Republic of the Philippines basis provided for in Exhibit "3".
Thereafter, Gaite embarked
SUPREME COURT
Manila
G.R. No. L-11827 July 31, 1961
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP
MINES & SMELTING CO., INC., SEGUNDINA VIVAS,
FRNACISCO DANTE, PACIFICO ESCANDOR and
FERNANDO TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance
because the claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or
holder, either by himself or in a representative capacity, of 11
iron lode mineral claims, known as the Dawahan Group,
situated in the municipality of Jose Panganiban, province of
Camarines Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit
"3"), Fonacier constituted and appointed plaintiff-appellee
Fernando A. Gaite as his true and lawful attorney-in-fact to enter
into a contract with any individual or juridical person for the
exploration and development of the mining claims
aforementioned on a royalty basis of not less than P0.50 per ton
of ore that might be extracted therefrom. On March 19, 1954,
Gaite in turn executed a general assignment (Record on Appeal,
pp. 17-19) conveying the development and exploitation of said
mining claims into the Larap Iron Mines, a single proprietorship
owned solely by and belonging to him, on the same royalty
upon the development and exploitation of the mining claims in
question, opening and paving roads within and outside their
boundaries, making other improvements and installing facilities
therein for use in the development of the mines, and in time
extracted therefrom what he claim and estimated to be
approximately 24,000 metric tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke
the authority granted by him to Gaite to exploit and develop the
mining claims in question, and Gaite assented thereto subject to
certain conditions. As a result, a document entitled "Revocation
of Power of Attorney and Contract" was executed on December
8, 1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for
the consideration of P20,000.00, plus 10% of the royalties that
Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or
outside said claims, the right to use the business name "Larap
Iron Mines" and its goodwill, and all the records and documents
relative to the mines. In the same document, Gaite transferred
to Fonacier all his rights and interests over the "24,000 tons of
iron ore, more or less" that the former had already extracted
from the mineral claims, in consideration of the sum of
P75,000.00, P10,000.00 of which was paid upon the signing of
the agreement, and
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first letter of
credit covering the first shipment of iron ores and of the
first amount derived from the local sale of iron ore made
by the Larap Mines & Smelting Co. Inc., its assigns,
administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00,
Fonacier promised to execute in favor of Gaite a surety bond,
and pursuant to the promise, Fonacier delivered to Gaite a
surety bond dated December 8, 1954 with himself (Fonacier) as
principal and the Larap Mines and Smelting Co. and its
stockholders George Krakower, Segundina Vivas, Pacifico
Escandor, Francisco Dante, and Fernando Ty as sureties
(Exhibit "A-1"). Gaite testified, however, that when this bond was
presented to him by Fonacier together with the "Revocation of
Power of Attorney and Contract", Exhibit "A", on December 8,
1954, he refused to sign said Exhibit "A" unless another bond
under written by a bonding company was put up by defendants
to secure the payment of the P65,000.00 balance of their price
of the iron ore in the stockpiles in the mining claims. Hence, a
second bond, also dated December 8, 1954 (Exhibit "B"),was
executed by the same parties to the first bond Exhibit "A-1", with
the Far Eastern Surety and Insurance Co. as additional surety,
but it provided that the liability of the surety company would
attach only when there had been an actual sale of iron ore by
the Larap Mines & Smelting Co. for an amount of not less then
P65,000.00, and that, furthermore, the liability of said surety
company would automatically expire on December 8, 1955.
Both bonds were attached to the "Revocation of Power of
Attorney and Contract", Exhibit "A", and made integral parts
thereof.
On the same day that Fonacier revoked the power of attorney
he gave to Gaite and the two executed and signed the
"Revocation of Power of Attorney and Contract", Exhibit "A",
Fonacier entered into a "Contract of Mining Operation", ceding,
transferring, and conveying unto the Larap Mines and Smelting
Co., Inc. the right to develop, exploit, and explore the mining
claims in question, together with the improvements therein and
the use of the name "Larap Iron Mines" and its good will, in
consideration of certain royalties. Fonacier likewise transferred,
in the same document, the complete title to the approximately
24,000 tons of iron ore which he acquired from Gaite, to the
Larap & Smelting Co., in consideration for the signing by the
company and its stockholders of the surety bonds delivered by
Fonacier to Gaite (Record on Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired
with respect to the Far Eastern Surety and Insurance Company,
no sale of the approximately 24,000 tons of iron ore had been
made by the Larap Mines & Smelting Co., Inc., nor had the
P65,000.00 balance of the price of said ore been paid to Gaite
by Fonacier and his sureties payment of said amount, on the
theory that they had lost right to make use of the period given
them when their bond, Exhibit "B" automatically expired
(Exhibits "C" to "C-24"). And when Fonacier and his sureties
failed to pay as demanded by Gaite, the latter filed the present
complaint against them in the Court of First Instance of Manila
(Civil Case No. 29310) for the payment of the P65,000.00
balance of the price of the ore, consequential damages, and
attorney's fees.
All the defendants except Francisco Dante set up the uniform
defense that the obligation sued upon by Gaite was subject to a
condition that the amount of P65,000.00 would be payable out
of the first letter of credit covering the first shipment of iron ore
and/or the first amount derived from the local sale of the iron ore
by the Larap Mines & Smelting Co., Inc.; that up to the time of
the filing of the complaint, no sale of the iron ore had been
made, hence the condition had not yet been fulfilled; and that
consequently, the obligation was not yet due and demandable.
Defendant Fonacier also contended that only 7,573 tons of the
estimated 24,000 tons of iron ore sold to him by Gaite was
actually delivered, and counterclaimed for more than
P200,000.00 damages.
At the trial of the case, the parties agreed to limit the
presentation of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to
pay Gaite P65,000.00 become due and demandable when the
defendants failed to renew the surety bond underwritten by the
Far Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which
expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by
plaintiff Gaite to defendant Fonacier were actually in existence
in the mining claims when these parties executed the
"Revocation of Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of
the defendants to pay plaintiff the P65,000.00 balance of the
price of the approximately 24,000 tons of iron ore was one with
a term: i.e., that it would be paid upon the sale of sufficient iron
ore by defendants, such sale to be effected within one year or
before December 8, 1955; that the giving of security was a
condition precedent to Gait's giving of credit to defendants; and
that as the latter failed to put up a good and sufficient security in
lieu of the Far Eastern Surety bond (Exhibit "B") which expired
on December 8, 1955, the obligation became due and
demandable under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff
Gaite did have approximately 24,000 tons of iron ore at the
mining claims in question at the time of the execution of the
contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite
ordering defendants to pay him, jointly and severally,
P65,000.00 with interest at 6% per annum from December 9,
1955 until payment, plus costs. From this judgment, defendants
jointly appealed to this Court.
During the pendency of this appeal, several incidental motions
were presented for resolution: a motion to declare the appellants
Larap Mines & Smelting Co., Inc. and George Krakower in
contempt, filed by appellant Fonacier, and two motions to
dismiss the appeal as having become academic and a motion
for new trial and/or to take judicial notice of certain documents,
filed by appellee Gaite. The motion for contempt is
unmeritorious because the main allegation therein that the
appellants Larap Mines & Smelting Co., Inc. and Krakower had
sold the iron ore here in question, which allegedly is "property in
litigation", has not been substantiated; and even if true, does not
make these appellants guilty of contempt, because what is
under litigation in this appeal is appellee Gaite's right to the
payment of the balance of the price of the ore, and not the iron
ore itself. As for the several motions presented by appellee
Gaite, it is unnecessary to resolve these motions in view of the
results that we have reached in this case, which we shall
hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of
appellant Fonacier to pay appellee Gaite the P65,000.00
(balance of the price of the iron ore in question)is one with a
period or term and not one with a suspensive condition, and that
the term expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only
10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite
to appellant Fonacier.
The first issue involves an interpretation of the following
provision in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby
transfers to Isabelo F. Fonacier all his rights and interests
over the 24,000 tons of iron ore, more or less, above-
referred to together with all his rights and interests to
operate the mine in consideration of the sum of
SEVENTY-FIVE THOUSAND PESOS (P75,000.00)
which the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid
upon the signing of this agreement.
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00)will be paid from and out of the first letter of
credit covering the first shipment of iron ore made by the
Larap Mines & Smelting Co., Inc., its assigns,
administrators, or successors in interest.
We find the court below to be legally correct in holding that the
shipment or local sale of the iron ore is not a condition
precedent (or suspensive) to the payment of the balance of
P65,000.00, but was only a suspensive period or term. What
characterizes a conditional obligation is the fact that its efficacy
or obligatory force (as distinguished from its demandability) is
subordinated to the happening of a future and uncertain event;
so that if the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never
existed. That the parties to the contract Exhibit "A" did not intend
any such state of things to prevail is supported by several
circumstances:
1) The words of the contract express no contingency in the
buyer's obligation to pay: "The balance of Sixty-Five Thousand
Pesos (P65,000.00) will be paid out of the first letter of credit
covering the first shipment of iron ores . . ." etc. There is no
uncertainty that the payment will have to be made sooner or
later; what is undetermined is merely the exact date at which it
will be made. By the very terms of the contract, therefore, the
existence of the obligation to pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not
only does each one of the parties assume a correlative
obligation (the seller to deliver and transfer ownership of the
thing sold and the buyer to pay the price),but each party
anticipates performance by the other from the very start. While
in a sale the obligation of one party can be lawfully subordinated
to an uncertain event, so that the other understands that he
assumes the risk of receiving nothing for what he gives (as in
the case of a sale of hopes or expectations, emptio spei), it is
not in the usual course of business to do so; hence, the
contingent character of the obligation must clearly appear.
Nothing is found in the record to evidence that Gaite desired or
assumed to run the risk of losing his right over the ore without
getting paid for it, or that Fonacier understood that Gaite
assumed any such risk. This is proved by the fact that Gaite
insisted on a bond a to guarantee payment of the P65,000.00,
an not only upon a bond by Fonacier, the Larap Mines &
Smelting Co., and the company's stockholders, but also on one
by a surety company; and the fact that appellants did put up
such bonds indicates that they admitted the definite existence of
their obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining
P65,000.00 to the sale or shipment of the ore as a condition
precedent, would be tantamount to leaving the payment at the
discretion of the debtor, for the sale or shipment could not be
made unless the appellants took steps to sell the ore. Appellants
would thus be able to postpone payment indefinitely. The
desireability of avoiding such a construction of the contract
Exhibit "A" needs no stressing.
4) Assuming that there could be doubt whether by the wording
of the contract the parties indented a suspensive condition or a
suspensive period (dies ad quem) for the payment of the
P65,000.00, the rules of interpretation would incline the scales
in favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article
1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in
favor of the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains if
the buyer' obligation is deemed to be actually existing, with only
its maturity (due date) postponed or deferred, that if such
obligation were viewed as non-existent or not binding until the
ore was sold.
The only rational view that can be taken is that the sale of the
ore to Fonacier was a sale on credit, and not an aleatory
contract where the transferor, Gaite, would assume the risk of
not being paid at all; and that the previous sale or shipment of
the ore was not a suspensive condition for the payment of the
balance of the agreed price, but was intended merely to fix the
future date of the payment.
This issue settled, the next point of inquiry is whether
appellants, Fonacier and his sureties, still have the right to insist
that Gaite should wait for the sale or shipment of the ore before
receiving payment; or, in other words, whether or not they are
entitled to take full advantage of the period granted them for
making the payment.
We agree with the court below that the appellant have forfeited
the right court below that the appellants have forfeited the right
to compel Gaite to wait for the sale of the ore before receiving
payment of the balance of P65,000.00, because of their failure
to renew the bond of the Far Eastern Surety Company or else
replace it with an equivalent guarantee. The expiration of the
bonding company's undertaking on December 8, 1955
substantially reduced the security of the vendor's rights as
creditor for the unpaid P65,000.00, a security that Gaite
considered essential and upon which he had insisted when he
executed the deed of sale of the ore to Fonacier (Exhibit "A").
The case squarely comes under paragraphs 2 and 3 of Article
1198 of the Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make
use of the period:
(1) . . .
(2) When he does not furnish to the creditor the
guaranties or securities which he has promised.
(3) When by his own acts he has impaired said
guaranties or securities after their establishment, and
when through fortuitous event they disappear, unless he
immediately gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's
bond upon its expiration plainly impaired the securities given to
the creditor (appellee Gaite), unless immediately renewed or
replaced.
There is no merit in appellants' argument that Gaite's
acceptance of the surety company's bond with full knowledge
that on its face it would automatically expire within one year was
a waiver of its renewal after the expiration date. No such waiver
could have been intended, for Gaite stood to lose and had
nothing to gain barely; and if there was any, it could be rationally
explained only if the appellants had agreed to sell the ore and
pay Gaite before the surety company's bond expired on
December 8, 1955. But in the latter case the defendants-
appellants' obligation to pay became absolute after one year
from the transfer of the ore to Fonacier by virtue of the deed
Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite
acted within his rights in demanding payment and instituting this
action one year from and after the contract (Exhibit "A") was
executed, either because the appellant debtors had impaired the
securities originally given and thereby forfeited any further time
within which to pay; or because the term of payment was
originally of no more than one year, and the balance of
P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is
whether there were really 24,000 tons of iron ore in the
stockpiles sold by appellee Gaite to appellant Fonacier, and
whether, if there had been a short-delivery as claimed by
appellants, they are entitled to the payment of damages, we
must, at the outset, stress two things: first, that this is a case of
a sale of a specific mass of fungible goods for a single price or a
lump sum, the quantity of "24,000 tons of iron ore, more or less,"
stated in the contract Exhibit "A," being a mere estimate by the
parties of the total tonnage weight of the mass; and second, that
the evidence shows that neither of the parties had actually
measured of weighed the mass, so that they both tried to arrive
at the total quantity by making an estimate of the volume thereof
in cubic meters and then multiplying it by the estimated weight
per ton of each cubic meter.
The sale between the parties is a sale of a specific mass or iron
ore because no provision was made in their contract for the
measuring or weighing of the ore sold in order to complete or
perfect the sale, nor was the price of P75,000,00 agreed upon
by the parties based upon any such measurement.(see Art.
1480, second par., New Civil Code). The subject matter of the
sale is, therefore, a determinate object, the mass, and not the
actual number of units or tons contained therein, so that all that
was required of the seller Gaite was to deliver in good faith to
his buyer all of the ore found in the mass, notwithstanding that
the quantity delivered is less than the amount estimated by them
(Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage
Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil
Code). There is no charge in this case that Gaite did not deliver
to appellants all the ore found in the stockpiles in the mining
claims in questions; Gaite had, therefore, complied with his
promise to deliver, and appellants in turn are bound to pay the
lump price.
But assuming that plaintiff Gaite undertook to sell and appellants
undertook to buy, not a definite mass, but approximately 24,000
tons of ore, so that any substantial difference in this quantity
delivered would entitle the buyers to recover damages for the
short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had
actually measured or weighed the whole mass of ore cubic
meter by cubic meter, or ton by ton. Both parties predicate their
respective claims only upon an estimated number of cubic
meters of ore multiplied by the average tonnage factor per cubic
meter.
Now, appellee Gaite asserts that there was a total of 7,375
cubic meters in the stockpiles of ore that he sold to Fonacier,
while appellants contend that by actual measurement, their
witness Cirpriano Manlañgit found the total volume of ore in the
stockpiles to be only 6.609 cubic meters. As to the average
weight in tons per cubic meter, the parties are again in
disagreement, with appellants claiming the correct tonnage
factor to be 2.18 tons to a cubic meter, while appellee Gaite
claims that the correct tonnage factor is about 3.7.
In the face of the conflict of evidence, we take as the most
reliable estimate of the tonnage factor of iron ore in this case to
be that made by Leopoldo F. Abad, chief of the Mines and
Metallurgical Division of the Bureau of Mines, a government
pensionado to the States and a mining engineering graduate of
the Universities of Nevada and California, with almost 22 years
of experience in the Bureau of Mines. This witness placed the
tonnage factor of every cubic meter of iron ore at between 3
metric tons as minimum to 5 metric tons as maximum. This
estimate, in turn, closely corresponds to the average tonnage
factor of 3.3 adopted in his corrected report (Exhibits "FF" and
FF-1") by engineer Nemesio Gamatero, who was sent by the
Bureau of Mines to the mining claims involved at the request of
appellant Krakower, precisely to make an official estimate of the
amount of iron ore in Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of
ore in the stockpiles made by appellant's witness Cipriano
Manlañgit is correct, if we multiply it by the average tonnage
factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons,
which is not very far from the estimate of 24,000 tons made by
appellee Gaite, considering that actual weighing of each unit of
the mass was practically impossible, so that a reasonable
percentage of error should be allowed anyone making an
estimate of the exact quantity in tons found in the mass. It must
not be forgotten that the contract Exhibit "A" expressly stated
the amount to be 24,000 tons, more or less. (ch. Pine River
Logging & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as
would entitle appellants to the payment of damages, nor could
Gaite have been guilty of any fraud in making any
misrepresentation to appellants as to the total quantity of ore in
the stockpiles of the mining claims in question, as charged by
appellants, since Gaite's estimate appears to be substantially
correct.
WHEREFORE, finding no error in the decision appealed from,
we hereby affirm the same, with costs against appellants.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-59266 February 29, 1988
SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners,
vs.
HON. COURT OF APPEALS and ATILANO G. JABIL,
respondents.
BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of
the: (1) Decision * of the 9th Division, Court of Appeals dated
July 31,1981, affirming with modification the Decision, dated
August 25, 1972 of the Court of First Instance ** of Cebu in civil
Case No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos
and Isabela Lumungsod de Dignos and Panfilo Jabalde, as
Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas;
and (2) its Resolution dated December 16, 1981, denying
defendant-appellant's (Petitioner's) motion for reconsideration,
for lack of merit.
The undisputed facts as found by the Court of Appeals are as
follows:
The Dignos spouses were owners of a parcel of land, known as
Lot No. 3453, of the cadastral survey of Opon, Lapu-Lapu City.
On June 7, 1965, appellants (petitioners) Dignos spouses sold
the said parcel of land to plaintiff-appellant (respondent Atilano
J. Jabil) for the sum of P28,000.00, payable in two installments,
with an assumption of indebtedness with the First Insular Bank
of Cebu in the sum of P12,000.00, which was paid and
acknowledged by the vendors in the deed of sale (Exh. C)
executed in favor of plaintiff-appellant, and the next installment
in the sum of P4,000.00 to be paid on or before September 15,
1965.
On November 25, 1965, the Dignos spouses sold the same land
in favor of defendants spouses, Luciano Cabigas and Jovita L.
De Cabigas, who were then U.S. citizens, for the price of
P35,000.00. A deed of absolute sale (Exh. J, also marked Exh.
3) was executed by the Dignos spouses in favor of the Cabigas
spouses, and which was registered in the Office of the Register
of Deeds pursuant to the provisions of Act No. 3344.
As the Dignos spouses refused to accept from plaintiff-appellant
the balance of the purchase price of the land, and as plaintiff-
appellant discovered the second sale made by defendants-
appellants to the Cabigas spouses, plaintiff-appellant brought
the present suit. (Rollo, pp. 27-28)
After due trial, the Court of first Instance of Cebu rendered its
Decision on August 25,1972, the decretal portion of which
reads:
WHEREFORE, the Court hereby declares the deed of sale
executed on November 25, 1965 by defendant Isabela L. de
Dignos in favor of defendant Luciano Cabigas, a citizen of the
United States of America, null and void ab initio, and the deed of
sale executed by defendants Silvestre T. Dignos and Isabela
Lumungsod de Dignos not rescinded. Consequently, the plaintiff
Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen
Thousand Pesos (P16,000.00) to the defendants-spouses upon
the execution of the Deed of absolute Sale of Lot No. 3453,
Opon Cadastre and when the decision of this case becomes
final and executory.
The plaintiff Atilano G. Jabil is ordered to reimburse the
defendants Luciano Cabigas and Jovita L. de Cabigas, through
their attorney-in-fact, Panfilo Jabalde, reasonable amount
corresponding to the expenses or costs of the hollow block
fence, so far constructed.
It is further ordered that defendants-spouses Silvestre T. Dignos
and Isabela Lumungsod de Dignos should return to defendants-
spouses Luciano Cabigas and Jovita L. de Cabigas the sum of
P35,000.00, as equity demands that nobody shall enrich himself
at the expense of another.
The writ of preliminary injunction issued on September 23, 1966,
automatically becomes permanent in virtue of this decision.
With costs against the defendants.
From the foregoing, the plaintiff (respondent herein) and
defendants-spouss (petitioners herein) appealed to the Court of
Appeals, which appeal was docketed therein as CA-G.R. No.
54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al."
On July 31, 1981, the Court of Appeals affirmed the decision of
the lower court except as to the portion ordering Jabil to pay for
the expenses incurred by the Cabigas spouses for the building
of a fence upon the land in question. The disposive portion of
said decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, except as
to the modification of the judgment as pertains to plaintiff-
appellant above indicated, the judgment appealed from is
hereby AFFIRMED in all other respects.
With costs against defendants-appellants.
SO ORDERED.
Judgment MODIFIED.
A motion for reconsideration of said decision was filed by the
defendants- appellants (petitioners) Dignos spouses, but on
December 16, 1981, a resolution was issued by the Court of
Appeals denying the motion for lack of merit.
Hence, this petition.
In the resolution of February 10, 1982, the Second Division of
this Court denied the petition for lack of merit. A motion for
reconsideration of said resolution was filed on March 16, 1982.
In the resolution dated April 26,1982, respondents were required
to comment thereon, which comment was filed on May 11, 1982
and a reply thereto was filed on July 26, 1982 in compliance
with the resolution of June 16,1 982. On August 9,1982, acting
on the motion for reconsideration and on all subsequent
pleadings filed, this Court resolved to reconsider its resolution of
February 10, 1982 and to give due course to the instant petition.
On September 6, 1982, respondents filed a rejoinder to reply of
petitioners which was noted on the resolution of September 20,
1982.
Petitioners raised the following assignment of errors:
I
THE COURT OF APPEALS COMMITTED A GRAVE ERROR
OF LAW IN GROSSLY, INCORRECTLY INTERPRETING THE
TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN
ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP
OVER THE PROPERTY IN QUESTION TO THE
RESPONDENT AND NOT MERELY A CONTRACT TO SELL
OR PROMISE TO SELL; THE COURT ALSO ERRED IN
MISAPPLYING ARTICLE 1371 AS WARRANTING READING
OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE
SALE, DESPITE THE CLARITY OF THE TERMS THEREOF
SHOWING IT IS A CONTRACT OF PROMISE TO SELL.
II
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW
IN INCORRECTLY APPLYING AND OR IN MISAPPLYING
ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING
THE ERRONEOUS CONCLUSION THAT THE NOTICE OF
RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS
NOT BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL
ACT.
III
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW
IN REJECTING THE APPLICABILITY OF ARTICLES
2208,2217 and 2219 OF THE NEW CIVIL CODE AND
ESTABLISHED JURISPRUDENCE AS TO WARRANT THE
AWARD OF DAMAGES AND ATTORNEY'S FEES TO
PETITIONERS.
IV
PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE
SHOULD HAVE BEEN DISMISSED, HE HAVING COME TO
COURT WITH UNCLEAN HANDS.
V balance of Four. Thousand Pesos (P4,000.00) on or before
BY AND LARGE, THE COURT OF APPEALS COMMITTED AN
ERROR IN AFFIRMING WITH MODIFICATION THE DECISION
OF THE TRIAL COURT DUE TO GRAVE
MISINTERPRETATION, MISAPPLICATION AND
MISAPPREHENSION OF THE TERMS OF THE QUESTIONED
CONTRACT AND THE LAW APPLICABLE THERETO.
The foregoing assignment of errors may be synthesized into two
main issues, to wit:
I. Whether or not subject contract is a deed of absolute sale
or a contract Lot sell.
II. Whether or not there was a valid rescission thereof.
There is no merit in this petition.
It is significant to note that this petition was denied by the
Second Division of this Court in its Resolution dated February 1
0, 1 982 for lack of merit, but on motion for reconsideration and
on the basis of all subsequent pleadings filed, the petition was
given due course.
I.
The contract in question (Exhibit C) is a Deed of Sale, with the
following conditions:
1. That Atilano G..Jabilis to pay the amount of Twelve
Thousand Pesos P12,000.00) Phil. Philippine Currency as
advance payment;
2. That Atilano G. Jabil is to assume the balance of Twelve
Thousand Pesos (P12,000.00) Loan from the First Insular Bank
of Cebu;
3. That Atilano G. Jabil is to pay the said spouses the
September 15,1965;
4. That the said spouses agrees to defend the said Atilano
G. Jabil from other claims on the said property;
5. That the spouses agrees to sign a final deed of absolute
sale in favor of Atilano G. Jabil over the above-mentioned
property upon the payment of the balance of Four Thousand
Pesos. (Original Record, pp. 10-11)
In their motion for reconsideration, petitioners reiterated their
contention that the Deed of Sale (Exhibit "C") is a mere contract
to sell and not an absolute sale; that the same is subject to two
(2) positive suspensive conditions, namely: the payment of the
balance of P4,000.00 on or before September 15,1965 and the
immediate assumption of the mortgage of P12,000.00 with the
First Insular Bank of Cebu. It is further contended that in said
contract, title or ownership over the property was expressly
reserved in the vendor, the Dignos spouses until the suspensive
condition of full and punctual payment of the balance of the
purchase price shall have been met. So that there is no actual
sale until full payment is made (Rollo, pp. 51-52).
In bolstering their contention that Exhibit "C" is merely a contract
to sell, petitioners aver that there is absolutely nothing in Exhibit
"C" that indicates that the vendors thereby sell, convey or
transfer their ownership to the alleged vendee. Petitioners insist
that Exhibit "C" (or 6) is a private instrument and the absence of
a formal deed of conveyance is a very strong indication that the
parties did not intend "transfer of ownership and title but only a
transfer after full payment" (Rollo, p. 52). Moreover, petitioners
anchored their contention on the very terms and conditions of
the contract, more particularly paragraph four which reads, "that
said spouses has agreed to sell the herein mentioned property
to Atilano G. Jabil ..." and condition number five which reads,
"that the spouses agrees to sign a final deed of absolute sale
over the mentioned property upon the payment of the balance of
four thousand pesos."
Such contention is untenable.
By and large, the issues in this case have already been settled
by this Court in analogous cases.
Thus, it has been held that a deed of sale is absolute in nature
although denominated as a "Deed of Conditional Sale" where
nowhere in the contract in question is a proviso or stipulation to
the effect that title to the property sold is reserved in the vendor
until full payment of the purchase price, nor is there a stipulation
giving the vendor the right to unilaterally rescind the contract the
moment the vendee fails to pay within a fixed period Taguba v.
Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v.
Maritime Building Co., Inc., 86 SCRA 305).
A careful examination of the contract shows that there is no
such stipulation reserving the title of the property on the vendors
nor does it give them the right to unilaterally rescind the contract
upon non-payment of the balance thereof within a fixed period.
On the contrary, all the elements of a valid contract of sale
under Article 1458 of the Civil Code, are present, such as: (1)
consent or meeting of the minds; (2) determinate subject matter;
and (3) price certain in money or its equivalent. In addition,
Article 1477 of the same Code provides that "The ownership of
the thing sold shall be transferred to the vendee upon actual or
constructive delivery thereof." As applied in the case of Froilan
v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court
held that in the absence of stipulation to the contrary, the
ownership of the thing sold passes to the vendee upon actual or
constructive delivery thereof.
While it may be conceded that there was no constructive
delivery of the land sold in the case at bar, as subject Deed of
Sale is a private instrument, it is beyond question that there was
actual delivery thereof. As found by the trial court, the Dignos
spouses delivered the possession of the land in question to Jabil
as early as March 27,1965 so that the latter constructed thereon
Sally's Beach Resort also known as Jabil's Beach Resort in
March, 1965; Mactan White Beach Resort on January 15,1966
and Bevirlyn's Beach Resort on September 1, 1965. Such facts
were admitted by petitioner spouses (Decision, Civil Case No.
23-L; Record on Appeal, p. 108).
Moreover, the Court of Appeals in its resolution dated December
16,1981 found that the acts of petitioners, contemporaneous
with the contract, clearly show that an absolute deed of sale was
intended by the parties and not a contract to sell.
Be that as it may, it is evident that when petitioners sold said
land to the Cabigas spouses, they were no longer owners of the
same and the sale is null and void.
II.
Petitioners claim that when they sold the land to the Cabigas
spouses, the contract of sale was already rescinded.
Applying the rationale of the case of Taguba v. Vda. de Leon SO ORDERED.
(supra) which is on all fours with the case at bar, the contract of
sale being absolute in nature is governed by Article 1592 of the
Civil Code. It is undisputed that petitioners never notified private
respondents Jabil by notarial act that they were rescinding the
contract, and neither did they file a suit in court to rescind the
sale. The most that they were able to show is a letter of Cipriano
Amistad who, claiming to be an emissary of Jabil, informed the
Dignos spouses not to go to the house of Jabil because the
latter had no money and further advised petitioners to sell the
land in litigation to another party (Record on Appeal, p. 23). As
correctly found by the Court of Appeals, there is no showing that
Amistad was properly authorized by Jabil to make such extra-
judicial rescission for the latter who, on the contrary, vigorously
denied having sent Amistad to tell petitioners that he was
already waiving his rights to the land in question. Under Article
1358 of the Civil Code, it is required that acts and contracts
which have for their object the extinguishment of real rights over
immovable property must appear in a public document.

Petitioners laid considerable emphasis on the fact that private

respondent Jabil had no money on the stipulated date of
payment on September 15,1965 and was able to raise the
necessary amount only by mid-October 1965.

It has been ruled, however, that "where time is not of the

essence of the agreement, a slight delay on the part of one
party in the performance of his obligation is not a sufficient
ground for the rescission of the agreement" (Taguba v. Vda. de
Leon, supra). Considering that private respondent has only a
balance of P4,000.00 and was delayed in payment only for one
month, equity and justice mandate as in the aforecited case that
Jabil be given an additional period within which to complete
payment of the purchase price.

WHEREFORE, the petition filed is hereby Dismissed for lack of

merit and the assailed decision of the Court of Appeals is
Affirmed in toto.
Republic of the Philippines
SUPREME COURT The facts of this case may be briefly stated as follows:
Manila
Clara Tambunting de Legarda died testate on April 22, 1950.
SECOND DIVISION Among the properties left by the deceased is the "Legarda
Tambunting Subdivision" located on Rizal Avenue Extension,
G.R. No. L-41847 December 12, 1986 City of Manila, containing an area of 80,238.90 sq. m., covered
by Transfer Certificates of Title No. 62042; 45142; 45149;
CATALINO LEABRES, petitioner, 49578; 40957 and 59585. Shortly after the death of said
vs. deceased, plaintiff Catalino Leabres bought, on a partial
COURT OF APPEALS and MANOTOK REALTY, INC., payment of Pl,000.00 a portion (No. VIII, Lot No. 1) of the
respondents. Subdivision from surviving husband Vicente J. Legarda who
acted as special administrator, the deed or receipt of said sale
Magtanggol C. Gunigundo for petitioner. appearing to be dated May 2, 1950 (Annex "A"). Upon petition of
Vicente L. Legarda, who later was appointed a regular
Marcelo de Guzman for respondents. administrator together with Pacifica Price and Augusto
Tambunting on August 28, 1950, the Probate Court of Manila in
the Special Proceedings No. 10808) over the testate estate of
PARAS, J.: said Clara Tambunting, authorized through its order of
November 21, 1951 the sale of the property.
Before Us is a Petition for certiorari to review the decision of the
Court of Appeals which is quoted hereunder: In the meantime, Vicente L. Legarda was relieved as a regular
Administrator and the Philippine Trust Co. which took over as
In Civil Case No. 64434, the Court of First Instance of Manila such administrator advertised the sale of the subdivision which
made the following quoted decision: includes the lot subject matter herein, in the issues of August 26
and 27, September 2 and 3, and 15 and 17, 1956 of the Manila
(1) Upon defendant's counterclaim, ordering plaintiff Catalino Times and Daily Mirror. In the aforesaid Special Proceedings
Leabres to vacate and/or surrender possession to defendant No. 10808, no adverse claim or interest over the subdivision or
Manotok Realty, Inc. the parcel of land subject matter of the any portion thereof was ever presented by any person, and in
complaint described in paragraph 3 thereof and described in the the sale that followed, the Manotok Realty, Inc. emerged the
Bill of Particulars dated March 4, 1966; successful bidder at the price of P840,000.00. By order of the
Probate Court, the Philippine Trust Co. executed the Deed of
(2) To pay defendant the sum of P81.00 per month from Absolute Sale of the subdivision dated January 7, 1959 in favor
March 20, 1959, up to the time he actually vacates and/or of the Manotok Realty, Inc. which deed was judicially approved
surrenders possession of the said parcel of land to the on March 20, 1959, and recorded immediately in the proper
defendant Manotok Realty, Inc., and Register of Deeds which issued the corresponding Certificates
of Title to the Manotok Realty, Inc., the defendant appellee
(3) To pay attorney's fees to the defendant in the amount of herein.
P700.00 and pay the costs. (Decision, R.A., pp. 54-55).
A complaint dated February 8, 1966, was filed by herein plaintiff,
which seeks, among other things, for the quieting of title over
the lot subject matter herein, for continuing possession thereof,
and for damages. In the scheduled hearing of the case, plaintiff
Catalino Leabres failed to appear although he was duly notified,
and so the trial Court, in its order dated September 14, 1967,
dismissed the complaint (Annex "E").<äre||anº•1àw> In another
order of dismissal was amended as to make the same refer only
to plaintiff's complaint and the counter claim of the defendant
was reinstated and as the evidence thereof was already
adduced when defendant presented its evidence in three other
cases pending in the same Court, said counterclaim was also
considered submitted for resolution. The motion for
reconsideration dated January 22, 1968 (Annex " I "), was filed
by plaintiff, and an opposition thereto dated January 25, 1968,
was likewise filed by defendant but the Court a quo dismissed
said motion in its order dated January 12, 1970 (Annex "K"), "for
lack of merits" (pp. 71-72, Record on Appeal).
Appealing the decision of the lower Court, plaintiff-appellant
advances the following assignment of errors:
I Under the afore-cited section, it is discretionary on the part of
THE LOWER COURT ERRED IN DENYING THE MOTION
FOR RECONSIDERATION, DATED OCTOBER 9, 1967, THUS
DEPRIVING THE PLAINTIFF-APPELLANT HIS DAY IN
COURT.
II
THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-
APPELLANT CATALINO LEABRES TO VACATE AND/OR
SURRENDER THE POSSESSION OF THE LOT SUBJECT
MATTER OF THE COMPLAINT TO DEFENDANT-APPELLEE.
III
THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-
APPELLANT TO PAY DEFENDANT-APPELLEE THE SUM OF
P 81.00 PER MONTH FROM MARCH 20, 1969, UP TO THE
TIME HE ACTUALLY VACATE THE PARCEL OF LAND.
(Appellant's Brief, p. 7)
In the First Assigned Error, it is contended that the denial of his
Motion for Reconsideration dated October 9, 1967, the plaintiff-
appellant was not accorded his day in Court.
The rule governing dismissal of actions for failure to prosecute is
provided for in Section 3, Rule 17 of the Rules of Court, as
follows:
If the plaintiff fails to appear at the time of the trial, or to
prosecute his action for an unreasonable length of time, or to
comply with these rules or any order of the Court, the action
may be dismissed upon motion of the defendant or upon the
Court's own motion. This dismissal shall have the effect of an
adjudication upon the merits, unless otherwise provided by the
Court.
the Court to dismiss an action for failure to prosecute, and its
action will not be reversed upon appeal in the absence of abuse.
The burden of showing abuse of this discretion is upon the
appellant since every presumption is toward the correctness of
the Court's action (Smith, Bell & Co., et al vs. American Pres.
Lines, Ltd., and Manila Terminal Co., No. L-5304, April 30,
1954; Adorable vs. Bonifacio, G. R. No. L-0698, April 22, 1959);
Flores vs. Phil. Alien Property Administration, G.R. No. L-12741,
April 27, 1960). By the doctrine laid down in these cases, and by
the provisions of Section 5, Rules 131 of the Rules of Court,
particularly paragraphs (m) and (o) which respectively presume
the regularity of official performance and the passing upon by
the Court over all issues within a case, it matters not if the Court
dismissing the action for failure to prosecute assigns any special
reason for its action or not. We take note of the fact that the
Order declaring appellant in default was handed down on
September 14, 1967. Appellant took no steps to have this Order
set aside. It was only on January 22, 1968, after he was
furnished a copy of the Court's decision dated December 9,
1967 or about four months later that he attached this Order and
the decision of the Court. Appellant slept on his rights-if he had
any. He had a chance to have his day in Court but he passed it
off. Four months later he alleges that sudden illness had
prevented him. We feel appellant took a long time too-long in
fact-to inform the Court of his sudden illness. This sudden
illness that according to him prevented him from coming to
Court, and the time it took him to tell the Court about it, is
familiar to the forum as an oft repeated excuse to justify
indifference on the part of litigants or outright negligence of
those who represent them which subserves the interests of
justice. In the instant case, not only did the appellant wantonly
pass off his chance to have a day in Court but he has also failed
to give a convincing, just and valid reason for the new hearing
he seeks. The trial court found it so; We find it so. The trial Court
in refusing to give appellant a new trial does not appear to have
abused his discretion as to justify our intervention.
The Second and Third Assignments of Error are hereby jointly
treated in our discussion since the third is but a consequence of
the second.
It is argued that had the trial Court reconsidered its order dated
September 14, 1967 dismissing the complaint for failure to
prosecute, plaintiff-appellant might have proved that he owns
the lot subjectmatter of the case, citing the receipt (Annex A) in
his favor; that he has introduced improvements and erected a
house thereon made of strong materials; that appellee's adverse
interest over the property was secured in bad faith since he had
prior knowledge and notice of appellant's physical possession or
acquisition of the same; that due to said bad faith appellant has
suffered damages, and that for all the foregoing, the judgment
should be reversed and equitable relief be given in his favor.
As above stated, the Legarda-Tambunting Subdivision which
includes the lot subject matter of the instant case, is covered by
Torrens Certificates of Title. Appellant anchors his claim on the
receipt (Annex "A") dated May 2, 1950, which he claims as
evidence of the sale of said lot in his favor. Admittedly, however,
Catalino Leabres has not registered his supposed interest over
the lot in the records of the Register of Deeds, nor did he
present his claim for probate in the testate proceedings over the
estate of the owner of said subdivision, in spite of the notices
advertised in the papers. (Saldana vs. Phil. Trust Co., et al.;
Manotok Realty, Inc., supra).
On the other hand, defendant-appellee, Manotok Realty, Inc.,
bought the whole subdivision which includes the subject matter
herein by order and with approval of the Probate Court and
upon said approval, the Deed of Absolute Sale in favor of
appellee was immediately registered with the proper Register of
Deeds. Manotok Realty, Inc. has therefore the better right over
the lot in question because in cases of lands registered under
the Torrens Law, adverse interests not therein annotated which
are without the previous knowledge by third parties do not bind
the latter. As to the improvement which appellant claims to have
introduced on the lot, purchase of registered lands for value and
in good faith hold the same free from all liens and
encumbrances except those noted on the titles of said land and
those burdens imposed by law. (Sec. 39, Act.
496).<äre||anº•1àw> An occupant of a land, or a purchaser
thereof from a person other than the registered owner, cannot
claim good faith so as to be entitled to retention of the parcels
occupied by him until reimbursement of the value of the
improvements he introduced thereon, because he is charged
with notice of the existence of the owner's certificate of title (J.M.
Tuason & Co. vs. Lecardo, et al., CA-G.R. No. 25477-R, July
24, 1962; J.M. Tuason & Co., Inc. vs. Manuel Abundo, CA-G.R.
No. 29701-R, November 18, 1968).
Appellant has not convinced the trial Court that appellee acted
in bad faith in the acquisition of the property due to the latter's
knowledge of a previous acquisition by the former, and neither
are we impressed by the claim. The purchaser of a registered
land has to rely on the certificate of title thereof. The good faith
of appellee coming from the knowledge that the certificate of title
covering the entire subdivision contain no notation as to
appellant's interest, and the fact that the records of these eases
like Probate Proceedings Case No. 10808, do not show the
existence of appellant's claim, strongly support the correctness
of the lower Court's decision
WHEREFORE, in view of the foregoing, we find no reason to
amend or set aside the decision appealed from, as regards to
plaintiff-appellant Catalino Leabres. We therefore affirm the
same, with costs against appellant. (pp. 33-38, Rollo)
Petitioner now comes to us with the following issues:
(1) Whether or not the petitioner was denied his day in court
and deprived of due process of law.
(2) Whether or not the petitioner had to submit his receipt to
the probate court in order that his right over the parcel of land in
dispute could be recognized valid and binding and conclusive
against the Manotok Realty, Inc.
(3) Whether or not the petitioner could be considered as a
possessor in good faith and in the concept of owner. (p. 11,
Rollo)
Petitioner's contention that he was denied his day in court holds
no water. Petitioner does not deny the fact that he failed to
appear on the date set for hearing on September 14, 1967 and
as a consequence of his non-appearance, the order of dismissal
was issued, as provided for by Section 3, Rule 17 of the
Revised Rules of Court.
Moreover, as pointed out by private respondent in its brief, the
hearing on June 11, 1967 was not ex parte. Petitioner was
represented by his counsel on said date, and therefore,
petitioner was given his day in Court.
The main objection of the petition in the lower court's
proceeding is the reception of respondent's evidence without
declaring petitioner in default. We find that there was no
necessity to declare petitioner in default since he had filed his
answer to the counterclaim of respondent.
Petitioner anchors his main arguments on the receipt (Exh. 1)
dated May 2, 1950, as a basis of a valid sale. An examination of
the receipt reveals that the same can neither be regarded as a
contract of sale or a promise to sell. There was merely an
acknowledgment of the sum of One Thousand Pesos
(P1,000.00). There was no agreement as to the total purchase
price of the land nor to the monthly installment to be paid by the
petitioner. The requisites of a valid Contract of Sale namely 1)
consent or meeting of the minds of the parties; 2) determinate
subject matter; 3) price certain in money or its equivalent-are
lacking in said receipt and therefore the "sale" is not valid nor
enforceable. Furthermore, it is a fact that Dona Clara
Tambunting died on April 22, 1950. Her estate was thereafter
under custodia legis of the Probate Court which appointed Don
Vicente Legarda as Special Administrator on August 28, 1950.
Don Vicente Legarda entered into said sale in his own personal-
capacity and without court approval, consequently, said sale
cannot bind the estate of Clara Tambunting. Petitioner should
have submitted the receipt of alleged sale to the Probate Court
for its approval of the transactions. Thus, the respondent Court
did not err in holding that the petitioner should have submitted
his receipt to the probate court in order that his right over the
subject land could be recognized-assuming of course that the
receipt could be regarded as sufficient proof.
Anent his possession of the land, petitioner cannot be deemed a
possessor in good faith in view of the registration of the
ownership of the land. To consider petitioner in good faith would
be to put a premium on his own gross negligence. The Court
resolved to DENY the petition for lack of merit and to AFFIRM
the assailed judgment.
EN BANC
[G.R. No. 956. November 18, 1902. ]
FRANCISCO IRURETA GOYENA, Plaintiff-Appellee, v.
ILDEFONSO TAMBUNTING, Defendant-Appellant.
Jose Robles Lahesa, for Appellant.
Manuel Torres, for Appellee.
SYLLABUS
1. CONTRACTS; SPECIFIC PERFORMANCE; SALE OF
REALTY. — An agreement to purchase a certain specified lot of
land at a certain specified price is obligatory and enforceable
regardless of the fact that its area is less than that mentioned in
the contract.
2. ID.; ID.; PRIVATE CONTRACTS. — A private contract which
contains the requisite elements is obligatory and enforceable
between the parties.
DECISION
WILLARD, J. :
The plaintiff’s principal owned a tract of land and the building
thereon known as No. 20 Calle San Jose, Ermita, Manila. This
tract contained 152.46 square meters of land. A broker,
representing the plaintiff, stated to the defendant that this lot
was for sale and, on information received from the plaintiff, that
it measured 23 meters in front and 8 meters in depth.
The broker had nothing more to do with the matter, and the
plaintiff and defendant had certain negotiations between
themselves concerning the sale.
On March 13, 1901, the defendant signed the following
document:jgc:chanrobles.com.ph
"On this date I have bought from Don Francisco Yrureta Goyena
a lot at No. 20 Calle San Jose, Ermita, for the sum of thirty-two
hundred pesos, this money to be paid as soon as the bill of sale
is signed. Manila, March 12, 1901. (Signed) Tambunting."cralaw
virtua1aw library
The plaintiff signed a similar document. What the negotiations
between the parties were prior to the signing of these
documents does not appear. There is no evidence whatever in
the record that they came to any agreement in regard to the sale
other than the one contained in the papers of March 12.
The defendant took from the office of the notary employed to
make the formal transfer the title papers which showed the area
of the lot of land to be 152.46 square meters, kept them for
several days, and returned them to the notary. On the day
assigned for the execution of the instrument, all the parties
being in the office of the notary, the defendant told the latter to
insert in the writing the price, $3,200, and then refused to sign it
because the lot did not contain the area which the plaintiff,
through the broker, had represented that it contained. He
expressed his willingness to sign it if a proportional reduction
was made in the price. This the plaintiff refused to make, and
this action was brought under article 1451 of the Civil Code.
The question to be decided is: Ought the plaintiff to make this
reduction?
The private contract expresses a specific thing as the object of
the contract. Upon this point there is no controversy. There is no
doubt as to which lot is No. 20 on Calle San Jose, of the District
of Ermita of the city of Manila.
The private contract specifies a certain price, 3,200 pesos.
There is no controversy whatsoever upon this point. there is no
question that this sum is there specified plainly and specifically,
and without being made subject to any condition whatever.
Is this a perfect contract?
Evidently nothing is lacking for the existence of a perfect
contract of purchase and sale. Article 1445 of the Civil Code is
as follows: "By the contract of purchase and sale one of the
contracting parties undertakes to deliver a specific thing, and the
other to pay therefore a price certain, in money or in some thing
representing it."cralaw virtua1aw library
Article 1450 of the same Code is as follows: "The sale shall be
perfected between vendor and vendee and shall be binding on
both of them, if they have agreed upon the thing which is the
object of the contract and upon the price, even when neither has
been delivered."cralaw virtua1aw library
This private document was not a more draft or project. It can not
be said that the purchase is not to be understood as perfected
until the execution of the public instrument. That private
document is not subject to any term or condition whatever.
The least that can be said about the private document is that it
contains a promise to buy, not a mere project of sale, and a
promise to buy, according to article 1451, confers upon the
contracting parties the right to reciprocally demand the
performance of the contract. If the contract were not perfected
no right would accrue in favor of the contracting parties to
reciprocally demand its performance. A thing which has no
existence can produce no effect.
Because it is merely a private document which contemplates the
subsequent execution of a public instrument, it does not follow
that it is not enforceable as it now stands. "Contracts," says
article 1278, "shall be obligatory whatever may be the form in
which they have been entered into, provided that the essential
elements for their validity are present," to wit, a determinate
thing, a price certain, and a meeting of the minds with respect to
the object of the contract. Hence the contract in question is
obligatory.
But the defendant says: "I can not pay the 3,200 pesos
indicated in the private document, inasmuch as the lot does not
contain a sufficient number of meters to be worth this sum total
of 3,200 pesos, at so much a meter. I made the purchase at so
much a meter." He then cites article 1469, 2, which is: "If the
sale of real property should be made with a statement of its
area, at the rate of a certain price for a unit of measure or
number, the vendor shall be obliged to deliver to the vendee, if
the latter should require it, all that may have been mentioned in
the contract; but should this not be possible, the vendee may
choose between a proportional reduction in the price or the
rescission of the contract: Provided, That in the latter case the
decrease in the real estate is not less than one-tenth of the area
given it.
"The same shall be done, even when the area appears to be the
same, if any part of the real estate is not of the character
mentioned in the contract.
"The rescission in such case shall only take place at the will of
the vendee, when the inferior value of the thing sold exceeds
one-tenth of the price agreed upon."cralaw virtua1aw library
In reply to the contention of the defendant the plaintiff cites
article 1471, which says in part: "In the sale of real estate made
for a fixed price and not at the rate of a specified sum for a unit
of measure or number, the increase or decrease of the same
shall not be considered, even when greater or less area or
amount than that stated in the contract may be found."cralaw
virtua1aw library
The plaintiff also says: "The fact is that in a private document no
statement is made of any superficial area, nor of a price on the
basis of a unit of measure or number. Hence, I am under no
obligation to deliver any determinate area or number or
measure, but simply lot No. 20 Calle San Jose, as to whose
specific individuality there is no controversy or doubt."cralaw to that end. We rather construe it as indicating a willingness on
virtua1aw library the part of the plaintiff to abate a trifle from what he was entitled
to demand with the purpose of obtaining an amicable settlement
Article 1218 says: "Public documents may be used as evidence of the controversy and avoiding litigation.
against the contracting parties and those who contract under
them with respect to the statements therein contained, made by Upon the whole evidence we think the judgment below is right,
the contracting parties."cralaw virtua1aw library and it is accordingly affirmed, with costs of this instance against
the defendant.
Article 1225 says: "A private document, legally acknowledged,
has the same value as the public instrument between those who Arellano, C.J., Cooper, Smith, Mapa and Ladd, JJ., concur.
have signed the same, and their privies."cralaw virtua1aw library
Torres, J., withdrew from this case.
Hence it follows that, whether evidenced by a public instrument
or by a private document, the contract is what the words of the
parties indicate. It will not avail the defendant to say, "But my
intention was not what my words express." The defendant
bought a specific article and agreed to pay $3,200 for it. The fact
that the article is not as large as he thought it was does not
relieve him from the necessity of paying that price. It was just
such cases as this that article 1471, 1, was intended to cover. If
the defendant intended to buy by the meter he should have so
stated in the contract. Not only does the contract not so state,
but there is no evidence in the case that the parties ever
discussed at all the price which should be paid for each meter.

There was considerable evidence in the case concerning an

agreement by the plaintiff to reduce the price and the plaintiff in
answering interrogatories propounded by the defendant said
that, after the objection of the defendant to carry out the
contract, he did agree to make a proportional reduction. The
case shows, however, that this answer and the testimony of the
defendant and his witness referred to a conversation at the
house of the defendant, and that this statement of the plaintiff
was made when he thought that the difference was slight, not
amounting to more than a meter or two, and that a proportional
reduction would not decrease the price more than 20 or 30
pesos. We do not think that this admission of the defendant is
sufficient of itself to prove a contract by measure in the face of
the written document and the entire absence of other evidence
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R.NO. L-36249 March 29, 1985
ANIANO OBAÑA, petitioner,
vs.
THE COURT OF APPEALS AND ANICETO SANDOVAL,
respondents.
MELENCIO-HERRERA, J.:
Petitioner seeks a review of the Decision of respondent
Appellate Court (in CA-G.R. No. 44345-R) ordering him in an
action for Replevin to return to Aniceto SANDOVAL, private
respondent herein, 170 cavans of rice or to pay its value in the
amount of P37.25 per cavan, with legal interest from the filing of
the Complaint until fully paid.
SANDOVAL is the owner and manager of the "Sandoval and
Sons Rice Mill" located in Rosales, Pangasinan. He is engaged
in the buying and selling of palay.
On November 21, 1964, SANDOVAL was approached by a
certain Chan Lin who offered to purchase from him 170 cavans
of clean rice (wagwag variety) at the price of P37.26 per cavan,
delivery to be made the following day at petitioner's store in San
Fernando, La Union, with payment to be made thereat by Chan
Lin to SANDOVAL's representative. SANDOVAL accepted the
offer as he knew petitioner and had had previous transactions
with him.
As agreed, the 170 cavans of rice were transported the following
day on a truck belonging to SANDOVAL to petitioner's store in
San Fernando, La Union. Chan Lin accompanied the shipment.
Upon arrival thereat, the goods were unloaded but when the
truck driver attempted to collect the purchase price from Chan
Lin, the latter was nowhere to be found. The driver tried to
collect from petitioner, but the latter refused stating that he had
purchase the goods from Chan Lin at P33.00 per cavan and that
the price therefore had already been paid to Chan Lin.
Further demands having been met with refusal, SANDOVAL, as
plaintiff, filed suit for replevin against petitioner, then the
defendant, before the Municipal Court of San Fernando, La
Union, which ordered petitioner-defendant to pay to SANDOVAL
one-half (½) of the cost of the rice or P2,805.00.
On appeal by petitioner-defendant to the then Court of First
Instance of La Union, the parties agreed to adopt SANDOVAL's
testimony before the Municipal Court. After trial de novo,
judgment was rendered dismissing the complaint against
petitioner-defendant.
On appeal to respondent Appellate Court, SANDOVAL obtained
a reversal in his favor, as follows:
WHEREFORE, the appealed decision is hereby set aside and
another one entered ordering defendant-appellee to return the
one hundred and seventy cavans of rice to plaintiff- appellant or
to pay its value in the amount of P 37.25 per cavan, with legal
interest from the filing of the complaint until fully paid and with
costs against the appellee. 1
Before us, petitioner-defendant takes issue with the following
Appellate Court findings:
From the evidence presented by the parties, it is evident that
this is a simple case of swindling perpetuated by Chan Lin at the
expense of the plaintiff and the defendant. The act of Chan Lin
in purchasing plaintiff's rice at the price of P 37.25 per cavan
and thereafter offering the same goods to defendant at a much
lower price is an indication that it was never his intention to
comply with his obligation to plaintiff. It is clear that Chan Lin's
only purpose in entering into said contract with plaintiff was to
acquire the physical possession of the goods and then to pass
them on to defendant on the pretext that he is the owner thereof.
Premises considered, therefore, Chan Lin cannot be considered
as the owner of the goods at the time the same was said to
have been sold to the defendant-appellee. Considering that
defendant acquired the 170 cavans of rice from a person who is
not the owner thereof, it is therefore clear that he acquired no
greater right than his predecessor-in-interest.
Finally, on principle of equity, it is but proper that plaintiff-
appellant be allowed to recover the one-hundred and seventy
cavans of rice or its value. Being the undisputed owner of the
above mentioned goods, the appellant cannot be deprived of its
ownership without the corresponding payment. 2
We agree with petitioner-defendant that there was a perfected
sale. Article 1475 of the Civil Code lays down the general rule
that there is perfection when there is consent upon the subject
matter and price, even if neither is delivered.
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.
xxx xxx xxx
Ownership of the rice, too, was transferred to the vendee, Chan
Lin, upon its delivery to him at San Fernando, La Union, the
place stipulated 3 and pursuant to Articles 1477 and 1496 of the
same Code:
Art. 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive
delivery thereof.
Art. 1496. The ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways
specified in Articles 1497 to 1501, or in any manner signifying
an agreement that the possession is transferred from the vendor
to the vendee.
At the very least, Chan Lin had a rescissible title to the goods for
the non-payment of the purchase price, but which had not been
rescinded at the time of the sale to petitioner.
However, from petitioner-defendant's own testimony before the
Court of First Instance, he admits that three days after the
delivery, he was repaid the sum of P5,600.00 by Chan Lin, who
was then accompanied by SANDOVAL's driver, and that he had
delivered the rice back to them. On rebuttal, however, the driver
denied that the rice had ever been returned. 4 The driver's
version is the more credible, for, as SANDOVAL's counsel had
manifested in open Court, if return of the rice had been effected,
they would have withdrawn the complaint. 5 Following is the
admission made by petitioner-defendant:
Q After the third day ... when that request for you to hold the
rice was already overdue, what happened?
A This is what happened. Chan Lin and the driver with the
same truck that they used to unload the rice, came to me.
Q What day was that?
A That was I think, Thursday, about 4:30 P.M.
Q Do you know the date?
A November 26, I think.
Q What did they do when this driver and Mr. Chan Lin came
back?
A They told me that they wanted the rice back and give my
money back.
Q Did they give you your money back? own testimony above-quoted, was ready to return the rice to
SANDOVAL, and the latter's driver denies that the rice had been
A Yes. returned by petitioner-defendant cannot be allowed to unjustly
enrich himself at the expense of another by holding on to
Q How much? property no longer belonging to him.7 In law and in equity,
therefore, SANDOVAL is entitled to recover the rice, or the
A They gave me P5.600. value theref since hewas not paid the price therefor.

COURT: WHEREFORE, albeit on a different premise, the judgment

under review is hereby AFFIRMED. Costs against petitioner.
Q They gave you that amount?
SO ORDERED.
A Yes, sir.
Plana, Relova, Gutierrez, Jr., De la Fuente and Alampay, JJ.,
ATTY. GUALBERTO: concur.

Q Did they tell you why they were getting back the rice and Teehankee, J., took no part.
giving you back your money?

A Yes. The complete rice, and Vallo (SANDOVAL's driver)

told me, he wanted to return the rice to the ricemill, that is what
Vallo and the Chinese agreed with Aniceto Sandoval.

Q Did the Chinese tell you that he made agreement with

Sandoval to get back the rice?

A Yes.

COURT:

Q Did you receive the money?

A Yes , sir6

Having been repaid the purchases price by Chan Lin , the sale,
as between them, had been voluntarily rescinded, and
petitioner-defendant was thereby divested of any claim to the
rice. Technically, therefore, he should return the rice to Chan
Lin, but since even the latter, again from petitioner-defendant's
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-61623 December 26, 1984
PEOPLE'S HOMESITE & HOUSING CORPORATION,
petitioner-appellant,
vs.
COURT OF APPEALS, RIZALINO L. MENDOZA and
ADELAIDA R. MENDOZA, respondents-appellees.
Manuel M. Lazaro, Pilipinas Arenas Laborte and Antonio M.
Brillantes for petitioner PHHC.
Tolentino, Cruz, Reyes, Lava and Manuel for private
respondents.
AQUINO, J.:
The question in this case is whether the People's Homesite &
Housing Corporation bound itself to sell to the Mendoza
spouses Lot 4 (Road) Pcs- 4564 of the revised consolidation
subdivision plan with an area of 2,6,08.7 (2,503.7) square
meters located at Diliman, Quezon City.
The PHHC board of directors on February 18, 1960 passed
Resolution No. 513 wherein it stated "that subject to the
approval of the Quezon City Council of the above-mentioned
Consolidation Subdivision Plan, Lot 4. containing 4,182.2
square meters be, as it is hereby awarded to Spouses Rizalino
Mendoza and Adelaida Mendoza, at a price of twenty-one pesos
(P21.00) per square meter" and "that this award shall be subject
to the approval of the OEC (PHHC) Valuation Committee and
higher authorities".
The city council disapproved the proposed consolidation
subdivision plan on August 20, 1961 (Exh. 2). The said spouses
were advised by registered mail of the disapproval of the plan
(Exh. 2-PHHC). Another subdivision plan was prepared and
submitted to the city council for approval. The revised plan,
which included Lot 4, with a reduced area of 2,608.7, was
approved by the city council on February 25, 1964 (Exh. H).
On April 26, 1965 the PHHC board of directors passed a
resolution recalling all awards of lots to persons who failed to
pay the deposit or down payment for the lots awarded to them
(Exh. 5). The Mendozas never paid the price of the lot nor made
the 20% initial deposit.
On October 18, 1965 the PHHC board of directors passed
Resolution No. 218, withdrawing the tentative award of Lot 4 to
the Mendoza -spouses under Resolution No. 513 and re-
awarding said lot jointly and in equal shares to Miguela Sto.
Domingo, Enrique Esteban, Virgilio Pinzon, Leonardo Redublo
and Jose Fernandez, subject to existing PHHC rules and
regulations. The prices would be the same as those of the
adjoining lots. The awardees were required to deposit an
amount equivalent to 20% of the total selling price (Exh. F).
The five awardees made the initial deposit. The corresponding
deeds of sale were executed in their favor. The subdivision of
Lot 4 into five lots was approved by the city council and the
Bureau of Lands.
On March 16, 1966 the Mendoza spouses asked for
reconsideration of the withdrawal of the previous award to them
of Lot 4 and for the cancellation of the re-award of said lot to
Sto. Domingo and four others. Before the request could be
acted upon, the spouses filed the instant action for specific
performance and damages.
The trial court sustained the withdrawal of the award. The
Mendozas appealed. The Appellate Court reversed that decision
and declared void the re-award of Lot 4 and the deeds of sale
and directed the PHHC to sell to the Mendozas Lot 4 with an depend upon the happening of the event which constitutes the
area of 2,603.7 square meters at P21 a square meter and pay to condition. (Art. 1181, Civil Code). "Se llama suspensive la
them P4,000 as attorney's fees and litigation expenses. The condicion de la que depende la perfeccion, o sea el principio del
PHHC appealed to this Court. contrato". (9 Giorgi, Teoria de las Obligaciones, p. 57).

The issue is whether there was a perfected sale of Lot 4, with Under the facts of this case, we cannot say there was a meeting
the reduced area, to the Mendozas which they can enforce of minds on the purchase of Lot 4 with an area of 2,608.7
against the PHHC by an action for specific performance. square meters at P21 a square meter.

We hold that there was no perfected sale of Lot 4. It was
conditionally or contingently awarded to the Mendozas subject
to the approval by the city council of the proposed consolidation
subdivision plan and the approval of the award by the valuation
committee and higher authorities.
The case of Lapinig vs. Court of Appeals, 115 SCRA 213 is not
in point because the awardee in that case applied for the
purchase of the lot, paid the 10% deposit and a conditional
contract to sell was executed in his favor. The PHHC could not
re-award that lot to another person.

The city council did not approve the subdivision plan. The
Mendozas were advised in 1961 of the disapproval. In 1964,
when the plan with the area of Lot 4 reduced to 2,608.7 square
meters was approved, the Mendozas should have manifested in
writing their acceptance of the award for the purchase of Lot 4
just to show that they were still interested in its purchase
although the area was reduced and to obviate ally doubt on the
matter. They did not do so. The PHHC board of directors acted
within its rights in withdrawing the tentative award.
WHEREFORE, the decision of the Appellate Court is reversed
and set aside and the judgment of the trial court is affirmed. No
costs.
SO ORDERED.
Makasiar (Chairman), Concepcion, Jr., Abad Santos, Escolin
and Cuevas, JJ., concur.

"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 law governing
the form of contracts." (Art. 1475, Civil Code).

"Son, sin embargo, excepcion a esta regla los casos en que por
virtud de la voluntad de las partes o de la ley, se celebra la
venta bajo una condicion suspensiva, y en los cuales no se
perfecciona la venta hasta el cumplimiento de la condicion" (4
Castan Tobenas, Derecho Civil Español 8th ed. p. 81).

"In conditional obligations, the acquisition of rights, as well as

the extinguishment or loss of those already acquired, shall
epublic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 80058 February 13, 1989
ERNESTO R. ANG and ROSALINDA ANG, petitioners,
vs.
THE COURT OF APPEALS and LEE CHUY REALTY CORP.,
respondents.
Quisumbing, Torres & Evangelista for petitioners.
Victor J. Lee for respondents.
GANCAYCO, J.:
This is a petition for review on certiorari of the decision of the
Court of Appeals dated June 22, 1987 1 reversing the decision
of the Regional Trial Court dated June 23, 1983 which
dismissed the complaint of private respondent and awarded
damages to petitioner. 2 The focus is on the issue of when a
breach of contract may warrant its resolution.
The antecedents of this case are as follows:
Petitioners Ernesto Ang and Rosalinda Ang, brother and sister,
are the owners of three (3) parcels of land located at A.
Bonifacio St., Balintawak, Quezon City with an aggregate area
of 2,096 square meters covered by Transfer Certificates of Title
Nos. 258870, 258871 and 258872 which they acquired by
purchase from the Cruz family on July 3, 1979 at a price of
P680,000.00. 3
Sometime in November 1979, negotiations were undertaken for
the sale of the aforementioned properties between the
petitioners as sellers and private respondent Lee Chuy Realty
Corporation, through its president Henry Lee Chuy as buyer.
On December 4, 1979, private respondent issued in favor of
petitioners Manila Banking Corporation Check No. 30022695 in
the amount of P50,000.00 4 which it transmitted to petitioners
together with a receipt supposedly embodying the terms and
conditions of their agreement as follows:
RECEIVED from LEE CHUY REALTY CORPORATION the sum
of FIFTY THOUSAND PESOS (P50,000.00) ONLY, Philippine
Currency, per MBTC (sic) Check No. 30022695, as down
payment for the sale to it of three (3) parcels of land located at
A. Bonifacio, Balintawak, Quezon City, covered by TCT Nos.
258870, 258871, and 258872 of the Registry of Deeds for Metro
Manila District II, at the agreed total price of One Million Six
Hundred Thousand Pesos (P1,600,000.00), under the following
agreement:
1. The sellers hereby undertake to remove and clear the subject
property of all occupants and obstruction within this month of
December 1979 at their own expenses (sic);
2. Upon the subject property being cleared of occupants and
obstruction and ready for turn over to the buyer, the sellers shall
forthwith execute and deliver a deed of absolute sale in favor of
the buyer together with a tax clearance as to payment of capital
gain (sic) tax and such other papers as are necessary for the
buyer to register the sale and (the) issuance of the
corresponding transfer certificate of title in its name, free from
any lien and encumbrance; and simultaneously therewith, the
buyer shall pay the sellers the additional sum of Seven Hundred
Fifty Thousand Pesos (P750,000.00) to complete payment of
fifty per centum (50%) of the price in the amount of Eight
hundred Thousand Pesos (P800,000.00) shall be payable by
the buyer to the sellers within a period of forty-five (45) days
thereafter;
3. The sale carries the usual seller's warranty of peaceful
possession and valid title by the buyer.
4. All expenses for the execution and registration of the
sale, including lawyer's fees, notarial fees, documentary stamp
tax, transfer tax, registration fees, and agent's commission are
for the accounts (sic) of the sellers. 5
The check for P50,000.00 was received and thereafter
encashed by petitioners. However, the accompanying receipt
was not returned by petitioners and instead another receipt
prepared and signed by petitioners was forwarded to private
respondent. This receipt thus reads:
RECEIVED from LEE CHUY REALTY CORPORATION the sum
of FIFTY THOUSAND PESOS (P50,000.00), Philippine
Currency, per MBTC (Sic) Check No. 30022695 as deposit to
sale of three (3) parcels of land located at A. Bonifacio,
Balintawak, Quezon City, covered by TCT Nos. 258870,
258871, and 258872 of the Registry of Deeds for Metro Manila
District II, in lieu of the agreed price, under the following
agreement:
1. The sellers hereby undertake to remove and clear the subject
property of all occupants and obstruction within this month of
December 1979 at their own expenses (sic);
2. Upon the subject property being cleared of occupants and
obstruction and ready for turn over to the buver, the sellers shall
forthwith execute and deliver a deed of absolute sale in favor of
the buyer together with all pertinent papers necessary for the
transfer of the certificate of title in its name, free from any lien
and encumbrance and simultaneously therewith, the buyer shall
pay the seller 50% of the agreed price minus the deposit of
FIFTY THOUSAND PESOS (P 50,000.00) in Philippine
Currency and the balance of 50% of the agreed price shall be
paid within a period of forty five (45) days with a post dated
check;
3. The sale carries the usual seller's warranty of peaceful
possession and valid title by the buyer;
4. The agent's commission will be for the account of the
sellers;
5. All expenses for the execution and registration of the sale,
including lawyer's fees, notarial fees, documentary stamp tax,
transfer tax and registration fees will be deducted from the
agent's commission. 6
On January 12, 1980, petitioner Rosalinda R. Ang sent private
respondent a letter giving the latter up to January 24, 1980 to
pay the balance of the purchase price, and informing it that
failure to do so will result in the cancellation of their agreement.
7
In reply thereto, private respondent wrote petitioners on January
25, 1980 expressing surprise over the demand for payment
made by petitioners since private respondent had been ready
since December 1979 to perform its part of the agreement while
petitioners had not yet complied with their undertaking to clear
the subject properties of the obstructions thereon. 8
On March 3, 1980, private respondent, through its counsel,
wrote petitioners demanding the refund of the P 50,000.00 down
payment made by private respondent on account of the failure
of the petitioners to comply with their undertaking and their
subsequent withdrawal from the sale. 9
Upon the failure of the petitioners to return the P50,000.00 down
payment, private respondent filed a complaint for the collection
of a sum of money with damages before the Court of First
Instance (now Regional Trial Court) of Rizal on May 9, 1980.
The petitioners sought the dismissal of the complaint. They also
filed a counterclaim, praying for actual damages of P20,000.00
a month counted from November 1979 to continue while their
deprivation of rental income persists, as well as moral and
exemplary damages, plus attorney's fees.
After trial where the parties presented only one (1) witness
each, the trial court rendered its decision dated June 23, 1983
10 in favor of petitioners and ordered private respondent to pay
to petitioners the amounts of P170,000.00 with interest of 12%
per annum to commence from the date of the filing of the
complaint, P 25,000.00 as exemplary damages and P 20,000.00
as attorney's fees.
Both petitioners and private respondent appealed the decision
of the trial court.
The Court of Appeals held that petitioners were the ones who
breached the agreement. In a decision dated June 22, 1987, 11
the appellate court reversed the decision of the trial court and
ordered petitioners to pay private respondent the amount of
P50,000.00 with legal interest computed from March 3, 1980
plus P 10,000.00 attorney's fees.
The motion for reconsideration filed by petitioners was denied
by the Court of Appeals in its resolution dated September
18,1987. 12
Hence, this petition for review on certiorari wherein petitioners
raise several errors which all boil down to the issue of which
party, the petitioners or the private respondent, breached the
agreement.
Outside of the documentary evidence submitted by the parties,
the only evidence available are the testimonies of the two
witnesses presented during the trial — Henry Lee Chuy,
president of respondent corporation, for the plaintiff (herein
private respondent) and Ang Kilin alias Tan Tian, father of the
petitioner, for the defense — which testimonies are diametrically
opposed to one another.
After a careful examination of the records of the case, this Court
rules in favor of the private respondent.
There is no doubt that there was a perfected contract for the
sale of subject properties between petitioners and private
respondent as evidenced by the down payment of P50,000.00.
13 What needs to be resolved is the agreed price for the sale of
subject properties. In the receipt prepared by private respondent
which was not signed by petitioners, the stated purchase price is
P1,600,000.00. However, the receipt signed by petitioners,
which substantially reproduced the terms and conditions
embodied in the original receipt, did not state the agreed price.
Henry Lee Chuy testified that the second receipt did not indicate
the agreed price because petitioners wanted to undervalue the
price of P1,600,000.00 so that they will not pay a large amount
of capital gains tax considering that the prior acquisition price for
the property was only P680,000.00. 14 Initially, he refused to
agree but upon the assurance of petitioners' father Ang Kilin that
the clearing work in the property will be completed in a week or
two, he agreed to keep the receipt.
On the other hand, Ang Kilin testified that the real price for the
sale is P2,340,000.00 and not P1,600,000.00 as claimed by
private respondent so that they (the petitioners) did not sign the
receipt prepared by the latter. He claimed that it was Mrs. Lee,
the mother of Henry Lee Chuy, who did not want to state the
correct price since she wanted to undervalue the property. He
adds that they have received offers for the properties in the
amount of P2,160,000.00 from Dolora Chua, 15 and Pl,300.00
per square meter from Eusebio Chang of the Ching Chua
Printing Press. 16 He also testified that inasmuch as the offer of
private respondent was made earlier, petitioners were not in a
position to negotiate with the other buyers.
The respondent Court of Appeals arrived at the conclusion that
the petitioner committed a breach of their contract and acted in
bad faith in dealing with private respondent.
We agree.
Petitioners did not offer any plausible explanation as to why Mrs.
Lee did not want to state the correct price except that the latter
wanted to undervalue the property. The reason why Mrs. Lee
wanted to undervalue the property was not clear. On the other
hand, Henry Lee Chuy categorically stated that petitioners did
not want to state the correct price for purposes of reducing their
capital gains tax liability.
The Court finds that the latter explanation appears to be the
more logical reason why petitioners did not state any specified
amount for the agreed price in the receipt they signed. Since
petitioners acquired the property for only P680,000.00 and the
purchase price of the same was set at P1,600,000.00, they
would have been liable to pay quite a large amount of capital
gains tax for the profits to be realized from the sale, and even
more had the price been set at P2,340,000.00.
Moreover, the original receipt prepared by private respondent
recites in detail the manner of payment of the balance of the
purchase price, to wit: P750,000.00 to be paid after the property
is cleared of occupants and obstructions and upon delivery of
the deed of absolute sale; and the balance of P800,000.00 to be
paid within 45 days thereafter. On the other hand, the receipt
prepared and signed by petitioners merely indicates that 50% of
the price minus the deposit shall be paid upon delivery of the
deed of absolute sale and the other 50% would be paid within
45 days thereafter without stating the price. If the price was
really P2,340,000.00 as claimed by petitioners, they could have
easily written the amount in the receipt. With or without a lawyer
to assist them, petitioners must have been aware of the
importance of indicating the correct amount in the receipt since
they claim that they did not sign the receipt prepared by private
respondent because the price indicated thereon was wrong.
Petitioners were the ones who clearly caused the obscurity
when they omitted the purchase price in the receipt they
prepared and signed. Hence, such obscurity must be construed
against them. 17
The claim of the petitioners, which the trial court believed, is that
they could no longer accept the offers they have received from
Dolora Chua and the Ching Hua Printing Press because of their
previous commitment with private respondent. This pretension is
not supported by the evidence. The records show that
petitioners had entered into an "Agreement of Purchase or Sale"
with Dolora Chua on December 3, 1979, 18 or one day before
the date of the receipt they signed for the P50,000.00 down
payment made by private respondent.
Petitioners also argue that the appellate court e"ed when it
considered the said document as an agreement and not a mere
offer. We have carefully examined the said document and We
find no cogent basis to view the same as a mere offer. It is
clearly stated in the agreement that petitioners received
P20,000.00 from Dolora Chua as down payment for the subject
properties with the balance of the purchase price of
P2,160,000.00 to be paid in full at the time the land shall have
been cleared and that petitioners bind themselves to deliver to
the buyer a deed of sale and conveyance upon full payment.
The terms of the agreement are so. clear as not to leave room
for any other interpretation. 19
The aforementioned agreement further bolsters the conclusion
that the price agreed upon by petitioners and private respondent
was P1,600,000.00. If the true price was P2,340,000.00, it
would be unusual for petitioners to enter into such an agreement
with Chua at a lesser purchase price. The only logical
conclusion is that petitioners had intentionally omitted the price
of P1,600,000.00 in the receipt they signed either to compel
private respondent to agree to a price increase or to enable
them to back out of their agreement notwithstanding their plan to
reduce their capital gains tax liability.
Having settled the issue as to the agreed purchase price, We
are now faced with the question of who breached the agreement
and, as a corollary to this, who has the right to withdraw from
the sale.

The Court of Appeals found that the petitioners breached the
agreement when they failed to undertake fulfillment of the two
conditions embodied in the same; (1) that petitioners will
undertake to remove and clear the subject property of all
occupants and obstructions within the month of December 1979
and (2) that when the subject property is cleared of all
occupants and obstructions, the petitioners shall deliver a deed
of absolute sale in favor of private respondent with all pertinent
papers necessary for the registration and issuance of a
certificate of title in the name of private respondent.
Said conclusion of the Court of Appeals that petitioners failed to
comply with their part of the agreement is conclusive upon this
Court. 20 The appellate court discussed in detail its findings on
the matter. We have gone through the records of this case and
find no cogent reason to disturb such findings.
However, such breach of the agreement by petitioner does not
warrant a resolution of the contract. 21 While it is true that in
reciprocal obligations, such as the contract of purchase and sale
in this case, the power to rescind is implied and any of the
contracting parties may, upon non-fulfillment by the other party
of his part of the obligation, resolve the contract, 22 rescission
wig not be permitted for a slight or casual breach of the contract.
Rescission may be had only for such breaches that are so
substantial and fundamental as to defeat the object of the
parties in making the agreement. 23 The two aforementioned
conditions that were breached by petitioners are not essential
for the fulfillment of the obligations to sen on their part but
merely an incidental undertaking. The rescission of the contract
may not be allowed on this ground alone.
At any rate, private respondent at first did not seek to rescind
the contract on the basis of the non-fulfillment of these
conditions. Private respondent in fact sought definite advice
from petitioners as to when they can comply with the conditions
since it was ready to perform its part of the agreement since
December 1979. This was after it received the letter of
petitioners demanding payment of the balance of the purchase
price on or before January 24, 1980 with the threat that failure to
do so will lead to the repudiation of the agreement. Of course,
petitioners cannot unilaterally repudiate the contract for the
slight delay in payment incurred by private respondent which,
even if true, cannot also be a ground for rescission since the
same amounts to a slight breach. 24 Indeed, it was the failure of
the petitioners to comply with the aforementioned conditions of
the agreement that caused the delay in the payment by private
respondent. However, when petitioners still failed to comply with
their obligation and refused to proceed with the sale unless the
purchase price is increased, that was the time private
respondent demanded the resolution of the sale by asking for
the refund of the downpayment.
The Court holds that when petitioners refused to proceed with
the sale unless private respondent agreed to pay the higher
price of P2,340,000.00, the petitioners thereby committed a
serious breach of the agreement. There was a perfected
contract of sale between the parties and the purchase price was
set at P1,600,000.00. Petitioners cannot increase the purchase
price agreed upon without the consent of private respondent. As
private respondent was willing to buy the subject property at the
price of P1,600,000.00 as agreed upon and petitioners were not
willing to sell unless the price is increased to P2,340,000.00, 25
private respondent had the right to rescind the agreement as
petitioners committed a serious breach of the terms of the same.
Moreover, as the Court of Appeals correctly observed, since
petitioners had already sold the subject properties to Dolora
Chua, they can no longer perform what was incumbent upon
them under the terms of the agreement, that is, to deliver the
subject property to private respondent. This is another breach of
their agreement. The appellate court aptly characterized the
actuations of petitioners to be "double-dealing."
As a consequence of the resolution of the contract of sale, the
parties should be restored to their original situation. 26
Petitioners should, therefore, be liable to refund the P50,000.00
down payment they have received from private respondent with
legal interest computed from the date of the extrajudicial
demand made on March 3, 1980. 27

WHEREFORE, the decision of the Court of Appeals dated June

22, 1987 in Case No. CA-GR CV No. 07139 is hereby
AFFIRMED. No pronouncement as to costs.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11908 February 4, 1918
ANTONIO M.A BARRETTO, plaintiff-appellant,
vs.
JOSE SANTA MARINA and "LA INSULAR," defendants-
appellees.
Alfredo Chcote and Jose Arnaiz for appellant.
William A. Kincaid and Kincaid and Perkins for appellee.
CARSON, J.:
The material facts upon which our disposition of this appeal
necessarily turns are set out at length in our opinion in the case
of Barretto vs. Santa Marina, decided December 2, 1913 (26
Phil rep., 200). This court having ruled against the plaintiff's
contention in the former case, he now sets up a claim for
interest at the legal rate upon the amount of the purchase price
of his share (participacion) in the business from the 1st day of
July, 1909, to the 22d day of November, 1910, the day upon
which it was turned over to him.
The finding of facts, and the reasoning upon which we based
our rulings in the former case, are manifestly conclusive in the
present case as to the plaintiff's claim of a right to interest from
the first of July, 1909, to the third of May, 1910.
In the former case we held that the sale of plaintiff's share
(participacion) in the tobacco factory was consummated on the
latter date; that the valuation set upon his share (participacion)
in business was determined as of that day by the committee
charged with the duty of ascertaining the cash value of this
share (participacion) in order to determine the exact amount
which the parties had agreed upon as the purchase price to be
paid therefor; and that the committee had included that the
plaintiff's share of the profits of the business down to the third of
May, 1910, in their estimate of the value of his share
(participacion) in the business of that date.
These rulings were made after a review of the same record
which is now relied upon by the plaintiff in support of his claim of
interest upon the amount fixed by the committee as the true
value of his share (participacion) in the business. We find
nothing in the record of the contention of counsel in this regard
which would justify or necessitate a modification or reversal of
the conclusions reached by us in our former opinion.
Plaintiff's share (participacion) in the business having been sold
on the 3rd day of May, 1910, for a stipulated price, that is to say,
for its value on that day as fixed by the valuation committee, it is
very clear that he is not entitled to interest on the amount fixed
by the committee, prior to the date on which the sale was
consummated (3rd of may, 1910).
So also plaintiff's contention that he should be allowed interest
on the amount of the purchase price from the date of the sale,
May 3, 1910, down to the day upon which the money was
actually turned over to him, November 22, 1910, cannot be
sustained. Under the express terms of the agreement for the
sale on May 3, 1910, the plaintiff agreed to accept, and the
defendant to pay, the amount which the committee should find
to be the true value of plaintiff's share (participacion) in the
business as of that day. Under the agreement the defendant
neither expressly nor impliedly obligated himself to pay interest
on that amount pending the report of the committee. The only
contractual obligation assumed by him was that he would pay
the amount fixed by the committee in cash immediately upon the
making of the award by the committee, and in accordance with
its terms.
The committee's report is dated November 14, 1910, and it
appears that promptly upon the submission of this report, the
amount awarded the plaintiff (P280,025.16) was paid over by
the defendant to the plaintiff in cash; and the letter of counsel for
plaintiff dated November 17, 1910, tendering a formal deed of
sale of plaintiff's share (participacion) in the business and
making demand for the purchase price as fixed by the
committee, read together with the formal deed of sale executed
November 22, 1910, with its acknowledgment of the receipt of
the purchase price, leaves no room for doubt that at that time
the parties understood and accepted the purchase price therein
set forth as full payment of plaintiff's share (participacion) in the
business in exact conformity with the conditions imposed in the
agreement consummated to May 3, 1910.

The right to interest arises either by virtue of a contract or by

way of damages for delay or failure (demora) to pay the
principal on which interest is demanded, at the time when the
debtor is obligated to make such payment. In the case at bar
where was no contract, express or implied, for the payment of
interest pending the award of the committee appointed to value
the property sold on May 3, 1910, and there was no delay in the
punctual compliance with defendant's obligation to make
immediate payment, in cash, of the amount of the award, upon
the filing of the report of the committee.

We conclude that the judgment entered in the court below

dismissing the complaint in this case sine die should be
affirmed, with the costs of this instance against the appellant. So
ordered.

Arellano, C.J., Torres, Johnson, Street, Malcolm and Avanceña,

JJ., concur.
Araullo J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-9935 February 1, 1915
YU TEK and CO., plaintiff-appellant,
vs.
BASILIO GONZALES, defendant-appellant.
Beaumont, Tenney and Ferrier for plaintiff.
Buencamino and Lontok for defendant.
TRENT, J.:
The basis of this action is a written contract, Exhibit A, the
pertinent paragraphs of which follow:
1. That Mr. Basilio Gonzalez hereby acknowledges receipt of
the sum of P3,000 Philippine currency from Messrs. Yu Tek and
Co., and that in consideration of said sum be obligates himself
to deliver to the said Yu Tek and Co., 600 piculs of sugar of the
first and second grade, according to the result of the
polarization, within the period of three months, beginning on the
1st day of January, 1912, and ending on the 31st day of March
of the same year, 1912.
2. That the said Mr. Basilio Gonzales obligates himself to deliver
to the said Messrs. Yu Tek and Co., of this city the said 600
piculs of sugar at any place within the said municipality of Santa
Rosa which the said Messrs. Yu Tek and Co., or a
representative of the same may designate.
3. That in case the said Mr. Basilio Gonzales does not deliver to
Messrs. Yu Tek and Co. the 600 piculs of sugar within the
period of three months, referred to in the second paragraph of
this document, this contract will be rescinded and the said Mr.
Basilio Gonzales will then be obligated to return to Messrs. Yu
Tek and Co. the P3,000 received and also the sum of P1,200 by
way of indemnity for loss and damages.
Plaintiff proved that no sugar had been delivered to it under this
contract nor had it been able to recover the P3,000. Plaintiff
prayed for judgment for the P3,000 and, in addition, for P1,200
under paragraph 4, supra. Judgment was rendered for P3,000
only, and from this judgment both parties appealed.
The points raised by the defendant will be considered first. He
alleges that the court erred in refusing to permit parol evidence
showing that the parties intended that the sugar was to be
secured from the crop which the defendant raised on his
plantation, and that he was unable to fulfill the contract by
reason of the almost total failure of his crop. This case appears
to be one to which the rule which excludes parol evidence to
add to or vary the terms of a written contract is decidedly
applicable. There is not the slightest intimation in the contract
that the sugar was to be raised by the defendant. Parties are
presumed to have reduced to writing all the essential conditions
of their contract. While parol evidence is admissible in a variety
of ways to explain the meaning of written contracts, it cannot
serve the purpose of incorporating into the contract additional
contemporaneous conditions which are not mentioned at all in
the writing, unless there has been fraud or mistake. In an early
case this court declined to allow parol evidence showing that a
party to a written contract was to become a partner in a firm
instead of a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep.,
592.) Again, in Eveland vs. Eastern Mining Co. (14 Phil. Rep.,
509) a contract of employment provided that the plaintiff should
receive from the defendant a stipulated salary and expenses.
The defendant sought to interpose as a defense to recovery that
the payment of the salary was contingent upon the plaintiff's
employment redounding to the benefit of the defendant
company. The contract contained no such condition and the
court declined to receive parol evidence thereof.
In the case at bar, it is sought to show that the sugar was to be
obtained exclusively from the crop raised by the defendant.
There is no clause in the written contract which even remotely
suggests such a condition. The defendant undertook to deliver a
specified quantity of sugar within a specified time. The contract
placed no restriction upon the defendant in the matter of
obtaining the sugar. He was equally at liberty to purchase it on
the market or raise it himself. It may be true that defendant
owned a plantation and expected to raise the sugar himself, but
he did not limit his obligation to his own crop of sugar. Our
conclusion is that the condition which the defendant seeks to
add to the contract by parol evidence cannot be considered. The
rights of the parties must be determined by the writing itself.
The second contention of the defendant arises from the first. He
assumes that the contract was limited to the sugar he might
raise upon his own plantation; that the contract represented a
perfected sale; and that by failure of his crop he was relieved
from complying with his undertaking by loss of the thing due.
(Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty
in assuming that there was a perfected sale. Article 1450
defines a perfected sale as follows:
The sale shall be perfected between vendor and vendee and
shall be binding on both of them, if they have agreed upon the
thing which is the object of the contract and upon the price, even
when neither has been delivered.
Article 1452 reads: "The injury to or the profit of the thing sold
shall, after the contract has been perfected, be governed by the
provisions of articles 1096 and 1182."
This court has consistently held that there is a perfected sale
with regard to the "thing" whenever the article of sale has been
physically segregated from all other articles Thus, a particular
tobacco factory with its contents was held sold under a contract
which did not provide for either delivery of the price or of the
thing until a future time. McCullough vs. Aenlle and Co. (3 Phil.
Rep., 295). Quite similar was the recent case of Barretto vs.
Santa Marina (26 Phil. Rep., 200) where specified shares of
stock in a tobacco factory were held sold by a contract which
deferred delivery of both the price and the stock until the latter
had been appraised by an inventory of the entire assets of the
company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a
specific house was held perfected between the vendor and
vendee, although the delivery of the price was withheld until the
necessary documents of ownership were prepared by the
vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the
plaintiff had delivered a quantity of hemp into the warehouse of
the defendant. The defendant drew a bill of exchange in the sum
of P800, representing the price which had been agreed upon for
the hemp thus delivered. Prior to the presentation of the bill for
payment, the hemp was destroyed. Whereupon, the defendant
suspended payment of the bill. It was held that the hemp having
been already delivered, the title had passed and the loss was
the vendee's. It is our purpose to distinguish the case at bar
from all these cases.
In the case at bar the undertaking of the defendant was to sell to
the plaintiff 600 piculs of sugar of the first and second classes.
Was this an agreement upon the "thing" which was the object of
the contract within the meaning of article 1450, supra? Sugar is
one of the staple commodities of this country. For the purpose of
sale its bulk is weighed, the customary unit of weight being
denominated a "picul." There was no delivery under the
contract. Now, if called upon to designate the article sold, it is
clear that the defendant could only say that it was "sugar." He
could only use this generic name for the thing sold. There was
no "appropriation" of any particular lot of sugar. Neither party
could point to any specific quantity of sugar and say: "This is the
article which was the subject of our contract." How different is
this from the contracts discussed in the cases referred to above!
In the McCullough case, for instance, the tobacco factory which
the parties dealt with was specifically pointed out and
distinguished from all other tobacco factories. So, in the Barretto
case, the particular shares of stock which the parties desired to
transfer were capable of designation. In the Tan Leonco case,
where a quantity of hemp was the subject of the contract, it was
shown that that quantity had been deposited in a specific
warehouse, and thus set apart and distinguished from all other
hemp.
A number of cases have been decided in the State of Louisiana,
where the civil law prevails, which confirm our position. Perhaps
the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145;
47 Sou., 444). In this case a contract was entered into by a
traveling salesman for a quantity of shoes, the sales having
been made by sample. The court said of this contract:
But it is wholly immaterial, for the purpose of the main question,
whether Mitchell was authorized to make a definite contract of
sale or not, since the only contract that he was in a position to
make was an agreement to sell or an executory contract of sale.
He says that plaintiff sends out 375 samples of shoes, and as
he was offering to sell by sample shoes, part of which had not
been manufactured and the rest of which were incorporated in
plaintiff's stock in Lynchburg, Va., it was impossible that he and
Seegars and Co. should at that time have agreed upon the
specific objects, the title to which was to pass, and hence there
could have been no sale. He and Seegars and Co. might have
agreed, and did (in effect ) agree, that the identification of the
objects and their appropriation to the contract necessary to
make a sale should thereafter be made by the plaintiff, acting for
itself and for Seegars and Co., and the legend printed in red ink
on plaintiff's billheads ("Our responsibility ceases when we take
transportation Co's. receipt `In good order'" indicates plaintiff's
idea of the moment at which such identification and
appropriation would become effective. The question presented
was carefully considered in the case of State vs. Shields, et al.
(110 La., 547, 34 Sou., 673) (in which it was absolutely
necessary that it should be decided), and it was there held that
in receiving an order for a quantity of goods, of a kind and at a
price agreed on, to be supplied from a general stock,
warehoused at another place, the agent receiving the order
merely enters into an executory contract for the sale of the
goods, which does not divest or transfer the title of any
determinate object, and which becomes effective for that
purpose only when specific goods are thereafter appropriated to
the contract; and, in the absence of a more specific agreement
on the subject, that such appropriated takes place only when the
goods as ordered are delivered to the public carriers at the
place from which they are to be shipped, consigned to the
person by whom the order is given, at which time and place,
therefore, the sale is perfected and the title passes.
This case and State vs. Shields, referred to in the above
quotation are amply illustrative of the position taken by the
Louisiana court on the question before us. But we cannot refrain
from referring to the case of Larue and Prevost vs. Rugely, Blair
and Co. (10 La. Ann., 242) which is summarized by the court
itself in the Shields case as follows:
. . . It appears that the defendants had made a contract for the
sale, by weight, of a lot of cotton, had received $3,000 on
account of the price, and had given an order for its delivery,
which had been presented to the purchaser, and recognized by
the press in which the cotton was stored, but that the cotton had
been destroyed by fire before it was weighed. It was held that it
was still at the risk of the seller, and that the buyer was entitled
to recover the $3,000 paid on account of the price.
We conclude that the contract in the case at bar was merely an
executory agreement; a promise of sale and not a sale. At there
was no perfected sale, it is clear that articles 1452, 1096, and
1182 are not applicable. The defendant having defaulted in his
engagement, the plaintiff is entitled to recover the P3,000 which
it advanced to the defendant, and this portion of the judgment
appealed from must therefore be affirmed.
The plaintiff has appealed from the judgment of the trial court on
the ground that it is entitled to recover the additional sum of
P1,200 under paragraph 4 of the contract. The court below held
that this paragraph was simply a limitation upon the amount of
damages which could be recovered and not liquidated damages
as contemplated by the law. "It also appears," said the lower
court, "that in any event the defendant was prevented from
fulfilling the contract by the delivery of the sugar by condition
over which he had no control, but these conditions were not
sufficient to absolve him from the obligation of returning the
money which he received."

The above quoted portion of the trial court's opinion appears to

be based upon the proposition that the sugar which was to be
delivered by the defendant was that which he expected to obtain
from his own hacienda and, as the dry weather destroyed his
growing cane, he could not comply with his part of the contract.
As we have indicated, this view is erroneous, as, under the
contract, the defendant was not limited to his growth crop in
order to make the delivery. He agreed to deliver the sugar and
nothing is said in the contract about where he was to get it.

We think is a clear case of liquidated damages. The contract

plainly states that if the defendant fails to deliver the 600 piculs
of sugar within the time agreed on, the contract will be rescinded
and he will be obliged to return the P3,000 and pay the sum of
P1,200 by way of indemnity for loss and damages. There cannot
be the slightest doubt about the meaning of this language or the
intention of the parties. There is no room for either interpretation
or construction. Under the provisions of article 1255 of the Civil
Code contracting parties are free to execute the contracts that
they may consider suitable, provided they are not in
contravention of law, morals, or public order. In our opinion
there is nothing in the contract under consideration which is
opposed to any of these principles.

For the foregoing reasons the judgment appealed from is

modified by allowing the recovery of P1,200 under paragraph 4
of the contract. As thus modified, the judgment appealed from is
affirmed, without costs in this instance.

Arellano, C.J., Torres, Carson and Araullo, JJ., concur.