfaction of
the judge. (Rule 132, Revised Rules of Court)
And on the basis of the findings of fact of the trial court as follows:
Here, people who witnessed the execution of subject deed positively
testified on the authenticity thereof. They categorically stated that it had
been executed and signed by the signatories thereto. In fact, one of such
witnesses, Gerardo M. Ogsoc, declared on the witness stand that he was the
one who prepared said deed of sale and had copied parts thereof from the
"Escritura De Venta Absoluta" (Exhibit B) by which one Saturnina Sabesaje
sold the same parcel of land to appellant Segundo Dalion. Ogsoc copied the
bounderies thereof and the name of appellant Segundo Dalion's wife,
erroneously written as "Esmenia" in Exhibit "A" and "Esmenia" in Exhibit
"B". (p. 41, Rollo)
xxx xxx xxx
Against defendant's mere denial that he signed the document, the positive
testimonies of the instrumental Witnesses Ogsoc and Espina, aside from the
testimony of the plaintiff, must prevail. Defendant has affirmatively alleged
forgery, but he never presented any witness or evidence to prove his claim
of forgery. Each party must prove his own affirmative allegations (Section 1,
Rule 131, Rules of Court). Furthermore, it is presumed that a person is
innocent of a crime or wrong (Section 5 (a), Idem), and defense should have
come forward with clear and convincing evidence to show that plaintiff
committed forgery or caused said forgery to be committed, to overcome
the presumption of innocence. Mere denial of having signed, does not
suffice to show forgery.
In addition, a comparison of the questioned signatories or specimens (Exhs.
A-2 and A-3) with the admitted signatures or specimens (Exhs. X and Y or 3-
C) convinces the court that Exhs. A-2 or Z and A-3 were written by
defendant Segundo Dalion who admitted that Exhs. X and Y or 3-C are his
signatures. The questioned signatures and the specimens are very similar to
each other and appear to be written by one person.
Further comparison of the questioned signatures and the specimens with
the signatures Segundo D. Dalion appeared at the back of the summons (p.
9, Record); on the return card (p. 25, Ibid.); back of the Court Orders dated
December 17, 1973 and July 30, 1974 and for October 7, 1974 (p. 54 & p. 56,
respectively, Ibid.), and on the open court notice of April 13, 1983 (p. 235,
Ibid.) readily reveal that the questioned signatures are the signatures of
defendant Segundo Dalion.
It may be noted that two signatures of Segundo D. Dalion appear on the
face of the questioned document (Exh. A), one at the right corner bottom of
the document (Exh. A-2) and the other at the left hand margin thereof (Exh.
A-3). The second signature is already a surplusage. A forger would not
attempt to forge another signature, an unnecessary one, for fear he may
commit a revealing error or an erroneous stroke. (Decision, p. 10) (pp. 42-
43, Rollo)
We see no reason for deviating from the appellate court's ruling (p. 44,
Rollo) as we reiterate that
Appellate courts have consistently subscribed to the principle that
conclusions and findings of fact by the trial courts are entitled to great
weight on appeal and should not be disturbed unless for strong and cogent
reasons, since it is undeniable that the trial court is in a more advantageous
position to examine real evidence, as well as to observe the demeanor of
the witnesses while testifying in the case (Chase v. Buencamino, Sr., G.R. No.
L-20395, May 13, 1985, 136 SCRA 365; Pring v. Court of Appeals, G.R. No. L-
41605, August 19, 1985, 138 SCRA 185)
Assuming authenticity of his signature and the genuineness of the
document, Dalion nonetheless still impugns the validity of the sale on the
ground that the same is embodied in a private document, and did not thus
convey title or right to the lot in question since "acts and contracts which
have for their object the creation, transmission, modification or extinction
of real rights over immovable property must appear in a public instrument"
(Art. 1358, par 1, NCC).
This argument is misplaced. The provision of Art. 1358 on the necessity of a
public document is only for convenience, not for validity or enforceability. It
is not a requirement for the validity of a contract of sale of a parcel of land
that this be embodied in a public instrument.
A contract of sale is a consensual contract, which means that the sale is
perfected by mere consent. No particular form is required for its validity.
Upon perfection of the contract, the parties may reciprocally demand
performance (Art. 1475, NCC), i.e., the vendee may compel transfer of
ownership of the object of the sale, and the vendor may require the vendee
to pay the thing sold (Art. 1458, NCC).
The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje
the parcel of land and to execute corresponding formal deed of conveyance
in a public document. Under Art. 1498, NCC, when the sale is made through
a public instrument, the execution thereof is equivalent to the delivery of
the thing. Delivery may either be actual (real) or constructive. Thus delivery
of a parcel of land may be done by placing the vendee in control and
possession of the land (real) or by embodying the sale in a public instrument
(constructive).
As regards petitioners' contention that the proper action should have been
one for specific performance, We believe that the suit for recovery of
ownership is proper. As earlier stated, Art. 1475 of the Civil Code gives the
parties to a perfected contract of sale the right to reciprocally demand
performance, and to observe a particular form, if warranted, (Art. 1357).
The trial court, aptly observed that Sabesaje's complaint sufficiently alleged
a cause of action to compel Dalion to execute a formal deed of sale, and the
suit for recovery of ownership, which is premised on the binding effect and
validity inter partes of the contract of sale, merely seeks consummation of
said contract.
... . A sale of a real property may be in a private instrument but that contract
is valid and binding between the parties upon its perfection. And a party
may compel the other party to execute a public instrument embodying their
contract affecting real rights once the contract appearing in a private
instrument hag been perfected (See Art. 1357).
... . (p. 12, Decision, p. 272, Records)
ACCORDINGLY, the petition is DENIED and the decision of the Court of
Appeals upholding the ruling of the trial court is hereby AFFIRMED. No
costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-55048 May 27, 1981
SUGA SOTTO YUVIENCO, BRITANIA SOTTO, and MARCELINO SOTTO,
petitioners,
vs.
HON. AUXENCIO C. DACUYCUY, Judge of the CFI of Leyte, DELY
RODRIGUEZ, FELIPE ANG CRUZ, CONSTANCIA NOGAR, MANUEL GO,
INOCENTES DIME, WILLY JULIO, JAIME YU, OSCAR DY, DY CHIU SENG,
BENITO YOUNG, FERNANDO YU, SEBASTIAN YU, CARLOS UY, HOC CHUAN
and MANUEL DY, respondents.
BARREDO, J.:1wph1.t This refers to the Sotto property (land and building) situated at Tacloban
Petition for certiorari and prohibition to declare void for being in grave
abuse of discretion the orders of respondent judge dated November 2, 1978
and August 29, 1980, in Civil Case No. 5759 of the Court of First Instance of
Leyte, which denied the motion filed by petitioners to dismiss the complaint
of private respondents for specific performance of an alleged agreement of
sale of real property, the said motion being based on the grounds that the
respondents' complaint states no cause of action and/or that the claim
alleged therein is unenforceable under the Statute of Frauds.
Finding initially prima facie merit in the petition, We required respondents
to answer and We issued a temporary restraining order on October 7, 1980
enjoining the execution of the questioned orders.
In essence, the theory of petitioners is that while it is true that they did
express willingness to sell to private respondents the subject property for
P6,500,000 provided the latter made known their own decision to buy it not
later than July 31, 1978, the respondents' reply that they were agreeable
was not absolute, so much so that when ultimately petitioners'
representative went to Cebu City with a prepared and duly signed contract
for the purpose of perfecting and consummating the transaction,
respondents and said representative found variance between the terms of
payment stipulated in the prepared document and what respondents had in
mind, hence the bankdraft which respondents were delivering to petit
loners' representative was returned and the document remained unsigned
by respondents. Hence the action below for specific performance.
To be more specific, the parties do not dispute that on July 12, 1978,
petitioners, thru a certain Pedro C. Gamboa, sent to respondents the
following letter:
Mr. Yao King Ong
Life Bakery
Tacloban City
Dear Mr. Yao: 1wph1.t
City. My clients are willing to sell them at a total price of P6,500,000.00.
While there are other parties who are interested to buy the property, I am
giving you and the other occupants the preference, but such priority has to
be exercised within a given number of days as I do not want to lose the
opportunity if you are not interested. I am therefore gluing you and the rest
of the occupants until July 31, 1978 within it which to decide whether you
want to buy the property. If I do not hear from you by July 31, I will offer or
close the deal with the other interested buyer.
Thank you so much for the hospitality extended to me during my last trip to
Tacloban, and I hope to hear from you very soon. 1wph1.t
Very truly yours,
Pedro C. Gamboa 1
(Page 9, Record.)
Reacting to the foregoing letter, the following telegram was sent by "Yao
King Ong & tenants" to Atty. Pedro Gamboa in Cebu City:
 Tacloban City Ice Plant, Inc.) without giving notice to plaintiffs, changed the
Atty. Pedro Gamboa mode of payment with respect to the balance of P4,500,000.00 by imposing
upon plaintiffs to pay same amount within thirty (30) days from execution
Room 314, Maria Cristina Bldg. of the contract instead of the former term of ninety (90) days as stated in
paragraph 8 hereof. (Pp. 10-11, Record.)
Osmea Boulevard, Cebu City
Additionally and to reenforce their position, respondents alleged further in
Reurlet dated July 12 inform Dra. Yuvienco we agree to buy property their complaint: 1wph1.t
proceed Tacloban to negotiate details 1wph1.t
8. That on July 12, 1978, defendants (except defendant Tacloban City
Yao King Ong & tenants Ice Plant, Inc.) finally sent a telegram letter to plaintiffs- tenants, through
same Mr. Yao King Ong, notifying them that defendants are willing to sell
(Page 10, Record.) the properties (lands and building) at a total price of P6,500,000.00, which
herein plaintiffs-tenants have agreed to buy the said properties for said
Likewise uncontroverted is the fact that under date of July 27, 1978, Atty. price; a copy of which letter is hereto attached as integral part hereof and
Gamboa wired Yao King Ong in Tacloban City as follows: marked as Annex 'C', and plaintiffs accepted the offer through a telegram
dated July 25, 1978, sent to defendants (through defendant Pedro C.
NLT Gamboa), a copy of which telegram is hereto attached as integral part
hereof and marked as Annex C-1 and as a consequence hereof. plaintiffs
YAO KING ONG except plaintiff Tacloban - merchants' Realty Development Corporation) and
defendants (except defendant Tacloban City Ice Plant. Inc.) agreed to the
LIFE BAKERY following terms and conditions respecting the payment of said purchase
price, to wit: 1wph1.t
TACLOBAN CITY
P2,000,000.00 to be paid in full on the date of the execution of the contract;
PROPOSAL ACCEPTED ARRIVING TUESDAY MORNING WITH CONTRACT and the balance of P4,500,000.00 shall be fully paid within ninety (90) days
PREPARE PAYMENT BANK DRAFT 1wph1.t thereafter;

ATTY. GAMBOA
(Page 10, Id.)
Now, Paragraph 10 of the complaint below of respondents alleges:
1wph1.t
10. That on August 1, 1978, defendant Pedro Gamboa arrived Tacloban
City bringing with him the prepared contract to purchase and to sell
referred to in his telegram dated July 27, 1978 (Annex 'D' hereof) for the
purpose of closing the transactions referred to in paragraphs 8 and 9 hereof,
however, to the complete surprise of plaintiffs, the defendant (except def.
9. That on July 27, 1978, defendants sent a telegram to plaintiff-
tenants, through the latter's representative Mr. Yao King Ong, reiterating
their acceptance to the agreement referred to in the next preceding
paragraph hereof and notifying plaintiffs-tenants to prepare payment by
bank drafts; which the latter readily complied with; a copy of which
telegram is hereto attached as integral part hereof and marked as Annex
"D"; (Pp 49-50, Record.)
It was on the basis of the foregoing facts and allegations that herein
petitioners filed their motion to dismiss alleging as main grounds:
1wph1.t
I. That plaintiff, TACLOBAN MERCHANTS' REALTY DEVELOPMENT
CORPORATION, amended complaint, does not state a cause of action and
the claim on which the action is founded is likewise unenforceable under
the provisions of the Statute of Frauds.
II. That as to the rest of the plaintiffs, their amended complaint does
not state a cause of action and the claim on which the action is founded is
likewise unenforceable under the provisions of the Statute of Frauds. (Page
81, Record.)
With commendable knowledgeability and industry, respondent judge ruled
negatively on the motion to dismiss, discoursing at length on the personality
as real party-in-interest of respondent corporation, while passing lightly,
however, on what to Us are the more substantial and decisive issues of
whether or not the complaint sufficiently states a cause of action and
whether or not the claim alleged therein is unenforceable under the Statute
of Frauds, by holding thus: 1wph1.t constitute a counter-offer.
The second ground of the motion to dismiss is that plaintiffs' claim is
unenforceable under the Statute of Frauds. The defendants argued against
this motion and asked the court to reject the objection for the simple
reason that the contract of sale sued upon in this case is supported by
letters and telegrams annexed to the complaint and other papers which will
be presented during the trial. This contention of the defendants is not well
taken. The plaintiffs having alleged that the contract is backed up by letters
and telegrams, and the same being a sufficient memorandum, the
complaint states a cause of action and they should be given a day in court
and allowed to substantiate their allegations (Paredes vs. Espino, 22 SCRA
1000).
To take a contract for the sale of land out of the Statute of Frauds a mere
note or memorandum in writing subscribed by the vendor or his agent
containing the name of the parties and a summary statement of the terms
of the sale either expressly or by reference to something else is all that is
required. The statute does not require a formal contract drawn up with
technical exactness for the language of Par. 2 of Art. 1403 of the Philippine
Civil Code is' ... an agreement ... or some note or memorandum thereof,'
thus recognizing a difference between the contract itself and the written
evidence which the statute requires (Berg vs. Magdalena Estate, Inc., 92
Phil. 110; Ill Moran, Comments on the Rules of Court, 1952 ed. p. 187). See
also Bautista's Monograph on the Statute of Frauds in 21 SCRA p. 250. (Pp.
110-111, Record)
Our first task then is to dwell on the issue of whether or not in the light of
the foregoing circumstances, the complaint in controversy states sufficiently
a cause of action. This issue necessarily entails the determination of
whether or not the plaintiffs have alleged facts adequately showing the
existence of a perfected contract of sale between herein petitioners and the
occupant represented by respondent Yao King Ong.
In this respect, the governing legal provision is, of course, Article 1319 of the
Civil Code which provides:1wph1.t
ART. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are constitute the contract.
The offer must be certain the acceptance absolute. A qualified acceptance
Acceptance made by letter or telegram does not bind offerer except from
the time it came to his knowledge. The contract, in a case, is presumed to
have been entered into in the place where the offer was made.
In the instant case, We can lay aside, for the moment, petitioners'
contention that the letter of July 12, 1978 of Atty. Pedro C. Gamboa to
respondents Yao King Ong and his companions constitute an offer that is
"certain", although the petitioners claim that it was a mere expression of
willingness to sell the subject property and not a direct offer of sale to said
respondents. What We consider as more important and truly decisive is
what is the correct juridical significance of the telegram of respondents
instructing Atty. Gamboa to "proceed to Tacloban to negotiate details." We
underline the word "negotiate" advisedly because to Our mind it is the key
word that negates and makes it legally impossible for Us to hold that
respondents' acceptance of petitioners' offer, assuming that it was a
"certain" offer indeed, was the "absolute" one that Article 1319 above-
quoted requires.
Dictionally, the implication of "to negotiate" is practically the opposite of
the Idea that an agreement has been reached. Webster's Third International
Dictionary, Vol. II (G. & C. Merriam Co., 1971 Philippine copyright) gives the
meaning of negotiate as "to communicate or confer with another so as to
arrive at the settlement of some matter; meet with another so as to arrive
through discussion at some kind of agreement or compromise about
something; to arrange for or bring about through conference or
discussion; work at or arrive at or settle upon by meetings and agreements
or compromises ". Importantly, it must be borne in mind that Yao King
Ong's telegram simply says "we agree to buy property". It does not
necessarily connote acceptance of the price but instead suggests that the
details were to be subject of negotiation.
Respondents now maintain that what the telegram refers to as "details" to
be "negotiated" are mere "accidental elements", not the essential elements
of the contract. They even invite attention to the fact that they have alleged
in their complaint (Par. 6) that it was as early as "in the month of October,
1977 (that) negotiations between plaintiffs and defendants for the purchase
and sale (in question) were made, thus resulting to offers of same
defendants and counter-offer of plaintiffs". But to Our mind such alleged
facts precisely indicate the failure of any meeting of the minds of the
parties, and it is only from the letter and telegrams above-quoted that one
can determine whether or not such meeting of the minds did materialize. As
We see it, what such allegations bring out in bold relief is that it was
precisely because of their past failure to arrive at an agreement that
petitioners had to put an end to the uncertainty by writing the letter of July
12, 1978. On the other hand, that respondents were all the time agreeable
to buy the property may be conceded, but what impresses Us is that instead
of "absolutely" accepting the "certain" offer if there was one of the
petitioners, they still insisted on further negotiation of details. For anyone
to read in the telegram of Yao that they accepted the price of P6,500,000.00
would be an inference not necessarily warranted by the words "we agree to
buy" and "proceed Tacloban to negotiate details". If indeed the details
being left by them for further negotiations were merely accidental or formal
ones, what need was there to say in the telegram that they had still "to
negotiate (such) details", when, being unessential per their contention, they
could have been just easily clarified and agreed upon when Atty. Gamboa
would reach Tacloban?
Anent the telegram of Atty. Gamboa of July 27, 1978, also quoted earlier
above, We gather that it was in answer to the telegram of Yao. Considering
that Yao was in Tacloban then while Atty. Gamboa was in Cebu, it is difficult
to surmise that there was any communication of any kind between them
during the intervening period, and none such is alleged anyway by
respondents. Accordingly, the claim of respondents in paragraph 8 of their
complaint below that there was an agreement of a down payment of P2 M,
with the balance of P4.5M to be paid within 90 days afterwards is rather
improbable to imagine to have actually happened.
Respondents maintain that under existing jurisprudence relative to a motion
to dismiss on the ground of failure of the complaint to state a cause of
action, the movant-defendant is deemed to admit the factual allegations of
the complaint, hence, petitioners cannot deny, for purposes of their motion,
that such terms of payment had indeed been agreed upon.
While such is the rule, those allegations do not detract from the fact that
under Article 1319 of the Civil Code above-quoted, and judged in the light of
the telegram-reply of Yao to Atty. Gamboa's letter of July 12, 1978, there
was not an absolute acceptance, hence from that point of view, petitioners'
contention that the complaint of respondents state no cause of action is
correct.
Nonetheless, the alleged subsequent agreement about the P2 M down and
P4.5 M in 90 days may at best be deemed as a distinct cause of action. And
placed against the insistence of petitioners, as demonstrated in the two
deeds of sale taken by Atty. Gamboa to Tacloban, Annexes 9 and 10 of the
answer of herein respondents, that there was no agreement about 90 days,
an issue of fact arose, which could warrant a trial in order for the trial court
to determine whether or not there was such an agreement about the
balance being payable in 90 days instead of the 30 days stipulated in
Annexes 9 and 10 above-referred to. Our conclusion, therefore, is that
although there was no perfected contract of sale in the light of the letter of
Atty. Gamboa of July 12, 1978 and the letter-reply thereto of Yao; it being
doubtful whether or not, under Article 1319 of the Civil Code, the said letter
may be deemed as an offer to sell that is "certain", and more, the Yao
telegram is far from being an "absolute" acceptance under said article, still
there appears to be a cause of action alleged in Paragraphs 8 to 12 of the
respondents' complaint, considering it is alleged therein that subsequent to
the telegram of Yao, it was agreed that the petitioners would sell the
property to respondents for P6.5 M, by paving P2 M down and the balance
in 90 days and which agreement was allegedly violated when in the deeds
prepared by Atty. Gamboa and taken to Tacloban, only 30 days were given
to respondents.
But the foregoing conclusion is not enough to carry the day for respondents.
It only brings Us to the question of whether or not the claim for specific
performance of respondents is enforceable under the Statute of Frauds. In
this respect, We man, view the situation at hand from two angles, namely,
(1) that the allegations contained in paragraphs 8 to 12 of respondents'
complaint should be taken together with the documents already
aforementioned and (2) that the said allegations constitute a separate and
distinct cause of action. We hold that either way We view the situation, the
conclusion is inescapable e that the claim of respondents that petitioners
have unjustifiably refused to proceed with the sale to them of the property
v in question is unenforceable under the Statute of Frauds.
It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there
is any writing or memorandum, much less a duly signed agreement to the
effect that the price of P6,500,000 fixed by petitioners for the real property
herein involved was agreed to be paid not in cash but in installments as
alleged by respondents. The only documented indication of the non-wholly-
cash payment extant in the record is that stipulated in Annexes 9 and 10
above-referred to, the deeds already signed by the petitioners and taken to
Tacloban by Atty. Gamboa for the signatures of the respondents. In other
words, the 90-day term for the balance of P4.5 M insisted upon by
respondents choices not appear in any note, writing or memorandum
signed by either the petitioners or any of them, not even by Atty. Gamboa.
Hence, looking at the pose of respondents that there was a perfected
agreement of purchase and sale between them and petitioners under which
they would pay in installments of P2 M down and P4.5 M within ninety 90)
days afterwards it is evident that such oral contract involving the "sale of
real property" comes squarely under the Statute of Frauds (Article 1403, No.
2(e), Civil Code.)
On the other score of considering the supposed agreement of paying
installments as partly supported by the letter and t telegram earlier quoted
herein, His Honor declared with well studied ratiocination, albeit legally
inaccurate, that: 1wph1.t sudden fluctuation of the rate of interest. In other words, it is indisputable
The next issue relate to the State of Frauds. It is contended that plaintiffs'
action for specific performance to compel the defendants to execute a good
and sufficient conveyance of the property in question (Sotto land and
building) is unenforceable because there is no other note memorandum or
writing except annexes "C", "C-l" and "D", which by themselves did not give
birth to a contract to sell. The argument is not well founded. The rules of
pleading limit the statement of the cause of action only to such operative
facts as give rise to the right of action of the plaintiff to obtain relief against
the wrongdoer. The details of probative matter or particulars of evidence,
statements of law, inferences and arguments need not be stated. Thus, Sec.
1 of Rule 8 provides that 'every pleading shall contain in a methodical and
logical form, a plain concise and direct statement of the ultimate facts on
which the party pleading relies for his claim or defense, as the case may be,
omitting the statement of mere evidentiary facts.' Exhibits need not be
attached. The contract of sale sued upon in this case is supported by letters
and telegrams annexed to the complaint and plaintiffs have announced that
they will present additional evidences during the trial to prove their cause of
action. The plaintiffs having alleged that the contract is backed up by letters
and telegrams, and the same being sufficient memorandum, the complaint
states a cause of action and they should be given their day in court and
allowed to substantiate their allegations (Parades vs. Espino, 22 SCRA 1000).
(Pp 165-166, Record.)
The foregoing disquisition of respondent judge misses at least two (2)
juridical substantive aspects of the Statute of Frauds insofar as sale of real
property is concerned. First, His Honor assumed that the requirement of
perfection of such kind of contract under Article 1475 of the Civil Code
which provides that "(t)he contract of sale is perfected at the moment there
is a meeting of the minds upon the thing which is the object of the contract
and upon the price", the Statute would no longer apply as long as the total
price or consideration is mentioned in some note or memorandum and
there is no need of any indication of the manner in which such total price is
to be paid.
We cannot agree. In the reality of the economic world and the exacting
demands of business interests monetary in character, payment on
installments or staggered payment of the total price is entirely a different
matter from cash payment, considering the unpredictable trends in the
that the value of money - varies from day to day, hence the indispensability
of providing in any sale of the terms of payment when not expressly or
impliedly intended to be in cash.
Thus, We hold that in any sale of real property on installments, the Statute
of Frauds read together with the perfection requirements of Article 1475 of
the Civil Code must be understood and applied in the sense that the idea of
payment on installments must be in the requisite of a note or memorandum
therein contemplated. Stated otherwise, the inessential elements"
mentioned in the case of Parades vs. Espino, 22 SCRA 1000, relied upon by
respondent judge must be deemed to include the requirement just
discussed when it comes to installment sales. There is nothing in the
monograph re the Statute of Frauds appearing in 21 SCRA 250 also cited
by His Honor indicative of any contrary view to this ruling of Ours, for the
essence and thrust of the said monograph refers only to the form of the
note or memorandum which would comply with the Statute, and no doubt,
while such note or memorandum need not be in one single document or
writing and it can be in just sufficiently implicit tenor, imperatively the
separate notes must, when put together', contain all the requisites of a
perfected contract of sale. To put it the other way, under the Statute of
Frauds, the contents of the note or memorandum, whether in one writing
or in separate ones merely indicative for an adequate understanding of all
the essential elements of the entire agreement, may be said to be the
contract itself, except as to the form.
Secondly, We are of the considered opinion that under the rules on proper
pleading, the ruling of the trial court that, even if the allegation of the
existence of a sale of real property in a complaint is challenged as barred
from enforceability by the Statute of Frauds, the plaintiff may simply say
there are documents, notes or memoranda without either quoting them in
or annexing them to the complaint, as if holding an ace in the sleeves is not
correct. To go directly to the point, for Us to sanction such a procedure is to
tolerate and even encourage undue delay in litigation, for the simple reason
that to await the stage of trial for the showing or presentation of the
requisite documentary proof when it already exists and is asked to be
produced by the adverse party would amount to unnecessarily postponing,
with the concomitant waste of time and the prolongation of the
proceedings, something that can immediately be evidenced and thereby
determinable with decisiveness and precision by the court without further
delay.
In this connection, Moran observes that unlike when the ground of dismissal
alleged is failure of the complaint to state a cause of action, a motion to
dismiss invoking the Statute of Frauds may be filed even if the absence of
compliance does not appear an the face of the complaint. Such absence
may be the subject of proof in the motion stage of the proceedings. (Moran,
Comment on the Rules of Court, Vol. 1, p. 494, 1979 ed.) It follows then that
when such a motion is filed and all the documents available to movant are
before the court, and they are insufficient to comply with the Statute, it
becomes incumbent upon the plaintiff, for the reasons of policy We have
just' indicated regarding speedy administration of justice, to bring out what
note or memorandum still exists in his possession in order to enable the
court to expeditiously determine then and there the need for further
proceedings. In other words, it would be inimical to the public interests in
speedy justice for plaintiff to play hide and seek at his own convenience,
particularly, when, as is quite apparent as in the instant case that chances
are that there are no more writings, notes or memoranda of the installment
agreement alleged by respondents. We cannot divine any reason why any
such document would be withheld if they existed, except the unpermissible
desire of the respondents to force the petitioners to undergo the ordeals,
time, effort and expenses of a futile trial.
In the foregoing premises, We find no alternative than to render judgment
in favor of petitioners in this certiorari and prohibition case. If at all, appeal
could be available if the petitioners subjected themselves to the trial ruled
to be held by the trial court. We foresee even at this point, on the basis of
what is both extant and implicit in the records, that no different result can
be probable. We consider it as sufficiently a grave abuse of discretion
warranting the special civil actions herein the failure of respondent judge to
properly apply the laws on perfection of contracts in relation to the Statute
of Frauds and the pertinent rules of pleading and practice, as We have
discussed above.
ACCORDINGLY, the impugned orders of respondent judge of November 2,
1978 and August 29, 1980 are hereby set aside and private respondents'
amended complaint, Annex A of the petition, is hereby ordered dismissed
and the restraining order heretofore issued by this Court on October 7, 1980
is declared permanent. Costs against respondents.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11311 May 28, 1958
MARTA C. ORTEGA, plaintiff-appellant,
vs.
DANIEL LEONARDO, defendant-appellee.
Jose Ma. Reyes for appellant.
Tomas A. Leonardo for appellee.
BENGZON, J.:
Well known is the general rule in the Statute of Frauds precluding
enforcement of oral contracts for the sale of land. Not so well known is
exception concerning the partially executed contracts1 least our
jurisprudence offers few, if any, apposite illustrations. This appeal
exemplifies such exception.
Alleging partial performance, plaintiff sought to compel defendant to
comply with their oral contract of sale of a parcel of land. Upon a motion to
dismiss, the Manila court of first instance ordered dismissal following the
above general rule.
Hence this appeal. It should be sustained if the allegations of the complaint
which the motion to dismiss admitted set out an instance of partial
performance.
Stripped of non-essentials, the complaint averred that long before and until
her house had been completely destroyed during the liberation of the City
of Manila, plaintiff occupied a parcel of land, designated as Lot 1, Block 3
etc. (hereinafter called Lot I) located at San Andres Street, Malate, Manila;
that after liberation she re-occupied it; that when the administration and
disposition of the said Lot I (together with other lots in the Ana Sarmiento
Estate) were assigned by the Government to the Rural Progress
Administration2 plaintiff asserted her right thereto (as occupant) for
purposes of purchase; that defendant also asserted a similar right, alleging
occupancy of a portion of the land subsequent to plaintiff's; that during the
investigation of such conflicting interests, defendant asked plaintiff to desist
from pressing her claim and definitely promised that if and when he
succeeded in getting title to Lot I3 , he would sell to her a portion thereof
with an area of 55.60 square meters (particularly described) at the rate of
P25.00 per square meter, provided she paid for the surveying and
subdivision of the Lot and provided further that after he acquired title, she
could continue holding the lot as tenant by paying a monthly rental of
P10.00 until said portion shall have been segregated and the purchase price
fully paid; that plaintiff accepted defendant's offer, and desisted from
further claiming Lot I; that defendant finally acquired title thereto; that
relying upon their agreement, plaintiff caused the survey and segregation of
the portion which defendant had promised to sell incurring expenses
therefor, said portion being now designated as Lot I-B in a duly prepared
and approved subdivision plan; that in remodelling her son's house
constructed on a lot adjoining Lot I she extended it over said Lot I-B; that
after defendant had acquired Lot I plaintiff regularly paid him the monthly
rental of P10.00; that in July 1954, after the plans of subdivision and
segregation of the lot had been approved by the Bureau of Lands, plaintiff
tendered to defendant the purchase price which the latter refused to
accept, without cause or reason.
The court below explained in its order of dismissal:
It is admitted by both parties that an oral agreement to sell a piece of land is
not enforceable. (Art. 1403, Civil Code, Section 21, Rule 123, Rules of Court.)
Plaintiff, however, argues that the contract in question, although verbal,
was partially performed because plaintiff desisted from claiming the portion
of lot I in question due to the promise of defendant to transfer said portion
to her after the issuance of title to defendant. The court thinks that even
granting that plaintiff really desisted to claim not on oral promise to sell
made by defendant, the oral promise to sell cannot be enforced. The
desistance to claim is not a part of the contract of sale of the land. Only in
essential part of the executory contract will, if it has already been
performed, make the verbal contract enforceable, payment of price being
an essential part of the contract of sale.
If the above means that partial performance of a sale contract occurs only
when part of the purchase price is paid, it surely constitutes a defective
statement of the law. American Jurisprudence in its title "Statute of Frauds"
lists other acts of partial performance, such as possession, the making of
improvements, rendition of services, payment of taxes, relinquishment of
rights, etc.
Thus, it is stated that "The continuance in possession may, in a proper case,
be sufficiently referable to the parol contract of sale to constitute a part
performance thereof. There may be additional acts or peculiar
circumstances which sufficiently refer the possession to the contract. . . .
Continued possession under an oral contract of sale, by one already in
possession as a tenant, has been held a sufficient part performance, where
accompanied by other acts which characterize the continued possession
and refer it to the contract of purchase. Especially is this true where the
circumstances of the case include the making of substantial, permanent,
and valuable improvements." (49 American Jurisprudence 44)
It is also stated that "The making of valuable permanent improvements on
the land by the purchaser, in pursuance of the agreement and with the
knowledge of the vendor, has been said to be the strongest and the most
unequivocal act of part performance by which a verbal contract to sell land
is taken out of the statute of frauds, and is ordinarily an important element
in such part performance. . . . Possession by the purchaser under a parol
contract for the purchase of real property, together with his making
valuable and permanent improvements on the property which are referable
exclusively to the contract, in reliance on the contract, in the honest belief
that he has a right to make them, and with the knowledge and consent or
acquiescence of the vendor, is deemed a part performance of the contract.
The entry into possession and the making of the improvements are held on
amount to such an alteration in the purchaser's position as will warrant the
court's entering a degree of specific performance." (49 American
Jurisprudence p.755, 756.)
Again, it is stated that "A tender or offer of payment, declined by the
vendor, has been said to be equivalent to actual payment, for the purposes
of determining whether or not there has been a part performance of the
contract. This is apparently true where the tender is by a purchaser who has
made improvements. But the doctrine now generally accepted, that not
even the payment of the purchase price, without something more, . . . is a
sufficient part performance. (49 American Jurisprudence p. 772.)
And the relinquishment of rights or the compromise thereof has likewise
been held to constitute part performance. (See same title secs. 473, 474,
475.)
In the light of the above four paragraphs, it would appear that the
complaint in this case described several circumstance indicating partial
performance: relinquishment of rights4 continued possession, building of
improvements, tender of payment plus the surveying of the lot at plaintiff's
expense and the payment of rentals.
We shall not take, time to discuss whether one or the other or any two or
three of them constituted sufficient performance to take the matter away
from the operation of the Statute of Frauds. Enough to hold that the
combination of all of them amounted to partial performance; and we do so
line with the accepted basis of the doctrine, that it would be a fraud upon
the plaintiff if the defendant were permitted to oppose performance of his
part after he has allowed or induced the former to perform in reliance upon
the agreement. (See 49 American Jurisprudence p. 725.)
The paragraph immediately preceding will serve as our comment on the
appellee's quotations from American Jurisprudence itself to the effect that
"relinquishment" is not part performance, and that neither "surveying the
land"5 nor tender of payment is sufficient. The precedents hereinabove
transcribed oppose or explain away or qualify the appellee's citations. And
at the risk of being repetitious we say: granting that none of the three
circumstances indicated by him, (relinquishment, survey, tender) would
separately suffice, still the combination of the three with the others already
mentioned, amounts to more than enough.
Hence, as there was partial performance, the principle excluding parol
contracts for the sale of realty, does not apply.
The judgment will accordingly be reversed and the record remanded for
further proceedings. With costs against appellee.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 85240 July 12, 1991
HEIRS OF CECILIO (also known as BASILIO) CLAUDEL, namely, MODESTA
CLAUDEL, LORETA HERRERA, JOSE CLAUDEL, BENJAMIN CLAUDEL, PACITA
CLAUDEL, CARMELITA CLAUDEL, MARIO CLAUDEL, ROBERTO CLAUDEL,
LEONARDO CLAUDEL, ARSENIA VILLALON, PERPETUA CLAUDEL and FELISA
CLAUDEL, petitioners,
vs.
HON. COURT OF APPEALS, HEIRS OF MACARIO, ESPERIDIONA, RAYMUNDA
and CELESTINA, all surnamed CLAUDEL, respondents.
Ricardo L. Moldez for petitioners.
Juan T. Aquino for private respondents
SARMIENTO, J.:
This petition for review on certiorari seeks the reversal of the decision
rendered by the Court of Appeals in CA-G.R. CV No. 044291 and the
reinstatement of the decision of the then Court of First Instance (CFI) of
Rizal, Branch CXI, in Civil Case No. M-5276-P, entitled. "Heirs of Macario
Claudel, et al. v. Heirs of Cecilio Claudel, et al.," which dismissed the
complaint of the private respondents against the petitioners for cancellation
of titles and reconveyance with damages.2
As early as December 28, 1922, Basilio also known as "Cecilio" Claudel,
acquired from the Bureau of Lands, Lot No. 1230 of the Muntinlupa Estate
Subdivision, located in the poblacion of Muntinlupa, Rizal, with an area of
10,107 square meters; he secured Transfer Certificate of Title (TCT) No.
7471 issued by the Registry of Deeds for the Province of Rizal in 1923; he
also declared the lot in his name, the latest Tax Declaration being No. 5795.
He dutifully paid the real estate taxes thereon until his death in 1937.3
Thereafter, his widow "Basilia" and later, her son Jose, one of the herein
petitioners, paid the taxes.
The same piece of land purchased by Cecilio would, however, become the
subject of protracted litigation thirty-nine years after his death.
Two branches of Cecilio's family contested the ownership over the land-on
one hand the children of Cecilio, namely, Modesto, Loreta, Jose, Benjamin,
Pacita, Carmelita, Roberto, Mario, Leonardo, Nenita, Arsenia Villalon, and
Felisa Claudel, and their children and descendants, now the herein
petitioners (hereinafter referred to as HEIRS OF CECILIO), and on the other,
the brother and sisters of Cecilio, namely, Macario, Esperidiona, Raymunda,
and Celestina and their children and descendants, now the herein private
respondents (hereinafter referred to as SIBLINGS OF CECILIO). In 1972, the
HEIRS OF CECILIO partitioned this lot among themselves and obtained the
corresponding Transfer Certificates of Title on their shares, as follows:
TCT No. 395391 1,997 sq. m. Jose Claudel
TCT No. 395392 1,997 sq. m. Modesta Claudel and children
TCT No. 395393 1,997 sq. m. Armenia C. Villalon
TCT No. 395394 1,997 sq. m. Felisa Claudel4
Four years later, on December 7, 1976, private respondents SIBLINGS OF
CECILIO, filed Civil Case No. 5276-P as already adverted to at the outset,
with the then Court of First Instance of Rizal, a "Complaint for Cancellation
of Titles and Reconveyance with Damages," alleging that 46 years earlier, or
sometime in 1930, their parents had purchased from the late Cecilio Claudel
several portions of Lot No. 1230 for the sum of P30.00. They admitted that
the transaction was verbal. However, as proof of the sale, the SIBLINGS OF
CECILIO presented a subdivision plan of the said land, dated March 25,
1930, indicating the portions allegedly sold to the SIBLINGS OF CECILIO.
As already mentioned, the then Court of First Instance of Rizal, Branch CXI,
dismissed the complaint, disregarding the above sole evidence (subdivision
plan) presented by the SIBLINGS OF CECILIO, thus:
Examining the pleadings as well as the evidence presented in this case by
the parties, the Court can not but notice that the present complaint was
filed in the name of the Heirs of Macario, Espiridiona, Raymunda and
Celestina, all surnamed Claudel, without naming the different heirs
particularly involved, and who wish to recover the lots from the defendants.
The Court tried to find this out from the evidence presented by the plaintiffs
but to no avail. On this point alone, the Court would not be able to
apportion the property to the real party in interest if ever they are entitled
to it as the persons indicated therein is in generic term (Section 2, Rule 3).
The Court has noticed also that with the exception of plaintiff Lampitoc and
(sic) the heirs of Raymunda Claudel are no longer residing in the property as
they have (sic) left the same in 1967. But most important of all the plaintiffs
failed to present any document evidencing the alleged sale of the property
to their predecessors in interest by the father of the defendants.
Considering that the subject matter of the supposed sale is a real property
the absence of any document evidencing the sale would preclude the
admission of oral testimony (Statute of Frauds). Moreover, considering also
that the alleged sale took place in 1930, the action filed by the plaintiffs
herein for the recovery of the same more than thirty years after the cause
of action has accrued has already prescribed.
WHEREFORE, the Court renders judgment dismissing the complaint, without
pronouncement as to costs.
SO ORDERED.5
On appeal, the following errors6 were assigned by the SIBLINGS OF CECILIO:
1. THE TRIAL COURT ERRED IN DISMISSING PLAINTIFFS' COMPLAINT
DESPITE CONCLUSIVE EVIDENCE SHOWING THE PORTION SOLD TO EACH OF
PLAINTIFFS' PREDECESSORS.
2. THE TRIAL COURT ERRED IN HOLDING THAT PLAINTIFFS FAILED TO
PROVE ANY DOCUMENT EVIDENCING THE ALLEGED SALE.
3. THE TRIAL COURT ERRED IN NOT GIVING CREDIT TO THE PLAN,
EXHIBIT A, SHOWING THE PORTIONS SOLD TO EACH OF THE PLAINTIFFS'
PREDECESSORS-IN-INTEREST.
4. THE TRIAL COURT ERRED IN NOT DECLARING PLAINTIFFS AS
OWNERS OF THE PORTION COVERED BY THE PLAN, EXHIBIT A.
5. THE TRIAL COURT ERRED IN NOT DECLARING TRANSFER
CERTIFICATES OF TITLE NOS. 395391, 395392, 395393 AND 395394 OF THE
REGISTER OF DEEDS OF RIZAL AS NULL AND VOID.
The Court of Appeals reversed the decision of the trial court on the
following grounds:
1. The failure to bring and prosecute the action in the name of the real
party in interest, namely the parties themselves, was not a fatal omission
since the court a quo could have adjudicated the lots to the SIBLINGS OF
CECILIO, the parents of the herein respondents, leaving it to them to
adjudicate the property among themselves.
2. The fact of residence in the disputed properties by the herein
respondents had been made possible by the toleration of the deceased
Cecilio.
3. The Statute of Frauds applies only to executory contracts and not to
consummated sales as in the case at bar where oral evidence may be
admitted as cited in Iigo v. Estate of Magtoto7 and Diana, et al. v.
Macalibo.8
In addition,
. . . Given the nature of their relationship with one another it is not unusual
that no document to evidence the sale was executed, . . ., in their blind faith
in friends and relatives, in their lack of experience and foresight, and in their
ignorance, men, in spite of laws, will make and continue to make verbal
contracts. . . .9
4. The defense of prescription cannot be set up against the herein
petitioners despite the lapse of over forty years from the time of the alleged
sale in 1930 up to the filing of the "Complaint for Cancellation of Titles and
Reconveyance . . ." in 1976.
According to the Court of Appeals, the action was not for the recovery of
possession of real property but for the cancellation of titles issued to the
HEIRS OF CECILIO in 1973. Since the SIBLINGS OF CECILIO commenced their
complaint for cancellation of titles and reconveyance with damages on
December 7, 1976, only four years after the HEIRS OF CECILIO partitioned
this lot among themselves and obtained the corresponding Transfer
Certificates of Titles, then there is no prescription of action yet.
Thus the respondent court ordered the cancellation of the Transfer
Certificates of Title Nos. 395391, 395392, 395393, and 395394 of the
Register of Deeds of Rizal issued in the names of the HEIRS OF CECILIO and
corollarily ordered the execution of the following deeds of reconveyance:
To Celestina Claudel, Lot 1230-A with an area of 705 sq. m.
To Raymunda Claudel, Lot 1230-B with an area of 599 sq. m.
To Esperidiona Claudel, Lot 1230-C with an area of 597 sq. m.
To Macario Claudel, Lot 1230-D, with an area of 596 sq. m.10
The respondent court also enjoined that this disposition is without prejudice
to the private respondents, as heirs of their deceased parents, the SIBLINGS
OF CECILIO, partitioning among themselves in accordance with law the
respective portions sold to and herein adjudicated to their parents.
The rest of the land, lots 1230-E and 1230-F, with an area of 598 and 6,927
square meters, respectively would go to Cecilio or his heirs, the herein
petitioners. Beyond these apportionments, the HEIRS OF CECILIO would not
receive anything else.
The crux of the entire litigation is whether or not the Court of Appeals
committed a reversible error in disposing the question of the true
ownership of the lots.
And the real issues are:
1. Whether or not a contract of sale of land may be proven orally:
2. Whether or not the prescriptive period for filing an action for
cancellation of titles and reconveyance with damages (the action filed by
the SIBLINGS OF CECILIO) should be counted from the alleged sale upon
which they claim their ownership (1930) or from the date of the issuance of
the titles sought to be cancelled in favor of the HEIRS OF CECILIO (1976).
The rule of thumb is that a sale of land, once consummated, is valid
regardless of the form it may have been entered into.11 For nowhere does
law or jurisprudence prescribe that the contract of sale be put in writing
before such contract can validly cede or transmit rights over a certain real
property between the parties themselves.
However, in the event that a third party, as in this case, disputes the
ownership of the property, the person against whom that claim is brought
can not present any proof of such sale and hence has no means to enforce
the contract. Thus the Statute of Frauds was precisely devised to protect the
parties in a contract of sale of real property so that no such contract is
enforceable unless certain requisites, for purposes of proof, are met.
The provisions of the Statute of Frauds pertinent to the present
controversy, state:
Art. 1403 (Civil Code). The following contracts are unenforceable, unless
they are ratified:
xxx xxx xxx
2) Those that do not comply with the Statute of Frauds as set forth in
this number. In the following cases, an agreement hereafter made shall be
unenforceable by action unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:
xxx xxx xxx
e) An agreement for the leasing for a longer period than one year, or
for the sale of real property or of an interest therein;
xxx xxx xxx
(Emphasis supplied.)
The purpose of the Statute of Frauds is to prevent fraud and perjury in the
enforcement of obligations depending for their evidence upon the
unassisted memory of witnesses by requiring certain enumerated contracts
and transactions to be evidenced in Writing.12
The provisions of the Statute of Frauds originally appeared under the old
Rules of Evidence. However when the Civil Code was re-written in 1949 (to
take effect in 1950), the provisions of the Statute of Frauds were taken out
of the Rules of Evidence in order to be included under the title on
Unenforceable Contracts in the Civil Code. The transfer was not only a
matter of style but to show that the Statute of Frauds is also a substantive
law.
Therefore, except under the conditions provided by the Statute of Frauds,
the existence of the contract of sale made by Cecilio with his siblings13 can
not be proved.
On the second issue, the belated claim of the SIBLINGS OF CECILIO who filed
a complaint in court only in 1976 to enforce a light acquired allegedly as
early as 1930, is difficult to comprehend.
The Civil Code states:
Art. 1145. The following actions must be commenced within six years:
(1) Upon an oral contract . . . (Emphasis supplied).
If the parties SIBLINGS OF CECILIO had allegedly derived their right of action
from the oral purchase made by their parents in 1930, then the action filed
in 1976 would have clearly prescribed. More than six years had lapsed.
We do not agree with the parties SIBLINGS OF CECILIO when they reason
that an implied trust in favor of the SIBLINGS OF CECILIO was established in
1972, when the HEIRS OF CECILIO executed a contract of partition over the
said properties.
But as we had pointed out, the law recognizes the superiority of the torrens
title.
Above all, the torrens title in the possession of the HEIRS OF CECILIO carries
more weight as proof of ownership than the survey or subdivision plan of a
parcel of land in the name of SIBLINGS OF CECILIO.
The Court has invariably upheld the indefeasibility of the torrens title. No
possession by any person of any portion of the land could defeat the title of
the registered owners thereof.14
A torrens title, once registered, cannot be defeated, even by adverse, open
and notorious possession. A registered title under the torrens system
cannot be defeated by prescription.1wphi1 The title, once registered, is
notice to the world. All persons must take notice. No one can plead
ignorance of the registration.15
xxx xxx xxx
Furthermore, a private individual may not bring an action for reversion or
any action which would have the effect of cancelling a free patent and the
corresponding certificate of title issued on the basis thereof, with the result
that the land covered thereby will again form part of the public domain, as
only the Solicitor General or the officer acting in his stead may do so.16
It is true that in some instances, the Court did away with the irrevocability
of the torrens title, but the circumstances in the case at bar varied
significantly from these cases.
In Bornales v. IAC, 17 the defense of indefeasibility of a certificate of title
was disregarded when the transferee who took it had notice of the flaws in
the transferor's title. No right passed to a transferee from a vendor who did
not have any in the first place. The transferees bought the land registered
under the torrens system from vendors who procured title thereto by
means of fraud. With this knowledge, they can not invoke the indefeasibility
of a certificate of title against the private respondent to the extent of her
interest. This is because the torrens system of land registration, though
indefeasible, should not be used as a means to perpetrate fraud against the
rightful owner of real property.
Mere registration of the sale is not good enough, good faith must concur
with registration. Otherwise registration becomes an exercise in futility.18
In Amerol v. Bagumbaran,19 we reversed the decision of the trial court. In
this case, the title was wrongfully registered in another person's name. An
implied trust was therefore created. This trustee was compelled by law to
reconvey property fraudulently acquired notwithstanding the irrevocability
of the torrens title.20
No clear specific contrary evidence was cited by the respondent appellate
court to justify the reversal of the lower court's findings. Thus, in this case,
between the factual findings of the trial court and the appellate court, those
of the trial court must prevail over that of the latter.26

In the present case, however, the facts belie the claim of ownership.
For several years, when the SIBLINGS OF CECILIO, namely, Macario,
Esperidiona Raymunda, and Celestina were living on the contested
premises, they regularly paid a sum of money, designated as "taxes" at first,
to the widow of Cecilio, and later, to his heirs.21 Why their payments were
never directly made to the Municipal Government of Muntinlupa when they
were intended as payments for "taxes" is difficult to square with their claim
of ownership. We are rather inclined to consider this fact as an admission of
non-ownership. And when we consider also that the petitioners HEIRS OF
CECILIO had individually paid to the municipal treasury the taxes
corresponding to the particular portions they were occupying,22 we can
readily see the superiority of the petitioners' position.
WHEREFORE, the petition is GRANTED We REVERSE and SET ASIDE the
decision rendered in CA-G.R. CV No. 04429, and we hereby REINSTATE the
decision of the then Court of First Instance of Rizal (Branch 28, Pasay City) in
Civil Case No. M-5276-P which ruled for the dismissal of the Complaint for
Cancellation of Titles and Reconveyance with Damages filed by the Heirs of
Macario, Esperidiona Raymunda, and Celestina, all surnamed CLAUDEL.
Costs against the private respondents.
SO ORDERED.

Renato Solema and Decimina Calvez, two of the respondents who derive
their right from the SIBLINGS OF CLAUDEL, bought a portion of the lot from
Felisa Claudel, one of the HEIRS OF CLAUDEL.23 The Calvezes should not be
paying for a lot that they already owned and if they did not acknowledge
Felisa as its owner.

In addition, before any of the SIBLINGS OF CECILIO could stay on any of the
portions of the property, they had to ask first the permission of Jose Claudel
again, one of the HEIRS OF CECILIO.24 In fact the only reason why any of the
heirs of SIBLINGS OF CECILIO could stay on the lot was because they were
allowed to do so by the HEIRS OF CECILIO.25

In view of the foregoing, we find that the appellate court committed a

reversible error in denigrating the transfer certificates of title of the
petitioners to the survey or subdivision plan proffered by the private
respondents. The Court generally recognizes the profundity of conclusions
and findings of facts reached by the trial court and hence sustains them on
appeal except for strong and cogent reasons inasmuch as the trial court is in
a better position to examine real evidence and observe the demeanor of
witnesses in a case.
FIRST DIVISION
[G.R. No. 144225. June 17, 2003]
SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO, SPOUSES
ARNULFO SAVELLANO and EDITHA B. SAVELLANO, DANTON D.
MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and ESTELA S. ESPIRITU
and ELIZABETH TUAZON, petitioners, vs. SPOUSES ARMANDO BORRAS and
ADELIA LOBATON BORRAS, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review assailing the Decision[1] of the Court of
Appeals dated 26 November 1999 affirming the decision[2] of the Regional
Trial Court of Bataan, Branch 4, in Civil Case No. DH-256-94. Petitioners also
question the Resolution of the Court of Appeals dated 26 July 2000 denying
petitioners motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters (Subject Land) in Barrio
Culis, Mabiga, Hermosa, Bataan is the subject of controversy in this case.
The registered owners of the Subject Land were petitioner spouses,
Godofredo Alfredo (Godofredo) and Carmen Limon Alfredo (Carmen). The
Subject Land is covered by Original Certificate of Title No. 284 (OCT No. 284)
issued to Godofredo and Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras
(Armando) and Adelia Lobaton Borras (Adelia), filed a complaint for specific
performance against Godofredo and Carmen before the Regional Trial Court
of Bataan, Branch 4. The case was docketed as Civil Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen
mortgaged the Subject Land for P7,000.00 with the Development Bank of
the Philippines (DBP). To pay the debt, Carmen and Godofredo sold the
Subject Land to Armando and Adelia for P15,000.00, the buyers to pay the
DBP loan and its accumulated interest, and the balance to be paid in cash to
the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the
loan to DBP which signed the release of mortgage and returned the owners
duplicate copy of OCT No. 284 to Godofredo and Carmen. Armando and
Adelia subsequently paid the balance of the purchase price of the Subject
Land for which Carmen issued a receipt dated 11 March 1970. Godofredo
and Carmen then delivered to Adelia the owners duplicate copy of OCT No.
284, with the document of cancellation of mortgage, official receipts of
realty tax payments, and tax declaration in the name of Godofredo.
Godofredo and Carmen introduced Armando and Adelia, as the new owners
of the Subject Land, to the Natanawans, the old tenants of the Subject Land.
Armando and Adelia then took possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had
entered the Subject Land and were cutting trees under instructions of
allegedly new owners of the Subject Land. Subsequently, Armando and
Adelia discovered that Godofredo and Carmen had re-sold portions of the
Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the
Register of Deeds of Bataan. Armando and Adelia discovered that
Godofredo and Carmen had secured an owners duplicate copy of OCT No.
284 after filing a petition in court for the issuance of a new copy. Godofredo
and Carmen claimed in their petition that they lost their owners duplicate
copy. Armando and Adelia wrote Godofredo and Carmen complaining about
their acts, but the latter did not reply. Thus, Armando and Adelia filed a
complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to
include the following persons as additional defendants: the spouses Arnulfo
Savellano and Editha B. Savellano, Danton D. Matawaran, the spouses Delfin
F. Espiritu, Jr. and Estela S. Espiritu, and Elizabeth Tuazon (Subsequent
Buyers). The Subsequent Buyers, who are also petitioners in this case,
purchased from Godofredo and Carmen the subdivided portions of the
Subject Land. The Register of Deeds of Bataan issued to the Subsequent
Buyers transfer certificates of title to the lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers
(collectively petitioners) argued that the action is unenforceable under the
Statute of Frauds. Petitioners pointed out that there is no written
instrument evidencing the alleged contract of sale over the Subject Land in
favor of Armando and Adelia. Petitioners objected to whatever parole
evidence Armando and Adelia introduced or offered on the alleged sale
unless the same was in writing and subscribed by Godofredo. Petitioners
asserted that the Subsequent Buyers were buyers in good faith and for
value. As counterclaim, petitioners sought payment of attorneys fees and
incidental expenses.
Trial then followed. Armando and Adelia presented the following witnesses:
Adelia, Jesus Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando
Natanawan, Tomas Natanawan, and Mildred Lobaton. Petitioners presented
two witnesses, Godofredo and Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando
and Adelia. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
plaintiffs, the spouses Adelia Lobaton Borras and Armando F. Borras, and
against the defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo, spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin
F. Espiritu, Jr. and Estela S. Espiritu, Danton D. Matawaran and Elizabeth
Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land
(covered by OCT No. 284) executed by the spouses Godofredo Alfredo and
Camen Limon Alfredo in favor of spouses Arnulfo Sabellano and Editha B.
Sabellano, spouses Delfin F. Espiritu, Danton D. Matawaran and Elizabeth
Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in
the names of spouses Arnulfo Sabellano and Editha B. Sabellano; Transfer
Certificates of Title Nos. T-163268 and 163272 in the names of spouses
Delfin F. Espiritu, Jr. and Estela S. Espiritu; Transfer Certificates of Title Nos.
T-163269 and T-163271 in the name of Danton D. Matawaran; and Transfer
Certificate of Title No. T-163270 in the name of Elizabeth Tuazon, as null and
void and that the Register of Deeds of Bataan is hereby ordered to cancel
said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to execute and deliver a good and valid Deed of Absolute Sale of the
disputed parcel of land (covered by OCT No. 284) in favor of the spouses
Adelia Lobaton Borras and Armando F. Borras within a period of ten (10)
days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to surrender their owners duplicate copy of OCT No. 284 issued to
them by virtue of the Order dated May 20, 1992 of the Regional Trial Court
of Bataan, Dinalupihan Branch, to the Registry of Deeds of Bataan within ten
(10) days from the finality of this decision, who, in turn, is directed to cancel
the same as there exists in the possession of herein plaintiffs of the owners
duplicate copy of said OCT No. 284 and, to restore and/or reinstate OCT No.
284 of the Register of Deeds of Bataan to its full force and effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon
Alfredo to restitute and/or return the amount of the respective purchase
prices and/or consideration of sale of the disputed parcels of land they sold
to their co-defendants within ten (10) days from the finality of this decision
with legal interest thereon from date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses
the sum of P20,000.00 as and for attorneys fees and litigation expenses; and
7. Ordering defendants to pay the costs of suit.
Defendants counterclaims are hereby dismissed for lack of merit.
SO ORDERED.[3]
Petitioners appealed to the Court of Appeals.
On 26 November 1999, the Court of Appeals issued its Decision affirming
the decision of the trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No.
DH-256-94 is hereby AFFIRMED in its entirety. Treble costs against the
defendants-appellants.
SO ORDERED.[4]
On 26 July 2000, the Court of Appeals denied petitioners motion for
reconsideration.

The Ruling of the Trial Court
The trial court ruled that there was a perfected contract of sale between the
spouses Godofredo and Carmen and the spouses Armando and Adelia. The
trial court found that all the elements of a contract of sale were present in
this case. The object of the sale was specifically identified as the 81,524-
square meter lot in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT
No. 284 issued by the Registry of Deeds of Bataan. The purchase price was
fixed at P15,000.00, with the buyers assuming to pay the sellers P7,000.00
DBP mortgage loan including its accumulated interest. The balance of the
purchase price was to be paid in cash to the sellers. The last payment of
P2,524.00 constituted the full settlement of the purchase price and this was
paid on 11 March 1970 as evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of
sale: (1) Godofredo and Carmen delivered to Armando and Adelia the
Subject Land; (2) Armando and Adelia treated as their own tenants the
tenants of Godofredo and Carmen; (3) Godofredo and Carmen turned over
to Armando and Adelia documents such as the owners duplicate copy of the
title of the Subject Land, tax declaration, and the receipts of realty tax
payments in the name of Godofredo; and (4) the DBP cancelled the
mortgage on the Subject Property upon payment of the loan of Godofredo
and Carmen. Moreover, the receipt of payment issued by Carmen served as
an acknowledgment, if not a ratification, of the verbal sale between the
sellers and the buyers. The trial court ruled that the Statute of Frauds is not
applicable because in this case the sale was perfected.
The trial court concluded that the Subsequent Buyers were not innocent
purchasers. Not one of the Subsequent Buyers testified in court on how
they purchased their respective lots. The Subsequent Buyers totally
depended on the testimony of Constancia Calonso (Calonso) to explain the
subsequent sale. Calonso, a broker, negotiated with Godofredo and Carmen
the sale of the Subject Land which Godofredo and Carmen subdivided so
they could sell anew portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The
trial court pointed out that Calonso did not inquire on the nature of the
tenancy of the Natanawans and on who owned the Subject Land. Instead,
she bought out the tenants for P150,000.00. The buy out was embodied in a
Kasunduan. Apolinario Natanawan (Apolinario) testified that he and his wife
accepted the money and signed the Kasunduan because Calonso and the
Subsequent Buyers threatened them with forcible ejectment. Calonso
brought Apolinario to the Agrarian Reform Office where he was asked to
produce the documents showing that Adelia is the owner of the Subject
Land. Since Apolinario could not produce the documents, the agrarian
officer told him that he would lose the case. Thus, Apolinario was
constrained to sign the Kasunduan and accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that she
saw an adverse claim on the title of the Subject Land when she registered
the deeds of sale in the names of the Subsequent Buyers. Calonso ignored
the adverse claim and proceeded with the registration of the deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and
Adelia. In justifying the award of attorneys fees, the trial court invoked
Article 2208 (2) of the Civil Code which allows a court to award attorneys
fees, including litigation expenses, when it is just and equitable to award the
same. The trial court ruled that Armando and Adelia are entitled to
attorneys fees since they were compelled to file this case due to petitioners
refusal to heed their just and valid demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well
supported by the evidence. Based on these findings, the Court of Appeals
also concluded that there was a perfected contract of sale and the
Subsequent Buyers were not innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March
1970 is sufficient proof that Godofredo and Carmen sold the Subject Land to
Armando and Adelia upon payment of the balance of the purchase price.
The Court of Appeals found the recitals in the receipt as sufficient to serve
as the memorandum or note as a writing under the Statute of Frauds.[5]
The Court of Appeals then reiterated the ruling of the trial court that the
Statute of Frauds does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of
Armando and Adelia, Mildred Lobaton, who explained why the title to the
Subject Land was not in the name of Armando and Adelia. Lobaton testified
that Godofredo was then busy preparing to leave for Davao. Godofredo
promised that he would sign all the papers once they were ready. Since
Armando and Adelia were close to the family of Carmen, they trusted
Godofredo and Carmen to honor their commitment. Armando and Adelia
had no reason to believe that their contract of sale was not perfected or
validly executed considering that they had received the duplicate copy of
OCT No. 284 and other relevant documents. Moreover, they had taken
physical possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only
Carmen signed the receipt dated 11 March 1970. Citing Felipe v. Heirs of
Maximo Aldon,[6] the appellate court ruled that a contract of sale made by
the wife without the husbands consent is not void but merely voidable. The
Court of Appeals further declared that the sale in this case binds the
conjugal partnership even if only the wife signed the receipt because the
proceeds of the sale were used for the benefit of the conjugal partnership.
The appellate court based this conclusion on Article 161[7] of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are
buyers in good faith because they had constructive notice of the adverse
claim of Armando and Adelia. Calonso, who brokered the subsequent sale,
testified that when she registered the subsequent deeds of sale, the adverse
claim of Armando and Adelia was already annotated on the title of the
Subject Land. The Court of Appeals believed that the act of Calonso and the
Subsequent Buyers in forcibly ejecting the Natanawans from the Subject
Land buttresses the conclusion that the second sale was tainted with bad
faith from the very beginning.
Finally, the Court of Appeals noted that the issue of prescription was not
raised in the Answer. Nonetheless, the appellate court explained that since
this action is actually based on fraud, the prescriptive period is four years,
with the period starting to run only from the date of the discovery of the
fraud. Armando and Adelia discovered the fraudulent sale of the Subject
Land only in January 1994. Armando and Adelia lost no time in writing a
letter to Godofredo and Carmen on 2 February 1994 and filed this case on 7
March 1994. Plainly, Armando and Adelia did not sleep on their rights or
lose their rights by prescription.
The Court of Appeals sustained the award of attorneys fees and imposed
treble costs on petitioners.
The Issues
Petitioners raise the following issues:
I
Whether the alleged sale of the Subject Land in favor of Armando and
Adelia is valid and enforceable, where (1) it was orally entered into and not
in writing; (2) Carmen did not obtain the consent and authority of her
husband, Godofredo, who was the sole owner of the Subject Land in whose
name the title thereto (OCT No. 284) was issued; and (3) it was entered into
during the 25-year prohibitive period for alienating the Subject Land
without the approval of the Secretary of Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought
after 24 years from its alleged perfection had been barred by prescription
and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over
the portions of the Subject Land issued to the Subsequent Buyers, innocent
purchasers in good faith and for value whose individual titles to their
respective lots are absolute and indefeasible, are valid.
IV
Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as
attorneys fees and litigation expenses and the treble costs, where the claim
of Armando and Adelia is clearly unfounded and baseless.
V
Whether petitioners are entitled to the counterclaim for attorneys fees and
litigation expenses, where they have sustained such expenses by reason of
institution of a clearly malicious and unfounded action by Armando and
Adelia.[8]
The Courts Ruling
The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews only
errors of law and not errors of facts.[9] The factual findings of the appellate
court are generally binding on this Court.[10] This applies with greater force
when both the trial court and the Court of Appeals are in complete
agreement on their factual findings.[11] In this case, there is no reason to
deviate from the findings of the lower courts. The facts relied upon by the
trial and appellate courts are borne out by the record. We agree with the
conclusions drawn by the lower courts from these facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the
spouses Armando and Adelia was a perfected contract. A contract is
perfected once there is consent of the contracting parties on the object
certain and on the cause of the obligation.[12] In the instant case, the object
of the sale is the Subject Land, and the price certain is P15,000.00. The trial
and appellate courts found that there was a meeting of the minds on the
sale of the Subject Land and on the purchase price of P15,000.00. This is a
finding of fact that is binding on this Court. We find no reason to disturb this
finding since it is supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated
because the sellers and buyers have performed their respective obligations
under the contract. In a contract of sale, the seller obligates himself to
transfer the ownership of the determinate thing sold, and to deliver the
same, to the buyer who obligates himself to pay a price certain to the
seller.[13] In the instant case, Godofredo and Carmen delivered the Subject
Land to Armando and Adelia, placing the latter in actual physical possession
of the Subject Land. This physical delivery of the Subject Land also
constituted a transfer of ownership of the Subject Land to Armando and
Adelia.[14] Ownership of the thing sold is transferred to the vendee upon its
actual or constructive delivery.[15] Godofredo and Carmen also turned over
to Armando and Adelia the documents of ownership to the Subject Land,
namely the owners duplicate copy of OCT No. 284, the tax declaration and
the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as
evidenced by the receipt dated 11 March 1970 issued by Carmen. Armando
and Adelia fulfilled their obligation to provide the P7,000.00 to pay the DBP
loan of Godofredo and Carmen, and to pay the latter the balance of
P8,000.00 in cash. The P2,524.00 paid under the receipt dated 11 March
1970 was the last installment to settle fully the purchase price. Indeed,
upon payment to DBP of the P7,000.00 and the accumulated interests, the
DBP cancelled the mortgage on the Subject Land and returned the owners
duplicate copy of OCT No. 284 to Godofredo and Carmen.
The trial and appellate courts correctly refused to apply the Statute of
Frauds to this case. The Statute of Frauds[16] provides that a contract for
the sale of real property shall be unenforceable unless the contract or some
note or memorandum of the sale is in writing and subscribed by the party
charged or his agent. The existence of the receipt dated 11 March 1970,
which is a memorandum of the sale, removes the transaction from the
provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to
contracts either partially or totally performed.[17] Thus, where one party
has performed ones obligation, oral evidence will be admitted to prove the
agreement.[18] In the instant case, the parties have consummated the sale
of the Subject Land, with both sellers and buyers performing their
respective obligations under the contract of sale. In addition, a contract that
violates the Statute of Frauds is ratified by the acceptance of benefits under
the contract.[19] Godofredo and Carmen benefited from the contract
because they paid their DBP loan and secured the cancellation of their
mortgage using the money given by Armando and Adelia. Godofredo and
Carmen also accepted payment of the balance of the purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the
existence of the verbal contract of sale because they have performed their
obligations, and have accepted benefits, under the verbal contract. [20]
Armando and Adelia have also performed their obligations under the verbal
contract. Clearly, both the sellers and the buyers have consummated the
verbal contract of sale of the Subject Land. The Statute of Frauds was
enacted to prevent fraud.[21] This law cannot be used to advance the very
evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to
Armando and Adelia is void on two grounds. First, Carmen sold the Subject
Land without the marital consent of Godofredo. Second, the sale was made
during the 25-year period that the law prohibits the alienation of land
grants without the approval of the Secretary of Agriculture and Natural
Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any
alienation or encumbrance made by the husband of the conjugal
partnership property without the consent of the wife is void. However,
when the sale is made before the effectivity of the Family Code, the
applicable law is the Civil Code.[22]
Article 173 of the Civil Code provides that the disposition of conjugal
property without the wifes consent is not void but merely voidable. Article
173 reads:
The wife may, during the marriage, and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of
the husband entered into without her consent, when such consent is
required, or any act or contract of the husband which tends to defraud her
or impair her interest in the conjugal partnership property. Should the wife
fail to exercise this right, she or her heirs, after the dissolution of the
marriage, may demand the value of property fraudulently alienated by the
husband.
In Felipe v. Aldon,[23] we applied Article 173 in a case where the wife sold
some parcels of land belonging to the conjugal partnership without the
consent of the husband. We ruled that the contract of sale was voidable
subject to annulment by the husband. Following petitioners argument that
Carmen sold the land to Armando and Adelia without the consent of
Carmens husband, the sale would only be voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts
are susceptible of ratification.[24] Godofredo ratified the sale when he
introduced Armando and Adelia to his tenants as the new owners of the
Subject Land. The trial court noted that Godofredo failed to deny
categorically on the witness stand the claim of the complainants witnesses
that Godofredo introduced Armando and Adelia as the new landlords of the
tenants.[25] That Godofredo and Carmen allowed Armando and Adelia to
enjoy possession of the Subject Land for 24 years is formidable proof of
Godofredos acquiescence to the sale. If the sale was truly unauthorized,
then Godofredo should have filed an action to annul the sale. He did not.
The prescriptive period to annul the sale has long lapsed. Godofredos
conduct belies his claim that his wife sold the Subject Land without his
consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to
pay their debt with the DBP. We agree with the Court of Appeals that the
sale redounded to the benefit of the conjugal partnership. Article 161 of the
Civil Code provides that the conjugal partnership shall be liable for debts
and obligations contracted by the wife for the benefit of the conjugal
partnership. Hence, even if Carmen sold the land without the consent of her
husband, the sale still binds the conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of
the Subject Land to Armando and Adelia as shown by this portion of Adelias
testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me.[26]
Petitioners raise this factual issue for the first time. The Court of Appeals
could have passed upon this issue had petitioners raised this earlier. At any
rate, the cited testimony of Adelia does not convincingly prove that
Godofredo and Carmen did not deliver the Subject Land to Armando and
Adelia. Adelias cited testimony must be examined in context not only with
her entire testimony but also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the
Subject Land from Julie Limon (Julie), her classmate in college and the sister
of Carmen. Earlier, Adelias own sister had secured the title from the father
of Carmen. However, Adelias sister, who was about to leave for the United
States, gave the title to Julie because of the absence of the other
documents. Adelias sister told Adelia to secure the title from Julie, and this
was how Adelia obtained the title from Julie.
It is not necessary that the seller himself deliver the title of the property to
the buyer because the thing sold is understood as delivered when it is
placed in the control and possession of the vendee.[27] To repeat,
Godofredo and Carmen themselves introduced the Natanawans, their
tenants, to Armando and Adelia as the new owners of the Subject Land.
From then on, Armando and Adelia acted as the landlords of the
Natanawans. Obviously, Godofredo and Carmen themselves placed control
and possession of the Subject Land in the hands of Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of
Agriculture and Natural Resources to nullify the sale. Petitioners never
raised this issue before the trial court or the Court of Appeals. Litigants
cannot raise an issue for the first time on appeal, as this would contravene
the basic rules of fair play, justice and due process.[28] However, we will
address this new issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the
Secretary did not approve the sale, which was made within 25 years from
the issuance of the homestead title. Section 118 of the Public Land Act
(Commonwealth Act No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or
institutions or legally constituted banking corporation, lands acquired under
free patent or homestead provisions shall not be subject to encumbrance or
alienation from the date of the approval of the application and for a term of
five years from and after the date of the issuance of the patent or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and
before twenty-five years after the issuance of title shall be valid without the
approval of the Secretary of Agriculture and Commerce, which approval
shall not be denied except on constitutional and legal grounds.
A grantee or homesteader is prohibited from alienating to a private
individual a land grant within five years from the time that the patent or
grant is issued.[29] A violation of this prohibition renders a sale void.[30]
This prohibition, however, expires on the fifth year. From then on until the
next 20 years[31] the land grant may be alienated provided the Secretary of
Agriculture and Natural Resources approves the alienation. The Secretary is
required to approve the alienation unless there are constitutional and legal
grounds to deny the approval. In this case, there are no apparent
constitutional or legal grounds for the Secretary to disapprove the sale of
the Subject Land.
The failure to secure the approval of the Secretary does not ipso facto make
a sale void.[32] The absence of approval by the Secretary does not nullify a
sale made after the expiration of the 5-year period, for in such event the
requirement of Section 118 of the Public Land Act becomes merely
directory[33] or a formality.[34] The approval may be secured later,
producing the effect of ratifying and adopting the transaction as if the sale
had been previously authorized.[35] As held in Evangelista v. Montano:[36]
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins
that the approval by the Department Secretary "shall not be denied except
on constitutional and legal grounds." There being no allegation that there
were constitutional or legal impediments to the sales, and no pretense that
if the sales had been submitted to the Secretary concerned they would have
been disapproved, approval was a ministerial duty, to be had as a matter of
course and demandable if refused. For this reason, and if necessary,
approval may now be applied for and its effect will be to ratify and adopt
the transactions as if they had been previously authorized. (Emphasis
supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is
captioned as one for Specific Performance. In reality, the ultimate relief
sought by Armando and Adelia is the reconveyance to them of the Subject
Land. An action for reconveyance is one that seeks to transfer property,
wrongfully registered by another, to its rightful and legal owner.[37] The
body of the pleading or complaint determines the nature of an action, not
its title or heading.[38] Thus, the present action should be treated as one for
reconveyance.[39]
Article 1456 of the Civil Code provides that a person acquiring property
through fraud becomes by operation of law a trustee of an implied trust for
the benefit of the real owner of the property. The presence of fraud in this
case created an implied trust in favor of Armando and Adelia. This gives
Armando and Adelia the right to seek reconveyance of the property from
the Subsequent Buyers.[40]
To determine when the prescriptive period commenced in an action for
reconveyance, plaintiffs possession of the disputed property is material. An
action for reconveyance based on an implied trust prescribes in ten
years.[41] The ten-year prescriptive period applies only if there is an actual
need to reconvey the property as when the plaintiff is not in possession of
the property.[42] However, if the plaintiff, as the real owner of the property
also remains in possession of the property, the prescriptive period to
recover title and possession of the property does not run against him.[43] In
such a case, an action for reconveyance, if nonetheless filed, would be in
the nature of a suit for quieting of title, an action that is imprescriptible.[44]
In this case, the appellate court resolved the issue of prescription by ruling
that the action should prescribe four years from discovery of the fraud. We
must correct this erroneous application of the four-year prescriptive period.
In Caro v. Court of Appeals,[45] we explained why an action for
reconveyance based on an implied trust should prescribe in ten years. In
that case, the appellate court also erroneously applied the four-year
prescriptive period. We declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R.
No. L-33261, September 30, 1987,154 SCRA 396 illuminated what used to be
a gray area on the prescriptive period for an action to reconvey the title to
real property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the
effectivity of the new Civil Code, the old Code of Civil Procedure (Act No.
190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the
recovery of real property can only be brought within the following periods
after the right of action accrues:
xxx xxx xxx
3. Within four years: xxx An action for relief on the ground of fraud, but the
right of action in such case shall not be deemed to have accrued until the
discovery of the fraud;
xxx xxx xxx
In contrast, under the present Civil Code, we find that just as an implied or
constructive trust is an offspring of the law (Art. 1456, Civil Code), so is the
corresponding obligation to reconvey the property and the title thereto in
favor of the true owner. In this context, and vis-a-vis prescription, Article
1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from
the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxxxxxxxx
(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust must
perforce prescribe in ten years and not otherwise. A long line of decisions of
this Court, and of very recent vintage at that, illustrates this rule.
Undoubtedly, it is now well-settled that an action for reconveyance based
on an implied or constructive trust prescribes in ten years from the issuance
of the Torrens title over the property. The only discordant note, it seems, is
Balbin vs. Medalla which states that the prescriptive period for a
reconveyance action is four years. However, this variance can be explained
by the erroneous reliance on Gerona vs. de Guzman. But in Gerona, the
fraud was discovered on June 25,1948, hence Section 43(3) of Act No. 190,
was applied, the new Civil Code not coming into effect until August 30, 1950
as mentioned earlier. It must be stressed, at this juncture, that article 1144
and article 1456, are new provisions. They have no counterparts in the old
Civil Code or in the old Code of Civil Procedure, the latter being then
resorted to as legal basis of the four-year prescriptive period for an action
for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of
Presidential Decree No. 1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his
legal and equitable remedies against the parties to such fraud without
prejudice, however, to the rights of any innocent holder of the decree of
registration on the original petition or application, xxx
This provision should be read in conjunction with Article 1456 of the Civil
Code, which provides:
Article 1456. If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes.
The law thereby creates the obligation of the trustee to reconvey the
property and the title thereto in favor of the true owner. Correlating Section
53, paragraph 3 of Presidential Decree No. 1529 and Article 1456 of the Civil
Code with Article 1144(2) of the Civil Code, supra, the prescriptive period
for the reconveyance of fraudulently registered real property is ten (10)
years reckoned from the date of the issuance of the certificate of title xxx
(Emphasis supplied)[46]
Following Caro, we have consistently held that an action for reconveyance
based on an implied trust prescribes in ten years.[47] We went further by
specifying the reference point of the ten-year prescriptive period as the
date of the registration of the deed or the issuance of the title.[48]
Had Armando and Adelia remained in possession of the Subject Land, their
action for reconveyance, in effect an action to quiet title to property, would
not be subject to prescription. Prescription does not run against the plaintiff
in actual possession of the disputed land because such plaintiff has a right to
wait until his possession is disturbed or his title is questioned before
initiating an action to vindicate his right.[49] His undisturbed possession
gives him the continuing right to seek the aid of a court of equity to
determine the nature of the adverse claim of a third party and its effect on
his title.[50]
Armando and Adelia lost possession of the Subject Land when the
Subsequent Buyers forcibly drove away from the Subject Land the
Natanawans, the tenants of Armando and Adelia.[51] This created an actual
need for Armando and Adelia to seek reconveyance of the Subject Land. The
statute of limitation becomes relevant in this case. The ten-year prescriptive
period started to run from the date the Subsequent Buyers registered their
deeds of sale with the Register of Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land
on 22 February 1994, the date of execution of their deeds of sale. The
Register of Deeds issued the transfer certificates of title to the Subsequent
Buyers on 24 February 1994. Armando and Adelia filed the Complaint on 7
March 1994. Clearly, prescription could not have set in since the case was
filed at the early stage of the ten-year prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure
or neglect, for an unreasonable time, to do that which, by the exercise of
due diligence, could or should have been done earlier.[52] It is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it.[53] Armando and Adelia discovered in January 1994
the subsequent sale of the Subject Land and they filed this case on 7 March
1994. Plainly, Armando and Adelia did not sleep on their rights.
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because the
Subsequent Buyers, the co-petitioners of Godofredo and Carmen,
purchased and registered the Subject Land in good faith. Petitioners argue
that the testimony of Calonso, the person who brokered the second sale,
should not prejudice the Subsequent Buyers. There is no evidence that
Calonso was the agent of the Subsequent Buyers and that she
communicated to them what she knew about the adverse claim and the
prior sale. Petitioners assert that the adverse claim registered by Armando
and Adelia has no legal basis to render defective the transfer of title to the
Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject
Land to Armando and Adelia. The settled rule is when ownership or title
passes to the buyer, the seller ceases to have any title to transfer to any
third person.[54] If the seller sells the same land to another, the second
buyer who has actual or constructive knowledge of the prior sale cannot be
a registrant in good faith.[55] Such second buyer cannot defeat the first
buyers title.[56] In case a title is issued to the second buyer, the first buyer
may seek reconveyance of the property subject of the sale.[57]
Thus, to merit protection under the second paragraph of Article 1544[58] of
the Civil Code, the second buyer must act in good faith in registering the
deed.[59] In this case, the Subsequent Buyers good faith hinges on whether
they had knowledge of the previous sale. Petitioners do not dispute that
Armando and Adelia registered their adverse claim with the Registry of
Deeds of Bataan on 8 February 1994. The Subsequent Buyers purchased
their respective lots only on 22 February 1994 as shown by the date of their
deeds of sale. Consequently, the adverse claim registered prior to the
second sale charged the Subsequent Buyers with constructive notice of the
defect in the title of the sellers,[60] Godofredo and Carmen.
this requirement.[65] We agree with the trial court that if it were not for
petitioners unjustified refusal to heed the just and valid demands of
Armando and Adelia, the latter would not have been compelled to file this
action.
The Court of Appeals echoed the trial courts condemnation of petitioners
fraudulent maneuverings in securing the second sale of the Subject Land to
the Subsequent Buyers. We will also not turn a blind eye on petitioners
brazen tactics. Thus, we uphold the treble costs imposed by the Court of
Appeals on petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is
AFFIRMED. Treble costs against petitioners.
SO ORDERED.

It is immaterial whether Calonso, the broker of the second sale,

communicated to the Subsequent Buyers the existence of the adverse
claim. The registration of the adverse claim on 8 February 1994 constituted,
by operation of law, notice to the whole world.[61] From that date onwards,
the Subsequent Buyers were deemed to have constructive notice of the
adverse claim of Armando and Adelia. When the Subsequent Buyers
purchased portions of the Subject Land on 22 February 1994, they already
had constructive notice of the adverse claim registered earlier.[62] Thus, the
Subsequent Buyers were not buyers in good faith when they purchased
their lots on 22 February 1994. They were also not registrants in good faith
when they registered their deeds of sale with the Registry of Deeds on 24
February 1994.

The Subsequent Buyers individual titles to their respective lots are not
absolutely indefeasible. The defense of indefeasibility of the Torrens Title
does not extend to a transferee who takes the certificate of title with notice
of a flaw in his title.[63] The principle of indefeasibility of title does not
apply where fraud attended the issuance of the titles as in this case.[64]

Attorneys Fees and Costs

We sustain the award of attorneys fees. The decision of the court must state
the grounds for the award of attorneys fees. The trial court complied with
Republic of the Philippines Was this document, executed and signed by the petitioner's sales
SUPREME COURT representative, a perfected contract of sale, binding upon the petitioner,
Manila breach of which would entitle the private respondent to damages and
attorney's fees? The trial court and the Court of Appeals took the
FIRST DIVISION affirmative view. The petitioner disagrees. Hence, this petition for review on
certiorari.

The antecedents as disclosed in the decisions of both the trial court and the
G.R. No. L-116650 May 23, 1995 Court of Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc.
(hereinafter Toyota) and respondent Luna L. Sosa (hereinafter Sosa) are as
TOYOTA SHAW, INC., petitioner, follows. Sometime in June of 1989, Luna L. Sosa wanted to purchase a
vs. Toyota Lite Ace. It was then a seller's market and Sosa had difficulty finding
COURT OF APPEALS and LUNA L. SOSA, respondents. a dealer with an available unit for sale. But upon contacting Toyota Shaw,
Inc., he was told that there was an available unit. So on 14 June 1989, Sosa
and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig,
DAVIDE, JR., J.: Metro Manila. There they met Popong Bernardo, a sales representative of
Toyota.
At the heart of the present controversy is the document marked Exhibit "A"
1 for the private respondent, which was signed by a sales representative of Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17
Toyota Shaw, Inc. named Popong Bernardo. The document reads as follows: June 1989 because he, his family, and a balikbayan guest would use it on 18
June 1989 to go to Marinduque, his home province, where he would
4 June 1989 celebrate his birthday on the 19th of June. He added that if he does not
arrive in his hometown with the new car, he would become a "laughing
AGREEMENTS BETWEEN MR. SOSA stock." Bernardo assured Sosa that a unit would be ready for pick up at
& POPONG BERNARDO OF TOYOTA 10:00 a.m. on 17 June 1989. Bernardo then signed the aforequoted
SHAW, INC. "Agreements Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It
was also agreed upon by the parties that the balance of the purchase price
1. all necessary documents will be submitted to TOYOTA SHAW, INC. would be paid by credit financing through B.A. Finance, and for this Gilbert,
(POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from the on behalf of his father, signed the documents of Toyota and B.A. Finance
Province (Marinduque) where the unit will be used on the 19th of June. pertaining to the application for financing.

2. the downpayment of P100,000.00 will be paid by Mr. Sosa on June The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the
15, 1989. downpayment of P100,000.00. They met Bernardo who then accomplished
a printed Vehicle Sales Proposal (VSP) No. 928,2 on which Gilbert signed
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and under the subheading CONFORME. This document shows that the
released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m. customer's name is "MR. LUNA SOSA" with home address at No. 2316 Guijo
Street, United Paraaque II; that the model series of the vehicle is a "Lite
Very truly yours, Ace 1500" described as "4 Dr minibus"; that payment is by "installment," to
be financed by "B.A.," 3 with the initial cash outlay of P100,000.00 broken
(Sgd.) POPONG BERNARDO. down as follows:
a) and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces
provided for "Delivery Terms" were not filled-up. It also contains the
downpayment following pertinent provisions:

CONDITIONS OF SALES

P 53,148.00 1. This sale is subject to availability of unit.

b) 2. Stated Price is subject to change without prior notice, Price

prevailing and in effect at time of selling will apply. . . .
insurance
Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved
the VSP.

P 13,970.00 On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him
that the vehicle would not be ready for pick up at 10:00 a.m. as previously
c) agreed upon but at 2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert
met Bernardo at the latter's office. According to Sosa, Bernardo informed
BLT registration fee them that the Lite Ace was being readied for delivery. After waiting for
about an hour, Bernardo told them that the car could not be delivered
because "nasulot ang unit ng ibang malakas."

P 1,067.00 Toyota contends, however, that the Lite Ace was not delivered to Sosa
because of the disapproval by B.A. Finance of the credit financing
CHMO fee application of Sosa. It further alleged that a particular unit had already been
reserved and earmarked for Sosa but could not be released due to the
uncertainty of payment of the balance of the purchase price. Toyota then
gave Sosa the option to purchase the unit by paying the full purchase price
P 2,715.00 in cash but Sosa refused.

service fee After it became clear that the Lite Ace would not be delivered to him, Sosa
asked that his downpayment be refunded. Toyota did so on the very same
day by issuing a Far East Bank check for the full amount of P100,000.00, 4
P 500.00 the receipt of which was shown by a check voucher of Toyota,5 which Sosa
accessories signed with the reservation, "without prejudice to our future claims for
damages."

Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June
P 29,000.00 1989 and signed by him, he demanded the refund, within five days from
receipt, of the downpayment of P100,000.00 plus interest from the time he
paid it and the payment of damages with a warning that in case of Toyota's
failure to do so he would be constrained to take legal action. 6 The second,
dated 4 November 1989 and signed by M. O. Caballes, Sosa's counsel,
demanded one million pesos representing interest and damages, again, with
a warning that legal action would be taken if payment was not made within
three days.7 Toyota's counsel answered through a letter dated 27
November 1989 8 refusing to accede to the demands of Sosa. But even
before this answer was made and received by Sosa, the latter filed on 20
November 1989 with Branch 38 of the Regional Trial Court (RTC) of
Marinduque a complaint against Toyota for damages under Articles 19 and
21 of the Civil Code in the total amount of P1,230,000.00.9 He alleges, inter
alia, that:
9. As a result of defendant's failure and/or refusal to deliver the
vehicle to plaintiff, plaintiff suffered embarrassment, humiliation, ridicule,
mental anguish and sleepless nights because: (i) he and his family were
constrained to take the public transportation from Manila to Lucena City on
their way to Marinduque; (ii) his balikbayan-guest canceled his scheduled
first visit to Marinduque in order to avoid the inconvenience of taking public
transportation; and (iii) his relatives, friends, neighbors and other
provincemates, continuously irked him about "his Brand-New Toyota Lite
Ace that never was." Under the circumstances, defendant should be
made liable to the plaintiff for moral damages in the amount of One Million
Pesos (P1,000,000.00). 10
In its answer to the complaint, Toyota alleged that no sale was entered into
between it and Sosa, that Bernardo had no authority to sign Exhibit "A" for
and in its behalf, and that Bernardo signed Exhibit "A" in his personal
capacity. As special and affirmative defenses, it alleged that: the VSP did not
state date of delivery; Sosa had not completed the documents required by
the financing company, and as a matter of policy, the vehicle could not and
would not be released prior to full compliance with financing requirements,
submission of all documents, and execution of the sales agreement/invoice;
the P100,000.00 was returned to and received by Sosa; the venue was
improperly laid; and Sosa did not have a sufficient cause of action against it.
It also interposed compulsory counterclaims.
After trial on the issues agreed upon during the pre-trial session, 11 the trial
court rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled
that Exhibit "A," the "AGREEMENTS BETWEEN MR. SOSA AND POPONG
BERNARDO," was a valid perfected contract of sale between Sosa and
Toyota which bound Toyota to deliver the vehicle to Sosa, and further
agreed with Sosa that Toyota acted in bad faith in selling to another the unit
already reserved for him.
As to Toyota's contention that Bernardo had no authority to bind it through
Exhibit "A," the trial court held that the extent of Bernardo's authority "was
not made known to plaintiff," for as testified to by Quirante, "they do not
volunteer any information as to the company's sales policy and guidelines
because they are internal matters." 13 Moreover, "[f]rom the beginning of
the transaction up to its consummation when the downpayment was made
by the plaintiff, the defendants had made known to the plaintiff the
impression that Popong Bernardo is an authorized sales executive as it
permitted the latter to do acts within the scope of an apparent authority
holding him out to the public as possessing power to do these acts." 14
Bernardo then "was an agent of the defendant Toyota Shaw, Inc. and hence
bound the defendants." 15
The court further declared that "Luna Sosa proved his social standing in the
community and suffered besmirched reputation, wounded feelings and
sleepless nights for which he ought to be compensated." 16 Accordingly, it
disposed as follows:
WHEREFORE, viewed from the above findings, judgment is hereby rendered
in favor of the plaintiff and against the defendant:
1. ordering the defendant to pay to the plaintiff the sum of P75,000.00
for moral damages;
2. ordering the defendant to pay the plaintiff the sum of P10,000.00
for exemplary damages;
3. ordering the defendant to pay the sum of P30,000.00 attorney's
fees plus P2,000.00 lawyer's transportation fare per trip in attending to the
hearing of this case;
4. ordering the defendant to pay the plaintiff the sum of P2,000.00
transportation fare per trip of the plaintiff in attending the hearing of this
case; and

5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to the Court of
Appeals. The case was docketed as CA-G.R. CV No. 40043. In its decision
promulgated on 29 July 1994,17 the Court of Appeals affirmed in toto the
appealed decision.
Toyota now comes before this Court via this petition and raises the core
issue stated at the beginning of the ponencia and also the following related
issues: (a) whether or not the standard VSP was the true and documented
understanding of the parties which would have led to the ultimate contract
of sale, (b) whether or not Sosa has any legal and demandable right to the
delivery of the vehicle despite the non-payment of the consideration and
the non-approval of his credit application by B.A. Finance, (c) whether or
not Toyota acted in good faith when it did not release the vehicle to Sosa,
and (d) whether or not Toyota may be held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the conclusion
that Exhibit "A" is a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed perfected:
Art. 1475. The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the contract and
upon the price.
From that moment, the parties may reciprocally demand performance,
subject to the provisions of the law governing the form of contracts.
What is clear from Exhibit "A" is not what the trial court and the Court of
Appeals appear to see. It is not a contract of sale. No obligation on the part
of Toyota to transfer ownership of a determinate thing to Sosa and no
correlative obligation on the part of the latter to pay therefor a price certain
appears therein. The provision on the downpayment of P100,000.00 made
no specific reference to a sale of a vehicle. If it was intended for a contract
of sale, it could only refer to a sale on installment basis, as the VSP executed
the following day confirmed. But nothing was mentioned about the full
purchase price and the manner the installments were to be paid.
This Court had already ruled that a definite agreement on the manner of
payment of the price is an essential element in the formation of a binding
and enforceable contract of sale. 18 This is so because the agreement as to
the manner of payment goes into the price such that a disagreement on the
manner of payment is tantamount to a failure to agree on the price.
Definiteness as to the price is an essential element of a binding agreement
to sell personal property. 19
Moreover, Exhibit "A" shows the absence of a meeting of minds between
Toyota and Sosa. For one thing, Sosa did not even sign it. For another, Sosa
was well aware from its title, written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG BERNARDO OF TOYOTA
SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo and that the
latter did not misrepresent that he had the authority to sell any Toyota
vehicle. He knew that Bernardo was only a sales representative of Toyota
and hence a mere agent of the latter. It was incumbent upon Sosa to act
with ordinary prudence and reasonable diligence to know the extent of
Bernardo's authority as an
agent20 in respect of contracts to sell Toyota's vehicles. A person dealing
with an agent is put upon inquiry and must discover upon his peril the
authority of the agent.21
At the most, Exhibit "A" may be considered as part of the initial phase of the
generation or negotiation stage of a contract of sale. There are three stages
in the contract of sale, namely:
(a) preparation, conception, or generation, which is the period of
negotiation and bargaining, ending at the moment of agreement of the
parties;
(b) perfection 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.22
The second phase of the generation or negotiation stage in this case was the
execution of the VSP. It must be emphasized that thereunder, the
downpayment of the purchase price was P53,148.00 while the balance to be
paid on installment should be financed by B.A. Finance Corporation. It is, of
course, to be assumed that B.A. Finance Corp. was acceptable to Toyota,
otherwise it should not have mentioned B.A. Finance in the VSP.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as
amended by P.D. No. 1454 and P.D. No. 1793, as "corporations or
partnerships, except those regulated by the Central Bank of the Philippines,
the Insurance Commission and the Cooperatives Administration Office,
which are primarily organized for the purpose of extending credit facilities
to consumers and to industrial, commercial, or agricultural enterprises,
either by discounting or factoring commercial papers or accounts
receivables, or by buying and selling contracts, leases, chattel mortgages, or
other evidence of indebtedness, or by leasing of motor vehicles, heavy
equipment and industrial machinery, business and office machines and
equipment, appliances and other movable property." 23
Accordingly, in a sale on installment basis which is financed by a financing
company, three parties are thus involved: the buyer who executes a note or
notes for the unpaid balance of the price of the thing purchased on
installment, the seller who assigns the notes or discounts them with a
financing company, and the financing company which is subrogated in the
place of the seller, as the creditor of the installment buyer. 24 Since B.A.
Finance did not approve Sosa's application, there was then no meeting of
minds on the sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance disapproved
Sosa's application for which reason it suggested to Sosa that he pay the full
purchase price. When the latter refused, Toyota cancelled the VSP and
returned to him his P100,000.00. Sosa's version that the VSP was cancelled
because, according to Bernardo, the vehicle was delivered to another who
was "mas malakas" does not inspire belief and was obviously a delayed
afterthought. It is claimed that Bernardo said, "Pasensiya kayo, nasulot ang
unit ng ibang malakas," while the Sosas had already been waiting for an
hour for the delivery of the vehicle in the afternoon of 17 June 1989.
However, in paragraph 7 of his complaint, Sosa solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning, defendant's sales
representative, Mr. Popong Bernardo, called plaintiff's house and informed
the plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a.m.
of June 17, 1989 but at 2:00 p.m. of that day instead. Plaintiff and his son
went to defendant's office on June 17 1989 at 2:00 p.m. in order to pick-up
the vehicle but the defendant for reasons known only to its representatives,
refused and/or failed to release the vehicle to the plaintiff. Plaintiff
demanded for an explanation, but nothing was given; . . . (Emphasis
supplied). 25
The VSP was a mere proposal which was aborted in lieu of subsequent
events. It follows that the VSP created no demandable right in favor of Sosa
for the delivery of the vehicle to him, and its non-delivery did not cause any
legally indemnifiable injury.
The award then of moral and exemplary damages and attorney's fees and
costs of suit is without legal basis. Besides, the only ground upon which Sosa
claimed moral damages is that since it was known to his friends,
townmates, and relatives that he was buying a Toyota Lite Ace which they
expected to see on his birthday, he suffered humiliation, shame, and
sleepless nights when the van was not delivered. The van became the
subject matter of talks during his celebration that he may not have paid for
it, and this created an impression against his business standing and
reputation. At the bottom of this claim is nothing but misplaced pride and
ego. He should not have announced his plan to buy a Toyota Lite Ace
knowing that he might not be able to pay the full purchase price. It was he
who brought embarrassment upon himself by bragging about a thing which
he did not own yet.

Since Sosa is not entitled to moral damages and there being no award for
temperate, liquidated, or compensatory damages, he is likewise not entitled
to exemplary damages. Under Article 2229 of the Civil Code, exemplary or
corrective damages are imposed by way of example or correction for the
public good, in addition to moral, temperate, liquidated, or compensatory
damages.

Also, it is settled that for attorney's fees to be granted, the court must
explicitly state in the body of the decision, and not only in the dispositive
portion thereof, the legal reason for the award of attorney's fees. 26 No
such explicit determination thereon was made in the body of the decision of
the trial court. No reason thus exists for such an award.

WHEREFORE, the instant petition is GRANTED. The challenged decision of

the Court of Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of
the Regional Trial Court of Marinduque in Civil Case No. 89-14 are
REVERSED and SET ASIDE and the complaint in Civil Case No. 89-14 is
DISMISSED. The counterclaim therein is likewise DISMISSED.

No pronouncement as to costs.

SO ORDERED.