You are on page 1of 36

Republic of the Philippines development and exploitation of said mining claims into the Larap

SUPREME COURT Iron Mines, a single proprietorship owned solely by and belonging
Manila to him, on the same royalty basis provided for in Exhibit "3".
Thereafter, Gaite embarked upon the development and
EN BANC exploitation of the mining claims in question, opening and paving
roads within and outside their boundaries, making other
G.R. No. L-11827 July 31, 1961 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
FERNANDO A. GAITE, plaintiff-appellee,
ore.
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES
& SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO For some reason or another, Isabelo Fonacier decided to revoke
DANTE, PACIFICO ESCANDOR and FERNANDO the authority granted by him to Gaite to exploit and develop the
TY, defendants-appellants. 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,
Alejo Mabanag for plaintiff-appellee.
1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
consideration of P20,000.00, plus 10% of the royalties that
defendants-appellants.
Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or outside
REYES, J.B.L., J.: said claims, the right to use the business name "Larap Iron Mines"
and its goodwill, and all the records and documents relative to the
This appeal comes to us directly from the Court of First Instance mines. In the same document, Gaite transferred to Fonacier all his
because the claims involved aggregate more than P200,000.00. 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
Defendant-appellant Isabelo Fonacier was the owner and/or consideration of the sum of P75,000.00, P10,000.00 of which was
holder, either by himself or in a representative capacity, of 11 iron paid upon the signing of the agreement, and
lode mineral claims, known as the Dawahan Group, situated in the
municipality of Jose Panganiban, province of Camarines Norte. b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first letter of
By a "Deed of Assignment" dated September 29, 1952(Exhibit "3"), credit covering the first shipment of iron ores and of the first
Fonacier constituted and appointed plaintiff-appellee Fernando A. amount derived from the local sale of iron ore made by the
Gaite as his true and lawful attorney-in-fact to enter into a contract Larap Mines & Smelting Co. Inc., its assigns,
with any individual or juridical person for the exploration and administrators, or successors in interests.
development of the mining claims aforementioned on a royalty
basis of not less than P0.50 per ton of ore that might be extracted To secure the payment of the said balance of P65,000.00, Fonacier
therefrom. On March 19, 1954, Gaite in turn executed a general promised to execute in favor of Gaite a surety bond, and pursuant
assignment (Record on Appeal, pp. 17-19) conveying the to the promise, Fonacier delivered to Gaite a surety bond dated
December 8, 1954 with himself (Fonacier) as principal and the of the approximately 24,000 tons of iron ore had been made by the
Larap Mines and Smelting Co. and its stockholders George Larap Mines & Smelting Co., Inc., nor had the P65,000.00 balance
Krakower, Segundina Vivas, Pacifico Escandor, Francisco Dante, of the price of said ore been paid to Gaite by Fonacier and his
and Fernando Ty as sureties (Exhibit "A-1"). Gaite testified, sureties payment of said amount, on the theory that they had lost
however, that when this bond was presented to him by Fonacier right to make use of the period given them when their bond, Exhibit
together with the "Revocation of Power of Attorney and Contract", "B" automatically expired (Exhibits "C" to "C-24"). And when
Exhibit "A", on December 8, 1954, he refused to sign said Exhibit Fonacier and his sureties failed to pay as demanded by Gaite, the
"A" unless another bond under written by a bonding company was latter filed the present complaint against them in the Court of First
put up by defendants to secure the payment of the P65,000.00 Instance of Manila (Civil Case No. 29310) for the payment of the
balance of their price of the iron ore in the stockpiles in the mining P65,000.00 balance of the price of the ore, consequential
claims. Hence, a second bond, also dated December 8, 1954 damages, and attorney's fees.
(Exhibit "B"),was executed by the same parties to the first bond
Exhibit "A-1", with the Far Eastern Surety and Insurance Co. as All the defendants except Francisco Dante set up the uniform
additional surety, but it provided that the liability of the surety defense that the obligation sued upon by Gaite was subject to a
company would attach only when there had been an actual sale of condition that the amount of P65,000.00 would be payable out of
iron ore by the Larap Mines & Smelting Co. for an amount of not the first letter of credit covering the first shipment of iron ore and/or
less then P65,000.00, and that, furthermore, the liability of said the first amount derived from the local sale of the iron ore by the
surety company would automatically expire on December 8, 1955. Larap Mines & Smelting Co., Inc.; that up to the time of the filing of
Both bonds were attached to the "Revocation of Power of Attorney the complaint, no sale of the iron ore had been made, hence the
and Contract", Exhibit "A", and made integral parts thereof. condition had not yet been fulfilled; and that consequently, the
obligation was not yet due and demandable. Defendant Fonacier
On the same day that Fonacier revoked the power of attorney he also contended that only 7,573 tons of the estimated 24,000 tons
gave to Gaite and the two executed and signed the "Revocation of of iron ore sold to him by Gaite was actually delivered, and
Power of Attorney and Contract", Exhibit "A", Fonacier entered into counterclaimed for more than P200,000.00 damages.
a "Contract of Mining Operation", ceding, transferring, and
conveying unto the Larap Mines and Smelting Co., Inc. the right to At the trial of the case, the parties agreed to limit the presentation
develop, exploit, and explore the mining claims in question, of evidence to two issues:
together with the improvements therein and the use of the name
"Larap Iron Mines" and its good will, in consideration of certain (1) Whether or not the obligation of Fonacier and his sureties to
royalties. Fonacier likewise transferred, in the same document, the pay Gaite P65,000.00 become due and demandable when the
complete title to the approximately 24,000 tons of iron ore which defendants failed to renew the surety bond underwritten by the Far
he acquired from Gaite, to the Larap & Smelting Co., in Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which expired
consideration for the signing by the company and its stockholders on December 8, 1955; and
of the surety bonds delivered by Fonacier to Gaite (Record on
Appeal, pp. 82-94).
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff
Gaite to defendant Fonacier were actually in existence in the
Up to December 8, 1955, when the bond Exhibit "B" expired with mining claims when these parties executed the "Revocation of
respect to the Far Eastern Surety and Insurance Company, no sale Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of the results that we have reached in this case, which we shall hereafter
defendants to pay plaintiff the P65,000.00 balance of the price of discuss.
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 The main issues presented by appellants in this appeal are:
defendants, such sale to be effected within one year or before
December 8, 1955; that the giving of security was a condition (1) that the lower court erred in holding that the obligation of
precedent to Gait's giving of credit to defendants; and that as the appellant Fonacier to pay appellee Gaite the P65,000.00 (balance
latter failed to put up a good and sufficient security in lieu of the Far of the price of the iron ore in question)is one with a period or term
Eastern Surety bond (Exhibit "B") which expired on December 8, and not one with a suspensive condition, and that the term expired
1955, the obligation became due and demandable under Article on December 8, 1955; and
1198 of the New Civil Code.
(2) that the lower court erred in not holding that there were only
As to the second question, the lower court found that plaintiff Gaite 10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite to
did have approximately 24,000 tons of iron ore at the mining claims appellant Fonacier.
in question at the time of the execution of the contract Exhibit "A."
The first issue involves an interpretation of the following provision
Judgment was, accordingly, rendered in favor of plaintiff Gaite in the contract Exhibit "A":
ordering defendants to pay him, jointly and severally, P65,000.00
with interest at 6% per annum from December 9, 1955 until
7. That Fernando Gaite or Larap Iron Mines hereby
payment, plus costs. From this judgment, defendants jointly
transfers to Isabelo F. Fonacier all his rights and interests
appealed to this Court.
over the 24,000 tons of iron ore, more or less, above-
referred to together with all his rights and interests to
During the pendency of this appeal, several incidental motions operate the mine in consideration of the sum of SEVENTY-
were presented for resolution: a motion to declare the appellants FIVE THOUSAND PESOS (P75,000.00) which the latter
Larap Mines & Smelting Co., Inc. and George Krakower in binds to pay as follows:
contempt, filed by appellant Fonacier, and two motions to dismiss
the appeal as having become academic and a motion for new trial
a. TEN THOUSAND PESOS (P10,000.00) will be paid
and/or to take judicial notice of certain documents, filed by appellee
upon the signing of this agreement.
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 b. The balance of SIXTY-FIVE THOUSAND PESOS
allegedly is "property in litigation", has not been substantiated; and (P65,000.00)will be paid from and out of the first letter of
even if true, does not make these appellants guilty of contempt, credit covering the first shipment of iron ore made by the
because what is under litigation in this appeal is appellee Gaite's Larap Mines & Smelting Co., Inc., its assigns,
right to the payment of the balance of the price of the ore, and not administrators, or successors in interest.
the iron ore itself. As for the several motions presented by appellee
Gaite, it is unnecessary to resolve these motions in view of the 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 indicates that they admitted the definite existence of their obligation
was only a suspensive period or term. What characterizes a to pay the balance of P65,000.00.
conditional obligation is the fact that its efficacy or obligatory force
(as distinguished from its demandability) is subordinated to the 3) To subordinate the obligation to pay the remaining P65,000.00
happening of a future and uncertain event; so that if the suspensive to the sale or shipment of the ore as a condition precedent, would
condition does not take place, the parties would stand as if the be tantamount to leaving the payment at the discretion of the
conditional obligation had never existed. That the parties to the debtor, for the sale or shipment could not be made unless the
contract Exhibit "A" did not intend any such state of things to prevail appellants took steps to sell the ore. Appellants would thus be able
is supported by several circumstances: to postpone payment indefinitely. The desireability of avoiding such
a construction of the contract Exhibit "A" needs no stressing.
1) The words of the contract express no contingency in the buyer's
obligation to pay: "The balance of Sixty-Five Thousand Pesos 4) Assuming that there could be doubt whether by the wording of
(P65,000.00) will be paid out of the first letter of credit covering the the contract the parties indented a suspensive condition or a
first shipment of iron ores . . ." etc. There is no uncertainty that the suspensive period (dies ad quem) for the payment of the
payment will have to be made sooner or later; what is P65,000.00, the rules of interpretation would incline the scales in
undetermined is merely the exact date at which it will be made. By favor of "the greater reciprocity of interests", since sale is
the very terms of the contract, therefore, the existence of the essentially onerous. The Civil Code of the Philippines, Article 1378,
obligation to pay is recognized; only its maturity or demandability is paragraph 1, in fine, provides:
deferred.
If the contract is onerous, the doubt shall be settled in favor
2) A contract of sale is normally commutative and onerous: not only of the greatest reciprocity of interests.
does each one of the parties assume a correlative obligation (the
seller to deliver and transfer ownership of the thing sold and the and there can be no question that greater reciprocity obtains if the
buyer to pay the price),but each party anticipates performance by buyer' obligation is deemed to be actually existing, with only its
the other from the very start. While in a sale the obligation of one maturity (due date) postponed or deferred, that if such obligation
party can be lawfully subordinated to an uncertain event, so that were viewed as non-existent or not binding until the ore was sold.
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
The only rational view that can be taken is that the sale of the ore
expectations, emptio spei), it is not in the usual course of business
to Fonacier was a sale on credit, and not an aleatory contract
to do so; hence, the contingent character of the obligation must
where the transferor, Gaite, would assume the risk of not being
clearly appear. Nothing is found in the record to evidence that Gaite
paid at all; and that the previous sale or shipment of the ore was
desired or assumed to run the risk of losing his right over the ore
not a suspensive condition for the payment of the balance of the
without getting paid for it, or that Fonacier understood that Gaite
agreed price, but was intended merely to fix the future date of the
assumed any such risk. This is proved by the fact that Gaite
payment.
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 This issue settled, the next point of inquiry is whether appellants,
company; and the fact that appellants did put up such bonds Fonacier and his sureties, still have the right to insist that Gaite
should wait for the sale or shipment of the ore before receiving would automatically expire within one year was a waiver of its
payment; or, in other words, whether or not they are entitled to take renewal after the expiration date. No such waiver could have been
full advantage of the period granted them for making the payment. 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
We agree with the court below that the appellant have forfeited the appellants had agreed to sell the ore and pay Gaite before the
right court below that the appellants have forfeited the right to surety company's bond expired on December 8, 1955. But in the
compel Gaite to wait for the sale of the ore before receiving latter case the defendants-appellants' obligation to pay became
payment of the balance of P65,000.00, because of their failure to absolute after one year from the transfer of the ore to Fonacier by
renew the bond of the Far Eastern Surety Company or else replace virtue of the deed Exhibit "A.".
it with an equivalent guarantee. The expiration of the bonding
company's undertaking on December 8, 1955 substantially All the alternatives, therefore, lead to the same result: that Gaite
reduced the security of the vendor's rights as creditor for the unpaid acted within his rights in demanding payment and instituting this
P65,000.00, a security that Gaite considered essential and upon action one year from and after the contract (Exhibit "A") was
which he had insisted when he executed the deed of sale of the executed, either because the appellant debtors had impaired the
ore to Fonacier (Exhibit "A"). The case squarely comes under securities originally given and thereby forfeited any further time
paragraphs 2 and 3 of Article 1198 of the Civil Code of the within which to pay; or because the term of payment was originally
Philippines: of no more than one year, and the balance of P65,000.00 became
due and payable thereafter.
"ART. 1198. The debtor shall lose every right to make use
of the period: 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
(1) . . . appellee Gaite to appellant Fonacier, and whether, if there had
been a short-delivery as claimed by appellants, they are entitled to
(2) When he does not furnish to the creditor the guaranties the payment of damages, we must, at the outset, stress two
or securities which he has promised. 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
(3) When by his own acts he has impaired said guaranties
"A," being a mere estimate by the parties of the total tonnage
or securities after their establishment, and when through
weight of the mass; and second, that the evidence shows that
fortuitous event they disappear, unless he immediately
neither of the parties had actually measured of weighed the mass,
gives new ones equally satisfactory.
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
Appellants' failure to renew or extend the surety company's bond it by the estimated weight per ton of each cubic meter.
upon its expiration plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately renewed or replaced.
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
There is no merit in appellants' argument that Gaite's acceptance measuring or weighing of the ore sold in order to complete or
of the surety company's bond with full knowledge that on its face it perfect the sale, nor was the price of P75,000,00 agreed upon by
the parties based upon any such measurement.(see Art. 1480, made by Leopoldo F. Abad, chief of the Mines and Metallurgical
second par., New Civil Code). The subject matter of the sale is, Division of the Bureau of Mines, a government pensionado to the
therefore, a determinate object, the mass, and not the actual States and a mining engineering graduate of the Universities of
number of units or tons contained therein, so that all that was Nevada and California, with almost 22 years of experience in the
required of the seller Gaite was to deliver in good faith to his buyer Bureau of Mines. This witness placed the tonnage factor of every
all of the ore found in the mass, notwithstanding that the quantity cubic meter of iron ore at between 3 metric tons as minimum to 5
delivered is less than the amount estimated by them (Mobile metric tons as maximum. This estimate, in turn, closely
Machinery & Supply Co., Inc. vs. York Oilfield Salvage Co., Inc. corresponds to the average tonnage factor of 3.3 adopted in his
171 So. 872, applying art. 2459 of the Louisiana Civil Code). There corrected report (Exhibits "FF" and FF-1") by engineer Nemesio
is no charge in this case that Gaite did not deliver to appellants all Gamatero, who was sent by the Bureau of Mines to the mining
the ore found in the stockpiles in the mining claims in questions; claims involved at the request of appellant Krakower, precisely to
Gaite had, therefore, complied with his promise to deliver, and make an official estimate of the amount of iron ore in Gaite's
appellants in turn are bound to pay the lump price. stockpiles after the dispute arose.

But assuming that plaintiff Gaite undertook to sell and appellants Even granting, then, that the estimate of 6,609 cubic meters of ore
undertook to buy, not a definite mass, but approximately 24,000 in the stockpiles made by appellant's witness Cipriano Manlañgit is
tons of ore, so that any substantial difference in this quantity correct, if we multiply it by the average tonnage factor of 3.3 tons
delivered would entitle the buyers to recover damages for the to a cubic meter, the product is 21,809.7 tons, which is not very far
short-delivery, was there really a short-delivery in this case? from the estimate of 24,000 tons made by appellee Gaite,
considering that actual weighing of each unit of the mass was
We think not. As already stated, neither of the parties had actually practically impossible, so that a reasonable percentage of error
measured or weighed the whole mass of ore cubic meter by cubic should be allowed anyone making an estimate of the exact quantity
meter, or ton by ton. Both parties predicate their respective claims in tons found in the mass. It must not be forgotten that the contract
only upon an estimated number of cubic meters of ore multiplied Exhibit "A" expressly stated the amount to be 24,000 tons, more or
by the average tonnage factor per cubic meter. less. (ch. Pine River Logging & Improvement Co. vs U.S., 279, 46
L. Ed. 1164).
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 There was, consequently, no short-delivery in this case as would
appellants contend that by actual measurement, their witness entitle appellants to the payment of damages, nor could Gaite have
Cirpriano Manlañgit found the total volume of ore in the stockpiles been guilty of any fraud in making any misrepresentation to
to be only 6.609 cubic meters. As to the average weight in tons per appellants as to the total quantity of ore in the stockpiles of the
cubic meter, the parties are again in disagreement, with appellants mining claims in question, as charged by appellants, since Gaite's
claiming the correct tonnage factor to be 2.18 tons to a cubic meter, estimate appears to be substantially correct.
while appellee Gaite claims that the correct tonnage factor is about
3.7. WHEREFORE, finding no error in the decision appealed from, we
hereby affirm the same, with costs against appellants. Bengzon,
In the face of the conflict of evidence, we take as the most reliable C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Dizon, De
estimate of the tonnage factor of iron ore in this case to be that Leon and Natividad, JJ., concur.
SECOND DIVISION land to Nestor and Elisea Mercado who took possession
of the land in that year.
Petitioner contested the award in court. She claimed
[G.R. No. 115101. March 2, 1998] precedence not only in actual occupation of the land but
also in application for its purchase. Her right to the land
was upheld by the Court of First Instance of Quezon City,
whose decision was later affirmed by the Intermediate
FIDELA MANANZALA, petitioner, vs. COURT OF Appellate Court. Consequently, the PHHC cancelled the
APPEALS, and CORAZON award made to the Mercado spouses.
ARAEZ, respondents.
On December 14, 1984, petitioner paid in full the price
DECISION of the land under the deed of conditional sale. The NHA
therefore executed a deed of sale in her favor on January
MENDOZA, J.: 14, 1985.[2] The next day a transfer certificate of title to the
lot was issued in the name of petitioner.[3]
This is a petition for review on certiorari of the
decision[1] of the Court of Appeals in C.A.-G.R. CV No. On January 31, 1985, private respondent Corazon
31546, reversing the decision of the Regional Trial Court, Aranez brought this action below for specific performance
Branch 106, Quezon City, dismissing the complaint for against petitioner to enforce a deed of sale covering the
specific performance brought by private respondent. The same lot allegedly entered into between her and petitioner
appellate court instead ordered petitioner to convey the on March 22, 1960. The contract[4] stipulated that title to
property in question to private respondent. the land shall be transferred to private respondent within
30 days after full payment of the purchase price by
The background of this case is as follows. petitioner to the PHHC.[5] The deed was notarized by Atty.
Pio Lopez, who was petitioners counsel in her case
Petitioner Fidela Mananzala is the registered owner of
against the Mercado spouses.[6] Private respondent
a parcel of land located at Bagong Pagasa, Quezon City,
alleged that petitioner refused, despite repeated demands
under Transfer Certificate of Title No. 32314, issued on
made by her, to comply with the stipulation in their
January 15, 1985. Petitioner had been in actual
contract. She prayed that petitioner be ordered to transfer
possession of the land since 1955 by virtue of a conditional
ownership of the land to her.
sale made in her favor by the Philippine Homesite and
Housing Corporation (PHHC), now the National Housing Petitioner denied selling the land to private
Authority (NHA). In 1960, however, the PHHC awarded the respondent. She contended that the deed was a forgery
and that her signature was secured through fraud by
private respondent and by Atty. Pio Lopez. In the EXECUTED IN VIOLATION OF LAW AND
alternative, she averred that the deed of sale was void PUBLIC POLICY.
because it was made before the actual award of the land
II.
to her and that it was made in violation of the prohibition in
the rules and regulations of the PHHC against the THE CHALLENGED NOTARIAL DOCUMENT,
subsequent disposition of the land within one year of the APART FROM BEING CONTRARY TO LAW
issuance of the title. AND PUBLIC POLICY, DOES NOT SERVE
THE PRESUMPTION OF REGULARITY.
The trial court dismissed the complaint. Although
finding petitioners signature on the deed to be genuine, it We shall deal with these questions in inverse order.
nevertheless ruled that there was no perfected contract of
sale because petitioner never really intended to sell the First. Petitioner avers that the appellate court erred in
land. Furthermore, the trial court also found the alleged relying on the presumption of regularity accorded to
contract to be null and void because, at the time of the notarial documents in holding the deed of sale between
sale, petitioner was not yet the owner thereof.[7] her and private respondent to be valid.

On appeal, the Court of Appeals reversed.[8] It held This is not true. The decision of the appellate court
that there was a meeting of the minds between the parties shows that the court also took into account the evidence
as evidenced by the signature of the petitioner on the deed of the parties. It relied on the report of the National Bureau
of sale which the National Bureau of Investigation found to of Investigation which found the signature of the petitioner
be genuine. The notarization of the deed gave rise to the on the questioned document to be genuine.[10] The NBI
presumption of its regularity.[9] The Court of Appeals report was based on a comparison of the signature on the
further held that petitioner could validly sell the land even deed and ten specimen signatures of petitioners. The trial
before the actual award to her pursuant to Art. 1461 of the court itself arrived at the same conclusion as to the
Civil Code, which provides that things having a potential genuiness and due execution of the deed.[11] Indeed,
existence may be the object of a contract of petitioners claim that her signature on the deed had been
sale. Consequently, the court ordered petitioner to transfer procured through fraud is contradicted by her allegation in
ownership of the land to private respondent. Hence this court that the signature on the deed was not hers. As she
petition. claimed in her testimony, That is not my signature.[12] If the
signature on the deed was not her signature, then it could
Petitioner alleges two grounds for her petition, to wit: not have been procured by fraud.
I. Anyway, that the signature of petitioner in the deed in
question is genuine is a factual finding of both the trial
THE RESPONDENT COURT OF APPEALS
court and the Court of Appeals which, in the absence of
ERRED IN VALIDATING A CONTRACT
very clear evidence to the contrary, this Court will not there was a meeting of the minds of the parties, and
revise.[13] whether there could be a sale of future property. The
question whether the sale was void because it was made
Second. The other question is whether the contract
within the one-year period of prohibition to petitioner as
between petitioner and private respondent is valid and
awardee was never briefed or in any way argued
binding. Petitioner invokes the ruling in Ibay v.
below. For all intents and purposes, therefore, petitioner
Intermediate Appellate Court.[14] In that case the transfer
waived this ground and cannot now urge it as ground for
of rights to petitioner was disapproved by the PHHC in
reversing the decision of the Court of Appeals.
view of Resolution No. 82 providing that the sale of more
than one lot per person shall not be permitted. Petitioner WHEREFORE, the decision of the Court of Appeals is
was already the holder of a land by reason of a previous AFFIRMED.
award made to him by the PHHC.Accordingly, the right of
SO ORDERED.
the awardee to recover the possession of the lot from him
was upheld. In this case, however, there is no evidence Regalado (Chairman), Melo, Puno and Martinez, JJ.,
that the sale to private respondent of the lot was made in concur.
violation of any rule of the PHHC. This issue was never
passed upon by either the trial court or the Court of
Appeals.
The above argument, as well as petitioners contention
that the sale to private respondent is void because it was
made within one year after the title to the property was
issued in the name of petitioner, while raised by petitioner
in her answer in the trial court, was not passed upon and
she did not urge it anymore except now. As already
noted, the trial court based its decision on its finding that
the sale was void on the ground that there was no meeting
of the minds of the parties.When its decision was
appealed, petitioner (as appellee) did not urge her original
defenses to uphold the decision in her favor. She merely
relied on the ruling of the trial court.[15] The appellate court,
in reversing the trial court, simply considered the issues

raised by the trial courts decision, namely, whether

petitioners signature on the deed was a forgery, whether

collectively, respondents) under TCT No. N-225996.9

Sometime in June 2001, while Donton was in the United States, he


discovered that herein respondents took possession and control of
the subject property, as well as the management of his business
operating thereat.10 Donton's lawyers in the Philippines made
demands upon respondents to vacate the subject property and to
cease and desist from operating his business, but to no avail.11 Thus,
Donton was forced to return to the Philippines, where he learned
SECOND DIVISION that respondents, through alleged fraudulent means, were able to
transfer the ownership of the subject property in their
G.R. No. 216491, August 23, 2017 names.12 Accordingly, his title, TCT No. N-137480, had been
cancelled and a new one, TCT No. N-225996, had been issued in
THE HEIRS OF PETER DONTON, THROUGH THEIR LEGAL respondents' names.
REPRESENTATIVE, FELIPE G. CAPULONG, Petitioners, v. DUANE
STIER AND EMILY MAGGAY, Respondents. Hence, he filed the instant complaint13 for annulment of title and
reconveyance of property with damages against respondents and
DECISION the Register of Deeds of Quezon City, alleging that the signature on
the Deed of Absolute Sale14 dated July 16, 2001, by virtue of which
he purportedly sold the subject property to respondents, was a
PERLAS-BERNABE, J.: forgery.15 He denied signing or executing the document in favor of
respondents, especially considering that on the date of its purported
Assailed in this petition for review on certiorari1 are the execution, i.e., July 16, 2001, he was allegedly still in the United
Decision2 dated June 13, 2014 and the Resolution3 dated January States, having departed from the Philippines on June 27, 2001 and
21, 2015 rendered by the Court of Appeals (CA) in CA-G.R. CV No. returned only on August 30, 2001.16 He averred that respondents
97138, which affirmed the Decision4 dated December 14, 2009 and conspired with the employees of the Registry of Deeds of Quezon
the Order5 dated May 4, 2011 of the Regional Trial Court of Quezon City to defraud him, and that Stier is an American citizen and a non-
City, Branch 215 (RTC) dismissing the complaint for annulment of resident alien who is, therefore, not allowed by law to own any real
title and reconveyance of property with damages originally filed by property in the Philippines.17 Accordingly, he prayed that TCT No. N-
now-deceased6 Peter Donton (Donton), the predecessor of herein 225996 in respondents' names be annulled and cancelled; that a
petitioners Heirs of Peter Donton (petitioners), for insufficiency of new title be issued in his name as the rightful owner of the subject
evidence. property; and that respondents be ordered to pay him
P1,000,000.00 as moral damages, P200,000.00 as exemplary
The Facts damages, P200,000.00 as attorney's fees, and P200,000.00 as
litigation expenses.18
The subject matter of this case is a parcel of land with improvements
located at No. 33, Don Jose Street, Murphy, Cubao, Quezon City, In their Answer with Counterclaim,19 respondents claimed that the
consisting of 553.60 square meters,7 more or less (subject subject property had been lawfully transferred to them, asserting
property). It was previously covered by Transfer Certificate of Title that on September 11, 1995, Donton executed an Occupancy
(TCT) No. N-1374808 of the Registry of Deeds of Quezon City under Agreement20 whereby he acknowledged that Stier had been residing
the name of Donton until its registration in the names of thereat since January 5, 1995; that Stier had extended a loan to
respondents Duane Stier (Stier) and Emily Maggay (Maggay; him in the amount of P3,000,000.00 on July 5, 1997, secured by a
mortgage over the subject property and its improvements; and that Likewise, the RTC refused to give probative weight to the expert
until full payment thereof, Donton allowed Stier to occupy the same. testimony offered by Perez after the latter admitted that she
Respondents likewise claimed that Donton executed a Special Power conducted the examination of the sample signatures not by virtue
of Attorney (SPA) dated September 11, 1995 in favor of Stier, giving of a court order, but at the instance of Donton and the Criminal
him full authority to sell, mortgage, or lease the subject Investigation and Detection Group (CIDG).31 She also admitted that
property.21 Unfortunately, Donton failed to pay his obligation to she did not know the source of the documents procured by the CIDG
Stier; thus, they initially executed a "unilateral contract of that she used in her examination. On this score, the RTC held that
sale"22 dated June 25, 2001 over the subject property. Eventually, the forensic examination and testimony of Perez were self-
however, they executed the Deed of Absolute Sale dated July 16, serving,32 further explaining that it was not bound to accept the
2001. As such, respondents argued that Donton cannot feign findings of a handwriting expert.33Therefore, the same cannot be
ignorance of the sale of the subject property to them. By way of used to invalidate the Deed of Absolute Sale and the title issued to
counterclaim, respondents prayed for the awards of moral damages respondents.
in the amount of P1,000,000.00, exemplary damages in the amount
of P200,000.00, and P400,000.00 as attorney's fees, and litigation Petitioners moved34 to set aside the RTC Decision, which the RTC
expenses.23 treated as a motion for reconsideration and which it subsequently
denied in an Order35 dated May 4, 2011. In denying petitioners'
During trial, Donton presented the findings of Rosario C. Perez motion, the RTC reiterated the disquisitions in its Decision and
(Perez), Document Examiner II of the Philippine National Police added that petitioners failed to prove that Stier is an American
(PNP) Crime Laboratory in Camp Crame, who, after comparing the citizen.36 It explained that the only evidence that petitioners
alleged signature of Donton on the Deed of Absolute Sale to his presented was a Certification37from the Bureau of Immigration
standard ones,24 found "significant divergences in the manner of (BOI) certifying that one Duane Otto Stier, an American citizen,
execution, line quality, stroke structure, and other individual visited the Philippines on September 2, 2001 and left on October 6,
handwriting characteristics" between them, and concluded that they 2001. As such, the RTC reasoned that the same was not sufficient
were not written by one and the same person.25Perez herself to prove Stier's citizenship; at most, it merely proved the alleged
testified on the results of her examination. travel of the latter.38 Similarly, petitioners failed to show that Stier
is married, as alleged in the complaint. With respect to petitioners'
In an Order26 dated February 9, 2004, the RTC allowed the contention that Maggay had no capacity to acquire real property,
substitution of petitioners as plaintiffs after Donton passed away on the RTC found the same to be bereft of probative value, being
November 22, 2003. merely an opinion.39 Finally, the allegation that Donton was in the
United States from June 27, 2001 until August 30, 2001, and
On the other hand, respondents waived27 their right to present their therefore not in the Philippines on July 16, 2001 at the time of the
evidence. execution of the sale lost its credibility in the face of his admission
that he was in the Philippines in the last week of July 2001.40
The RTC Ruling
Aggrieved, petitioners appealed41 to the CA.
28
In a Decision dated December 14, 2009, the RTC dismissed the
complaint on the ground of insufficiency of evidence,29 finding that The CA Ruling
the Deed of Absolute Sale, being a public and notarial document,
enjoys the presumption of regularity, and thus cannot be simply In a Decision42 dated June 13, 2014, the CA denied the appeal and
defeated by Danton's bare allegation of forgery of his signature affirmed the assailed RTC Decision and Order, finding that
thereon.30 petitioners failed to substantiate their allegation that Donton's
signature on the Deed of Absolute Sale was forged.43 It held that
the aforesaid document was notarized and therefore enjoys the The Court's Ruling
presumption of validity, which can only be overturned by clear and
convincing evidence.44Further, upon examination of Donton's The petition is partly meritorious.
passport stamps, which petitioners offered in evidence to prove that
Donton could not have signed the Deed of Absolute Sale on July 16, At the outset, the Court deems it necessary to underscore that a
2001, the CA held that although he departed from the Philippines on re�examination of factual findings cannot be done acting on a
June 27, 2001, there was no entry stamp of his admittance to the petition for review on certiorari because the Court is not a trier of
United States sometime between said date and August 30, 2001, facts but reviews only questions of law.51 Thus, in petitions for
the date of his return to the Philippines.45 review on certiorari, only questions of law may generally be put into
issue.
As regards the findings and testimony of Perez, the CA held that
"[n]otwithstanding Perez's expert testimony that the questioned This rule, however, admits of exceptions, such as when the
signature and the standard signatures [of Donton] were not signed findings of fact are premised on the supposed absence of
by the same person,"46 the RTC was correct in declaring her evidence and contradicted by the evidence on record and
testimony as self-serving. It considered that Perez did not know the when the Court of Appeals manifestly overlooked certain
source of the documents, and that it was the CIDG that provided relevant facts not disputed by the parties, which, if properly
her with Donton's standard signatures. She admitted that she had considered, would justify a different conclusion.52 Finding a
no actual knowledge of whether the documents given to her for confluence of certain exceptions in this case, the general rule that
examination came from Donton, and that she merely proceeded to only legal issues may be raised in a petition for review
examine them without verifying the source.47 Thus, the source of on certiorari under Rule 45 of the Rules of Court does not apply, and
the documents being unverified, it cannot be concluded that the the Court retains the authority to pass upon the evidence presented
signatures thereon are the genuine signatures of Donton. and draw conclusions therefrom.53

Finally, the CA sustained the RTC in ruling that petitioners failed to In civil cases, basic is the rule that the party making allegations has
substantiate their allegation that Stier is an American citizen and the burden of proving them by a preponderance of evidence.
married, and that Maggay had no capacity to purchase real property. Preponderance of evidence is the weight, credit, and value of the
On this score, the CA quoted with approval the RTC's findings that aggregate evidence on either side and is usually considered to be
the BOI-issued Certification procured and presented in evidence by synonymous with the term "greater weight of the evidence" or
petitioners was insufficient to prove Stier's alleged American "greater weight of the credible evidence." It is a phrase which, in
citizenship, and that there was dearth of evidence to further prove the last analysis, means probability of the truth, or evidence which
their allegation that he is married, or that Maggay had no capacity is more convincing to the court as worthier of belief than that which
to purchase real property.48 is offered in opposition thereto.54

Petitioners' motion for reconsideration49 was denied in a The main thrust of petitioners' contention in this case is that
Resolution50 dated January 21, 2015; hence, this petition. Donton's signature on the Deed of Absolute Sale is a forgery. They
maintain that it was not possible for him to have signed the said
The Issue Before the Court document considering that he was not in the Philippines on July 16,
2001, the date of execution and notarization thereof, he being in the
The issue for the Court's consideration is whether or not the CA United States at the time. To bolster this argument, they offered in
erred in ruling that petitioners failed to discharge the burden of proof evidence, among others, the immigration stamps on Donton's
required to be entitled to the reliefs prayed for in this case, namely, passport,55 showing that the latter departed from the Philippines on
the annulment of title and reconveyance of property with damages. June 20, 2001 and returned on August 30, 2001.
In Gepulle-Garbo v. Spouses Garabato,58 the Court explained the
However, as the courts a quo have aptly opined, the foregoing factors involved in the examination and comparison of handwritings
immigration stamps are insufficient to prove that Donton was in this wise:
chanRoblesvirtualLawlibrary

physically absent from the country to have been able to appear x x x [T]he authenticity of a questioned signature cannot be
before the notary public on July 16, 2001, the date of the determined solely upon its general characteristics, similarities or
acknowledgment of the Deed of Absolute Sale. It is well to point out, dissimilarities with the genuine signature. Dissimilarities as regards
as the RTC did, that petitioners failed to prove Donton's arrival or spontaneity, rhythm, pressure of the pen, loops in the strokes, signs
entry in the United States, where he alleged to have gone, and his of stops, shades, etc., that may be found between the questioned
departure therefrom to return to the Philippines on August 30, 2001. signature and the genuine one are not decisive on the question of
Without evidence of such admittance to and departure from the the former's authenticity. The result of examinations of questioned
United States between June 27, 2001 and August 30, 2001, the handwriting, even with the benefit of aid of experts and scientific
Court cannot discount the possibility that Donton may have returned instruments, is, at best, inconclusive. There are other factors that
to the Philippines anytime between those dates to execute the Deed must be taken into consideration. The position of the writer, the
of Absolute Sale. This is especially so in light of his own admission condition of the surface on which the paper where the questioned
in the complaint that he returned to the Philippines "sometime in signature is written is placed, his state of mind, feelings and nerves,
the last week of July 2001"56 allegedly to ascertain the truth and and the kind of pen and/or paper used, play an important role on
veracity of the information he received that the subject property had the general appearance of the signature. Unless, therefore, there is,
been transferred to respondents. These inconsistencies heavily in a given case, absolute absence, or manifest dearth, of direct or
militate against him, effectively tainting his credibility as a witness circumstantial competent evidence on the character of a questioned
and rendering doubtful the veracity of his testimony. handwriting, much weight should not be given to characteristic
similarities, or dissimilarities, between that questioned handwriting
Furthermore, forgery, as a rule, cannot be presumed and must be and an authentic one.59
proved by clear, positive and convincing evidence, and the burden To prove forgery, petitioners offered in evidence the findings and
of proof lies on the party alleging forgery - in this case, petitioners. testimony given by expert witness Perez, who declared that she
The fact of forgery can only be established by a comparison between found "significant divergences in the manner of execution, line
the alleged forged signature and the authentic and genuine quality, stroke structure and other individual handwriting
signature of the person whose signature is theorized to have been characteristics" between the signature that appears on the Deed of
forged.57Pertinently, Section 22, Rule 132 of the Revised Rules of Absolute Sale and the standard signatures of Donton, thereby
Court provides: chanRoblesvirtualLawlibrary concluding that they were not written by one and the same
Section. 22. How genuineness of handwriting proved. - The person.60 On cross-examination, however, Perez admitted that she
handwriting of a person may be proved by any witness who believes had no actual knowledge of the source of the specimen signatures
it to be the handwriting of such person because he has seen the given to her for examination, as it was the CIDG personnel who
person write, or has seen writing purporting to be his upon which provided her with the same.61 Thus, as the CA correctly observed,
the witness has acted or been charged, and has thus acquired Perez's findings deserve little or no probative weight at all,
knowledge of the handwriting of such person. Evidence respecting considering that the signatures which she used for comparison came
the handwriting may also be given by a comparison, made by the from an unverified source. Perforce, petitioners are left with no
witness or the court, with writings admitted or treated as conclusive evidence to prove their allegation that Donton's signature
genuine by the party against whom the evidence is offered, on the Deed of Absolute Sale was forged.
or proved to be genuine to the satisfaction of the judge.
(Emphasis supplied) It bears stressing that the opinion of handwriting experts are not
necessarily binding upon the court, the expert's function being to
place before the court data upon which the court can form its own
opinion. This principle holds true especially when the question Hence, the courts a quo erred in ruling that Stier's American
involved is mere handwriting similarity or dissimilarity, which can be citizenship was not established in this case, effectively rendering the
determined by a visual comparison of specimens of the questioned sale of the subject property as to him void ab initio, in light of the
signatures with those of the currently existing ones. A finding of clear proscription under Section 7, Article XII of the Constitution
forgery does not depend entirely on the testimonies of handwriting against foreigners acquiring real property in the Philippines, to
experts, because the judge must conduct an independent wit:chanRoblesvirtualLawlibrary

examination of the questioned signature in order to arrive at a Section 7. Save in cases of hereditary succession, no private lands
reasonable conclusion as to its authenticity.62 shall be transferred or conveyed except to individuals, corporations,
or associations qualified to acquire or hold lands of the public
In fine, the Court, therefore, upholds the findings of the courts a domain.
quo in this respect. Thus, lands of the public domain, which include private lands, may
be transferred or conveyed only to individuals or entities qualified
Be that as it may, the Court, however, differs from the findings of to acquire or hold private lands or lands of the public domain. Aliens,
the courts a quo with respect to Stier's citizenship. More than the whether individuals or corporations, have been disqualified from
Certification63 issued by the BOI, which clearly states that Stier is acquiring lands of the public domain as well as private lands.72
an American citizen, the records contain other documents validating
the information. For instance, in paragraph 164 of respondents' In light of the foregoing, even if petitioners failed to prove that
Answer with Counterclaim,65 they admitted paragraphs 1, 2, and 3 Donton's signature on the Deed of Absolute Sale was a forgery, the
of the Complaint insofar as their personal circumstances are sale of the subject property to Stier is in violation of the
concerned, and paragraph 2 of the Complaint states: chanRoblesvirtualLawlibrary Constitution; hence, null and void ab initio. A contract that violates
"2. Defendant DUANE STIER is of legal age, married, an American the Constitution and the law is null and void and vests no rights and
citizen, a non-resident alien with postal address at Blk. 5, Lot 27, creates no obligations. It produces no legal effect at
A, B, Phase 1, St. Michael Home Subd., Binangonan, Rizal; x x all.73 Furthermore, Stier is barred from recovering any amount that
x"66 (Emphases supplied) he paid for the subject property, the action being proscribed by the
Similarly, one of the attachments to the Manifestation67 filed by Constitution.74
respondents before the RTC is an Affidavit68 executed by Stier
himself, stating: Nevertheless, considering that petitioners failed to prove their
allegation that Maggay, the other vendee, had no capacity to
"I, DUANE STIER, of legal age, married, American citizen x x purchase the subject property, the sale to her remains valid but only
x"69 (Emphasis supplied) up to the extent of her undivided one-half share
therein.75 Meanwhile, the other undivided one-half share, which
The foregoing statements made by Stier are admissions against pertained to Stier, shall revert to Donton, the original owner, for
interest and are therefore binding upon him. An admission against being the subject of a transaction void ab initio. Consequently, the
interest is the best evidence which affords the greatest certainty of Deed of Absolute Sale, together with TCT No. N-225996 issued in
the facts in dispute since no man would declare anything against respondents' favor, must be annulled only insofar as Stier is
himself unless such declaration is true. Thus, an admission against concerned, without prejudice, however, to the rights of any
interest binds the person who makes the same, and absent any subsequent purchasers for value of the subject property.
showing that this was made through palpable mistake, no amount
of rationalization can offset it,70 especially so in this case where WHEREFORE, the petition is PARTLY GRANTED. The Decision
respondents failed to present even one piece of evidence in their dated June 13, 2014 and the Resolution dated January 21, 2015 of
defense.71 the Court of Appeals in CA-G.R. CV No. 97138, which affirmed the
dismissal of the complaint filed by petitioners on the ground of
insufficiency of evidence, are hereby REVERSED and SET ASIDE,
and a NEW ONE is entered: (1) annulling the Deed of Absolute Sale
dated July 16, 2001 insofar as respondent Duane Stier is concerned;
(2) annulling Transfer Certificate of Title No. N-225996 insofar as
respondent Duane Stier is concerned; and (3) directing the Registry
of Deeds of Quezon City to issue a new title in the name of Peter
Donton and Emily Maggay, all without prejudice to the rights of any
subsequent purchasers for value of the subject property.

SO ORDERED.

Carpio,*Acting C. J., (Chairperson), Peralta, and Reyes, Jr., JJ.,


concur.
Caguioa, J., on leave.
Republic of the Philippines On July 10, 1990, Domingo Carabeo (petitioner)
Supreme Court entered into a contract denominated as Kasunduan sa
Baguio City Bilihan ng Karapatan sa Lupa[1] (kasunduan) with
Spouses Norberto and Susan Dingco (respondents)
whereby petitioner agreed to sell his rights over a 648
THIRD DIVISION square meter parcel of unregistered land situated
in Purok III, Tugatog, Orani, Bataan to respondents
DOMINGO CARABEO, G.R. No. 190823 for P38,000.
Petitioner,
Present: Respondents tendered their initial payment of P10,000
upon signing of the contract, the remaining balance to
CARPIO,* J., be paid on September 1990.
- versus - CARPIO MORALES, J., Chairperson,
BRION,
BERSAMIN, and Respondents were later to claim that when they were
SERENO, JJ. about to hand in the balance of the purchase price,
SPOUSES NORBERTO and petitioner requested them to keep it first as he was yet
SUSAN DINGCO, Promulgated: to settle an on-going squabble over the land.
Respondents. April 4, 2011
Nevertheless, respondents gave petitioner small
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -sums
- - - -of- -money
- - - - -from
x time to time which totaled P9,100,
on petitioners request according to them;due to
DECISION respondents inability to pay the amount of the
remaining balance in full, according to petitioner.
CARPIO MORALES, J.:
By respondents claim, despite the alleged
problem over the land, they insisted on petitioners
acceptance of the remaining balance of P18,900 to thus constrain him to accept installment payments
butpetitioner remained firm in his refusal, proffering as totaling P9,100.
reason therefor that he would register the land first.
After the case was submitted for decision or on
Sometime in 1994, respondents learned that the January 31, 2001,[2] petitioner passed away. The
alleged problem over the land had been settled and that records do not show that petitioners counsel informed
petitioner had caused its registration in his name on Branch 1 of the Bataan RTC, where the complaint was
December 21, 1993 under Transfer Certificate of Title lodged, of his death and that proper substitution was
No. 161806. They thereupon offered to pay the balance effected in accordance with Section 16, Rule 3, Rules
but petitioner declined, drawing them to file a of Court.[3]
complaint before the Katarungan
Pambarangay. No settlement was reached, however, By Decision of February 25, 2001,[4] the trial
hence, respondent filed a complaint for specific court ruled in favor of respondents, disposing as
performance before the Regional Trial Court (RTC) of follows:
Balanga, Bataan.
WHEREFORE, premises
Petitioner countered in his Answer to the considered, judgment is hereby rendered
ordering:
Complaint that the sale was void for lack of object
certain, the kasunduan not having specified the metes 1. The defendant to sell his right over 648
and bounds of the land. In any event, petitioner alleged square meters of land pursuant to the
that if the validity of the kasunduan is upheld, contract dated July 10, 1990 by
respondents failure to comply with their reciprocal executing a Deed of Sale thereof after
obligation to pay the balance of the purchase price the payment of P18,900 by the
plaintiffs;
would render the action premature. For, contrary to
respondents claim, petitioner maintained that they
failed to pay the balance of P28,000 on September 1990
2. The defendant to pay the costs of the judicial consignation after herein petitioner
suit. allegedly refused to accept payment of the
balance of the purchase price.
SO ORDERED.[5]
(C)

Petitioners counsel filed a Notice of Appeal on in upholding the validity of the


March 20, 2001. contract, Kasunduan sa Bilihan ng
Karapatan sa Lupa, despite the lack of
spousal consent, (underscoring supplied)
By the herein challenged Decision dated July 20,
[6]
2009, the Court of Appeals affirmed that of the trial
court. and proffering that

Petitioners motion for reconsideration having (D)


been denied by Resolution of January 8, 2010, the
present petition for review was filed by Antonio [t]he death of herein petitioner causes the
Carabeo, petitioners son,[7] faulting the appellate court: dismissal of the action filed by
respondents; respondents cause of action
being an action in personam. (underscoring
(A)
supplied)
in holding that the element of a
contract, i.e., an object certain is present in
this case. The petition fails.

(B) The pertinent portion of the kasunduan reads:[8]

in considering it unfair to expect xxxx


respondents who are not lawyers to make
Na ako ay may isang partial na lupa will not be considered, in the present case, in the
na matatagpuan sa Purok 111, Tugatog, interest of fair play, justice and due process.[10]
Orani Bataan, na may sukat na 27 x 24
metro kuwadrado, ang nasabing lupa ay
may sakop na dalawang punong santol at Respecting the argument that petitioners death
isang punong mangga, kayat ako ay rendered respondents complaint against him
nakipagkasundo sa mag-asawang Norby dismissible, Bonilla v. Barcena[11] enlightens:
Dingco at Susan Dingco na ipagbili sa
kanila ang karapatan ng nasabing lupa sa The question as to whether an action
halagang P38,000.00. survives or not depends on the nature of the
action and the damage sued for. In
x x x x (underscoring supplied) the causes of action which survive, the
wrong complained [of] affects primarily
and principally property and property
That the kasunduan did not specify the technical rights, the injuries to the person being
boundaries of the property did not render the sale a merely incidental, while in the causes of
action which do not survive, the injury
nullity. The requirement that a sale must have for its
complained of is to the person, the property
object a determinate thing is satisfied as long as, at the and rights of property affected being
time the contract is entered into, the object of the sale incidental. (emphasis and underscoring
is capable of being made determinate without the supplied)
necessity of a new or further agreement between the
parties.[9] As the above-quoted portion of In the present case, respondents are pursuing a
the kasunduan shows, there is no doubt that the object property right arising from the kasunduan, whereas
of the sale is determinate. petitioner is invoking nullity of the kasunduan to
protect his proprietary interest. Assuming arguendo,
Clutching at straws, petitioner proffers lack of however, that the kasunduan is deemed void, there is a
spousal consent. This was raised only on appeal, hence, corollary obligation of petitioner to return the money
paid by respondents, and since the action involves CONCHITA CARPIO MORALES
property rights,[12] it survives. Associate Justice

It bears noting that trial on the merits was already


concluded before petitioner died. Since the trial court
was not informed of petitioners death, it may not be
faulted for proceeding to render judgment without
ordering his substitution. Its judgment is thus valid and
binding upon petitioners legal representatives or
successors-in-interest, insofar as his interest in the
property subject of the action is concerned.[13]

In another vein, the death of a client immediately


divests the counsel of authority.[14] Thus, in filing a
Notice of Appeal, petitioners counsel of record had no
personality to act on behalf of the already deceased
client who, it bears reiteration, had not been substituted
as a party after his death. The trial courts decision had
thereby become final and executory, no appeal having
been perfected.

WHEREFORE, the petition is DENIED.

SO ORDERED.
Republic of the Philippines Decree No. 4. One of its incidental functions is the buying of palay
SUPREME COURT grains from qualified farmers.
Manila
On August 23, 1979, private respondent Leon Soriano offered to
THIRD DIVISION sell palay grains to the NFA, through William Cabal, the Provincial
Manager of NFA stationed at Tuguegarao, Cagayan. He submitted
G.R. No. 74470 March 8, 1989 the documents required by the NFA for pre-qualifying as a seller,
namely: (1) Farmer's Information Sheet accomplished by Soriano
NATIONAL GRAINS AUTHORITY and WILLLAM and certified by a Bureau of Agricultural Extension (BAEX)
CABAL, petitioners technician, Napoleon Callangan, (2) Xerox copies of four (4) tax
vs. declarations of the riceland leased to him and copies of the lease
THE INTERMEDIATE APPELLATE COURT and LEON contract between him and Judge Concepcion Salud, and (3) his
SORIANO, respondents. Residence Tax Certificate. Private respondent Soriano's
documents were processed and accordingly, he was given a quota
of 2,640 cavans of palay. The quota noted in the Farmer's
Cordoba, Zapanta, Rola & Garcia for petitioner National Grains
Information Sheet represented the maximum number of cavans of
Authority.
palay that Soriano may sell to the NFA.
Plaridel Mar Israel for respondent Leon Soriano.
In the afternoon of August 23, 1979 and on the following day,
August 24, 1979, Soriano delivered 630 cavans of palay. The palay
delivered during these two days were not rebagged, classified and
weighed. when Soriano demanded payment of the 630 cavans of
MEDIALDEA, J.: palay, he was informed that its payment will be held in abeyance
since Mr. Cabal was still investigating on an information he
This is a petition for review of the decision (pp. 9-21, Rollo) of the received that Soriano was not a bona tide farmer and the palay
Intermediate Appellate Court (now Court of Appeals) dated delivered by him was not produced from his farmland but was taken
December 23, 1985 in A.C. G.R. CV No. 03812 entitled, "Leon from the warehouse of a rice trader, Ben de Guzman. On August
Soriano, Plaintiff- Appellee versus National Grains Authority and 28, 1979, Cabal wrote Soriano advising him to withdraw from the
William Cabal, Defendants Appellants", which affirmed the NFA warehouse the 630 cavans Soriano delivered stating that NFA
decision of the Court of First Instance of Cagayan, in Civil Case cannot legally accept the said delivery on the basis of the
No. 2754 and its resolution (p. 28, Rollo) dated April 17, 1986 which subsequent certification of the BAEX technician, Napoleon
denied the Motion for Reconsideration filed therein. Callangan that Soriano is not a bona fide farmer.

The antecedent facts of the instant case are as follows: Instead of withdrawing the 630 cavans of palay, private respondent
Soriano insisted that the palay grains delivered be paid. He then
Petitioner National Grains Authority (now National Food Authority, filed a complaint for specific performance and/or collection of
NFA for short) is a government agency created under Presidential money with damages on November 2, 1979, against the National
Food Authority and Mr. William Cabal, Provincial Manager of NFA
with the Court of First Instance of Tuguegarao, and docketed as time of the filing of this case assigned at
Civil Case No. 2754. Tuguegarao, Cagayan or whomsoever is his
successors, are likewise ordered to pay the plaintiff
Meanwhile, by agreement of the parties and upon order of the trial Leon T. Soriano, the legal interest at the rate of
court, the 630 cavans of palay in question were withdrawn from the TWELVE (12%) percent per annum, of the amount
warehouse of NFA. An inventory was made by the sheriff as of P 47,250.00 from the filing of the complaint on
representative of the Court, a representative of Soriano and a November 20, 1979, up to the final payment of the
representative of NFA (p. 13, Rollo). price of P 47,250.00;

On September 30, 1982, the trial court rendered judgment ordering 3. That the defendants National Grains Authority,
petitioner National Food Authority, its officers and agents to pay now National Food Authority, or their agents and
respondent Soriano (as plaintiff in Civil Case No. 2754) the amount duly authorized representatives can now withdraw
of P 47,250.00 representing the unpaid price of the 630 cavans of the total number of bags (630 bags with an excess
palay plus legal interest thereof (p. 1-2, CA Decision). The of 13 bags) now on deposit in the bonded
dispositive portion reads as follows: warehouse of Eng. Ben de Guzman at
Tuguegarao, Cagayan pursuant to the order of this
WHEREFORE, the Court renders judgment in court, and as appearing in the written inventory
favor of the plaintiff and against the defendants dated October 10, 1980, (Exhibit F for the plaintiff
National Grains Authority, and William Cabal and and Exhibit 20 for the defendants) upon payment
hereby orders: of the price of P 47,250.00 and TWELVE
PERCENT (12%) legal interest to the plaintiff,
1. The National Grains Authority, now the National
Food Authority, its officers and agents, and Mr. 4. That the counterclaim of the defendants is
William Cabal, the Provincial Manager of the hereby dismissed;
National Grains Authority at the time of the filing of
this case, assigned at Tuguegarao, Cagayan, 5. That there is no pronouncement as to the award
whomsoever is his successors, to pay to the of moral and exemplary damages and attorney's
plaintiff Leon T. Soriano, the amount of fees; and
P47,250.00, representing the unpaid price of the
palay deliveries made by the plaintiff to the 6. That there is no pronouncement as to costs.
defendants consisting of 630 cavans at the rate
Pl.50 per kilo of 50 kilos per cavan of palay; SO ORDERED (pp. 9-10, Rollo)

2. That the defendants National Grains Authority, Petitioners' motion for reconsideration of the decision was denied
now National Food Authority, its officer and/or on December 6, 1982.
agents, and Mr. William Cabal, the Provincial
Manager of the National Grains Authority, at the
Petitioners' appealed the trial court's decision to the Intermediate Article 1458 of the Civil Code of the Philippines defines sale as a
Appellate Court. In a decision promulgated on December 23, 1986 contract whereby one of the contracting parties obligates himself
(pp. 9-21, Rollo) the then Intermediate Appellate Court upheld the to transfer the ownership of and to deliver a determinate thing, and
findings of the trial court and affirmed the decision ordering NFA the other party to pay therefore a price certain in money or its
and its officers to pay Soriano the price of the 630 cavans of rice equivalent. A contract, on the other hand, is a meeting of minds
plus interest. Petitioners' motion for reconsideration of the between two (2) persons whereby one binds himself, with respect
appellate court's decision was denied in a resolution dated April 17, to the other, to give something or to render some service (Art.
1986 (p. 28, Rollo). 1305, Civil Code of the Philippines). The essential requisites of
contracts are: (1) consent of the contracting parties, (2) object
Hence, this petition for review filed by the National Food Authority certain which is the subject matter of the contract, and (3) cause of
and Mr. William Cabal on May 15, 1986 assailing the decision of the obligation which is established (Art. 1318, Civil Code of the
the Intermediate Appellate Court on the sole issue of whether or Philippines.
not there was a contract of sale in the case at bar.
In the case at bar, Soriano initially offered to sell palay grains
Petitioners contend that the 630 cavans of palay delivered by produced in his farmland to NFA. When the latter accepted the
Soriano on August 23, 1979 was made only for purposes of having offer by noting in Soriano's Farmer's Information Sheet a quota of
it offered for sale. Further, petitioners stated that the procedure 2,640 cavans, there was already a meeting of the minds between
then prevailing in matters of palay procurement from qualified the parties. The object of the contract, being the palay grains
farmers were: firstly, there is a rebagging wherein the palay is produced in Soriano's farmland and the NFA was to pay the same
transferred from a private sack of a farmer to the NFA sack; depending upon its quality. The fact that the exact number of
secondly, after the rebagging has been undertaken, classification cavans of palay to be delivered has not been determined does not
of the palay is made to determine its variety; thirdly, after the affect the perfection of the contract. Article 1349 of the New Civil
determination of its variety and convinced that it passed the quality Code provides: ". . .. The fact that the quantity is not determinate
standard, the same will be weighed to determine the number of shall not be an obstacle to the existence of the contract, provided
kilos; and finally, it will be piled inside the warehouse after the it is possible to determine the same, without the need of a new
preparation of the Warehouse Stock Receipt (WSP) indicating contract between the parties." In this case, there was no need for
therein the number of kilos, the variety and the number of bags. NFA and Soriano to enter into a new contract to determine the
Under this procedure, rebagging is the initial operative act exact number of cavans of palay to be sold. Soriano can deliver so
signifying acceptance, and acceptance will be considered much of his produce as long as it does not exceed 2,640 cavans.
complete only after the preparation of the Warehouse Stock
Receipt (WSR). When the 630 cavans of palay were brought by In its memorandum (pp. 66-71, Rollo) dated December 4, 1986,
Soriano to the Carig warehouse of NFA they were only offered for petitioners further contend that there was no contract of sale
sale. Since the same were not rebagged, classified and weighed because of the absence of an essential requisite in contracts,
in accordance with the palay procurement program of NFA, there namely, consent. It cited Section 1319 of the Civil Code which
was no acceptance of the offer which, to petitioners' mind is a clear states: "Consent is manifested by the meeting of the offer and the
case of solicitation or an unaccepted offer to sell. acceptance of the thing and the cause which are to constitute the
contract. ... " Following this line, petitioners contend that there was
The petition is not impressed with merit.
no consent because there was no acceptance of the 630 cavans ACCORDINGLY, the instant petition for review is DISMISSED. The
of palay in question. assailed decision of the then Intermediate Appellate Court (now
Court of Appeals) is affirmed. No costs.
The above contention of petitioner is not correct Sale is a
consensual contract, " ... , there is perfection when there is consent SO ORDERED.
upon the subject matter and price, even if neither is delivered."
(Obana vs. C.A., L-36249, March 29, 1985, 135 SCRA 557, 560)
This is provided by Article 1475 of the Civil Code which states:

Art. 1475. The contract of sale is perfected at the


moment there is a meeting of minds upon the thing
which is the object of the contract and upon the
price.

xxx

The acceptance referred to which determines consent is the


acceptance of the offer of one party by the other and not of the
goods delivered as contended by petitioners.

From the moment the contract of sale is perfected, it is incumbent


upon the parties to comply with their mutual obligations or "the
parties may reciprocally demand performance" thereof. (Article
1475, Civil Code, 2nd par.).

The reason why NFA initially refused acceptance of the 630 cavans
of palay delivered by Soriano is that it (NFA) cannot legally accept
the said delivery because Soriano is allegedly not a bona fide
farmer. The trial court and the appellate court found that Soriano
was a bona fide farmer and therefore, he was qualified to sell palay
grains to NFA.

Both courts likewise agree that NFA's refusal to accept was without
just cause. The above factual findings which are supported by the
record should not be disturbed on appeal.
REGISTER OF DEEDS OF LAS PINAS, METRO MANILA,
DISTRICT IV, Respondents.

DECISION

SERENO, J.:

Before us are consolidated Rule 45 Petitions1 seeking to nullify the


Court of Appeals (CA) Decision dated 2 November 20042 and
Resolution dated 10 May 20053 in CA-G.R. CV No. 47421. The CA
Decision reversed and set aside the Decision dated 6 July 1992
FIRST DIVISION issued by the Regional Trial Court (RTC), Branch 65 of Makati.4

January 13, 2016 FACTUAL ANTECEDENTS

G.R. No. 168078 Petitioner Dulos Realty was the registered owner of certain
residential lots covered by Transfer Certificate of Title (TCT) Nos.
S-39767, S-39775, S-28335, S-39778 and S-29776, located at
FABIO CAHAYAG and CONRADO RIVERA, Petitioners,
Airmen's Village Subdivision, Pulang Lupa II, Las Pinas, Metro
vs.
Manila.
COMMERCIAL CREDIT CORPORATION, represented by its
President, LEONARDO B. ALEJANDRO; TERESITA T. QUA,
assisted by her husband ALFONSO MA. QUA; and the On 20 December 1980, Dulos Realty obtained a loan from
REGISTER OF DEEDS OF LAS PINAS, METRO MANILA, respondent CCC in the amount of P300,000. To secure the loan,
DISTRICT IV, Respondents. the realty executed a Real Estate Mortgage over the subject
properties in favor of respondent. The mortgage was duly
annotated on the certificates of title on 3 February 1981.5
x-----------------------x
On 29 March 1981, Dulos Realty entered into a Contract to Sell
G.R. No. 168357
with petitioner Cahayag over the lot covered by TCT No. S-39775.6
DULOS REALTY & DEVELOPMENT CORPORATION,
On 12 August 1981, Dulos Realty entered into another Contract to
represented by its President, JUANITO C. DULOS; and
Sell, this time with petitioner Rivera over the lot covered by TCT
MILAGROS E. ESCALONA, and ILUMINADA D.
No. S-28335.7
BALDOZA, Petitioners,
vs.
COMMERCIAL CREDIT CORPORATION, represented by its Dulos Realty defaulted in the payment of the mortgage loan,
President, LEONARDO B. ALEJANDRO; TERESITA T. QUA, prompting respondent CCC to initiate extrajudicial foreclosure
assisted by her husband ALFONSO MA. QUA; and the
proceedings. On 17 November 1981, the auction sale was held, Subsequently, respondent Qua filed ejectment suits individually
with respondent CCC emerging as the highest bidder.8 against petitioners Du1os Realty,17 Cahayag,18Esca1ona,19 and
Rivera20 before the Metropolitan Trial Court (MTC) of Las Piñas,
On 23 November 1981, a Certificate of Sale covering the Metro Manila.
properties, together with all the buildings and improvements
existing thereon, was issued in favor of CCC.9 The Certificate of The MTC rendered Decisions in favor of respondent Qua. It
Sale was annotated on the corresponding titles to the properties ordered Dulos Realty, Escalona, Cahayag, and Rivera to vacate
on 8 March 1982.10 the properties.

Thereafter, or on 13 January 1983, Dulos Realty entered into a On 8 March 1988, the MTC issued a Writ of Execution to enforce
Contract to Sell with petitioner Escalona over the house and lot its Decision dated 20 October 1986 in Civil Case No. 2257 against
covered by TCT No. S-29776.11 Dulos Realty "and all persons claiming right under
defendant."21 The subject of the writ of execution was Lot 11 Block
On 10 November 1983, an Affidavit of Consolidation in favor of II,22 which was the lot sold by Dulos Realty to petitioner Baldoza.
respondent CCC dated 26 August 1983 was annotated on the
corresponding titles to the properties.12 By virtue of the affidavit, COMPLAINT FOR ANNULMENT
TCT Nos. S-39775, S-28335, S-39778 and S-29776 - all in the OF SHERIFF'S SALE AND OTHER DOCUMENTS
name of Dulos Realty - were cancelled and TCT Nos. 74531,
74532, 74533 and 74534 were issued in the name of respondent On 5 December 1988, petitioners filed a Complaint against
CCC on the same day.13 respondents for the "Annulment of Sherifffs] Sale and Other
Documents with Preliminary Injunction and/or Temporary
On 10 December 1983, Dulos Realty entered into a Deed of Restraining Order" before the RTC of Makati City, where it was
Absolute Sale with petitioner Baldoza over the property covered by docketed as Civil Case No. 88-2599.23
TCT No. S-39778, together with the improvements existing
thereon.14 The Complaint24 alleged that petitioners Cahayag, Rivera,
Escalona and Baldoza were owners of the properties in question
On 21 December 1983, respondent CCC, through a Deed of by virtue of Contracts of Sale individually executed in their favor,
Absolute Sale, sold to respondent Qua the same subject and that the Real Estate Mortgage between Dulos Realty and
properties, now covered by TCT Nos. 74531, 74532, 74533 and defendant-appellant CCC did not include the houses, but merely
74534, which were in the name of respondent CCC. The sale was referred to the lands themselves.25 Thus, the inclusion of the
duly annotated on the corresponding titles to the properties on 5 housing units in the Deed of Sale executed by respondent CCC in
January 1984.15 favor of respondent Qua was allegedly illegal.26

Accordingly, TCT Nos. 74531, 74532, 74533 and 74534 were Respondents failed to file an answer within the reglementary
cancelled; and TCT Nos. 77012, 77013, 77014 and 770015 were period. Subsequently, they were declared in default. They
issued to respondent Qua on 5 January 1984.16 appealed the order of default but their appeal was dismissed on 8
February 1990.27
On 6 July 1992, the RTC rendered a Decision,28 which ruled that null and void on the purported ground that Dulos was no longer the
the houses were not included in the Real Estate Mortgage; and that owner at the time of the sale.
the foreclosure of the mortgage over the subject lots, as well as the
housing units, was not valid.29 The trial court held that this The CA accordingly reversed and set aside the RTC Decision,
conclusion was established by the plaintiffs' evidence, which went dismissed the case for lack of merit, and ordered petitioners to
unrefuted when defendants were declared in default.30 surrender possession of the properties to respondent Qua.

THE CA DECISION THE RULE 45 PETITIONS

Respondents proceeded to the CA, where they secured a On 30 May 2005, petitioners Cahayag and Rivera filed their Rule
favorable ruling. In its Decision rendered on 2 November 45 Petition with this Court.32 For their part, petitioners Dulos Realty,
2004,31 the appellate court held that the extrajudicial foreclosure Baldoza and Escalona filed their Rule 45 Petition on 19 July 2005.33
was valid, since the Real Estate Mortgage clearly included the
buildings and improvements on the lands, subject of the mortgage. In the Petition under G.R. No. 168357, it is argued, among others,
that the Deed of Absolute Sale in favor of petitioner Baldoza was
After establishing the inclusion of the housing units in the Real the culmination of a Contract to Sell between her and Dulos Realty.
Estate Mortgage, the CA determined the rights of the buyers in the She claims that the Contract to Sell, marked as Exhibit "L" during
Contracts to Sell/Contract of Sale vis-a-vis those of the mortgagee the trial, was executed on 10 January 1979, which preceded the
and its successor-in-interest. execution of the Deed of Real Estate Mortgage and the registration
of the mortgage on 3 February 1981.34 After full payment of the
In the cases of petitioners Cahayag, Rivera and Escalona, the CA price under the Contract to Sell, Dulos Realty executed the Deed
pointed to lack of evidence establishing full payment of the price. of Absolute Sale. In other words, Baldoza is arguing that she has
As supporting reason, it stated that even if there were full payment a better title to the property than respondent Qua since the
of the purchase price, the mortgagee and the latter's successor-in- unregistered contract to sell in her favor was executed before the
interest had a better right over the properties. The CA anchored registration of the mortgage. But the CA ignored Exhibit "L" and
this conclusion on the fact that the Real Estate Mortgage was merely stated that there was only a Deed of Absolute Sale in favor
annotated at the back of the titles to the subject properties before of Baldoza.
the execution of the Contracts to Sell. It said that the annotation
constituted sufficient notice to third parties that the property was THE ARGUMENTS
subject to an encumbrance. With the notice, Cahayag, Rivera and
Escalona should have redeemed the properties within the one-year The arguments of petitioners, as stated in their respective
redemption period, but they failed to do so. Consequently, the right Memoranda, are summarized as follows:
of respondent CCC over the properties became absolute, and the
transfer to respondent Qua was valid.
Coverage of the Mortgage
As regards Baldoza, though the case involved a Contract of Sale,
Initially, petitioners attempt to stave off the effects of the extra
and not a mere Contract to Sell, the CA declared the transaction
judicial foreclosure by attacking the coverage of the Real Estate
Mortgage with respect to its subject-matter.35 They draw attention a mortgagee need not look beyond the title cannot benefit banks
to the fact that the List of Properties attached to the Deed of Real and other financial institutions, as a higher due diligence
Estate Mortgage refers merely to the lands themselves and does requirement is imposed on them.
not include the housing units found thereon.36 Petitioners also
contend that doubts should be resolved against the drafter They also raise the contention that lack of full payment of the
inasmuch as the agreement is a contract of adhesion, having been purchase price under the Contracts to Sell on the part of Cahayag,
prepared by the mortgagee.37 Rivera and Escalona was due to respondent Qua's "harassment
and unlawful actuations.43
As backup argument for the theory that the houses are outside the
coverage of the mortgage agreement, petitioners argue that the Petitioners further state that respondent Qua is a mere transferee
improvements were not owned by Dulos Realty, the mortgagor, but of respondent CCC and that, like a stream, she cannot rise higher
by its buyers under the Contracts to Sell and Contracts of Sale; than her source. They also argue that Qua is not an innocent
hence, those improvements are excluded from the coverage of the purchaser for value, since she is a former investor of respondent
real estate mortgage. CCC and one of its principal stockholders.44

Validity of the Mortgage No Prior Written HLURB Approval of


the Mortgage
Petitioners next challenge the validity of the foreclosure sale on the
ground that the mortgage executed by the mortgagor (petitioner Finally, petitioners allege that the mortgage contract in this case
Dulos Realty) and the mortgagee (respondent CCC) was null and was not approved by the BLURB, which violates Section 18 of P.D.
void.38 Petitioners claim that Dulos Realty was no longer the owner 95745 and results in the nullity of the mortgage.46
of the properties it had mortgaged at the time of the execution of
the mortgage contract, as they were sold under existing Contracts Exhibit "L" as Evidence of a Prior
to Sell and Deed of Absolute Sale.39 Contract to Sell

Petitioners Cahayag, Rivera and Escalona lean on the The matter of CA ignoring Exhibit "L" as evidence of a prior
unregistered Contracts to Sell they had individually executed with unregistered Contract to Sell was not included in the Memoranda
Dulos Realty as vendor. For his part, petitioner Baldoza points to of petitioners.
the Deed of Absolute Sale executed by Dulos Realty in his favor.
THE ISSUES
Better Right over the Properties
Based on the foregoing facts and arguments raised by petitioners,
Petitioners claim that respondent CCC cannot claim to be a the threshold issues to be resolved are the following:
mortgagee in good faith, since it is a financial institution.40 As such,
respondent CCC knew that it was dealing with a subdivision
1. Whether the real mortgage covers the lands only, as
developer, which was in the business of selling subdivision
enumerated in the Deed of Real Estate Mortgage or the
lots.41 Dela Merced v. GSIS42 which states that the general rule that
housing units as well;
2. Whether Dulos Realty was the owner of the properties it which the MORTGAGOR hereby warrants that he is the absolute
had mortgaged at the time of its execution in view of the owner and exclusive possessor thereof, free from all liens and
various Contracts to Sell and Deed of Absolute Sale encumbrances of whatever kind and nature. xxx.47 (Emphasis
respectively executed in favor of petitioners Cahayag, Ours)
Rivera, Escalona and Cahayag;
Thus, the housing units would fall under the catch-all
3. Who, as between petitioners-buyers and respondent phrase "together with all the buildings and/or other
Qua, has a better right over the properties? improvements now existing or which may hereafter be placed
or constructed thereon."
4. Whether the Deed of Absolute Sale in favor of Baldoza
was not preceded by a Contract to Sell and full payment of The contra proferentem rule finds no application to this case. The
the purchase price; and doctrine provides that in the interpretation of documents,
ambiguities are to be construed against the drafter.48 By its very
5. Whether the mortgage is void on the ground that it nature, the precept assumes the existence of an ambiguity in the
lacked the prior written approval of the HLURB. contract, which is why contra proferentem is also called the
ambiguity doctrine.49 In this case, the Deed of Real Estate
OUR RULING Mortgage clearly establishes that the improvements found on the
real properties listed therein are included as subject-matter of the
contract. It covers not only the real properties, but the buildings and
We deny the Petition for reasons as follows.
improvements thereon as well.
1. Attack on the Subject-matter of
2. Challenge to the Foreclosure
the Real Estate Mortgage
Sale with Regard to the
Ownership of the Mortgaged
It is true that the List of Properties attached to the Deed of Real Properties
Estate Mortgage refers merely to the lands themselves and does
not include the housing units found thereon. A plain reading of the
To begin with, the Contracts to Sell and Deed of Absolute Sale
Real Estate Mortgage, however, reveals that it covers the housing
could not have posed an impediment at all to the mortgage, given
units as well. We quote the pertinent provision of the agreement:
that these contracts had yet to materialize when the mortgage was
constituted. They were all executed after the constitution of the
[T]he MORTGAGOR has transferred and conveyed and, by these Real Estate Mortgage on 20 December 1980.
presents, do hereby transfer and convey by way of FIRST
MORTGAGE unto the MORTGAGEE, its successors and assigns
As regards Cahayag, the Contract to Sell in his favor was executed
the real properties described in the list appearing at the back of this
on 29 March 1981, more than three months after the execution of
document and/or in a supplemental document attached hereto as
the mortgage contract.50 This is taken from the Contract to Sell
Annex "A" and made and integral part hereof, together with all
itself, which forms part of the records of this case.51
the buildings and/or other improvements now existing or
which may hereafter be place[d] or constructed thereon, all of
At this juncture, we note that the CA, for reasons unknown, There is no evidence to show that any of petitioners Cahayag,
specified 29 September 1980,52 and not 29 March 1981, as the date Rivera and Escalona were able to effect full payment of the
of the execution of the Contract to Sell in its Decision. Respondent purchase price, which could have at least given rise to the
Qua has raised this point in her Memorandum filed with us. This obligation to transfer ownership. Petitioners Cahayag and Rivera
Court cannot be bound by the factual finding of the CA with regard even admit that they defaulted on their obligations under their
to the date of the Contract to Sell in favor of Cahayag. The general respective Contracts to Sell, although they attribute the default to
rule that the Court is bound by the factual findings of the CA must respondent Qua's "harassment and unlawful actuations."59 The
yield in this case, as it falls under one of the exceptions: when the statement, though, was a mere allegation that was left
findings of the CA are contradicted by the evidence on record.53 In unsubstantiated and, as such, could not qualify as proof of
this case, there is nothing in the records to support the CA's anything.60
conclusion that the Contract to Sell was executed on 29 September
1980. The evidence on record, however, reveals that the correct 3. Who Has a Better Right over the Properties
date is 29 March 1981.
Registration of the mortgage hound the buyers under the
In the case of petitioner Rivera, the corresponding Contract to Sell Contracts to Sell
in his favor was executed only on 12 August 1981, or almost eight
months after the perfection of the mortgage contract on 20 Registration of the mortgage establishes a real right or lien in favor
December 1980. of the mortgagee, as provided by Articles 131261and 212662 of the
Civil Code.63 Corollary to the rule, the lien has been treated as
Lastly, Dulos Realty executed the Deed of Absolute Sale in favor "inseparable from the property inasmuch as it is a right in rem."64 In
of petitioner Baldoza on 10 December 1983, which was almost other words, it binds third persons to the mortgage.
three years from the time the mortgage contract was executed on
20 December 1980. The purpose of registration is to notify persons other than the
parties to the contract that a transaction concerning the property
There was neither a contract to sell nor a deed of absolute sale to was entered into.65 Ultimately, registration, because it provides
speak of when the mortgage was executed. constructive notice to the whole world, makes the certificate of title
reliable, such that third persons dealing with registered land need
Petitioners equate a contract to sell to a contract of sale, in which only look at the certificate to determine the status of the property.66
the vendor loses ownership over the property upon its
delivery.54 But a contract to sell, standing alone, does not transfer In this case, the Real Estate Mortgage over the property was
ownership.55 At the point of perfection, the seller under a contract registered on 3 February 1981. On the other hand, the Contracts
to sell does not even have the obligation to transfer ownership to to Sell were all executed after the registration of the mortgage. The
the buyer.56 The obligation arises only when the buyer fulfills the Contract to Sell in favor of petitioner Cahayag was executed on 29
condition: full payment of the purchase price.57 In other words, the March 1981, or almost two months after the registration of the
seller retains ownership at the time of the execution of the contract mortgage. The corresponding Contract to Sell in favor of Rivera
to sell.58 was executed only on 12 August 1981, roughly six months after the
registration of the mortgage contract. Lastly, the Contract to Sell in
favor of Escalona was executed on 13 January 1983, or nearly two But Dela Merced is not relevant here. Dela Merced involved a
years after the registration of the mortgage on 3 February 1981. Contract to Sell that was executed prior to the mortgage, while the
Contracts to Sell in this case were all executed after the
Consequently, petitioners Cahayag, Rivera and Escalona, were constitution and registration of the mortgage.
bound to the mortgage executed between mortgagor Dulos Realty
and mortgagee CCC, by virtue of its registration. Definitely, the In Dela Merced, since GSIS had knowledge of the contract to sell,
buyers each had constructive knowledge of the existence of the this knowledge was equivalent to the registration of the Contract to
mortgage contract when they individually executed the Contracts Sell. Effectively, this constitutes registration canceled out the
to Sell. subsequent registration of the mortgage. In other words, the buyer
under the Contract to Sell became the- first to register. Following
Dela Merced v. GSIS not applicable the priority in time rule in civil law, the lot buyer was accorded
preference or priority in right in Dela Merced.
Petitioner invokes the above case. Dela Merced involved a clash
between an unrecorded contract to sell and a registered mortgage In this case, the registration of the mortgage, which predated the
contract. The contract to sell between the mortgagors (Spouses Contracts to Sell, already bound the buyers to the mortgage.
Zulueta) and the buyer (Francisco Dela Merced) was Consequently, the determination of good faith does not come into
executed before the former's constitution of the mortgage in favor play.
of GSIS. Because the Zuluetas defaulted on their loans, the
mortgage was foreclosed; the properties were sold at public Dela Merced materially differs from this case on another point. The
auction to GSIS as the highest bidder; and the titles were Contract to Sell in favor of Dela Merced was followed by full
consolidated after the spouses' failure to redeem the properties payment of the price and execution of the Deed of Absolute
within the one-year redemption period. GSIS later sold the Sale. In this case, the Contract to Sell in favor of each of petitioners
contested lot to Elizabeth D. Manlongat and Ma. Therese D. Cahayag, Rivera and Escalona, is not coupled with full payment
Manlongat. However, Dela Merced was able to fully pay the and execution of a deed of absolute sale.
purchase price to Spouses Zulueta, who executed a Deed of
Absolute Sale in his favor prior to the foreclosure sale. This case also needs to be distinguished from Luzon Development
Bank v. Enriquez.67 In that case, the unregistered Contract to Sell
This Court stated therein the general rule that the purchaser is not was executed after the execution of the mortgage. Instead of
required to go beyond the Torrens title if there is nothing therein to resorting to foreclosure, the owner/developer and the bank entered
indicate any cloud or vice in the ownership of the property or any into a dacion en pago. The Court declared that the bank was bound
encumbrance thereon. The case nonetheless provided an by the Contract to Sell despite the non-registration of the contract.
exception to the general rule. The exception arises when the It reasoned that the bank impliedly assumed the risk that some of
purchaser or mortgagee has knowledge of a defect in the vendor's the units might have been covered by contracts to sell. On the other
title or lack thereof, or is aware of sufficient facts to induce a hand, the Court pronounced the mortgage to be void, as it was
reasonably prudent person to inquire into the status of the property without the approval of the Housing and Land Use Regulatory
under litigation. The Court applied the exception, taking into Board (HLURB). The Court consequently ordered the unit buyer in
consideration the fact that GSIS, the mortgagee, was a financing that case to pay the balance to the bank, after which the buyer was
institution. obliged to deliver a clean title to the property.
There are points of distinction between the case at bar and Luzon whichever comes first.70 The General Banking Law of 2000 came
Development Bank. First, there is a definite finding in Luzon into law on 13 June 2000.
Development Bank that the mortgage was without prior HLURB
approval, rendering the mortgage void. In the present case, as will If the redemption period expires and the mortgagors or their
be discussed later, there is no proof from the records on whether successors-in-interest fail to redeem the foreclosed property, the
the HLURB did or did not approve the mortgage. Second, Luzon title thereto is consolidated in the purchaser.71 The consolidation
Development Bank did not even reach the foreclosure stage of the confirms the purchaser as the owner of the property; concurrently,
mortgage. This case, however, not only reached the foreclosure the mortgagor-for failure to exercise the right of redemption within
stage; it even went past the redemption period, consolidation of the the period-loses all interest in the property.72
title in the owner, and sale of the property by the highest bidder to
a third person. We now apply the rules to this case.

The first distinction deserves elaboration. The absence of prior As the foreclosure sale took place prior to the advent of the General
written approval of the mortgage by the HLURB rendered it void. Banking Law of 2000, the applicable redemption period is one year.
This effectively wiped out any discussion on whether registration In this case, because the Certificate of Sale in favor of respondent
bound the installment buyer. In fact, Luzon Development Bank did CCC was registered on 8 March 1982, the redemption period was
not even bother to state whether the mortgage was registered or until 8 March 1983. It lapsed without any right of redemption having
not. More important, the tables were turned when Luzon been exercised by Dulos Realty. Consequently, the right of
Development Bank held that the bank was bound to the Contract respondent CCC, as purchaser of the subject lots, became
to Sell in view of the latter's constructive notice of the Contract to absolute. As a matter of right, it was entitled to the consolidation of
Sell. Stated differently, the actually unregistered Contract to Sell the titles in its name and to the possession of those lots. Further,
became fictionally registered, making it binding on the bank. the right of respondent CCC over the lots was transferred to
respondent Qua by virtue of the Deed of Sale executed between
In this case, on account of its registration, and the fact that the them.
contracts were entered into after it, the mortgage is valid even as
to petitioners. Given the foregoing considerations, respondent Qua, who now has
title to the properties subject of the various Contracts to Sell, is the
No Redemption within One Year from the Foreclosure Sale lawful owner thereof.

When it comes to extrajudicial foreclosures, the law68 grants Foreclosure Sale vs. Contract of Sale
mortgagors or their successors-in-interest an opportunity to
redeem the property within one year from the date of the sale. The When Dulos Realty executed a Deed of Absolute Sale covering the
one-year period has been jurisprudentially held to be counted from real property registered under TCT No. S-39778 in favor of
the registration of the foreclosure sale with the Register of petitioner Baldoza on 10 December 1983, it was no longer the
Deeds.69 An exception to this rule has been carved out by Congress owner of the property. Titles to the subject properties, including the
for juridical mortgagors. Section 47 of the General Banking Law of one sold to Baldoza, had already been consolidated in favor of
2000 shortens the redemption period to within three months after respondent CCC as early as 10 November 1983. In fact, on the
the foreclosure sale or until the registration of the certificate of sale,
same date, the titles to the subject lots in the name of Dulos Realty Cavite Development Bank thereafter turns to Article 1459, which
had already been cancelled and new ones issued to respondent requires ownership by the seller of the thing sold at the time of
CCC. delivery or consummation stage of the sale. The Court explains
that if the rule were otherwise, the seller would not be able to
The fact that Dulos Realty was no longer the owner of the real comply with the latter's obligation to transfer ownership to the buyer
property at the time of the sale led the CA to declare that the under a perfected contract of sale. The Court ends the discourse
Contract of Sale was null and void. On this premise, the appellate with the conclusion that "[i]t is at the consummation stage where
court concluded that respondent Qua had a better title to the the principle of nemo dat quad non habet applies.76
property over petitioner Baldoza.
Case law also provides that the fact th,at the seller is not the owner
We find no error in the conclusion of the CA that respondent Qua of the subject matter of the sale at the time of perfection does not
has a better right to the property. The problem lies with its make the sale void.77
reasoning. We therefore take a different route to reach the same
conclusion. Hence, the lesson: for title to pass to the buyer, the seller must be
the owner of the thing sold at the consummation stage or at the
Proper place of nemo dat quod non habet in the Law on Sales time of delivery of the item sold. The seller need not be the owner
at the perfection stage of the contract, whether it is of a contract to
Undeniably, there is an established rule under the law on sales that sell or a contract of sale. Ownership is not a requirement for a valid
one cannot give what one does not have (Nemo dat quad non ha contract of sale; it is a requirement for a valid transfer of ownership'.
bet).73 The CA, however, confuses the application of this rule with
respect to time. It makes the nemo dat quad non habet rule a Consequently, it was not correct for the CA to consider the contract
requirement for the perfection of a contract of sale, such that a of sale void. The CA erroneously considered lack of ownership on
violation thereof goes into the validity of the sale. But the Latin the part of the seller as having an effect on the validity of the sale.
precept has been jurisprudentially held to apply to a contract of sale The sale was very much valid when the Deed of Absolute Sale
at its consummation stage, and not at the perfection stage.74 between the parties was executed on 10 December 1983, even
though title to the property had earlier been consolidated in favor
Cavite Development Bank v. Spouses Syrus Lim75 puts nemo dat of respondent CCC as early as 10 November 1983. The fact that
quad non habet in its proper place. Initially, the Court rules out Dulos Realty was no longer the owner of the property in question
at the time of the sale did not affect the validity of the contract.
1âwphi1

ownership as a requirement for the perfection of a contract of sale.


For all that is required is a meeting of the minds upon the object of
the contract and the price. The case then proceeds to give On the contrary, lack of title goes into the performance of a
examples of the rule. It cites Article 1434 of the Civil Code, which contract of sale. It is therefore crucial to determine in this case if
provides that in case the seller does not own the subject matter of the seller was the owner at the time of delivery of the object of the
the contract at the time of the sale, but later acquires title to the sale. For this purpose, it should be noted that execution of a public
thing sold, ownership shall pass to the buyer. The Court also refers instrument evidencing a sale translates to delivery.78 It transfers
to the rule as the rationale behind Article 1462, which deals with ownership of the item sold to the buyer.79
sale of "future goods."
In this case, the delivery coincided with the perfection of the We absolutely discard the argument. We can think of at least four
contract -The Deed of Absolute Sale covering the real property in reasons why. First, Exhibit "L" was not formally offered in
favor of petitioner Baldoza was executed on 10 December 1983. evidence. Second, it was not even incorporated into the
As already mentioned, Dulos Realty was no longer the owner of records. Third, the argument is irrelevant. Fourth, it was even
the property on that date. Accordingly, it could not have validly abandoned in the Memoranda filed by petitioners with us. Last, we
transferred ownership of the real property it had sold to petitioner. are not a trier of facts and thus we yield to the finding of the CA.

Thus, the correct conclusion that should be made is that while there Exhibit "L" not formally offered
was a valid sale, there was no valid transfer of title to Baldoza,
since Dulos Realty was no longer the owner at the time of the A perusal of the records shows that the Contract to Sell that
execution of the Deed of Absolute Sale. Baldoza referred to had in fact been marked as Exhibit "L" during
her direct examination in court.81 Even so, Exhibit "L" was never
No Bad Faith on Qua formally offered as evidence. For this reason, we reject her
contention. Courts do not consider evidence that has not been
The contention that Qua is a stockholder and former member of formally offered.82 This explains why the CA never mentioned the
the Board of Directors of respondent CCC and therefore she is not alleged Contract to Sell in favor of Baldoza.
exactly a stranger to the affairs of CCC is not even relevant.
The rationale behind the rule rests on the need for judges to
An innocent purchaser for value is one who "buys the property of confine their factual findings and ultimately their judgment solely
another without notice that some other person has a right to or and strictly to the evidence offered by the parties to a suit.83 The
interest in it, and who pays a full and fair price at the time of the rule has a threefold purpose. It allows the trial judge to know the
purchase or before receiving any notice of another person's purpose of the evidence presented; affords opposing parties the
claim."80 The concept thus presupposes that there must be an opportunity to examine the evidence and object to its admissibility
adverse claim or defect in the title to the property to be purchased when necessary; and facilitates review, given that an appellate
by the innocent purchaser for value. court does not have to review documents that have not been
subjected to scrutiny by the trial court.84
Respondent Qua traces her title to respondent CCC, whose
acquisition over the property proceeded from a foreclosure sale Exhibit "L" not incorporated into the records
that was valid. As there is no defect in the title of respondent CCC
to speak of in this case, there is no need to go into a discussion of The rule, of course, admits an exception. Evidence not formally
whether Qua is an innocent purchaser for value. offered may be admitted and considered by the trial court so long
as the following requirements obtain: (1) the evidence is
4. Dispute as to the Factual Finding of the CA that the Deed of duly identified by testimony duly recorded; and (2) the evidence
Absolute Sale in Favor of Baldoza was not Preceded by a is incorporated into the records of the case.
Contract to Sell and Full Payment of the Purchase Price
The exception does not apply to the case of Baldoza. While she
duly identified the Contract to Sell during her direct examination,
which was duly recorded, Exhibit "L" was not incorporated into the failure of petitioners to include the issue in the Memorandum. They
records. have either waived or abandoned it.

Exhibit "L" not relevant 5. Issue of HLURB's Non-Approval of the Mortgage

Be that as it may, the contention that a Contract to Sell in favor of Petitioners allege before the Court that the mortgage contract in
Baldoza preceded the sale in her favor is irrelevant. It must be this case was not approved by the HLURB. They claim that this
stressed that the sale to Baldoza made by Dulos Realty took violates Section 18 of P.D. 95786 and results in the nullity of the
place after the lapse of the redemption period and after mortgage. Respondents have disputed the claim and counter-
consolidation of title in the name of respondent CCC on 10 argue that the allegation of the petitioners is not supported by
November 1983, one month prior to the sale to Baldoza on 10 evidence. Respondents likewise aver that the argument was raised
December 1983. Dulos Realty still would have lost all interest over for the first time on appeal.87
the property mortgaged.
It is rather too late in the day for petitioners to raise this argument.
The fact that Dulos Realty ceased to be the owner of the property Parties are not permitted to change their theory of a case at the
and therefore it could no longer effect delivery of the property at appellate stage.88 Thus, theories and issues not raised at the trial
the time the Deed of Absolute Sale in favor of Baldoza was level will not be considered by a reviewing court on the ground that
executed is the very reason why the case of Baldoza cannot be they cannot be raised for the first time on appeal.89 Overriding
compared with Dela Merced. In the case, the buyer in the Contract considerations of fair play, justice and due process dictate this
to Sell was able to effect full payment of the purchase price and to recognized rule.90 This Court cannot even receive evidence on this
execute a Deed of Absolute Sale in his favor before the matter.
foreclosure sale. In this case, the full payment of the purchase
price and the execution of a Deed of Absolute Sale in favor of Petitioners' original theory of the case is the nullity of the mortgage
Baldoza was done after the foreclosure sale. on the grounds previously discussed. If petitioners are allowed to
introduce their new theory, respondents would have no more
Issue over Exhibit "L" not included in the Memorandum opportunity to rebut the new claim with contrary evidence, as the
trial stage has already been terminated. In the interest of fair play
Equally important is the fact that petitioners failed to include the and justice, the introduction of the new argument must be barred.91
issue over Exhibit "L" in any of the Memoranda they filed with us.
The omission is fatal. Issues raised in previous pleadings but Exceptions Not Applicable
not included in the memorandum are deemed waived or
abandoned (A.M. No. 99-2-04-SC). As they are "a summation of The Court is aware that the foregoing is merely a general rule.
the parties' previous pleadings, the memoranda alone may be Exceptions are written in case law: first, an issue of jurisdiction may
considered by the Court in deciding or resolving the be raised at any time, even on appeal, for as long as the exercise
petition."85 Thus, even as the issue was raised in the Petition, the thereof will not result in a mockery of the demands of fair
Court may not consider it in resolving the case on the ground of play;92 second, in the interest of justice and at the sound discretion
of the appellate court, a party may be allowed to change its legal
theory on appeal, but only when the factual bases thereof would
not require further presentation of evidence by the adverse party
for the purpose of addressing the issue raised in the new
theory;93 and last, which is actually a bogus exception, is when the
question falls within the issues raised at the trial court.94

The exceptions do not apply to the instant case. The new argument
offered in this case concerns a factual matter - prior approval by
the HLURB. This prerequisite is not in any way related to
jurisdiction, and so the first exception is not applicable. There is
nothing in the record to allow us to make any conclusion with
respect to this new allegation.

Neither will the case fall under the second exception. Evidence
would be required of the respondents to disprove the new
allegation that the mortgage did not have the requisite prior HLURB
approval. Besides, to the mind of this court, to allow petitioners to
change their theory at this stage of the proceedings will be
exceedingly inappropriate.

Petitioners raised the issue only after obtaining an unfavorable


judgment from the CA. Undoubtedly, if we allow a change of theory
late in the game, so to speak, we will unjustifiably close our eyes
to the fundamental right of petitioners to procedural due process.
They will lose the opportunity to meet the challenge, because trial
has already ended. Ultimately, we will be throwing the
Constitutional rulebook out the window.

WHEREFORE, premises considered, the Petitions are DENIED,


and the Court of Appeals Decision dated 2 November 2004 and
Resolution dated 10 May 2005 in CA-G.R. CV No. 47421 are
hereby AFFIRMED.

SO ORDERED.

MARIA LOURDES P.A. SERENO


Chief Justice, Chairperson