[G.R. No. 124554.

December 9, 1997]
ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner,
vs. COURT OF APPEALS and NORTH PHILIPPINE UNION MISSION OF
THE SEVENTH DAY ADVENTISTS, respondents.

The antecedents are as follows:

Petitioner EGMPC and private respondent NPUM entered into a Land

Development Agreement. Under the agreement, EGMPC was to develop a
parcel of land owned by NPUM into a memorial park subdivided into lots. The
parties further agreed - (d) THAT the FIRST PARTY shall receive forty (40%)
percent of the gross collection less Perpetual Care Fees or Net Gross
Collection (NGC) from this project. This shall be remitted monthly by the
SECOND PARTY in the following manner: (i) Forty (40%) percent of the NGC,
plus (ii) if it becomes necessary for the FIRST PARTY to vacate the property
earlier than two years from the date of this agreement, at the option of the
FIRST PARTY, an additional amount equivalent to twenty (20%) percent of the
NGC as cash advance for the first four (4) years with interest at twelve (12%)
percent per annum which cash advance shall be deductible out of the
proceeds from the FIRST PARTYs 40% from the 5th year onward. The SECOND
PARTY further agrees that if the FIRST PARTY shall desire to have its projected
receivables collected at the 5th year, the SECOND PARTY shall assist in
having the same discounted in advance.

The P1.5 million initial payment mentioned in the Deed of Absolute Sale,
covering the first phase of the project, shall be deducted out of the proceeds
from the FIRST PARTYs 40% at the end of the 5th year. Subsequent payments
made by the SECOND PARTY on account of the stated purchase price in said
Deed of Absolute Sale shall be charged against what is due to the FIRST
PARTY under this LAND DEVELOPMENT AGREEMENT.

Later, two claimants of the parcel of land surfaced - Maysilo Estate and
the heirs of a certain Vicente Singson Encarnacion. EGMPC thus filed an
action for interpleader against Maysilo Estate and NPUM. The Singson heirs
in turn filed an action for quieting of title against EGMPC and NPUM.

From these two cases, several proceedings ensued. One such case, from
the interpleader action, culminated in the filing and subsequent resolution
wherein EGMPC assailed that the appellate court’s resolution
requiring petitioner Eternal Gardens [to] deposit whatever amounts are due
from it under the Land Development Agreement with a reputable bank to be
designated by the respondent court.

In the Decision of September 19, 1988, the court ruled thus:

PREMISES CONSIDERED, (a) the petition is DISMISSED for lack of merit; (b)
this case is REMANDED to the lower court for further proceedings; and (c) the
Resolution of the Third Division of this Court requiring the deposit by the
petitioner of the amounts contested in a depository bank STANDS until after
the decision on the merits shall have become final and executory.

Entry of judgment was made on April 24, 1989.

Sometime thereafter, the trial court rendered decisions in interpleader
case and the case for quieting of title. These decisions were appealed to the
Court of Appeals, and the appeals were consolidated.

The appellate court rendered judgment in the consolidated case as

follows: (a.) the trial courts decision in the Interpleader Case was affirmed
insofar as it dismissed the claims of the intervenors, including the Maysilo
Estate, and the titles of NPUM to the subject parcel of land were declared
valid; and (b.) the trial courts decision in the case for quieting of title in favor
of the Singson heirs was reversed and set aside.

From the consolidated decision, the Singson heirs, Maysilo Estate and
EGMPC each filed with this Court their petitions for review on certiorari. The
petition filed by the Singson heirs was denied and entry of judgment was
made. G.R. No. 105159 filed by the Maysilo Estate was denied for failure of
petitioner to raise substantial legal issues, and entry of judgment made. G.R.
Nos. 103230-31 filed by EGMPC was denied for failure to comply with Circular
No. 19-91, and entry of judgment made. EGMPCs other petition, this time
under Rule 65, was dismissed for having been filed out of time and for lack of
merit.

Following these, the Court, through the Third Division, issued a Resolution
dated, thus:

WHEREFORE, considering that the ownership of the property in dispute has

now been settled with finality, the Court sees no further legal obstacle in
carrying out the respective covenants of the parties to the Land
Development Agreement. x x x. In respect to the mutual accounting required
to determine the remaining accrued rights and liabilities of said parties, the
case is hereby remanded to the Court of Appeals for proper determination
and disposition. All other incidental motions involving G.R. No. 73794, still
pending with this Court, are hereby, declared MOOT and are NOTED
WITHOUT ACTION.

In compliance with the Supreme Court resolution, the Court of Appeals

proceeded with the disposition of the case, and required the parties to
appear at a scheduled, with counsel and accountants, as well as books of
accounts and related records, to determine the remaining accrued rights and
liabilities of said parties.
 Citing the following provision of the land development agreement:

(e) THAT the SECOND PARTY shall keep proper books and accounting records
of all transactions affecting the sale of said memorial lots, which records
shall be open for inspection by the FIRST PARTY at any time during usual
office hours. The SECOND PARTY shall also render to the FIRST PARTY a
monthly accounting report of all sales and cash collections effected the
preceding month. It is also understood that all financial statements shall be
subject to annual audit by a reputable external accounting firm which should
be acceptable to the FIRST PARTY.

The appellate court required EGMPC to produce at the scheduled hearings

the following documents:

(a) statements of monthly gross income from the year 1981,

supported by copies of the contracts/agreements of the sale of lots
to buyers/customers; and
(b) summary statements, by month, of the forty per cent (40%) share
in the net gross income under the land development agreement
between the parties.

The accounting of the parties’ respective obligations was referred to the

Courts Accountant, Ms. Carmencita Angelo, with the concurrence of the
parties, to whom the documents were to be submitted.

NPUM prepared and submitted a Summary of Sales and Total Amounts

Due based on the following documents it likewise submitted to the court:

A-1 Land Development Agreement executed between NPUM and

EGMPC on October 6, 1976.
A-2 Submittal of requirements filed by EGMPC to the Securities and
Exchange Commission dated July 26, 1976 re: its application to
develop, sell and maintain a first class private cemetery part
situated in Baesa, Kalookan City on the 23 has. property of PUC of
NPUM. EGMPCs application calls for the development of 31,326
lawn type memorial lots for underground and above ground
interment, and 20,808 garden and family/estates memorial lots for
above ground interment, or a total of 52,134 memorial lots.
A-3 EGMPC Daily Sales Report which shows that from 1978, 1979,
1980 and 1981 EGMPC has sold 19,237 memorial lots with gross
sales amounting to P52,421,879.70.
A-3a Machine copy of EGMPC Daily Sales Report dated December 29,
1979 showing that in 1978 it sold 2,805
memorial lots valued at P5591,716.40 and in 1979 it sold 5,503
memorial lots valued at P11,943,631.00.
A-3a-1 Weekly Sales Report of EGMPC corresponding to the period
December 26 to 31, 1979, showing cumulatively as of said date it
has sold a total of 5,503 memorial lots from January 1 to December
29, 1979.
A-3a-2 Sales Report of EGMPC for the period February 12 to 18, 1980.
A-3a-4 Letter of Gabriel O. Vida, Executive Vice President and General
Manager of EGMPC, dated April 9, 1980, to Pastor Bienvenido
Capuli stating among others that for the year 1978, EGMPC has
sold 2,805 memorial lots and in the first quarter of 1980 from
January 1 to April 2, it has sold 2,418 memorial lots, for a total
gross sales of 10,730 memorial lots.
A-3b EGMPC Daily Sales Report which show that from 1978 up to
December 9, 1980 it has sold a total of 15,253 memorial lots with
sales value of P38,085,299.40.
A-3b-1 Are supporting sales records and/or weekly sales reports of
A-3b-2 EGMPC in relation to Exhibit A-3b.
A-3b-3
A-3b-4
A-3b-5
A-36-6
A-3b-7
A-4 Audited Financial Statement of EGMPC for 1985 which it filed with
the Securities and Exchange Commission on April 16, 1986
pursuant to the reportorial requirements of the SEC, with
accompanying balance sheet and statement of income and
expenses, consisting of five (5) pages.
A-5 Actual Gross Profit Rate of EGMPC for the year 1985 which shows
that it sold 3,623 memorial lots valued at P25,299,601.20.
A-6 Machine copy of Assumptions to Projected Cash Flow and Income
Statements prepared by EGMPC with assumptions that the 52,000
memorial lots would be sold and that 15% of total sales per year
are cash sales and 85% are on installment and that installment
sales are payable over a period of 60 months at 12% interest per
annum.
A-7 Formula for Computation of Interest Income for Lots Sold on
Installment.
A-8 Sales Price Analysis based on Lawn Class Memorial Lots for the
period 1978 to 1988, inclusive.
A-8a Price list issued by EGMPC effective December 1, 1977.
A-9 Computation of interest due for use of NPUM share.
A-9a Letter dated April 11, 1983 of Alfonso P. Roda, President of PUC
of NPUM showing summary of gross collections from memorial lots
sales starting January 1978 up to June 1982, inclusive, per
computation given to PUC by EGMPC.
A-9b Are validating documents consisting of accounting ledgers
A-9c in support of the computations given by EGMPC to PUC
A-9d as mentioned in Dr. Rodas Letter dated April 11, 1983.
A-10 Promissory Note of EGMPC dated April 6, 1976 issued to NPUM
for a loan of P720,000 for which EGMPC agreed to pay 12% interest
per annum.
B Price List of Memorial Lots of HIMLAYANG PILIPINO,
B-1 INC. effective February 3, 1981.
C Price List of Memorial Lots of HIMLAYANG PILIPINO,
C-1 INC. effective March 15, 1982.
C-2
D Price List of Memorial Lots of HIMLAYANG PILIPINO,
D-1 INC. effective February 18, 1983.
D-2
E Price List of Memorial Lots of HIMLAYANG PILIPINO,
E-1 INC. effective January 23, 1984.
E-2
F Price List of Memorial Lots of HIMLAYANG PILIPINO,
F-1 INC. effective July 9, 1984.
F-2
G Price List of Memorial Lots of HIMLAYANG PILIPINO,
G-1 INC. effective March 1, 1985.
G-2
H Price List of Memorial Lots of HIMLAYANG PILIPINO, INC. effective
July 1, 1987.
I Price List of Memorial Lots of HIMLAYANG PILIPINO, INC. effective
January 4, 1989.
J Price List of Memorial Lots of HIMLAYANG PILIPINO, INC. effective
August 2, 1989.
K Price List of Memorial Lots of HIMLAYANG PILIPINO,
K-1 INC. effective February 4, 1990.
L Price List of Memorial Lots of HIMLAYANG PILIPINO, INC. effective
February 2, 1991.
M Price List of Memorial Lots of HIMLAYANG PILIPINO,
M-1 INC. effective October 2, 1991.
N Price List of Memorial Lots of HIMLAYANG PILIPINO,
N-1 INC. effective February 5, 1992.
O Price List of Memorial Lots of HIMLAYANG PILIPINO, INC. effective
October 9, 1992.
P Price List of Memorial Lots of HIMLAYANG PILIPINO, INC. effective
January 15, 1993.
Q Price List of Memorial Lots of HIMLAYANG PILIPINO, INC. effective
February 16, 1993.
R Price List of Memorial Lots of HIMLAYANG PILIPINO,
R-1 INC. effective March 16, 1993.
S Price List of Memorial Lots of HIMLAYANG PILIPINO,
S-1 INC. effective September 15, 1993.
T Price List of Memorial Lots of MANILA MEMORIAL
 T-1 PARK effective January 1, 1985.
T-2
T-3
T-4
U Price List of Memorial Lots of MANILA MEMORIAL
U-1 PARK effective June 1, 1991.
U-2
U-3
U-4
V Price List of Memorial Lots of MANILA MEMORIAL
V-1 PARK effective November 2, 1991.
V-2
V-3
V-4
W Price List of Memorial Lots of HOLY CROSS
W-1 MEMORIAL PARK effective December 1, 1987.
W-2
W-3

It appears that EGMPC did not submit any document whatsoever to aid
the appellate court in its mandated task. Thus, in a Resolution, the appellate
court declared:

x x x (1) that Eternal Gardens Memorial Park Corporation has waived its
rights to present the records and documents necessarily for accounting,
which records they were specifically required to preserve under the parties
Land Development Agreement; and (2) that it will now proceed to the mutual
accounting required to determine the remaining accrued rights and liabilities
of the said parties x x x ordered by the Supreme Court in its Resolution of
December 1, 1993 (p. 7, rec.), and that the Court will proceed to do what it is
required to do on the basis of the documents submitted by the North
Philippine Union Mission of the Seventh Day Adventists only.

Ms. Angelo submitted her Report dated January 31, 1995, to which the
appellate court required the parties to comment on.
EGMPC took exception to the appellate courts having considered it to
have waived its right to present documents. Considering EGMPCs arguments,
the court set a hearing date where NPUM would present its
documents according to the Rules [of Court], and giving the private
respondent [EGMPC] the opportunity to object thereto.

Subsequently, NPUM asked for and the appellate court issued a subpoena
duces tecum and subpoena ad testificandum to EGMPCs President, Mr.
Gabriel O. Vida requiring him to produce the following documents:
 1. Copies of Deeds of Sale corresponding to each memorial lot sold
subject of the Land Development Agreement between the parties;
2. Lists of all memorial lots sold under or affecting the said Land
Development Agreement with an indication of the types/ kinds of
memorial lots and the corresponding prices at which each was sold
and the dates when each lot was sold;
3. Lists of all the owners of the memorial lots affected by the Land
Development Agreement;
4. Copies of all the annual audits made by the external accounting
firm pursuant to provision (a) of the Land Development Agreement;
5. Copies of all audited financial statements of ETERNAL from 1978 to
the present;
6. Copies of all monthly accounting reports of all sales and cash
collections regarding all the memorial lots sold under the Land
Development Agreement pursuant to provision (e) of the said Land
Development Agreement;
7. The name/s of the Depository/Trustee Bank/s which acted as the
depository/trustee of funds collected by ETERNAL pursuant to
provision (f) of the subject Land Development Agreement;
8. All other accounting books and records on all transactions affecting
all the memorial lots covered under the Land Development
Agreement;
9. List of all the corporate officers and employees of ETERNAL from
1975 up to the present whose duties and responsibilities involved
the recording of all sales and other transactions and the
safekeeping of such records relating to the sale of the memorial
lots subject of the Land Development Agreement.

NPUM also filed a Request for Admission of the documents it had earlier
submitted to the Court annexed to the Summary of Sales and Total Amounts
Due, addressed to Mr. Vida. EGMPC, however, filed a Denial to the Request
for Admission, alleging that it was without knowledge or information of the
documents, except for the Land Development Agreement of October 6, 1976.

NPUM then reiterated its request for and was granted by the appellate
court, a subpoena duces tecum and subpoena ad testificandum, this time
addressed to the Chief of the Records Division of EGMPC. NPUM further filed
a Motion for Production, Inspection and Photocopying of Documents and
Books of Accounts of EGMPC, in particular:

1. Master Development and/or Operational Plan of Eternal Gardens for

Memorial Park at Baesa, Metro Manila subject of the Land
Development Agreement.
2. Inventory of memorial lots developed and sold by Eternal under the
Land Development Agreement and the type of memorial lots
developed and sold, i.e., whether lawn type, family estate type,
 garden estate type and the number of each type developed and
sold.
3. List of buyers and owners of memorial lots sold under the Land
Development Agreement and the corresponding sales contracts.
4. Records of number of memorial lots sold on installment terms, and
those sold on cash basis.
5. Sales and marketing records as to the number of memorial lots
effected by the Land Development Agreement sold in each of the
following years: 1978, 1979, 1980, 1981, 1982, 1983, 1984, 1985,
1986, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994 and 1995.
6. Monthly accounting records of collections from sales of memorial
lots under the Land Development Agreement from 1978 to 1995,
inclusive.
7. Year-end audited financial statements of Eternal Gardens Memorial
Park Corporation from 1977 to 1995, inclusive.
8. Price list of Eternals memorial plot lots affected by the Land
Development Agreement covering the period 1977 to 1995.
9. List of accredited and/or authorized agents, brokers, salesmen, and
sales counsellors of Eternal from 1977 to 1995 and their addresses.
10. Records of collections representing 10% of the gross collections
on each memorial lot sold under the Land Development
Agreement, for perpetual care fees and constituting a trust fund to
secure perpetual care of the memorial park affected by the Land
Development Agreement.

Later, NPUM filed a second Request for Admissions addressed to Mr.

Vida. He was asked to make the following admissions:

1. That the auditor retained by Eternal Gardens Memorial Park Corp. to

audit and examine its financial position, and which prepared Eternals
audited financial statements, for the years 1982, 1983 and 1984 was
the auditing and accounting firms of Josue, Arceo & Co., CPAs, with
office at the 2nd Floor, Roman R. Santos Building, Plaza Goeti, Manila.

2. That the auditor retained by Eternal Gardens Memorial Park Corp. to

audit and examine its financial position, and which prepared Eternals
audited financial statement for the Fiscal years 1985 and 1986 was
Roseller A. Ditangco, CPA, with offices at No. 6, Plata Street, Tugatog,
Malabon, Metro Manila.

3. That the auditor retained by Eternal Gardens Memorial Park Corp. to

audit and examine its financial position, and which prepared Eternals
audited financial statements for the Fiscal years 1987, 1988, 1989,
1990, 1991, 1992 and 1993, was Bernardino T. Dela Cruz, CPA with
offices at No. 9, Interior II, K-8th Street, Kamuning, Quezon City.
4. That true and faithful copies of the audited financial statements of
Eternal Gardens Memorial Park Corp. for the Fiscal years 1981 to 1993,
inclusive, specifically those referred to in paragraphs 1, 2 and 3 of this
Request, were submitted to and filed with the Bureau of Internal
Revenue as an integral part of Eternals Income Tax Returns, as well as
with the Securities and Exchange Commission in compliance with the
reportorial requirements of the said Securities and Exchange
Commission.
5. That each of the following documents, exhibited with and attached to
this request, are true and faithful copies of the original and genuine
documents, thus:

a. Annex A (inclusive of sub-markings from Annexes A-1 to A-9) is the

audit report prepared by the accounting firm of Josue, Arceo & Co.,
(CPAs), of the financial position of Eternal Gardens Memorial Park
Corp. at 31 December 1982;
b. Annex B (inclusive of sub-markings from Annexes B-1 to B-3) is the
audit report prepared by the accounting firm of Josue, Arceo & Co.,
(CPAs) of the financial position of Eternal Gardens Memorial Park
Corp. at 31 December 1983;
c. Annex C (inclusive of sub-markings from Annexes C-1 to C-6) is the
audit report prepared by the accounting firm of Josue, Arceo & Co.
(CPAs) of the financial position of Eternal Gardens Memorial Park
Corp. at 31 December 1984;
d. Annex D (inclusive of sub-markings from Annexes D-1 to D-3) is the
audit report prepared by Roseller A. Ditangco, CPA of the financial
position of Eternal Gardens Memorial Park Corp. at 31 December
1985;
e. Annex E (inclusive of sub-markings from Annexes E-1 to E-8) is the
audit report prepared by Bernardino T. Dela Cruz, CPA, of the
financial position of Eternal Gardens Memorial Park Corp. at 31
December 1987;
f. Annex F (inclusive of sub-markings from Annexes F-1 to F-7) is the
audit report prepared by Bernardino T. Dela Cruz, CPA, of the
financial position of Eternal Gardens Memorial Park Corp. at 31
December 1989;
g. Annex G (inclusive of sub-markings from Annexes G-1 to G-9) is the
audit report prepared by Bernardino T. Dela Cruz, CPA, of the
financial position of Eternal Gardens Memorial Park Corp., at 31
December 1990;
h. Annex H (inclusive of sub-markings from Annexes H-1 to H-13) is
the audit report prepared by Bernardino T. Dela Cruz, CPA, of the
financial position of Eternal Gardens Memorial Park Corp., at 31
December 1991;
i. Annex I (inclusive of sub-markings from Annexes I-1 to I-8) is the
audit report prepared by Bernardino T. Dela Cruz, CPA, of the
 financial position of Eternal Gardens Memorial Park Corp. at 31
December 1992;
j. Annex J (inclusive of sub-markings from Annexes J-1 to J-7) is the
audit report prepared by Bernardino T. Dela Cruz, CPA, of the
financial position of Eternal Gardens Memorial Park Corp. at 31
December 1993.

Meanwhile, EGMPC failed to present the documents required by

the subpoena. It further filed a Denial and/or Objection to the Requests for
Admission on the ground that it could not make comparison of the
documents with the originals thereof.
On November 10, 1995, Ms. Angelo submitted her Report.
In a Resolution dated January 15, 1996, the Court of Appeals approved
the report of Ms. Angelo, finding this to be a just and fair account of what
Eternal Gardens and Memorial Park owes to the petitioner North Philippine
Union Mission of the Seventh-Day Adventists, and accordingly orders the
former to pay and turn over to the latter the amounts of P167,065,195.00 as
principal and P167,235,451.00 in interest x x x.
EGMPC filed a Motion for Reconsideration, which was denied for lack of
merit by the appellate court in a Resolution dated April 12, 1996.
On April 29, 1996, EGMPC filed a Motion for Extension of Time to File
Petition for Certiorari and Prohibition with this Court, docketed as G.R. No.
124554, seeking the review of the appellate courts Resolutions dated January
15, 1996 and April 12, 1996. The Court granted this motion for
extension, and on May 27, 1996, EGMPC filed the instant petition. It appears,
however, that in a Report dated May 31, 1996 in CA-G.R. SP No. 04869, the
Court of Appeals informed the parties that its January 15, 1996 Resolution
had attained finality considering the following:

The respondent Eternal Gardens Memorial Park received copy of the

resolution on January 22, 1996 and, after twelve (12) days from its receipt,
filed a motion for reconsideration thereof. This Court denied Eternal Gardens
motion for reconsideration in a resolution, a copy of which it received. After
eleven (11) days from receipt of the resolution denying its motion for
reconsideration, it filed a motion for extension to file a petition for review
with the Supreme Court.

It is quite clear that after the denial of its motion for reconsideration,
Eternal Gardens had only three (3) days left of the reglementary period to file
a petition for review, but Eternal Gardens allowed that period to lapse, and
then filed its motion to extend to file its petition - which is eight (8) days
beyond the period of finality of the resolution sought to be reviewed by the
Supreme Court. Consequently, the resolution had attained finality before
Eternal Gardens filed its motion to extend before this Honorable Court.
 Following the above incidents, EGMPC filed an Opposition and/or
Comment to the Report of the Court of Appeals dated 31 May 1996 with the
prayer:

x x x to disregard and nullify the Report of the Court of Appeals and at the
same time allow or tolerate the First Division of the Honorable Supreme
Court to resolved (sic) the petitioner Eternal Gardens Petition
for Certiorari against the Court of Appeals and NPUM.

In retort to EGMPCs opposition, also in G.R. No. 73794, NPUM filed on June
11, 1996 an Omnibus Motion (a) to dismiss the petition in G.R. No. 124554,
or (b) to consolidate the two petitions, and (c) for the issuance of a writ of
execution. NPUM contended that as a consequence of the appellate courts
resolutions in CA G.R. SP No. 04869 having attained finality, a writ of
execution may be issued under G.R. No. 73794, and EGMPC could no longer
file a separate petition such as that docketed as G.R. No. 124554.

In its Comment filed on July 17, 1996, in G.R. No. 124554, NPUM prayed
for the denial of the petition for being frivolous and dilatory, citing EGMPCs
violation of Circular No. 04-94 on forum shopping, in reference to its
(EGMPCs) pleadings filed in G.R. No. 73794. NPUM pointed out that the reliefs
sought by EGMPC in G.R. No. 124554 were identical to those in its Opposition
And/Or Comment to the Report of the Court of Appeals dated 31 May 1996
filed in G.R. No. 73794.

On December 26, 1996, the Regional Trial Court of Kalookan City, Branch
120, issued an Order in the case of origin, Civil Case No. 9556,
granting NPUMs motion for execution of judgment. A writ of execution was
subsequently issued by that trial court on January 7, 1997.

Because of the trial courts issuance of the writ of execution, on January

10, 1997, EGMPC filed in G.R. No. 124554 an Urgent Motion for Restraining
Order And/Or Injunction and Motion for Contempt of Court. EGMPC prayed
that pending resolution of the petition to promptly issue a restraining order
and/or injunction against Judge Jaime Discaya of the RTC Br. 120 of Kalookan
City in Civil Case No. 9556 x x x
EGMPC also filed in G.R. No. 73794 on January 17, 1997 an Urgent Motion
for Restraining Order And/Or Injunctive Relief with the same prayer as in its
Urgent Motion filed in G.R. No. 124554.
In G.R. No. 124554, the Court granted EGMPCs motion and issued a
temporary restraining order against the trial courts order dated December
16, 1996 and writ of execution dated January 7, 1997.
In a Resolution dated January 27, 1997 issued in G.R. No. 73794, the
Court denied for lack of merit EGMPCs Urgent Motion.
 The threshold question here is whether Eternal Gardens timely
filed its petition for review from the Court of Appeals January 15,
1996 and April 12, 1996 Resolutions.
We restate the material dates thus:

EGMPC received a copy of the January 15, 1996 Resolution on January 22,
1996. Twelve days from such receipt, or on February 2, 1996, EGMPC filed its
Motion for Reconsideration. On April 18, 1996, EGMPC received the appellate
courts Resolution of April 12, 1996 denying its Motion for Reconsideration. On
April 29, 1996, or eleven days from its receipt of the denial of its motion for
reconsideration, EGMPC filed a motion for extension of time to file its Petition
for Certiorari and Prohibition and concurrently paid the legal fees.

We find that EGMPCs Motion for Extension of Time to File a Petition for
Review was timely filed on April 29, 1996, such motion having been filed
eleven days from receipt of the appellate courts denial of its motion for
reconsideration. Supreme Court Circular No. 10 dated August 28, 1986 on
modes and periods of appeal provides thus:

(5) APPEALS BY CERTIORARI TO THE SUPREME COURT

In an appeal by certiorari to this Court under Rule 45 of the Rules of Court,

Section 25 of the Interim Rules and Section 7 of PD 1606, a party may file a
petition for review on certiorari of the judgment of a regional trial court, the
Court of Appeals or the Sandiganbayan within fifteen days from notice of
judgment or of the denial of his motion for reconsideration filed in due time,
and paying at the same time the corresponding docket fee (Section 1 of Rule
45). In other words, in the event a motion for reconsideration is filed and
denied, the period of fifteen days begins to run again from notice of denial.

A motion for extension of time to file a petition for review on certiorari

may be filed with the Supreme Court within the reglementary period, paying
at the same time the corresponding docket fee.

While the petition filed by EGMPC purports to be one of certiorari under

Rule 65 of the Revised Rules of Court, we shall treat it as having been filed
under Rule 45, considering that it was filed within the 15-day reglementary
period for the filing of a petition for review on certiorari. As the Court stated
in Delsan Transport Lines, Inc. vs. Court of Appeals, where the Court was
liberal in its application of the Rules of Court in the interest of justice: It
cannot x x x be claimed that this petition is being used as a substitute for
appeal after that remedy has been lost through the fault of
petitioner. Moreover, stripped of allegations of grave abuse of discretion, the
petition actually avers errors of judgment rather than of jurisdiction, which
are the subject of a petition for review.
 The May 31, 1996 Report of the Court of Appeals informed the parties
that the January 15, 1996 Resolution had attained finality, erroneously
applying the rule applicable to petitions for review filed with the Court of
Appeals from a final judgment or order of the regional trial court.
We cannot and do not in the instant case vacate and set aside the May
31, 1996 Report. The report is not before this Court on review. We must
however, within the milieu of this case, regard the report impertinent by the
fact of EGMPC having timely filed its motion for extension of time to file its
petition on April 29, 1996.
We also consider that the consequences of the issuance of the report,
that is, the entry of judgment in the appellate court and the writ of execution
issued by the trial court in the case of origin, inextricably affect the
resolution of the instant case. Hence, the rationale for our restraining order
of January 15, 1997.
We next consider whether, as asserted by NPUM, EGMPCs petition must
be summarily dismissed on the ground of forum shopping. NPUM points to
EGMPCs Opposition and/or Comment to the Report of the Court of Appeals
dated May 31, 1996 filed in G. R. No. 73794 vis-a-vis its Petition for Review in
the instant case, and the two Urgent Motions for the Issuance of a Temporary
Restraining Order filed in G.R. No. 73794 and in the instant case.
NPUM asserts that the reliefs sought by EGMPC in its opposition and in its
petition are identical. We disagree. The petition here seeks the setting aside
of the Court of Appeals January 15, 1996 and April 12, 1996 Resolutions.
The Opposition in G.R. No. 73794, on the other hand, sought the
nullification of the May 31, 1996 Report and as a corollary, for the instant
case to be allowed or tolerated.
The opposition and the petition do not seek to provoke from this Court
the resolution of a same issue, the evil which Revised Circular No. 28-91 and
its companion Administrative Circular No. 04-94 address. We read the
opposition in G.R. No. 73794 as a complement to the petition here, to which
it makes categorical and express reference. We consider it as merely a
matter of discourse and emphasis that Eternal Gardens reiterated its case in
the later pleading.
Regarding the motions for the issuance of a temporary restraining order
filed by EGMPC on January 10, 1997 in the instant case and on January 17,
1997 in G.R. No. 73794, we consider the exigency which may have prompted
EGMPC to file the motions in both cases. The trial court in the case of origin,
acted favorably on NPUMs motion for the issuance of a writ of execution, the
basis of which is the alleged finality of the appellate courts January 15, 1996
Resolution. The trial court ruled that the instant case denominated as an
original action for certiorari does not interrupt the course of the principal
action [G.R. No. 73794] nor the running of the period in the proceeding. To
not stay the execution considering the trial courts ratiocination would render
moot EGMPCs remedy in the instant case.
NPUM also contends that EGMPC has committed perjury, pointing to the
certification under oath filed by EGMPC, through its President Gabriel O. Vida,
where he states that there is no other case pending in any court or tribunal
in the Philippines, with the same issues in this case x x x.
Again, we disagree. It does not appear that EGMPC was to pursue the
two cases concurrently. EGMPC filed this new petition, and did not assail the
appellate courts resolution under G.R. No. 73794, as in fact the Court has
informed the parties that no further pleadings were to be entertained in G.R.
No. 73794 after remand to the Court of Appeals.
EGMPC next asserts that the Resolution of the Third Division dated
December 1, 1993 ordering the remand to the Court of Appeals of the case
for accounting changed, modified and reversed the September 19, 1988
Decision of the Second Division which ordered the remand of the case to the
trial court. EGMPC contends that the Third Division is in violation of the
constitution which provides that no doctrine or principle of law laid down in a
decision en banc or in division may be changed modified or revised by the
Court except when sitting en banc.
EGMPC had raised the very same issue in its Motion for Reconsideration
of the December 1, 1993 Resolution. The Court, in its Resolution dated
February 14, 1994 had denied the motion with finality for lack of merit.
Needless to say, the argument raised by EGMPC is utterly without
consequence. At the time the September 19, 1988 Decision was rendered,
the two civil cases - interpleader and quieting of title - were still
pending. What was brought before the appellate courts and subject of G.R.
No. 73794 were mere incidents, and not the judgment of the trial court; thus,
the remand to the trial court for further proceedings on the merits of the
case. The December 1, 1993 Resolution was issued after the issue of
ownership of the subject parcel of land was already resolved with
finality. What was left for the courts to do was to have an accounting done of
the rights and liabilities of EGMPC and NPUM, thus, the remand to the Court
of Appeals.
We now consider the merits of the case.
The gist of EGMPCs contentions is that it owes the amount of
only P35,000,000.00 less advances and not P167,065,195.00 as
principal and P167,235,451.00 in interest as computed by Court
Accountant Carmencita C. Angelo.
EGMPC first contends that the appellate court, in appointing an
accountant to make the computations, delegated judicial function, such as to
determine the admissibility of evidence.
Under the Revised Internal Rules of the Court of Appeals, that court has
the -
d. Authority to receive evidence and perform any and all acts necessary for
the resolution of factual issues raised in cases falling within its original
jurisdiction.
For the proper disposition of the case, the appellate court, under the
above-quoted authority, designated an accountant to receive, collate and
analyze the documents to be filed by the parties.
 No judicial function was exercised by Ms. Angelo. She was not asked to
rule on the admissibility of the evidence. The documents were duly marked
during the hearing of July 19, 1995, for the consideration of the appellate
court, which alone had the power to decide. Ms. Angelo’s role in the
proceedings was to prepare a report, which she did, culling from the
documents submitted to her. While it may be true that the report, when
adopted by the appellate court, became part of its decision, judicial power
lies, not with the official who prepared the report, but with the court itself
which wields the power of approval or rejection. Under American
jurisprudence, the rule is thus - It would seem on principle that a
commissioner, master or referee appointed by a court to aid it in the
adjudication of a particular case is not a court when performing the functions
assigned to him, although the court may adopt his conclusions in its decision
x x x. It has, for instance, been held that a statute giving the supreme court
of a state the power to appoint commissioners thereof whose duty shall be,
under such rules and regulations as the court may adopt, to assist it in the
performance of its functions, and in disposing of undetermined cases before
it, is not unconstitutional or open to the objection that the commissioners are
vested with judicial power, since the commissioners merely report facts
found and conclusions reached, and the court retains the power to decide
which is the only judicial power. It has also been pointed out that a
chancellor does not, by referring a matter to a commissioner, delegate his
judicial function to him. The commissioner is appointed for the purpose of
assisting the chancellor, not to supplant or replace him, and the findings of a
commissioner are merely advisory and not binding on the court.
EGMPC also contends that it was deprived of due process because it was
not given reasonable opportunity to know and meet the claim of [NPUM] as
its counsel was not able to cross-examine the American Accountant of
[NPUM].
The contention is without merit.
Contrary to EGMPCs claim, it was given every opportunity to present its
case. At the outset, the parties were asked by the appellate court to submit
documents for accounting. NPUM made full utilization of the modes of
discovery, asking the appellate court to subpoena documents and
testimonies, and requesting admissions from EGMPC regarding documents it
(EGMPC) had in its possession, documents which emanated from the
corporation itself, and either sent to NPUM as communiqus, such as the
Letter of Mr. Vida dated April 4, 1980 to Pastor Bienvenido Capule of NPUM
stating inter alia that for 1978, EGMPC sold 2,805 memorial lots and that
during the first quarter of 1980 the corporation sold 2,418 lots, totalling
10,730, or documents available to the general public, as in the Price Lists, or
filed with government offices, specifically the Securities and Exchange
Commission and the Bureau of Internal Revenue.
EGMPC cannot claim that it was denied the forum to confer with NPUM
and NPUMs accountant. The appellate court had arranged conferences for
the parties and their accountants to allow them to discuss with each other
and with Ms. Angelo. Even Ms. Angelo, in her Letter dated November 10,
1995 covering her second and final report spoke of such a conference, to wit:
In compliance with your instructions in the last conference-meeting with the
party-litigants in Case CA-G.R. No. SP No. 04869 held last August 30, 1995,
the undersigned together with the representatives of the North Philippine
Union Mission (NPUM) and the Eternal Gardens Memorial, Inc. had a
discussion on the computations made by each of the party of the amount
due to the North Philippine Union Mission which were submitted to the Court.
It was not even imperative that EGMPC cross-examine the accountant
who prepared EGMPCs computation, and there was no denial of due process
without such cross-examination. This computation was merely to aid Ms.
Angelo, who was to make her own independent computation from the
documents submitted to her.
EGMPC also asserts that substantially if not all records, documents and
papers submitted by the private respondent NPUM to the Courts Accountant
which eventually became the basis of the report and Resolution of January
15, 1996 of the public respondent Court, were not genuine and not properly
identified by the persons who were supposed to have executed the same
including the alleged financial statement of Eternal Gardens allegedly issued
by the Securities and Exchange Commission (SEC).
From the transcript of stenographic notes of the proceedings in the
appellate court, we find that EGMPC acquiesced to the use of the documents
submitted by NPUM, including the financial statements, even actively
participating in the discussion of the contents of such documents. EGMPCs
main objection was only on how the entries in these documents were to be
interpreted, for example, on how payments towards the perpetual care fund
would be credited. EGMPC did not object even when counsel for NPUM read
into the records the contents of the documents.
It even appears that after Ms. Angelo came up with her first report,
EGMPCs counsel expressed that it was amenable to that computation. In that
report, Ms. Angelo had stressed that [s]ince the Eternal Gardens Memorial
Park, Inc. did not submit to the Court any documents pertaining to the
computations of the 40% share of the North Philippine Union Mission of the
Seventh Day Adventists, then we have no other recourse but to base the
computation on the available figures and on the other documents as
presented by the petitioner [NPUM].
EGMPC lastly contends that it is not liable for interest. It claims that it
was justified in withholding payment as there was still the unresolved issue
of ownership over the property subject of the Land Development Agreement
of October 6, 1976.
The argument is without merit. EGMPC under the agreement had the
obligation to remit monthly to NPUM forty percent (40%) of its net gross
collection from the development of a memorial park on property owned by
NPUM. The same agreement provided for the designation of a
depository/trustee bank to act as the depository/trustee for all funds
collected by EGMPC. There was no obstacle, legal or otherwise, to the
compliance by EGMPC of this provision in the contract, even on the
affectation that it did not know to whom payment was to be made.
Even disregarding the agreement, EGMPC cannot suspend payment
on the pretext that it did not know who among the subject
property’s claimants the rightful owner was. It had a remedy under
the New Civil Code of the Philippines - to give in consignation the
amounts due, as these fell due Consignation produces the effect of
payment.
The rationale for consignation is to avoid the performance of an
obligation becoming more onerous to the debtor by reason of
causes not imputable to him. For its failure to consign the amounts
due, Eternal Gardens obligation to NPUM necessarily became more
onerous as it became liable for interest on the amounts it failed to
remit.
Notably, EGMPC filed an interpleader action, the essence of which, aside
from the disavowal of interest in the property in litigation on the part of the
petitioner, is the deposit of the property or funds in controversy with the
court. Yet from the outset, EGMPC had assailed any court ruling ordering the
deposit with a reputable bank of the amounts due from it under the Land
Development Agreement. In G.R. No. 73794, the Court made the following
discourse on the disavowal of EGMPC of its obligations, thus:
In the case at bar, a careful analysis of the records will show that petitioner
admitted among others in its complaint in Interpleader that it is still
obligated to pay certain amounts to private respondent; that it claims no
interest in such amounts due and is willing to pay whoever is declared
entitled to said amounts. Such admissions in the complaint were reaffirmed
in open court before the Court of Appeals as stated in the latter courts
resolution dated September 5, 1985 in C.A. G.R. No. 04869 which states:
The private respondent (MEMORIAL) then reaffirms before the Court its
original position that it is a disinterested party with respect to the property
now the subject of the interpleader case.
In the light of the willingness, expressly made before the court, affirming the
complaint filed below, that the private respondent (MEMORIAL) will pay
whatever is due on the Land Development Agreement to the rightful
owner/owners, there is no reason why the amount due on subject agreement
has not been placed in the custody of the Court.
Under the circumstances, there appears to be no plausible reason for
petitioners objections to the deposit of the amounts in litigation after having
asked for the assistance of the lower court by filing a complaint for
interpleader where the deposit of aforesaid amounts is not only required by
the nature of the action but is a contractual obligation of the petitioner under
the Land Development Program.
As correctly observed by the Court of Appeals, the essence of an
interpleader, aside from the disavowal of interest in the property in litigation
on the part of the petitioner, is the deposit of the property or funds in
controversy with the court, it is a rule founded on justice and equity: that the
plaintiff may not continue to benefit from the property or funds in litigation
during the pendency of the suit at the expense of whoever will ultimately be
decided as entitled thereto.
The case at bar was elevated to the Court of Appeals on certiorari with
prohibitory and mandatory injunction. Said appellate court found that more
than twenty million pesos are involved; so that on interest alone for savings
or time deposit would be considerable, now accruing in favor of the Eternal
Gardens. Finding that such is violative of the very essence of the complaint
for interpleader as it clearly runs against the interest of justice in this case,
the Court of Appeals cannot be faulted for finding that the lower court
committed a grave abuse of discretion which requires correction by the
requirement that a deposit of said amounts should be made to a bank
approved by the Court.
Petitioner would now compound the issue by its obvious turnabout, presently
claiming in its memorandum that there is a novation of contract so that the
amounts due under the Land Development Agreement were allegedly
extinguished, and the requirement to make a deposit of said amounts in a
depository bank should be held in abeyance until after the conflicting claims
of ownership now on trial before Branch CXXII RTC-Caloocan City, has finally
been resolved.
All these notwithstanding, the need for the deposit in question has been
established, not only in the lower courts and in the Court of Appeals but also
in the Supreme Court where such deposit was required in the resolution of
July 8, 1987 to avoid wastage of funds.
Even during the pendency of G.R. No. 73794, EGMPC was required to
deposit the accruing interests with a reputable commercial bank to avoid
possible wastage of funds when the case was given due course. Yet, EGMPC
hedged in depositing the amounts due and made obvious attempts to stay
payment by filing sundry motions and pleadings.
We thus find that the Court of Appeals correctly held Eternal Gardens
liable for interest at the rate of twelve percent (12%). The withholding of the
amounts due under the agreement was tantamount to a forbearance of
money.
CONSIDERING THE FOREGOING, the Court Resolved to DENY the
petition. The Resolutions dated January 15, 1996 and April 12, 1996 are
AFFIRMED. The temporary restraining order issued by this Court on January
15, 1997 is LIFTED.
SO ORDERED.
[G.R. No. 150913. February 20, 2003]
SPOUSES TEOFILO and SIMEONA RAYOS, and GEORGE
RAYOS, petitioners, vs. DONATO REYES, SATURNINO REYES,
TOMASA R. BUSTAMANTE and TORIBIA R.
CAMELO, respondents.
The three (3) parcels were formerly owned by the spouses Francisco
and Asuncion Tazal who on 1 September 1957 sold them for P724.00 to
respondent’s predecessor-in-interest, one Mamerto Reyes, with right to
repurchase within two (2) years from date thereof by paying to the vendee
the purchase price and all expenses incident to their reconveyance. After the
sale the vendee a retro took physical possession of the properties and paid
the taxes thereon.
The otherwise inconsequential sale became controversial when two (2)
of the three (3) parcels were again sold on 24 December 1958 by
Francisco Tazal for P420.00 in favor of petitioners predecessor-in-
interest Blas Rayos without first availing of his right to repurchase
the properties.
In the meantime, on 1 September 1959 the conventional right of
redemption in favor of spouses Francisco and Asuncion Tazal
expired without the right being exercised by either the Tazal
spouses or the vendee Blas Rayos.
After the expiration of the redemption period, Francisco Tazal
attempted to repurchase the properties from Mamerto Reyes by
asserting that the 1 September 1957 deed of sale with right of
repurchase was actually an equitable mortgage and offering the
amount of P724.00 to pay for the alleged debt. But Mamerto Reyes
refused the tender of payment and vigorously claimed that their
agreement was not an equitable mortgage.
On 9 May 1960 Francisco Tazal filed a complaint with the Court of First
Instance of Pangasinan against Mamerto Reyes, for the declaration of the 1
September 1957 transaction as a contract of equitable mortgage. He also
prayed for an order requiring defendant Mamerto Reyes to accept the
amount of P724.00 which he had deposited on 31 May 1960 with the trial
court as full payment for his debt, and canceling the supposed mortgage on
the three (3) parcels of land with the execution of the corresponding
documents of reconveyance in his favor. [4] Defendant denied plaintiffs
allegations and maintained that their contract was a sale with right of
repurchase that had long expired.
On 22 June 1961 Francisco Tazal again sold the third parcel of land
previously purchased by Mamerto Reyes to petitioner-spouses Teofilo and
Simeona Rayos for P400.00. On 1 July 1961 petitioner-spouses bought from
Blas Rayos for P400.00 the two (2) lots that Tazal had sold at the first
instance to Mamerto Reyes and thereafter to Blas Rayos. Curiously, these
contracts of sale in favor of petitioner-spouses were perfected while
Civil Case No. A-245 was pending before the trial court.
On 26 September 1962 the parties in Civil Case No. A-245 submitted a
stipulation of facts upon which the Court of First Instance would decide the
case. They admitted the genuineness and due execution of the 1 September
1957 deed of sale with right of repurchase although they were in
disagreement as to its true character. They also acknowledged the
consignation of P724.00 in the Court of First Instance on 31 May 1960 and
the payment of taxes by Mamerto Reyes on the three (3) parcels of land from
1958 to 1962.
On 5 January 1963 the trial court in Civil Case No. A-245 rejected
the contention of Francisco Tazal that the deed of sale executed on
1 September 1957 was an equitable mortgage but held that Tazal
could nonetheless redeem the three (3) parcels of land within thirty
(30) days from finality of judgment by paying to Mamerto Reyes the
purchase price of P724.00 and all expenses to execute the
reconveyance, i.e., the expenses of the contract and the necessary
and useful expenses made on the properties as required by Art.
1616 of the Civil Code. The dispositive portion of the trial courts
decision reads -

WHEREFORE, the Court, hereby renders judgment declaring the contract x x

x entered into by the plaintiffs and the defendant and captioned Deed of
Sale with Right to Repurchase as a true sale with right to repurchase x x x
and not an equitable mortgage x x x and declaring the plaintiffs entitled to
repurchase the property in question within thirty (30) days from finality of
this decision, without pronouncement as to cost.[6]

Mamerto Reyes appealed the Decision to the Court of Appeals, which in

turn elevated the appeal to this Court since only questions of law were
involved. When Mamerto Reyes died in 1986, petitioner-spouses Teofilo and
Simeona Rayos wrested physical possession of the disputed properties from
Reyess heirs.
 On 16 May 1990 this Court considered the case closed and terminated for
failure of the parties therein to manifest their interest to further prosecute
the case. On 20 June 1990 the judgment in Civil Case No. A-245 became final
and executory.
Subsequent to the finality of judgment in Civil Case No. A-245
petitioner-spouses did nothing to repurchase the three (3) parcels
of land within the thirty (30) - day grace period from finality of
judgment since, according to them, they believed that the
consignation of P724.00 in the civil case had perfected the
repurchase of the disputed properties.
On 6 July 1992 respondents as heirs of Mamerto Reyes executed an
affidavit adjudicating to themselves the ownership of the parcels of land and
declared the properties in their names for assessment and collection of real
estate taxes. On 19 January 1993 respondents registered the 1 September
1957 deed of sale with right of repurchase with the register of deeds.
On 8 July 1993 respondents filed a complaint for damages and recovery
of ownership and possession of the three (3) parcels of land in dispute
against herein petitioner-spouses Teofilo and Simeona Rayos and petitioner
George Rayos as administrator thereof before the Regional Trial Court of
Alaminos, Pangasinan. It was respondent’ theory that neither petitioners nor
their predecessors-in-interest Francisco Tazal and Blas Rayos repurchased the
properties before buying them in 1958 and 1961 or when the judgment in
Civil Case No. A-245 became final and executory in 1990, hence the sale of
the three (3) parcels of land to petitioner-spouses did not transfer ownership
thereof to them.
Petitioners argued on the other hand that the consignation
of P724.00 in Civil Case No. A-245 had the full effect of redeeming
the properties from respondents and their predecessor-in-interest,
and that respondents were guilty of estoppel and laches since
Mamerto Reyes as their predecessor-in-interest did not oppose the
sale to Blas Rayos and to petitioner-spouses Teofilo and Simeona
Rayos. The parties then filed their respective memoranda after
which the case was submitted for decision.
On 15 November 1996 the trial court promulgated its Decision in Civil
Case No. A-2032 finding merit in respondents claim for damages as well as
ownership and possession of the disputed parcels of land from
petitioners. The court declared void the separate deeds of absolute sale
thereof executed by Francisco Tazal in favor of Blas Rayos and to spouses
Teofilo and Simeona Rayos and by Blas Rayos to the same spouses, and
ordered herein petitioners and Francisco Tazal to vacate and reconvey the
lands to respondents as heirs of Mamerto Reyes and to pay actual damages
for litigation expenses in the sum of P20,000.00, attorneys fees
of P10,000.00, and exemplary damages of P50,000.00 plus costs. The
court a quo rationalized that petitioners did not present evidence to prove
that they and their predecessor-in-interest were able to repurchase the
property within the period of redemption set forth by the Court of First
Instance in Civil Case No. A-245. Petitioners appealed the Decision to the
Court of Appeals.
On 31 May 2001 the appellate court promulgated
its Decision affirming in toto the judgment appealed from. The Court
of Appeals held that the deposit of P724.00 on 31 May 1960 in Civil
Case No. A-245 was done belatedly, i.e., after the two (2) year -
period from 1 September 1957, the date of the sale as stated in the
deed of sale between the spouses Francisco and Asuncion Tazal and
Mamerto Reyes, and did not cover the entire redemption price, i.e.,
the selling price of P724.00 plus the expenses of executing the contract and
the necessary and useful expenses made on the properties. The appellate
court further ruled that estoppel and laches did not bar the cause of
action of respondents as plaintiffs in Civil Case No. A-2032 since Mamerto
Reyes as their predecessor-in-interest actively resisted the claim of Francisco
Tazal in Civil Case No. A-245 to treat the 1 September 1957 sale as an
equitable mortgage and to authorize the redemption of the parcels of land in
dispute beyond the two (2)-year period stipulated in the sale with right to
repurchase. Hence, the instant petition for review.
Petitioners argue that the consignation of P724.00 in Civil Case
No. A-245 provides the best evidence of the repurchase of the three
(3) parcels of land; that the consignation was admitted by Mamerto
Reyes himself in the stipulation of facts and approved implicitly by
the Court of First Instance when it held the 1 September 1957
transaction as a contract of sale with right of repurchase; that
respondents failed to prove the existence of other expenses, i.e., the
expenses of the contract and the necessary and useful expenses made on
the properties, required by Art. 1616 of the Civil Code to be paid in addition
to the purchase price of P724.00 so that petitioners may validly exercise the
right to repurchase the real estate; that Mamerto Reyes as respondents
predecessor-in-interest was guilty of estoppel and laches for not seeking the
annulment of the contracts of sale in favor of Blas Rayos and petitioner-
spouses Teofilo and Simeona Rayos; that petitioner-spouses are buyers in
good faith and for value of the three (3) parcels of land; and finally, that
there is no legal basis for awarding damages since Civil Case No. A-2032 was
decided solely on the basis of the parties’ memoranda and not upon any
evidence offered.
It appears that petitioners hinge their arguments upon the
validity of the consignation of P724.00 and accept the proposition
that if the consignation is declared void the subsequent sales to
Blas Rayos and petitioner-spouses would be ineffective to transfer
ownership of the disputed parcels and concomitantly would vest
respondents with the ownership and possession thereof.
On the other hand, respondents maintain that the absence of an
express or at least discernible court approval of the consignation
of P724.00 in Civil Case No. A-245 prevented the repurchase of the
parcels of land in question; that the deposit of only P724.00 did not
cover all the expenses required by Art. 1616 of the Civil Code for a
valid repurchase of the properties; that Mamerto Reyes as their
predecessor-in-interest was not guilty of estoppel and laches in not
filing a complaint to annul the contracts of sale in favor of Blas
Rayos and petitioner-spouses Teofilo and Simeona Rayos since
during that time Civil Case No. A-245 was pending before the courts;
that petitioner-spouses are not buyers in good faith and for value
since they knew that the parcels of land had been previously sold to
Mamerto Reyes and that, in any event, the rule protecting buyers in
good faith and for value applies only to transactions involving
registered lands and not to unregistered lands as in the instant
case; and finally, that the award of damages is amply supported by
their pleadings in the trial court.
We deny the instant petition for review and affirm the decision of
the court a quo, except for the sole modification to delete and set
aside the award of damages. There is no evidence to prove that
petitioners paid at any time the repurchase price for the three (3)
parcels of land in dispute except for the deposit of P724.00 in the
Court of First Instance which however fell short of all the acts
necessary for a valid consignation and discharge of their obligation
to respondents.
In order that consignation may be effective the debtor must
show that (a) there was a debt due; (b) the consignation of the
obligation had been made because the creditor to whom a valid
tender of payment was made refused to accept it; (c) previous
notice of the consignation had been given to the person interested
in the performance of the obligation; (d) the amount due was placed
at the disposal of the court; and, (e) after the consignation had
been made the person interested was notified thereof.
In the instant case, petitioners failed, first, to offer
a valid and unconditional tender of payment; second, to notify
respondents of the intention to deposit the amount with the court;
and third, to show the acceptance by the creditor of the amount
deposited as full settlement of the obligation, or in the alternative,
a declaration by the court of the validity of the consignation. The
failure of petitioners to comply with any of these requirements
rendered the consignation ineffective.
 Consignation and tender of payment must not be encumbered by
conditions if they are to produce the intended result of fulfilling the
obligation. In the instant case, the tender of payment of P724.00 was
conditional and void as it was predicated upon the argument of Francisco
Tazal that he was paying a debt which he could do at any time allegedly
because the 1 September 1957 transaction was a contract of equitable
mortgage and not a deed of sale with right to repurchase. The ostensible
purposes of offering the amount in connection with a purported outstanding
debt were to evade the stipulated redemption period in the deed of sale
which had already expired when the tender of payment was made and Civil
Case No. A-245 was instituted, and as a corollary, to avail of the thirty (30)-
day grace period under Art. 1606 of the Civil Code within which to exercise
the right to repurchase. Mamerto Reyes was therefore within his right
to refuse the tender of payment offered by petitioners because it
was conditional upon his waiver of the two (2)-year redemption
period stipulated in the deed of sale with right to repurchase.
Moreover, petitioners failed to prove in Civil Cases Nos. A-245 and A-2032
that any form of notice regarding their intention to deposit the amount
of P724.00 with the Court of First Instance had been served upon
respondents. This requirement is not fulfilled by the notice which could have
ensued from the filing of the complaint in Civil Case No. A-245 or the
stipulation made between Francisco Tazal and Mamerto Reyes regarding the
consignation of P724.00. The latter constitutes the second notice required by
law as it already concerns the actual deposit or consignation of the amount
and is different from the first notice that makes known the debtors intention
to deposit the amount, a requirement missing in the instant case. Without
any announcement of the intention to resort to consignation first
being made to the persons interested in the fulfillment of the
obligation, the consignation as a means of payment is void.
It is also futile to argue that the deposit of P724.00 with the Court of First
Instance could have perfected the redemption of the three (3) parcels of land
because it was not approved by the trial court, much less accepted by
Mamerto Reyes or his heirs, herein respondents. The dispositive portion of
the Decision in Civil Case No. A-245, which reads x x x x the Court, hereby
renders judgment declaring the contract x x x entered into by the plaintiffs
and the defendant and captioned Deed of Sale with Right to Repurchase as a
true sale with right to repurchase x x x and not an equitable mortgage x x x
and declaring the plaintiffs entitled to repurchase the property in question
within thirty (30) days from finality of this decision x x x x plainly rejected
the complaint for lack of merit and necessarily also the consignation done
pursuant thereto. This conclusion is buttressed by the directive of the trial
court in the body of the Decision that Francisco Tazal may still exercise the
right to repurchase the property in question by returning to the [Mamerto
Reyes] the purchase price of P724.00 plus all expenses incident to the
reconveyance within the period of thirty (30)-days from the time this
decision becomes final x x x x [21] The obvious reference of this statement was
the stipulation made by the parties therein that the defendant [Mamerto
Reyes] has been paying the taxes on said properties from 1958 to 1969 x x x
x[22] where the taxes paid constituted necessary expenses that petitioners
had to reimburse to respondents predecessor-in-interest aside from
the P724.00 earlier deposited by Tazal.
To be sure, while it has been held that approval of the court or the
obligee’s acceptance of the deposit is not necessary where the
obligor has performed all acts necessary to a valid consignation
such that court approval thereof cannot be doubted, Sia v. Court of
Appeals clearly advises that this ruling is applicable only where
there is unmistakable evidence on record that the prerequisites of a
valid consignation are present, especially the conformity of the proffered
payment to the terms of the obligation which is to be paid. In the instant
case, since there is no clear and preponderant evidence that the
consignation of P724.00 satisfied all the requirements for validity
and enforceability, and since Mamerto Reyes vehemently contested
the propriety of the consignation, petitioners cannot rely upon
sheer speculation and unfounded inference to construe
the Decision of the Court of First Instance as one impliedly
approving the consignation of P724.00 and perfecting the
redemption of the three (3) parcels of land.
It should be recalled that one of the requisites of consignation is the filing
of the complaint by the debtor against the creditor. Hence it is the judgment
on the complaint where the court declares that the consignation has been
properly made that will release the debtor from liability. Should the
consignation be disapproved by the court and the case dismissed, there is no
payment and the debtor is in mora and he shall be liable for the expenses
and bear the risk of loss of the thing.
To sanction the argument of petitioners and in the process excuse them
from their responsibility of securing from the trial court in Civil Case No. A-
245 a categorical declaration that the consignation of P724.00 had complied
with all the essential elements for its validity would only dilute the rule
requiring absolute compliance with the requisites of consignation. It also
disturbs a steady and stable status of proprietary rights, i.e., x x x el
acreedor tan solo, y no el juez, puede autorizar la variacion que para los
derechos de aquel suponga la que se intente en el objeto, cuantia o forma
de las obligaciones, since parties are left guessing on whether the
repurchase of the properties had been effected. In a broader sense, this
uncertain state will only depress the market value of the land and virtually
paralyze efforts of the landowner to meet his needs and obligations and
realize the full value of his land.
Moreover, we do not think that respondents causes of action in Civil Case
No. A-2032 are now barred by estoppel and laches. The essence of
estoppel and laches is the failure or neglect for an unreasonable
and unexplained length of time to do that which by exercising due
diligence could or should have been done earlier; it is the
negligence or omission to assert a right within a reasonable time
warranting a presumption that the party entitled to assert it either
has abandoned or declined to assert it although there is no absolute
rule as to what constitutes staleness of demand as each case is to
be determined according to its particular circumstances.
In the instant case, it was prudent and discerning for respondents and
their predecessor-in-interest Mamerto Reyes that they deferred any action
against petitioners, i.e., Civil Case No. A-2032, to recover ownership and
possession of the three (3) pieces of real estate, until the finality of judgment
in Civil Case No. A-245. For patiently electing not to inundate our courts of
justice with cases the outcome of which may well depend upon the then
pending civil suit, respondents cannot now be penalized by barring their
complaint in Civil Case No. A-2032 on the equitable grounds of estoppel and
laches.
We also find no reason to disturb our findings upon petitioner’s assertion
that they were purchasers of the three (3) parcels of land in good faith and
for value. As we held in David v. Bandin, the issue of good faith or bad faith
of the buyer is relevant only where the subject of the sale is registered land
and the purchaser is buying the same from the registered owner whose title
to the land is clean x x x in such case the purchaser who relies on the clean
title of the registered owner is protected if he is a purchaser in good faith for
value. Since the properties in question are unregistered lands, petitioner’s as
subsequent buyers thereof did so at their peril. Their claim of having bought
the land in good faith, i.e., without notice that some other person has a right
to or interest in the property, would not protect them if it turns out, as it
actually did in this case, that their seller did not own the property at the time
of the sale.
At any rate, petitioners failed to discharge their burden of proof that they
were purchasers of the three (3) parcels of land in good faith. For, as we
ruled in Embrado v. Court of Appeals, the burden of proving the status of a
purchaser in good faith and for value lies upon him who asserts that status,
which is not discharged by simply invoking the ordinary presumption of good
faith, i.e., that everyone is presumed to act in good faith, since the good faith
that is here essential is integral with the very status which must be
established.
In the proceedings a quo, what is evident is the admitted fact of payment
made by Mamerto Reyes as respondents predecessor-in-interest of the taxes
on the properties prior to and at the time when the contracts of sale in favor
of petitioner-spouses were perfected, which undoubtedly confirms the
precedence of respondents possession of the parcels of land in question. This
situation should have compelled petitioners to investigate the right of
respondents over the properties before buying them, and in the absence of
such inquiry, the rule is settled that a buyer in the same circumstances
herein involved cannot claim to be a purchaser in good faith.
The absence of good faith on the part of petitioner-spouses Teofilo and
Simeona Rayos in purchasing the three (3) parcels of unregistered land
precludes the application of the rule on double sales enunciated in Art. 1544
of the Civil Code. In any event, even if we apply Art. 1544, the facts would
nonetheless show that respondents and their predecessor-in-interest
registered first the source of their ownership and possession, i.e., the 1
September 1957 deed of sale with right to repurchase, held the oldest title,
and possessed the real properties at the earliest time. Applying the
doctrine of priority in time, priority in rights or prius tempore,
potior jure, respondents are entitled to the ownership and
possession of the parcels of land in dispute.
Finally, on the issue of damages, we agree with petitioners that
respondents failed to prove their entitlement to actual damages for litigation
expenses of P20,000.00, attorneys fees of P10,000.00 and exemplary
damages of P50,000.00 plus costs. No evidence to prove actual damages
was offered in Civil Case No. A-2032 since the parties therein submitted the
case for decision on the basis of their respective memoranda, hence no
actual damages can be awarded. [32] In the same manner, there is no clear
and convincing showing that petitioners acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner to warrant the imposition of
exemplary damages in respondents favor. [33] In any event, exemplary
damages cannot be adjudicated in the instant case since there is no award of
moral, temperate or compensatory damages.[34]
Similarly, we cannot award attorney’s fees since there is no stipulation to
grant the same nor were exemplary damages awarded or were improperly
imposed as in the instant case. It is appropriate to stress that the mere filing
of a complaint does not ipso facto entitle a party to attorney’s fees since this
act is a means sanctioned by law to protect rights and interests even if found
subsequently to be unmeritorious.
WHEREFORE, the instant Petition for Review is DENIED. The
assailed Decision of the Court of Appeals in CA-G.R. CV No. 55789
affirming in toto the Decision of the Regional Trial Court, Branch 54,
Alaminos, Pangasinan in Civil Case No. A-2032, i.e., declaring void the Deeds
of Absolute Sale executed by Francisco Tazal in favor of Blas Rayos, and by
the latter in favor of Teofilo Rayos, and by Francisco Tazal in favor of Teofilo
Rayos dated 22 June 1961, all encompassing the three (3) parcels of land
sold under the Deeds of Sale with the Right to Repurchase, insofar as they
authorized the transfer of ownership and possession thereof to petitioner-
spouses Teofilo and Simeona Rayos; proclaiming respondents Donato Reyes,
Saturnino Reyes, Tomasa R. Bustamante and Toribia R. Camelo who are heirs
of Mamerto Reyes as absolute owners of the property in question free from
all liens and encumbrances; and, ordering petitioner-spouses Teofilo and
Simeona Rayos, petitioner George Rayos and Francisco Tazal and/or their
agents or representatives to vacate and surrender the parcels of land in
favor of respondents Donato Reyes, Saturnino Reyes, Tomasa R. Bustamante
and Toribia R. Camelo, are AFFIRMED with the SOLE MODIFICATION that the
award of actual damages for litigation expenses, attorney’s fees and
exemplary damages plus costs is DELETED and SET ASIDE. No costs.
SO ORDERED.

G.R. No. 57630 March 13, 1992

CLARA BADAYOS, petitioner, vs. THE COURT OF APPEALS and Spouses

MAXIMO LISONDRA and CONRADA GABISAN, respondents.

We are primarily tasked with the determination of the proper period

within which the right to repurchase, granted under the
questioned pacto de retro sale, may be exercised.

The factual antecedents of the case are not disputed.

On 9 March 1973, petitioner executed in favor of private respondents

spouses a Deed of Sale With The Right to Repurchase over her
undivided half portion of Lot No. 3493 of the Talisay-Minglanilla
Estate located at Tabunok, Talisay, Cebu for a consideration of Seven
Thousand Four Hundred Pesos (P7,400.00); the sale was made subject to
the following stipulation:

That it is the essence of this contract that the vendor, Clara

Badayos has the right to repurchase the above described
property after two (2) years from and after the execution
of this contract for the same amount of SEVEN THOUSAND
FOUR HUNDRED PESOS (P7,400.00).

Two (2) years after the execution of the document in question, or

specifically on 17 April 1975, private respondents filed with the then
Court of First Instance (now Regional Trial Court) of Cebu an action,
docketed as Civil Case No. 14516, to consolidate ownership over the
property in question; it is alleged therein that "the two years (sic)
period from March 9, 1973 had already elapsed but defendant never
repurchased the said property in violation of the contract of pacto
de Retro Sale."

In her Answer With Counterclaim, petitioner, as defendant, alleges, inter

alia, that: (1) the document in question is actually an equitable
mortgage intended to secure her loan of P4,000.00 from private
respondents who charged an interest of P3,400.00; (2) after the
expiration of the two-year period counted from 9 March 1973, she
approached the private respondents to request for an extension of time
within which to pay the obligation, which was granted, as she was waiting for
the approval of the loan of her daughter in the amount of P30,000.00 with
the Philippine National Bank; (3) she owns the property in question and is in
possession thereof, enjoying its fruits, and paying the taxes thereon; (4) the
piece of land, located in the commercial district of Tabunok, Talisay, Cebu, is
classified as residential and has a commercial value of P100.00 per square
meter; and (6) the private respondents are lessees thereof, paying rentals of
"P18.00 only annually, for a term of 20 years to expire in
1976."

In their Reply, private respondents deny that the document in

question is an equitable mortgage and that they had granted the
petitioner an extension of time within which to pay her obligation.

On 21 July 1975, the trial court issued a pre-trial order setting the case for
trial on the merits and stating that the "parties and counsels did not submit
any stipulation of facts but relied on their pleadings." 4

On 11 August 1975, petitioner filed a manifestation informing the trial

court that on 4 August 1975, she consigned the amount of P7,400.00
with the Clerk of Court in favor of the private respondents as
payment of her obligation and/or redemption of the property in
question; thus, the case has become moot and academic and should
be dismissed.

Acting on the manifestation, the trial court issued on 2 September 1975 an

Order granting the petitioner five (5) days within which to submit a
motion to dismiss and the private respondents five (5) days from receipt of
said motion to interpose their opposition thereto.

In her motion to dismiss filed on 4 September 1975, petitioner contends that:

. . . the right of Clara Badayos to pay her obligation or to redeem

the property in question occurred after March 9, 1975, and under
this state of things, the right of Clara Badayos to pay her
obligation or redeem the property has not yet elapsed or expired
when she consigned or consignated the amount of P7,400.00
with the Clerk of Court, on August 4, 1975, or even up to the
present. Considering that there is no period fixed within which to
pay after March 9, 1975, the law comes in and fixed the period
which is four (4) years from the date of the contract,
as provided for in Art. 1606 of the New Civil Code . . .
 . . . even granting in gratia argumenti that the right to pay the
obligation or to redeem the property has thus elapsed, such
rights will be reborn within 30 days after final judgment. So,
clearly, . . . there is no more point to proceed with the trial of the
case at bar, and the case should therefore be dismissed. 7

Private respondents opposed the motion to dismiss arguing that since the
pre-trial order has long become final, the petitioner has lost her right to
redeem or repurchase the property and is thus estopped from changing her
position that the pacto de retro sale is an equitable mortgage and not a sale
with the option to repurchase.

On 13 January 1976, the trial court ordered the petitioner to file an amended
answer based on her new stand as presented in the motion to dismiss.

On 21 January 1976, petitioner filed an Amended Answer With Counterclaim

incorporating her new stand that the complaint should be dismissed because
she has already consigned the P7,400.00 repurchase price with the trial court
on 4 August 1975, well within the period prescribed by the document in
question.

On 26 February 1976, private respondents filed an Opposition to Admission

of Amended Answer contending that petitioner must take a definite stand as
to whether she considers the document in question as a contract of sale with
option to repurchase or a contract of mortgage.

The trial court, on 25 March 1976, admitted petitioner's Amended Answer

With Counterclaim and required private respondents to file a reply thereto.

In their Reply, private respondents contend that petitioner should be

considered as having waived her right to repurchase the property as a result
of her failure and refusal to exercise such right despite numerous demands.

On 3 November 1976, petitioner filed with the trial court a manifestation that
she is reinstating and refilling her 4 September 1975 Motion to Dismiss.

Thereafter, on 17 March 1977, private respondent filed a Rejoinder to Motion

to Dismiss asking for a trial on the merits and alleging that the grounds
relied upon for a dismissal are matters of defense.

On 27 May 1977, the trial court dismissed the complaint in an Order stating
that:

A (sic) reading of the deed in question it is very clear and in

certain terms as shown in the 4th paragraph of said contract that
the right to repurchase the property shall occur after two years
 from and after the execution of the contract for the same amount
of P7,400.00 counted from March 9, 1973.

It appears that defendant's former theory was that the contract

was not a deed of sale with the right to repurchase but an
equitable mortgage. Later, however, she changed her theory and
admitted the allegations in the complaint for consolidation of
right of ownership but the right to exercise the right to
repurchase was not within two years, but after two years from
execution thereof.

Hence, as she is now willing to repurchase the property the

defendant argued, and the Court concurs, that the condition of
the contract is that the defendant has the right to repurchase for
the same amount the half (sic) portion of this Lot No. 3493 after
two years from March 9, 1973, effectively on August 11, 1975 a
little over two years from March 9, 1973 she (sic) consigned the
same amount of P7,400.00 as repurchase price in favor of the
plaintiffs thru the Clerk of Court and now asks for the dismissal of
the case as she has opted to exercise the right to repurchase
within the terms and contents of the contract.

The Court further concurs with the defendant's arguments that

even if the complaint is decided in favor of the plaintiffs
consolidating their title and under Art. 1606 of the Civil Code, the
defendant has still 30 days from final judgment to exercise the
right to repurchase and failure to exercise the same the
execution of the judgment may follow for the sale of the property
at public auction to cover the judgment debt.

Finding the motion to dismiss meritorious, the same is

GRANTED.

Their motion for the reconsideration of this Order having been denied for
lack of merit, private respondents appealed to the Court of Appeals, which
docketed the case as C.A.-G.R. No. 62677-R.

In its decision promulgated on 4 May 1981, the Court of Appeals reversed the
appealed Order principally on the ground that since petitioner abandoned
her theory of equitable mortgage, she should have exercised her right of
redemption within two (2) years from 9 March 1973, or on or before 9 March
1975. Since she failed to do so, she lost that right. The appellant court held:

As found by the court below in the disputed order of May 27,

1977, the defendant changed the theory of her case in the
amended answer from one of an equitable mortgage to one of a
 deed of sale with right of repurchase, and contended that her
right to repurchase the subject land has not yet expired when
she consigned on August 11, 1975 the sum of P7,400.00,
pursuant to the penultimate paragraph on the contract. Such
being the case, and without any objection from the defendant-
appellee, the issue as to the nature of the transaction is settled,
it is a deed of sale with right to repurchase.

The facts show that the defendant failed to redeem the land on
May 9, 1975, which is the expiration date of the two-year period
from the execution of the contract on March 9, 1973. This is
admitted by the appellee in both her answer and amended
answer. We cannot over emphasis (sic) this point. And this fact is
confirmed by the fact that the defendant requested for an
extension of time to redeem the land. This too is admitted by the
appellee in her amended answer. But the plaintiffs did not grant
the request of the appellee but filed instead the present suit on
April 17, 1975.

It appearing that the appellee had failed to redeemed (sic) the

subject property as stipulated in the contract, it follows that the
action for consolidation of ownership of the subject land is
tenable. The fact that defendant consigned the redemption price
in court does not cure the defect because the consignation was
effected after the defendant had incurred (sic) delay. 19

Petitioner sought reconsideration of the foregoing decision but the same was
denied.

Hence, the petitioner filed the instant petition for review on certiorari on 25
August 1981. Petitioner contends that she neither changed nor
abandoned her theory that the contract in question is an equitable
mortgage but merely alleged alternative defenses, including the
defense that if the contract is a true sale with right to repurchase,
then there is nothing more to litigate in view of her exercise of the
right to repurchase; granting even that the contract is a true sale
with right to repurchase, she still had the time to exercise her right;
the dismissal of the case by the trial court was justified because it
became moot and academic; and that there is no procedural or
substantive justification for the Court of Appeals to declare the
private respondents as the lawful owners of the property by
consolidation, without any trial on the merits.

To the mind of this Court, the principal issue is whether or not petitioner
was able to repurchase the property in question within the period
stipulated in the deed of sale with right to repurchase. The fourth
paragraph of said deed expressly provides:

That it is the essence of this contract that the vendor, Clara

Badayos has the right to repurchase the above described
property after two (2) years from and after the execution of this
contract for the same amount of SEVEN THOUSAND FOUR
HUNDRED PESOS (P7,400.00). 21

The respondent Court interpreted this provision to mean that the

two-year period shall commence from the date of the execution of
the contract, i.e., from 9 March 1973, and that the right must be
exercised within that period. This is not correct. The petition then is
impressed with merit.

The foregoing stipulation is clear and needs no further interpretation; hence,

its literal meaning is binding. It simply means that petitioner can
redeem the property in question "AFTER TWO (2) years from and
after the execution of the contract," NOT WITHIN two (2) years from
such execution. Since the contract was executed on 9 March 1973,
petitioner can redeem the property only after 9 March 1975. The rule in this
jurisdiction is that if the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of its
stipulations shall control.

It is to be noted, however, that while the parties agreed on the period within
which the right may not be exercised or will be deemed suspended, they did
not specify the period within which such may be exercised
thereafter. This suspension remains valid as long as Article 1606 of
the Civil Code is not violated. Said Article reads:

The right referred to in article 1601, in the absence of an express

agreement, shall last four years from the date of the contract.

Should there be an agreement, the period cannot exceed ten

years. . . .

While the counting of this four-year period shall begin from the execution of
the contract, where the right is suspended by agreement until after a
certain time, event or condition, the period shall be counted from
the time such right could be exercised, but not exceeding ten (10)
years from the execution of the contract. Applying the provision to the
instant case, the period to repurchase the property must be deemed to be
four (4) years from 9 March 1975 or until 9 March 1979. Since petitioner
consigned the repurchase price on 11 August 1975, a fact private
respondents did not deny, this Court declares that this consignation
operated as a valid offer or tender of the redemption price. It must
be emphasized that consignation was not necessary for the reason
that the relationship that existed between petitioner and private
respondents, in respect to the right of redemption, was not one of
debtor-creditor. Petitioner was exercising a right, not discharging an
obligation, hence a mere tender of payment is sufficient to preserve
the right of a vendor a retro.

The foregoing renders unnecessary discussions on the other secondary

issues raised.

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

respondent Court in C.A.-G.R. No. 62677-R, promulgated on 4 May 1981, is
hereby SET ASIDE and the Order of the trial court of 27 May 1977 in Civil
Case No. R-14516 is hereby REINSTATED and AFFIRMED. Costs against
private respondents. IT IS SO ORDERED.
G.R. No. 111238 January 25, 1995

ADELFA PROPERTIES, INC., petitioner, vs. COURT OF APPEALS,

ROSARIO JIMENEZ-CASTAÑEDA and SALUD JIMENEZ, respondents.

The main issues presented for resolution in this petition for review
on certiorari of the judgment of respondent Court of appeals, dated April 6,
1993, in CA-G.R. CV No. 34767 are (1) whether of not the "Exclusive
Option to Purchase" executed between petitioner Adelfa Properties,
Inc. and private respondents Rosario Jimenez-Castañeda and Salud
Jimenez is an option contract; and (2) whether or not there was a
valid suspension of payment of the purchase price by said
petitioner, and the legal effects thereof on the contractual relations
of the parties.

The records disclose the following antecedent facts, to wit:

1. Herein private respondents and their brothers, Jose and Dominador

Jimenez, were the registered co-owners of a parcel of land, situated in Barrio
Culasi, Las Piñas, Metro Manila.

2. On July 28, 1988, Jose and Dominador Jimenez sold their share consisting
of one-half of said parcel of land, specifically the eastern portion thereof, to
herein petitioner pursuant to a "Kasulatan sa Bilihan ng Lupa.” Subsequently,
a "Confirmatory Extrajudicial Partition Agreement" was executed by the
Jimenezes, wherein the eastern portion of the subject lot was adjudicated to
Jose and Dominador Jimenez, while the western portion was allocated to
herein private respondents.

3. Thereafter, herein petitioner expressed interest in buying the western

portion of the property from private respondents. Accordingly, an "Exclusive
Option to Purchase" was executed between petitioner and private
respondents, under the following terms and conditions:
 1. The selling price of said 8,655 square meters of the subject
property is P2,856,150.00.

2. The sum of P50,000.00 which we received from ADELFA

PROPERTIES, INC. as an option money shall be credited as partial
payment upon the consummation of the sale and the balance in
the sum of P2,806,150.00 to be paid on or before November 30,
1989;

3. In case of default on the part of ADELFA PROPERTIES, INC. to

pay said balance in accordance with paragraph 2 hereof, this
option shall be cancelled and 50% of the option money to be
forfeited in our favor and we will refund the remaining 50% of
said money upon the sale of said property to a third party;

4. All expenses including the corresponding capital gains tax,

cost of documentary stamps are for the account of the
VENDORS, and expenses for the registration of the deed of sale
in the Registry of Deeds are for the account of ADELFA
PROPERTIES, INC.

Considering, however, that the owner's copy of the certificate of

title issued to respondent Salud Jimenez had been lost, a petition
for the re-issuance of a new owner's copy of said certificate of title
was filed in court through Atty. Bayani L. Bernardo, who acted as
private respondents' counsel. Eventually, a new owner's copy of the
certificate of title was issued but it remained in the possession of
Atty. Bernardo until he turned it over to petitioner Adelfa
Properties, Inc.

4. Before petitioner could make payment, it received summons , together

with a copy of a complaint filed by the nephews and nieces of private
respondents against the latter, Jose and Dominador Jimenez, and herein
petitioner in the Regional Trial Court of Makati, docketed as Civil Case No. 89-
5541, for annulment of the deed of sale in favor of Household Corporation
and recovery of ownership of the property covered by TCT No. 309773.

5. As a consequence, in a letter dated November 29, 1989, petitioner

informed private respondents that it would hold payment of the full purchase
price and suggested that private respondents settle the case with their
nephews and nieces, adding that ". . . if possible, although November 30,
1989 is a holiday, we will be waiting for you and said plaintiffs at our office
up to 7:00 p.m." Another letter of the same tenor and of even date was sent
by petitioner to Jose and Dominador Jimenez. Respondent Salud Jimenez
refused to heed the suggestion of petitioner and attributed the
suspension of payment of the purchase price to "lack of word of
honor."

6. On December 7, 1989, petitioner caused to be annotated on the title of

the lot its option contract with private respondents, and its contract of sale
with Jose and Dominador Jimenez, as Entry No. 1437-4 and entry No. 1438-4,
respectively.

7. On December 14, 1989, private respondents sent Francisca Jimenez to see

Atty. Bernardo, in his capacity as petitioner's counsel, and to inform the latter
that they were cancelling the transaction. In turn, Atty. Bernardo offered to
pay the purchase price provided that P500,000.00 be deducted therefrom for
the settlement of the civil case. This was rejected by private respondents. On
December 22, 1989, Atty. Bernardo wrote private respondents on the same
matter but this time reducing the amount from P500,000.00 to P300,000.00,
and this was also rejected by the latter.

8. On February 23, 1990, the Regional Trial Court of Makati dismissed Civil
Case No. 89-5541. Thus, on February 28, 1990, petitioner caused to be
annotated anew on TCT No. 309773 the exclusive option to purchase as
Entry No. 4442-4.

9. On the same day, February 28, 1990, private respondents executed a

Deed of Conditional Sale in favor of Emylene Chua over the same parcel of
land for P3,029,250, of which P1,500,000.00 was paid to private respondents
on said date, with the balance to be paid upon the transfer of title to the
specified one-half portion.

10. On April 16, 1990, Atty. Bernardo wrote private respondents informing
the latter that in view of the dismissal of the case against them, petitioner
was willing to pay the purchase price, and he requested that the
corresponding deed of absolute sale be executed. This was ignored by
private respondents.

11. On July 27, 1990, private respondents' counsel sent a letter to petitioner
enclosing therein a check for P25,000.00 representing the refund of fifty
percent of the option money paid under the exclusive option to purchase.
Private respondents then requested petitioner to return the owner's duplicate
copy of the certificate of title of respondent Salud Jimenez. Petitioner failed
to surrender the certificate of title, hence private respondents filed Civil Case
No. 7532 in the Regional Trial Court of Pasay City, Branch 113, for annulment
of contract with damages, praying, among others, that the exclusive option
to purchase be declared null and void; that defendant, herein petitioner, be
ordered to return the owner's duplicate certificate of title; and that the
annotation of the option contract on TCT No. 309773 be cancelled. Emylene
Chua, the subsequent purchaser of the lot, filed a complaint in intervention.
12. The trial court rendered judgment therein on September 5, 1991
holding that the agreement entered into by the parties was merely
an option contract, and declaring that the suspension of payment by
herein petitioner constituted a counter-offer which, therefore, was
tantamount to a rejection of the option. It likewise ruled that herein
petitioner could not validly suspend payment in favor of private respondents
on the ground that the vindicatory action filed by the latter's kin did not
involve the western portion of the land covered by the contract between
petitioner and private respondents, but the eastern portion thereof which
was the subject of the sale between petitioner and the brothers Jose and
Dominador Jimenez. The trial court then directed the cancellation of the
exclusive option to purchase, declared the sale to intervenor Emylene Chua
as valid and binding, and ordered petitioner to pay damages and attorney's
fees to private respondents, with costs.

13. On appeal, respondent Court of appeals affirmed in toto the decision of

the court a quo and held that the failure of petitioner to pay the purchase
price within the period agreed upon was tantamount to an election by
petitioner not to buy the property; that the suspension of payment
constituted an imposition of a condition which was actually a counter-offer
amounting to a rejection of the option; and that Article 1590 of the Civil Code
on suspension of payments applies only to a contract of sale or a contract to
sell, but not to an option contract which it opined was the nature of the
document subject of the case at bar. Said appellate court similarly upheld
the validity of the deed of conditional sale executed by private respondents
in favor of intervenor Emylene Chua.

In the present petition, the following assignment of errors are raised:

1. Respondent court of appeals acted with grave abuse of discretion in

making its finding that the agreement entered into by petitioner and private
respondents was strictly an option contract;

2. Granting arguendo that the agreement was an option contract, respondent

court of Appeals acted with grave abuse of discretion in grievously failing to
consider that while the option period had not lapsed, private respondents
could not unilaterally and prematurely terminate the option period;

3. Respondent Court of Appeals acted with grave abuse of discretion in

failing to appreciate fully the attendant facts and circumstances when it
made the conclusion of law that Article 1590 does not apply; and

4. Respondent Court of Appeals acted with grave abuse of discretion in

conforming with the sale in favor of appellee Ma. Emylene Chua and the
award of damages and attorney's fees which are not only excessive, but also
without in fact and in law. 14
An analysis of the facts obtaining in this case, as well as the
evidence presented by the parties, irresistibly leads to the
conclusion that the agreement between the parties is a contract to
sell, and not an option contract or a contract of sale.

1. In view of the extended disquisition thereon by respondent court, it would

be worthwhile at this juncture to briefly discourse on the rationale behind our
treatment of the alleged option contract as a contract to sell, rather than a
contract of sale. The distinction between the two is important for in contract
of sale, the title passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price. In a contract of
sale, the vendor has lost and cannot recover ownership until and unless the
contract is resolved or rescinded; whereas in a contract to sell, title is
retained by the vendor until the full payment of the price, such payment
being a positive suspensive condition and failure of which is not a breach but
an event that prevents the obligation of the vendor to convey title from
becoming effective. Thus, a deed of sale is considered absolute in nature
where there is neither a stipulation in the deed that title to the property sold
is reserved in the seller until the full payment of the price, nor one giving the
vendor the right to unilaterally resolve the contract the moment the buyer
fails to pay within a fixed period.

There are two features which convince us that the parties never intended to
transfer ownership to petitioner except upon the full payment of the
purchase price. Firstly, the exclusive option to purchase, although it provided
for automatic rescission of the contract and partial forfeiture of the amount
already paid in case of default, does not mention that petitioner is obliged to
return possession or ownership of the property as a consequence of non-
payment. There is no stipulation anent reversion or reconveyance of the
property to herein private respondents in the event that petitioner does not
comply with its obligation. With the absence of such a stipulation, although
there is a provision on the remedies available to the parties in case of
breach, it may legally be inferred that the parties never intended to transfer
ownership to the petitioner to completion of payment of the purchase price.

In effect, there was an implied agreement that ownership shall not pass to
the purchaser until he had fully paid the price. Article 1478 of the civil code
does not require that such a stipulation be expressly made. Consequently, an
implied stipulation to that effect is considered valid and, therefore, binding
and enforceable between the parties. It should be noted that under the law
and jurisprudence, a contract which contains this kind of stipulation is
considered a contract to sell.

Moreover, that the parties really intended to execute a contract to sell, and
not a contract of sale, is bolstered by the fact that the deed of absolute sale
would have been issued only upon the payment of the balance of the
purchase price, as may be gleaned from petitioner's letter dated April 16,
1990 wherein it informed private respondents that it "is now ready and
willing to pay you simultaneously with the execution of the corresponding
deed of absolute sale."

Secondly, it has not been shown there was delivery of the property, actual or
constructive, made to herein petitioner. The exclusive option to purchase is
not contained in a public instrument the execution of which would have been
considered equivalent to delivery. Neither did petitioner take actual,
physical possession of the property at any given time. It is true that after the
reconstitution of private respondents' certificate of title, it remained in the
possession of petitioner's counsel, Atty. Bayani L. Bernardo, who thereafter
delivered the same to herein petitioner. Normally, under the law, such
possession by the vendee is to be understood as a delivery. However, private
respondents explained that there was really no intention on their part to
deliver the title to herein petitioner with the purpose of transferring
ownership to it. They claim that Atty. Bernardo had possession of the title
only because he was their counsel in the petition for reconstitution. We have
no reason not to believe this explanation of private respondents, aside from
the fact that such contention was never refuted or contradicted by petitioner.

2. Irrefragably, the controverted document should legally be considered as a

perfected contract to sell. On this particular point, therefore, we reject the
position and ratiocination of respondent Court of Appeals which, while
awarding the correct relief to private respondents, categorized the
instrument as "strictly an option contract."

The important task in contract interpretation is always the ascertainment of

the intention of the contracting parties and that task is, of course, to be
discharged by looking to the words they used to project that intention in their
contract, all the words not just a particular word or two, and words in context
not words standing alone. Moreover, judging from the subsequent acts of
the parties which will hereinafter be discussed, it is undeniable that the
intention of the parties was to enter into a contract to sell. In addition, the
title of a contract does not necessarily determine its true nature. Hence, the
fact that the document under discussion is entitled "Exclusive Option to
Purchase" is not controlling where the text thereof shows that it is a contract
to sell.

An option, as used in the law on sales, is a continuing offer or contract by

which the owner stipulates with another that the latter shall have the right to
buy the property at a fixed price within a certain time, or under, or in
compliance with, certain terms and conditions, or which gives to the owner
of the property the right to sell or demand a sale. It is also sometimes called
an "unaccepted offer." An option is not of itself a purchase, but merely
secures the privilege to buy. It is not a sale of property but a sale of property
but a sale of the right to purchase. It is simply a contract by which the owner
of property agrees with another person that he shall have the right to buy his
property at a fixed price within a certain time. He does not sell his land; he
does not then agree to sell it; but he does sell something, that it is, the right
or privilege to buy at the election or option of the other party. Its
distinguishing characteristic is that it imposes no binding obligation on the
person holding the option, aside from the consideration for the offer. Until
acceptance, it is not, properly speaking, a contract, and does not vest,
transfer, or agree to transfer, any title to, or any interest or right in the
subject matter, but is merely a contract by which the owner of property gives
the optionee the right or privilege of accepting the offer and buying the
property on certain terms.

On the other hand, a contract, like a contract to sell, involves a meeting of

minds two persons whereby one binds himself, with respect to the other, to
give something or to render some service. 26 Contracts, in general, are
perfected by mere consent, which is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to constitute the
contract. The offer must be certain and the acceptance absolute. The
distinction between an "option" and a contract of sale is that an option is an
unaccepted offer. It states the terms and conditions on which the owner is
willing to sell the land, if the holder elects to accept them within the time
limited. If the holder does so elect, he must give notice to the other party,
and the accepted offer thereupon becomes a valid and binding contract. If an
acceptance is not made within the time fixed, the owner is no longer bound
by his offer, and the option is at an end. A contract of sale, on the other
hand, fixes definitely the relative rights and obligations of both parties at the
time of its execution. The offer and the acceptance are concurrent, since the
minds of the contracting parties meet in the terms of the agreement.

A perusal of the contract in this case, as well as the oral and documentary
evidence presented by the parties, readily shows that there is indeed a
concurrence of petitioner's offer to buy and private respondents' acceptance
thereof. The rule is that except where a formal acceptance is so required,
although the acceptance must be affirmatively and clearly made and must
be evidenced by some acts or conduct communicated to the offeror, it may
be made either in a formal or an informal manner, and may be shown by
acts, conduct, or words of the accepting party that clearly manifest a present
intention or determination to accept the offer to buy or sell. Thus,
acceptance may be shown by the acts, conduct, or words of a party
recognizing the existence of the contract of sale.

The records also show that private respondents accepted the offer of
petitioner to buy their property under the terms of their contract. At the time
petitioner made its offer, private respondents suggested that their transfer
certificate of title be first reconstituted, to which petitioner agreed. As a
matter of fact, it was petitioner's counsel, Atty. Bayani L. Bernardo, who
assisted private respondents in filing a petition for reconstitution. After the
title was reconstituted, the parties agreed that petitioner would pay either in
cash or manager's check the amount of P2,856,150.00 for the lot. Petitioner
was supposed to pay the same on November 25, 1989, but it later offered to
make a down payment of P50,000.00, with the balance of P2,806,150.00 to
be paid on or before November 30, 1989. Private respondents agreed to the
counter-offer made by petitioner. As a result, the so-called exclusive option
to purchase was prepared by petitioner and was subsequently signed by
private respondents, thereby creating a perfected contract to sell between
them.

It cannot be gainsaid that the offer to buy a specific piece of land was
definite and certain, while the acceptance thereof was absolute and without
any condition or qualification. The agreement as to the object, the price of
the property, and the terms of payment was clear and well-defined. No other
significance could be given to such acts that than they were meant to finalize
and perfect the transaction. The parties even went beyond the basic
requirements of the law by stipulating that "all expenses including the
corresponding capital gains tax, cost of documentary stamps are for the
account of the vendors, and expenses for the registration of the deed of sale
in the Registry of Deeds are for the account of Adelfa properties, Inc." Hence,
there was nothing left to be done except the performance of the respective
obligations of the parties.

We do not subscribe to private respondents' submission, which was upheld

by both the trial court and respondent court of appeals, that the offer of
petitioner to deduct P500,000.00, (later reduced to P300,000.00) from the
purchase price for the settlement of the civil case was tantamount to a
counter-offer. It must be stressed that there already existed a perfected
contract between the parties at the time the alleged counter-offer was made.
Thus, any new offer by a party becomes binding only when it is accepted by
the other. In the case of private respondents, they actually refused to concur
in said offer of petitioner, by reason of which the original terms of the
contract continued to be enforceable.

At any rate, the same cannot be considered a counter-offer for the simple
reason that petitioner's sole purpose was to settle the civil case in order that
it could already comply with its obligation. In fact, it was even indicative of a
desire by petitioner to immediately comply therewith, except that it was
being prevented from doing so because of the filing of the civil case which, it
believed in good faith, rendered compliance improbable at that time. In
addition, no inference can be drawn from that suggestion given by petitioner
that it was totally abandoning the original contract.
More importantly, it will be noted that the failure of petitioner to pay the
balance of the purchase price within the agreed period was attributed by
private respondents to "lack of word of honor" on the part of the former. The
reason of "lack of word of honor" is to us a clear indication that private
respondents considered petitioner already bound by its obligation to pay the
balance of the consideration. In effect, private respondents were demanding
or exacting fulfillment of the obligation from herein petitioner. with the arrival
of the period agreed upon by the parties, petitioner was supposed to comply
with the obligation incumbent upon it to perform, not merely to exercise an
option or a right to buy the property.

The obligation of petitioner on November 30, 1993 consisted of an obligation

to give something, that is, the payment of the purchase price. The contract
did not simply give petitioner the discretion to pay for the property. It will be
noted that there is nothing in the said contract to show that petitioner was
merely given a certain period within which to exercise its privilege to buy.
The agreed period was intended to give time to herein petitioner within
which to fulfill and comply with its obligation, that is, to pay the balance of
the purchase price. No evidence was presented by private respondents to
prove otherwise.

The test in determining whether a contract is a "contract of sale or purchase"

or a mere "option" is whether or not the agreement could be specifically
enforced. There is no doubt that the obligation of petitioner to pay the
purchase price is specific, definite and certain, and consequently binding and
enforceable. Had private respondents chosen to enforce the contract, they
could have specifically compelled petitioner to pay the balance of
P2,806,150.00. This is distinctly made manifest in the contract itself as an
integral stipulation, compliance with which could legally and definitely be
demanded from petitioner as a consequence.

This is not a case where no right is as yet created nor an obligation declared,
as where something further remains to be done before the buyer and seller
obligate themselves. An agreement is only an "option" when no obligation
rests on the party to make any payment except such as may be agreed on
between the parties as consideration to support the option until he has made
up his mind within the time specified. An option, and not a contract to
purchase, is effected by an agreement to sell real estate for payments to be
made within specified time and providing forfeiture of money paid upon
failure to make payment, where the purchaser does not agree to purchase,
to make payment, or to bind himself in any way other than the forfeiture of
the payments made. As hereinbefore discussed, this is not the situation
obtaining in the case at bar.

While there is jurisprudence to the effect that a contract which provides that
the initial payment shall be totally forfeited in case of default in payment is
to be considered as an option contract, still we are not inclined to conform
with the findings of respondent court and the court a quo that the contract
executed between the parties is an option contract, for the reason that the
parties were already contemplating the payment of the balance of the
purchase price, and were not merely quoting an agreed value for the
property. The term "balance," connotes a remainder or something remaining
from the original total sum already agreed upon.

In other words, the alleged option money of P50,000.00 was actually earnest
money which was intended to form part of the purchase price. The amount of
P50,000.00 was not distinct from the cause or consideration for the sale of
the property, but was itself a part thereof. It is a statutory rule that whenever
earnest money is given in a contract of sale, it shall be considered as part of
the price and as proof of the perfection of the contract. It constitutes an
advance payment and must, therefore, be deducted from the total price.
Also, earnest money is given by the buyer to the seller to bind the bargain.

There are clear distinctions between earnest money and option money, viz.:
(a) earnest money is part of the purchase price, while option money ids the
money given as a distinct consideration for an option contract; (b) earnest
money is given only where there is already a sale, while option money
applies to a sale not yet perfected; and (c) when earnest money is given, the
buyer is bound to pay the balance, while when the would-be buyer gives
option money, he is not required to buy.

The aforequoted characteristics of earnest money are apparent in the so-

called option contract under review, even though it was called "option
money" by the parties. In addition, private respondents failed to show that
the payment of the balance of the purchase price was only a condition
precedent to the acceptance of the offer or to the exercise of the right to buy.
On the contrary, it has been sufficiently established that such payment was
but an element of the performance of petitioner's obligation under the
contract to sell.

II

1. This brings us to the second issue as to whether or not there was valid
suspension of payment of the purchase price by petitioner and the legal
consequences thereof. To justify its failure to pay the purchase price within
the agreed period, petitioner invokes Article 1590 of the civil Code which
provides:

Art. 1590. Should the vendee be disturbed in the possession or

ownership of the thing acquired, or should he have reasonable
grounds to fear such disturbance, by a vindicatory action or a
foreclosure of mortgage, he may suspend the payment of the
 price until the vendor has caused the disturbance or danger to
cease, unless the latter gives security for the return of the price
in a proper case, or it has been stipulated that, notwithstanding
any such contingency, the vendee shall be bound to make the
payment. A mere act of trespass shall not authorize the
suspension of the payment of the price.

Respondent court refused to apply the aforequoted provision of law on the

erroneous assumption that the true agreement between the parties was a
contract of option. As we have hereinbefore discussed, it was not an option
contract but a perfected contract to sell. Verily, therefore, Article 1590 would
properly apply.

Both lower courts, however, are in accord that since Civil Case No. 89-5541
filed against the parties herein involved only the eastern half of the land
subject of the deed of sale between petitioner and the Jimenez brothers, it
did not, therefore, have any adverse effect on private respondents' title and
ownership over the western half of the land which is covered by the contract
subject of the present case. We have gone over the complaint for recovery of
ownership filed in said case and we are not persuaded by the factual
findings made by said courts. At a glance, it is easily discernible that,
although the complaint prayed for the annulment only of the contract of sale
executed between petitioner and the Jimenez brothers, the same likewise
prayed for the recovery of therein plaintiffs' share in that parcel of land
specifically covered by TCT No. 309773. In other words, the plaintiffs therein
were claiming to be co-owners of the entire parcel of land described in TCT
No. 309773, and not only of a portion thereof nor, as incorrectly interpreted
by the lower courts, did their claim pertain exclusively to the eastern half
adjudicated to the Jimenez brothers.

Such being the case, petitioner was justified in suspending payment of the
balance of the purchase price by reason of the aforesaid vindicatory action
filed against it. The assurance made by private respondents that petitioner
did not have to worry about the case because it was pure and simple
harassment is not the kind of guaranty contemplated under the exceptive
clause in Article 1590 wherein the vendor is bound to make payment even
with the existence of a vindicatory action if the vendee should give a security
for the return of the price.

2. Be that as it may, and the validity of the suspension of payment

notwithstanding, we find and hold that private respondents may no longer be
compelled to sell and deliver the subject property to petitioner for two
reasons, that is, petitioner's failure to duly effect the consignation of the
purchase price after the disturbance had ceased; and, secondarily, the fact
that the contract to sell had been validly rescinded by private respondents.
The records of this case reveal that as early as February 28, 1990 when
petitioner caused its exclusive option to be annotated anew on the certificate
of title, it already knew of the dismissal of civil Case No. 89-5541. However, it
was only on April 16, 1990 that petitioner, through its counsel, wrote private
respondents expressing its willingness to pay the balance of the purchase
price upon the execution of the corresponding deed of absolute sale. At
most, that was merely a notice to pay. There was no proper tender of
payment nor consignation in this case as required by law.

The mere sending of a letter by the vendee expressing the intention to

pay, without the accompanying payment, is not considered a valid tender of
payment. Besides, a mere tender of payment is not sufficient to compel
private respondents to deliver the property and execute the deed of absolute
sale. It is consignation which is essential in order to extinguish petitioner's
obligation to pay the balance of the purchase price. The rule is different in
case of an option contract or in legal redemption or in a sale with right to
repurchase, wherein consignation is not necessary because these cases
involve an exercise of a right or privilege (to buy, redeem or repurchase)
rather than the discharge of an obligation, hence tender of payment would
be sufficient to preserve the right or privilege. This is because the provisions
on consignation are not applicable when there is no obligation to pay. A
contract to sell, as in the case before us, involves the performance of an
obligation, not merely the exercise of a privilege of a right. consequently,
performance or payment may be effected not by tender of payment alone
but by both tender and consignation.

Furthermore, petitioner no longer had the right to suspend payment after the
disturbance ceased with the dismissal of the civil case filed against it.
Necessarily, therefore, its obligation to pay the balance again arose and
resumed after it received notice of such dismissal. Unfortunately, petitioner
failed to seasonably make payment, as in fact it has deposit the money with
the trial court when this case was originally filed therein.

By reason of petitioner's failure to comply with its obligation, private

respondents elected to resort to and did announce the rescission of the
contract through its letter to petitioner dated July 27, 1990. That written
notice of rescission is deemed sufficient under the circumstances. Article
1592 of the Civil Code which requires rescission either by judicial action or
notarial act is not applicable to a contract to sell. Furthermore, judicial action
for rescission of a contract is not necessary where the contract provides for
automatic rescission in case of breach, as in the contract involved in the
present controversy.

We are not unaware of the ruling in University of the Philippines vs. De los
Angeles, etc. that the right to rescind is not absolute, being ever subject to
scrutiny and review by the proper court. It is our considered view, however,
that this rule applies to a situation where the extrajudicial rescission is
contested by the defaulting party. In other words, resolution of reciprocal
contracts may be made extrajudicially unless successfully impugned in court.
If the debtor impugns the declaration, it shall be subject to judicial
determination otherwise, if said party does not oppose it, the extrajudicial
rescission shall have legal effect.

In the case at bar, it has been shown that although petitioner was duly
furnished and did receive a written notice of rescission which specified the
grounds therefore, it failed to reply thereto or protest against it. Its silence
thereon suggests an admission of the veracity and validity of private
respondents' claim. Furthermore, the initiative of instituting suit was
transferred from the rescinder to the defaulter by virtue of the automatic
rescission clause in the contract. But then, the records bear out the fact that
aside from the lackadaisical manner with which petitioner treated private
respondents' latter of cancellation, it utterly failed to seriously seek redress
from the court for the enforcement of its alleged rights under the contract. If
private respondents had not taken the initiative of filing Civil Case No. 7532,
evidently petitioner had no intention to take any legal action to compel
specific performance from the former. By such cavalier disregard, it has been
effectively estopped from seeking the affirmative relief it now desires but
which it had theretofore disdained.

WHEREFORE, on the foregoing modificatory premises, and considering that

the same result has been reached by respondent Court of Appeals with
respect to the relief awarded to private respondents by the court a quo which
we find to be correct, its assailed judgment in CA-G.R. CV No. 34767 is
hereby AFFIRMED. SO ORDERED.

[G.R. No. 106467-68. October 19, 1999]

DOLORES LIGAYA DE MESA, petitioner, vs. THE COURT OF APPEALS,

OSSA HOUSE, INC. AND DEVELOPMENT BANK OF THE
PHILIPPINES, respondents.

DECISION
PURISIMA, J.:
 At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
questioning the Decision[1] of the Court of Appeals[2] dated March 31, 1992 in CA-G.R. Nos.
19145 and 19146, which modified the decision of Branch 138 of the Regional Trial Court of
Makati in Civil Case Nos. 41059 and 42381.
The antecedent facts are as follows:
Petitioner Dolores Ligaya de Mesa owns several parcels of land in Makati, Pasay City,
Cavite, and General Santos City[3] which were mortgaged to the Development Bank of the
Philippines (DBP) as security for a loan she obtained from the bank. Failing to pay her mortgage
debt, all her mortgaged properties were foreclosed and sold at public auction held on different
days. On April 30, 1977, the Makar property was sold and the corresponding certificate of sale
inscribed on March 10, 1978. On August 25, 1977, the Naic, Cavite property was sold and the
certificate of sale registered on the same day. On August 30, 1977, the two (2) parcels of land in
Makati were sold at public auction and the certificate of sale was inscribed on November 25,
1977. And on January 12, 1978, the three (3) parcels of land in Pasay City were also sold and the
certificate of sale was recorded on the same date. In all the said auction sales, DBP was the
winning bidder.
In a letter dated May 29, 1978, petitioner de Mesa requested DBP that she be allowed to
repurchase her foreclosed properties.
On October 23, 1978, Mrs. de Mesa, under a Deed of Sale with Assumption of Mortgage,
sold the foreclosed properties to private respondent OSSA under the condition that the latter
[4]

was to assume the payment of the mortgage debt by the repurchase of all the properties
mortgaged on installment basis, with an initial payment of P90,000.00 representing 20% of the
total obligation.
On October 23, 1978, private respondent OSSA remitted to DBP the initial payment
of P90,000.00, in addition to the amount of P10,000.00 previously paid to the petitioner.
On February 22, 1979, DBP granted petitioners request to repurchase the foreclosed
properties such that in March 1979 a Deed of Conditional Sale was executed under which DBP
agreed to sell the said properties to the petitioner for the sum of P363,408.20, P90,000.00 of
which was to be paid as initial payment and the balance in seven (7) years on a quarterly
amortization plan, with a first quarterly installment of P15,475.17.
Private respondent OSSA paid DBP the first to eight quarterly installments from April 11,
1979 to May 8, 1991, in the total amount of P137,595.31, which installment payments were
applied to petitioners obligation with DBP pursuant to the Deed of Conditional Sale.
On March 11, 1981, petitioner de Mesa notified private respondent OSSA that she was
rescinding the Deed of Sale with Assumption of Mortgage she executed in favor of the latter on
the ground that OSSA failed to comply with the terms and conditions of their agreement,
particularly the payment of installments to the Development Bank of the Philippines, the
discharge and cancellation of the mortgage on the property listed in item IV of the first whereas
clause, and the payment of the balance of more or less P45,000.00 to petitioner, representing the
difference between the purchase price of subject properties and the actual obligation to the DBP.
On April 11, 1981, OSSA offered to pay the amount of P34,363.08, which is the difference
between the purchase price of P500,000.00 and the mortgage obligation to DBP of P455,636.92,
after deducting the downpayment of P10,000.00 stipulated in said Deed of Sale with Assumption
of Mortgage, but the petitioner refused to accept such payment. So, on April 28, 1981, OSSA
brought a Complaint for Consignation against the petitioner, docketed as Civil Case No. 41059
before the then Court of First Instance of Rizal, Branch XV, and at the same time, deposited the
amount of P34,363.08 with said court.
On August 5, 1981, DBP refused to accept the 9th quarterly installment paid by OSSA,
prompting the latter to file against DBP and the petitioner, on August 11, 1981, Civil Case No.
42381 for specific performance and consignation, with the then Court of First Instance of Pasig,
Rizal, depositing in said case the amount of P15,824.92.
On October 21, 1981, upon petitioner de Mesas motion, Civil Case Nos. 41059 and 42381
were consolidated before the then Court of First Instance of Rizal, Branch XV, Makati, Metro
Manila, now Regional Trial Court of Makati City , Branch CXXXVIII (138).
In an Order dated July 23, 1982, the lower court allowed OSSA to deposit with the Court a
quo by way of consignation, all future quarterly installments without need of formal tenders of
payment and service of notices of consignation. Correspondingly and over the period of time
stipulated, OSSA deposited with the lower court the 10 to the 20th installments in the aggregate
th

amount of P172, 562.11.

After trial, the lower court came out with a Decision for the private respondent OSSA,
holding thus:

WHEREFORE, premises considered, judgment is hereby rendered (a) declaring the

consignation made by plaintiff as proper and valid and ordering defendants Dolores
Ligaya de Mesa and Development Bank of the Philippines to withdraw and receive
said payments due them which plaintiff has consigned with the Court;

(b) Ordering defendant Development Bank of the Philippines to furnish plaintiff with
a statement of payments and balance, if any, still due from defendant de Mesa after
applying all payments already received, including the amounts placed under
consignation;

(c) Upon payment by the plaintiff of the balance if any, still due on the properties,
defendant Development Bank of the Philippines shall execute a Deed of Absolute Sale
in favor of the plaintiff over the properties subject matter of the Deed of Absolute Sale
with Assumption of Mortgage executed by and between plaintiff and defendant de
Mesa;

(d) Ordering plaintiff to pay defendant de Mesa the difference, if any, between the
agreed purchase price of P500,000.00 and the payments made to the defendant
Development Bank of the Philippines, less the P10,000.00 down payment already paid
and the P34,363.08 consigned with the Court; and
(e) Ordering defendant de Mesa to pay plaintiff the sum of P10,000.00 as attorneys
fees.

SO ORDERED.' [5]

The petitioner appealed to the Court of Appeals which handed down on March 31, 1992, its
decision modifying the challenged decision, as follows:

WHEREFORE, the decision appealed from is hereby MODIFIED:

(a) declaring the consignation made by OSSA as proper and valid as far as de Mesa
is concerned, and ordering de Mesa to receive the said amount consigned with the
court and pay DBP with the said amount;

(b) ordering DBP to furnish de Mesa with a statement of payments and the balance, if
any, still due from de Mesa after applying all payments already received, including
the amounts paid under consignation;

(c) ordering de Mesa to furnish OSSA with a copy of the statement of payments
described in the preceding paragraph, and the balance appearing therein, if any, shall
be paid by OSSA for the account of de Mesa;

(d) ordering DBP to execute a Deed of Absolute Sale in favor of de Mesa over the
properties subject of the Deed of Conditional Sale;

(e) ordering Ossa to pay de Mesa the difference, if any, between the agreed purchase
price of P500,000.00 and the payments made to DBP, less the P10,000.00 down
payment and the P34,363.08 consigned with the court;

(f) ordering de Mesa thereafter, to execute a Deed of Absolute Sale in favor of OSSA
over the properties subject of the Deed of Sale with assumption of Mortgage; and

(g) ordering de Mesa to pay OSSA the sum of P10,000.00 as and for attorneys fees.

No pronouncement as to costs.

SO ORDERED.[6]

On May 5, 1992, petitioner interposed a motion for reconsideration of the aforesaid

decision, theorizing that:

I
THIS COURT ERRED WHEN IT HELD THAT WHAT WAS SOLD UNDER THE
DEED OF SALE WITH ASSUMPTION OF MORTGAGE WERE THE
PROPERTIES LISTED THEREIN AND NOT MERELY THE RIGHT OF
REDEMPTION DESPITE THE TESTIMONIES OF BOTH CONTRACTING
PARTIES THAT WHAT SOLD AND BOUGHT WAS MERELY THE RIGHT OF
REDEMPTION.

II

THIS COURT ERRED IN HOLDING THAT DE MESAS REQUEST TO

REPURCHASE THE FORECLOSED PROPERTIES FROM DBP REDOUNDED
TO THE BENEFIT OF OSSA HOUSE, INC.

III

THIS COURT ERRED IN HOLDING DE MESA IN ESTOPPEL.

IV

THIS COURT ERRED IN RULING THAT THE MANDATORY REQUIREMENTS

OF THE CIVIL CODE ON CONSIGNATION CAN BE WAIVED BY THE TRIAL
COURT.[7]

With the denial of her aforestated motion for reconsideration, petitioner found her way to
this Court via the present petition, raising the issues:

(i) Whether or not the requirements of Articles 1256 to 1261 can be relaxed or
substantially complied with.

(ii) Whether or not the Court can supplant its own reading of an ambiguous contract
for the actual intention of the contracting parties as testified to in open court and under
oath.

(iii) Whether or not petitioner de Mesa can be held in estoppel for the acts of the DBP.

Article 1370 of the New Civil Code, reads:

"Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of its stipulation shall control.

xxx
When the words of a contract are plain and readily understood, there is no room for
construction. As the agreement of the parties are reduced to writing, such agreement is
considered as containing all its terms and there can be, between the parties and their successors-
in-interest, no evidence of the terms of the written agreement other than the contents of the
writing.[8]
In the case under consideration, the terms of the Deed of Sale with Assumption of Mortgage
Debt are clear and leave no doubt as to what were sold thereunder. It provided as follows:

"WHEREAS, the VENDOR has agreed to sell to the VENDEE (plaintiff Ossa House,
Inc.), and the VENDEE has agreed to purchase form the VENDOR, all the properties
described in Items I, II, and III, of the First Whereas Clause, for the price and under
the terms hereinafter contained;

NOW, THEREFORE, for and in consideration of the premises and the sum of TEN
THOUSAND PESOS (P10,000.00), the receipt whereof is hereby acknowledged, and
the assumption by the VENDEE of the total mortgage obligation of the VENDOR has
sold, transferred, and conveyed, and by these presents does sell, transfer and convey,
unto the said VENDEE, its administrators and assigns, free from all liens and
encumbrances except as noted herein, the parcels of land hereinabove described in
Items I, II, and III, together with all the buildings and improvements thereon;

The VENDEE does hereby assume the payment of the mortgage obligations by
repurchase of all the properties mortgaged on installment, with an initial payment
of P90,000.00 representing payment 20% of the total obligation; and consequently,
the within sale is subject to the mortgage in favor of the Development Bank of the
Philippines;

Nowhere is it provided in the aforequoted provisions, as the petitioner insists, that what she
sold to respondent OSSA was merely the right to redeem the mortgaged properties and not the
foreclosed properties themselves. On the contrary, the very words of the contract reveal that the
subject of the sale were all the properties described in items I, II, III of the First Whereas Clause.
Indeed, the contract under scrutiny is so explicit and unambiguous that it does not justify
any attempt to read into it any supposed intention of the parties, as the said contract is to be
understood literally, just as they appear on its face.[9]
Petitioner capitalizes on the following prefatory clause of the contract, to wit:

WHEREAS, the VENDOR (defendant De Mesa) is the registered owner with a

preferential right of redemption of the following mortgaged properties with the
Development Bank of the Philippines, more particularly described as follows:

However, not the slightest indication can be gleaned from the abovequoted provision that the
subject of the Deed of Sale with Assumption of Mortgage was petitioners right of
redemption. The said provision merely speaks of the preferential right of the latter to redeem the
real properties involved.
 Furthermore, the court discerns no inconsistency between the contracts recognition of the
preferential right of petitioner to redeem the mortgaged properties, and the sale of the said
properties to respondent OSSA. Petitioner can validly redeem subject properties and still
recognize the sale thereof to the respondent corporation because nothing therein is contrary to
law, morals, good customs, public order or public policy. Besides, it is a well-settled doctrine that
in the construction of an instrument where there are several provisions, or particulars, such a
construction is, if possible, to be adopted as will give effect to all. [10] Thus, the recognition of both
the preferential right of the petitioner to redeem the mortgaged properties and the sale of the
same properties to respondent OSSA is in order, as it would harmonize and give effect to all the
provisions of the Deed of Sale with Assumption of Mortgage under controversy.
As aptly ruled by the respondent court, the grant by DBP of petitioners request to repurchase
the mortgaged properties redounded to the benefit of respondent OSSA, the sale of the said
properties having been previously agreed upon by the petitioner and respondent OSSA.
Petitioner contends that she is not estopped from questioning DBPs application to her
account of OSSAs initial payment of P90,000.00 as well as the first to eight quarterly
installments. It bears stressing, however, that the remittance of the said payment was made in
implementation of the provisions of their contract. The belated claim of the petitioner, which was
not given credence by the trial court, that she objected to the application by DBP to her account
of all the remittances of OSSA is tainted with bad faith as this is an attempt to renegade against
her contract with respondent OSSA. Besides, the issue of whether or not petitioner objected is a
question of fact that has already been settled by the trial court which best performs the matter of
assigning values to the testimony of witnesses,[11] and whose findings are accorded great weight
especially when affirmed by the Court of Appeals[12], as in the case at bar.
Petitioner next argues that there was no notice to her regarding OSSAs consignation of the
amounts corresponding to the 12 up to the 20 quarterly installments. The records, however,
th th

show that several tenders of payment were consistently turned down by the petitioner, so much
so that the respondent OSSA found it pointless to keep on making formal tenders of payment and
serving notices of consignation to petitioner. Moreover, in a motion dated May 7, 1987, OSSA
prayed before the lower court that it be allowed to deposit by way of consignation all the
quarterly installments, without making formal tenders of payment and serving notice of
consignation, which prayer was granted by the trial court in the Order dated July 3, 1982. The
motion and the subsequent court order served on the petitioner in the consignation proceedings
sufficiently served as notice to petitioner of OSSAs willingness to pay the quarterly installments
and the consignation of such payments with the court. For reasons of equity, the procedural
requirements of consignation are deemed substantially complied with in the present case.[13]
Petitioner also insists that there was no valid tender of payment because the amount tendered
was P34,363.08, not P51,243.26, and assuming ex gratia argumenti that it was the correct
amount, the tender thereof was still not valid, the same having been made by check. This claim,
however, does not accord with the records on hand. Thus, the Court of Appeals ratiocinated:

The Deed of Sale with Assumption of Mortgage, was for a consideration

of P500,000.00, from which shall be deducted de Mesass outstanding obligation, with
the DBP pegged as of May 10, 1978, by the parties themselves, at P455,636.92. This
amount of P455,636.92 owing DBP, is what OSSA agreed to assume. What remained
to be paid de Mesa was P44,636.08, but OSSA made an advance payment
of P10,000.00, hence the remaining amount payable to de Mesa is P34,363.08, which
OSSA tendered in cash (Exhibits X, BB and CC).[14]

It is thus beyond cavil that the respondent OSSA tendered the correct amount, the tender of
which was in cash and not by check, as theorized by petitioner.
Premises studiedly considered, the Court is of the ineluctable conclusion, and so holds, that
the Court of Appeals erred not in affirming the decision of the trial court of origin.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals
in CA-G.R. Nos. 19145 and 19156 dated March 31, 1992 AFFIRMED. No pronouncement as to
costs.
SO ORDERED.

G.R. No. L-9935 February 1, 1915

YU TEK and CO., plaintiff-appellant,

vs.
BASILIO GONZALES, defendant-appellant.

Beaumont, Tenney and Ferrier for plaintiff.

Buencamino and Lontok for defendant.

TRENT, J.:

The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of which follow:
 1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of P3,000 Philippine
currency from Messrs. Yu Tek and Co., and that in consideration of said sum be obligates
himself to deliver to the said Yu Tek and Co., 600 piculs of sugar of the first and second
grade, according to the result of the polarization, within the period of three months, beginning
on the 1st day of January, 1912, and ending on the 31st day of March of the same year,
1912.

2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said Messrs. Yu Tek
and Co., of this city the said 600 piculs of sugar at any place within the said municipality of
Santa Rosa which the said Messrs. Yu Tek and Co., or a representative of the same may
designate.

3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek and Co. the
600 piculs of sugar within the period of three months, referred to in the second paragraph of
this document, this contract will be rescinded and the said Mr. Basilio Gonzales will then be
obligated to return to Messrs. Yu Tek and Co. the P3,000 received and also the sum of
P1,200 by way of indemnity for loss and damages.

Plaintiff proved that no sugar had been delivered to it under this contract nor had it been able to
recover the P3,000. Plaintiff prayed for judgment for the P3,000 and, in addition, for P1,200 under
paragraph 4, supra. Judgment was rendered for P3,000 only, and from this judgment both parties
appealed.

The points raised by the defendant will be considered first. He alleges that the court erred in refusing
to permit parol evidence showing that the parties intended that the sugar was to be secured from the
crop which the defendant raised on his plantation, and that he was unable to fulfill the contract by
reason of the almost total failure of his crop. This case appears to be one to which the rule which
excludes parol evidence to add to or vary the terms of a written contract is decidedly applicable.
There is not the slightest intimation in the contract that the sugar was to be raised by the defendant.
Parties are presumed to have reduced to writing all the essential conditions of their contract. While
parol evidence is admissible in a variety of ways to explain the meaning of written contracts, it
cannot serve the purpose of incorporating into the contract additional contemporaneous conditions
which are not mentioned at all in the writing, unless there has been fraud or mistake. In an early
case this court declined to allow parol evidence showing that a party to a written contract was to
become a partner in a firm instead of a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.)
Again, in Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of employment provided
that the plaintiff should receive from the defendant a stipulated salary and expenses. The defendant
sought to interpose as a defense to recovery that the payment of the salary was contingent upon the
plaintiff's employment redounding to the benefit of the defendant company. The contract contained
no such condition and the court declined to receive parol evidence thereof.

In the case at bar, it is sought to show that the sugar was to be obtained exclusively from the crop
raised by the defendant. There is no clause in the written contract which even remotely suggests
such a condition. The defendant undertook to deliver a specified quantity of sugar within a specified
time. The contract placed no restriction upon the defendant in the matter of obtaining the sugar. He
was equally at liberty to purchase it on the market or raise it himself. It may be true that defendant
owned a plantation and expected to raise the sugar himself, but he did not limit his obligation to his
own crop of sugar. Our conclusion is that the condition which the defendant seeks to add to the
contract by parol evidence cannot be considered. The rights of the parties must be determined by
the writing itself.
The second contention of the defendant arises from the first. He assumes that the contract was
limited to the sugar he might raise upon his own plantation; that the contract represented a perfected
sale; and that by failure of his crop he was relieved from complying with his undertaking by loss of
the thing due. (Arts. 1452, 1096, and 1182, Civil Code.) This argument is faulty in assuming that
there was a perfected sale. Article 1450 defines a perfected sale as follows:

The sale shall be perfected between vendor and vendee and shall be binding on both of
them, if they have agreed upon the thing which is the object of the contract and upon the
price, even when neither has been delivered.

Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract has been
perfected, be governed by the provisions of articles 1096 and 1182."

This court has consistently held that there is a perfected sale with regard to the "thing" whenever the
article of sale has been physically segregated from all other articles Thus, a particular tobacco
factory with its contents was held sold under a contract which did not provide for either delivery of
the price or of the thing until a future time. McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite
similar was the recent case of Barretto vs. Santa Marina (26 Phil. Rep., 200) where specified shares
of stock in a tobacco factory were held sold by a contract which deferred delivery of both the price
and the stock until the latter had been appraised by an inventory of the entire assets of the company.
In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was held perfected between the
vendor and vendee, although the delivery of the price was withheld until the necessary documents of
ownership were prepared by the vendee. In Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff
had delivered a quantity of hemp into the warehouse of the defendant. The defendant drew a bill of
exchange in the sum of P800, representing the price which had been agreed upon for the hemp thus
delivered. Prior to the presentation of the bill for payment, the hemp was destroyed. Whereupon, the
defendant suspended payment of the bill. It was held that the hemp having been already delivered,
the title had passed and the loss was the vendee's. It is our purpose to distinguish the case at bar
from all these cases.

In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs of sugar of
the first and second classes. Was this an agreement upon the "thing" which was the object of the
contract within the meaning of article 1450, supra? Sugar is one of the staple commodities of this
country. For the purpose of sale its bulk is weighed, the customary unit of weight being denominated
a "picul." There was no delivery under the contract. Now, if called upon to designate the article sold,
it is clear that the defendant could only say that it was "sugar." He could only use this generic name
for the thing sold. There was no "appropriation" of any particular lot of sugar. Neither party could
point to any specific quantity of sugar and say: "This is the article which was the subject of our
contract." How different is this from the contracts discussed in the cases referred to above! In the
McCullough case, for instance, the tobacco factory which the parties dealt with was specifically
pointed out and distinguished from all other tobacco factories. So, in the Barretto case, the particular
shares of stock which the parties desired to transfer were capable of designation. In the Tan Leonco
case, where a quantity of hemp was the subject of the contract, it was shown that that quantity had
been deposited in a specific warehouse, and thus set apart and distinguished from all other hemp.

A number of cases have been decided in the State of Louisiana, where the civil law prevails, which
confirm our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and Co. (122 La., 145; 47
Sou., 444). In this case a contract was entered into by a traveling salesman for a quantity of shoes,
the sales having been made by sample. The court said of this contract:

But it is wholly immaterial, for the purpose of the main question, whether Mitchell was
authorized to make a definite contract of sale or not, since the only contract that he was in a
 position to make was an agreement to sell or an executory contract of sale. He says that
plaintiff sends out 375 samples of shoes, and as he was offering to sell by sample shoes,
part of which had not been manufactured and the rest of which were incorporated in
plaintiff's stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should at
that time have agreed upon the specific objects, the title to which was to pass, and hence
there could have been no sale. He and Seegars and Co. might have agreed, and did (in
effect ) agree, that the identification of the objects and their appropriation to the contract
necessary to make a sale should thereafter be made by the plaintiff, acting for itself and for
Seegars and Co., and the legend printed in red ink on plaintiff's billheads ("Our responsibility
ceases when we take transportation Co's. receipt `In good order'" indicates plaintiff's idea of
the moment at which such identification and appropriation would become effective. The
question presented was carefully considered in the case of State vs. Shields, et al. (110 La.,
547, 34 Sou., 673) (in which it was absolutely necessary that it should be decided), and it
was there held that in receiving an order for a quantity of goods, of a kind and at a price
agreed on, to be supplied from a general stock, warehoused at another place, the agent
receiving the order merely enters into an executory contract for the sale of the goods, which
does not divest or transfer the title of any determinate object, and which becomes effective
for that purpose only when specific goods are thereafter appropriated to the contract; and, in
the absence of a more specific agreement on the subject, that such appropriated takes place
only when the goods as ordered are delivered to the public carriers at the place from which
they are to be shipped, consigned to the person by whom the order is given, at which time
and place, therefore, the sale is perfected and the title passes.

This case and State vs. Shields, referred to in the above quotation are amply illustrative of the
position taken by the Louisiana court on the question before us. But we cannot refrain from referring
to the case of Larue and Prevost vs.Rugely, Blair and Co. (10 La. Ann., 242) which is summarized by
the court itself in the Shields case as follows:

. . . It appears that the defendants had made a contract for the sale, by weight, of a lot of
cotton, had received $3,000 on account of the price, and had given an order for its delivery,
which had been presented to the purchaser, and recognized by the press in which the cotton
was stored, but that the cotton had been destroyed by fire before it was weighed. It was held
that it was still at the risk of the seller, and that the buyer was entitled to recover the $3,000
paid on account of the price.

We conclude that the contract in the case at bar was merely an executory agreement; a promise of
sale and not a sale. At there was no perfected sale, it is clear that articles 1452, 1096, and 1182 are
not applicable. The defendant having defaulted in his engagement, the plaintiff is entitled to recover
the P3,000 which it advanced to the defendant, and this portion of the judgment appealed from must
therefore be affirmed.

The plaintiff has appealed from the judgment of the trial court on the ground that it is entitled to
recover the additional sum of P1,200 under paragraph 4 of the contract. The court below held that
this paragraph was simply a limitation upon the amount of damages which could be recovered and
not liquidated damages as contemplated by the law. "It also appears," said the lower court, "that in
any event the defendant was prevented from fulfilling the contract by the delivery of the sugar by
condition over which he had no control, but these conditions were not sufficient to absolve him from
the obligation of returning the money which he received."

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

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

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

G.R. No. L-29298 December 15, 1928

REYNALDO LABAYEN, ET AL., plaintiffs.

REYNALDO LABAYEN, appellant, vs. TALISAY-SILAY MILLING
CO., INC., Defendant-Appellee.

Angel S. Gamboa for appellant.

R. Nolan for appellee.

MALCOLM, J.:
This is an action for damage in the amount of P28,620 for the
alleged breach of a contract to grind sugar cane in 1920-1921. After
a rehearing, the defendant was absolved from the complaint,
andthe plaintiff was condemned, on the cross-complaint, to pay the
defendant the sum of P12,114, without special pronouncement as to
costs.chanroblesvirtualawlibrary chanrobles virtual law library

An examination of the record on appeal discloses that the exhibits

are missing. Still this is not in this instance of great importance. The
facts as found by the trial judge are not seriously disputed from the
facts which worry the parties. chanroblesvirtualawlibrary chanrobles virtual law library

The plaintiff, along with another, possesses the hacienda known as

Dos Hermanos of Talisay, Occidental Negros. The defendant is a
corporation dedicated to the milling of sugar cane. On August 27,
1919, the plaintiff and the defendant entered into a contract similar
to contracts entered into by the defendant and other planters. It is
this contract which is the basis of plaintiff's cause of action. Among
the clauses in the contract are the following:

COVENANTS OF 'LA CENTRAL'

chanrobles virtual law library

Third: That it shall build and after building it shall do or cause to be

done all that is necessary for its preservation in good condition, and
shall, during the period of this agreement, without charge to the
Procedure or Procedures, operate a permanent railroad run by
steam or motor, or both, for the use of the plantation or plantations
in the transportation of sugar cane, sugar, fertilizer, and all such
articles as the procedure may need for his estate, his use and that
of his family and employees, and shall cause the main line or a
branch thereof, as the case may be, to reach the point of the
plantation to be hereafter described not farther than one mile from
ay of the boundaries of said plantation, whenever the contour of the
land, the curves, and elevations permit the same; it shall provide
said railroad with locomotives or motors and wagons in a number
sufficient to make the transportation of sugar cane, sugar, fertilizer,
and the above mentioned articles, and shall likewise build a branch
of said railroad in such a way that from the main line, mill and
warehouses, it shall reach the wharf above mentioned, and it shall
also cause the yard of the factory near the sugar mill to be available
for use with switches or otherwise. All the steam locomotives shall
be provided with safety spark devices. The railroad shall consist of a
road or path conveniently and duly designated so that, so far as
possible, all the producers may derive equal benefit from said
railroad. The right-of way for the main line of the railroad shall be
three and a half (3-�) meters wide measured from the center of the
road to each side, and the branches, switches, or curves shall have
more if necessary.

OBLIGATIONS OF THE PRODUCER

chanrobles virtual law library

Fifth: That he shall accept the provisions of clauses 7, 8, and 9 of

the covenants of "La Central" and shall deliver the cane as therein
provided; hereby binding himself to plant each year according to the
usage and custom of a good agriculturist not less than one-half of
his own lands devoted to sugar cane subject to the approval of the
Committee of Producers leaving the remainder uncultivated.

MUTUAL OBLIGATIONS

chanrobles virtual law library

10. In case of . . . inability to secure, under reasonable conditions

such rights-of-way as "La Central" may require, . . . "La Central"
shall notify the Committee of Producers and without incurring any
liability for the non-fulfillment of the terms of this contract, its
effects shall be suspended in part or in whole during such period of
incapacity. . . . (Emphasis inserted.)

With particular reference to the third paragraph of the clauses

obligating the central, it is admitted that the central has not
continued its railroad through to the Hacienda Dos Hermanos. The
railroad comes to the Hacienda Esmeralda No. 2 and there stops.
For the railroad to extend to the Hacienda Dos Hermanos, a
distance of four kilometers would require a gradual elevation of 4.84
per cent to 7 per cent, would make necessary the providing of
twenty-six curves, and would cost about P80,000. The witness H.
W. Corp, a civil engeneer employed in the construction work of the
Manila Railroad Company, the Pampanga Sugar Milling Co., and the
Binalbagan Central, testified that it was possible to construct a
railroad to the Hacienda Dos Hermanos but that to do so would be
very dangerous. chanroblesvirtualawlibrary chanrobles virtual law library

Recalling that the contract provided for the construction of a

railroad "whenever the contour of the land, the curves, and
elevations permit the same," and that such construction is possible
but very dangerous, the question then arises if the defendant can
excuse itself on this ground, or if the plaintiff can recover from the
defendant for damages for breach of contract, through inability to
mill cane.chanroblesvirtualawlibrary chanrobles virtual law library

It is elemental that the law requires parties to do what they have

agreed to do. If a party charges himself with an obligation possible
to be performed, he must abide by it unless performance is
rendered impossible by the act of God, the law, or the other party.
A showing of mere inconvenience, unexpected impediments, or
increased expenses is not enough. Equity cannot relieve from bad
bargains simply because they are such. So one must answer in
damages where the impossibility is only so in fact. (Thornborow vs.
Whitacre, 2 Ld. Raym. [1164], 92 E. R., 270; Reid vs. Alaska
Packing Co. [1903], 43 Or., 429; Columbus Ry. & Power Co. vs.
Columbus [1919], 249 U. S., 399.) chanrobles virtual law library

The foregoing are familiar principles to be found in the American

and English law of contracts. The civil law on the subject of
obligations is not essentially different. Article 1272 of the Civil Code
provides: "Impossible things of services cannot be the subject-
matter of contracts." And article 1184 of the same Code provides:
"The debtor shall also be relieved from obligations which consist in
the performance of a act if fulfillment of the undertaking becomes
legally or physically impossible." chanrobles virtual law library

May one obligate himself to do something which, when

accomplished, will prove to be dangerous to life and property? We
doubt it. Take the contract in question as an example. It was a
general contract of the form used by the central and various
proprietors of sugar-cane fields. It was intended to be limited in
particular application to haciendas where not impeded by physical
impossibility. The contract was qualified by an implied condition
which, if given practical effect, results in absolving the central from
its promise. Not to sanction an exception to the general rule would
run counter to public policy and the law by forcing the performance
of a contract undesirable and harmful. (8 Manresa's Codigo Civil
Espanol, p. 355.) chanrobles virtual law library

There is another aspect to the case which has to do with the tenth
paragraph of the mutual obligations of the contract and which
concerned the securing of the right- of-way for the proposed
railroad. To get from the Hacienda Esmeralda No. 2 to
the Hacienda Dos Hermanos, the railroad would have to pass
through the haciendas of Esteban de la Rama. But he would not
grant permission to use his land for this purpose in 1920, and only
consented to do so in 1924. Here then was a clear case of such a
condition of affairs as was contemplated by the contract. chanroblesvirtualawlibrary chanrobles virtual law library

The foregoing points being admitted, it logically follows that the

defendant can recover on its cross-complaint. The defense to the
cross-complaint is identical with the theory of the complaint. For the
same reasons that the plaintiff cannot recover must be make good
for his debt to the defendant. chanroblesvirtualawlibrary chanrobles virtual law library

Accepting, therefore, the facts as found by the trial judge, and

nothing no reversible error on any legal question, the judgment
appealed from must be as it is hereby affirmed, with the costs of
this instance against the appellant. cha