Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. Nos.

L-46430-31 July 30, 1979 FRANCISCA ALSUA-BETTS, JOSEPH O. BETTS, JOSE MADARETA, ESTEBAN P. RAMIREZ, and THE REGISTER OF DEEDS FOR ALBAY PROVINCE, petitioners, vs. COURT OF APPEALS, AMPARO ALSUA BUENVIAJE, FERNANDO BUENVIAJE, FERNANDO ALSUA, represented by his guardian, CLOTILDE S. ALSUA and PABLO ALSUA, respondents. Rafael Triumfante for petitioners. Sabido-Sabido & Associates and Madrid Law Office for private respondents. GUERRERO, J.:1wph1.t This is an appeal by certiorari from the decision of the Court of Appeals in CA-G.R. Nos. 54492-R and 54493R which reversed the decision of the Court of First Instance of Albay allowing the probate of the win of Don Jesus Alsua in Special Proceedings No. 699 and dismissing the complaint in Civil Case 3068 after declaring the two deeds of sale executed by Don Jesus Alsua legal and valid. The respondent court 1 denied the probate of the will, declared null and void the two sales subject of the complaint and ordered the defendants, petitioners herein, to pay damages to the plaintiffs, now the private respondents, the sum of Five Thousand Pesos (P5,000.00), to render an accounting of the properties in their possession and to reimburse the latter the net gain in the proportion that appertains to them in the properties from the date of the firing of the complaint up to complete restoration plus Fifty Thousand Pesos (P50,000.00) as attorney's fees and costs. The antecedent events leading to the filing of these two consolidated actions are the following. On November 25, 1949, Don Jesus Alsua and his wife, Do;a Florentina Rella, both of Ligao, Albay, together with all their living children, Francisca Alsua-Betts, Pablo Alsua, Fernando Alsua thru this judicial guardian Clotilde Samson, and Amparo Alsua de Buenviaje, entered into a duly notarized agreement, Escritura de Particion Extrajudicial (Exhibit 8), over the then present and existing properties of the spouses Don Jesus and Do;a Florentina enumerated in a prepared inventory, Exhibit 8-A, the essential features of which are stated in private respondents' Brief, pp. 26-29, to wit: t.hqw (1) Basis of the partition: Inventory (Annex A) of all the properties of the Alsua spouses, which inventory consists of 97 pages, all of them signed by the spouses and all the above named heirs in the left margin of every page (parafo primers). (2) An acknowledgment of the spouses that all the properties described in the inventory (Annex A) are conjugal properties with the exception of five parcels of land Identified with the figures of 1 to 5 and 30 shares of San Miguel Brewery stock which are paraphernal properties of the late Do;a Tinay (segundo parafo). (3) An acknowledgment that during their marriage, they had nine children but five of them died minors, unmarried (parafo tercero y cuatro). (4) An acknowledgment that on the basis of Article 1056 of the Civil Code (old) to avoid Possible misunderstanding among their children concerning the inheritance they are entitled to in the event of death of one of them they have decided to effectuate an extrajudicial partition of all the properties described in Annex "A" thereto under the following terms and conditions: (Parafo quinto):

To Francisca Alsua, married to Joseph O. Betts were allotted or assigned all the real properties with the improvements thereon specifically described from pages 1-12 of said inventory or, 34 parcels of land with a total land area of 5,720,364 sq. meters, with a book or appraised value of P69,740.00. To Pablo Alsua, married to Teresa Locsin were allotted or assigned all the real properties with the improvements thereon specifically described from pages 12-20 of said inventory or, 26 parcels of land with a total land area of 5,679,262 sq. meters, with a book or appraised value of P55,940.00. To Fernando Alsua, married to Clotilde Samson were allotted or assigned all the real properties with the improvements thereon specifically described from pages 20-33 of said inventory or, 47 parcels of land with a total land area of 6,639,810 sq. meters, with a book or appraised value of P89,300.00. To Amparo Alsua, married to Fernando Buenviaje were allotted or assigned all the real properties with the improvements thereon specifically described from pages 33-47 of said inventory or, 47 parcels of land with a total land area of 5,630,715 sq. meters, with a book or appraised value of P58,830.00. t.hqw (a) Each and every one of the heirs named above acknowledge and admit that the totality of the properties allotted and adjudicated to the heirs as described in the preceding paragraph, constitute one half of the properties described in Annex "A", including any amount of cash deposited. (b) That all the heirs acknowledge and admit that all the properties assigned to them as their hereditary portion represent one-half not only of the conjugal properties but includes the paraphernal properties waiving now and forever any complaint or claim they have or they may have concerning the amount, value, extension and location of the properties that are allotted to each and everyone. They also waive any claim they have or they may have over the remaining portion of the properties, which spouses reserved for themselves. (c) That in case of death of one of the spouses, each and everyone of the heirs acknowledge that the properties which are left in the possession of the surviving spouse, including any amount in cash, are even less than the one- half that should correspond in absolute ownership as his legitimate participation in the conjugal properties. In consequence they waive any claim that they have or may have over said portion of said properties or any amount in cash during the lifetime of the surviving spouse, including any right or claim they have or they may have over the paraphernal properties of Do;a Tinay in the event the surviving spouse is Don Jesus. (d) The spouses on their part in case of death of any one of them, the surviving spouse waives any claim he or she may have over the properties assigned or adjudicated to the heirs under and by virtue of this deed. The properties which were reserved for them (the spouses) should be considered as his or her legitimate participation in the conjugal properties and the fair compensation of his or her usufruct on the properties that the surviving spouse reserved for himself or herself which shag be distributed in equal shares among the heirs upon his or her death unless said properties of some of them have been disposed of during the lifetime of the surviving spouse. (e) Any heir who may dare question the validity and legitimacy of the provision contained herein shall be under obligation to pay to the other heirs, in the concept of damages and prejudice, the sum of P5,000.00 plus attorney's fees. (f) The provisions of this deed shall bind the successors of the herein heirs. (g) In the event of death of one of the spouses, the properties assigned or adjudicated to each and everyone of the heirs shall be considered as his share or participation in the estate or as his inheritance left by the deceased and each heir shall become the absolute owner of the properties adjudicated to him under this deed.

On January 5, 1955, Don Jesus and Do;a Florentina, also known as Do;a Tinay separately executed their respective holographic wills (Exhs. 6-B and 7-B), the provisions of which were in conformity and in implementation of the extrajudicial partition of November 25, 1949. Their holographic wills similarly provided for the institution of the other to his or her share in the conjugal properties, the other half of the conjugal assets having been partitioned to constitute their legitime among their four living children in the Extrajudicial Partition of 1949. The wigs also declared that in the event of future acquisitions of other properties by either of them, one-half thereof would belong to the other spouse, and the other half shall be divided equally among the four children. The holographic will of Do;a Tinay written in Spanish reads, as translated: t.hqw TESTAMENT I, FLORENTINA R. DE ALSUA, 67 years old, Filipina, married to Don Jesus Alsua, resident of and with postal address in the Municipality of Ligao, Province of Albay, Philippines, being in the full possession of my mental and physical faculties freely and spontaneously execute this my last will and testament in my handwriting and signed by me and expressed in the Spanish language which I speak, write and understand, this 5th day of January, 1955 in the Municipality of Ligao, Province of Albay, and in which I ordain and provide: First: That in or about the year 1906 I was married to my husband Don Jesus Alsua and begot nine (9) children with him, four (4) of whom are still living and they are Francisco Alsua, Pablo Alsua, Fernando Alsua and Amparo Alsua. The other five (5) died during their minority, single and without children. Second: That after my marriage to my husband Don Jesus Alsua and during our conjugal union, and as a result of our efforts and industry, we were able to acquire conjugal properties consisting of abaca (abales) and cacao lands and urban lands registered in the office of the Registry of Property of the Province of Albay and in the City of Manila. Third: That I institute as my heirs with right to inherit the following- my spouse Don Jesus Alsua, one-half (1/2) of my properties, real and personal, and the other half, to my children Francisco Alsua, married to Joseph O. Betts, Pablo Alsua, Fernando Alsua, married to Clotilde Samson, and Amparo Alsua, married to Fernando Buenviaje, in equal parts. It is to be understood, however, that the other half that corresponds as legitime to my above named children have already been given to them, pursuant to a document dated November 25, 1949 and ratified on the same day, month and year before Notary Public Segundo G. Flores (Reg. No. 525; Pag. 15; Lib. 11; Series of 1949) enjoining each and everyone of them to respect and faithfully comply with each and every clause contained in the said document. Fourth: That should I acquire new properties after the execution of this testament, the same shall be partitioned among my spouse and above named children or the children mentioned in above par. 3 in the same proportion that is, one-half (1 1/2) to my spouse; and the other half to my children in equal parts. Fifth: That I name as my executor my husband Don Jesus Alsua without having to post any bond. IN VIRTUE WHEREOF, I hereby sign in my own handwriting this testament on this 5th day of January, 1955 in the Municipality of Ligao, Province of Albay, Philippines. t.hqw (Joint Record on appeal pp. 420-423, CA-G.R. No. 54492-R) As previously stated, Don Jesus Alsua executed a separate but similar holographic will on the same day, Jan. 5, 1955 in exactly the same terms and conditions as the above will of his wife.

On May 21, 1956, the spouses Don Jesus and Do;a Tinay filed before the Court of First Instance of Albay their respective petitions for the probate of their respective holographic wins which were docketed as Special Proceedings No. 484 (Jesus Alsua, Petitioner) and Special Proceedings No. 485 (Do;a Florentina Ralla de Alsua, Petitioner). On August 14, 1956, the spouses Don Jesus and Do;a Tinay executed their mutual and reciprocal codicils amending and supplementing their respective holographic wins. Again, the codicils similarly acknowledged and provided that one-half of all the properties of the spouses, conjugal and paraphernal, had been disposed of, conveyed to and partitioned among their legitimate heirs in the "Escritura de Particion" of November 25, 1949, but that they reserved for themselves (the spouses Don Jesus and Do;a Tinay) the other half or those not disposed of to the said legitimate heirs under the above agreement of partition, and that they mutually and reciprocally bequeathed unto each other their participation therein as well as in all properties which might be acquired subsequently. Each spouse also declared that should she or he be the surviving spouse, whatever belongs to him or her or would pertain to him or her, would be divided equally among the four children. It was also declared in both codicils that upon the death of either of the spouses, the surviving spouse was designated mutually and reciprocally as the executor or administrator of all the properties reserved for themselves. The codicil executed by Do;a Tinay, written in Spanish reads, as translated: t.hqw CODICIL This codicil supplements and amends the preceding testament. That my spouse and I have agreed to divide the properties which we have acquired into 2 parts. The 1/2 that would correspond to me covers all the properties that I have partitioned among my children in the Document of Partition dated November 25, 1949 before Notary Public Segundo G. Flores, Jr. (Doc. No. 525; Pag. No. 15; Lib. No. 11; Series of 1949) (and) even as the properties which by reason of this testament I leave to my husband as his share and the other half that corresponds to my husband constitutes an the properties that up to now have not been disposed of, particularly the urban lands situated in Legaspi, Albay, Ligao of the Province of Albay and in the City of Manila, with the exception of that portion that I bequeath to my husband as his inheritance and his legitimate. That I institute as my heirs with the right to inherit my husband Don Jesus Alsua and my children Francisco Alsua, Pablo Alsua, Fernando Alsua and Amparo Alsua. I leave to my aforecited children all the properties described in the above mentioned Document of Partition dated November 25, 1949 which correspond to each one of them and in the profits (fruits) expressed in the same, and in the event that the properties granted to one or any of my children should exceed in quantity or value those corresponding to another or others, I hereby declare that it is my will that the same be divided among my children as their inheritance from the free portion of my property. I leave to my spouse Don Jesus Alsua as his legitime and as Ws inheritance the part of the free portion of my property which have not been allocated in favor of my children in the Document of Partition aforecited and that which should exceed 1/2 of the conjugal property of gains that pertains to him as above stated, including all those properties which we shall acquire after the execution of this document. In case it should be God's will that I survive my spouse, I hereby declare that it is my will that any and all kinds of property that pertain to me or would pertain to me, which have not been disposed of pursuant to the partition, should be divided equally among my above-mentioned heirs after my death. Ligao, Albay, Philippines, August 14,1956. t.hqw (joint Record on Appeal pp. 423-425, CA-G.R. No. 54492-R)

And as stated previously, on the same day, August 14, 1956, Don Jesus executed also a separate but similar codicil in exactly the same terms and conditions as the above codicil of his wife. Also on the same day of August 14, 1956, the spouses Don Jesus and Do;a Tinay both filed their respective supplemental petitions for the probate of their respective codicils in the probate proceedings earlier filed. On February 19, 1957, their respective holographic wins and the codicils thereto were duly admitted to probate. Upon the death of Do;a Tinay on October 2, 1959, Don Jesus was named executor to serve without bond in an order issued by the probate court on October 13, 1959. Letters testamentary having been issued in favor of Don Jesus, he took his oath of office and performed his duties as such until July 1, 1960. Thereafter in the early part of November, 1959, Don Jesus cancelled his holographic will in the presence of his bookkeeper and secretary, Esteban P. Ramirez, whom he instructed to make a list of all his remaining properties with their corresponding descriptions. His lawyer, Atty. Gregorio imperial Sr. was then instructed to draft a new will which was duly signed by Don Jesus and his attesting witnesses on November 14, 1959 at Ms home in Ligao, Albay. This notarial will and testament (Exh. A) of Don Jesus executed on November 14, 1959 had three essential features: (a) it expressly cancelled, revoked and annulled all the provisions of Don Jesus' holographic will of January 5, 1955 and his codicil of August 14, 1956; (b) it provided for the collation of all his properties donated to his four living children by virtue of the "Escritura de Particion Extra. judicial" of 1949, and that such properties be taken into account in the partition of his estate among the children; and (c) it instituted his children as legatees/devisees of certain specific properties, and as to the rest of the properties and whatever may be subsequently acquired in the future, before his death, were to be given to Francisca and Pablo, naming Francesca as executrix to serve without a bond. After all debts, funeral charges and other expenses of the estate of Do;a Tinay had been paid, all her heirs including Don Jesus, submitted to the probate court for approval a deed of partition executed on December 19, 1959 (Exh. 7-Q) and which essentially confirmed the provisions of the partition of 1949, the holographic will and codicil of Do;a Tinay. On July 6, 1960, the court approved the partition of 1959 and on January 6, 1961 declared the termination of the proceedings on the estate of Do;a Tinay. On May 6,1964, Don Jesus Alsua died. On May 20, 1964, petitioner herein Francisca Alsua Betts, as the executrix named in the will of November 14, 1959, filed a petition for the probate of said new will of Don Jesus Alsua before the Court of First Instance of Albay and was docketed as Special Proceedings No. 699. Oppositions thereto were filed by Pablo, Amparo and Fernando, thru his judicial guardian Clotilde Samson, on the following grounds: (a) that Don Jesus was not of sound and disposing mind at the time of the execution of the alleged will; (b) that the will was executed under duress or influence of fear or threats; or it was procured by undue and improper pressure and influence on the part of the main beneficiaries and of person or persons in collusion with them, or the signature of the testator was secured by or thru fraud; (c) that the will was not executed according to the formal requirements of the law; and (d) that the alleged will subject of probate contravened the Extrajudicial Partition of 1949 agreed upon by him, his deceased spouse, Do;a Tinay, and all his children, Francisco, Pablo, Amparo and Fernando thru his judicial guardian Clotilde Samson, and also contravened Don Jesus' own probated holographic will and codicil of 1955 and 1956, respectively, essentially confirming and implementing the said partition of 1949 which had already been partially executed by all the signatories thereto in the partition of the estate of Do;a Tinay in December, 1959. On the basis of Francisca's designation as executrix in the new will dated November 14, 1959, the Probate Court appointed her Administratrix of the estate of her late father, Don Jesus Alsua. She then filed with the Probate Court an inventory of the properties of the estate which, according to the oppositors therein (the private respondents now) did not include some properties appearing in the agreement of November 25. 1949 or in the inventory attached thereto as Annex "A" and in the "Escritura de Particion" of December 19, 1959 as belonging to or should pertain to Don Jesus. According to the oppositors, these properties consist of thirtythree (33) premium agricultural lots with a total land area of 1,187,970 square meters, or approximately 119 hectares and with a total assessed value of P48,410.00 or a probable total market value of P238,000.00 at only P2,000.00 per hectare, and four (4) commercial urban lots Ideally located in the business section of Legazpi City including the lot and the building presently occupied by the well-known "Mayon Hotel" with an

assessed value of approximately P117,260.00 or a probable market value at the time of P469,040.00. It appearing from the new will that these properties were bequeathed to Pablo Alsua and Francisco Alsua-Betts, specifically, 3 parcels of the 33 agricultural lands to Pablo and the rest to Francisco, the oppositors also raised in issue the non-inclusion of said properties in the inventory of the estate of their late father. In answer, Francisco claimed ownership over the same, alleging that she bought the properties from their father and presenting the two Deeds of Sale now being assailed, one dated August 26, 1961 purporting to show the sale of the 33 parcels of agricultural land to Francisco by their father for the price of P70,000.00 and the other dated November 26, 1962 evidencing the sale of the four urban lots for the sum of P80,000.00. Claiming fraud in the sales, the oppositors filed Civil Case No. 3068, seeking the annulment of the aforesaid two deeds of sale, with damages, which upon agreement of the parties was then jointly heard and tried with Special Proceedings No. 699 for probate of the Last Will and Testament of Don Jesus executed on November 14, 1959. After a joint hearing of the merits of these two cases, the Court of First Instance of Albay promulgated a decision on January 15, 1973, the dispositive portion of which states: t.hqw WHEREFORE, in view of all the foregoing, judgment is hereby rendered, to wit: 1. In Special Proceedings 699, the Court hereby APPROVES and ALLOWS the Will executed by Don Jesus Alsua at Ligao, Albay, on November 14, 1959, which had been marked as Exhibit A, consisting of nine (9) pages, and orders that the same be made the basis for division and distribution of the estate of said testator; 2. In Civil Case 3068, the Court hereby dismisses the complaint and holds that the sale on August 26, 1961 (Exh. U) and the sale on November 26, 1962 (Exh. W), are lawful and valid sales and accordingly conveyed title to the VENDEE thereof. The Plaintiffs in Civil Case 3068. are ordered jointly and severally to pay to the defendant, Francisco Alsua Betts Fifty Thousand Pesos (P50,000.00) as damages and Fifty Thousand (P50,000.00) Pesos for attorney's fees or a total of One Hundred Thousand Pesos (P100,000.00) and to pay the costs. On appeal by herein respondents to the Court of Appeals, the court reversed the appealed decision in a judgment rendered on April 4, 1977, the dispositive portion of which states, as translated, thus t.hqw IN VIEW OF THE FOREGOING, this Tribunal finds itself constrained to set aside as it hereby sets aside the decision appealed from in the following manner: (1) in Special Proceedings 699, the probate of the will, Exh. A, is hereby denied; (2) in Civil Case No. 3068, Exhs. U and W and the titles issued on the basis thereof are hereby declared null and void, ordering the appellees Francisco Alsua and Joseph Betts to pay to the plaintiffs in the concept of fixed damages, the sum of P5,000.00 and to render an accounting of properties in their possession and to reimburse the plaintiffs the net gain, in the proportion that appertains to them in the properties subject of litigation in Civil Case No. 3068 from the date of the filing of this complaint, up to the complete restoration of the properties pertaining to (plaintiffs) pursuant to Article 2208 of the New Civil Code, paragraph 11, ordering them in addition to pay to the plaintiffs and oppositors the sum of P50,000.00 as attorney's fees, and the costs. Hence, the petition at bar assailing the respondent court's decision on four assigned errors, to wit: t.hqw I. The respondent Court of Appeals erred in not affirming the findings of the probate court (Special Proceedings No. 699) that private respondents, oppositors to the probate of the will, are in estoppel to question the competence of testator Don Jesus Alsua. II. The respondent Court of Appeals grossly erred in holding that testator Don Jesus Alsua cannot revoke his previous will.

III. The respondent court's finding is grounded entirely on speculation, surmises or conjectures resulting in a gross misapprehension of facts. IV. The respondent court grossly erred in annulling the sales of August 26, 1961 (Exh. U), and of November 26, 1962 (Exh. W). On the first issue of estoppel raised in the assignment of errors, We hold that the same is of no moment. The controversy as to the competency or incompetency of Don Jesus Alsua to execute his will cannot be determined by acts of the herein private respondents as oppositors to the will in formally agreeing in writing jointly with the petitioner Francisca Alsua de Betts that their father, Don Jesus Alsua, be appointed by the court executor of the will of their mother in Special Proceedings No. 485, Testate Estate of Do;a Florentina Ralla de Alsua and in subsequently petitioning the court not to require Don Jesus Alsua to file any accounting as executor in the proceedings, which petitioners claim and was upheld by the trial court as constituting estoppel on the part of the private respondents from questioning the competence of Don Jesus Alsua. The principle of estoppel is not applicable in probate proceedings, a ruling laid down in the case of Testate Estate of the Late Procopia Apostol Benedicta Obispo, et al vs. Remedios Obispo, 50 O.G. 614, penned by Justice J.B.L. Reyes, an eminent and recognized authority on Civil Law when he was still in the Court of Appeals, and We quote:t.hqw Finally, probate proceedings involve public interest, and the application therein of the rile of estoppel, when it win block the ascertainment of the truth as to the circumstances surrounding the execution of a testament, would seem inimical to public policy. Over and above the interest of private parties is that of the state to see that testamentary dispositions be carried out if, and only if, executed conformably to law. The Supreme Court of New York aptly said in Re Canfield's Will, 300 N.Y.S., 502: t.hqw 'The primary purpose of the proceeding is not to establish the existence of the right of any living person, but to determine whether or not the decedent has performed the acts specified by the pertinent statutes, which are the essential prerequisites to personal direction of the mode of devolution of his property on death. There is no legal but merely a moral duty resting upon a proponent to attempt to validate the wishes of the departed, and he may and frequently does receive no personal benefit from the performance of the act. One of the most fundamental conceptions of probate law, is that it is the duty of the court to effectuate, in so far as may be compatible with the public interest, the devolutionary wishes of a deceased person (Matter of Watson's Wilt 262 N.Y., 284, 294, 186, N.E., 787; Matter of Marriman's Estate, 124 Misc. 320, 325, 208, N.Y.S., 672; Foley, S., affirmed 217 app. Div., 733, 216 N.Y.S., 126, Henderson, S., Matter of Draske's Estate, 160 Misc. 587, 593, 290, N.Y.S., 581). To that end, the court is, in effect, an additional party to every litigation affecting the disposal of the assets of the deceased. Matter of Van Valkenburgh's Estate, 164 Misc. 295, 298, N.Y.S., 219.' The next issue that commands Our attention is whether the respondent court erred in not allowing the probate of the last will and testament of Don Jesus Alsua. Petitioners claim that the disallowance was based on speculations, surmises or conjectures, disregarding the facts as found by the trial court. The Civil Court is very clear and explicit in providing the cases where a will may be disallowed under Article 839 which provides as follows: t.hqw

Art. 839. The will shall be disallowed in any of the following cases: (1) If the formalities required by law have not been complied with; (2) If the testator was insane, or otherwise mentally incapable of making a wilt at the time of its execution; (3) If it was executed through force or under duress, or the influence of fear, or threats; (4) If it was procured by undue and improper pressure and influence, on the part of the beneficiary or of some other person; (5) If the signature of the testator was procured by fraud, (6) If the testator acted by mistake or did not intend that the instrument he signed should be his will at the time of affixing his signature thereto. The issue under consideration appears to Us to have been answered by the respondent court itself when it accepted the findings of the trial court on the due execution of the questioned will and testament of Don Jesus, declaring: t.hqw ... and going back to the previous question, whether the questioned will and testament of November 14, 1959, Exh. A, was executed in accordance with Arts. 805-809 of the New Civil Code, this Tribunal from the very beginning accepts the findings of the inferior court concerning the question, t.hqw On October 2, 1959, Do;a Florentina died at Ligao, Albay. About 2 weeks after said death of his wife, Don Jesus Alsua decided to make a new will, thereby revoking and cancelling his previous holographic will which he made on January 5, 1955 and also its codicil dated August 14, 1956. In the presence of his bookkeeper and secretary, Esteban P. Ramirez, he crossed out in ink each and every page of said page he wrote on each page the word "cancelado", and affixed his signature thereon (Exh V-5, V-6, consecutively up to and including Exh. V-14). He then instructed Ramirez to make a list of all s properties with their corresponding descriptions. Meanwhile, Don Jesus Alsua sent for his lawyer, Don Gregorio Imperial, Sr. and the latter came accompanied by his son, Atty. Jorge S, Imperial, who, incidentally, is now a judge of the Court of First Instance of Naga City, Camarines Sur. Don Jesus informed his lawyers that he wanted to make a new will, and accordingly gave more detailed instructions as to how he wanted to divide his properties among his four children. He handed to them a list and on the left he indicated the name of the child to whom the listed properties shall pertain. Atty. Jorge Imperial took notes of the instructions of Don Jesus Alsua. To Don Jesus, Spanish is his major language, as in fact his conversations with Don Gregorio are always in Spanish. A few days before November 14, 1959, Atty. Jorge S. Imperial showed to Don Jesus the semi-final draft of the will and after reading it Don Jesus said that it was as directed by him, and after making a few minor corrections, he instructed Atty. Jorge S. Imperial to put the win in final form. He further told Atty, Jorge Imperial that the signing of the will should be at his home in Ligao, in the morning of November 14, 1959, and that the witnesses should be Mr. Ramon Balana, the then Register of Deeds of Albay; Mr. Jose Madarieta who is a friend of

the family; and Mr. Jose Gaya who is a sort of employee of Don Jesus. Thus in the morning of November 14, 1959, Don Gregorio and Atty. Jorge S. Imperial, riding in a sedan, stopped at the Legaspi residence of Mr. Ramon Balana, and informed the latter that Don Jesus was requesting him to be one of the attesting witnesses to his will. Mr. Balana, having a very high regard for Don Jesus, considered it an honor to be so asked, and gladly went with the Imperials. They arrived at the residence of Don Jesus at Ligao; Albay, almost ten o'clock of that morning, and they were ushered in by Mr. Jose Gaya, and the latter requested them to be seated at the usual receiving room on the ground floor while he announced their arrival to Don Jesus who was on the second floor. Soon Don Jesus came down, carrying with him the will to be signed placed inside a cartolina folder. He greeted Don Gregorio, Mr. Balan, and Atty. Imperial and immediately joined them in conversation. Mr. Gaya called for Mr. Jose Madarieta, whose residence is just across the road from the house of Don Jesus. Mr. Madarieta was already informed by Don Jesus himself about the fact of signing the will that morning, and so, on being advised by Mr. Gaya that the Imperials had already arrived, Madarieta proceeded to the residence of Don Jesus, without much delay. With the coming of Madarieta and the coming back of Gaya, there were now six people gathered in the living room, namely: Don Jesus Alsua, Don Gregorio Imperial Atty. Jorge S. Imperial Mr. Ramon Balana, Mr. Jose Madarieta, and Mr. Jose Gaya. All the witnesses who testified for the petitioner declared that Don Jesus was in bright and lively conversation which ran from problems of farming and the merits of French-made wines. At 1 1:00 o'clock, Don Gregorio made a remark that it is about time to do what they were there for, and this was followed by a more or less statement from Jesus, who said: t.hqw 'Preisamente es por lo que he Hamado a ustedes que esten presentes para ser testigos de rni ultimo voluntad y testamento que ha sido preparado por el abogado Sr. Gregorio Imperial segun mis instrucciones cuyo documento tengo aqui conmigo y encuentro que, despues de lo he leido, esta satisfactoriamente hecho segun mis instrucciones, Como saben ustedes tengo cuatro (4) hijos todos egos.' (pp. 43-44, t.s.n., hearing of December 7, 1967, Sarte. On request of Don Jesus, all of them moved to the big round table on another part of the same sala for convenience in signing because there were chairs all around this table. The will which consisted of nine pages, with a duplicate, and triplicate was laid on the round table and the signing began, with Atty. Jorge S. Imperial assisting each person signing by indicating the proper place where the signature shall be written. Don Jesus, as testator, signed first. After signing the original and the two other sets, the three sets were then passed to Mr. Ramon Balana who signed as

attesting witness. After Mr. Balana, Mr. Jose Madarieta signed next as another attesting witness, and when Mr. Madarieta finished signing all the three sets, the same were passed to Mr. Jose Gaya who also signed as the third attesting witness. On each of the three sets, Don Jesus signed ten times, one on the margin of each of the nine pages, and at the end of the instrument proper. Each of the three attesting witnesses (Balana, Madarieta and Gaya) signed eleven times on each set, one on the margin of each of the nine pages, one at the end of the instrument proper and one below the attestation clause. The original will was marked as Exh. A (or set A); the duplicate as Exh. K (or set K) and the triplicate of Don Jesus, Mr. Balana, Mr. Madarieta, and Mr. Gaya were Identified by Mr. Balana, Mr. Madarieta and Atty. (now Judge) imperial. It was also clearly established that when Don Jesus signed the will Mr. Balana, Mr. Madarieta, and Mr. Gaya were present and witnessed said signing, and that when each of these three witnesses was signing, Don Jesus and the two other attesting witnesses were present and Witnessing said Signing. The signing by the testator and the attesting witnesses having been completed, Atty. Jorge S. Imperial as Notary Public with commission for the entire province of Albay, notarized the wilt and sealed it with his notarial seat which seal he brought along that morning. After all the three sets were notarized, they were all given back to Don Jesus who placed them inside the same folder. At that moment, it was already about 12:30 P.M. and Don Jesus invited all of them to lunch, which invitation was gladly accepted by all of then-L (pp. 474-480, Joint Record on Appeal in CA-G.R. No. 54492-R) which findings are supported by the evidence, - it is quite difficult to conclude that the same had not complied with the requirements of Arts. 804- 806 of the New Civil Code. ... (CA Decision, pp. 13-16, as translated). This cited portion of the appealed decision accepts as a fact that the findings of the lower court declaring the contested will as having been executed with all the formal requirements of a valid will, are supported by the evidence. This finding is conclusive upon this Tribunal and We cannot alter, review or revise the same. Hence, there is no further need for Us to dwell on the matter as both the lower court and the respondent appellate court have declared that these are the facts and such facts are fully borne and supported by the records. We find no error in the conclusion arrived at that the contested will was duly executed in accordance with law. We rule that the questioned last will and testament of Don Jesus Alsua fully complied with the formal requirements of the law. Respondent court, however, denied probate of the will after ,'noting certain details which were a little bit difficult to reconcile with the ordinary course of things and of life." First was the fact that the spouses Don Jesus and Do;a Tinay together with their four children Francisco, Pablo, Amparo and Fernando had executed the Extrajudicial Partition of November 25, 1949 (Exh. A) which divided the conjugal properties of the spouses between the spouses themselves and the children under the terms and conditions and dispositions herein before stated and to implement its provisions, Don Jesus and Do;a Tinay subsequently executed separately their respective holographic wigs both dated January 5, 1955 and codicils dated August 14, 1956 with the same terms and conditions as reproduced herein earlier. Both holographic wills and codicils having been probated thereafter and upon the death of Do;a Tinay, Don Jesus was appointed executor of the will and in due time the partition of the properties or estate of Do;a Tinay was approved by the probate court on July 6, 1960.

The respondent court ruled that the Extrajudicial Partition of November 25, 1949 was an enforceable contract which was binding on Don Jesus Alsua as the surviving spouse, barring him from violating said partition agreement, barring him from revoking his holographic will of January 5, 1955 and his codicil of August 14, 1956, and further barring him from executing his new will and testament of November 14, 1959, now the subject of the probate proceedings elevated to this Court. We do not agree with this ruling of the Court of Appeals. We hold that the Extrajudicial Partition of November 25, 1949 is null and void under Article 1056 in relation to Article 1271 of the old Civil Code which are applicable hereto. These Articles provide as follows: t.hqw Art. 1056. If the testator should make a partition of his property by an act inter vivos, or by will, such partition shall stand in so far as it does not prejudice the legitime of the forced heirs. ... Art. 1271. All things, even future ones, which are not excluded from the commerce of man, may be the subject-matter of contracts. Nevertheless, no contract may be entered into with respect to future inheritances, except those the object of which is to make a division inter vivos of an estate, in accordance with Article 1056. All services not contrary to law or to good morals may also be the subject- matter of contract. Article 1056 specifically uses the word "testator" from which the clear intent of the law may be deduced that the privilege of partitioning one's estate by acts inter vivos is restricted only to one who has made a prior will or testament. In other words, Article 1056 being an exception cannot be given a wider scope as to include in the exception any person whether he has made a will or not. Respondent court citing the same Article concluded that under both the old and new Civil Code, a person who executes a will is permitted at the same time or a little thereafter or even before as long as he mentions this fact in the will, to partition his properties pursuant to the provisions of Article 1056 of the old Civil Code. The court further added that jurisprudence is to the effect that the partition presupposes the execution of the will that it ratifies or effectuates, citing the case of Legasto vs. Verzosa, 54 Phil. 776. Finally, respondent court held the opinion that the extrajudicial partition of November 14, 1949 was ratified in the holographic will executed by Don Jesus on Jan. 5, 1955 and in the codicil of August 14, 1956. Again, We do not agree with this ruling of the respondent court. In Legasto vs. Verzosa, supra, the Supreme Court categorically declared the necessity of a prior will before the testator can partition his properties among his heirs, and We quote the pertinent portions of the decision: t.hqw The first question to decide in the instant appeal is whether the partition made by Sabina Almadin of her property among her nieces, the defendants and appellants herein, was valid and enforceable. Article 1056 of the Civil Code provides: Art. 1056. If the testator should make a partition of his property by an act inter vivos, or by will, such partition shall stand in so far as it does not prejudice the legitime of the forced heirs. The Supreme Court of Spain, in a decision rendered on June 13, 1903, laid down the following doctrine: Considering that the language of article 1056 cannot be interpreted to mean that a person may, by acts inter vivos, partition his property referred to in the section wherein said article is found, without the authority of a testament containing an expression of his last will, or the authority of law, for, otherwise, a partition thus made would be tantamount to making a will in a manner not provided for, authorized, nor included in the

chapter referring to testaments, and especially, to the forms thereof, which is entirely different from the legal consequences of a free disposition made by parents during their lifetime, whereby they give to their children the whole or a part of their property; Considering that, inasmuch as the second paragraph of article 1271 makes reference to the aforesaid article, in providing that no contracts may be entered into with respect to future inheritances except those the object of which is to make a division inter vivos of the estate in accordance with article 1056, it is evident that said difference likewise leads to the conclusion that a partition thus made should be on the basis of a testamentary or legal succession and should be made in conformity with the fundamental rules thereof and the order of the heirs entitled to the estate, because neither of the two provisions could be given a wider meaning or scope than that they simply provide for the division of the estate during the lifetime of the owner, which, otherwise, would have to be done upon the death of the testator in order to carry into effect the partition of the estate among the persons interested. Manresa comments on the same article as follows: A distinction must be made between the disposition of property and its division; and the provision of article 1056 authorizing the testator to dispose of his property by acts inter vivos or by last will, must be understood in accordance with this distinction. The Idea is to divide the estate among the heirs designated by the testator. This designation constitutes the disposition of the properties to take effect after his death, and said act must necessarily appear in the testament because it is the expression of the testator's last will and must be surrounded by appropriate formalities. Then comes the second part, to wit, the division in conformity with that disposition, and the testator may make this division in the same will or in another will, or by an act inter vivos. With these words, the law, in article 1056 as well as in article 1057, which we shall hereafter examine, makes allusion to the forms or manner of making the partition and not to the effects thereof, which means that, for purposes of partition the formal solemnities which must accompany every testament or last will are not necessary. Neither is it necessary to observe the special for. realities required in case of donations, because it is not a matter of disposing gratuitously of properties, but of dividing those which already have been legally disposed of. It is thus seen that both the Spanish Supreme Court and the learned and authoritative commentator, Manresa, are of opinion that a testator may, by an act inter vivos, partition his property, but he must first make a will with all the formalities provided for by law. And it could not be otherwise, for without a will there can be no testator; when the law, therefore, speaks of the partition inter vivos made by a testator of his property, it necessarily refers to that property which he has devised to his heirs. A person who disposes of his property gratis inter vivos is not called a testator, but a donor. In employing the word "testator," the law evidently desired to distinguish between one who freely donates his property in life and one who disposes of it by will to take effect after his death. We are not in conformity with the holding of the respondent court that the extrajudicial partition of November 25, 1949 which under the old Civil Code was expressly prohibited as against public policy had been validly ratified by the holographic will of Don Jesus executed on January 5, 1955 and his codicil of August 14, 1956. Such a holding of the appellate court that a person who executes a will is permitted to partition his properties pursuant to the provisions of Article 1056 of the old Civil Code even before executing his will as long as he mentions this fact in the will, is not warranted under the ruling of Legasto vs. Verzosa, supra and the commentary of Manresa as quoted above. We rule, therefore, that the respondent court erred in denying probate to the will of Don Jesus dated November 14, 1959; it erred in holding that Don Jesus being a party to the extrajudicial partition of 1949 was contractually bound by the provisions thereof and hence could not revoke his participation therein by the simple expedience of making a new will with contrary provisions or

dispositions. It is an error because the so-called extrajudicial partition of 1949 is void and inoperative as a partition; neither is it a valid or enforceable contract because it involved future inheritance; it may only be given effect as a donation inter vivos of specific properties to the heirs made by the parents. Considering that the document, the extrajudicial partition of November 25, 1949, contained specific designation of properties allotted to each child, We rule that there was substantial compliance with the rules on donations inter vivos under the old Civil Code (Article 633). On the other hand, there could have been no valid donation to the children of the other half reserved as the free portion of Don Jesus and Do;a Tinay which, as stated in the deed, was to be divided equally among the children for the simple reason that the property or properties were not specifically described in the public instrument, an essential requirement under Article 633 which provides as follows: t.hqw Art. 633. In order that a donation or real property be valid it must be made by public instrument in which the property donated must be specifically described and in the amount of the encumbrances to be assumed by the donee expressed. The acceptance must be made in the deed of gift or in a separate public writing; but it shall produce no effect if not made during the lifetime of the donor. If the acceptance is made by separate public instrument, authentic notice thereof shall be given the donor, and this proceeding shall be noted in both instruments. This other half, therefore, remained as the disposable free portion of the spouses which may be disposed of in such manner that either of the spouses would like in regards to his or her share in such portion, unencumbered by the provision enjoining the last surviving spouse to give equally to the children what belongs or-would pertain to him or her. The end result, therefore, is that Don Jesus and Do;a Tinay, in the Deed of 1949, made to their children valid donations of only one-half of their combined properties which must be charged against their legitime and cannot anymore be revoked unless inofficious; the other half remained entirely at the free disposal of the spouses with regards to their respective shares. Upon the death of Do;a Tinay on October 2, 1959, her share in the free portion was distributed in accordance with her holographic will dated January 25, 1955 and her codicil dated August 14, 1956. It must be stressed here that the distribution of her properties was subject to her holographic win and codicil, independently of the holographic will and codicil of Don Jesus executed by him on the same date. This is fundamental because otherwise, to consider both wills and codicils jointly would be to circumvent the prohibition of the Civil Code on joint wills (Art. 818) and secondly because upon the death of Do;a Tinay, only her estate was being settled, and not that of Don Jesus. We have carefully examined the provisions of the holographic will and codicil of Do;a Tinay and We find no indication whatsoever that Do;a Tinay expressly or impliedly instituted both the husband and her children as heirs to her free portion of her share in the conjugal assets. In her holographic will, mention of her children as heirs was made in the fourth clause but it only provided that, to wit: t.hqw Cuatro. Que si yo adquieriese nuevase propiedades despues de otorgado este mi testamento seran las mismas repartados entre mi esposo o hijos arriba mencionada en el parrafo tercero su la misma proporcion o sea: la mitad (1/2) para is esposa; y la otra mitad (1/2) para mis hijos en partes iguales. For purposes of clarity and convenience, this fourth clause provided that "Should I acquire new properties after the execution of this testament, the same shall be partitioned among my spouse and above named children or the children mentioned in above par. 3 in the same proportion, that is, one- half (1/2) to my spouse; and the other half to my children in equal parts." From the above-quoted provision, the children would only inherit together with Don Jesus whatever new properties Do;a Tinay would acquire after the execution of her will. Likewise, the codicil of Do;a Tinay instituted her husband as sole heir to her share in the free portion of the conjugal assets, and We quote that part of the codicil: t.hqw

Dejo a mi esposo Jesus Alsua como su legitima y como herencia que se sacara de ni cuenta de libre disposicion todos aquellos bienes de los que no he dispuesto aun en favor de mis hijos en la escritura de reparticion precitada y que excedieran de la mitad de gananciales que le corresponds tal como arriba declare, incluyendo todos aquenos bienes que se adquiriesen por nosotros despues de otorgado por mi este testamento. Para el caso de que Dios dispusiera que yo sobreviviera a mi esposo declaro que es mi voluntad que todas las propiedades de todo genero que me pertenecen y me pudieran pertenecer, no dispuestas aun en la reparticion, se dividan por igual entre mis herederos mencionados despues de mi muerte. Again for purposes of clarity and convenience, the above portion states: t.hqw I leave to my spouse Don Jesus Alsua as his legitime and as his inheritance the part of the free portion of my property which have not been allocated in favor of my children in the Document of Partition aforecited and that which should exceed 1/2 of the conjugal property of gains that pertains to him as above stated, including all those properties which we shall acquire after the execution of this document. In case it should be God's will that I survive my spouse, I hereby declare that it is my will that any and all kinds of property that pertains to me or would pertain to me, which have not been disposed of pursuant to the partition, should be divided equally among my above-mentioned heirs after my death. The children, therefore, would only receive equal shares in the remaining estate of Do;a Tinay in the event that she should be the surviving spouse. To stress the point, Do;a Tinay did not oblige her husband to give equally to the children, upon his death, all such properties she was bequeathing him. Considering now the efficacy of Don Jesus' last will and testament executed on November 14, 1959 in view of Our holding that Do;a Tinay's wig and codicil did not stipulate that Don Jesus will bestow the properties equally to the children, it follows that all the properties of Do;a Tinay bequeathed to Don Jesus under her holographic win and codicil became part of Don Jesus' estate unburdened by any condition obligation or proviso. Respondents insist that Don Jesus was bound by the extrajudicial partition of November 25, 1949 and had in fact conformed to said Partition by making a holographic will and codicil with exactly the same provisions as those of Do;a Tinay, which respondent court sustained. We rule, however, that Don Jesus was not forever bound thereby for his previous holographic will and codicil as such, would remain revokable at his discretion. Art. 828 of the new Civil Code is clear: "A win may be revoked by the testator at any time before his death. Any waiver or restriction of this right is void." There can be no restriction that may be made on his absolute freedom to revoke his holographic will and codicil previously made. This would still hold true even if such previous will had as in the case at baralready been probated (Palacios v. Palacios, 106 Phil. 739). For in the first place, probate only authenticates the will and does not pass upon the efficacy of the dispositions therein. And secondly, the rights to the succession are transmitted only from the moment of the death of the decedent (Article 777, New Civil Code). In fine, Don Jesus retained the liberty of disposing of his property before his death to whomsoever he chose, provided the legitime of the forced heirs are not prejudiced, which is not herein claimed for it is undisputed that only the free portion of the whole Alsua estate is being contested. After clearly establishing that only Don Jesus was named as sole heir instituted to the remaining estate of Do;a Tinay in her holographic will and codicil resulting in all such properties becoming the properties of Don Jesus alone, and after clearly pointing out that Don Jesus can, in law, revoke his previous holographic will and codicil, by making another win expressly cancelling and revoking the former, the next issue for the Court's resolution is the validity of the provisions of the contested will. Though the law and jurisprudence are clear that only questions about the extrinsic validity of the will may be entertained by the probate court, the Court had, on more than one occasion, passed upon the intrinsic validity of a will even before it had been authenticated. Thus We declared inNuguid v. Nuguid, 17 SCRA 499: t.hqw

The parties shunted aside the question of whether or not the will should be allowed to probate. For them, the meat of the case is the intrinsic validity of the wilt Normally this comes only after the court has declared that the will has been duly authenticated. ... ... If the case were to be remanded for probate of the wilt nothing will be gained. On the contrary, this litigation win be protracted and for ought that appears in the record, in the event of probate or if the court rejects the will probability exists that the case win come up once again before us on the issue of the intrinsic validity or nullity of the wilt Result: waste of time, effort, expense, plus added anxiety. These are the practical considerations that induce us to a behalf that we might as well meet head-on the time of the validity of the provisions of the will in question. ... The last Will and Testament of Don Jesus executed on November 14, 1959 contained an express revocation of his holographic wig of January 5, 1955 and the codicil of August 14, 1956; a statement requiring that all of his properties donated to his children in the Deed of 1949 be collated and taken into account in the partition of his estate; the institution of all his children as devisees and legatees to certain specific properties; a statement bequeathing the rest of his properties and all that may be acquired in the future, before his death, to Pablo and Francesca; and a statement naming Francesca as executrix without bond. Considering these testamentary provisions, a close scrutiny of the properties distributed to the children under the Deed of 1949 and those distributed under the contested will of Don Jesus does not show that the former had in fact been included in the latter. This being so, it must be presumed that the intention of Don Jesus in his last win was not to revoke the donations already made in the Deed of 1949 but only to redistribute his remaining estate, or that portion of the conjugal assets totally left to his free disposal and that which he received as his inheritance from Do;a Tinay. The legitimes of the forced heirs were left unimpaired, as in fact, not one of said forced heirs claimed or intimated otherwise. The properties that were disposed of in the contested will belonged wholly to Don Jesus Alsua's free portion and may be diamond of by him to whomsoever he may choose. If he now favored Francesca more, as claimed by private respondents, or Pablo as in fact he was, We cannot and may not sit in judgment upon the motives and sentiments of Don Jesus in doing so. We have clearly laid down this rule in Bustamante v. Arevalo, 73 Phil. 635, to wit: t.hqw ... nevertheless it would be venturesome for the court to advance its own Idea of a just distribution of the property in the face of a different mode of disposition so clearly expressed by the testatrix in the latter will. ... It would be a dangerous precedent to strain the interpretation of a will in order to effect what the court believes to be an equitable division of the estate of a deceased person. The only functions of the courts in these cases is to carry out the intention of the deceased as manifested in the wig. Once that intention has been determined through a careful reading of the will or wills, and provided the law on legitimes has not been violated, it is beyond the place of judicial cognizance to inquire into the fairness or unfairness of any devise or bequeast. The court should not sit in judgment upon the motives and sentiments of the testatrix, first, because as already stated, nothing in the law restrained her from disposing of her property in any manner she desired, and secondly, because there are no adequate means of ascertaining the inward process of her conscience. She was the sole judge of her own attitude toward those who expected her bounty. ... Respondent court, in trying to rationalize the will of Don Jesus which allegedly benefited and favored the petitioner to the prejudice of the other heirs who would have been entitled to an equal share under the extrajudicial partition of 1949, faced two alternatives-one, to consider Don Jesus as a man of culture and honor and would not snow himself to violate the previous agreement, and the other as one whose mental faculties or his possession of the same had been diminished considering that when the will was executed, he was already 84 years of age and in view of his weakness and advanced age, the actual administration of his properties had been left to his assistant Madarieta who, for his part received instructions from Francisco and

her husband, Joseph Betts. According to the court, the better explanation is the latter, which is not legally tenable. Under Article 799 of the New Civil Code which provides as follows: t.hqw Art. 799. To be of sound mind, it is not necessary that the testator be in full possession of all his reasoning faculties, or that his mind be wholly unbroken, unimpaired, or unshattered by disease, injury or other cause. It shall be sufficient if the testator was able at the time of making the will to know the nature of the estate to be disposed of, the proper objects of his bounty, and the character of the testamentary act, The test of testamentary capacity is at the time of the making of the win. Mere weakness of mind or partial imbecility from disease of body or from age-does not render a person incapable of making a will. t.hqw Between the highest degree of soundness of mind and memory which unquestionably carries with it full testamentary capacity, and that degrees of mental aberration generally known as insanity or Idiocy, there are numberless degrees of mental capacity or incapacity and while on one hand it has been held that mere weakness of mind, or partial imbecility from disease of body, or from age, will not render a person incapable of making a will; a weak or feebleminded person may make a valid will, provided he has understanding and memory sufficient to enable him to know what he is about to do and how or to whom he is disposing of his property. To constitute a sound and disposing mind, it is not necessary that the mind be unbroken or unimpaired or unshattered by disease or otherwise. It has been held that testamentary incapacity does not necessarily require that a person shall actually be insane or of unsound mind. (Bugnao vs. Ubag, 14 Phil. 163). The Civil Code itself provides under Article 798 that in order to make a will, it is essential that the testator be of sound mind at the time of its execution, and under Article 800, the law presumes that every person is of sound mind in the absence of proof to the contrary. In the case at bar, the acceptance by the respondent court of the findings of fact of the trial court on the due execution of the last win and testament of Don Jesus has foreclosed any and all claim to the contrary that the will was not executed in accordance with the requirements of the law. But more than that, gleaned from the quoted portions of the appealed decision, the described behavior of Don Jesus is not that of a mentally incapacitated person nor one suffering from "senile dementia" as claimed by private respondents. From these accepted facts, We find that: (a) it was Don Jesus himself who gave detailed instructions to his lawyer as to how he wanted to divide his properties among his children by means of a list of his properties should pertain; (b) the semi-final draft of the contested will prepared by his lawyer w-as even corrected by Don Jesus; (c) on the day of the signing of the will at his house in Ligao, "Don Jesus was in bright and lively spirits ..., leading in the conversation which ran from problems of farming and the merits of French-made wines"; (d) the signing of the will by Don Jesus and his attesting witnesses was made after a statement from Don Jesus of the purpose of their meeting or gathering, to wit: t.hqw Precisamente es por lo que he Ilamado a ustedes que eaten presentes para ser testigos de mi ultima voluntad y testamento que ha sido preparado por el abogado Sr. Gregorio Imperial segun mis instrucciones cuyo documents tengo aqui con migo y encuentro que, despues de lo he leido, esta satisfactoriamente hecho segun mis ingtrucciones, Como saben ustedes tengo cuatro (4) hijos todos ellos. Clearly then, Don Jesus knew exactly what his actions were and the fun implications thereof. In rejecting probate of the wilt respondent court further pointed out other details which, in the words of the decision "are a little bit difficult to reconcile with the ordinary course of things and of fife" such as the fact that Don Jesus had sought the probate of his will of January 5, 1955 and his codicil of August 14, 1956 during his lifetime but insofar as the will of November 14, 1959 is concerned, he had no intention of seeking the probate thereof during his lifetime, the alleged redundant and unnecessary proceedings undertaken by Don Jesus in the properties under question to petitioner Franciso Alsua-Betts when the same properties had already been bequeathed to her in the will of November 14, 1959 and that "nothing, absolutely nothing, could be made the

basis for finding that Don Jesus Alsua had regarded his other children with less favor, and that he was more sympathetic to Francisca so as to or forget the former depriving them of benefits already given to them and rewarding the latter with disproportionate advantages or benefits, to such an extreme as to violate his previous disposition consecrated in the previous extrajudicial partition, Exh. 8." We agree with the petitioner that these details which respondent court found difficult to reconcile with the ordinary course of things and of life are mere conjectures, surmises or speculations which, however, do not warrant or justify disallowance of the probate of the win of Don Jesus. The fact that Don Jesus did not cause his will to be probated during his lifetime while his previous holographic win and codicil were duly probated when he was still alive is a mere speculation which depends entirely on the discretion of Don Jesus as the testator. The law does not require that a will be probated during the lifetime of the testator and for not doing so there cannot arise any favorable or unfavorable consequence therefrom. The parties cannot correctly guess or surmise the motives of the testator and neither can the courts. Such surmise, speculation or conjecture is no valid and legal ground to reject allowance or disallowance of the wig. The same thing can be said as to whatever reason Don Jesus had for selling the properties to his daughter Francisca when he had already assigned the same properties to her in his will. While We can speculate that Don Jesus desired to have possession of the properties transferred to Francisca after the sale instead of waiting for his death may be a reasonable explanation or speculation for the act of the testator and yet there is no certainty that such was actually the reason. This is as good a conjecture as the respondents may offer or as difficult to accept which respondent court believes. A conjecture is always a conjecture; it can never be admitted as evidence. Now, the annulment case. The only issue raised anent the civil case for annulment of the two Deeds of Sale executed by and between Don Jesus and petitioner Francisco is their validity or nullity. Private respondents mainly contend that the sales were fictitious or simulated, there having been no actual consideration paid. They further insist that the issue raised is a question of fact and, therefore, not reviewable in a certiorari proceeding before the Supreme Court. On the other hand, petitioners herein maintain that it was error for the respondent court to set aside on appeal the factual findings of the trial court that the two sales were valid. It is true that the jurisprudence of this Court in cases brought to Us from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its findings of fact being conclusive; and this same principle applies even if the Court of Appeals was in disagreement with the lower court as to the weight of evidence with a consequent reversal of its findings of fact. But what should not be ignored by lawyers and litigants alike is the more basic principle that the "findings of fact" described as "final" or "conclusive" are those borne out by the record or those which are based upon substantial evidence. The general rule laid down by the Supreme Court does not declare the absolute correctness of all the findings of fact made by the Court of Appeals. These are exceptions to the general rule, where We have reviewed and revised the findings of fact of the Court of Appeals. Among the exceptions to the rule that findings of fact by the Court of Appeals cannot be reviewed on appeals by certiorari are: 1. When the conclusion is a finding grounded entirely on speculation, surmises or conjectures (Joaquin vs. Navarro, 93 Phil. 257); 2. When the inference made is manifestly mistaken, absurd or impossible (Luna vs. Linatok, 74 Phil. 15); 3. Where there is a grave abuse of discretion (Buyco vs. People, 51 O.G. 2927); 4. When the judgment is based on a misapprehension of facts (Cruz vs. Sosing, L-4875, Nov. 27, 1953); 5. When the findings of fact are conflicting (Casica vs. Villaseca, L-9590, April 30, 1957); and 6. When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee (Evangelists vs. Alto Surety & Ins. Co., L-11139, April 23, 1958; Ramos vs. Pepsi Cola, L-22533, Feb. 9, 1967, 19 SCRA 289). In the case at bar, We find and so declare that the respondent court's conclusion as to the nullity of the contested sales was not supported by the evidence on record and adduced during the trial.

Evident from the records are the following documentary evidence: (1) Exhibit U, a deed of sale over agricultural lands executed on August 26, 1961 by Don Jesus in favor of Francisca for the consideration of Seventy Thousand Pesos (P70,000.00), which document bears the signature of Don Jesus, not assailed as a forgery, and the signature of Pablo Alsua as an instrumental witness, again not assailed as a forgery nor alleged as done thru fraud, force or threat. (2) Exhibit "W", a deed of sale over urban lots executed on November 16, 1962 for the consideration of Eighty Thousand Pesos (P80,000.00), which document also bears the signature of Don Jesus, also admittedly not a forgery. (3) Exhibit "F", a document dated August 26, 1961 and signed by Don Jesus and Pablo Alsua as witness, acknowledging receipt of a Bank of Philippine Island Check No. 0252 in the amount of Seventy Thousand Pesos (P70,000.00) for the sale of 33 parcels of agricultural land to Francisco under the same date; again, Pablo did not deny the genuineness of his signature. (4) Exhibit "X", a Bank of the Philippine Islands Check No. D-6979 dated November 26, 1962, in the amount of P32,644.71, drawn and signed by Francesca, payable to Don Jesus. (5) Exhibit "X-1", a second Bank of Philippine Islands Check (No. D-6980) also dated November 26, 1962 in the amount of ?47,355.29, drawn by Francisco and payable to Don Jesus. (6) Exhibit "X-3 " and "X-5 ", endorsements on the back of the last two checks by Don Jesus, again, his signatures thereon were not assailed. (7) Exhibit "A" (in the annulment case), a Bureau of Internal Revenue Receipt (No. 2347260) dated November 29, 1962 with a notation acknowledging the receipt of BPI Check No. D-6980 in the amount of P47,355.29 from Don Jesus Alsua in payment of Balance of Transfer of Tax Ass. No. EA-35415-19 plus interest. We are convinced and satisfied from this array of documentary evidence that in fact, Don Jesus sold the subject properties to his daughter, Francisca for the total consideration of P150,000.00. The claim of the private respondents that the sales were fictitious and void for being without cause or consideration is as weak and flimsy as the ground upon which the respondent court upheld said claim on the basis that there was no need for funds in Don Jesus' old age aside from the speculation that there was nothing in the evidence that showed what motivated Don Jesus to change his mind as to favor Francesca and discriminate against the other children. The two contracts of same executed by Don Jesus in favor of Francesca are evidenced by Exhibits "U" and "W", the genuineness of which were not at all assailed at any time during this long drawn-out litigation of 15 years standing. That the consideration stated in the contracts were paid is also sufficiently proved as the receipts thereof by Don Jesus were even signed by one of the private respondents, Pablo Alsua, as a witness. The latter cannot now deny the payment of the consideration And even of he now allege that in fact no transfer of money was involved, We find his allegation belied by Exhibits "X-3 " and "X-5 ", which show that the checks of Francisco made payable to Don Jesus. were in fact given to Don Jesus as he endorsed them on the back thereof, and most specifically Exhibit "A" in the annulment case, which proved that Don Jesus actually used Exhibit "XI " to complete payment on the estate and inheritance tax on the estate of his wife to the Bureau of Internal Revenue. Private respondents further insist that the sales were fraudulent because of the inadequacy of the given price. Inadequacy of consideration does not vitiate a contract unless it is proven which in the case at bar was not, that there was fraud, mistake or undue influence. (Article 1355, New Civil Code). We do not find the stipulated price as so inadequate to shock the court's conscience, considering that the price paid was much higher than the assessed value of the subject properties and considering that the sales were effected by a father to her daughter in which case filial love must be taken into account. WHEREFORE, IN VIEW OF THE FOREGOING, the decision appealed from is hereby set aside. The decision of the Court of First Instance Of Albay in Special Proceedings No. 699 and Civil Case No. 3068 is hereby reinstated, with costs against respondents. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-45645 June 28, 1983 FRANCISCO A. TONGOY, for himself and as Judicial Administrator of the Estate of the Late Luis D. Tongoy and Ma. Rosario Araneta Vda. de Tongoy, petitioners, vs. THE HONORABLE COURT OF APPEALS, MERCEDES T. SONORA, JUAN T. SONORA, JESUS T. SONORA, TRINIDAD T. SONORA, RICARDO P. TONGOY, CRESENCIANO P. TONGOY, AMADO P. TONGOY, and NORBERTO P. TONGOY, respondents. Taada, Sanchez, Tanada & Tanada Law Office for petitioners. Reyes & Pablo Law Office for respondents. MAKASIAR, J.: This is a petition for certiorari, to review the decision of respondent Court of Appeals in CA-G.R. No. 45336-R, entitled "Mercedes T. Sonora, et al. versus Francisco A. Tongoy, et al.", promulgated on December 3, 1975. The antecedent facts which are not controverted are quoted in the questioned decision, as follows: The case is basically an action for reconveyance respecting two (2) parcels of land in Bacolod City. The first is Lot No. 1397 of the Cadastral Survey of Bacolod, otherwise known as Hacienda Pulo, containing an area of 727,650 square meters and originally registered under Original Certificate of Title No. 2947 in the names of Francisco Tongoy, Jose Tongoy, Ana Tongoy, Teresa Tongoy and Jovita Tongoy in pro-indiviso equal shares. Said co-owners were all children of the late Juan Aniceto Tongoy. The second is Lot No. 1395 of the Cadastral Survey of Bacolod, briefly referred to as Cuaycong property, containing an area of 163,754 square meters, and formerly covered by Original Certificate of Title No. 2674 in the name of Basilisa Cuaycong. Of the original registered co-owners of Hacienda Pulo, three died without issue, namely: Jose Tongoy, who died a widower on March 11, 1961; Ama Tongoy, who also died single on February 6, 1957, and Teresa Tongoy who also died single on November 3, 1949. The other two registered co-owners, namely, Francisco Tongoy and Jovita Tongoy, were survived by children. Francisco Tongoy, who died on September 15, 1926, had six children; Patricio D. Tongoy and Luis D. Tongoy by the first marriage; Amado P. Tongoy, Ricardo P. Tongoy; Cresenciano P. Tongoy and Norberto P. Tongoy by his second wife Antonina Pabello whom he subsequently married sometime after the birth of their children. For her part, Jovita Tongoy (Jovita Tongoy de Sonora), who died on May 14, 1915, had four children: Mercedes T. Sonora, Juan T. Sonora, Jesus T. Sonora and Trinidad T. Sonora. By the time this case was commenced, the late Francisco Tongoy's aforesaid two children by his first marriage, Patricio D. Tongoy and Luis D. Tongoy, have themselves died. It is claimed that Patricio D. Tongoy left three acknowledged natural children named Fernando, Estrella and Salvacion, all surnamed Tongoy. On the other hand, there is no question that Luis D. Tongoy left behind a son, Francisco A. Tongoy, and a surviving spouse, Ma. Rosario Araneta Vda. de Tongoy. The following antecedents are also undisputed, though by no means equally submitted as the complete facts, nor seen in Identical lights: On April 17, 1918, Hacienda Pulo was mortgaged by its registered co-owners to the Philippine National Bank (PNB), Bacolod Branch, as security for a loan of P11,000.00 payable in ten (10) years at 8%

interest per annum. The mortgagors however were unable to keep up with the yearly amortizations, as a result of which the PNB instituted judicial foreclosure proceedings over Hacienda Pulo on June 18, 1931. To avoid foreclosure, one of the co-owners and mortgagors, Jose Tongoy, proposed to the PNB an amortization plan that would enable them to liquidate their account. But, on December 23, 1932, the PNB Branch Manager in Bacolod advised Jose Tongoy by letter that the latter's proposal was rejected and that the foreclosure suit had to continue. As a matter of fact, the suit was pursued to finality up to the Supreme Court which affirmed on July 31, 1935 the decision of the CFI giving the PNB the right to foreclose the mortgage on Hacienda Pulo. In the meantime, Patricio D. Tongoy and Luis Tongoy executed on April 29, 1933 a Declaration of Inheritance wherein they declared themselves as the only heirs of the late Francisco Tongoy and thereby entitled to the latter's share in Hacienda Pulo. On March 13, 1934, Ana Tongoy, Teresa Tongoy, Mercedes Sonora, Trinidad Sonora, Juan Sonora and Patricio Tongoy executed an "Escritura de Venta" (Exh. 2 or Exh. W), which by its terms transferred for consideration their rights and interests over Hacienda Pulo in favor of Luis D. Tongoy. Thereafter, on October 23, 1935 and November 5, 1935, respectively, Jesus Sonora and Jose Tongoy followed suit by each executing a similar "Escritura de Venta" (Exhs. 3 or DD and 5 or AA) pertaining to their corresponding rights and interests over Hacienda Pulo in favor also of Luis D. Tongoy. In the case of Jose Tongoy, the execution of the "Escritura de Venta" (Exh. 5 or AA) was preceded by the execution on October 14, 1935 of an Assignment of Rights (Exh. 4 or Z) in favor of Luis D. Tongoy by the Pacific Commercial Company as judgment lien-holder (subordinate to the PNB mortgage) of Jose Tongoy's share in Hacienda Pulo. On the basis of the foregoing documents, Hacienda Pulo was placed on November 8, 1935 in the name of Luis D. Tongoy, married to Maria Rosario Araneta, under Transfer Certificate of "Title No. 20154 (Exh. 20). In the following year, the title of the adjacent Cuaycong property also came under the name of Luis D. Tongoy, married to Maria Rosario Araneta, per Transfer Certificate of Title No. 21522, by virtue of an "Escritura de Venta" (Exh. 6) executed in his favor by the owner Basilisa Cuaycong on June 22, 1936 purportedly for P4,000.00. On June 26, 1936, Luis D. Tongoy executed a real estate mortgage over the Cuaycong property in favor of the PNB, Bacolod Branch, as security for loan of P4,500.00. Three days thereafter, on June 29, 1936, he also executed a real estate mortgage over Hacienda Pulo in favor of the same bank to secure an indebtedness of P21,000.00, payable for a period of fifteen (15) years at 8% per annum. After two decades, on April 17, 1956, Luis D. Tongoy paid off all his obligations with the PNB, amounting to a balance of P34,410.00, including the mortgage obligations on the Cuaycong property and Hacienda Pulo. However, it was only on April 22, 1958 that a release of real estate mortgage was executed by the bank in favor of Luis D. Tongoy. On February 5, 1966, Luis D. Tongoy died at the Lourdes Hospital in Manila, leaving as heirs his wife Maria Rosario Araneta and his son Francisco A. Tongoy. Just before his death, however, Luis D. Tongoy received a letter from Jesus T. Sonora, dated January 26, 1966, demanding the return of the shares in the properties to the co-owners. Not long after the death of Luis D. Tongoy, the case now before Us was instituted in the court below on complaint filed on June 2, 1966 by Mercedes T. Sonora, Juan T. Sonora ** , Jesus T. Sonora, Trinidad T. Sonora, Ricardo P. Tongoy and Cresenciano P. Tongoy. Named principally as defendants were Francisco A. Tongoy, for himself and as judicial administrator of the estate of the late Luis D. Tongoy, and Maria Rosario Araneta Vda. de Tongoy. Also impleaded as defendants, because of their unwillingness to join as plaintiffs were Amado P. Tongoy, Norberto P. Tongoy ** and Fernando P. Tongoy. Alleging in sum that plaintiffs and/or their predecessors transferred their interests on the two lots in question to Luis D. Tongoy by means of simulated sales, pursuant to a trust arrangement whereby the latter would return such interests after the

10

mortgage obligations thereon had been settled, the complaint prayed that 'judgment be rendered in favor of the plaintiffs and against the defendants(a) Declaring that the HACIENDA PULO, Lot 1397-B-3 now covered by T.C.T. No. 29152, Bacolod City, and the former Cuaycong property, Lot 1395 now covered by T.C.T. No. T-824 (RT-4049) (21522), Bacolod City, as trust estate belonging to the plaintiffs and the defendants in the proportion set forth in Par. 26 of this complaint; (b) Ordering the Register of Deeds of Bacolod City to cancel T.C.T. No. 29152 and T.C.T. No. T-824 (RT-4049) (21522), Bacolod City, and to issue new ones in the names of the plaintiffs and defendants in the proportions set forth in Par. 26 thereof, based on the original area of HACIENDA PULO; (c) Ordering the defendants Francisco A. Tongoy and Ma. Rosario Araneta Vda. de Tongoy to render an accounting to the plaintiffs of the income of the above two properties from the year 1958 to the present and to deliver to each plaintiff his corresponding share with legal interest thereon from 1958 and until the same shall have been fully paid; (d) Ordering the defendants Francisco Tongoy and Ma. Rosario Araneta Vda. de Tongoy to pay to the plaintiffs as and for attorney's fees an amount equivalent to twenty-four per cent (24%) of the rightful shares of the plaintiffs over the original HACIENDA PULO and the Cuaycong property, including the income thereof from 1958 to the present; and (e) Ordering the defendants Francisco A. Tongoy and Ma. Rosario Vda. de Tongoy to pay the costs of this suit. Plaintiffs also pray for such other and further remedies just and equitable in the premises. Defendants Francisco A. Tongoy and Ma. Rosario Vda. de Tongoy filed separate answers, denying in effect plaintiffs' causes of action, and maintaining, among others, that the sale to Luis D. Tongoy of the two lots in question was genuine and for a valuable consideration, and that no trust agreement of whatever nature existed between him and the plaintiffs. As affirmative defenses, defendants also raised laches, prescription, estoppel, and the statute of frauds against plaintiffs. Answering defendants counter claimed for damages against plaintiffs for allegedly bringing an unfounded and malicious complaint. For their part, defendants Norberto Tongoy and Amado Tongoy filed an answer under oath, admitting every allegation of the complaint. On the other hand, defendant Fernando Tongoy originally joined Francisco A. Tongoy in the latter's answer, but after the case was submitted and was pending decision, the former filed a verified answer also admitting every allegation of the complaint. Meanwhile, before the case went to trial, a motion to intervene as defendants was filed by and was granted to Salvacion Tongoy and Estrella Tongoy, alleging they were sisters of the full blood of Fernando Tongoy. Said intervenors filed an answer similarly admitting every allegation of the complaint. After trial on the merits, the lower court rendered its decision on October 15, 1968 finding the existence of an implied trust in favor of plaintiffs, but at the same time

holding their action for reconveyance barred by prescription, except in the case of Amado P. Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy, and Norberto P. Tongoy, who were adjudged entitled to reconveyance of their corresponding shares in the property left by their father Francisco Tongoy having been excluded therefrom in the partition had during their minority, and not having otherwise signed any deed of transfer over such shares. The dispositive portion of the decision reads: IN VIEW OF ALL THE FOREGOING considerations, judgment is hereby rendered dismissing the complaint, with respect to Mercedes, Juan, Jesus and Trinidad, all surnamed Sonora. The defendants Francisco Tongoy and Rosario Araneta Vda. de Tongoy are hereby ordered to reconvey the proportionate shares of Ricardo P., Cresenciano P., Amado P., and Norberto P., all surnamed Tongoy in Hda. Pulo and the Cuaycong property. Without damages and costs. SO ORDERED. Upon motion of plaintiffs, the foregoing dispositive portion of the decision was subsequently clarified by the trial court through its order of January 9, 1969 in the following tenor: Considering the motion for clarification of decision dated November 7, 1968 and the opposition thereto, and with the view to avoid further controversy with respect to the share of each heir, the dispositive portion of the decision is hereby clarified in the sense that, the proportionate legal share of Amado P. Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy and the heirs of Norberto P. Tongoy, in Hda. Pulo and Cuaycong property consist of 4/5 of the whole trust estate, leaving 1/5 of the same to the heirs of Luis D. Tongoy. SO ORDERED. (pp. 157-166, Vol. I, rec.). Both parties appealed the decision of the lower court to respondent appellate court. Plaintiffs-appellants Mercedes T. Sonora, Jesus T. Sonora, Trinidad T. Sonora and the heirs of Juan T. Sonora questioned the lower court's decision dismissing their complaint on ground of prescription, and assailed it insofar as it held that the agreement created among the Tongoy-Sonora family in 1931 was an implied, and not an express, trust; that their action had prescribed; that the defendants-appellants were not ordered to render an accounting of the fruits and income of the properties in trust; and that defendants were not ordered to pay the attorney's fees of plaintiffs- appellants. For their part, defendants-appellants Francisco A. Tongoy and Ma. Rosario Araneta Vda. de Tongoy not only refuted the errors assigned by plaintiffs-appellants, but also assailed the findings that there was preponderance of evidence in support of the existence of an implied trust; that Ricardo P. Tongoy, Amado P. Tongoy and Norberto P. Tongoy are the legitimate half-brothers of the late Luis D. Tongoy; that their shares in Hacienda Pulo and Cuaycong property should be reconveyed to them by defendants-appellants; and that an execution was ordered pending appeal. On December 3, 1975, respondent court rendered the questioned decision, the dispositive portion of which is as follows: WHEREFORE, judgment is hereby rendered modifying the judgment and Orders appealed from by ordering Maria Rosario Araneta Vda. de Tongoy and Francisco A. Tongoy. 1) To reconvey to Mercedes T. Sonora, Juan T. Sonora (as substituted and represented by his heirs), Jesus T. Sonora and Trinidad T. Sonora each a 7/60th portion of both Hacienda Pulo and the Cuaycong property, based on their original shares; 2) To reconvey to Ricardo P. Tongoy, Cresenciano P. Tongoy, Amado P. Tongoy and Norberto P. Tongoy as substituted and represented by his heirs each a 14/135th portion

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of both Hacienda Pulo and the Cuaycong property, also based on their original shares; provided that the 12 hectares already reconveyed to them by virtue of the Order for execution pending appeal of the judgment shall be duly deducted; 3) To render an accounting to the parties named in pars. 1 and 2 above with respect to the income of Hacienda Pulo and the Cuaycong property from May 5, 1958 up to the time the reconveyances as herein directed are made; and to deliver or pay to each of said parties their proportionate shares of the income, if any, with legal interest thereon from the date of filing of the complaint in this case, January 26, 1966, until the same is paid; 4) To pay unto the parties mentioned in par. 1 above attorney's fees in the sum of P 20,000.00; and 5) To pay the costs. SO ORDERED (pp. 207-208, Vol. 1, rec.). Petitioners Francisco A. Tongoy and Ma. Rosario Araneta Vda. de Tongoy (defendants-appellants) have come before Us on petition for review on certiorari with the following assignments of errors (pp. 23-24, Brief for Petitioners): I. The Court of Appeals erred in finding that there was a trust constituted on Hacienda Pulo. II. The Court of Appeals erred in finding that the purchase price for the Cuaycong property was paid by Jose Tongoy and that said property was also covered by a trust in favor of respondents. III. Conceding, for the sake of argument, that respondents have adequately proven an implied trust in their favor, the Court of Appeals erred in not finding that the rights of respondents have prescribed, or are barred by laches. IV. The Court of Appeals erred in finding that the respondents Tongoy are the legitimated children of Francisco Tongoy. V. Granting arguendo that respondents Tongoy are the legitimated children of Francisco Tongoy, the Court of Appeals erred in not finding that their action against petitioners has prescribed. VI. The Court of Appeals erred in ordering petitioners to pay attorney's fees of P 20,000.00. VII. The Court of Appeals erred in declaring that execution pending appeal in favor of respondents Tongoys was justified. I It appears to US that the first and second errors assigned by petitioners are questions of fact which are beyond OUR power to review. Thus, as found by the respondent Court of Appeals: xxx xxx xxx We shall consider first the appeal interposed by plaintiffs-appellants. The basic issues underlying the disputed errors raised suggest themselves as follows: 1) whether or not the conveyance respecting the questioned lots made in favor of Luis D. Tongoy in 1934 and 1935 were conceived pursuant to a trust agreement among the parties; 2) if so, whether the trust created was an express or implied trust; and 3) if the trust was not an express trust, whether the action to enforce it has prescribed. The first two issues indicated above will be considered together as a matter of logical necessity, being so closely interlocked. To begin with, the trial court found and ruled that

the transfers made in favor of Luis D. Tongoy were clothed with an implied trust, arriving at this conclusion as follows: The Court finds that there is preponderance of evidence in support of the existence of constructive, implied or tacit trust. The hacienda could have been leased to third persons and the rentals would have been sufficient to liquidate the outstanding obligation in favor of the Philippine National Bank. But the co-owners agreed to give the administration of the property to Atty. Luis D. Tongoy, so that the latter can continue giving support to the TongoySonora family and at the same time, pay the amortization in favor of the Philippine National Bank, in the same manner that Jose Tongoy did. And of course, if the administration is successful, Luis D. Tongoy would benefit with the profits of the hacienda. Simulated deeds of conveyance in favor of Luis D. Tongoy were executed to facilitate and expedite the transaction with the Philippine National Bank. Luis D. Tongoy supported the TongoySonora family, defrayed the expenses of Dr. Jesus Sonora and Atty. Ricardo P. Tongoy, in their studies. Luis Tongoy even gave Sonoras their shares in the "beneficacion" although the "beneficacion" were included in the deeds of sale. The amount of consideration of the one-fifth (15) share of Jose Tongoy is one hundred (P 100,00) pesos only. Likewise the consideration of the sale of the interests of the Pacific Commercial Company is only P100.00 despite the fact that Jose Tongoy paid in full his indebtedness in favor of said company. The letter of Luis D. Tongoy dated November 5, 1935 (Exhibit 'BB-1') is very significant, the tenor of which is quoted hereunder: Dear Brother Jose: Herewith is the deed which the bank sent for us to sign. The bank made me pay the Pacific the sum of P100.00 so as not to sell anymore the land in public auction. This deed is for the purpose of dispensing with the transfer of title to the land in the name of the bank, this way we will avoid many expenses. Yours, Luis D. Tongoy Jose Tongoy signed the deed because he incurred the obligation with the Pacific and paid it. In releasing the second mortgage, Luis Tongoy paid only P100.00 and the deed was in favor of Luis Tongoy. This was done in order "to avoid many expenses " of both Jose and Luis as obviously referred to in the word "WE". Those two transactions with nominal considerations are irrefutable and palpable evidence of the existence of constructive or implied trust. Another significant factor in support of the existence of constructive trust is the fact that in 1933-34, when proposals for amicable settlement with the Philippine National Bank were being formulated and considered, Luis D. Tongoy was yet a neophite (sic) in the practice of law, and he was still a bachelor. It was proven that it was Jose Tongoy, the administrator of Hda. Pulo, who provided for his expenses when he studied law, when he married Maria Araneta, the latter's property were leased and the rentals were not sufficient to cover all the considerations stated in the deeds of sale executed by the coowners of Hda. Pulo, no matter how inadequate were the amounts so stated. These

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circumstances fortified the assertion of Judge Arboleda that Luis D. Tongoy at that time was in no condition to pay the purchase price of the property sold, But the Court considers the evidence of execution of express trust agreement insufficient. Express trust agreement was never mentioned in the plaintiffs' pleadings nor its existence asserted during the pre-trial hearings. It was only during the trial on the merits when Atty. Eduardo P. Arboleda went on to testify that he prepared the deed of trust agreement. Indeed the most formidable weapon the plaintiff could have used in destroying the "impregnable walls of the defense castle consisting of public documents" is testimony of Atty. Eduardo P. Arboleda. He is most qualified and in a knowable position to testify as to the truth of the existence of the trust agreement, because he was not only the partner of the late Luis D. Tongoy in their practice of law especially during the time he prepared and/or notarized the deeds of sale but he was also his colleague in the City Council. But however forceful would be the impact of his testimony, it did not go beyond the establishment of constructive or implied trust agreement. In the first place, if it is true that written trust agreement was prepared by him and signed by Luis D. Tongoy for the security of the vendor, why is it that only two copies of the agreement were prepared, one copy furnished Jose Tongoy and the other kept by Luis Tongoy, instead of making five copies and furnished copy to each co-owner, or at least one copy would have been kept by him? Why is it that when Atty. Arboleda invited Mrs. Maria Rosario Araneta Vda. de Tongoy and her son to see him in his house, Atty. Arboleda did not reveal or mention the fact of the existence of a written trust agreement signed by the late Luis D. Tongoy? The revelation of the existence of a written trust agreement would have been a vital and controlling factor in the amicable settlement of the case, which Atty. Arboleda would have played an effective role as an unbiased mediator. Why did not Atty. Arboleda state the precise context of the written agreement; its form and the language it was written, knowing as he should, the rigid requirements of proving the contents of a lost document. It is strange that when Mrs. Maria Rosario Araneta Vda. de Tongoy and her son were in the house of Atty. Arboleda, in compliance with his invitation for the supposed friendly settlement of the case, Atty. Arboleda did not even submit proposals for equitable arbitration of the case. On the other hand, according to Mrs. Tongoy, Mrs. Arboleda intimated her desire to have Atty. Arboleda be taken in. The Court refuses to believe that Judge Arboleda was aware of the alleged intimations of Mrs. Arboleda, otherwise he would not have tolerated or permitted her to indulge in such an embarrassing and uncalled for intrusion. The plaintiffs evidently took such ungainly insinuations with levity so much so that they did not think it necessary to bring Mrs. Arboleda to Court to refute this fact. The parties, on either side of this appeal take issue with the conclusion that there was an implied trust, one side maintaining that no trust existed at all, the other that the trust was an express trust. To begin with, We do not think the trial court erred in its ultimate conclusion that the transfers of the two lots in question made in favor of the late Luis D. Tongoy by his coowners in 1933 and 1934 created an implied trust in favor of the latter. While, on one hand, the evidence presented by plaintiffs-appellants to prove an express trust agreement accompanying the aforesaid transfers of the lots are incompetent, if not inadequate, the record bears sufficiently clear and convincing evidence that the transfers were only simulated to enable Luis D. Tongoy to save Hacienda Pulo from foreclosure for the benefit of the co-owners, including himself. Referring in more detail to the evidence on the supposed express trust, it is true that plaintiffs- appellants Jesus T. Sonora, Ricardo P. Tongoy, Mercedes T. Sonora and Trinidad T. Sonora have testified with some vividness on the holding of a family conference in December 1931

among the co-owners of Hacienda Pulo to decide on steps to be taken vis-a-vis the impending foreclosure of the hacienda by the PNB upon the unpaid mortgage obligation thereon. Accordingly, the co-owners had agreed to entrust the administration and management of Hacienda Pulo to Luis D. Tongoy who had newly emerged as the lawyer in the family. Thereafter, on the representation of Luis D. Tongoy that the bank wanted to deal with only one person it being inconvenient at time to transact with many persons, specially when some had to be out of town the co-owners agreed to make simulated transfers of their participation in Hacienda Pulo to him. As the evidence stands, even if the same were competent, it does not appear that there was an express agreement among the co-owners for Luis D. Tongoy to hold Hacienda Pulo in trust, although from all the circumstances just indicated such a trust may be implied under the law (Art. 1453, Civil Code; also see Cuaycong vs. Cuaycong, L-21616, December 11, 1967, 21 SCRA 1192, 1197-1198). But, whatever may be the nature of the trust suggested in the testimonies adverted to, the same are incompetent as proof thereof anent the timely objections of defendants-appellees to the introduction of such testimonial evidence on the basis of the survivorship rule. The witnesses being themselves parties to the instant case, suing the representatives of the deceased Luis D. Tongoy upon a demand against the latter's estate, said witnesses are barred by the objections of defendants-appellees from testifying on matters of fact occurring before the death of the deceased (Sec. 20[a], Rule 130), more particularly where such occurrences consist of verbal agreements or statements made by or in the presence of the deceased. Neither has the existence of the alleged contra-documento-- by which Luis D. Tongoy supposedly acknowledged the transfers to be simulated and bound himself to return the shares of his co-owners after the mortgage on the Hacienda had been discharged-been satisfactorily established to merit consideration as proof of the supposed express trust. We can hardly add to the sound observations of the trial court in rejecting the evidence to the effect as insufficient, except to note further that at least plaintiffs-appellants Mercedes T. Sonora and Trinidad T. Sonora have testified having been apprised of the document and its contents when Luis D. Tongoy supposedly delivered one copy to Jose Tongoy. And yet as the trial court noted, no express trust agreement was ever mentioned in plaintiffs-appellants' pleadings or at the pre-trial. Nevertheless, there is on record enough convincing evidence not barred by the survivorship rule, that the transfers made by the co-owners in favor of Luis D. Tongoy were simulated and that an implied or resulting trust thereby came into existence, binding the latter to make reconveyance of the co-owners' shares after the mortgage indebtedness on Hacienda Pulo has been discharged. Thus it appears beyond doubt that Hacienda Pulo has been the source of livelihood to the co-owners and their dependents, when the subject transfers were made. It is most unlikely that all of the several other co-owners should have come at the same time to one mind about disposing of their participation in the hacienda, when the same counted so much in their subsistence and self-esteem. Only extreme necessity would have forced the co-owners to act in unison towards earnestly parting with their shares, taking into account the meager considerations mentioned in the deeds of transfer which at their most generous gave to each co-owner only P2,000.00 for a 1/5 part of the hacienda. As it appears to Us, the impending foreclosure on the mortgage for P11,000.00 could not have created such necessity. Independent of testimony to the effect, it is not hard to surmise that the hacienda could have been leased to others on terms that would have satisfied the mortgage obligation. Moreover, as it turned out, the PNB was amenable, and did actually accede, to a restructuring of the mortgage loan in favor of Luis D. Tongoy, thereby saving the hacienda from foreclosure. As a matter of fact, the co-owners must have been posted on the attitude of the bank regarding the overdue mortgage loan, and its willingness to renew or restructure the same upon certain conditions. Under such

13

circumstances, it is more reasonable to conclude that there was no compelling reason for the other co-owners to sell out their birthrights to Luis D. Tongoy, and that the purported transfers were, as claimed by them in reality simulated pursuant to the suggestion that the bank wanted to deal with only one person. In fact, as recited in the Escritura de Venta (Exh. AA) executed between Luis. D. Tongoy and Jose Tongoy, it appears that the series of transfers made in favor of the former by the co-owners of Hacienda Pulo followed and was made pursuant to a prior arrangement made with the PNB by Luis D. Tongoy to redeem the shares or participation of his co-owners. That this was readily assented to in the anxiety to save and preserve Hacienda Pulo for all its coowners appears very likely anent undisputed evidence that the said co-owners had been used to entrusting the management thereof to one among them, dating back to the time of Francisco Tongoy who once acted as administrator, followed by Jose Tongoy, before Luis D. Tongoy himself took over the hacienda. Strongly supported the theory that the transfers were only simulated to enable Luis D. Tongoy (to) have effective control and management of the hacienda for the benefit of all the co-owners is preponderant evidence to the effect that he was in no financial condition at the time to purchase the hacienda. Witness Eduardo Arboleda who was a law partner of Luis D. Tongoy when the transfers were made, and who is not a party in this case, emphatically testified that Luis D. Tongoy could not have produced the money required for the purchase from his law practice then. On the other hand, the suggestion that his wife Ma. Rosario Araneta had enough income from her landed properties to sufficiently augment Luis D. Tongoy's income from his practice is belied by evidence that such properties were leased, and the rentals collected in advance, for eleven (11) crop years beginning 1931 (Exh. EEE), when they were not yet married. The financial incapacity of Luis D. Tongoy intertwines, and together gains strength, with proof that the co-owners as transferors in the several deeds of sale did not receive the considerations stated therein. In addition to the testimony of the notary public, Eduardo P. Arboleda, that no consideration as recited in the deeds of transfer were ever paid in his presence, all the transferors who testified including Jesus T. Sonora, Mercedes T. Sonora and Trinidad T. Sonora-all denied having received the respective considerations allegedly given them. While said transferors are parties in this case, it has been held that the survivorship rule has no application where the testimony offered is to the effect that a thing did not occur (Natz vs. Agbulos, CA-G.R. No. 4098-R, January 13, 1951; Mendoza v. C. Vda. de Goitia, 54 Phil. 557, cited by Mora, Comments on the Rules of Court, 1970 ed., Vol. 5, p. 174). Also of some significance is the fact that the deeds of transfer executed by Ana Tongoy, Teresa Tongoy, Mercedes Sonora, Trinidad Sonora, Juan Sonora, and Patricio Tongoy (Exh. W) as well as that by Jesus Sonora (Exh. DD) did not even bother to clarify whether Luis D. Tongoy as transferee of his co-owners' share was assuming the indebtedness owing to the PNB upon the mortgage on Hacienda Pulo. In an honest-togoodness sale, it would have been most unlikely that the transferors would have paid no attention to this detail, least of all where, as in this case, the transfers were apparently prompted by the inability of the co-owners to discharge the mortgage obligation and were being pressed for payment. Furthermore, the tenor of the letter from Luis D. Tongoy to Jose Tongoy, dated November 5, 1935 (Exhibit Bb-1), as heretofore quoted with portions of the decision on appeal, is very revealing of the fact that the steps taken to place Hacienda Pulo in the name of Luis D. Tongoy were made for the benefit not only of himself but for the other co-owners as well. Thus, the letter ends with the clause-"this way we will avoid many expenses.

Finally, it is not without significance that the co-owners and their dependents continued to survive apparently from the sustenance from Hacienda Pulo for a long time following the alleged transfers in favor of Luis D. Tongoy. In fact, it does not appear possible that Jesus T. Sonora and Ricardo P. Tongoy could have finished medicine and law, respectively, without support from Luis D. Tongoy as administrator of the common property. All the foregoing, considered together, constitute clear and convincing evidence that the transfers made in favor of Luis D. Tongoy by his co- owners were only simulated, under circumstances giving rise to an implied or resulting trust whereby Luis D. Tongoy is bound to hold title in trust for the benefit of his co-owners (cf. de Buencamino, et al. vs. De Matias, et al., L-19397, April 30, 1966, 16 SCRA 849)" [pp. 170-181, Vol. I, rec.]. The Court of Appeals found enough convincing evidence not barred by the aforecited survivorship rule to the effect that the transfers made by the co- owners in favor of Luis D. Tongoy were simulated. All these findings of fact, as a general rule, are conclusive upon US and beyond OUR power to review. It has been well-settled that the jurisdiction of the Supreme Court in cases brought to IT from the Court of Appeals is limited to reviewing and revising errors of law imputed to it, its findings of fact being conclusive as a matter of general principle (Chan vs. C.A., 33 SCRA 737, 744; Alquiza vs. Alquiza, 22 SCRA 494, 497). The proofs submitted by petitioners do not place the factual findings of the Court of Appeals under any of the recognized exceptions to the aforesaid general rule. I The initial crucial issue therefore is-whether or not the rights of herein respondents over subject properties, which were the subjects of simulated or fictitious transactions, have already prescribed. The negative answer to the aforesaid query is found in Articles 1409 and 1410 of the New Civil Code. Said provisions state thus: Art. 1409. The following contracts are inexistent and void from the beginning: xxx xxx xxx 2) Those which are absolutely simulated or fictitious; xxx xxx xxx These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived (emphasis supplied). Art. 1410. The action or defense for the declaration of the inexistence of a contract does not prescribe. The characteristic of simulation is the fact that the apparent contract is not really desired nor intended to produce legal effects nor in any way alter the juridical situation of the parties. Thus, where a person, in order to place his property beyond the reach of his creditors, simulates a transfer of it to another, he does not really intend to divest himself of his title and control of the property; hence, the deed of transfer is but a sham. This characteristic of simulation was defined by this Court in the case of Rodriguez vs. Rodriguez, No. L-23002, July 31, 1967, 20 SCRA 908. A void or inexistent contract is one which has no force and effect from the very beginning, as if it had never been entered into, and which cannot be validated either by time or by ratification (p. 592, Civil Code of the Philippines, Vol. IV, Tolentino, 1973 Ed.). Avoid contract produces no effect whatsoever either against or in favor of anyone; hence, it does not create, modify or extinguish the juridical relation to which it refers (p. 594, Tolentino, supra). The following are the most fundamental characteristics of void or inexistent contracts:

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1) As a general rule, they produce no legal effects whatsoever in accordance with the principle "quod nullum est nullum producit effectum." 2) They are not susceptible of ratification. 3) The right to set up the defense of inexistence or absolute nullity cannot be waived or renounced. 4) The action or defense for the declaration of their inexistence or absolute nullity is imprescriptible. 5) The inexistence or absolute nullity of a contract cannot be invoked by a person whose interests are not directly affected (p. 444, Comments and Jurisprudence on Obligations and Contracts, Jurado, 1969 Ed.; emphasis supplied). The nullity of these contracts is definite and cannot be cured by ratification. The nullity is permanent, even if the cause thereof has ceased to exist, or even when the parties have complied with the contract spontaneously (p. 595, Tolentino, supra). In Eugenio vs. Perdido, et al., No. L-7083, May 19, 1955, 97 Phil. 41, this Court thus reiterated: Under the existing classification, such contract would be "inexisting" and the "action or defense for declaration' of such inexistence "does not prescribe' (Art. 14 10 New Civil Code). While it is true that this is a new provision of the New Civil Code, it is nevertheless a principle recognized since Tipton vs. Velasco, 6 Phil. 67 that "mere lapse of time cannot give efficacy to contracts that are null and void. Consistently, this Court held that 11 where the sale of a homestead is nun and void, the action to recover the same does not prescribe because mere lapse of time cannot give efficacy to the contracts that are null and void and inexistent" (Angeles, et al. vs. Court of Appeals, et al., No. L-11024, January 31, 1958, 102 Phil. 1006). In the much later case of Guiang vs. Kintanar (Nos. L-49634-36, July 25, 1981, 106 SCRA 49), this Court enunciated thus: It is of no consequence, pursuant to the same article, that petitioners, the Guiang spouses, executed on August 21, 1975, apparently in ratification of the impugned agreement, the deeds of sale covering the two lots already referred to and that petitioners actually received in part or in whole the money consideration stipulated therein, for according to the same Article 1409, contracts contemplated therein, as the one We are dealing with, "cannot be ratified nor the defense of its illegality be waived." Neither it it material, much less decisive, that petitioners had not earlier judicially moved to have the same annulled or set aside. Under Article 1410 of the Civil Code, (t)he action or defense for declaration of the inexistence of a contract does not prescribe. Evidently, therefore, the deeds of transfer executed in favor of Luis Tongoy were from the very beginning absolutely simulated or fictitious, since the same were made merely for the purpose of restructuring the mortgage over the subject properties and thus preventing the foreclosure by the PNB. Considering the law and jurisprudence on simulated or fictitious contracts as aforestated, the within action for reconveyance instituted by herein respondents which is anchored on the said simulated deeds of transfer cannot and should not be barred by prescription. No amount of time could accord validity or efficacy to such fictitious transactions, the defect of which is permanent. There is no implied trust that was generated by the simulated transfers; because being fictitious or simulated, the transfers were null and void ab initio-from the very beginning and thus vested no rights whatsoever in favor of Luis Tongoy or his heirs. That which is inexistent cannot give life to anything at all. II

But even assuming arguendo that such an implied trust exists between Luis Tongoy as trustee and the private respondents as cestui que trust, still the rights of private respondents to claim reconveyance is not barred by prescription or laches. Petitioners maintain that, even conceding that respondents have adequately proven an implied trust in their favor, their rights have already prescribed, since actions to enforce an implied trust created under the old Civil Code prescribes in ten years. Under Act No. 190, whose statute of limitation would apply if there were an implied trust as in this case, the longest period of extinctive prescription was only ten years (Salao vs. Salao, 70 SCRA 84; Diaz vs. Gorricho and Aguado, 103 Phil. 261, 226). On the other hand, private respondents contend that prescription cannot operate against the cestui que trust in favor of the trustee, and that actions against a trustee to recover trust property held by him are imprescriptible (Manalang vs. Canlas, 50 OG 1980). They also cite other pre-war cases to bolster this contention, among which are: Camacho vs. Municipality of Baliwag, 28 Phil. 46; Uy vs. Cho Jan Ling, 19 Phil. 202 [pls. see pp. 258-259, Brief for Respondents, p. 398, rec.]. They further allege that possession of a trustee is, in law, possession of thecestui que trust and, therefore, it cannot be a good ground for title by prescription (Laguna vs. Levantino, 71 Phil. 566; Cortez vs. Oliva, 33 Phil. 480, cited on p. 261, Brief for Respondents, supra). The rule now obtaining in this jurisdiction is aptly discussed in the case of Bueno vs. Reyes (27 SCRA 1179, 1183), where the Court through then Mr. Justice Makalintal, held: While there are some decisions which hold that an action upon a trust is imprescriptible, without distinguishing between express and implied trusts, the better rule, as laid down by this Court in other decisions, is that prescription does supervene where the trust is merely an implied one. The reason has been expressed by Mr. Justice J.B.L. Reyes in J.M. Tuazon and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as follows: Under Section 40 of the Old Code of Civil Procedure, all actions for recovery of real property prescribe in ten years, excepting only actions based on continuing or subsisting trusts that were considered by section 38 as imprescriptible. As held in the case of Diaz vs. Gorricho, L-11229, March 29, 1958, however, the continuing or subsisting trusts contemplated in Sec. 38 of the Code of Civil Procedure referred only to express unrepudiated trusts, and did not include constructive trusts (that are imposed by law) where no fiduciary relation exists and the trustee does not recognize the trust at all. This doctrine has been reiterated in the latter case of Escay vs. C.A. (61 SCRA 370, 387), where WE held that implied or constructive trusts prescribe in ten years. "The prescriptibility of an action for reconveyance based on implied or constructive trust, is now a settled question in this jurisdiction. It prescribes in ten years" (Boaga vs. Soler, et al., 2 SCRA 755; J.M. Tuazon and Co., Inc. vs. Magdangal, 4 SCRA 88, special attention to footnotes). Following such proposition that an action for reconveyance such as the instant case is subject to prescription in ten years, both the trial court and respondent appellate court are correct in applying the ten-year prescriptive period. The question, however, is, from what time should such period be counted? The facts of the case at bar reveal that the title to Hacienda Pulo was registered in the name of Luis D. Tongoy with the issuance of TCT No. 20154 on November 8, 1935; that the title to the adjacent Cuaycong property was transferred to Luis D. Tongoy with the issuance of TCT No. 21522 on June 22, 1936. The properties were mortgaged in the year 1936 by said Luis D. Tongoy for P4,500.00 and P 21,000.00, respectively, for a period of fifteen years; that the mortgage obligations to the PNB were fully paid on April 17, 1956; that the release of mortgage was recorded in the Registry of Deeds on May 5, 1958; and that the case for reconveyance was filed in the trial court on June 2, 1966.

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Considering that the implied trust resulted from the simulated sales which were made for the purpose of enabling the transferee, Luis D. Tongoy, to save the properties from foreclosure for the benefit of the coowners, it would not do to apply the theory of constructive notice resulting from the registration in the trustee's name. Hence, the ten-year prescriptive period should not be counted from the date of registration in the name of the trustee, as contemplated in the earlier case of Juan vs. Zuiga (4 SCRA 1221). Rather, it should be counted from the date of recording of the release of mortgage in the Registry of Deeds, on which date May 5, 1958 the cestui que trust were charged with the knowledge of the settlement of the mortgage obligation, the attainment of the purpose for which the trust was constituted. Indeed, as respondent Court of Appeals had correctly held: ... as already indicated, the ten-year prescriptive period for bringing the action to enforce the trust or for reconveyance of plaintiffs-appellants" shares should be toned from the registration of the release of the mortgage obligation, since only by that time could plaintiffs-appellants be charged with constructive knowledge of the liquidation of the mortgage obligations, when it became incumbent upon them to expect and demand the return of their shares, there being no proof that plaintiffs-appellants otherwise learned of the payment of the obligation earlier. More precisely then the prescriptive period should be reckoned from May 5, 1958 when the release of the mortgage was recorded in the Registry of Deeds, which is to say that the present complaint was still filed within the period on June 4, 1966 (p. 35 of questioned Decision, on p. 191, rec.). Consequently, petitioner Francisco A. Tongoy as successor-in-interest and/or administrator of the estate of the late Luis D. Tongoy, is under obligation to return the shares of his co-heirs and co-owners in the subject properties and, until it is done, to render an accounting of the fruits thereof from the time that the obligation to make a return arose, which in this case should be May 5, 1958, the date of registration of the document of release of mortgage. Hence, WE find no evidence of abuse of discretion on the part of respondent Court of Appeals when it ordered such accounting from May 5, 1958, as well as the imposition of legal interest on the fruits and income corresponding to the shares that should have been returned to the private respondents, from the date of actual demand which has been determined to have been made on January 26, 1966 by the demand letter (Exh. TT) of respondent Jesus T. Sonora to deceased Luis D. Tongoy. III With respect to the award of attorney's fees in the sum of P20,000.00, the same appears to have been properly made, considering that private respondents were unnecessarily compelled to litigate (Flordelis vs. Mar, 114 SCRA 41; Sarsosa Vda. de Barsobin vs. Cuenco, 113 SCRA 547; Phil. Air Lines vs. C.A., 106 SCRA 393). As pointed out in the questioned decision of the Court of Appeals: As for the claim for attorney's fees, the same appears to be well taken in the light of the findings WE have made considering that prevailing plaintiffs- appellants were forced to litigate to enforce their rights, and that equity under all the circumstances so dictate, said plaintiffs-appellants should recover attorney's fees in a reasonable amount. We deem P20,000.00 adequate for the purpose (p. 36 of Decision, p. 151, rec.). IV The remaining assignement of error dwells on the question of whether or not respondents Amado, Ricardo, Cresenciano and Norberto, all surnamed Tongoy, may be considered legitimated by virtue of the marriage of their parents, Francisco Tongoy and Antonina Pabello, subsequent to their births and shortly before Francisco died on September 15, 1926. Petitioners maintain that since the said respondents were never acknowledged by their father, they could not have been legitimated by the subsequent marriage of their parents, much less could they inherit from the estate of their father, the predecessor-in-interest of Luis D. Tongoy, who is admittedly the half brother of the said respondents. Both the trial court and the respondent appellate court have found overwhelming evidence to sustain the following conclusions: that Amado P. Tongoy, Ricardo P. Tongoy, Cresenciano P. Tongoy and Norberto P. Tongoy were born illegitimate to Antonina Pabello on August 19, 1910 (Exh. A), August 12,1914 (Exh. B), December 1, 1915 (Exhs. C and C- 1) and August 4, 1922 (Exh. D), respectively; that Francisco Tongoy was their father; that said Francisco Tongoy had before them two legitimate children by his first wife, namely, Luis

D. Tongoy and Patricio D. Tongoy; that Francisco Tongoy and Antonina Pabello were married sometime before his death on September 15, 1926 (Exh. H); that shortly thereafter, Luis D. Tongoy and Patricio D. Tongoy executed an Extra-Judicial Declaration of Heirs, leaving out their half-brothers Amado, Ricardo, Cresenciano, and Norberto, who were then still minors; that respondents Amado, Ricardo, Cresenciano and Norberto were known and accepted by the whole clan as children of Francisco; that they had lived in Hacienda Pulo with their parents, but when they went to school, they stayed in the old family home at Washington Street, Bacolod, together with their grandmother, Agatona Tongoy, as well as with the Sonoras and with Luis and Patricio Tongoy; that everybody in Bacolod knew them to be part of the Tongoy-Sonora clan; and that Luis D. Tongoy as administrator of Hacienda Pulo, also spent for the education of Ricardo Tongoy until he became a lawyer; and that even petitioners admit the fact that they were half-brothers of the late Luis D. Tongoy. The bone of contention, however, hinges on the absence of an acknowledgment through any of the modes recognized by the Old Civil Code (please see Articles 131 and 135 of the Old Civil Code), such that legitimation could not have taken place in view of the provisions of Art. 121 of the same Code which states that "children shall be considered legitimated by a subsequent marriage only when they have been acknowledged by the parents before or after the celebration thereof." Of course, the overwhelming evidence found by respondent Court of Appeals conclusively shows that respondents Amado, Ricardo, Cresenciano and Norberto have been in continuous possession of the status of natural, or even legitimated, children. Still, it recognizes the fact that such continuous possession of status is not, per se, a sufficient acknowledgment but only a ground to compel recognition (Alabat vs. Alabat, 21 SCRA 1479; Pua vs. Chan, 21 SCRA 753; Larena vs. Rubio, 43 Phil. 1017). Be that as it may, WE cannot but agree with the liberal view taken by respondent Court of Appeals when it said: ... It does seem equally manifest, however, that defendants-appellants stand on a purely technical point in the light of the overwhelming evidence that appellees were natural children of Francisco Tongoy and Antonina Pabello, and were treated as legitimate children not only by their parents but also by the entire clan. Indeed, it does not make much sense that appellees should be deprived of their hereditary rights as undoubted natural children of their father, when the only plausible reason that the latter could have had in mind when he married his second wife Antonina Pabello just over a month before his death was to give legitimate status to their children. It is not in keeping with the more liberal attitude taken by the New Civil Code towards illegitimate children and the more compassionate trend of the New Society to insist on a very literal application of the law in requiring the formalities of compulsory acknowledgment, when the only result is to unjustly deprive children who are otherwise entitled to hereditary rights. From the very nature of things, it is hardly to be expected of appellees, having been reared as legitimate children by their parents and treated as such by everybody, to bring an action to compel their parents to acknowledge them. In the hitherto cited case of Ramos vs. Ramos, supra, the Supreme Court showed the way out of patent injustice and inequity that might result in some cases simply because of the implacable insistence on the technical amenities for acknowledgment. Thus, it held Unacknowledged natural children have no rights whatsoever (Buenaventura vs. Urbano, 5 Phil. 1; Siguiong vs. Siguiong, 8 Phil. 5, 11; Infante vs. Figueras, 4 Phil. 738; Crisolo vs. Macadaeg, 94 Phil. 862). The fact that the plaintiffs, as natural children of Martin Ramos, received shares in his estate implied that they were acknowledged. Obviously, defendants Agustin Ramos and Granada Ramos and the late Jose Ramos and members of his family had treated them as his children. Presumably, that fact was wellknown in the community. Under the circumstances, Agustin Ramos and Granada Ramos and the heirs of Jose Ramos, are estopped from attacking plaintiffs' status as acknowledged natural children (See Arts. 283 [4] and 2666 [3], New Civil Code). [Ramos vs. Ramos, supra].

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With the same logic, estoppel should also operate in this case in favor of appellees, considering, as already explained in detail, that they have always been treated as acknowledged and legitimated children of the second marriage of Francisco Tongoy, not only by their presumed parents who raised them as their children, but also by the entire Tongoy-Sonora clan, including Luis D. Tongoy himself who had furnished sustenance to the clan in his capacity as administrator of Hacienda Pulo and had in fact supported the law studies of appellee Ricardo P. Tongoy in Manila, the same way he did with Jesus T. Sonora in his medical studies. As already pointed out, even defendants-appellants have not questioned the fact that appellees are half-brothers of Luis D. Tongoy. As a matter of fact, that are really children of Francisco Tongoy and Antonina Pabello, and only the technicality that their acknowledgment as natural children has not been formalized in any of the modes prescribed by law appears to stand in the way of granting them their hereditary rights. But estoppel, as already indicated, precludes defendants-appellants from attacking appellees' status as acknowledged natural or legitimated children of Francisco Tongoy. In addition to estoppel, this is decidedly one instance when technicality should give way to conscience, equity and justice (cf. Vda. de Sta. Ana vs. Rivera, L-22070, October 29, 1966,18 SCRA 588) [pp. 196-198, Vol. 1, rec.]. It is time that WE, too, take a liberal view in favor of natural children who, because they enjoy the blessings and privileges of an acknowledged natural child and even of a legitimated child, found it rather awkward, if not unnecessary, to institute an action for recognition against their natural parents, who, without their asking, have been showering them with the same love, care and material support as are accorded to legitimate children. The right to participate in their father's inheritance should necessarily follow. The contention that the rights of the said respondents Tongoys have prescribed, is without merit. The death of Francisco Tongoy having occurred on September 15, 1926, the provisions of the Spanish Civil Code is applicable to this case, following the doctrine laid down in Villaluz vs. Neme (7 SCRA 27) where this Court, through Mr. Justice Paredes, held: Considering that Maria Rocabo died (on February 17, 1937) during the regime of the Spanish Civil Code, the distribution of her properties should be governed by said Code, wherein it is provided that between co-heirs, the act to demand the partition of the inheritance does not prescribe (Art. 1965 [Old Civil Code]; Baysa, et al. vs. Baysa, 53 Off. Gaz. 7272). Verily, the 3 living sisters were possessing the property as administratices of the other co-heirs, plaintiffs-appellants herein, who have the right to vindicate their inheritance regardless of the lapse of time (Sevilla vs. De los Angeles, L7745, 51 Off. Gaz. 5590, and cases cited therein). Even following the more recent doctrine enunciated in Gerona vs. de Guzman (11 SCRA 153) that "an action for reconveyance of real property based upon a constructive or implied trust, resulting from fraud, may be barred by the statute of limitations" (Candelaria vs. Romero, L-12149, Sept. 30, 1960; Alzona vs. Capunita, L10220, Feb. 28, 1962)", and that "the action therefor may be filed within four years from the discovery of the fraud x x x", said period may not be applied to this case in view of its peculiar circumstances. The registration of the properties in the name of Luis D. Tongoy on November 8, 1935 cannot be considered as constructive notice to the whole world of the fraud. It will be noted that the foreclosure on the original mortgage over Hacienda Pulo was instituted by PNB as early as June 18, 1931, from which time the members of the Tongoy-Sonora clan had been in constant conference to save the property. At that time all the respondents-Tongoys were still minors (except Amado, who was already 23 years old then), so that there could be truth to the allegation that their exclusion in the Declaration of Inheritance executed by Patricio and Luis Tongoy on April 29, 1933 was made to facilitate matters-as part of the general plan arrived at after the family conferences to transfer the administration of the property to the latter. The events that followed were obviously in pursuance of such plan, thus:

March 13, 1934 An Escritura de Venta (Exh. 2 or W) was executed in favor of Luis D. Tongoy by Ana Tongoy, Teresa Tongoy, Mercedes Sonora, Trinidad Sonora, Juan Sonora and Patricio Tongoy, transferring their rights and interests over Hacienda Pulo to the former. October 23, 1935 An Escritura de Venta (Exh. 3 or DD) was executed by Jesus Sonora, likewise transferring his rights and interests over Hacienda Pulo to Luis D. Tongoy; November 5, 1935 An Escritura de Venta (Exh. 5 or AA) was also executed by Jose Tongoy in favor of Luis D. Tongoy for the same purpose; (Note: This was preceded by the execution on October 14, 1935 of an Assignment of Rights [4 or Z) in favor of Luis D. Tongoy by the Pacific Commercial Company as judgment lien-holder [subordinate of the PNB mortgage] of Jose Tongoy on Hacienda Pulo November 5, 1935 Hacienda Pulo was placed in the name of Luis D. Tongoy married to Ma. Rosario Araneta with the issuance of TCT 20154 (Exh. 20); June 22, 1936 An Escritura de Venta was executed by Basilisa Cuaycong over the Cuaycong property in favor of Luis D. Tongoy, thereby resulting in the issuance of TCT No. 21522 in the name of Luis D. Tongoy married to Ma. Rosario Araneta; June 26, 1936 Luis D. Tongoy executed a real estate mortgage over the Cuaycong property in favor of the PNB to secure a loan of P4,500.00; and June 29, 1936 Luis D. Tongoy executed a real estate mortgage over Hacienda Pulo to secure a loan of P21,000.00 payable for fifteen years. When the mortgages were constituted, respondents Cresenciano Tongoy and Norberto Tongoy were still minors, while respondent Amado Tongoy became of age on August 19, 1931, and Ricardo Tongoy attained majority age on August 12, 1935. Still, considering that such transfer of the properties in the name of Luis D. Tongoy was made in pursuance of the master plan to save them from foreclosure, the said respondents were precluded from doing anything to assert their rights. It was only upon failure of the herein petitioner, as administrator and/or successor-in-interest of Luis D. Tongoy, to return the properties that the prescriptive period should begin to run. As above demonstrated, the prescriptive period is ten year-from the date of recording on May 5, 1958 of the release of mortgage in the Registry of Deeds. WHEREFORE, THE JUDGMENT APPEALED FROM IS HEREBY AFFIRMED IN TOTO. SO ORDERED.

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SECOND DIVISION [G.R. No. 128120. October 20, 2004] SWEDISH MATCH, AB, JUAN ENRIQUEZ, RENE DIZON, FRANCISCO RAPACON, FIEL SANTOS, BETH FLORES, LAMBRTO DE LA EVA, GLORIA REYES, RODRIGO ORTIZ, NICANOR ESCALANTE, PETER HODGSON, SAMUEL PARTOSA, HERMINDA ASUNCION, JUANITO HERRERA, JACOBUS NICOLAAS, JOSEPH PEKELHARING (now Representing himself without court sanction as JOOST PEKELHARING), MASSIMO ROSSI and ED ENRIQUEZ, petitioners, vs. COURT OF APPEALS, ALS MANAGEMENT & DEVELOPMENT CORPORATION and ANTONIO K. LITONJUA, respondents. DECISION TINGA, J.: Petitioners seek a reversal of the twin Orders[1] of the Court of Appeals dated 15 November 1996[2] and 31 January 1997,[3] in CA-G.R. CV No. 35886, entitled ALS Management et al., v. Swedish Match, AB et al. The appellate court overturned the trial courts Order[4] dismissing the respondents complaint for specific performance and remanded the case to the trial court for further proceedings. Swedish Match, AB (hereinafter SMAB) is a corporation organized under the laws of Sweden not doing business in the Philippines. SMAB, however, had three subsidiary corporations in the Philippines, all organized under Philippine laws, to wit: Phimco Industries, Inc. (Phimco), Provident Tree Farms, Inc., and OTT/Louie (Phils.), Inc. Sometime in 1988, STORA, the then parent company of SMAB, decided to sell SMAB of Sweden and the latters worldwide match, lighter and shaving products operation to Eemland Management Services, now known as Swedish Match NV of Netherlands, (SMNV), a corporation organized and existing under the laws of Netherlands. STORA, however, retained for itself the packaging business. SMNV initiated steps to sell the worldwide match and lighter businesses while retaining for itself the shaving business. SMNV adopted a two-pronged strategy, the first being to sell its shares in Phimco Industries, Inc. and a match company in Brazil, which proposed sale would stave-off defaults in the loan covenants of SMNV with its syndicate of lenders. The other move was to sell at once or in one package all the SMNV companies worldwide which were engaged in match and lighter operations thru a global deal (hereinafter, global deal). Ed Enriquez (Enriquez), Vice-President of Swedish Match Sociedad Anonimas (SMSA)the management company of the Swedish Match groupwas commissioned and granted full powers to negotiate by SMNV, with the resulting transaction, however, made subject to final approval by the board. Enriquez was held under strict instructions that the sale of Phimco shares should be executed on or before 30 June 1990, in view of the tight loan covenants of SMNV. Enriquez came to the Philippines in November 1989 and informed the Philippine financial and business circles that the Phimco shares were for sale. Several interested parties tendered offers to acquire the Phimco shares, among whom were the AFP Retirement and Separation Benefits System, herein respondent ALS Management & Development Corporation and respondent Antonio Litonjua (Litonjua), the president and general manager of ALS. In his letter dated 3 November 1989, Litonjua submitted to SMAB a firm offer to buy all of the latters shares in Phimco and all of Phimcos shares in Provident Tree Farm, Inc. and OTT/Louie (Phils.), Inc. for the sum of P750,000,000.00.[5] Through its Chief Executive Officer, Massimo Rossi (Rossi), SMAB, in its letter dated 1 December 1989, thanked respondents for their interest in the Phimco shares. Rossi informed respondents that their price offer was below their expectations but urged them to undertake a comprehensive review and analysis of the value and profit potentials of the Phimco shares, with the assurance that respondents would enjoy a certain priority although several parties had indicated their interest to buy the shares.[6]

Thereafter, an exchange of correspondence ensued between petitioners and respondents regarding the projected sale of the Phimco shares. In his letter dated 21 May 1990, Litonjua offered to buy the disputed shares, excluding the lighter division for US$30.6 million, which per another letter of the same date was increased to US$36 million.[7] Litonjua stressed that the bid amount could be adjusted subject to availability of additional information and audit verification of the company finances. Responding to Litonjuas offer, Rossi sent his letter dated 11 June 1990, informing the former that ALS should undertake a due diligence process or pre-acquisition audit and review of the draft contract for the Match and Forestry activities of Phimco at ALS convenience. However, Rossi made it clear that at the completion of the due diligence process, ALS should submit its final offer in US dollar terms not later than 30 June 1990, for the shares of SMAB corresponding to ninety-six percent (96%) of the Match and Forestry activities of Phimco. Rossi added that in case the global deal presently under negotiation for the Swedish Match Lights Group would materialize, SMAB would reimburse up to US$20,000.00 of ALS costs related to the due diligence process.[8] Litonjua in a letter dated 18 June 1990, expressed disappointment at the apparent change in SMABs approach to the bidding process. He pointed out that in their 4 June 1990 meeting, he was advised that one final bidder would be selected from among the four contending groups as of that date and that the decision would be made by 6 June 1990. He criticized SMABs decision to accept a new bidder who was not among those who participated in the 25 May 1990 bidding. He informed Rossi that it may not be possible for them to submit their final bid on 30 June 1990, citing the advice to him of the auditing firm that the financial statements would not be completed until the end of July. Litonjua added that he would indicate in their final offer more specific details of the payment mechanics and consider the possibility of signing a conditional sale at that time.[9] Two days prior to the deadline for submission of the final bid, Litonjua again advised Rossi that they would be unable to submit the final offer by 30 June 1990, considering that the acquisition audit of Phimco and the review of the draft agreements had not yet been completed. He said, however, that they would be able to finalize their bid on 17 July 1990 and that in case their bid would turn out better than any other proponent, they would remit payment within ten (10) days from the execution of the contracts.[10] Enriquez sent notice to Litonjua that they would be constrained to entertain bids from other parties in view of Litonjuas failure to make a firm commitment for the shares of Swedish Match in Phimco by 30 June 1990.[11] In a letter dated 3 July 1990, Rossi informed Litonjua that on 2 July 1990, they signed a conditional contract with a local group for the disposal of Phimco. He told Litonjua that his bid would no longer be considered unless the local group would fail to consummate the transaction on or before 15 September1990.[12] Apparently irked by SMABs decision to junk his bid, Litonjua promptly responded by letter dated 4 July 1990. Contrary to his prior manifestations, he asserted that, for all intents and purposes, the US$36 million bid which he submitted on 21 May 1990 was their final bid based on the financial statements for the year 1989. He pointed out that they submitted the best bid and they were already finalizing the terms of the sale. He stressed that they were firmly committed to their bid of US$36 million and if ever there would be adjustments in the bid amount, the adjustments were brought about by SMABs subsequent disclosures and validated accounts, such as the aspect that only ninety-six percent (96%) of Phimco shares was actually being sold and not one-hundred percent (100%).[13] More than two months from receipt of Litonjuas last letter, Enriquez sent a fax communication to the former, advising him that the proposed sale of SMABs shares in Phimco with local buyers did not materialize. Enriquez then invited Litonjua to resume negotiations with SMAB for the sale of Phimco shares. He indicated that SMAB would be prepared to negotiate with ALS on an exclusive basis for a period of fifteen (15) days from 26 September 1990 subject to the terms contained in the letter. Additionally, Enriquez clarified that if the sale would not be completed at the end of the fifteen (15)-day period, SMAB would enter into negotiations with other buyers.[14]

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Shortly thereafter, Litonjua sent a letter expressing his objections to the totally new set of terms and conditions for the sale of the Phimco shares. He emphasized that the new offer constituted an attempt to reopen the already perfected contract of sale of the shares in his favor. He intimated that he could not accept the new terms and conditions contained therein.[15] On 14 December 1990, respondents, as plaintiffs, filed before the Regional Trial Court (RTC) of Pasig a complaint for specific performance with damages, with a prayer for the issuance of a writ of preliminary injunction, against defendants, now petitioners. The individual defendants were sued in their respective capacities as officers of the corporations or entities involved in the aborted transaction. Aside from the averments related to their principal cause of action for specific performance, respondents alleged that the Phimco management, in utter bad faith, induced SMAB to violate its contract with respondents. They contended that the Phimco management took an interest in acquiring for itself the Phimco shares and that petitioners conspired to thwart the closing of such sale by interposing various obstacles to the completion of the acquisition audit.[16] Respondents claimed that the Phimco management maliciously and deliberately delayed the delivery of documents to Laya Manabat Salgado & Co. which prevented them from completing the acquisition audit in time for the deadline on 30 June 1990 set by petitioners. [17] Respondents added that SMABs refusal to consummate the perfected sale of the Phimco shares amounted to an abuse of right and constituted conduct which is contrary to law, morals, good customs and public policy.[18] Respondents prayed that petitioners be enjoined from selling or transferring the Phimco shares, or otherwise implementing the sale or transfer thereof, in favor of any person or entity other than respondents, and that any such sale to third parties be annulled and set aside. Respondents also asked that petitioners be ordered to execute all documents or instruments and perform all acts necessary to consummate the sales agreement in their favor. Traversing the complaint, petitioners alleged that respondents have no cause of action, contending that no perfected contract, whether verbal or written, existed between them. Petitioners added that respondents cause of action, if any, was barred by the Statute of Frauds since there was no written instrument or document evidencing the alleged sale of the Phimco shares to respondents. Petitioners filed a motion for a preliminary hearing of their defense of bar by the Statute of Frauds, which the trial court granted. Both parties agreed to adopt as their evidence in support of or against the motion to dismiss, as the case may be, the evidence which they adduced in support of their respective positions on the writ of preliminary injunction incident. In its Order dated 17 April 1991, the RTC dismissed respondents complaint.[19] It ruled that there was no perfected contract of sale between petitioners and respondents. The court a quosaid that the letter dated 11 June 1990, relied upon by respondents, showed that petitioners did not accept the bid offer of respondents as the letter was a mere invitation for respondents to conduct a due diligence process or pre-acquisition audit of Phimcos match and forestry operations to enable them to submit their final offer on 30 June 1990. Assuming that respondents bid was favored by an oral acceptance made in private by officers of SMAB, the trial court noted, such acceptance was merely preparatory to a formal acceptance by the SMABthe acceptance that would eventually lead to the execution and signing of the contract of sale. Moreover, the court noted that respondents failed to submit their final bid on the deadline set by petitioners. Respondents appealed to the Court of Appeals, assigning the following errors: A. THE TRIAL COURT EXCEEDED ITS AUTHORITY AND JURISDICTION WHEN IT ERRED PROCEDURALLY IN MOTU PROPIO (sic) DISMISSING THE COMPLAINT IN ITS ENTIRETY FOR LACK OF A VALID CAUSE OF ACTION WITHOUT THE BENEFIT OF A FULL-BLOWN TRIAL AND ON THE MERE MOTION TO DISMISS. B. THE TRIAL COURT ERRED IN IGNORING PLAINTIFF-APPELLANTS CAUSE OF ACTION BASED ON TORT WHICH, HAVING BEEN SUFFICIENTLY PLEADED, INDEPENDENTLY WARRANTED A FULLBLOWN TRIAL.

C. THE TRIAL COURT ERRED IN IGNORING PLAINTIFFS-APPELLANTS CAUSE OF ACTION BASED ON PROMISSORY ESTOPPEL WHICH, HAVING BEEN SUFFICIENTLY PLEADED, WARRANTED A FULLBLOWN TRIAL, INDEPENDENTLY FOR THE OTHER CAUSES OF ACTION. D. THE TRIAL COURT JUDGE ERRED IN FORSWEARING JUDICIAL OBJECTIVITY TO FAVOR DEFENDANTS-APPELLEES BY MAKING UNFOUNDED FINDINGS, ALL IN VIOLATION OF PLAINTIFFSAPPELLANTS RIGHT TO DUE PROCESS.[20] After assessing the respective arguments of the parties, the Court of Appeals reversed the trial courts decision. It ruled that the series of written communications between petitioners and respondents collectively constitute a sufficient memorandum of their agreement under Article 1403 of the Civil Code; thus, respondents complaint should not have been dismissed on the ground that it was unenforceable under the Statute of Frauds. The appellate court opined that any document or writing, whether formal or informal, written either for the purpose of furnishing evidence of the contract or for another purpose which satisfies all the Statutes requirements as to contents and signature would be sufficient; and, that two or more writings properly connected could be considered together. The appellate court concluded that the letters exchanged by and between the parties, taken together, were sufficient to establish that an agreement to sell the disputed shares to respondents was reached. The Court of Appeals clarified, however, that by reversing the appealed decision it was not thereby declaring that respondents are entitled to the reliefs prayed for in their complaint, but only that the case should not have been dismissed on the ground of unenforceability under the Statute of Frauds. It ordered the remand of the case to the trial court for further proceedings. Hence, this petition. Petitioners argue that the Court of Appeals erred in failing to consider that the Statute of Frauds requires not just the existence of any note or memorandum but that such note or memorandum should evidence an agreement to sell; and, that in this case, there was no word, phrase, or statement in the letters exchanged between the two parties to show or even imply that an agreement had been reached for the sale of the shares to respondent. Petitioners stress that respondent Litonjua made it clear in his letters that the quoted prices were merely tentative and still subject to further negotiations between him and the seller. They point out that there was no meeting of the minds on the essential terms and conditions of the sale because SMAB did not accept respondents offer that consideration would be paid in Philippine pesos. Moreover, Litonjua signified their inability to submit their final bid on 30 June 1990, at the same time stating that the broad terms and conditions described in their meeting were inadequate for them to make a response at that time so much so that he would have to await the corresponding specifics. Petitioners argue that the foregoing circumstances prove that they failed to reach an agreement on the sale of the Phimco shares. In their Comment, respondents maintain that the Court of Appeals correctly ruled that the Statute of Frauds does not apply to the instant case. Respondents assert that the sale of the subject shares to them was perfected as shown by the following circumstances, namely: petitioners assured them that should they increase their bid, the sale would be awarded to them and that they did in fact increase their previous bid of US$30.6 million to US$36 million; petitioners orally accepted their revised offer and the acceptance was relayed to them by Rene Dizon; petitioners directed them to proceed with the acquisition audit and to submit a comfort letter from the United Coconut Planters Bank (UCPB); petitioner corporation confirmed its previous verbal acceptance of their offer in a letter dated 11 June 1990; with the prior approval of petitioners, respondents engaged the services of Laya, Manabat, Salgado & Co., an independent auditing firm, to immediately proceed with the acquisition audit; and, petitioner corporation reiterated its commitment to be bound by the result of the acquisition audit and promised to reimburse respondents cost to the extent of US$20,000.00. All these incidents, according to respondents, overwhelmingly prove that the contract of sale of the Phimco shares was perfected. Further, respondents argued that there was partial performance of the perfected contract on their part. They alleged that with the prior approval of petitioners, they engaged the services of Laya, Manabat, Salgado

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& Co. to conduct the acquisition audit. They averred that petitioners agreed to be bound by the results of the audit and offered to reimburse the costs thereof to the extent of US$20,000.00. Respondents added that in compliance with their obligations under the contract, they have submitted a comfort letter from UCPB to show petitioners that the bank was willing to finance the acquisition of the Phimco shares.[21] The basic issues to be resolved are: (1) whether the appellate court erred in r eversing the trial courts decision dismissing the complaint for being unenforceable under the Statute of Frauds; and (2) whether there was a perfected contract of sale between petitioners and respondents with respect to the Phimco shares. The Statute of Frauds embodied in Article 1403, paragraph (2), of the Civil Code[22] requires certain contracts enumerated therein to be evidenced by some note or memorandum in order to be enforceable. The term Statute of Frauds is descriptive of statutes which require certain classes of contracts to be in writing. The Statute does not deprive the parties of the right to contract with respect to the matters therein involved, but merely regulates the formalities of the contract necessary to render it enforceable. [23] Evidence of the agreement cannot be received without the writing or a secondary evidence of its contents. The Statute, however, simply provides the method by which the contracts enumerated therein may be proved but does not declare them invalid because they are not reduced to writing. By law, contracts are obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. However, when the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be proved in a certain way, that requirement is absolute and indispensable.[24] Consequently, the effect of non-compliance with the requirement of the Statute is simply that no action can be enforced unless the requirement is complied with.[25] Clearly, the form required is for evidentiary purposes only. Hence, if the parties permit a contract to be proved, without any objection, it is then just as binding as if the Statute has been complied with.[26] The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending for their evidence on the unassisted memory of witnesses, by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged.[27] However, for a note or memorandum to satisfy the Statute, it must be complete in itself and cannot rest partly in writing and partly in parol. The note or memorandum must contain the names of the parties, the terms and conditions of the contract, and a description of the property sufficient to render it capable of identification.[28] Such note or memorandum must contain the essential elements of the contract expressed with certainty that may be ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to parol evidence.[29] Contrary to the Court of Appeals conclusion, the exchange of correspondence between the parties hardly constitutes the note or memorandum within the context of Article 1403 of the Civil Code. Rossis letter dated 11 June 1990, heavily relied upon by respondents, is not complete in itself. First, it does not indicate at what price the shares were being sold. In paragraph (5) of the letter, respondents were supposed to submit their final offer in U.S. dollar terms, at that after the completion of the due diligence process. The paragraph undoubtedly proves that there was as yet no definite agreement as to the price. Second, the letter does not state the mode of payment of the price. In fact, Litonjua was supposed to indicate in his final offer how and where payment for the shares was planned to be made.[30] Evidently, the trial courts dismissal of the complaint on the ground of unenforceability under the Statute of Frauds is warranted.[31] Even if we were to consider the letters between the parties as a sufficient memorandum for purposes of taking the case out of the operation of the Statute the action for specific performance would still fail. A contract is defined as a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of another, or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do.[32] There can be no contract unless the following requisites concur: (a) consent of the contracting parties; (b) object certain which is the subject matter of the contract; (c) cause of the obligation

which is established.[33] Contracts are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. [34] Specifically, in the case of a contract of sale, required is the concurrence of three elements, to wit: (a) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (b) determinate subject matter, and (c) price certain in money or its equivalent.[35] Such contract is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. [36] In general, contracts undergo three distinct stages, to wit: negotiation; perfection or birth; and consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and ends at the moment of agreement of the parties. Perfection or birth of the contract takes place when the parties agree upon the essential elements of the contract. Consummation occurs when the parties fulfill or perform the terms agreed upon in the contract, culminating in the extinguishment thereof.[37] A negotiation is formally initiated by an offer. A perfected promise merely tends to insure and pave the way for the celebration of a future contract. An imperfect promise (policitacion), on the other hand, is a mere unaccepted offer.[38] Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. At any time prior to the perfection of the contract, either negotiating party may stop the negotiation.[39] The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal.[40] An offer would require, among other things, a clear certainty on both the object and the cause or consideration of the envisioned contract. Consent in a contract of sale should be 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. A qualified acceptance constitutes a counter-offer.[41] Quite obviously, Litonjuas letter dated 21 May 1990, proposing the acquisition of the Phimco shares for US$36 million was merely an offer. This offer, however, in Litonjuas own words, is understood to be subject to adjustment on the basis of an audit of the assets, liabilities and net worth of Phimco and its subsidiaries and on the final negotiation between ourselves.[42] Was the offer certain enough to satisfy the requirements of the Statute of Frauds? Definitely not. Litonjua repeatedly stressed in his letters that they would not be able to submit their final bid by 30 June 1990.[43] With indubitable inconsistency, respondents later claimed that for all intents and purposes, the US$36 million was their final bid. If this were so, it would be inane for Litonjua to state, as he did, in his letter dated 28 June 1990 that they would be in a position to submit their final bid only on 17 July 1990. The lack of a definite offer on the part of respondents could not possibly serve as the basis of their claim that the sale of the Phimco shares in their favor was perfected, for one essential element of a contract of sale was obviously wantingthe price certain in money or its equivalent. The price must be certain, otherwise there is no true consent between the parties.[44] There can be no sale without a price.[45] Quite recently, this Court reiterated the long-standing doctrine that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist since the agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.[46] Granting arguendo, that the amount of US$36 million was a definite offer, it would remain as a mere offer in the absence of evidence of its acceptance. To produce a contract, there must be acceptance, which may be express or implied, but it must not qualify the terms of the offer.[47] The acceptance of an offer must be unqualified and absolute to perfect the contract.[48] In other words, it must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.[49] Respondents attempt to prove the alleged verbal acceptance of their US$36 million bid becomes futile in the face of the overwhelming evidence on record that there was in the first place no meeting of the minds with respect to the price. It is dramatically clear that the US$36 million was not the actual price agreed upon but merely a preliminary offer which was subject to adjustment after the conclusion of the audit of the company finances. Respondents failure to submit their final bid on the deadline set by petitioners prevented

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the perfection of the contract of sale. It was not perfected due to the absence of one essential element which was the price certain in money or its equivalent. At any rate, from the procedural stand point, the continuing objections raised by petitioners to the admission of parol evidence[50] on the alleged verbal acceptance of the offer rendered any evidence of acceptance inadmissible. Respondents plea of partial performance should likewise fail. The acquisition audit and submission of a comfort letter, even if considered together, failed to prove the perfection of the contract. Quite the contrary, they indicated that the sale was far from concluded. Respondents conducted the audit as part of the due diligence process to help them arrive at and make their final offer. On the other hand, the submission of the comfort letter was merely a guarantee that respondents had the financial capacity to pay the price in the event that their bid was accepted by petitioners. The Statute of Frauds is applicable only to contracts which are executory and not to those which have been consummated either totally or partially.[51] If a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already derived by him from the transaction in litigation, and at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby.[52] This rule, however, is predicated on the fact of ratification of the contract within the meaning of Article 1405 of the Civil Code either (1) by failure to object to the presentation of oral evidence to prove the same, or (2) by the acceptance of benefits under them. In the instant case, respondents failed to prove that there was partial performance of the contract within the purview of the Statute. Respondents insist that even on the assumption that the Statute of Frauds is applicable in this case, the trial court erred in dismissing the complaint altogether. They point out that the complaint presents several causes of action. A close examination of the complaint reveals that it alleges two distinct causes of action, the first is for specific performance[53] premised on the existence of the contract of sale, while the other is solely for damages, predicated on the purported dilatory maneuvers executed by the Phimco management. [54] With respect to the first cause of action for specific performance, apart from petitioners alleged refusal to honor the contract of salewhich has never been perfected in the first placerespondents made a number of averments in their complaint all in support of said cause of action. Respondents claimed that petitioners were guilty of promissory estoppel,[55] warranty breaches[56] and tortious conduct[57] in refusing to honor the alleged contract of sale. These averments are predicated on or at least interwoven with the existence or perfection of the contract of sale. As there was no such perfected contract, the trial court properly rejected the averments in conjunction with the dismissal of the complaint for specific performance. However, respondents second cause of action due to the alleged malicious and deliberate delay of the Phimco management in the delivery of documents necessary for the completion of the audit on time, not being based on the existence of the contract of sale, could stand independently of the action for specific performance and should not be deemed barred by the dismissal of the cause of action predicated on the failed contract. If substantiated, this cause of action would entitle respondents to the recovery of damages against the officers of the corporation responsible for the acts complained of. Thus, the Court cannot forthwith order dismissal of the complaint without affording respondents an opportunity to substantiate their allegations with respect to its cause of action for damages against the officers of Phimco based on the latters alleged self-serving dilatory maneuvers. WHEREFORE, the petition is in part GRANTED. The appealed Decision is hereby MODIFIED insofar as it declared the agreement between the parties enforceable under the Statute of Frauds. The complaint before the trial court is ordered DISMISSED insofar as the cause of action for specific performance is concerned. The case is ordered REMANDED to the trial court for further proceedings with respect to the cause of action for damages as above specified. SO ORDERED.

THIRD DIVISION [G.R. No. 138018. July 26, 2002] RIDO MONTECILLO, petitioner, vs. IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA ABUCAY, respondents. DECISION CARPIO, J.: The Case On March 24, 1993, the Regional Trial Court of Cebu City, Branch 18, rendered a Decision[1] declaring the deed of sale of a parcel of land in favor of petitioner null and void ab initio. The Court of Appeals,[2] in its July 16, 1998 Decision[3] as well as its February 11, 1999 Order[4] denying petitioners Motion for Reconsideration, affirmed the trial courts decision in toto. Before this Court now is a Petition for Review on Certiorari[5] assailing the Court of Appeals decision and order. The Facts Respondents Ignacia Reynes (Reynes for brevity) and Spouses Abucay (Abucay Spouses for brevity) filed on June 20, 1984 a complaint for Declaration of Nullity and Quieting of Title against petitioner Rido Montecillo (Montecillo for brevity). Reynes asserted that she is the owner of a lot situated in Mabolo, Cebu City, covered by Transfer Certificate of Title No. 74196 and containing an area of 448 square meters (Mabolo Lot for brevity). In 1981, Reynes sold 185 square meters of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they bought. Reynes alleged further that on March 1, 1984 she signed a Deed of Sale of the Mabolo Lot in favor of Montecillo (Montecillos Deed of Sale for brevity). Reynes, being illiterate,[6] signed by affixing her thumbmark[7] on the document. Montecillo promised to pay the agreed P47,000.00 purchase price within one month from the signing of the Deed of Sale. Montecillos Deed of Sale states as follows: That I, IGNACIA T. REYNES, of legal age, Filipino, widow, with residence and postal address at Mabolo, Cebu City, Philippines, for and in consideration of FORTY SEVEN THOUSAND (P47,000.00) PESOS, Philippine Currency, to me in hand paid by RIDO MONTECILLO, of legal age, Filipino, married, with residence and postal address at Mabolo, Cebu City, Philippines, the receipt hereof is hereby acknowledged, have sold, transferred, and conveyed, unto RIDO MONTECILLO, his heirs, executors, administrators, and assigns, forever, a parcel of land together with the improvements thereon, situated at Mabolo, Cebu City, Philippines, free from all liens and encumbrances, and more particularly described as follows: A parcel of land (Lot 203-B-2-B of the subdivision plan Psd-07-01-00 2370, being a portion of Lot 203-B-2, described on plan (LRC) Psd-76821, L.R.C. (GLRO) Record No. 5988), situated in the Barrio of Mabolo, City of Cebu. Bounded on the SE., along line 1-2 by Lot 206; on the SW., along line 2-3, by Lot 202, both of Banilad Estate; on the NW., along line 4-5, by Lot 203-B-2-A of the subdivision of Four Hundred Forty Eight (448) square meters, more or less. of which I am the absolute owner in accordance with the provisions of the Land Registration Act, my title being evidenced by Transfer Certificate of Title No. 74196 of the Registry of Deeds of the City of Cebu, Philippines. That This Land Is Not Tenanted and Does Not Fall Under the Purview of P.D. 27.[8] (Emphasis supplied) Reynes further alleged that Montecillo failed to pay the purchase price after the lapse of the one-month period, prompting Reynes to demand from Montecillo the return of the Deed of Sale. Since Montecillo refused to return the Deed of Sale,[9] Reynes executed a document unilaterally revoking the sale and gave a copy of the document to Montecillo.

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Subsequently, on May 23, 1984 Reynes signed a Deed of Sale transferring to the Abucay Spouses the entire Mabolo Lot, at the same time confirming the previous sale in 1981 of a 185-square meter portion of the lot. This Deed of Sale states: I, IGNACIA T. REYNES, of legal age, Filipino, widow and resident of Mabolo, Cebu City, do hereby confirm the sale of a portion of Lot No. 74196 to an extent of 185 square meters to Spouses Redemptor Abucay and Elisa Abucay covered by Deed per Doc. No. 47, Page No. 9, Book No. V, Series of 1981 of notarial register of Benedicto Alo, of which spouses is now in occupation; That for and in consideration of the total sum of FIFTY THOUSAND (P50,000) PESOS, Philippine Currency, received in full and receipt whereof is herein acknowledged from SPOUSES REDEMPTOR ABUCAY and ELISA ABUCAY, do hereby in these presents, SELL, TRANSFER and CONVEY absolutely unto said Spouses Redemptor Abucay and Elisa Abucay, their heirs, assigns and successors-in-interest the whole parcel of land together with improvements thereon and more particularly described as follows: TCT No. 74196 A parcel of land (Lot 203-B-2-B of the subdivision plan psd-07-01-002370, being a portion of Lot 203-B-2, described on plan (LRC) Psd 76821, LRC (GLRO) Record No. 5988) situated in Mabolo, Cebu City, along Arcilla Street, containing an area of total FOUR HUNDRED FORTY EIGHT (448) Square meters. of which I am the absolute owner thereof free from all liens and encumbrances and warrant the same against claim of third persons and other deeds affecting said parcel of land other than that to the said spouses and inconsistent hereto is declared without any effect. In witness whereof, I hereunto signed this 23rd day of May, 1984 in Cebu City, Philippines. [10] Reynes and the Abucay Spouses alleged that on June 18, 1984 they received information that the Register of Deeds of Cebu City issued Certificate of Title No. 90805 in the name of Montecillo for the Mabolo Lot. Reynes and the Abucay Spouses argued that for lack of consideration there (was) no meeting of the minds[11] between Reynes and Montecillo. Thus, the trial court should declare null and void ab initio Montecillos Deed of Sale, and order the cancellation of Certificate of Title No. 90805 in the name of Montecillo. In his Answer, Montecillo, a bank executive with a B.S. Commerce degree,[12] claimed he was a buyer in good faith and had actually paid the P47,000.00 consideration stated in his Deed of Sale. Montecillo, however, admitted he still owed Reynes a balance of P10,000.00. He also alleged that he paid P50,000.00 for the release of the chattel mortgage which he argued constituted a lien on the Mabolo Lot. He further alleged that he paid for the real property tax as well as the capital gains tax on the sale of the Mabolo Lot. In their Reply, Reynes and the Abucay Spouses contended that Montecillo did not have authority to discharge the chattel mortgage, especially after Reynes revoked Montecillos Deed of Sale and gave the mortgagee a copy of the document of revocation. Reynes and the Abucay Spouses claimed that Montecillo secured the release of the chattel mortgage through machination. They further asserted that Montecillo took advantage of the real property taxes paid by the Abucay Spouses and surreptitiously caused the transfer of the title to the Mabolo Lot in his name. During pre-trial, Montecillo claimed that the consideration for the sale of the Mabolo Lot was the amount he paid to Cebu Ice and Cold Storage Corporation (Cebu Ice Storage for brevity) for the mortgage debt of Bienvenido Jayag (Jayag for brevity). Montecillo argued that the release of the mortgage was necessary since the mortgage constituted a lien on the Mabolo Lot. Reynes, however, stated that she had nothing to do with Jayags mortgage debt except that the house mortgaged by Jayag stood on a portion of the Mabolo Lot. Reynes further stated that the payment by Montecillo to release the mortgage on Jayags house is a matter between Montecillo and Jayag. The mortgage on the house, being a chattel mortgage, could not be interpreted in any way as an encumbrance on

the Mabolo Lot. Reynes further claimed that the mortgage debt had long prescribed since the P47,000.00 mortgage debt was due for payment on January 30, 1967. The trial court rendered a decision on March 24, 1993 declaring the Deed of Sale to Montecillo null and void. The trial court ordered the cancellation of Montecillos Transfer Certificate of Title No. 90805 and the issuance of a new certificate of title in favor of the Abucay Spouses. The trial court found that Montecillos Deed of Sale had no cause or consideration because Montecillo never paid Reynes the P47,000.00 purchase price, contrary to what is stated in the Deed of Sale that Reynes received the purchase price. The trial court ruled that Montecillos Deed of Sale produced no effect whatsoever for want of consideration. The dispositive portion of the trial courts decision reads as follows: WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered declaring the deed of sale in favor of defendant null and void and of no force and effect thereby ordering the cancellation of Transfer Certificate of Title No. 90805 of the Register of Deeds of Cebu City and to declare plaintiff Spouses Redemptor and Elisa Abucay as rightful vendees and Transfer Certificate of Title to the property subject matter of the suit issued in their names. The defendants are further directed to pay moral damages in the sum of P20,000.00 and attorneys fees in the sum of P2,000.00 plus cost of the suit. xxx Not satisfied with the trial courts Decision, Montecillo appealed the same to the Court of Appeals. Ruling of the Court of Appeals The appellate court affirmed the Decision of the trial court in toto and dismissed the appeal[13] on the ground that Montecillos Deed of Sale is void for lack of consideration. The appellate court also denied Montecillos Motion for Reconsideration[14] on the ground that it raised no new arguments. Still dissatisfied, Montecillo filed the present petition for review on certiorari. The Issues Montecillo raises the following issues: 1. Was there an agreement between Reynes and Montecillo that the stated consideration of P47,000.00 in the Deed of Sale be paid to Cebu Ice and Cold Storage to secure the release of the Transfer Certificate of Title? 2. If there was none, is the Deed of Sale void from the beginning or simply rescissible?[15] The Ruling of the Court The petition is devoid of merit. First issue: manner of payment of the P47,000.00 purchase price. Montecillos Deed of Sale does not state that the P47,000.00 purchase price should be paid by Montecillo to Cebu Ice Storage. Montecillo failed to adduce any evidence before the trial court showing that Reynes had agreed, verbally or in writing, that the P47,000.00 purchase price should be paid to Cebu Ice Storage. Absent any evidence showing that Reynes had agreed to the payment of the purchase price to any other party, the payment to be effective must be made to Reynes, the vendor in the sale. Article 1240 of the Civil Code provides as follows: Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. Thus, Montecillos payment to Cebu Ice Storage is not the payment that would extinguish [16] Montecillos obligation to Reynes under the Deed of Sale. It militates against common sense for Reynes to sell her Mabolo Lot for P47,000.00 if this entire amount would only go to Cebu Ice Storage, leaving not a single centavo to her for giving up ownership of a

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valuable property. This incredible allegation of Montecillo becomes even more absurd when one considers that Reynes did not benefit, directly or indirectly, from the payment of the P47,000.00 to Cebu Ice Storage. The trial court found that Reynes had nothing to do with Jayags mortgage debt with Cebu Ice Storage. The trial court made the following findings of fact: x x x. Plaintiff Ignacia Reynes was not a party to nor privy of the obligation in favor of the Cebu Ice and Cold Storage Corporation, the obligation being exclusively of Bienvenido Jayag and wife who mortgaged their residential house constructed on the land subject matter of the complaint. The payment by the defendant to release the residential house from the mortgage is a matter between him and Jayag and cannot by implication or deception be made to appear as an encumbrance upon the land.[17] Thus, Montecillos payment to Jayags creditor could not possibly redound to the benefit [18] of Reynes. We find no reason to disturb the factual findings of the trial court. In petitions for review on certiorari as a mode of appeal under Rule 45, as in the instant case, a petitioner can raise only questions of law. [19] This Court is not the proper venue to consider a factual issue as it is not a trier of facts. Second issue: whether the Deed of Sale is void ab initio or only rescissible. Under Article 1318 of the Civil Code, [T]here is no contract unless the following requisites concur: (1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established. Article 1352 of the Civil Code also provides that [C]ontracts without cause x x x produce no effect whatsoever. Montecillo argues that his Deed of Sale has all the requisites of a valid contract. Montecillo points out that he agreed to purchase, and Reynes agreed to sell, the Mabolo Lot at the price ofP47,000.00. Thus, the three requisites for a valid contract concur: consent, object certain and consideration. Montecillo asserts there is no lack of consideration that would prevent the existence of a valid contract. Rather, there is only nonpayment of the consideration within the period agreed upon for payment. Montecillo argues there is only a breach of his obligation to pay the full purchase price on time. Such breach merely gives Reynes a right to ask for specific performance, or for annulment of the obligation to sell the Mabolo Lot. Montecillo maintains that in reciprocal obligations, the injured party can choose between fulfillment and rescission,[20] or more properly cancellation, of the obligation under Article 1191 [21] of the Civil Code. This Article also provides that the court shall decree the rescission claimed, unless there be just cause authorizing the fixing of the period. Montecillo claims that because Reynes failed to make a demand for payment, and instead unilaterally revoked Montecillos Deed of Sale, the court has a just cause to fix the period for payment of the balance of the purchase price. These arguments are not persuasive. Montecillos Deed of Sale states that Montecillo paid, and Reynes received, the P47,000.00 purchase price on March 1, 1984, the date of signing of the Deed of Sale. This is clear from the following provision of the Deed of Sale: That I, IGNACIA T. REYNES, x x x for and in consideration of FORTY SEVEN THOUSAND (P47,000.00) PESOS, Philippine Currency, to me in hand paid by RIDO MONTECILLO xxx, receipt of which is hereby acknowledged, have sold, transferred, and conveyed, unto RIDO MONTECILLO, x x x a parcel of land x x x. On its face, Montecillos Deed of Absolute Sale[22] appears supported by a valuable consideration. However, based on the evidence presented by both Reynes and Montecillo, the trial court found that Montecillo never paid to Reynes, and Reynes never received from Montecillo, the P47,000.00 purchase price. There was indisputably a total absence of consideration contrary to what is stated in Montecillos Deed of Sale. As pointed out by the trial court From the allegations in the pleadings of both parties and the oral and documentary evidence adduced during the trial, the court is convinced that the Deed of Sale (Exhibits 1 and 1-A) executed by plaintiff Ignacia Reynes acknowledged before Notary Public Ponciano Alvinio is devoid of any consideration. Plaintiff Ignacia Reynes through the representation of Baudillo Baladjay had executed a Deed of Sale in favor of defendant on

the promise that the consideration should be paid within one (1) month from the execution of the Deed of Sale. However, after the lapse of said period, defendant failed to pay even a single centavo of the consideration. The answer of the defendant did not allege clearly why no consideration was paid by him except for the allegation that he had a balance of only P10,000.00. It turned out during the pre-trial that what the defendant considered as the consideration was the amount which he paid for the obligation of Bienvenido Jayag with the Cebu Ice and Cold Storage Corporation over which plaintiff Ignacia Reynes did not have a part except that the subject of the mortgage was constructed on the parcel of land in question. Plaintiff Ignacia Reynes was not a party to nor privy of the obligation in favor of the Cebu Ice and Cold Storage Corporation, the obligation being exclusively of Bienvenido Jayag and wife who mortgaged their residential house constructed on the land subject matter of the complaint. The payment by the defendant to release the residential house from the mortgage is a matter between him and Jayag and cannot by implication or deception be made to appear as an encumbrance upon the land. [23] Factual findings of the trial court are binding on us, especially if the Court of Appeals affirms such findings.[24] We do not disturb such findings unless the evidence on record clearly does not support such findings or such findings are based on a patent misunderstanding of facts,[25] which is not the case here. Thus, we find no reason to deviate from the findings of both the trial and appellate courts that no valid consideration supported Montecillos Deed of Sale. This is not merely a case of failure to pay the purchase price, as Montecillo claims, which can only amount to a breach of obligation with rescission as the proper remedy. What we have here is a purported contract that lacks a cause - one of the three essential requisites of a valid contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract[26] while the latter prevents the existence of a valid contract Where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of consideration. This has been the well-settled rule as early as Ocejo Perez & Co. v. Flores,[27] a 1920 case. As subsequently explained in Mapalo v. Mapalo[28] In our view, therefore, the ruling of this Court in Ocejo Perez & Co. vs. Flores, 40 Phil. 921, is squarely applicable herein. In that case we ruled that a contract of purchase and sale is null and void and produces no effect whatsoever where the same is without cause or consideration in that the purchase price which appears thereon as paid has in fact never been paid by the purchaser to the vendor. The Court reiterated this rule in Vda. De Catindig v. Heirs of Catalina Roque,[29] to wit The Appellate Courts finding that the price was not paid or that the statement in the supposed contracts of sale (Exh. 6 to 26) as to the payment of the price was simulated fortifies the view that the alleged sales were void. If the price is simulated, the sale is void . . . (Art. 1471, Civil Code) A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid, has in fact never been paid by the purchaser to the vendor (Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921; Mapalo vs. Mapalo, L-21489, May 19, 1966, 64 O.G. 331, 17 SCRA 114, 122). Such a sale is nonexistent (Borromeo vs. Borromeo, 98 Phil. 432) or cannot be considered consummated (Cruzado vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA 229). Applying this well-entrenched doctrine to the instant case, we rule that Montecillos Deed of Sale is null and void ab initio for lack of consideration. Montecillo asserts that the only issue in controversy is the mode and/o r manner of payment and/or whether or not payment has been made.[30] Montecillo implies that the mode or manner of payment is separate from the consideration and does not affect the validity of the contract. In the recent case of San Miguel Properties Philippines, Inc. v. Huang,[31] we ruled that In Navarro v. Sugar Producers Cooperative Marketing Association, Inc. (1 SCRA 1181 [1961]), we laid down the rule that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the minds of the

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parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals (244 SCRA 320 [1995]), agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. (Emphasis supplied) One of the three essential requisites of a valid contract is consent of the parties on the object and cause of the contract. In a contract of sale, the parties must agree not only on the price, but also on the manner of payment of the price. An agreement on the price but a disagreement on the manner of its payment will not result in consent, thus preventing the existence of a valid contract for lack of consent. This lack of consent is separate and distinct from lack of consideration where the contract states that the price has been paid when in fact it has never been paid. Reynes expected Montecillo to pay him directly the P47,000.00 purchase price within one month after the signing of the Deed of Sale. On the other hand, Montecillo thought that his agreement with Reynes required him to pay the P47,000.00 purchase price to Cebu Ice Storage to settle Jayags mortgage debt. Montecillo also acknowledged a balance of P10,000.00 in favor of Reynes although this amount is not stated in Montecillos Deed of Sale. Thus, there was no consent, or meeting of the minds, between Reynes and Montecillo on the manner of payment. This prevented the existence of a valid contract because of lack of consent. In summary, Montecillos Deed of Sale is null and void ab initio not only for lack of consideration, but also for lack of consent. The cancellation of TCT No. 90805 in the name of Montecillo is in order as there was no valid contract transferring ownership of the Mabolo Lot from Reynes to Montecillo. WHEREFORE, the petition is DENIED and the assailed Decision dated July 16, 1998 of the Court of Appeals in CA-G.R. CV No. 41349 is AFFIRMED. Costs against petitioner. SO ORDERED.

FIRST DIVISION [G.R. No. 125088. April 14, 2004] LAGRIMAS A. BOY, petitioner, vs. COURT OF APPEALS, ISAGANI P. RAMOS and ERLINDA GASINGAN RAMOS, respondents. DECISION AZCUNA, J.: Before us is a petition for review on certiorari of the decision of the Court of Appeals in an ejectment case, docketed as CA-G.R. SP No. 38716, which reversed and set aside the decision[1]of the Regional Trial Court of Manila, Branch 54,[2] and reinstated the decision[3] of the Metropolitan Trial Court of Manila, Branch 14,[4] ordering petitioner to vacate the disputed premises and to pay rent until the premises are vacated and possession is turned over to private respondents. The facts, as stated by the Court of Appeals, are as follows: On September 24, 1993, the spouses Isagani P. Ramos and Erlinda Gasingan Ramos, private respondents herein, filed an action for ejectment against Lagrimas A. Boy (Lagrimas), petitioner herein, with the Metropolitan Trial Court of Manila. In their Complaint, the spouses Ramos alleged that they are the owners of a parcel of land with an area of 55.75 square meters, and the house existing thereon, situated at 1151 Florentino Torres St., Singalong, Manila. They acquired the said properties from Lagrimas who sold the same to them by virtue of a Deed of Absolute Sale,[5] which was executed on June 4, 1986. However, Lagrimas requested for time to vacate the premises, and they agreed thereto, because they were not in immediate need of the premises. Time came when they needed the said house as they were only renting their own residence. They then demanded that Lagrimas vacate the subject premises, but she refused to do so. Hence, they initiated this action for ejectment against Lagrimas.[6] In her Answer, Lagrimas alleged that sometime in September 1984, in order to accommodate her brothers need for a placement fee to work abroad, she borrowed P15,000 from the spouses Ramos, who asked for the subject property as collateral. On June 4, 1986, the spouses Ramos caused her to sign a Deed of Absolute Sale purporting to show that she sold the property in question to them for the sum of P31,000. The balance of P16,000 was promised to be paid on that date, but the promise was never fulfilled. Sometime in May 1988, Erlinda Ramos and Lagrimas executed an agreement (Kasunduan)[7] acknowledging that the subject parcel of land, together with the upper portion of the house thereon, had been sold by Lagrimas to the spouses Ramos for P31,000; that of the said price, the sum of P22,500 (representing P15,000 cash loan plus P7,500 as interest from September 1984 to May 1988) had been paid; that the balance ofP8,500 would be paid on the last week of August 1988; and that possession of the property would be transferred to the spouses Ramos only upon full payment of the purchase price.[8] Lagrimas admitted that the counsel of the spouses Ramos sent her a letter demanding that she vacate the premises. Lagrimas alleged that the demand for her to pay the sum of P6,000 per month has no legal basis. Lagrimas was summoned by the Punong Barangay for conciliation, but no settlement was reached.[9] The Metropolitan Trial Court (MeTC) noted the existence of a Deed of Absolute Sale executed by the spouses Ramos and Lagrimas on June 4, 1986. The Deed was duly acknowledged before a Notary Public and the parties therein did not deny its due execution. The MeTC observed that Lagrimas defense that the spouses Ramos still had to pay the amount of P16,000 to complete the full consideration of P31,000 was nowhere to be found in the Deed of Absolute Sale.[10] The MeTC held that the Kasunduan, which Lagrimas attached to her Answer, cannot be given binding effect. The MeTC stated that while Erlinda Ramos admitted the existence of said document, she thought that Lagrimas was only asking for an additional amount. Erlinda Ramos claimed that after signing and reading the document, she realized that it did not contain the true facts of the situation since they had already purchased the subject property and were, therefore, the owners thereof. Erlinda Ramos, thereafter, refused to give her

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residence certificate and asked the notary public not to notarize the document. Said incident was attested to by way of affidavit by Lutgarda Reyes, the friend and companion of Lagrimas.[11] Moreover, the MeTC ruled that the continued occupation by Lagrimas of said property after the sale, without payment of rent, was by mere tolerance. It held that since the spouses Ramos, who were staying in a rented place, were asked to vacate the same, they were in need to take possession of their own property. [12] The MeTC thus rendered judgment in favor of private respondents, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs [herein private respondents] and against the defendant [herein petitioner], ordering the latter and the persons claiming rights under her to vacate the premises known as 1151 Florentino [Torres] Street, Singalong, Manila. The defendant is likewise ordered to pay plaintiffs the sum of P1,000.00 per month as reasonable compensation for the use and occupation of the premises from the filing of this complaint until the premises is vacated and possession is turned over to the plaintiffs; the further sum of P5,000.00 as attorneys fees plus the costs of the suit. Defendants counterclaim is hereby dismissed for lack of merit. SO ORDERED.[13] Petitioner appealed said decision to the Regional Trial Court, which rendered judgment in her favor, thus: In view of the foregoing, this Court hereby reverses the assailed Decision and dismisses the complaint. Costs against the appellee. The order previously issued granting execution pending appeal is accordingly recalled. SO ORDERED.[14] The Regional Trial Court (RTC) held that the Kasunduan was binding between the parties and was the true agreement between them. It ruled that pending the determination of the question of ownership, it cannot deprive the party in actual possession of the right to continue peacefully with said possession. Since the question of ownership was inextricably woven with that of possession, the RTC held that the MeTC should have dismissed the case because jurisdiction pertains to another tribunal.[15] Private respondents filed a petition for review of the decision of the RTC with the Court of Appeals. They faulted the respondent Judge for giving credence to the Kasunduan and holding that it prevailed over the Deed of Absolute Sale. The Court of Appeals ruled in favor of private respondents, thus: WHEREFORE, the decision of the respondent Judge herein appealed from is hereby REVERSED and SET ASIDE, and the decision of the Metropolitan Trial Court is herebyREINSTATED. SO ORDERED.[16] The Court of Appeals found, thus: A review of the records discloses that the private respondent [herein petitioner Lagrimas] acquired the subject property from one Marianita C. Valera by virtue of two instruments. The first one is a Deed of Sale dated September 27, 1984, in which the vendor Marianita C. Valera sold a house of light wooden materials and her rights as a bonafide tenant of the land on which it stands, to the vendee Lagrimas A. Boy for P31,000.00 (Annex 1 to the Affidavit of Lagrimas A. Boy, p. 67, Record). The second one is a deed of absolute sale and assignment of rights dated March 18, 1985, in which the vendor Ma. Nita C. Valera sold a residential house and her rights and interests over a parcel of land in which it is located, to vendee Lagrimas A. Boy, for the price of P31,000.00 (Annex 2, Affidavit of Lagrimas A. Boy, pp. 68-69, Record). It appears from the foregoing that Marianita C. Valera was originally one of the tenants/residents of 669 square meters of land owned by the PNB. She constructed a house on a 55.75 square meter portion of the said land. In 1984, she sold the house and only her rights as tenant of the land to private respondent,

because the PNB had not yet sold the land to the residents. In 1985, the sale of the land to the residents had already been accomplished. Hence, she sold the house and her rights and interests to the land to the private respondent. Significantly, these contracts coincide with certain events in the relationship between the petitioners [herein private respondents spouses Ramos] and private respondent. According to the Answer of private respondent, sometime in September, 1984, she borrowed the sum of P15,000.00 from the petitioners to accommodate her brothers placement fee to work abroad (par. 7, Answer, p. 19, Record). And on March 19, 1985, the private respondent executed a deed of real estate mortgage (Annex a to the Affidavit of Erlinda C. Ramos, pp. 54-55, Record), in which she mortgaged the properties she has acquired from Marianita C. Valera to the petitioners, to secure a loan in the amount of P26,200.00, payable within three months. One year later, on June 4, 1986, the private respondent executed a deed of absolute sale in which she sold the same property acquired from Marianita C. Valera to the petitioners, for the price of P31,000.00. [17] Considering that petitioner borrowed P26,200 from private respondents, which loan was covered by a real estate mortgage of the subject house and lot, and the subsequent sale of the property to private respondents for P31,000 after non-payment of the loan, the Court of Appeals did not give credence to the statement in the Kasunduan that private respondents paid onlyP22,500 to petitioner since her indebtedness already reached P26,200. The Court of Appeals gave weight to the argument of private respondents that Erlinda Ramos was merely tricked into signing the Kasunduan. It gave credence to the version of private respondents on how the Kasunduan came to be executed but not notarized, thus: x x x Erlinda G. Ramos alleged in her affidavit that sometime in May, 1988, the exact date of which she cannot recall, Lagrimas Boy went to their residence and pleaded that even if they have already fully paid the subject house and lot, she was asking for an additional amount because she needed the money and there was no one for her to approach (walang ibang matatakbuhan). She [Erlinda Ramos] claimed she committed a mistake because she agreed to give an additional amount and went with [Lagrimas] to Atty. Estacio at the City Hall. [Lagrimas] arrive[d] ahead [of] Atty. Estacio in company with her friend Lutgarda Bayas. Atty. Estacio told her [Erlinda Ramos] that she will give an additional amount and she agreed without the knowledge of her husband. Atty. Estacio handed to her a piece of paper and she was made to sign and she acceded and signed it without reading. After [Lagrimas] and her witnesses including her companion Lutgarda Bayas signed the paper, she [Erlinda Ramos] go[t] it and read it. It was at that point that she discovered that what were written thereon were not in accordance with the true and real fact and situation that the subject house and lot already belongs to them because they have purchased it already and {Lagrimas} only requested for an addition. She [Erlinda Ramos] told Atty. Estacio to change (baguhin) the statement because she was not agreeable and she did not give her residence certificate (Cedula). Notary Public Estacio said that he cannot notarize the document (purported Kasunduan) because she [Erlinda Ramos] refused saying she was Pumapalag. He said that Erlinda Ramos and [Lagrimas] should talk to each other again. She [Erlinda Ramos] committed another mistake because she left the place leaving the piece of paper -purported Kasunduan without knowing that [Lagrimas] kept it. Erlinda Ramos innocently failed to demand the said piece of paper which [Lagrimas] is now using. She returned to Atty. Estacio to get the piece of paper but he answered her saying naibasura na and she trusted him but this time, it turned out that [Lagrimas] kept it which she is using now in this case.[18] The Court of Appeals stated that the fact that petitioner has remained in possession of the property sold, and paid its real estate taxes, would have made out a case for equitable mortgage. However, it noted that petitioner did not raise this defense, but admitted having sold the property to private respondents, alleging only that they have not paid the purchase price in full. It, therefore, ruled that the preponderance of evidence is against petitioner. Hence, this petition, with the following assigned errors: I THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT INTERPRETING THAT THE KASUNDUAN EXECUTED BY AND BETWEEN PETITIONER (DEFENDANT) AND PRIVATE

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RESPONDENT (PLAINTIFF) SUPERSEDES THE DEED OF SALE WHICH HAS NOT BEEN CONSUMMATED. II THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS DISCRETION IN MISINTERPRETING AND DISREGARDING THE KASUNDUAN AS NOT APPLICABLE IN THE CASE AT BAR. III THE RESPONDENT COURT ERRED AND ABUSED ITS DISCRETION IN REVERSING AND DISMISSING THE DECISION OF THE REGIONAL TRIAL COURT AND [IN REINSTATING] THE DECISION OF THE COURT A QUO.[19] Petitioner contends that, as ruled by the RTC, since the question of ownership in this case is interwoven with that of possession, the MeTC should have dismissed the case because jurisdiction pertains to another tribunal. The contention is without merit. The only issue for resolution in an unlawful detainer case is physical or material possession of the property involved, independent of any claim of ownership by any of the party litigants.[20] Prior to the effectivity of Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980), the jurisdiction of inferior courts was confined to receiving evidence of ownership in order to determine only the nature and extent of possession, by reason of which such jurisdiction was lost the moment it became apparent that the issue of possession was interwoven with that of ownership.[21] With the enactment of Batas Pambansa Blg. 129, inferior courts were granted jurisdiction to resolve questions of ownership provisionally in order to determine the issue of possession, thus: Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases.- Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise: xxx (2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided, That when in such cases, the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession.

As a rule, the findings of the fact of the Court of Appeals are final and cannot be reviewed on appeal by this Court, provided they are borne out by the record or are based on substantial evidence.[23] After reviewing the records herein, this Court finds no ground to change the factual finding of the Court of Appeals on the Kasunduan, with the resulting holding that it is not binding on the parties. The remaining issue is whether the Court of Appeals correctly ruled that private respondents have a right of material possession over the disputed property. It has been established that petitioner sold the subject property to private respondents for the price of P31,000, as evidenced by the Deed of Absolute Sale,[24] the due execution of which was not controverted by petitioner. The contract is absolute in nature, without any provision that title to the property is reserved in the vendor until full payment of the purchase price.[25] By the contract of sale,[26] petitioner (as vendor), obligated herself to transfer the ownership of, and to deliver, the subject property to private respondents (as vendees) after they paid the price of P31,000. Under Article 1477 of the Civil Code, the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. In addition, Article 1498 of the Civil Code provides that when the sale is made through a public instrument, as in this case, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. In this case, the Deed of Absolute Sale does not contain any stipulation against the constructive delivery of the property to private respondents. In the absence of stipulation to the contrary, the ownership of the property sold passes to the vendee upon the actual or constructive delivery thereof.[27] The Deed of Absolute Sale, therefore, supports private respondents right of material possession over the subject property. The finding of the MeTC, sustained by the Court of Appeals, is that the continued occupation by petitioner of said property after the sale, without payment of rent, was by mere tolerance. Private respondents claimed that petitioner requested for time to vacate the premises and they agreed thereto because they did not need the property at that time. However, when private respondents were asked to vacate their rented residence, they demanded that petitioner vacate the subject property, but petitioner refused to do so. A person who occupies the land of another at the latters tolerance or permission, without any contract between them, is bound by an implied promise that he will vacate the same upon demand, failing which a summary action for ejectment is the proper remedy against him.[28] WHEREFORE, the assailed decision of the Court of Appeals, in CA-G.R. SP No. 38716, which reversed and set aside the decision of the Regional Trial Court, and reinstated the decision of the Metropolitan Trial Court, is hereby AFFIRMED. No costs. SO ORDERED.

Section 16, Rule 70 (Forcible Entry and Unlawful Detainer) of the Rules of Court, as amended, similarly provides: Sec.16. Resolving defense of ownership.- When the defendant raises the defense of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession. Thus, in forcible entry and unlawful detainer cases, if the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the inferior courts have the undoubted competence provisionally to resolve the issue of ownership for the sole purpose of determining the issue of possession.[22] The MeTC, therefore, did not err in taking cognizance of the instant case. Petitioner also contends that the Court of Appeals erred by misinterpreting and disregarding the Kasunduan, which is binding between the parties and expressed their true intent. Petitioner asserts that the Kasunduan supersedes the Deed of Absolute Sale, which is actually a contract to sell. In effect, petitioner is asking this Court to review the factual finding of Court of Appeals on the true nature of the Kasunduan. FIRST DIVISION

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G.R. No. L-43059 October 11, 1979 SAMPAGUITA PICTURES, INC., Plaintiff-Appellant, v. JALWINDOR MANUFACTURERS, INC., defendantappellee. DE CASTRO, J: This case was certified to this Court by the Court of Appeals pursuant to the provisions of Section 17, paragraph (6) in relation to Section 31 of the Judiciary Act of 1948.chanrobles virtual law library Plaintiff-appellant Sampaguita Pictures, Inc. (hereinafter referred to as Sampaguita) is the owner of the Sampaguita Pictures Building located at the corner of General Araneta and General Roxas Streets, Cubao, Quezon City. The roofdeck of the building and all existing improvements thereon were leased by Sampaguita to Capitol "300" Inc. (Capitol for short), and it was agreed, among other things, that the premises shall be used by said club for social purposes exclusively for its members and guests; that all permanent improvements made by the lessee on the leased premises shall belong to the lessor without any obligation on the part of the lessor to reimburse the lessee for the sum spent for said improvements; that the improvements made by lessee have been considered as part of the consideration of the monthly rental and said improvements belong to the lessor; that any remodelling, alterations and/or addition to the premises shall be at the expense of the lessee and such improvements belong to the lessor, without any obligation to reimburse the lessee of any sum spent for said improvements. (pp. 29-32, Record on Appeal).chanrobles virtual law library Capitol "300" purchased on credit from defendant-appellee Jalwindor Manufacturers, Inc. (hereinafter referred to as Jalwindor) glass and wooden jalousies which were delivered and installed in the leased premises by Jalwindor replacing the existing windows. On June 1, 1964, Jalwindor filed with the Court of First Instance of Rizal, Quezon City, an action for collection of a sum of money with a petition for preliminary attachment against Capitol for its failure to pay its purchases. The parties submitted to the trial court a Compromise Agreement wherein Capitol acknowledged its indebtedness to Jalwindor in the amount of P9,531.09, exclusive of attorney's fees and interest, payable in monthly installments of at least P300.00 a month beginning December 15, 1964; and pending liquidation of the said obligation, all the materials purchased by Capitol will be considered as security for such undertaking. (p. 13, Record on Appeal).chanrobles virtual law library In the meantime, Capitol "300" was not able to pay rentals to Sampaguita from March 1, 1964 to April 30, 1965, water, electric and telephone services. Sampaguita filed a complaint for ejectment and for collection of a sum of money against Capitol and on June 8, 1965, the City Court of Quezon City rendered judgment ordering Capitol to vacate the premises and to pay Sampaguita.chanrobles virtual law library On the other hand, Capitol likewise failed to comply with the terms of the Compromise Agreement, and on July 31, 1965, the Sheriff of Quezon City made levy on the glass and wooden jalousies in question. Sampaguita filed a third party claim alleging that it is the owner of said materials and not Capitol, Jalwindor however, filed an indemnity bond in favor of the Sheriff and the items were sold et public auction on August 30, 1965 with Jalwindor as the highest bidder for P6,000.00.chanrobles virtual law library Sampaguita filed with the Court of First Instance of Rizal, Branch IV of Quezon City, an action to nullify the Sheriff's Sale and for the issuance of a writ of preliminary injunction against Jalwindor from detaching the glass and wooden jalousies. Jalwindor was ordered to maintain the status quo pending final determination of the case. No actual hearing was held and the parties submitted the following stipulation of facts for the consideration of the court. 1. That plaintiff and defendant are both domestic corporations duly organized and existing by and under the laws of the Philippines: 2. That plaintiff leased to the CAPITOL "300", Inc. the roofdeck of the Sampaguita building and all the existing improvements thereon for a monthly, rental of P650.00; that the parties to the lease contract agreed that all permanent improvements made by the lessee on the leased premises shall belong to the lessor without any obligation on the part of the lessor to reimburse the lessee for the sum spent for said improvements; that it

was agreed upon by the parties that the improvements made by the lessee have been considered as part of the consideration of the monthly rental; 3. That CAPITOL "300", Inc. made alterations on the leased premises; that it removed the then existing windows and replaced 'them with the following items bought on credit from the JALWINDOR MANUFACTURERS INC.. valued at P9,531.09, to wit: J-21(lever-type) Solex Bluepane Glass Jaluosies 11 Sets 15'-1 3/4" x 47-7/8" (5 units) 4 Sets 13'-5 3/4" x 47-7/8" (5 units) 3 Sets 10'-9 3/4" x 47-7/7" (4 units) 2 Sets 18'-1 3/3" x 56-3/8" (6 units) 1 Set 9'-1 3/4" x 65-3/8" (3 units) 115 Pcs. Roto Operators for J-21 MODEL J-21 (Roto-type) Glass and Wood Jalousies 8 Sets 32-1/2" x 60" Solex Bluepane 19 Sets 31-1/4" x 48" Solex Bluepane 18 Sets 34" x 48" Wood 4. That after the CAPITOL "300", Inc. failed to pay the price of the items mentioned in the preceding paragraph, JALWINDOR MANUFACTURERS, Inc, filed a case for collection of a sum of money against CAPITOL "300", Inc. with the Court of First Instance of Rizal (Branch IV Quezon City), Civil Case No. Q-8040; that by virtue of a Compromise Agreement, CAPITOL "300", Inc. acknowledged indebtedness in favor of JALWINDOR in the amount of P9,531,09, with a stipulation in the said Compromise Agreement, that the items forming part of the improvements will form as security for such an undertaking; 5. That due to non-compliance by CAPITOL "300", Inc., JALWINDOR executed judgment that the Sheriff of Quezon City made levy on the items above-stated in paragraph 3 hereof and sold them at a public auction to JALWINDOR MANUFACTURERS, INC. as the highest bidder, on August 30, 1965, for the total amount of P 6,000.00: 6. That after CAPITOL "300", Inc. failed to pay the rentals in arrears from March 1, 1964 to April 30, 1965, water, electric and telephone services amounting to P 10,772.90, the plaintiff SAMPAGUITA PICTURES, INC. filed with the City Court of Quezon City, Civil Case No. 11-13161 for ejectment and collection of a sum of money against the CAPITOL "300", Inc,; that the City Court rendered judgment in favor of the Sampaguita Pictures, Inc., on June 8, 1965, ordering the CAPITOL "300", Inc. to vacate the premises located at the Sampaguita Building and to pay the Sampaguita Pictures, Inc.; 7. That after the Sheriff of Quezon City made levy on the items above-stated in paragraph 3 hereof situated on the roofdeck of the Sampaguita Building, plaintiff filed a Third Party Claim stated in its affidavit on the ground of its right and title to the possession of the items and that CAPITOL "300", Inc. has no right or title whatsoever to the possession over said items; that defendant filed a bond to indemnify the Sheriff against the claim, and the Sheriff sold the items to the defendant; that the JALWINDOR MANUFACTURERS, Inc., being the highest bidder and the execution creditor, considered itself paid to the amount of P6,000.00; 8. That the parties herein agree that the matter of attorney's fees be left to the sound discretion of the Court, which shall not be less than P500.00. (Record on Appeal, pp. 11-14).

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On October 20, 1967, based on said Stipulation of Facts, the lower court dismissed the complaint and ordered Sampaguita to pay Jalwindor the amount of P500.00 as attorney's fees. Sampaguita filed a motion for reconsideration which was likewise denied, hence, the instant appeal.chanrobles virtual law library Petitioner-appellant raised the following assignment of errors: I The lower court erred in holding that Capitol "300" Inc. could not legally transfer or assign the glass and wooden jalousies in question to the plaintiff-appellant. II The lower court erred in not holding that plaintiff-appellant was the rightful owner of the glass and wooden jalousies when they were sold by the Sheriff at the public auction, III The lower court erred in not declaring as null and void the levy on execution and the Sheriff's sale at public auction of the glass and wooden jalousies. IV The lower court erred in holding that defendant-appellee became the rightful owner of the glass and wooden jalousies. When the glass and wooden jalousies in question were delivered and installed in the leased premises, Capitol became the owner thereof. Ownership is not transferred by perfection of the contract but by delivery, either actual or constructive. This is true even if the purchase has been made on credit, as in the case at bar. Payment of the purchase price is not essential to the transfer of ownership as long as the property sold has been delivered. Ownership is acquired from the moment the thing sold was delivered to vendee, as when it is placed in his control and possession. (Arts. 1477, 1496 and 1497, Civil Code of the Phil.) Capitol entered into a lease Contract with Sampaguita in 1964, and the latter became the owner of the items in question by virtue of the agreement in said contract "that all permanent improvements made by lessee shall belong to the lessor and that said improvements have been considered as part of the monthly rentals." When levy or said items was made on July 31, 1965, Capitol, the judgment debtor, was no longer the owner thereof.chanrobles virtual law library The action taken by Sampaguita to protect its interest is sanctioned by Section 17, Rule 39 of the Rules of Court, which reads: Section 17, Proceedings where property claimed by third person.chanrobles virtual law library ... The officer is not liable for damages for the taking or keeping of the property to any third-party claimant unless a claim is made by the latter and unless an action for damages is brought by him against the officer within one hundred twenty (120) days from the date of the filing of the bond. But nothing herein contained shall prevent claimant from vindicating his claim to the property by any action. It is, likewise, recignized in the case of Bayer Phil., Inc. vs. Agana, et al., 63 SCRA 358, wherein the Court declared, "that the rights of third party claimants over certain properties levied upon by the sheriff to satisfy the judgment, may not be taken up in the case where such claims are presented but in a separate and independent action instituted by claimants. ... and should a third-party appear to claim is denied, the remedy contemplated by the rules in the filing by said party of a reinvicatiry action against the execution creditor or the purchaser of the property after the sale is completed or that a complaint for damages to be charged against the bond filed by the creditor in favor of the sheriff. ... Thus, when a property levied upon by the sheriff pursuant to a writ of execution is claimed by a third person in a sworn statement of ownership thereof, as prescribed by the rules, an entirely different matter calling for a new adjudication arises."

The items in question were illegally levied upon since they do not belong to the judgemnt debtor. The power of the Court in execution of judgment extends only to properties unquestionably belonging to the judgment debtor. The fact that Capitol failed to pay Jalwindor the purchase price of the items levied upon did not prevent the transfer of ownership to Capitol. The complaint of Sampaguita to nullify the Sheriff's sale well-founded, and should prosper. Execution sales affect the rights of judgment debtor only, and the purchaser in the auction sale acquires only the right as the debtor has at the time of sale. Since the items already belong to Sampaguita and not to Capitol, the judgment debtor, the levy and auction sale are, accordingly, null and void. It is well-settled in this jurisdiction that the sheriff is not authorized to attach property not belonging to the judgment debtor. (Arabay, Inc. vs. Salvador, et al., 3 PHILAJUR, 413 [1978], Herald Publishing vs. Ramos, 88 Phil. 94, 100).chanrobles virtual law library WHEREFORE, the decision appealed from is hereby reversed, and plaintiff-appellant Sampaguita is declared the lawful owner of the disputed glass and wooden jalousies. Defendant-appellee Jalwindor is permanently enjoined from detaching said items from the roofdeck of the Sampaguita Pictures Building, and is also ordered to pay plaintiff-appellant the sum of P1,000.00 for and as attorney's fees, and costs.chanrobles virtual law library SO ORDERED.

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SECOND DIVISION [G.R. No. 117187. July 20, 2001] UNION MOTOR CORPORATION, petitioner-appellant, vs. THE COURT OF APPEALS, JARDINE-MANILA FINANCE, INC., SPOUSES ALBIATO BERNAL and MILAGROS BERNAL, respondentsappelles. DECISION DE LEON, JR., J.: Before us on appeal, by way of a petition for review on certiorari, is the Decision[1] dated March 30, 1994 and Resolution[2] dated September 14, 1994 of the Court of Appeals[3] which affirmed the Decision dated March 6, 1989 of the Regional Trial Court of Makati, Metro Manila, Branch 150, in Civil Case No. 920 as well as its Resolution dated September 14, 1994 which denied the Motion for Reconsideration of the petitioner. The facts are as follows: On September 14, 1979, the respondent Bernal spouses purchased from petitioner Union Motor Corporation one Cimarron Jeepney for Thirty Seven Thousand Seven Hundred Fifty Eight Pesos and Sixty Centavos (P37,758.60) to be paid in installments. For this purpose, the respondent spouses executed a promissory note and a deed of chattel mortgage in favor of the petitioner. Meanwhile, the petitioner entered into a contract of assignment of the promissory note and chattel mortgage with Jardine-Manila Finance, Inc. Through Manuel Sosmea, an agent of the petitioner, the parties agreed that the respondent spouses would pay the amount of the promissory note to Jardine-Manila Finance, Inc., the latter being the assignee of the petitioner. To effectuate the sale as well as the assignment of the promissory note and chattel mortgage, the respondent spouses were required to sign a notice of assignment, a deed of assignment, a sales invoice, a registration certificate, an affidavit, and a disclosure statement. The respondent spouses were obliged to sign all these documents for the reason that, according to Sosmea, it was a requirement of petitioner Union Motor Corporation and Jardine-Manila Finance, Inc. for the respondent spouses to accomplish all the said documents in order to have their application approved. Upon the respondent spouses tender of the downpayment worth Ten Thousand Thirty-Seven Pesos (P10,037.00), and the petitioners acceptance of the same, the latter approved the sale. Although the respondent spouses have not yet physically possessed the vehicle, Sosmea required them to sign the receipt as a condition for the delivery of the vehicle. The respondent spouses continued paying the agreed installments even if the subject motor vehicle remained undelivered inasmuch as Jardine-Manila Finance, Inc. promised to deliver the subject jeepney. The respondent spouses have paid a total of Seven Thousand Five Hundred Seven Pesos (P7,507.00) worth of installments before they discontinued paying on account of non-delivery of the subject motor vehicle. According to the respondent spouses, the reason why the vehicle was not delivered was due to the fact that Sosmea allegedly took the subject motor vehicle in his personal capacity. On September 11, 1981, Jardine-Manila Finance, Inc., filed a complaint for a sum of money, docketed as Civil Case No. 42849, against the respondent Bernal spouses before the then Court of First Instance of Manila. This case was later on transferred to the Regional Trial Court of Makati, Branch 150. On November 10, 1981, the complaint was amended to include petitioner Union Motor Corporation as alternative defendant, the reason being that if the respondent spouses refusal to pay Jardine-Manila Finance, Inc. was due to petitioners non-delivery of the unit, the latter should pay Jardine-Manila Finance, Inc. what has been advanced to the petitioner. After the petitioner filed its answer, the respondent spouses filed their amended answer with cross-claim against the former and counterclaim against Jardine-Manila Finance, Inc. Following the presentation of evidence of Jardine-Manila Finance, Inc., the respondent spouses presented as witnesses Albiato Bernal and Pacifico Tacub in support of their defense and counterclaim against the plaintiff and crossclaim against the petitioner. The petitioner did not present any evidence inasmuch as the testimony of the witness it presented was ordered stricken off the record for his repeated failure to appear for crossexamination on the scheduled hearings. The trial court deemed the presentation of the said witness as having been waived by the petitioner.

On March 6, 1989, the trial court rendered a decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering: 1. Plaintiff to pay spouses Bernals the sum of P7,507.15 plus legal interest until fully paid; 2. Union Motor Corporation to pay defendants spouses Bernals the downpayment in the amount of P10,037.00, plus legal interest until fully paid; 3. Union Motor Corporation to pay plaintiff P23,268.29, plus legal interest until fully paid, and attorneys fees equivalent to 20% of the amount due to plaintiff. Union Motor Corporation shall further pay defendants spouses Bernals the sum of P20,000.00 as moral damages, P10,000.00 as attorneys fees and costs of suit.[4] The petitioner interposed an appeal before the Court of Appeals while the respondent spouses appealed to hold the petitioner solidarily liable with Jardine-Manila Finance, Inc. The appellate court denied both appeals and affirmed the trial courts decision by holding that: Now, as to the appeal of defendant Union Motors, it must be noted that said defendant had failed to adduce evidence in court to support its claim of non-liability. We cannot see how the absence of any evidence in favor of said defendant can result in favorable reliefs to its side on appeal. There is simply no evidence to speak of in appellant Union Motors favor to cause a reversal of the lower courts decision. In the case of Tongson v. C.A. G.R. No. 77104, Nov. 6, 1992, the Supreme Court reiterated that: As mandated by the Rules of Court, each party must prove his own affirmative allegation, i.e., one who asserts the affirmative of the issue has the burden of presenting at the trial such amount of evidence required by law to obtain a favorable judgment: by preponderance of evidence in civil cases, and by proof beyond reasonable doubt in criminal cases. x x x. Hence, the instant petition anchored on the following assigned errors: I THE HONORABLE COURT OF APPEALS (SECOND DIVISION) GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT FINDING THAT THE LOWER COURT A QUOS DECISION OF MARCH 6, 1989 IS CONTRARY TO LAW AND THE EVIDENCE ON RECORD; II THE HONORALBLE COURT OF APPEALS (SECOND DIVISION) GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT FINDING THAT THE APPEALED DECISION WAS RENDERED IN DEPRIVATION AND IN DENIAL OF HEREIN PETITIOENR-APPELLANTS RIGHT TO DUE PROCESS. The first issue to be resolved in the instant case is whether there has been a delivery, physical or constructive, of the subject motor vehicle. On this score, petitioner Union Motor Corporation maintains that the respondent spouses are not entitled to a return of the downpayment for the reason that there was a delivery of the subject motor vehicle. According to the petitioner, the appellate court erred in holding that no delivery was made by relying exclusively on the testimonial evidence of respondent Albiato Bernal without considering the other evidence on record, like the sales invoice and delivery receipt which constitute an admission that there was indeed delivery of the subject motor vehicle. Also, there was a constructive delivery of the vehicle when respondent Albiato Bernal signed the registration certificate of the subject vehicle. Inasmuch as there was already delivery of the subject motor vehicle, ownership has been transferred to the respondent spouses. The Chattel Mortgage Contract signed by the respondent Bernal spouses in favor of the petitioner likewise proves that ownership has already been transferred to them for the reason that, under Article 2085 of the New Civil Code, the mortgagor must be the owner of the property.[5] As owners of the jeepney, the respondent Bernal spouses should bear the loss thereof in accordance with Article 1504 of the New Civil Code which provides that when

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the ownership of goods is transferred to the buyer, the goods are at the buyers risk whethe r actual delivery has been made or not. These, then, are the contentions of the petitioner. The main allegation of the respondent Bernal spouses, on the other hand, is that they never came into possession of the subject motor vehicle. Thus, it is but appropriate that they be reimbursed by the petitioner of the initial payment which they made. They also claim that Jardine-Manila Finance, Inc., and the petitioner conspired to defraud and deprive them of the subject motor vehicle for which they suffered damages. We rule in favor of the respondent Bernal spouses. Undisputed is the fact that the respondent Bernal spouses did not come into possession of the subject Cimarron jeepney that was supposed to be delivered to them by the petitioner. The registration certificate, receipt and sales invoice that the respondent Bernal spouses signed were explained during the hearing without any opposition by the petitioner. According to testimonial evidence adduced by the respondent spouses during the trial of the case, the said documents were signed as a part of the processing and for the approval of their application to buy the subject motor vehicle. Without such signed documents, no sale, much less delivery, of the subject jeepney could be made. The documents were not therefore an acknowledgment by respondent spouses of the physical acquisition of the subject motor vehicle but merely a requirement of petitioner so that the said subject motor vehicle would be delivered to them. We have ruled that the issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer; an invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale.[6] The registration certificate signed by the respondent spouses does not conclusively prove that constructive delivery was made nor that ownership has been transferred to the respondent spouses. Like the receipt and the invoice, the signing of the said documents was qualified by the fact that it was a requirement of petitioner for the sale and financing contract to be approved. In all forms of delivery, it is necessary that the act of delivery, whether constructive or actual, should be coupled with the intention of delivering the thing. The act, without the intention, is insufficient.[7] The critical factor in the different modes of effecting delivery which gives legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition.[8] Enlightening is Addison v. Felix and Tioco[9] wherein we ruled that: The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed in the hands and possession of the vendee. (Civil Code, Art. 1462). It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality-the delivery has not been effected. (Italics supplied) The act of signing the registration certificate was not intended to transfer the ownership of the subject motor vehicle to respondent Bernal spouses inasmuch as the petitioner still needed the same for the approval of the financing contract with Jardine-Manila Finance, Inc. The record shows that the registration certificate was submitted to Jardine-Manila Finance, Inc., which took possession thereof until Sosmea requested the latter to hand over the said document to him. The fact that the registration certificate was still kept by JardineManila Finance, Inc. and its unhesitating move to give the same to Sosmea just goes to show that the respondent spouses still had no complete control over the subject motor vehicle as they did not even possess the said certificate of registration nor was their consent sought when Jardine-Manila Finance, Inc. handed over the said document to Sosmea.

Inasmuch as there was neither physical nor constructive delivery of a determinate thing, (in this case, the subject motor vehicle) the thing sold remained at the sellers risk.[10] The petitioner should therefore bear the loss of the subject motor vehicle after Sosmea allegedly stole the same. Petitioners reliance on the Chattel Mortgage Contract executed by the respondent spouses does not help its assertion that ownership has been transferred to the latter since there was neither delivery nor transfer of possession of the subject motor vehicle to respondent spouses. Consequently, the said accessory contract of chattel mortgage has no legal effect whatsoever inasmuch as the respondent spouses are not the absolute owners thereof, ownership of the mortgagor being an essential requirement of a valid mortgage contract. The Carlos case[11] cited by the petitioner is not applicable to the case at bar for the reason that in the said case, apart from the fact that it has a different issue, the buyer took possession of the personal property and was able to sell the same to a third party. In the instant case, however, the respondent spouses never acquired possession of the subject motor vehicle. The manifestations of ownership are control and enjoyment over the thing owned. The respondent spouses never became the actual owners of the subject motor vehicle inasmuch as they never had dominion over the same. The petitioner also disputes the finding of the appellate court that there was no delivery. It did not consider, according to the petitioner, the fact that the circumstance of non-delivery was not shown and that the respondent spouses never made any demand for the possession of the vehicle. Contrary to the petitioners allegation, the respondent spouses presented sufficient evidence to prove that Sosmea took delivery and possession of that subject motor vehicle in his personal capacity as shown by a document [12] on which he (Sosmea) personally acknowledged receipt of the registration certificate from Jardine-Manila Finance, Inc. Also, respondent Albiato Bernal testified to the effect that they went several times to the office of the petitioner to demand the delivery of the subject motor vehicle. The petitioner failed to refute that testimonial evidence considering that it waived its right to present evidence. Anent the second issue, the petitioner claims that the trial court committed a violation of due process when it ordered the striking off of the testimony of the petitioners witness as well as the declaration that petitioner has abandoned its right to present evidence. According to the petitioner, the delays in the hearing of the case were neither unjust nor deliberate. It just so happened that from August 5, 1986 up to June 1987, the designated counsel for the petitioner was either appointed to the government or was short of time to go over the records of the case inasmuch as he was a new substitute counsel. During the last time the petitioners counsel moved for the postponement of the case, witness Ambrosio Balones was not available due to gastro-enteritis as shown by a medical certificate. Well-settled is the rule that factual findings of the Court of Appeals are conclusive on the parties and not reviewable by the Supreme Court and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court.[13] In the present case, the trial court found that after the direct testimony of petitioners witness, Ambrosio Balones, the continuation of the cross -examination was postponed and rescheduled for four (4) times from November 21, 1986 up to June 19, 1987, all at the instance of petitioner Union Motor Corporation. For three (3) times, the witness did not appear whenever the case was called for hearing. On June 19, 1987, when asked by the trial court why the witness was not present, the petitioners counsel could not give any good reason for his absence. Neither did the petitioner offer to present any other witness to testify on that day. The appellate court assented to these findings by quoting the decision of the trial court, to wit: Defendant Union Motors Corporation has no evidence as the testimony of its only witness, Ambrosio Balones, was orderd stricken off the record in the hearing of June 19, 1987, for his continuous failure to appear on scheduled hearings. The Court further considered said defendant to have waived further presentation of evidence.[14] The petitioner attempts to shift the blame on the respondents for the failure of its witness, Balones, to finish his testimony. It was at the instance of Atty. Tacub, counsel for the respondents, that the testimony of petitioners witness, Balones, was discontinued after Atty. Tacub asked for a recess and later on for the postponement of the cross-examination of the said witness. The petitioner had the duty to produce its witness when he was called to finish his testimony. To place the blame on the respondent spouses is to put a

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premium on the negligence of the petitioner to require its own witness to testify on cross-examination. By presenting witness Balones on direct-examination, the petitioner had the corresponding duty to make him available for cross-examination in accordance with fair play and due process. The respondents should not be prejudiced by the repeated failure of the petitioner to present its said witness for cross-examination. Hence, the trial court ordered that the unfinished testimony of said witness be stricken off the record. However, we cannot affirm that part of the ruling of the courts a quo awarding moral damages to the respondents. For moral damages to be awarded in cases of breach of contract, the plaintiff must prove bad faith or fraudulent act on the part of the defendant.[15] In the instant case, the allegations about connivance and fraudulent schemes by the petitioner and Manuel Sosmea were merely general allegations and without any specific evidence to sustain the said claims. In fact, Exhibit 1 which bears the name and signature of Sosmea as the person who received the registration certificate militates against the respondent spouses claim that the petitioner connived with its agent to deprive them of the possession of the subject motor vehicle. The said document shows that Sosmea acted only in his personal and private capacity, thereby effectively excluding any alleged participation of the petitioner in depriving them of the possession of the subject motor vehicle. The petitioner should not be held liable for the acts of its agent which were done by the latter in his personal capacity. However, we affirm the award of attorneys fees. When a party is compelled to litigate with third persons or to incur expenses to protect his interest, attorneys fees should be awarded.[16] In the present case, the respondent spouses were forced to implead the petitioner Union Motor Corporation on account of the collection suit filed against them by Jardine-Manila Finance, Inc., a case which was eventually won by the respondent spouses. WHEREFORE, the appealed Decision dated March 30, 1994 of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that the award of moral damages is deleted. With costs against the petitioner. SO ORDERED.

EN BANC [G.R. No. 130722. March 27, 2000] SPS. REYNALDO K. LITONJUA and ERLINDA P. LITONJUA and PHIL. WHITE HOUSE AUTO SUPPLY, INC., petitioners, vs. L & R CORPORATION, VICENTE M. COLOYAN in his capacity as Acting Registrar of the Register of Deeds of Quezon City thru Deputy Sheriff ROBERTO R. GARCIA, respondents.HATOL RESOLUTION YNARES-SANTIAGO, J.: For resolution is petitioners Motion for Partial Reconsideration of our December 9, 1999 Decision on the following grounds: "I........THE PROVISION OF PARAGRAPH NO. 9 OF THE SUBJECT MORTGAGE CONTRACT IS NULL AND VOID AB INITIO. II........THE RESCISSION OF THE DEED OF SALE DATED 6 AUGUST 1974 BETWEEN THE SPS. LITONJUA AND PHIILIPPINE WHITEHOUSE AUTO SUPPLY, INC. HAS NEVER BEEN INVOKED AS A DEFENSE BY RESPONDENT L & R CORPORATION; THUS, DEEMED WAIVED. III........THE DECISION RESCINDING THE DEED OF SALE EXECUTED BY AND BETWEEN THE PETITIONERS IN EFFECT DEPRIVED THEM OF THEIR BASIC RIGHT TO DUE PROCESS." Movants first theorize that paragraphs 8 (limiting the right of the mortgagor to sell the property, which we held as void) and 9 (on the right of first refusal of respondent Corporation) should be "regarded as a tandem designed to subvert the sound public policy prohibiting pactum commissarium"; that both paragraphs "constitute a package". In particular, petitioners argue that "(P)aragraph 9 being intended to support paragraph 8, it is therefore coupled thereto and is thus similarly mired in its invalidity". This is the first time, though, that petitioners have raised the issue of invalidity of paragraph 9. While respondent Corporation has consistently invoked the provisions thereof, petitioners have remained silent insofar as this provision is concerned, concentrating their pleadings on the invalidity of paragraph 8 alone. Not having been timely objected to below, petitioners cannot belatedly present their objections thereto at this stage. At any rate, even if we were to entertain petitioners objections, the same will still be held as without merit. To be sure, paragraphs 8 and 9 are separate provisions of the subject contract and the invalidity of one does not automatically render the other invalid. Indeed, Article 1420 of the New Civil Code holds that "(I)n case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced." Contrary to the suppositions of petitioners, the invalid stipulation is independent from the rest of the terms of the agreement and can easily be separated therefrom without doing violence to the manifest intention of the parties. This being so, the legal terms of the contract, including paragraph 9, can be enforced.[1] Petitioners next argue that even if paragraph 9 is considered independently of paragraph 8, it is still unenforceable for being null and void ab initio. In support of their argument, petitioners point out that the provision in paragraph 9 is not a perfected contract for lack of consideration as mandated by Article 1479. Petitioners argue that our finding that the consideration for the pre-emptive right is incorporated in the amount of the loan is a presumption that enjoys no basis. Again, petitioners arguments must be brushed aside. Petitioners contention that absent a consideration therefor, the right of first refusal embodied in paragraph 9 is void ab initio is misplaced. Such contention loses sight of the difference between a right of first refusal and an option contract where a separate consideration is, indeed, required. This distinction was set out in the analogous case of Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc.[2] where it was held that

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"Both contracts of lease in question provide the identically worded paragraph 8, which reads: That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-days exclusive option to purchase the same. In the event, however, that the leased premises is sold to someone other than the LESSEE, the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all the terms and conditions thereof. We agree with the respondent Court of Appeals that the aforecited contractual stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause or an option contract. It is a contract of a right of first refusal. As early as 1916, in the case of Beaumont vs. Prieto, unequivocal was our characterization of an option contract as one necessarily involving the choice granted to another for a distinct and separate consideration as to whether or not to purchase a determinate thing at a predetermined fixed price. It is unquestionable that, by means of the document Exhibit E, to wit, the letter of December 4, 1911, quoted at the beginning of this decision, the defendant Valdes granted to the plaintiff Borck the right to purchase the Nagtahan Hacienda belonging to Benito Legarda, during the period of three months and for its assessed valuation, a grant which necessarily implied the offer or obligation on the part of the defendant Valdes to sell to Borck the said hacienda during the period and for the price mentioned. x x x. There was, therefore, a meeting of minds on the part of the one and the other, with regard to the stipulations made in the said document. But it is not shown that there was any cause or consideration for that agreement, and this omission is a bar which precludes our holding that the stipulations contained in Exhibit E is a contract of option, for, x x x, there can be no contract without the requisite, among others, of the cause for the obligation to be established. In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language: A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from, or selling to B, certain securities or properties within a limited time at a specified price. (Story vs. Salamon, 71 N.Y., 420). From vol. 6, page 5001, of the work Words and Phrases, citing the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has been taken: An agreement in writing to give a person the option to purchase lands within a given time at a named price is neither a sale nor an agreement to sell. 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 is, the right or privilege to buy at the election or option of the other party. The second party gets in praesenti, not lands, not an agreement that he shall have lands, but he does get something of value; that is, the right to call for and receive lands if he elects. The owner parts with his right to sell his lands, except to the second party, for a limited period. The second party receives the right, or, rather, from his point of view, he receives the right to elect to buy. But the two definitions abovecited refer to the contract of option, or, what amounts to the same thing, to the case where there was cause or consideration for the obligation, the subject of the agreement made by the parties; while in the case at bar there was no such cause or consideration.

The rule so early established in this jurisdiction is that the deed of option or the option clause in a contract, in order to be valid and enforceable, must, among other things, indicate the definite price at which the person granting the option, is willing to sell. Notably, in one case we held that the lessee loses his right to buy the leased property for a named price per square meter upon failure to make the purchase within the time specified; in one other case we freed the landowner from her promise to sell her land if the prospective buyer could raise P4,500.00 in three weeks because such option was not supported by a distinct consideration; in the same vein in yet one other case, we also invalidated an instrument entitled, Option to Purchase a parcel of land for the sum of P1,510.00 because of lack of consideration; and as an exception to the doctrine enumerated in the two preceding cases, in another case, we ruled that the option to buy the leased premises for P12,000.00 as stipulated in the lease contract, is not without consideration for in reciprocal contracts, like lease, the obligation or promise of each party is the consideration for that of the other. In all these cases, the selling price of the object thereof is always predetermined and specified in the option clause in the contract or in the separate deed of option. We elucidated, thus, in the very recent case of Ang Yu Asuncion vs. Court of Appeals, that: x x x. In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. Article 1458 of the Civil Code provides: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. When the sale is not absolute but conditional, such as in a Contract to Sell where invariably the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. x x x. An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract of option. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz. ART. 1479. x x x. An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. Observe, however, that the option is not the contract of sale itself. The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected, are not considered binding commitments.

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Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal. (Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following rules generally govern: (1).......If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offerors coming to know of such fact, by communicating that withdrawal to the offeree. The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. (2).......If the period has a separate consideration, a contract of option is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance (exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract (object of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. x x x. In the light of the foregoing disquisition and in view of the wording of the questioned provision in the two lease contracts involved in the instant case, we so hold that no option to purchase in contemplation of the second paragraph of Article 1479 of the Civil Code, has been granted to Mayfair under the said lease contracts. Respondent Court of Appeals correctly ruled that the said paragraph 8 grants the right of first refusal to Mayfair and is not an option contract. It also correctly reasoned that as such, the requirement of a separate consideration for the option, has no applicability in the instant case. There is nothing in the identical Paragraphs 8 of the June 1, 1967 and March 31, 1969 contracts which would bring them into the ambit of the usual offer or option requiring an independent consideration. An option is a contract granting a privilege to buy or sell within an agreed time and at a determined price. It is a separate and distinct contract from that which the parties may enter into upon the consummation of the option. It must be supported by consideration. In the instant case, the right of first refusal is an integral part of the contracts of lease. The consideration is built into the reciprocal obligations of the parties. To rule that a contractual stipulation such as that found in paragraph 8 of the contracts is governed by Article 1324 on withdrawal of the offer or Article 1479 on promise to buy and sell would render ineffectual or inutile the provisions on right of first refusal so commonly inserted in leases of real estate nowadays. The Court of Appeals is correct in stating that Paragraph 8 was incorporated into the contracts of lease for the benefit of Mayfair which wanted to be assured that it shall be given the first crack or the first option to buy the property at the price which Carmelo is willing to accept. It is not also correct to say that there is no consideration in an agreement of right of first refusal. The stipulation is part and parcel of the entire contract of lease. The consideration for the lease includes the consideration for the right of first

refusal. Thus, Mayfair is in effect stating that it consents to lease the premises and to pay the price agreed upon provided the lessor also consents that, should it sell the leased property, then, Mayfair shall be given the right to match the offered purchase price and to buy the property at that price. As stated in Vda. De Quirino vs. Palarca, in reciprocal contract, the obligation or promise of each party is the consideration for that of the other. In the instant case, as we have already stated in our Decision sought to be reconsidered, the consideration for the loan-mortgage includes the consideration for the right of first refusal. Again, contrary to petitioners charge that this conclusion enjoys no basis, we have merely taken our cue from the Equatorial case, aforequoted. Petitioners also pray that since the subject contract is a contract of adhesion, its validity and legality should be strictly interpreted against respondent Corporation. As explained in Ayala Corporation vs. Ray Burton Development Corporation,[3] however, where this court refrained from applying the rule on strict interpretation of a contract of adhesion "(T)he stringent treatment towards contracts of adhesion which the courts are enjoined to observe is in pursuance of the mandate in Article 24 of the New Civil Code that (i)n all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. Thus, the validity and/or enforceability of a contract of adhesion will have to be determined by the peculiar circumstances obtaining in each case and the situation of the parties concerned." Here, petitioners, being not only educated but businesspersons as well, cannot claim being the weaker or disadvantaged parties in the subject contract so as to call for a strict interpretation against respondent Corporation. The court also went on to rule in the Ayala case (supra), that since the stipulations in the subject Deed of Restrictions are plain and unambiguous, which leave no room for interpretation, there was no cause for applying the rule on stringent treatment towards contracts of adhesion. Indeed, while ambiguities in a contract of adhesion are to be construed against the party that prepared the same, this rule applies only if the stipulations in such contract are obscure or ambiguous. If the terms thereof are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations control. In the latter case, there would be no need for construction.[4] Coming now to the case at bar, considering that the contract provision in question (paragraph 9) is likewise plain and unambiguous, we also find no occasion to apply the aforesaid treatment called for by petitioners. With respect to the rescission of the Deed of Sale, petitioners complain that this was never invoked as a defense by respondent corporation and is thus deemed waived. Thus, petitioners also complain that our Decision deprived them of due process since they were not given the opportunity to confront the issue of rescission, not having been raised as a defense by respondent corporation. It cannot be denied, however, that respondent Corporation had always invoked its right of first refusal, which became the basis for our order of rescission. Stated differently, rescission was the necessary relief arising out of the violation of the right of first refusal. For the same reason, neither may petitioners complain of having been denied due process as they were given the chance to meet the issue of violation of respondent Corporations right of first refusal upon which we anchored our order for the rescission of the Deed of Sale. WHEREFORE, premises considered, petitioners Motion for Partial Reconsideration is hereby DENIED for lack of merit. SO ORDERED

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 109125 December 2, 1994 ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners, vs. THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT CORPORATION, respondents. Antonio M. Albano for petitioners. Umali, Soriano & Associates for private respondent. VITUG, J.: Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04 December 1991, in CAG.R. SP No. 26345 setting aside and declaring without force and effect the orders of execution of the trial court, dated 30 August 1991 and 27 September 1991, in Civil Case No. 87-41058. The antecedents are recited in good detail by the appellate court thusly: On July 29, 1987 a Second Amended Complaint for Specific Performance was filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng, Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31, Manila in Civil Case No. 8741058, alleging, among others, that plaintiffs are tenants or lessees of residential and commercial spaces owned by defendants described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have occupied said spaces since 1935 and have been religiously paying the rental and complying with all the conditions of the lease contract; that on several occasions before October 9, 1986, defendants informed plaintiffs that they are offering to sell the premises and are giving them priority to acquire the same; that during the negotiations, Bobby Cu Unjieng offered a price of P6-million while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter asked the defendants to put their offer in writing to which request defendants acceded; that in reply to defendant's letter, plaintiffs wrote them on October 24, 1986 asking that they specify the terms and conditions of the offer to sell; that when plaintiffs did not receive any reply, they sent another letter dated January 28, 1987 with the same request; that since defendants failed to specify the terms and conditions of the offer to sell and because of information received that defendants were about to sell the property, plaintiffs were compelled to file the complaint to compel defendants to sell the property to them. Defendants filed their answer denying the material allegations of the complaint and interposing a special defense of lack of cause of action. After the issues were joined, defendants filed a motion for summary judgment which was granted by the lower court. The trial court found that defendants' offer to sell was never accepted by the plaintiffs for the reason that the parties did not agree upon the terms and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the lower court ruled that should the defendants subsequently offer their property for sale at a price of P11-million or below, plaintiffs will have the right of first refusal. Thus the dispositive portion of the decision states:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the plaintiffs summarily dismissing the complaint subject to the aforementioned condition that if the defendants subsequently decide to offer their property for sale for a purchase price of Eleven Million Pesos or lower, then the plaintiffs has the option to purchase the property or of first refusal, otherwise, defendants need not offer the property to the plaintiffs if the purchase price is higher than Eleven Million Pesos. SO ORDERED. Aggrieved by the decision, plaintiffs appealed to this Court in CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990 (penned by Justice Segundino G. Chua and concurred in by Justices Vicente V. Mendoza and Fernando A. Santiago), this Court affirmed with modification the lower court's judgment, holding: In resume, there was no meeting of the minds between the parties concerning the sale of the property. Absent such requirement, the claim for specific performance will not lie. Appellants' demand for actual, moral and exemplary damages will likewise fail as there exists no justifiable ground for its award. Summary judgment for defendants was properly granted. Courts may render summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the decision of the court a quo is legally justifiable. WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby AFFIRMED, but subject to the following modification: The court a quo in the aforestated decision gave the plaintiffs-appellants the right of first refusal only if the property is sold for a purchase price of Eleven Million pesos or lower; however, considering the mercurial and uncertain forces in our market economy today. We find no reason not to grant the same right of first refusal to herein appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos. No pronouncement as to costs. SO ORDERED. The decision of this Court was brought to the Supreme Court by petition for review on certiorari. The Supreme Court denied the appeal on May 6, 1991 "for insufficiency in form and substances" (Annex H, Petition). On November 15, 1990, while CA-G.R. CV No. 21123 was pending consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale (Annex D, Petition) transferring the property in question to herein petitioner Buen Realty and Development Corporation, subject to the following terms and conditions: 1. That for and in consideration of the sum of FIFTEEN MILLION PESOS (P15,000,000.00), receipt of which in full is hereby acknowledged, the VENDORS hereby sells, transfers and conveys for and in favor of the VENDEE, his heirs, executors, administrators or assigns, the above-described property with all the improvements found therein including all the rights and

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interest in the said property free from all liens and encumbrances of whatever nature, except the pending ejectment proceeding; 2. That the VENDEE shall pay the Documentary Stamp Tax, registration fees for the transfer of title in his favor and other expenses incidental to the sale of above-described property including capital gains tax and accrued real estate taxes. As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 was issued in the name of petitioner on December 3, 1990. On July 1, 1991, petitioner as the new owner of the subject property wrote a letter to the lessees demanding that the latter vacate the premises. On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner brought the property subject to the notice of lis pendens regarding Civil Case No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Unjiengs. The lessees filed a Motion for Execution dated August 27, 1991 of the Decision in Civil Case No. 87-41058 as modified by the Court of Appeals in CA-G.R. CV No. 21123. On August 30, 1991, respondent Judge issued an order (Annex A, Petition) quoted as follows: Presented before the Court is a Motion for Execution filed by plaintiff represented by Atty. Antonio Albano. Both defendants Bobby Cu Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison and Atty. Anacleto Magno respectively were duly notified in today's consideration of the motion as evidenced by the rubber stamp and signatures upon the copy of the Motion for Execution. The gist of the motion is that the Decision of the Court dated September 21, 1990 as modified by the Court of Appeals in its decision in CA G.R. CV-21123, and elevated to the Supreme Court upon the petition for review and that the same was denied by the highest tribunal in its resolution dated May 6, 1991 in G.R. No. L-97276, had now become final and executory. As a consequence, there was an Entry of Judgment by the Supreme Court as of June 6, 1991, stating that the aforesaid modified decision had already become final and executory. It is the observation of the Court that this property in dispute was the subject of theNotice of Lis Pendens and that the modified decision of this Court promulgated by the Court of Appeals which had become final to the effect that should the defendants decide to offer the property for sale for a price of P11 Million or lower, and considering the mercurial and uncertain forces in our market economy today, the same right of first refusal to herein plaintiffs/appellants in the event that the subject property is sold for a price in excess of Eleven Million pesos or more. WHEREFORE, defendants are hereby ordered to execute the necessary Deed of Sale of the property in litigation in favor of plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15 Million pesos in recognition of plaintiffs' right

of first refusal and that a new Transfer Certificate of Title be issued in favor of the buyer. All previous transactions involving the same property notwithstanding the issuance of another title to Buen Realty Corporation, is hereby set aside as having been executed in bad faith. SO ORDERED. On September 22, 1991 respondent Judge issued another order, the dispositive portion of which reads: WHEREFORE, let there be Writ of Execution issue in the aboveentitled case directing the Deputy Sheriff Ramon Enriquez of this Court to implement said Writ of Execution ordering the defendants among others to comply with the aforesaid Order of this Court within a period of one (1) week from receipt of this Order and for defendants to execute the necessary Deed of Sale of the property in litigation in favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the consideration of P15,000,000.00 and ordering the Register of Deeds of the City of Manila, to cancel and set aside the title already issued in favor of Buen Realty Corporation which was previously executed between the latter and defendants and to register the new title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go. SO ORDERED. On the same day, September 27, 1991 the corresponding writ of execution (Annex C, Petition) was issued. 1 On 04 December 1991, the appellate court, on appeal to it by private respondent, set aside and declared without force and effect the above questioned orders of the court a quo. In this petition for review on certiorari, petitioners contend that Buen Realty can be held bound by the writ of execution by virtue of the notice of lis pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase of the property on 15 November 1991 from the Cu Unjiengs. We affirm the decision of the appellate court. A not too recent development in real estate transactions is the adoption of such arrangements as the right of first refusal, a purchase option and a contract to sell. For ready reference, we might point out some fundamental precepts that may find some relevance to this discussion. An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the concurrence of the essential elements thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause established by the various sources of obligations (law, contracts, quasicontracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from the demandability of the obligation, are the active (obligee) and the passive (obligor) subjects. Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service (Art. 1305, Civil Code). A contract undergoes various stages that include its negotiation or preparation, its perfection and, finally, its consummation. Negotiation covers the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is concluded (perfected). The perfection of the contract takes place upon the concurrence of the essential elements thereof. A contract which is consensual as to perfection is so established upon a mere meeting of minds, i.e., the concurrence of

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offer and acceptance, on the object and on the cause thereof. A contract which requires, in addition to the above, the delivery of the object of the agreement, as in a pledge or commodatum, is commonly referred to as a real contract. In a solemn contract, compliance with certain formalities prescribed by law, such as in a donation of real property, is essential in order to make the act valid, the prescribed form being thereby an essential element thereof. The stage of consummationbegins when the parties perform their respective undertakings under the contract culminating in the extinguishment thereof. Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. In sales, particularly, to which the topic for discussion about the case at bench belongs, the contract is perfected when a person, called the seller, obligates himself, for a price certain, to deliver and to transfer ownership of a thing or right to another, called the buyer, over which the latter agrees. Article 1458 of the Civil Code provides: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. When the sale is not absolute but conditional, such as in a "Contract to Sell" where invariably the ownership of the thing sold is retained until the fulfillment of a positive suspensive condition (normally, the full payment of the purchase price), the breach of the condition will prevent the obligation to convey title from acquiring an obligatory force. 2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. 3 If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil Code). 4 An unconditional mutual promise to buy and sell, as long as the object is made determinate and the price is fixed, can be obligatory on the parties, and compliance therewith may accordingly be exacted. 5 An accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct and separate from the price, is what may properly be termed a perfected contract ofoption. This contract is legally binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil Code, viz: Art. 1479. . . . An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. (1451a) 6 Observe, however, that the option is not the contract of sale itself. 7 The optionee has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted before a breach of the option, a bilateral promise to sell and to buy ensues and both parties are then reciprocally bound to comply with their respective undertakings. 8 Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect promise (policitacion) is merely an offer. Public advertisements or solicitations and the like are ordinarily construed as mere invitations to make offers or only as proposals. These relations, until a contract is perfected, are not considered binding commitments. Thus, at any time prior to the perfection of the contract, either negotiating party may stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is effective immediately after its manifestation, such as by its mailing and not necessarily when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is given to the offeree within which to accept the offer, the following rules generally govern:

(1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror's coming to know of such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a unilateral promise to sell under Art. 1479, modifying the previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural Bank of Paraaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which ordains that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." (2) If the period has a separate consideration, a contract of "option" is deemed perfected, and it would be a breach of that contract to withdraw the offer during the agreed period. The option, however, is an independent contract by itself, and it is to be distinguished from the projected main agreement (subject matter of the option) which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer before its acceptance(exercise of the option) by the optionee-offeree, the latter may not sue for specific performance on the proposed contract ("object" of the option) since it has failed to reach its own stage of perfection. The optioner-offeror, however, renders himself liable for damages for breach of the option. In these cases, care should be taken of the real nature of the consideration given, for if, in fact, it has been intended to be part of the consideration for the main contract with a right of withdrawal on the part of the optionee, the main contract could be deemed perfected; a similar instance would be an "earnest money" in a contract of sale that can evidence its perfection (Art. 1482, Civil Code). In the law on sales, the so-called "right of first refusal" is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 9 of the same Code. An option or an offer would require, among other things, 10 a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct. Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. 11 It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 12 of the Civil Code, can warrant a recovery for damages. The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of private respondents to honor the right of first refusal, the remedy is not a writ of execution on the judgment, since there is none to execute, but an action for damages in a proper forum for the purpose. Furthermore, whether private respondent Buen Realty Development Corporation, the alleged purchaser of the property, has acted in good faith or bad faith and whether or not it should, in any case, be considered bound to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters that must be independently addressed in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. 87-41058, cannot be held subject to the writ of execution issued by respondent Judge, let alone ousted from the ownership and possession of the property, without first being duly afforded its day in court.

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We are also unable to agree with petitioners that the Court of Appeals has erred in holding that the writ of execution varies the terms of the judgment in Civil Case No. 87-41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has observed: Finally, the questioned writ of execution is in variance with the decision of the trial court as modified by this Court. As already stated, there was nothing in said decision 13 that decreed the execution of a deed of sale between the Cu Unjiengs and respondent lessees, or the fixing of the price of the sale, or the cancellation of title in the name of petitioner (Limpin vs. IAC, 147 SCRA 516; Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885). It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not have decreed at the time the execution of any deed of sale between the Cu Unjiengs and petitioners. WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a quo. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-9871 January 31, 1958 ATKINS, KROLL and CO., INC., petitioner, vs. B. CUA HIAN TEK, respondent. BENGZON, J.: Review of a Court of Appeals' decision. For its failure to deliver one thousand cartons of sardines, which it had sold to B. Cua Hian Tek, petitioner was sued, and after trial was ordered by the Manila court of first instance to Pay damages, which on appeal was reduced by the Court of Appeals to P3,240.15 representing unrealized profits. There was no such contract of sale, says petitioner, but only an option to buy, which was not enforceable for lack of consideration because in accordance with Art. 1479 of the New Civil Code "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. Simple are the facts of this case: Dated September 13, 1951, petitioner sent to respondent a letter of the following tenor: Sir (s) /Madam: We are pleased to make you herewith the following firm offer, subject to reply by September 23, 1951: Quantity and Commodity: 400 Ctns. Luneta brand Sardines in Tomato Sauce 48/15-oz. Ovals at $8.25 Ctn. 300 Ctns. Luntea brand Sardines Natural 48/15 oz. talls at $6.25 Ct. 300 Ctns. Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 Ct. Price(s): All prices C ad F Manila Cosular Fees of $6.00 to be added. Shipmet: Durig September/October from US Ports. Supplier: Atkins, Kroll & Co., Sa Frasisco, Cal. U.S.A. We are looking forward to receive your valued order and remain . The Court of first instance and the Court of Appeals1 found that B. Cua Hian Tek accepted the offer unconditionally and delivered his letter of acceptance Exh. B on September 21, 1951. However, due to shortage of catch of sardines by the packers in California, Atkins Kroll & Co., failed to deliver the commodities it had offered for sale. There are other details to which reference shall not be made, as they touch the question whether the acceptance had been handed on time; and on that issue of Court of Appeals definitely found for plaintiff. Ayway, in presenting its case before this Court petitioner does not dispute such timely acceptance. It merely raises the point that the acceptance only created an option, which, lacking consideration, had no obligatory force. The offer Exh. A, petitioner argues, "was a promise to sell a determinate thing for a price certain. Upon its acceptance by respondent, the offer became an accepted unilateral promise to sell a determinate thing for price certain. Inasmuch as there was no consideration to support the promise to sell distinct from the price, it follows that under Art. 1479 aforequoted, the promise is not binding on the petitioner even if it was accepted by respondent." (p. 12 brief of petitioner.). The argument, maifestly assumes that only a unilateral promise arose when the offeree accepted. Such assumption is a mistake, because a bilateral cotract to sell and to buy was created upon acceptance. So much so that B. Cua Hian Tek could be sued, he had backed out after accepting, by refusing to get the sardines and/or to pay for their price. Indeed, the word "option" is found neither in the offer nor in the

37

acceptance. On the copntrary Exh. B accepted "the firm offer for the sale" and adds, "the undersigned buyer has immediately filed an application for import license . . ." (Emphasis Ours.). Petitioner, however, insists the offer was a mere offer of option, because the "firm offer" Exh. A. was a continuing offer to sell until September 23, "an option is nothing more than a continuing offer" for a specified time. In our opinion implies more than that: it implies the legal obligation to keep open for the time specified.2 Yet the letter Exh. A did not by itself produce the legal obligation of keeping the offer open up ot Septmber 23. It could be withdrawn before acceptance, because it is admitted, there was no consideration for it. ART. 1324. When the offerer has showed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as somnething paid or promissed. (n) (New Civil Code.). Ordinarily an offer to buy or sell may be withdrawn or countermanded before accepatnce, even though the offer provides that it will not be withdrawn or countermanded, or allows the offeree a certain time within which to accept it, unless such provision or agreement is supported by an independent consideration. . . (77 Corpus Juris Secundum p. 636.). Furthermore, an option is unilateral: a promise to sell3 at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to later. In this case, however, upon accepeting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the obligations of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was bilalteral contract of sale. Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold that . If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a sufficient consideration. . . (77 Corpus Juris Secundum p. 652. See also 27 Ruling Case Law 339 and cases cited.). It can be taken for granted, as contended by the defendants, that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of this acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both actsthe offer and the acceptancecould at all events have generated a contract, if none there was before (atrs. 1254 and 1262 of the Civil Code). (Zayco vs. Serra, 44 Phil. 331.). One additional observation should be made before the closing this opinion. The defense in the court of first instance rested on the proposition or propositions that the offer had not been precedent had not been fulfilled. This option-without-consideration idea was never mentioned in the answer. A Change of theory in the appellate courts is not permitted. In order that a question may be raised on appeal, it is essential that it be within the issues made by the parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal because, to permit him to do so, would be unfair to the adverse party. (Rules of Court by Moran 1957 Ed. Vol. I p.715 citing Agoncillo vs. Javier, 38 Phil. 424; American Express Company vs. Natividad, 46 Phil. 207; San Agustin vs. Barrios, 68 Phil. 465, 480; Toribio vs. Dacasa, 55 Phil. 461.) . We must therefore hold, as the lower courts have held that there was a contract of sale between the parties. And as no legal excuse has been proven, the seller's failure to comply therewith gave around to an award for damages, which has been fixed by the Court of Appeals at P3,240.15-amount which petitioner does not dispute in this final instance. Consequently, the decision under review should be, and it is hereby affirmed, with cost against petitioner.

SECOND DIVISION [G.R. No. 135929. April 20, 2001] LOURDES ONG LIMSON, petitioner, vs. COURT OF APPEALS, SPOUSES LORENZO DE VERA and ASUNCION SANTOS-DE VERA, TOMAS CUENCA, JR., and SUNVAR REALTY DEVELOPMENT CORPORATION, respondents. DECISION BELLOSILLO, J.: Filed under Rule 45 of the Rules of Court this Petition for Review on Certiorari seeks to review, reverse and set aside the Decision[1] of the Court of Appeals dated 18 May 1998 reversing that of the Regional Trial Court dated 30 June 1993. The petition likewise assails the Resolution[2] of the appellate court of 19 October 1998 denying petitioners Motion for Reconsideration. Petitioner Lourdes Ong Limson, in her 14 May 1979 Complaint filed before the trial court,[3] alleged that in July 1978 respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera, through their agent Marcosa Sanchez, offered to sell to petitioner a parcel of land consisting of 48,260 square meters, more or less, situated in Barrio San Dionisio, Paraaque, Metro Manila; that respondent spouses informed her that they were the owners of the subject property; that on 31 July 1978 she agreed to buy the property at the price of P34.00 per square meter and gave the sum of P20,000.00 to respondent spouses as "earnest money;" that respondent spouses signed a receipt therefor and gave her a 10-day option period to purchase the property; that respondent Lorenzo de Vera then informed her that the subject property was mortgaged to Emilio Ramos and Isidro Ramos; that respondent Lorenzo de Vera asked her to pay the balance of the purchase price to enable him and his wife to settle their obligation with the Ramoses. Petitioner also averred that she agreed to meet respondent spouses and the Ramoses on 5 August 1978 at the Office of the Registry of Deeds of Makati, Metro Manila, to consummate the transaction but due to the failure of respondent Asuncion Santos-de Vera and the Ramoses to appear, no transaction was formalized. In a second meeting scheduled on 11 August 1978 she claimed that she was willing and ready to pay the balance of the purchase price but the transaction again did not materialize as respondent spouses failed to pay the back taxes of subject property. Subsequently, on 23 August 1978 petitioner allegedly gave respondent Lorenzo de Vera three (3) checks in the total amount of P36,170.00 for the settlement of the back taxes of the property and for the payment of the quitclaims of the three (3) tenants of subject land. The amount was purportedly considered part of the purchase price and respondent Lorenzo de Vera signed the receipts therefor. Petitioner alleged that on 5 September 1978 she was surprised to learn from the agent of respondent spouses that the property was the subject of a negotiation for the sale to respondent Sunvar Realty Development Corporation (SUNVAR) represented by respondent Tomas Cuenca, Jr. On 15 September 1978 petitioner discovered that although respondent spouses purchased the property from the Ramoses on 20 March 1970 it was only on 15 September 1978 that TCT No. S-72946 covering the property was issued to respondent spouses. As a consequence, she filed on the same day an Affidavit of Adverse Claim with the Office of the Registry of Deeds of Makati, Metro Manila, which was annotated on TCT No. S-72946. She also claimed that on the same day she informed respondent Cuenca of her "contract" to purchase the property. The Deed of Sale between respondent spouses and respondent SUNVAR was executed on 15 September 1978 and TCT No. S-72377 was issued in favor of the latter on 26 September 1978 with the Adverse Claim of petitioner annotated thereon. Petitioner claimed that when respondent spouses sold the property in dispute to SUNVAR, her valid and legal right to purchase it was ignored if not violated. Moreover, she maintained that SUNVAR was in bad faith as it knew of her "contract" to purchase the subject property from respondent spouses. Finally, for the alleged unlawful and unjust acts of respondent spouses, which caused her damage, prejudice and injury, petitioner claimed that the Deed of Sale, should be annuled and TCT No. S-72377 in the name of respondent SUNVAR canceled and TCT No. S-72946 restored. She also insisted that a Deed of

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Sale between her and respondent spouses be now executed upon her payment of the balance of the purchase price agreed upon, plus damages and attorneys fees. In their Answer[4] respondent spouses maintained that petitioner had no sufficient cause of action against them; that she was not the real party in interest; that the option to buy the property had long expired; that there was no perfected contract to sell between them; and, that petitioner had no legal capacity to sue. Additionally, respondent spouses claimed actual, moral and exemplary damages, and attorneys fees against petitioner. On the other hand, respondents SUNVAR and Cuenca, in their Answer,[5] alleged that petitioner was not the proper party in interest and/or had no cause of action against them. But, even assuming that petitioner was the proper party in interest, they claimed that she could only be entitled to the return of any amount received by respondent spouses. In the alternative, they argued that petitioner had lost her option to buy the property for failure to comply with the terms and conditions of the agreement as embodied in the receipt issued therefor. Moreover, they contended that at the time of the execution of the Deed of Sale and the payment of consideration to respondent spouses, they "did not know nor was informed" of petitioners interest or claim over the subject property. They claimed furthermore that it was only after the signing of the Deed of Sale and the payment of the corresponding amounts to respondent spouses that they came to know of the claim of petitioner as it was only then that they were furnished copy of the title to the property where the Adverse Claim of petitioner was annotated. Consequently, they also instituted a Cross-Claim against respondent spouses for bad faith in encouraging the negotiations between them without telling them of the claim of petitioner. The same respondents maintained that had they known of the claim of petitioner, they would not have initiated negotiations with respondent spouses for the purchase of the property. Thus, they prayed for reimbursement of all amounts and monies received from them by respondent spouses, attorneys fees and expenses for litigation in the event that the trial court should annul the Deed of Sale and deprive them of their ownership and possession of the subject land. In their Answer to the Cross-Claim[6] of respondents SUNVAR and Cuenca, respondent spouses insisted that they negotiated with the former only after the expiration of the option period given to petitioner and her failure to comply with her commitments thereunder. Respondent spouses contended that they acted legally and validly, in all honesty and good faith. According to them, respondent SUNVAR made a verification of the title with the Office of the Register of Deeds of Metro Manila District IV before the execution of the Deed of Absolute Sale. Also, they claimed that the Cross-Claim was barred by a written waiver executed by respondent SUNVAR in their favor. Thus, respondent spouses prayed for actual damages for the unjustified filing of the Cross-Claim, moral damages for the mental anguish and similar injuries they suffered by reason thereof, exemplary damages "to prevent others from emulating the bad example" of respondents SUNVAR and Cuenca, plus attorneys fees. After a protracted trial and reconstitution of the court records due to the fire that razed the Pasay City Hall on 18 January 1992, the Regional Trial Court rendered its 30 June 1993 Decision[7] in favor of petitioner. It ordered (a) the annulment and rescission of the Deed of Absolute Sale executed on 15 September 1978 by respondent spouses in favor of respondent SUNVAR; (b) the cancellation and revocation of TCT No. S-75377 of the Registry of Deeds, Makati, Metro Manila, issued in the name of respondent Sunvar Realty Development Corporation, and the restoration or reinstatement of TCT No. S-72946 of the same Registry issued in the name of respondent spouses; (c) respondent spouses to execute a deed of sale conveying ownership of the property covered by TCT No. S-72946 in favor of petitioner upon her payment of the balance of the purchase price agreed upon; and, (d) respondent spouses to pay petitioner P50,000.00 as and for attorneys fees, and to pay the costs. On appeal, the Court of Appeals completely reversed the decision of the trial court. It ordered (a) the Register of Deeds of Makati City to lift the Adverse Claim and such other encumbrances petitioner might have filed or caused to be annotated on TCT No. S-75377; and, (b) petitioner to pay (1) respondent SUNVAR P50,000.00 as nominal damages, P30,000.00 as exemplary damages and P20,000 as attorneys fees; (2) respondent spouses, P15,000.00 as nominal damages, P10,000.00 as exemplary damages and P10,000.00 as attorneys fees; and, (3) the costs.

Petitioner timely filed a Motion for Reconsideration which was denied by the Court of Appeals on 19 October 1998. Hence, this petition. At issue for resolution by the Court is the nature of the contract entered into between petitioner Lourdes Ong Limson on one hand, and respondent spouses Lorenzo de Vera and Asuncion Santos-de Vera on the other. The main argument of petitioner is that there was a perfected contract to sell between her and respondent spouses. On the other hand, respondent spouses and respondents SUNVAR and Cuenca argue that what was perfected between petitioner and respondent spouses was a mere option. A scrutiny of the facts as well as the evidence of the parties overwhelmingly leads to the conclusion that the agreement between the parties was a contract of option and not a contract to sell. An option, as used in the law of sales, is a continuing offer or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a time certain, or under, or in compliance with, certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It is also sometimes called an "unaccepted offer." An option is not of itself a purchase, but merely secures the privilege to buy.[8] It is not a sale of property but a sale of the right to purchase.[9] It is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election or option of the other party.[10] Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer. Until acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject matter, but is merely a contract by which the owner of the property gives the optionee the right or privilege of accepting the offer and buying the property on certain terms.[11] On the other hand, a contract, like a contract to sell, involves the meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.[12] Contracts, in general, are perfected by mere consent,[13] which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.[14] The Receipt[15] that contains the contract between petitioner and respondent spouses provides Received from Lourdes Limson the sum of Twenty Thousand Pesos (P20,000.00) under Check No. 22391 dated July 31, 1978 as earnest money with option to purchase a parcel of land owned by Lorenzo de Vera located at Barrio San Dionisio, Municipality of Paraaque, Province of Rizal with an area of forty eight thousand two hundred sixty square meters more or less at the price of Thirty Four Pesos (P34.00)[16] cash subject to the condition and stipulation that have been agreed upon by the buyer and me which will form part of the receipt. Should the transaction of the property not materialize not on the fault of the buyer, I obligate myself to return the full amount of P20,000.00 earnest money with option to buy or forfeit on the fault of the buyer. I guarantee to notify the buyer Lourdes Limson or her representative and get her conformity should I sell or encumber this property to a third person. This option to buy is good within ten (10) days until the absolute deed of sale is finally signed by the parties or the failure of the buyer to comply with the terms of the option to buy as herein attached. In the interpretation of contracts, the ascertainment of the intention of the contracting parties is to be discharged by looking to the words they used to project that intention in their contract, all the words, not just a particular word or two, and words in context, not words standing alone. [17] The above Receipt readily shows that respondent spouses and petitioner only entered into a contract of option; a contract by which respondent spouses agreed with petitioner that the latter shall have the right to buy the formers property at a fixed price of P34.00 per square meter within ten (10) days from 31 July 1978. Respondent spouses did not sell their property; they did not also agree to sell it; but they sold something, i.e., the privilege to buy at the election or option of petitioner. The agreement imposed no binding obligation on petitioner, aside from the consideration for the offer.

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The consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as "earnest money." However, a careful examination of the words used indicates that the money is not earnest money butoption money. "Earnest money" and "option money" are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, [18] but may even forfeit it depending on the terms of the option. There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase price. Moreover, it was not shown that there was a perfected sale between the parties where earnest money was given. Finally, when petitioner gave the "earnest money," the Receipt did not reveal that she was bound to pay the balance of the purchase price. In fact, she could even forfeit the money given if the terms of the option were not met. Thus, the P20,000.00 could only be money given as consideration for the option contract. That the contract between the parties is one of option is buttressed by the provision therein that should the transaction of the property not materialize without fault of petitioner as buyer, respondent Lorenzo de Vera obligates himself to return the full amount of P20,000.00 "earnest money" with option to buy or forfeit the same on the fault of petitioner. It is further bolstered by the provision therein that guarantees petitioner that she or her representative would be notified in case the subject property was sold or encumbered to a third person. Finally, the Receiptprovided for a period within which the option to buy was to be exercised, i.e., "within ten (10) days" from 31 July 1978. Doubtless, the agreement between respondent spouses and petitioner was an "option contract" or what is sometimes called an "unaccepted offer." During the option period the agreement was not converted into a bilateral promise to sell and to buy where both respondent spouses and petitioner were then reciprocally bound to comply with their respective undertakings as petitioner did not timely, affirmatively and clearly accept the offer of respondent spouses. The rule is that except where a formal acceptance is not required, although the acceptance must be affirmatively and clearly made and evidenced by some acts or conduct communicated to the offeror, it may be made either in a formal or an informal manner, and may be shown by acts, conduct or words by the accepting party that clearly manifest a present intention or determination to accept the offer to buy or sell. But there is nothing in the acts, conduct or words of petitioner that clearly manifest a present intention or determination to accept the offer to buy the property of respondent spouses within the 10-day option period. The only occasion within the option period when petitioner could have demonstrated her acceptance was on 5 August 1978 when, according to her, she agreed to meet respondent spouses and the Ramoses at the Office of the Register of Deeds of Makati. Petitioners agreement to meet with respondent spouses presupposes an invitation from the latter, which only emphasizes their persistence in offering the property to the former. But whether that showed acceptance by petitioner of the offer is hazy and dubious. On or before 10 August 1978, the last day of the option period, no affirmative or clear manifestation was made by petitioner to accept the offer. Certainly, there was no concurrence of private respondent spouses offer and petitioners acceptance thereof within the option period. Consequently, there was no perfected contract to sell between the parties. On 11 August 1978 the option period expired and the exclusive right of petitioner to buy the property of respondent spouses ceased. The subsequent meetings and negotiations, specifically on 11 and 23 August 1978, between the parties only showed the desire of respondent spouses to sell their property to petitioner. Also, on 14 September 1978 when respondent spouses sent a telegram to petitioner demanding full payment of the purchase price on even date simply demonstrated an inclination to give her preference to buy subject property. Collectively, these instances did not indicate that petitioner still had the exclusive right to purchase subject property. Verily, the commencement of negotiations between respondent spouses and respondent SUNVAR clearly manifested that their offer to sell subject property to petitioner was no longer exclusive to her.

We cannot subscribe to the argument of petitioner that respondent spouses extended the option period when they extended the authority of their agent until 31 August 1978. The extension of the contract of agency could not operate to extend the option period between the parties in the instant case. The extension must not be implied but categorical and must show the clear intention of the parties. As to whether respondent spouses were at fault for the non-consummation of their contract with petitioner, we agree with the appellate court that they were not to be blamed. First, within the option period, or on 4 August 1978, it was respondent spouses and not petitioner who initiated the meeting at the Office of the Register of Deeds of Makati. Second, that the Ramoses failed to appear on 4 August 1978 was beyond the control of respondent spouses. Third, the succeeding meetings that transpired to consummate the contract were all beyond the option period and, as declared by the Court of Appeals, the question of who was at fault was already immaterial. Fourth, even assuming that the meetings were within the option period, the presence of petitioner was not enough as she was not even prepared to pay the purchase price in cash as agreed upon. Finally, even without the presence of the Ramoses, petitioner could have easily made the necessary payment in cash as the price of the property was already set at P34.00 per square meter and payment of the mortgage could very well be left to respondent spouses. Petitioner further claims that when respondent spouses sent her a telegram demanding full payment of the purchase price on 14 September 1978 it was an acknowledgment of their contract to sell, thus denying them the right to claim otherwise. We do not agree. As explained above, there was no contract to sell between petitioner and respondent spouses to speak of. Verily, the telegram could not operate to estop them from claiming that there was such contract between them and petitioner. Neither could it mean that respondent spouses extended the option period. The telegram only showed that respondent spouses were willing to give petitioner a chance to buy subject property even if it was no longer exclusive. The option period having expired and acceptance was not effectively made by petitioner, the purchase of subject property by respondent SUNVAR was perfectly valid and entered into in good faith. Petitioner claims that in August 1978 Hermigildo Sanchez, the son of respondent spouses agent, Marcosa Sanchez, informed Marixi Prieto, a member of the Board of Directors of respondent SUNVAR, that the property was already sold to petitioner. Also, petitioner maintains that on 5 September 1978 respondent Cuenca met with her and offered to buy the property from her at P45.00 per square meter. Petitioner contends that these incidents, including the annotation of her Adverse Claim on the title of subject property on 15 September 1978 show that respondent SUNVAR was aware of the perfected sale between her and respondent spouses, thus making respondent SUNVAR a buyer in bad faith. Petitioner is not correct. The dates mentioned, at least 5 and 15 September 1978, are immaterial as they were beyond the option period given to petitioner. On the other hand, the referral to sometime in August 1978in the testimony of Hermigildo Sanchez as emphasized by petitioner in her petition is very vague. It could be within or beyond the option period. Clearly then, even assuming that the meeting with Marixi Prieto actually transpired, it could not necessarily mean that she knew of the agreement between petitioner and respondent spouses for the purchase of subject property as the meeting could have occurred beyond the option period. In which case, no bad faith could be attributed to respondent SUNVAR. If, on the other hand, the meeting was within the option period, petitioner was remiss in her duty to prove so. Necessarily, we are left with the conclusion that respondent SUNVAR bought subject property from respondent spouses in good faith, for value and without knowledge of any flaw or defect in its title. The appellate court awarded nominal and exemplary damages plus attorneys fees to respondent spouses and respondent SUNVAR. But nominal damages are adjudicated to vindicate or recognize the right of the plaintiff that has been violated or invaded by the defendant. [19] In the instant case, the Court recognizes the rights of all the parties and finds no violation or invasion of the rights of respondents by petitioner. Petitioner, in filing her complaint, only seeks relief, in good faith, for what she believes she was entitled to and should not be made to suffer therefor. Neither should exemplary damages be awarded to respondents as they are imposed only by way of example or correction for the public good and only in addition to the moral, temperate, liquidated or compensatory damages.[20] No such kinds of damages were awarded by

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the Court of Appeals, only nominal, which was not justified in this case. Finally, attorneys fees could not also be recovered as the Court does not deem it just and equitable under the circumstances. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals ordering the Register of Deeds of Makati City to lift the adverse claim and such other encumbrances petitioner Lourdes Ong Limson may have filed or caused to be annotated on TCT No. S-75377 is AFFIRMED, with the MODIFICATION that the award of nominal and exemplary damages as well as attorneys fees is DELETED. SO ORDERED. PANGANIBAN, J.:

THIRD DIVISION [G.R. No. 112485. August 9, 2001] EMILIA MANZANO, petitioner, vs. MIGUEL PEREZ SR., LEONCIO PEREZ, MACARIO PEREZ, FLORENCIO PEREZ, NESTOR PEREZ, MIGUEL PEREZ JR. and GLORIA PEREZ, respondents. DECISION Courts decide cases on the basis of the evidence presented by the parties. In the assessment of the facts, reason and logic are used. In civil cases, the party that presents a preponderance of convincing evidence wins. The Case Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the March 31, 1993 Decision[1] of the Court of Appeals (CA)[2] in CA-GR CV No. 32594. The dispositive part of the Decision reads: WHEREFORE, the judgment appealed from is hereby REVERSED and another one is entered dismissing plaintiffs complaint. On the other hand, the Judgment[3] reversed by the CA ruled in this wise: WHEREFORE, premises considered, judgment is hereby rendered: 1) Declaring the two Kasulatan ng Bilihang Tuluyan (Exh. J & K) over the properties in question void or simulated; 2) Declaring the two Kasulatan ng Bilihang Tuluyan (Exh. J & K) over the properties in question rescinded; 3) Ordering the defendants Miguel Perez, Sr., Macario Perez, Leoncio Perez, Florencio Perez, Miguel Perez, Jr., Nestor Perez and Gloria Perez to execute an Extra Judicial Partition with transfer over the said residential lot and house, now covered and described in Tax Declaration Nos. 1993 and 1994, respectively in the name of Nieves Manzano (Exh. Q & P), subject matter of this case, in favor of plaintiff Emilia Manzano; 4) Ordering the defendants to pay plaintiff: a) b) c) d) P25,000.00 as moral damages; P10,000.00 as exemplary damages; P15,000.00 as and for [a]ttorneys fees; and To pay the cost of suit.[4]

The Motion for Reconsideration filed by petitioner before the CA was denied in a Resolution dated October 28, 1993.[5] The Facts The facts of the case are summarized by the Court of Appeals as follows: [Petitioner] Emilia Manzano in her Complaint alleged that she is the owner of a residential house and lot, more particularly described hereunder: A parcel of residential lot (Lots 1725 and 1726 of the Cadastral Survey of Siniloan), together with all the improvements thereon, situated at General Luna Street, Siniloan, Laguna. Bounded on the North by Callejon;

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on the East, by [a] town river; on the South by Constancia Adofina; and on the West by Gen. Luna Street. Containing an area of 130 square meters more or less, covered by Tax Dec. No. 9583 and assessed at P1,330.00. A residential house of strong mixed materials and G.I. iron roofing, with a floor area of 40 square meters, more or less. Also covered by Tax No. 9583. In 1979, Nieves Manzano, sister of the [petitioner] and predecessor-in-interest of the herein [private respondents], allegedly borrowed the aforementioned property as collateral for a projected loan. The [petitioner] acceded to the request of her sister upon the latters promise that she [would] return the property immediately upon payment of her loan. Pursuant to their understanding, the [petitioner] executed two deeds of conveyance for the sale of the residential lot on 22 January 1979 (Exhibit J) and the sale of the house erected thereon on 2 February 1979 (Exhibit K), both for a consideration of P1.00 plus other valuables allegedly received by her from Nieves Manzano. On 2 April 1979, Nieves Manzano together with her husband, [respondent] Miguel Perez, Sr., and her son, [respondent] Macario Perez, obtained a loan from the Rural Bank of Infanta, Inc. in the sum of P30,000.00. To secure payment of their indebtedness, they executed a Real Estate Mortgage (Exhibit A) over the subject property in favor of the bank. Nieves Manzano died on 18 December 1979 leaving her husband and children as heirs. These heirs, [respondents] herein allegedly refused to return the subject property to the [petitioner] even after the payment of their loan with the Rural Bank (Exhibit B). The [petitioner] alleged that sincere efforts to settle the dispute amicably failed and that the unwarranted refusal of the [respondents] to return the property caused her sleepless nights, mental shock and social humiliation. She was, likewise, allegedly constrained to engage the services of a counsel to protect her proprietary rights. The [petitioner] sought the annulment of the deeds of sale and execution of a deed of transfer or reconveyance of the subject property in her favor, the award of moral damages of not less than P50,000.00, exemplary damages of P10,000.00 attorneys fees of P10,000.00 plus P500.00 per court appearance, and costs of suit. In seeking the dismissal of the complaint, the [respondents] countered that they are the owners of the property in question being the legal heirs of Nieves Manzano Who purchased the same from the [petitioner] for value and in good faith, as shown by the deeds of sale which contain the true agreements between the parties therein; that except for the [petitioners] bare allegations, she failed to show any proof that the transaction she entered into with her sister was a loan and not a sale. By way of special and affirmative defense, the [respondents] argued that what the parties to the [sale] agreed upon was to resell the property to the [petitioner] after the payment of the loan with the Rural Bank. But since the [respondents] felt that the property is the only memory left by their predecessor-in-interest, they politely informed the [petitioner] of their refusal to sell the same. The [respondents] also argued that the [petitioner] is now estopped from questioning their ownership after seven (7) years from the consummation of the sale. As a proximate result of the filing of this alleged baseless and malicious suit, the [respondents] prayed as counterclaim the award of moral damages in the amount of P10,000.00 each, exemplary damages in an amount as may be warranted by the evidence on record, attorneys fees of P10,000.00 plus P500.00 per appearance in court and costs of suit. In ruling for the [petitioner], the court a quo considered the following:

First, the properties in question after [they have] been transferred to Nieves Manzano, the same were mortgaged in favor of the Rural Bank of Infante, Inc. (Exh. A) to secure payment of the loan extended to Macario Perez. Second, the documents covering said properties which were given to the bank as collateral of said loan, upon payment and [release] to the [private respondents], were returned to [petitioner] by Florencio Perez, one of the [private respondents]. [These] uncontroverted facts [are] clear recognition [by private respondents] that [petitioner] is the owner of the properties in question. xxx xxx xxx Third, [respondents] pretense of ownership of the properties in question is belied by their failure to present payment of real estate taxes [for] said properties, and it is on [record] that [petitioner] has been paying the real estate taxes [on] the same (Exh. T, V, V-1, V-2 & V-3). xxx xxx xxx Fourth, [respondents] confirmed the fact that [petitioner] went to the house in question and hacked the stairs. According to [petitioner] she did it for failure of the [respondents] to return and vacate the premises. [Respondents] did not file any action against her. This is a clear indication also that they (respondents) recognized [petitioner] as owner of said properties. xxx xxx xxx Fifth, the Cadastral Notice of said properties were in the name of [petitioner] and the same was sent to her (Exh. F & G). xxx xxx xxx Sixth, upon request of the [petitioner] to return said properties to her, [respondents] did promise and prepare an Extra Judicial Partition with Sale over said properties in question, however the same did not materialize. The other heirs of Nieves Manzano did not sign. xxx xxx xxx Seventh, uncontroverted is the fact that the consideration [for] the alleged sale of the properties in question is P1.00 and other things of value. [Petitioner] denies she has received any consideration for the transfer of said properties, and the [respondents] have not presented evidence to belie her testimony.[6] Ruling of the Court of Appeals The Court of Appeals was not convinced by petitioners claim that there was a supposed oral agreement of commodatum over the disputed house and lot. Neither was it persuaded by her allegation that respondents predecessor-in-interest had given no consideration for the sale of the property in the latters favor. It explained as follows: To begin with, if the plaintiff-appellee remained as the rightful owner of the subject property, she would not have agreed to reacquire one-half thereof for a consideration of P10,000.00 (Exhibit U-1). This is especially true if we are to accept her assertion that Nieves Manzano did not purchase the property for value. More importantly, if the agreement was to merely use plaintiffs property as collateral in a mortgage loan, it was not explained why physical possession of the house and lot had to be with the supposed vendee and her family who even built a pigpen on the lot (p. 6, TSN, June 11, 1990). A mere execution of the document transferring title in the latters name would suffice for the purpose. The alleged failure of the defendants-appellants to present evidence of payment of real estate taxes cannot prejudice their cause. Realty tax payment of property is not conclusive evidence of ownership (Director of Lands vs. Intermediate Appellate Court, 195 SCRA 38). Tax receipts only become strong evidence of

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ownership when accompanied by proof of actual possession of the property (Tabuena vs. Court of Appeals, 196 SCRA 650). In this case, plaintiff-appell[ee] was not in possession of the subject property. The defendant-appellants were the ones in actual occupation of the house and lot which as aforestated was unnecessary if the real agreement was merely to lend the property to be used as collateral. Moreover, the plaintiff-appellee began paying her taxes only in 1986 after the instant complaint ha[d] been instituted (Exhibits V, V-1, V-3 and T), and are, therefore, self-serving. Significantly, while plaintiff-appellee was still the owner of the subject property in 1979 (Exhibit I), the Certificate of Tax Declaration issued by the Office of the Municipal Treasurer on 8 August 1990 upon the request of the plaintiff-appellee herself (Exhibit W) named Nieves Manzano as the owner and possessor of the property in question. Moreover, Tax Declaration No. 9589 in the name of Nieves Manzano (Exhibits D and D-1) indicates that the transfer of the subject property was based on the Absolute Sale executed before Notary Public Alfonso Sanvictores, duly recorded in his notarial book as Document No. 3157, Page 157, Book No. II. Tax Declaration No[s]. 9633 (Exhibit H), 1994 (Exhibit P), 1993 (Exhibit Q) are all in the name of Nieves Manzano. There is always the presumption that a written contract [is] for a valuable consideration (Section 5 (r), Rule 131 of the Rules of Court; Gamaitan vs. Court of Appeals, 200 SCRA 37). The execution of a deed purporting to convey ownership of a realty is in itself prima facie evidence of the existence of a valuable consideration and x x x the party alleging lack of consideration has the burden of proving such allegation (Caballero, et al. vs. Caballero, et al., C.A. 45 O.G. 2536). The consideration [for] the questioned [sale] is not the One (P1.00) Peso alone but also the other valuable considerations. Assuming that such consideration is suspiciously insufficient, this circumstance alone, is not sufficient to invalidate the sale. The inadequacy of the monetary consideration does not render a conveyance null and void, for the vendors liberality may be a sufficient cause for a valid contract (Ong vs. Ong, 139 SCRA 133).[7] Hence, this Petition.[8] Issues Petitioner submits the following grounds in support of her cause:[9] 1. The Court of Appeals erred in failing to consider that: A) The introduction of petitioners evidence is proper under the parol evidence rule. B) The rules on admission by silence apply in the case at bar. C) Petitioner is entitled to the reliefs prayed for. 2. The Court of Appeals erred in reversing the decision of the trial court whose factual findings are entitled to great respect since it was able to observe and evaluate the demeanor of the witnesses.[10] In sum, the main issue is whether the agreement between the parties was a commodatum or an absolute sale. The Courts Ruling The Petition has no merit. Main Issue: Sale or Commodatum Obviously, the issue in this case is enveloped by conflict in factual perception, which is ordinarily not reviewable in a petition under Rule 45. But the Court is constrained to resolve it, because the factual findings of the Court of Appeals are contrary to those of the trial court.[11] Preliminarily, petitioner contends that the CA erred in rejecting the introduction of her parol evidence. A reading of the assailed Decision shows, however, that an elaborate discussion of the parol evidence rule and its exceptions was merely given as a preface by the appellate court. Nowhere therein did it consider petitioners evidence as improper under the said rule. On the contrary, it considered and weighed each and

every piece thereof. Nonetheless, it was not persuaded, as explained in the multitude of reasons explicitly stated in its Decision. This Court finds no cogent reason to disturb the findings and conclusions of the Court of Appeals. Upon close examination of the records, we find that petitioner has failed to discharge her burden of proving her case by preponderance of evidence. This concept refers to evidence that has greater weight or is more convincing than that which is offered in opposition; at bottom, it means probability of truth.[12] In the case at bar, petitioner has presented no convincing proof of her continued ownership of the subject property. In addition to her own oral testimony, she submitted proof of payment of real property taxes. But that payment, which was made only after her Complaint had already been lodged before the trial court, cannot be considered in her favor for being self-serving, as aptly explained by the CA. Neither can we give weight to her allegation that respondents possession of the subject property was merely by virtue of her tolerance. Bare allegations, unsubstantiated by evidence, are not equivalent to proof under our Rules.[13] On the other hand, respondents presented two Deeds of Sale, which petitioner executed in favor of the formers predecessor-in-interest. Both Deeds for the residential lot and for the house erected thereon were each in consideration of P1.00 plus other valuable. Having been notarized, they are presumed to have been duly executed. Also, issued in favor of respondents predecessor-in-interest the day after the sale was Tax Declaration No. 9589, which covered the property. The facts alleged by petitioner in her favor are the following: (1) she inherited the subject house and lot from her parents, with her siblings waiving in her favor their claim over the same; (2) the property was mortgaged to secure a loan of P30,000 taken in the names of Nieves Manzano Perez and Respondent Miguel Perez; (3) upon full payment of the loan, the documents pertaining to the house and lot were returned by Respondent Florencio Perez to petitioner; (4) three of the respondents were signatories to a document transferring one half of the property to Emilia Manzano in consideration of the sum of ten thousand pesos, although the transfer did not materialize because of the refusal of the other respondents to sign the document; and (5) petitioner hacked the stairs of the subject house, yet no case was filed against her. These matters are not, however, convincing indicators of petitioners ownership of the house and lot. On the contrary, they even support the claim of respondents. Indeed, how could one of them obtained a mortgage over the property, without having dominion over it? Why would they execute a reconveyance of one half of it in favor of petitioner? Why would the latter have to pay P10,000 for that portion if, as she claims, she owns the whole? Pitted against respondents evidence, that of petitioner awfully pales. Oral testimony cannot, as a rule, prevail over a written agreement of the parties.[14] In order to contradict the facts contained in a notarial document, such as the two Kasulatan ng Bilihang Tuluyan in this case, as well as the presumption of regularity in the execution thereof, there must be clear and convincing evidence that is more than merely preponderant.[15] Here petitioner has failed to come up with even a preponderance of evidence to prove her claim. Courts are not blessed with the ability to read what goes on in the minds of people. That is why parties to a case are given all the opportunity to present evidence to help the courts decide on who are telling the truth and who are lying, who are entitled to their claim and who are not. The Supreme Court cannot depart from these guidelines and decide on the basis of compassion alone because, aside from being contrary to the rule of law and our judicial system, this course of action would ultimately lead to anarchy. We reiterate, the evidence offered by petitioner to prove her claim is sadly lacking. Jurisprudence on the subject matter, when applied thereto, points to the existence of a sale, not a commodatum over the subject house and lot. WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 150925 May 27, 2004 SPOUSES JAMES TAN and FLORENCE TAN, petitioners, vs. CARMINA, REYNALDO, YOLANDA and ELISA, all surnamed MANDAP, respondents. DECISION QUISUMBING, J.: For review on certiorari is the decision1 dated August 10, 2001, of the Court of Appeals, in CA-G.R. CV No. 59694, which affirmed in toto the decision,2 dated March 25, 1998, of the Regional Trial Court (RTC) of Manila, Branch 34, in Civil Case No. 89-50263. The trial court declared the sale of properties between Dionisio Mandap, Sr., and the spouses Crispulo and Elenita Vasquez simulated and thus void, and hence, the subsequent sale between the Vasquez spouses and petitioners herein, the spouses James and Florence Tan, similarly void. Likewise assailed by the petitioners is the resolution3 dated November 23, 2001 of the appellate court, denying their motion for reconsideration. The pertinent facts, as found by the trial court, are as follows: The respondents are the legitimate children of the marriage of Dionisio Mandap, Sr., and Maria Contreras Mandap. When the Mandap spouses parted ways, their children opted to stay with Maria. To help support the children, Maria filed Civil Case No. E-02380 in the former Juvenile and Domestic Relations Court of Manila for the dissolution and separation of the conjugal partnership. Two separate lots, each with an area of 88 square meters covered by TCT Nos. 44730 and 55847, respectively, located in Felix Huertas Street, Sta. Cruz, Manila, with improvements thereon, were adjudicated by the Juvenile and Domestic Relations Court in favor of Dionisio Mandap, Sr. Meanwhile, Dionisio Mandap, Sr., until his death on October 2, 1991 at age 64, lived with Diorita Dojoles, with whom he had two children. He suffered from diabetes since 1931, became totally blind in 1940, and was crippled for about 10 years until his death. However, before his death on May 25, 1989, he conveyed the subject properties to his common-law wifes sister, Elenita Dojoles Vasquez; and her husband, Crispulo Vasquez. As a result of this sale, TCT Nos. 44730 and 55847 were cancelled and TCT Nos. 186748 and 186749 covering the subject properties were issued in the name of Elenita Vasquez married to Crispulo Vasquez. On September 11, 1989, the Vasquez spouses conveyed the parcel of land covered by TCT No. 186748 in favor of petitioners. TCT No. 188862 covering the subject lot was then issued in favor of the latter. On September 5, 1989, prior to the sale to petitioners, the respondents filed an action for cancellation of title with damages, before the RTC of Manila against Diorita Dojoles and the Vasquez spouses, alleging that the sale of subject properties by their father was fictitious, and without any consideration. Further, the consent of their father was vitiated due to his physical infirmities. The action was docketed as Civil Case No. 89-50263. On February 15, 1991, respondents filed a supplemental complaint, this time against the spouses Tan, for the nullification of the sale to the latter of subject lot. On March 25, 1998, the trial court decided Civil Case No. 89-50263 in favor of the herein respondents. The decretal part of its judgment reads as follows: WHEREFORE, premises considered judgment is hereby rendered as follows: IN CIVIL CASE NO. 89-50263 1. Declaring the Deeds of Sale (Exh. "A" and "A-1"; "B" and "B-1") both dated May 25, 1989 executed in favor of Elenita Vasquez married to Crispulo Vasquez as null and void and of no legal force and effect whatsoever;

2. Ordering the Register of Deeds of Manila to cancel TCT No. 186748 (Exh. "K" to "K2") and TCT No. 186749 (Exh. "L" and "L-1") registered in the name of Elenita Vasquez married to Crispulo Vasquez having been issued thru a void and inexistent contract; further ordering the reconveyance of said title to the Estate of Dionisio Mandap, Sr.; 3. Ordering the plaintiffs or the Estate of Dionisio Mandap, Sr., to reimburse or return the sum ofP570,000.00 representing the purchase price of the subject lot, plus legal rate of interest starting from the rendition of this decision until fully paid; 4. Ordering the defendants Spouses Crispulo and Elenita Vasquez and Diorita Dojoles to jointly and severally reimburse or return the fruits or earnings in the mentioned lots in the form of rentals which is hereby fixed at P10,000.00 per month from the date this complaint was filed until defendants restore and/or surrender the subject premises to the Estate of Dionisio Mandap, Sr.; 5. Ordering the defendants Spouses Crispulo and Elenita Vasquez and Diorita Dojoles to pay attorneys fees in the amount of P50,000.00 and to pay the costs of this suit. IN THE SUPPLEMENTAL COMPLAINT AGAINST SPOUSES JAMES AND FLORENCE TAN 1. Declaring the Deed of Sale dated September 11, 1989 (Exh. "Q" and "7", Tan) executed by Elenita Vasquez married to Crispulo Vasquez as null and void and of no force and effect whatsoever, the vendor having no valid title to dispose of the same; 2. Ordering the Register of Deeds of Manila to cancel TCT No. 188862 issued in the name of James Tan, the source of which having been declared null and void; 3. Ordering Spouses Crispulo and Elenita Vasquez to return the sum of P1,000,000.00 representing the purchase price of the lot covered by TCT No. 188862 with legal rate of interest from the date of this decision; 4. Ordering defendants James and Florence Tan to jointly and severally pay the sum of P15,000.00 as and for attorneys fees. IN BOTH CASES THE COUNTERCLAIMS INTERPOSED BY THE DEFENDANTS ARE DISMISSED FOR LACK OF MERIT. SO ORDERED.4 From the above judgment, petitioners appealed to the Court of Appeals in CA-G.R. CV No. 59694 on the ground that the trial court erred in not declaring them to be buyers in good faith and in not sustaining the validity of their title, TCT No. 188862. In its decision dated August 10, 2001, the Court of Appeals found the appeal bereft of merit and affirmed in totothe lower court decision, thus: WHEREFORE, the appeals interposed by appellants Dojoles, Sps. Vasquez and Sps. James and Florence Tan is without merit; the Decision of the lower court dated March 25, 1998 is AFFIRMED in toto. Costs against appellants. SO ORDERED.5 Petitioners seasonably moved for reconsideration, but it was denied by the appellate court. Hence, this petition for review, submitting the following issues for our resolution: I WHETHER OR NOT PETITIONERS HAVE THE LEGAL PERSONALITY TO BRING THE INSTANT PETITION.

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II WHETHER OR NOT THE SALE BETWEEN MANDAP SR. AND THE VASQUEZES IS VALID. III WHETHER OR NOT THE SALE BETWEEN THE VASQUEZES AND PETITIONERS IS VALID. IV WHETHER OR NOT THE AWARD OF ATTORNEYS [FEES] HAS LEGAL BASIS.6 Anent the first issue, the petitioners submit that having been made parties-defendants by respondents via the supplemental complaint in Civil Case No. 89-50263, they have the right to appeal to this Court the adverse ruling of the appellate court against them, even if their co-defendants did not appeal the said ruling of the Court of Appeals. Respondents counter that petitioners have no legal personality to appeal the decision of the appellate court voiding the sale between Dionisio Mandap, Sr., and the Vasquez spouses. They contend that inasmuch as the latter did not appeal the questioned decision, it had become final and executory. Respondents contend that petitioners, not being privy to said sale, cannot invoke its validity. We find for petitioners on this issue. The trial court voided the petitioners sale of subject lot, and on appeal that decision was affirmed by the Court of Appeals. Hence, as aggrieved parties, petitioners may elevate to the Supreme Court the controversy within the prescriptive period for appeal.7 They possess locus standi, or legal personality, to seek a review by this Court of the decision by the appellate court which they assail. Note that while petitioners elevated the trial courts decision to the appellate court, their co-defendants in Civil Case No. 89-50263 did not do so. Thus, the trial courts decision became final and executory only as to petitioners co-defendants in the trial court who did not appeal, namely Diorita Dojoles and the Vasquez spouses. With regard to the second issue, the petitioners insist the essential requisites of a contract of sale have been satisfied, namely, (1) consent of the contracting parties, (2) object certain, and (3) cause or consideration therefor. They have been satisfied first in the sale by Mandap, Sr., of the lots to the Vasquez spouses and subsequently, in the sale by the Vasquezes to petitioners. Hence, petitioners contend that it was error for the appellate court to declare the sale to them of the subject lot null and void. After careful consideration of the submission of the parties, we find in favor of respondents. Petitioners contentions lack merit. At the time Dionisio Mandap, Sr., purportedly sold the lots in question to the Vasquez spouses, he was already totally blind and paralyzed. He could not possibly have read the contents of the deeds of sale. He could not have consented to a contract whose terms he never knew nor understood. It cannot be presumed Mandap, Sr., knew the contents of the deeds of sale disposing of his properties. Article 1332 of the Civil Code is applicable in these circumstances, to wit: ART. 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. As the party seeking to enforce the contract, the petitioners should have presented evidence showing that the terms of the deeds of sale to the Vasquez spouses were fully explained to Mandap, Sr. But petitioners failed to comply with the strict requirements of Article 1332, thereby casting doubt on the alleged consent of the vendor. Since the vendor in this case was totally blind and crippled at the time of the sale, entirely dependent on outside support, every care to protect his interest conformably with Article 24 of the Civil Code must be taken. Article 24 is clear on this. ART. 24. In all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. Petitioners presented no evidence disproving that (1) Mandap, Sr. was totally blind and suffering from acute diabetes such that he could no longer discern the legal consequences of his acts, and (2) that undue influence was exerted upon him, which vitiated his consent.

It is true that he who alleges a fact bears the burden of proving it. However, since fraud and undue influence are alleged by respondents, the burden shifts8 to petitioners to prove that the contents of the contract were fully explained to Mandap, Sr. Nothing, however, appears on record to show that this requirement was complied with. Thus, the presumption of fraud and undue influence was not rebutted. More important, evidence on record, in our view, prove the existence of fraud. On August 1, 1990, commissioners appointed by the lower court conducted an ocular inspection concerning the physical condition of Mandap, Sr. He stated on that occasion that he received P550,000 as first payment, another P550,000 as second payment, andP1,550,000 the remaining balance of the total selling price of what was loaned to the vendees. However, in the deeds of sale covering the subject properties, the prices indicated were P250,000 and P320,000, respectively or a total of only P570,000. This inconsistency in the amount of the consideration is unexplained. They point to fraud in the sale of the subject properties, to the prejudice of Mandap, Sr. Petitioners do not dispute the fact that the notary public who notarized the deeds of sale was not duly commissioned. But they contend the deeds validity were not affected. However, it bears stressing that even an apparently valid notarization of a document does not guarantee its validity.9 The crucial point here is that while Mandap, Sr., testified that he executed the deeds of sale in Las Pias, the said documents were actually notarized in Manila. Mandap, Sr., did not personally appear before a notary public. Yet the documents stated the contrary. Such falsity raises doubt regarding the genuineness of the vendors alleged consent to the deeds of sale. Petitioners also claim the purchase price was not grossly inadequate so as to invalidate the sale of subject properties. True, mere inadequacy of the price does not necessarily void a contract of sale. However, said inadequacy may indicate that there was a defect in the vendors consent.10 More important, it must be pointed out that the trial court and the Court of Appeals voided the sale of the subject properties not because the price was grossly inadequate, but because the presumptions of fraud and undue influence exerted upon the vendor had not been overcome by petitioners, the parties interested in enforcing the contract. On the third issue, petitioners argue that since the sale of subject properties by Mandap, Sr. to the Vasquez spouses is valid, it follows that the subsequent sale of the property by the latter to petitioners is also valid. But this contention cannot be sustained, since we find that based on the evidence on record, the sale in favor of the Vasquez spouses is void. Hence, it follows that the sale to petitioners is also void, because petitioners merely stepped into the shoes of the Vasquez spouses. Since the Vasquezes as sellers had no valid title over the parcel of land they sold, petitioners as buyers thereof could not claim that the contract of sale is valid. On the last issue, petitioners contest the award of attorneys fees. Indeed, no premium should be placed on the right to litigate, and not every winning party is entitled to an automatic grant of attorneys fees.11 The party must show that he falls under one of the instances enumerated in Article 2208 of the Civil Code, to wit: ART. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In this particular case, the award of attorneys fees is just and equitable, considering the circumstances herein. The court a quos order to pay P15,000 as attorneys fees does not appear to us unreasonable but just and equitable. WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals dated August 10, 2001 in CA-G.R. CV No. 59694, which sustained the decision dated March 25, 1998 of the Regional Trial Court of Manila, Branch 34, is AFFIRMED. Costs against petitioners. SO ORDERED.

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SECOND DIVISION [G.R. No. 129416. November 25, 2004] ZENAIDA B. TIGNO, IMELDA B. TIGNO and ARMI B. TIGNO, petitioners, vs. SPOUSES ESTAFINO AQUINO and FLORENTINA AQUINO and the HONORABLE COURT OF APPEALS, respondents. DECISION TINGA, J.: The controversy in the present petition hinges on the admissibility of a single document, a deed of sale involving interest over real property, notarized by a person of questionable capacity. The assailed ruling of the Court of Appeals, which overturned the findings of fact of the Regional Trial Court, relied primarily on the presumption of regularity attaching to notarized documents with respect to its due execution. We conclude instead that the document has not been duly notarized and accordingly reverse the Court of Appeals. The facts are as follow: On 11 January 1980, respondent spouses Estafino and Florentina Aquino (the Aquinos) filed a complaint for enforcement of contract and damages against Isidro Bustria (Bustria). [1] The complaint sought to enforce an alleged sale by Bustria to the Aquinos of a one hundred twenty thousand (120,000) square meter fishpond located in Dasci, Pangasinan. The property was not registered either under the Land Registration Act or under the Spanish Mortgage Law, though registrable under Act No. 3344.[2] The conveyance was covered by a Deed of Sale dated 2 September 1978. Eventually, Bustria and the Aquinos entered into a compromise agreement, whereby Bustria agreed to recognize the validity of the sale, and the Aquinos in turn agreed to grant to Bustria the right to repurchase the same property after the lapse of seven (7) years. Upon submission, the Court of First Instance of Pangasinan, Branch VII, approved and incorporated the compromise agreement in a Decision which it rendered on 7 September 1981. Bustria died in October of 1986.[3] On 1 December 1989, petitioner Zenaida B. Tigno (Tigno), in substitution of her deceased father Isidro Bustria,[4] attempted to repurchase the property by filing a Motion for Consignation. She deposited the amount of Two Hundred Thirty Thousand Pesos (P200,000.00) with the trial court, now Regional Trial Court (RTC), Branch 55 at Alaminos, Pangasinan. On 18 December 1989, the Aquinos filed an opposition, arguing that the right to repurchase was not yet demandable and that Tigno had failed to make a tender of payment. In anOrder dated 10 October 1999, the RTC denied the Motion for Consignation.[5] In June of 1991, Tigno filed a Motion for a Writ of Execution, which was likewise opposed by the Aquinos, and denied by the RTC. Then, on 6 September 1991, Tigno filed an action forRevival of Judgment,[6] seeking the revival of the decision in Civil Case No. A-1257, so that it could be executed accordingly.[7] The Aquinos filed an answer, wherein they alleged that Bustria had sold his right to repurchase the property to them in a deed of sale dated 17 October 1985.[8] Among the witnesses presented by the Aquinos during trial were Jesus De Francia (De Francia), the instrumental witness to the deed of sale, and former Judge Franklin Cario (Judge Cario), who notarized the same. These two witnesses testified as to the occasion of the execution and signing of the deed of sale by Bustria. Thereafter, in their Formal Offer of Documentary Evidence, the Aquinos offered for admission as their Exhibit No. 8, the deed of sale (Deed of Sale)[9] purportedly executed by Bustria. The admission of the Deed of Sale was objected to by Tigno on the ground that it was a false and fraudulent document which had not been acknowledged by Bustria as his own; and that its existence was suspicious, considering that it had been previously unknown, and not even presented by the Aquinos when they opposed Tignos previous Motion for Consignation.[10]

In an Order dated 6 April 1994, the RTC refused to admit the Deed of Sale in evidence.[11] A Motion for Reconsideration praying for the admission of said exhibit was denied in an Orderdated 27 April 1994.[12] Then, on 18 August 1994, a Decision was rendered by the RTC in favor of Tigno. The RTC therein expressed doubts as to the authenticity of the Deed of Sale, characterizing the testimonies of De Francia and Cario as conflicting.[13] The RTC likewise observed that nowhere in the alleged deed of sale was there any statement that it was acknowledged by Bustria;[14] that it was suspicious that Bustria was not assisted or represented by his counsel in connection with the preparation and execution of the deed of sale[15] or that Aquino had raised the matter of the deed of sale in his previous Opposition to the Motion for Consignation.[16] The RTC then stressed that the previous Motion for Execution lodged by Tigno had to be denied since more than five (5) years had elapsed from the date the judgment in Civil Case No. A-1257 had become final and executory; but the judgment could be revived by action such as the instant complaint. Accordingly, the RTC ordered the revival of the judgment dated 7 September 1981 in Civil Case No. A1257.[17] The Aquinos interposed an appeal to the Court of Appeals.[18] In the meantime, the RTC allowed the execution pending appeal of its Decision.[19] On 23 December 1996, the Court of Appeals Tenth Division promulgated a Decision[20] reversing and setting aside the RTC Decision. The appellate court ratiocinated that there were no material or substantial inconsistencies between the testimonies of Cario and De Francia that would taint the document with doubtful authenticity; that the absence of the acknowledgment and substitution instead of a jurat did not render the instrument invalid; and that the non-assistance or representation of Bustria by counsel did not render the document null and ineffective.[21] It was noted that a notarized document carried in its favor the presumption of regularity with respect to its due execution, and that there must be clear, convincing and more than merely preponderant evidence to contradict the same. Accordingly, the Court of Appeals held that the RTC erred in refusing to admit the Deed of Sale, and that the document extinguished the right of Bustrias heirs to repurchase the property. After the Court of Appeals denied Tignos Motion for Reconsideration,[22] the present petition was filed before this Court. Tigno imputes grave abuse of discretion and misappreciation of facts to the Court of Appeals when it admitted the Deed of Sale. He also argues that the appellate court should have declared the Deed of Sale as a false, fraudulent and unreliable document not supported by any consideration at all. The general thrusts of the arguments posed by Tigno are factually based. As such, they could normally lead to the dismissal of this Petition for Review. However, while this Court is not ordinarily a trier of facts,[23] factual review may be warranted in instances when the findings of the trial court and the intermediate appellate court are contrary to each other.[24] Moreover, petitioner raises a substantial argument regarding the capacity of the notary public, Judge Cario, to notarize the document. The Court of Appeals was unfortunately silent on that matter, but this Court will take it up with definitiveness. The notarial certification of the Deed of Sale reads as follows: ACKNOWLEDGMENT REPUBLIC OF THE PHILIPPINES) PROVINCE OF PANGASINAN ) S.S. MUNICIPALITY OF ALAMINOS ) SUBSCRIBED AND SWORN TO before me this 17th day of October 1985 at Alaminos, Pangasinan both parties known to me to be the same parties who executed the foregoing instrument. FRANKLIN CARIO Ex-Officio Notary Public Judge, M.T.C. Alaminos, Pangasinan

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There are palpable errors in this certification. Most glaringly, the document is certified by way of a jurat instead of an acknowledgment. A jurat is a distinct creature from an acknowledgment. An acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed; while a jurat is that part of an affidavit where the officer certifies that the same was sworn before him.[25] Under Section 127 of the Land Registration Act,[26] which has been replicated in Section 112 of Presidential Decree No. 1529,[27] theDeed of Sale should have been acknowledged before a notary public.[28] But there is an even more substantial defect in the notarization, one which is determinative of this petition. This pertains to the authority of Judge Franklin Cario to notarize the Deed of Sale. It is undisputed that Franklin Cario at the time of the notarization of the Deed of Sale, was a sitting judge of the Metropolitan Trial Court of Alaminos.[29] Petitioners point out, citing Tabao v. Asis,[30] that municipal judges may not undertake the preparation and acknowledgment of private documents, contracts, and other acts of conveyance which bear no relation to the performance of their functions as judges.[31] In response, respondents claim that the prohibition imposed on municipal court judges from notarizing documents took effect only in December of 1989, or four years after the Deed of Sale was notarized by Cario.[32] Respondents contention is erroneous. Municipal Trial Court (MTC) and Municipal Circuit Trial Court (MCTC) judges are empowered to perform the functions of notaries public ex officiounder Section 76 of Republic Act No. 296, as amended (otherwise known as the Judiciary Act of 1948) and Section 242 of the Revised Administrative Code.[33] However, as far back as 1980 inBorre v. Moya,[34] the Court explicitly declared that municipal court judges such as Cario may notarize only documents connected with the exercise of their official duties.[35] The Deed of Salewas not connected with any official duties of Judge Cario, and there was no reason for him to notarize it. Our observations as to the errant judge in Borre are pertinent in this case, considering that Judge Cario identified himself in the Deed of Sale as Ex-Officio Notary Public, Judge, MTC: [A notary ex officio] should not compete with private law practitioners or regular notaries in transacting legal conveyancing business. In the instant case, it was not proper that a city judge should notarize documents involving private transactions and sign the document in this wise: "GUMERSINDO ARCILLA, Notary Public Ex-Officio, City Judge" (p. 16, Rollo, Annex D of Complaint). In doing so, he obliterated the distinction between a regular notary and a notary ex officio.[36] There are possible grounds for leniency in connection with this matter, as Supreme Court Circular No. I-90 permits notaries public ex officio to perform any act within the competency of a regular notary public provided that certification be made in the notarized documents attesting to the lack of any lawyer or notary public in such municipality or circuit. Indeed, it is only when there are no lawyers or notaries public that the exception applies.[37] The facts of this case do not warrant a relaxed attitude towards Judge Carios improper notarial activity. There was no such certification in the Deed of Sale. Even if one was produced, we would be hard put to accept the veracity of its contents, considering that Alaminos, Pangasinan, now a city, [38] was even then not an isolated backwater town and had its fair share of practicing lawyers. There may be sufficient ground to call to task Judge Cario, who ceased being a judge in 1986, for his improper notarial activity. Perhaps though, formal sanction may no longer be appropriate considering Judge Carios advanced age, assuming he is still alive.[39] However, this Decision should again serve as an affirmation of the rule prohibiting municipal judges from notarizing documents not connected with the exercise of their official duties, subject to the exceptions laid down in Circular No. 1-90. Most crucially for this case, we should deem the Deed of Sale as not having been notarized at all. The validity of a notarial certification necessarily derives from the authority of the notarial officer. If the notary public does not have the capacity to notarize a document, but does so anyway, then the document should be treated as unnotarized. The rule may strike as rather harsh, and perhaps may prove to be prejudicial to parties in good faith relying on the proferred authority of the notary public or the person pretending to be one.

Still, to admit otherwise would render merely officious the elaborate process devised by this Court in order that a lawyer may receive a notarial commission. Without such a rule, the notarization of a document by a duly appointed notary public will have the same legal effect as one accomplished by a non-lawyer engaged in pretense. The notarization of a document carries considerable legal effect. Notarization of a private document converts such document into a public one, and renders it admissible in court without further proof of its authenticity.[40] Thus, notarization is not an empty routine; to the contrary, it engages public interest in a substantial degree and the protection of that interest requires preventing those who are not qualified or authorized to act as notaries public from imposing upon the public and the courts and administrative offices generally.[41] On the other hand, what then is the effect on the Deed of Sale if it was not notarized? True enough, from a civil law perspective, the absence of notarization of the Deed of Sale would not necessarily invalidate the transaction evidenced therein. Article 1358 of the Civil Code requires that the form of a contract that transmits or extinguishes real rights over immovable property should be in a public document, yet it is also an accepted rule that the failure to observe the proper form does not render the transaction invalid. Thus, it has been uniformly held that the form required in Article 1358 is not essential to the validity or enforceability of the transaction, but required merely for convenience.[42] We have even affirmed that a sale of real property though not consigned in a public instrument or formal writing, is nevertheless valid and binding among the parties, for the time-honored rule is that even a verbal contract of sale or real estate produces legal effects between the parties.[43] Still, the Court has to reckon with the implications of the lack of valid notarization of the Deed of Sale from the perspective of the law on evidence. After all, the case rests on the admissibility of the Deed of Sale. Clearly, the presumption of regularity relied upon by the Court of Appeals no longer holds true since the Deed of Sale is not a notarized document. Its proper probative value is governed by the Rules of Court. Section 19, Rule 132 states: Section 19. Classes of documents.For the purpose of their presentation in evidence, documents are either public or private. Public documents are: (a) The written official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers, whether of the Philippines, or of a foreign country; (b) Documents acknowledged before a notary public except last wills and testaments; and (c) Public records, kept in the Philippines, of private documents required by law to be entered therein. All other writings are private. (Emphasis supplied.) The Deed of Sale, invalidly notarized as it was, does not fall under the enumeration of public documents; hence, it must be considered a private document. The nullity of the alleged or attempted notarization performed by Judge Cario is sufficient to exclude the document in question from the class of public documents. Even assuming that the Deed of Sale was validly notarized, it would still be classified as a private document, since it was not properly acknowledged, but merely subscribed and sworn to by way of jurat. Being a private document, the Deed of Sale is now subject to the requirement of proof under Section 20, Rule 132, which states: Section 20. Proof of private document.Before any private document offered as authentic is received in evidence, its due execution and authenticity must be proved either:

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(a) By anyone who saw the document executed or written; or (b) By evidence of the genuineness of the signature or handwriting of the maker. Any other private document need only be identified as that which is claimed to be. The Deed of Sale was offered in evidence as authentic by the Aquinos, who likewise insist that its enforceability militates against Tignos claim. Correspondingly, the burden falls upon the Aquinos to prove its authenticity and due execution. The Court of Appeals clearly erred in not appreciating the Deed of Sale as a private document and in applying the presumption of regularity that attaches only to duly notarized documents, as distinguished from private documents. Did the RTC err then in refusing to admit the Deed of Sale? We hold that it did not. Section 20, Rule 132 provides ample discretion on the trier of fact before it may choose to receive the private document in evidence. The RTC wisely refused to admit the Deed of Sale, taking great lengths as it did to explain its doubts as to its veracity. The RTC was not convinced of the proffered proof by the Aquinos, and the exercise of its sound discretion as the primary trier of fact warrants due respect. The most telling observation of the RTC relates to the fact that for the very first time respondents alleged the existence of the Deed of Sale when they filed their answer to petitioners current action to revive judgment.[44] Prior to the initiation of the present action, Tigno had tried to operationalize and implement the Compromise Agreement through two judicial means: consignation and execution of judgment. The Aquinos duly opposed these prior attempts of the petitioner to exercise the right to repurchase, but they did not raise then the claim that such right to repurchase was already extinguished by the Deed of Sale. Tigno attempted to exercise the right to repurchase only a few years after the execution of the Deed of Sale to which respondents themselves were signatories. Thus, it is incredulous that the Aquinos did not invoke the Deed of Sale when they opposed in court petitioners successive attempts at consignation and execution of judgment. TheDeed of Sale, if in existence and valid, would have already precluded Tignos causes of action for either consignation or execution of judgment. The only believable conclusion, as drawn by the RTC, was that the Deed of Sale had yet to be created when petitioner moved in 1990 for consignation and execution of judgment an existential anomaly if we were to agree with the respondents that such document had been signed and notarized back in 1985. The dubiousness in origin of the Deed of Sale is not alleviated by the other observations of the RTC. It also pointed to certain incredible aspects in the Aquinos tale of events. It noted that no receipts were ever presented by the respondents to evidence actual payment of consideration by them to Bustria, despite the allegation of the respondents that the amount was covered by seven (7) receipts. [45] The Aquinos claimed that Bustria kept all the receipts, an assertion which the RTC found as unbelievable, citing ordinary human nature to ask for receipts for significant amounts given and to keep the same.[46] In itself, the absence of receipts, or any proof of consideration, would not be conclusive since consideration is always presumed. However, given the totality of the circumstances surrounding this case, the absence of such proof further militates against the claims of the Aquinos. We can appreciate in a similar vein the observation of the Court of Appeals that Bustria did not bother to seek his lawyers assistance as regards the execution of the Deed of Sale, considering that the subject property had previously been fiercely litigated. Although the Court of Appeals was correct in ruling that the document would not be rendered null or ineffective due to the lack of assistance of counsel, the implausibility of the scenario strikes as odd and therefore reinforces the version found by the RTC as credible. The Court likewise has its own observations on the record that affirm the doubts raised by the Court of Appeals. Isidro Bustria, who would die in 1986, was already ninety-three (93) years old when he allegedly signed the Deed of Sale in 1985. Still, the Aquinos asserted before the RTC that Bustria traveled unaccompanied from his home in Dasol, Pangasinan, passing through two towns to Alaminos, to execute the Deed of Sale. Without discrediting the accomplishments of nonagenarians capable of great physical feats, it should be acknowledged as a matter of general assumption that persons of Bustrias age are typically sedentary and rarely so foolhardy as to insist on traveling significant distances alone.

Also of note is the fact that there are glaring differences as to the alleged signature of Bustria on the Deed of Sale and as it otherwise appears on the judicial record. Bustrias signature in the 1981 Compromise Agreement is noticeably shaky which is not surprising, considering that it was subscribed when Bustria was eighty-nine (89) years old. However, Bustrias signature on theDeed of Sale, which if genuine was affixed when he was already ninety-three (93) years old, is remarkably steady in its strokes. There are also other evident differences between Bustrias signature on the Deed of Sale and on other documents on the record. Admittedly, these doubts cast above arise in chief from an appreciation of circumstantial evidence. These have to be weighed against the findings of the Court of Appeals that the fact that Bustria signed the Deed of Sale was established by the respective testimonies of witnesses De Francia and Judge Cario. In its own appreciation of these testimonies, the RTC alluded to notable inconsistencies in their testimonies. As a final measure of analysis, the Court shall now examine whether the appellate court was in error in reversing the conclusion of the RTC on these testimonies. The inconsistencies cited by the RTC were that De Francia testified that Judge Cario himself prepared and typed the Deed of Sale in his office, where the document was signed,[47] while Judge Cario testified that he did not type the Deed of Sale since it was already prepared when the parties arrived at his office for the signing.[48] On this point, the Court of Appeals stated with utter nonchalance that a perusal of the record revealed no material or substantial inconsistencies between the testimonies of Judge Cario and De Francia. Strangely, the appellate court made no comment as to the inconsistency pointed out by the RTC as to who prepared the Deed of Sale. If the only point of consideration was the due execution of the Deed of Sale, then the Court of Appeals should have properly come out with its finding. Other variances aside, there are no contradictions in the testimonies of Judge Cario and De Francia on the question of whether or not Bustria signed the Deed of Sale. However, as earlier established, the Deed of Sale is a private document. Thus, not only the due execution of the document must be proven but also its authenticity. This factor was not duly considered by the Court of Appeals. The testimonies of Judge Cario and De Francia now become material not only to establish due execution, but also the authenticity of the Deed of Sale. And on this point, the inconsistencies pointed out by the RTC become crucial. The matter of authenticity of the Deed of Sale being disputed, the identity of the progenitor of this allimportant document is a material evidentiary point. It is disconcerting that the very two witnesses of the respondent offered to prove the Deed of Sale, flatly contradict each other on the basis of their own personal and sensory knowledge. Worse, the purported author of the Deed of Sale disavowed having drafted the document, notwithstanding the contrary testimony grounded on personal knowledge by the documentary witness. Establishing the identity of the person who wrote the Deed of Sale would not ordinarily be necessary to establish the validity of the transaction it covers. However, since it is the authenticity of the document itself that is disputed, then the opposing testimonies on that point by the material witnesses properly raises questions about the due execution of the document itself. The inconsistencies in the testimonies of Judge Cario and De Francia are irreconcilable. It is not possible to affirm the testimony of either without denigrating the competence and credibility of the other as a witness. If Judge Cario was truthful in testifying that he did not write the Deed of Sale, then doubt can be cast as to the reliability of the notarial witness De Francia. It takes a leap of imagination, a high level of gumption, and perverse deliberation for one to erroneously assert, under oath and with particularities, that a person drafted a particular document in his presence. However, if we were to instead believe De Francia, then the integrity of the notary public, Judge Cario, would be obviously compromised. Assuming that Judge Cario had indeed authored the Deed of Sale, it would indeed be odd that he would not remember having written the document himself yet sufficiently recall notarizing the same. If his testimony as to authorship of the document is deemed as dubious, then there is all the reason to make a similar assumption as to his testimony on the notarization of the Deed of Sale.

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These inconsistencies are not of consequence because there is need to indubitably establish the author of the Deed of Sale. They are important because they cast doubt on the credibility of those witnesses of the Aquinos, presented as they were to attest to the due execution and authenticity of the Deed of Sale. The Court of Appeals was clearly in error in peremptorily disregarding this observation of the RTC. As a result, we are less willing than the Court of Appeals to impute conclusive value to the testimonies of de Francia and Judge Cario. The totality of the picture leads us to agree with the trial court that the Deed of Sale is ineluctably dubious in origin and in execution. The Court deems as correct the refusal of the RTC to admit the Deed of Sale, since its due execution and authenticity have not been proven. The evidence pointing to the non-existence of such a transaction is so clear and convincing that it is sufficient even to rebut the typical presumption of regularity arising from the due execution of notarial documents. However, for the reasons stated earlier, the Deed of Sale is ineluctably an unnotarized document. And the lower court had more than sufficient basis to conclude that it is a spurious document. Since the validity of the Deed of Sale has been successfully assailed, Tignos right to repurchase was not extinguished at the time of the filing of the Petition for revival of judgment, as correctly concluded by the RTC. The Court of Appeals being in error when it concluded otherwise, the reinstatement of the RTC Decision is warranted. WHEREFORE, the Petition is GRANTED. The assailed Decision dated 23 December 1996 and Resolution dated 9 June 1997 of the Court of Appeals in CA-G.R. CV No. 49879 is REVERSED, and the Decision dated 18 August 1994 of the Regional Trial Court of Alaminos, Pangasinan, Branch 55, in Civil Case No. A-1918 is REINSTATED. Costs against respondents. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-30486 October 31, 1972 MARIA SAN MIGUEL VDA. DE ESPIRITU, petitioner, vs. HON. COURT OF FIRST INSTANCE OF CAVITE, ANASTACIA TOPACIO, JOSEFA JARDINIANO and REGISTER OF DEEDS FOR THE PROVINCE OF CAVITE, respondents. Beltran, Beltran and Associates for petitioner. Remulla, Perez and Estrella for respondents. BARREDO, J.:p Petition for certiorari and mandamus; certiorari to set aside, for being null and void, the order of respondent court of July 27, 1967 in its Civil Case No. N-233, Maria San Miguel Vda. de Espiritu vs. Anastasia Topacio, et al., dismissing on the ground of prescription plaintiff's (herein petitioner's) action to compel defendants (herein private respondents) to execute the proper deed of conveyance of two parcels of land to said plaintiff, and the subsequent order for the return of the corresponding titles over said lands to defendants, as well as those combinedly dismissing plaintiff's appeal from said orders, for having been filed out of time. Petitioner's complaint in the court below which was filed on October 20, 1964 alleged that sometime in 1948, defendants had verbally sold to her the two parcels of land in question for Three Thousand (P3,000.00) Pesos and, in consequence, delivery thereof together with the corresponding transfer certificates of title was made to her, but no deed of sale was executed at the time because private respondents promised they would do so as soon as the titles which were then in the name of their predecessor in interest were transferred to their names, and that despite demands made "time and again" by her for the execution of such deed, said respondents, "without justifiable cause therefor adamantly failed and refused to comply with (such) just and valid demand." In their answer, defendants denied that the transaction was a sale and alleged that it was merely a contract of antichresis whereby petitioner had loaned to them P1,500.00, for which she demanded the delivery of the lands in question and the titles thereto as security, with the right to collect or receive the income therefrom pending the payment of the loan. And by way of affirmative defenses, respondents interposed (1) unenforceability by action of the alleged sale, under the statute of frauds, and (2) prescription of petitioner's action, the same having allegedly accrued in 1948. Subsequently, respondents reiterated their said affirmative defense of prescription in a formal motion to dismiss and as no opposition thereto was filed by petitioner, on July 31, 1967, respondent court issued the impugned order of dismissal reading as follows: Submitted for resolution is a motion to dismiss filed counsel for the defendants to which no opposition has been filed despite the fact that the plaintiff was furnished with a copy thereof. Finding the said motion to dismiss to be well-taken for the reasons stated therein, this Court grants the same and the complaint, dated October 16, 1964, is hereby dismissed with costs against the plaintiff. SO ORDERED. The other details leading to the issuance of this order and what took place thereafter up to the disapproval of the appeal of petitioner are recounted by the trial judge in his order of April 1, 1969 thus: At this stage of the proceedings, the issues squarely presented to the Court relate to the approval of plaintiff's: (1) motion for reconsideration, dated November 9, 1968, and (2) record on appeal.

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Plaintiff seeks for a reconsideration of the Court's order, dated July 31, 1967, which dismissed this case, on the basis of defendants' motion to dismiss, dated January 30, 1967. Plaintiff contends that 'an action to compel compliance to a promise to execute the necessary public document of sale of real estate does not prescribe.' In their opposition, defendants lay stress on the fact that the order (dated July 31, 1967) had already become final and executory when plaintiff filed her motion for reconsideration (dated November 9, 1968). But the plaintiff argues, in her reply to the opposition (dated December 20, 1968), that the order of the Court was never served on or received by either the plaintiff or her attorneys. An examination, therefore, of the record is necessary. It appears that on January 13, 1967, in open Court, the counsel for the defendants was given 15 days within which to file a motion to dismiss on any of the grounds alleged in the affirmative defenses contained in the answer, and the attorneys for the plaintiff were given an equal number of days from receipt of a copy thereof within which to file an opposition. The hearing set for that date was reset to February 28, 1967. On January 31, 1967, counsel for the defendants filed the motion to dismiss, and furnished on the same date the two lawyers of the plaintiff. At the hearing on February 28, 1967, none of the lawyers for the plaintiff appeared, although the plaintiff herself verbally informed the Court that because her lawyers were suddenly called to an emergency she prayed that the hearing on the motion to dismiss be reset to another date. No objection having been interposed by counsel for the defendants, the hearing was reset to March 15, 1967, in open Court where counsel for the defendants and the plaintiff were notified. A copy of the Order was sent by ordinary mail to Atty. Arturo T. de Guia, one of the lawyers for the plaintiff, on March 2, 1967. At the hearing on March 15, 1967, one of the lawyers of the plaintiff was given 5 days within which to submit an opposition to the motion to dismiss, and to furnish counsel for the defendants with a copy thereof. As more than 4 months have elapsed and no such opposition has been filed, counsel for the defendants filed on July 26, 1967 an urgent motion to resolve the motion to dismiss. The attorneys for the plaintiff were furnished with a copy of the urgent motion on July 25. The Court, finding the motion to dismiss to be well-taken for the reasons stated therein, issued the Order of July 31, 1967 dismissing the complaint with costs against the plaintiff. Copies of this order were sent to both counsel for the parties by ordinary mail on July 31, 1967. Almost 6 months thereafter, that is, on January 16, 1968, counsel for the defendants filed a 'Motion for Return of Transfer Certificates of Title,' furnishing on the same date counsel for the plaintiff with a copy thereof and setting the same for the consideration and approval of the Court on January 23, 1968. It should be noted that in paragraph 1 of this motion counsel for the defendants expressly stated, "That on July 31, 1967 this Honorable Court, acting on defendants' Motion to Dismiss on the ground that the cause of action of the plaintiff has already prescribed, issued an Order dismissing plaintiff's Complaint'; hence although a copy of the Order dated July 31, 1967 was not sent to plaintiff's counsel by registered mail, but by ordinary mail because the Court was without money to defray the expenses of registered mail, plaintiff's counsel cannot validly claim that they were unaware of said Order. Moreover, in paragraph 3 of defendants' "Opposition to Motion for Reconsideration" filed on May 30, 1968 is expressly alleged the "dismissal of the Complaint for the reasons stated in the Motion to dismiss filed by the herein defendants." Copies of this opposition were sent to the two lawyers of the plaintiff, and not one of them ever denied the veracity of such allegation. Finally, in defendants' "Memorandum in Support of Opposition to Motion for Reconsideration," dated August 2, 1968, the Order of this Court, dated July 31, 1967, is quoted verbatim. Although the two lawyers of the plaintiff were each furnished with a copy of this memorandum (see registry receipt attached to page 9 of the memorandum and registry return receipt attached to rejoinder to reply, dated January 3, 1969), none of them ever denied having received a copy of said quoted order. It should be noted that

although copies of the Orders of this Court (dated October 14, 1965, November 29, 1965, September 26, 1966, October 17, 1966, December 12, 1966) were sent by ordinary mail to counsel for the plaintiff, they were actually received as shown by the fact that said counsel appeared in court on the date set in said Orders. In view of the foregoing, this Court is persuaded to share, as it hereby sustains, the view of the defendants that the Order of this Court, dated July 31, 1967, has already become final and executory. Hence, plaintiff's motion for reconsideration, dated November 9, 1968, is denied. Anent plaintiff's record on appeal, the record shows that a copy of the Order, dated January 23, 1968, was sent by registered mail to Atty. Arsenio Cabrera of the plaintiff on February 8, 1968. Said Order granted defendants' motion to dismiss and ordered the plaintiff to return to the defendants Transfer Certificates of Title No. 18517 and 18518 of the Registry of Deeds for the Province of Cavite within ten (10) days from receipt of a copy of the order. Plaintiff's counsel neither moved for a reconsideration of, nor manifested an intention to appeal from, said Order. It was only on May 6, 1968, almost four (4) months after the issuance of the Order, that a motion for reconsideration signed by the plaintiff herself, not by her counsel, was filed with the Court. It is obvious that the motion was filed out of time the order of the Court has become final and executory. Even on the basis of the allegation in said motion that the Order was "received on March 27, 1968," the Order has already become final and executory before the motion was filed on May 6, 1968. Consequently, the notice of appeal filed on October 30, 1968 and the record on appeal filed on November 12, 1968 were both filed beyond the reglamentary period and, hence, are hereby both denied. SO ORDERED. Petitioner now alleges as grounds for her petition that: I. THE HON. COURT OF FIRST INSTANCE OF CAVITE LACKED JURISDICTION AND COMMITTED GRAVE ABUSE OF DISCRETION IN DISMISSING THE COMPLAINT, WITHOUT HEARING, ON THE GROUND OF PRESCRIPTION OF CAUSE OF ACTION, ALLEGED IN THE MOTION TO DISMISS, THERE BEING NO EVIDENCE NOR ALLEGATIONS IN THE COMPLAINT TO SUPPORT SAID DISMISSAL OR PRESCRIPTION; II. THE HON. COURT OF FIRST INSTANCE OF CAVITE LIKEWISE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS OF JURISDICTION IN DENYING THE MOTION FOR RECONSIDERATION OF SAID ORDER OF DISMISSAL, AND IN ISSUING THE ORDER DATED JAN. 23, 1968 IMPLEMENTING THE ORDER OF DISMISSAL BY REQUIRING PETITIONER TO RETURN CERTIFICATES OF TITLE TO THE VENDORS; III. THE LOWER COURT UNLAWFULLY DENIED THE APPEAL TAKEN BY PETITIONER FROM THE ORDER TO RETURN THE TITLES; There are two vital points that standout in this case: (1) that the order of dismissal of July 31, 1967 has never been served upon counsel for petitioner nor upon her, and (2) that although it seems that copy of the order of January 23, 1968 was sent by registered mail to Atty. Arsenio Cabrera, one of petitioner's counsel of record, on February 8, 1968, there is no showing as to when the same was received, whereas, there is no denying that another copy thereof was sent also by registered mail to petitioner herself and this was received by her on April 27, 1968. The first point is crucial for the simple reason that without such service being made, it is undeniable that when petitioner's counsel filed on November 11, 1968 their motion of November 9, 1968 for the reconsideration of the dismissal order of July 31, 1967, this order had not yet become final and executory. Needless to state, under Section 3 of Rule 41, the period for appeal from any final order or judgment starts only from the date

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from notice thereof, which means when it is duly served. 1 Section 7 of Rule 13 very explicitly enjoins that "(F)inal orders or judgments shall be served either personally or by registered mail", and "under this provision, a final order or judgment cannot be served by ordinary mail." 2 Indeed, Rule 13 constitutes an elaborate system of specific modes of filing and serving "pleadings, appearances, motions, notices, orders and other papers" which, of course, include a decision, 3 which is exactly what the dismissal order here in question is, and it would be subversive of this rule and productive of confusion, if any mode other than those respectively fixed by it for each particular situation therein expressly contemplated were to be sanctioned and given legal effect. Besides, Our jurisprudence is replete with cases wherein the Court refused to give its stamp of approval even to service actually and admittedly made upon a party merely because, under the rules, service must be made upon his lawyer of record, no matter if the party himself solicits the service and thereby factually learns of the judgment. 4 If service expressly admitted by a party to have been made to him has been considered ineffective only because it was not made in the manner prescribed, much more should such fate befall a defective service, proof of which does not exist, as in this case wherein there is no showing whatsoever that petitioner or her counsel did receive the ordinary mail containing the order of dismissal in dispute. It is contended that because copy of respondents' motion of January 16, 1968 for the return of their title, which included allegations attesting to the issuance of the order of dismissal, appears to have been "furnished" counsel for petitioner on the same date, petitioner must be deemed to have been on notice of said order since then. To start with, it is not very clear that petitioner's counsel was in fact served with such copy; in the second place and worse, in the light of the rulings just mentioned prescribing strict compliance with the requirements of service, such indirect way of imparting knowledge of the order to petitioner's counsel cannot serve as a mode of service within the contemplation of said rulings. Moreover, it is to be noted that significantly, there seems to have been no appearance for petitioner when the motion was heard on the day the court granted the same, hence, there is no affirmative act of petitioner or her counsel upon which an inference of possible waiver may be safely drawn, differently from what happened in the National Lumber case decided by this Court. 5 In this connection, it is likewise noteworthy that although His Honor's order of April 1, 1969 states that copy of the order of January 23, 1968 was sent to Counsel Cabrera of petitioner by registered mail, no mention is made of its actual receipt and the date of such receipt, although it is not disputed that a copy was actually received by petitioner by registered mail on April 27, 1968. Remarkable also is the fact that it was petitioner herself and not her counsel who signed the motion for reconsideration of May 6, 1968. In any event, since the order of dismissal on which this order of January 23, 1968 was premised, has not yet become final and executory, said later order is of secondary importance; its finality, if legally conceivable, cannot have any detracting effect upon the final outcome of the main controversy relative to the correctness or incorrectness of the order of dismissal. Understandably, if the order of dismissal is set aside, and the action of the petitioner is sustained, nothing in the order of January 23, 1968 can defeat or even minimize the right of petitioner to the lands in dispute. It is, therefore, idle to discuss whether or not said order has become final and unappealable. Upon the foregoing premises, and considering that there is in fact no showing that any entry of judgment was made before November 11, 1968, a decision granting herein petition could be in order, and in consequence, We could order that petitioner's appeal be given due course. It appears, however, that looking at petitioner's position from another angle, as to its substantive merits, there is hardly any prospect of its being ultimately successful. To require the parties to return first to the lower court and then come back here, only to rediscuss the same points which after all both of them have already extensively taken up in their pleadings in this case will not serve the ends of justice. This Court has already ruled on several occasions, since as early as De la Cruz vs. Blanco, 73 Phil. 596 that mandamus to compel approval and certification of an appeal, even if otherwise well grounded, procedurally speaking, has to be denied where it is evident that there is no merit in the appeal itself, and "it would serve no useful purpose to reinstate" the same. 6 After all, mandamus is mainly a remedy in equity, and good conscience cannot countenance the idea of allowing a party to spend more time, effort and money, only to lose, with more or less certainty in the end, when, provided due process is not denied, an earlier determination of his claim is possible.

It is petitioner's pose that respondent judge erred in holding that her action has already prescribed, predicating her contention on the theory that since she is seeking nothing more than to compel private respondents to execute a promised deed of sale in her favor, such action is imprescriptible under Section 38 of Art. 190, the Code of Civil Procedure, and per the ruling in Castillo vs. Court of Appeals, L-18046, March 31, 1964, 10 SCRA 549. We do not see it that way. Unlike in the Castillo case, petitioner's invocation here of Section 38 of Act 190 is being refuted by respondents with the citation principally of Article 2270 of the Civil Code of the Philippines which ordains that: ART. 2270. The following laws and regulations are hereby repealed: xxx xxx xxx (3) The provisions of the Code of Civil Procedure on prescription as far as inconsistent with this Code. and Article 2258, which provides: ART. 2258. Actions and rights which came into being but were not exercised before the effectivity of this Code, shall remain in full force in conformity with the old legislation; but their exercise, duration and the procedure to enforce them shall be regulated by this Code and by the Rules of Court. If the exercise of the right or action was commenced under the old laws, but is pending on the date this Code takes effect, and the procedure was different from that established in this new body of laws, the parties concerned may choose which method or course to pursue. (Rule 4). Indeed, the whole statute of limitations embodied in Chapter III of the Code of Civil Procedure must be deemed supplanted and replaced by Chapter 3, Title V, Book III of the Civil Code, which in itself is a complete and comprehensive body of rules on prescription intended to cover all conceivable situations. We cannot see any logic in thinking otherwise, having in mind the repealing clause just quoted. If Article 1357 which reads: ART. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article, the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. (1279a) is indicative of anything relevant to the point under discussion, it is simply that said article does not contemplate that the time to commence an action to compel the execution of a formal agreement can be longer than that for the filing of the suit for specific performance of the perfected contract itself. In other words, differently from the Code of Civil Procedure, the Civil Code does not consider the action by the vendee of real property to compel execution of a deed of conveyance as imprescriptible. In fact, under Article 1143, only the following rights "are not extinguished by prescription: (1) to demand a right of way, regulated in Article 649 and (2) to bring an action to abate a public or private nuisance", which are actions involving public policy. Nor is there any other provision of the Civil Code or any unrepealed law or jurisprudential ruling of this Court, under which petitioner's claim of imprescriptibility can be sustained. We believe that the specific enumeration in the Civil Code of imprescriptible actions excludes any other ones. In a broad sense, at least, the nature of petitioner's action may be said to be one founded on an oral contract, which, to be sure, cannot be considered as among those rendered unenforceable by the statute of frauds, for the simple reason that it has already been, from petitioner's own point of view, almost fully consummated by the delivery of the lands and the corresponding titles to her. Consequently, respondents are right in maintaining that the applicable provision here is Article 1145 which reads thus: ART. 1145. The following actions must be commenced within six years: (1) Upon an oral contract; (2) Upon a quasi-contract. Assuming otherwise, the only other possibility is that petitioner's case comes under Article 1149 providing:

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ART. 1149. All other actions whose periods are not fixed in this Code or in other laws must be brought within five years from the time the right of action accrues. In either case, since the cause of action of petitioner accrued in 1948 and the present suit was instituted in 1964 or sixteen years later, and none of the interrupting circumstances enumerated in Article 1155 has been shown to have intervened, it is unquestionable that petitioner's action filed in the court below has already prescribed. It may be mentioned, for the rest, that petitioner contends that the order of dismissal above-quoted, being a decision, violates the constitutional requirement, as well as of the rules, that it should state the facts and the law on which it is based. The contention is not well taken. As may be seen, the said order adopts by reference the reasons, alleged in the motion to dismiss of respondents, which, the record reveals, includes the facts and the law in support thereof. There is, therefore, substantial compliance with the fundamental law and the rules, albeit, judges are advised that mere general reference should be avoided, since anyway it is not difficult to quote textually the subject of the reference for a closer adherence to the obvious spirit and reason behind the requirements. WHEREFORE, the petition is denied, with costs against petitioner.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-46306 October 27, 1939 LEVY HERMANOS, INC., plaintiff-appellant, vs. LAZARO BLAS GERVACIO, defendant-appellee. Felipe Caniblas for appellant. Abreu, Lichaucco and Picazo for appellee. MORAN, J.: On February 9-4, 1938, plaintiff filed a complaint in the Court of First Instance of Manila, which substantially recites the following facts: On March 10, 1937, plaintiff Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a Packard car. Defendant, after making the initial payment, executed a promissory note for the balance of P2,400, payable on or before June 15, 1937, with interest at 12 per cent per annum, to secure the payment of the note, he mortgaged the car to the plaintiff. Defendant failed to pay the note it its maturity. Wherefore, plaintiff foreclosed the mortgage and the car was sold at public auction, at which plaintiff was the highest bidder for P1,800. The present action is for the collection of the balance of P1,600 and interest. Defendant admitted the allegations of the complaint, and with this admission, the parties submitted the case for decision. The lower court applied, the provisions of Act No. 4122, inserted as articles 1454-A of the Civil Code, and rendered judgment in favor of the defendant. Plaintiff appealed. Article 1454-A of the Civil Code reads as follows: In a contract for the sale of personal property payable in installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgage if one has been given on the property, without reimbursement to the purchaser of the installments already paid, if there be an agreement to this effect. However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the purchaser for the recovery of any unpaid balance owing by the same and any agreement to the contrary shall be null and void. In Macondray and Co. vs. De Santos (33 Off. Gaz., 2170), we held that "in order to apply the provisions of article 1454-A of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that there has been a failure to pay two or more installments." The contract, in the instant case, while a sale of personal property, is not, however, one on installments, but on straight term, in which the balance, after payment of the initial sum, should be paid in its totality at the time specified in the promissory note. The transaction is not is not, therefore, the one contemplated in Act No. 4122 and accordingly the mortgagee is not bound by the prohibition therein contained as to the right to the recovery of the unpaid balance. Undoubtedly, the law is aimed at those sales where the price is payable in several installments, for, generally, it is in these cases that partial payments consist in relatively small amounts, constituting thus a great temptation for improvident purchasers to buy beyond their means. There is no such temptation where the price is to be paid in cash, or, as in the instant case, partly in cash and partly in one term, for, in the latter case, the partial payments are not so small as to place purchasers off their guard and delude them to a miscalculation of their ability to pay. The oretically, perhaps, there is no difference between paying the price in tow installments, in so far as the size of each partial payment is concerned; but in actual practice the

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difference exists, for, according to the regular course of business, in contracts providing for payment of the price in two installments, there is generally a provision for initial payment. But all these considerations are immaterial, the language of the law being so clear as to require no construction at all.lwphi1.nt The suggestion that the cash payment made in this case should be considered as an installment in order to bring the contract sued upon under the operation of the law, is completely untenable. A cash payment cannot be considered as a payment by installment, and even if it can be so considered, still the law does not apply, for it requires non-payment of two or more installments in order that its provisions may be invoked. Here, only one installment was unpaid. Judgment is reversed, and the defendant-appellee is hereby sentenced to pay plaintiff-appellant the sum of P1,600 with interest at the rate of 12 per cent per annum from June 15, 1937, and the sum of P52.08 with interest at the rate of 6 per cent from the date of the filing of the complaint, with costs in both instances against the appellee. G.R. No. L-67181 November 22, 1985

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION SPOUSES RESTITUTO NONATO and ESTER NONATO, petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT and INVESTOR'S FINANCE CORPORATIONrespondents. ESCOLIN, J.: The issue posed in this petition for review of the decision of the respondent appellate court is whether a vendor, or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the purchase price. The pertinent facts are summarized by the respondent appellate court as follows: On June 28, 1976, defendant spouses Restituto Nonato and Ester Nonato purchased one (1) unit of Volkswagen Sakbayan from the People's Car, Inc., on installment basis. To secure complete payment, the defendants executed a promissory note (Exh. A or 1) and a chattel mortgage in favor of People's Car, Inc, (Exh. B or 2). People's Car, Inc., assigned its rights and interests over the note and mortgage in favor of plaintiff Investor's Finance Corporation (FNCB) Finance). For failure of defendants to pay two or more installments, despite demands, the car was repossessed by plaintiff on March 20, 1978 (Exh. E or 4). Despite repossession, plaintiff demanded from defendants that they pay the balance of the price of the car (Exhs. F and C). Finally, on June 9, 1978, plaintiff filed before the Court of First Instance of Negros Occidental the present complaint against defendants for the latter to pay the balance of the price of the car, with damages and attorney's fees. (Records, pp. 36-37) In their answer, the spouses Nonato alleged by way of defense that when the company repossessed the vehicle, it had, by that act, effectively cancelled the sale of the vehicle. It is therefore barred from exacting recovery of the unpaid balance of the purchase price, as mandated by the provisions of Article 1484 of the Civil Code. After due hearing, the trial court rendered a decision in favor of the IFC and against the Nonatos, as follows: PREMISES CONSIDERED, the Court hereby renders judgment ordering the defendant to pay to the plaintiff the amount of P 17,537.60 with interest at the rate of 14% per annum from July 28, 1976 until fully paid, 10% of the amount due as attorney's fees, litigation expenses in the amount of P 133.05 plus the costs of this suit. No pronouncement as to other charges and damages, the same not having been proven to the satisfaction of the Court. 1 On appeal, the respondent appellate court affirmed the j judgment. Hence, this petition for review on certiorari. The applicable law in the case at bar, involving as it does a sale of personal property on installment, is Article 1484 of the Civil Code which provides:

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In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. The meaning of the aforequoted provision has been repeatedly enunciated in a long line of cases. Thus: "Should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any of these three remedies-either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, that the exercise of one would bar the exercise of the others. 2 It is not disputed that the respondent company had taken possession of the car purchased by the Nonatos on installments. But while the Nonatos maintain that the company had, by that act, exercised its option to cancel the contract of sale, the company contends that the repossession of the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending full payment by the Nonatos of the purchasing price. The company thus denies having exercised its right to cancel the sale of the repossessed car. The records show otherwise. The receipt issued by the respondent company to the Nonatos when it took possession of the vehicle states that the vehicle could be redeemed within fifteen [151 days. 3 This could only mean that should petitioners fail to redeem the car within the aforesaid period by paying the balance of the purchase price, the company would retain permanent possession of the vehicle, as it did in fact. This was confirmed by Mr. Ernesto Carmona, the company's witness, who testified, to wit: ATTY. PAMPLONA: So that Mr. Witness, it is clear now that, per your receipt and your answer, the company will not return the unit without paying a sum of money, more particularly the balance of the account? WITNESS: Yes, sir. 4 Respondent corporation further asserts that it repossessed the vehicle merely for the purpose of appraising its current value. The allegation is untenable, for even after it had notified the Nonatos that the value of the car was not sufficient to cover the balance of the purchase price, there was no attempt at all on the part of the company to return the repossessed car, Indeed, the acts performed by the corporation are wholly consistent with the conclusion that it had opted to cancel the contract of sale of the vehicle. It is thus barred from exacting payment from petitioners of the balance of the price of the vehicle which it had already repossessed. It cannot have its cake and eat it too. WHEREFORE, the judgment of the appellate court in CA-G.R. No. 69276-R is hereby set aside and the complaint filed by respondent Investors Finance Corporation against petitioner in Civil Case No. 13852 should be, as it is hereby, dismissed. No costs. SO ORDERED. G.R. No. L-30583 October 23, 1982

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION EUTROPIO ZAYAS, JR., petitioner, vs. LUNETA MOTOR COMPANY and HONORABLE JUAN O. REYES, Presiding Judge of the Court of First Instance of Manila, Branch XXI, respondents. Pantaleon Z. Salcedo for petitioner. Leandro B. Fernandez for respondents. GUTIERREZ, JR., J.: Eutropio Zayas, Jr., filed this petition for review by certiorari to secure a reversal of the respondent court's orders which remanded Civil Case No. 74381 for further proceedings instead of affirming the city court's order of dismissal, The petitioner Eutropio Zayas, Jr, purchased on installment basis a motor vehicle described as ONE (1) UNIT FORD THAMES FREIGHTER W/PUJ BODY with Engine No. 400E-127738 and Chassis No. 400E-127738 from Mr. Roque Escao of the Escao Enterprises in Cagayan de Oro City, dealer of respondent Luneta Motor Company, under the following terms and conditions: Selling price Financing charge Total Selling Price Payable on Delivery Payable in 24 months at 12% interest per annum P7,500.00 P1,426.82 P8,926.82 P1,006.82 P7,920.00

The motor vehicle was delivered to the petitioner who 1) paid the initial payment in the amount of P1,006.82; and 2) executed a promissory note in the amount of P7,920.00, the balance of the total selling price, in favor of respondent Luneta Motor Company. The promissory note stated the amounts and dates of payment of twenty-six installments covering the P7,920.00 debt. Simultaneously with the execution of the promissory note and to secure its payment, the petitioner executed a chattel mortgage on the subject motor vehicle in favor of the respondent. After paying a total amount of P3,148.00, the petitioner was unable to pay further monthly installments prompting the respondent Luneta Motor Company to extra-judicially foreclose the chattel mortgage (Annex "A" to Answer, Original Record, p. 10, supra). The motor vehicle was sold at public auction with the respondent Luneta Motor Company represented by Atty. Leandro B. Fernandez as the highest bidder in the amount of P5,000.00 (Annex "B" to Answer, Original Record, p. 11, supra). Since the payments made by petitioner Eutropio Zayas, Jr. plus the P5,000.00 realized from the foreclosure of the chattel mortgage could not cover the total amount of the promissory note executed by the petitioner in favor of the respondent Luneta Motor Company, the latter filed Civil Case No. 165263 with the City Court of Manila for the recovery of the balance of P1,551.74 plus interests.

54

Luneta Motor Company alleged in its complaint that defendant Eutropio Zayas, Jr. executed a promissory note in the amount of P7,920.00 in its favor; that out of the P7,920.00, Eutropio Zayas, Jr. had paid only P6,368.26 plus interest up to the date of the sale at public auction of the motor vehicle; that the balance of P1,551.74 plus interest of 12% thereon from that date had already become due and payable but despite repeated demands to pay the same, Eutropio Zayas, Jr., refused and failed to pay. In his answer with affirmative defenses and counterclaim, Eutropio Zayas, Jr. admitted having executed the promissory note for the monthly payments, on a Ford Thames vehicle bearing Engine No. 400E-127738 which he purchased from the Luneta Motor Company but he denied his alleged outstanding liability of P1,551.74 plus interest thereon ... the said obligation if there was any, had already been discharged either by payment or by sale in public auction of the said motor vehicle as evidenced by a Notice of Sale marked as Annex "A" and Certificate of Sale marked as Annex "B"; (Answer, p. 7, Original Record). He alleged as affirmative defenses, among others: 1) that the plaintiff has no cause of action against him; and 2) that pursuant to Article 1484 of the New Civil Code and the case of Pacific Commercial Co. v. De La Rama, (72 Phil. 380) his obligation per the promissory note was extinguished by the sale at public auction of the motor vehicle, the subject of the chattel mortgage which was executed by him in favor of the plaintiff as security for the payment of said promissory note. (Answer, p. 8, Original Record) In its Reply, Luneta Motor Company denied the applicability of Article 1484 of the Civil Code ... for the simple reason that the contract involved between the parties is not one for a sale on installment" (Reply, p. 13, Original Record). After several postponements, the case was set for hearing. As a result of the non- appearance of the plaintiff and its counsel on the date set for hearing, defendant Zayas, Jr. moved to have the case dismissed for lack of interest on the part of the plaintiff. He also asked the court to allow him to discuss the merits of his affirmative defense as if a motion to dismiss had been filed. The issue raised and argued by the defendant was whether or not a deficiency amount after the motor vehicle, subject of the chattel mortgage, has been sold at public auction could still be recovered. Zayas cited the case of Ruperto Cruz v. Filipinas Investment (23 SCRA 791).<re||an1w> Acting on the motion, the city court issued an Order: On Petition of counsel for the defendant for the dismissal of this case on the ground that the defendant is no longer liable for the deficiency judgment inas much as the chattel mortgage has been foreclosed, with the plaintiff as the highest bidder thereof, citing the case of Ruperto G. Cruz v. Filipinas Investmentdecided on May 27, 1968, G.R. No. L24772 in connection with Article 1484 of the Civil Code, and finding the same well taken. Let this case be dismissed without pronouncement as to costs. Luneta Motor Company filed an "Urgent Motion for Reconsideration" reiterating its stand that Article 1484 of the New Civil Code on sale of personal property by installment was not applicable and that the contract involving the parties was a mere case of an ordinary loan secured by chattel mortgage. According to the plaintiff, the defendant executed the promissory note and chattel mortgage to secure the plaintiff's interest for having financed the purchase of the motor vehicle by the defendant from the Escao Enterprises of Cagayan de Oro City, an entity entirely different and distinct from the plaintiff corporation (p. 33, Original Record). The court denied the motion for reconsideration for lack of merit. Luneta Motor Company appealed the case to the Court of First Instance of Manila where it was docketed as Civil Case No. 74381. After various incidents, the respondent court issued an order which, in part, reads: This is an appeal taken by plaintiff from the order of the City Court of Manila, dismissing its complaint on the ground that the defendant is no longer liable for the deficiency judgment inasmuch as the chattel mortgage has been foreclosed, with the plaintiff as

the highest bidder thereof, in line with the ruling of the Supreme Court in the case of Ruperto G. Cruz v. Filipinas Investment (G.R. No. L24772) in connection with Article 1484 of the Civil Code. xxx xxx xxx After going over the pleadings in this case, more particularly the complaint and the answer to the complaint filed with the City Court of Manila, this Court is of the impression that the case at bar may not be decided merely, as the City Court had done, on the question of law since the presentation of evidence is necessary to adjudicate the questions involved. WHEREFORE, this case is hereby remanded to the court of origin for further proceedings. (pp. 82-83, Original Record) Hence, this petition. Petitioner Eutropio Zayas, Jr. now maintains:: That Respondent Court of First Instance erred: 1. IN HOLDING THAT THE QUESTION OF LAW CANNOT BE DECIDED SINCE PRESENTATION OF EVIDENCE IS NECESSARY- REGARDING THE QUESTION OF RECOVERY OF THE DEFICIENCY AMOUNT IN A CHATTEL MORTGAGE AFTER SELLING IT IN A PUBLIC AUCTION; 2. IN ORDERING THE REMAND OF THE CASE TO THE CITY COURT FOR FURTHER PROCEEDINGS TAKEN BY THE RESPONDENT FROM THE CITY COURT TO THE COURT OF FIRST INSTANCE, BRANCH XXI, MANILA; and 3. IN NOT DISMISSING THE APPEAL TAKEN BY THE PRIVATE RESPONDENT FROM THE CITY COURT TO THE COURT OF FIRST INSTANCE. The main defense of respondent Luneta Motor Company is that Escano Enterprises, Cagayan de Oro City from which petitioner Eutropio Zayas, Jr. purchased the subject motor vehicle was a distinct and different entity; that the role of Luneta Motor Company in the said transaction was only to finance the purchase price of the motor vehicle; and that in order to protect its interest as regards the promissory note executed in its favor, a chattel mortgage covering the same motor vehicle was also executed by petitioner Eutropio Zayas, Jr. In short, respondent Luneta Motor Company maintains that the contract between the company and the petitioner was only an ordinary loan removed from the coverage of Article 1484 of the New Civil Code. The respondent's arguments have no merit. The Escao Enterprises of Cagayan de Oro City was an agent of Luneta Motor Company. A very significant evidence which proves the nature of the relationship between Luneta Motor Company and Escao Enterprises is Annex "A. of the petitioner's OPPOSITION TO URGENT MOTION FOR RECONSIDERATION. (Original Record, p. 36) Annex "A" is a Certification from the cashier of Escano Enterprises on the monthly installments paid by Mr. Eutropio Zayas, Jr. In the certification, the promissory note in favor of Luneta Motor Company was specifically mentioned. There was only one promissory note executed by Eutropio Zayas, Jr. in connection with the purchase of the motor vehicle. The promissory note mentioned in the certification refers to the promissory note executed by Eutropio Zayas, Jr. in favor of respondent Luneta Motor Company. Thus: CERTIFICATION This is to certify that Mr. EUTROPIO ZAYAS, JR. has paid from us the following, of his FORD THAMES BEARING Engine No. 400E-127738, promissory note dated October 6, 1966. Viz:

55

ESCAO O.R 09998 10064 10188 10355 LMC C.R. #40031 10536 10645 10704 10749 10132 10788 10795 10827 10934 10991 11105

DATE RECEIVED October 5, 1966 October 20, 1966 November 8, 1966 December 12, 1966 January 19, 1967 February 1, 1967 February 27, 1967 March 13, 1967 March 22, 1967 March 30, 1967 April 8, 1967 April 11, 1967 April 18, 1967 May 10, 1967 May 26, 1967 June 19, 1967 P3,148.00

AMOUNT P 1, 0000.00 242.00 166.00 400.00 270.00 60.00 100.00 100.00 60.00 100.00 100.00 100.00 100.00 100.00 100.00 150.00

have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. xxx xxx xxx ... the established rule is to the effect that the foreclosure and actual sale of a mortgaged chattel bars further recovery by the vendor of any balance on the purchaser's outstanding obligation not so satisfied by the sale. And the reason for this doctrine was aptly stated in the case of Bachrach Motor Co. vs. Millan, supra, thus: Undoubtedly the principal object of the above amendment was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. Under this amendment the vendor of personal property, the purchase price of which is payable in installments, has the right to cancel the sale or foreclose the mortgage if one has been given on the property. Whichever right the vendor elects he need not return to the purchaser the amount of the installments already paid, "if there be an agreement to that effect". Furthermore, if the vendor avails himself of the right to foreclose the mortgage this amendment prohibits him from bringing an action against the purchaser for the unpaid balance. (Cruz v. Filipinas Investment & Finance Corporation, 23 SCRA 791) Our findings and conclusions are borne out by the records available to the respondent court. There was no necessity for the remand of records to the city court for the presentation of evidence on the issue raised in the case. WHEREFORE, the instant petition is hereby granted. The orders remanding the case to the court of origin and denying the motion for reconsideration of the Court of First Instance of Manila, Branch XXI issued in Civil Case No. 74381 are annulled. Accordingly, the Court of First Instance of Manila, Branch XXI is directed to dismiss the appeal in Civil Case No. 74381. The Order of the City Court of Manila dismissing the complaint in Civil Case No. 165263 is affirmed. SO ORDERED. SECOND DIVISION [G.R. No. 135602. April 28, 2000] HEIRS OF QUIRICO SERASPI AND PURIFICACION R. SERASPI, petitioners, vs. COURT OF APPEALS AND SIMEON RECASA, respondents. DECISION MENDOZA, J.: olanski This case is here for review of the decision[1] of the Court of Appeals, dated May 15, 1998, reversing the decision of Branch 1 of the Regional Trial Court, Kalibo, Aklan and dismissing, on the ground of prescription, the complaint filed by petitioners for the recovery of possession and ownership of two parcels of land in Banga, Aklan. The facts are as follows:

ESCAO ENTERPRISES (SGD.) EMELITA H. BACULIO Escano Enterprises, a dealer of respondent Luneta Motor Company, was merely a collecting-agent as far as the purchase of the subject motor vehicle was concerned. The principal and agent relationship is clear. But even assuming that the "distinct and independent entity" theory of the private respondent is valid, the nature of the transaction as a sale of personal property on installment basis remains. When, therefore, Escao Enterprises, assigned its rights vis-a-vis the sale to respondent Luneta Motor Company, the nature of the transaction involving Escano Enterprises and Eutropio Zayas, Jr. did not change at all. As assignee, respondent Luneta Motor Company had no better rights than assignor Escao Enterprises under the same transaction. The transaction would still be a sale of personal property in installments covered by Article 1484 of the New Civil Code. To rule otherwise would pave the way for subverting the policy underlying Article 1484 of the New Civil Code, on the foreclosure of chattel mortgages over personal property sold on installment basis. ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: xxx xxx xxx xxx xxx xxx (3) Foreclose the chattel ;mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall

56

Marcelino Recasa was the owner of two parcels of land described as follows: PARCEL I: A parcel of cocal land located at Barangay Lapnag, Banga, Aklan, with an area of 770 square meters, more or less; bounded North by Lazaro Navarra, now Flocerfina Ibit; South by Celsa Retis; East by Banga-Libacao Provincial Road; and West by Aklan River, which parcel of land declared in the name of Marcelino Recasa under Tax Declaration No. 3721, Series of 1984, with an assessed value of P2,440.00; PARCEL II: A parcel of cocal land with an area of 3,648 square meters, more or less, located in Barangay Lapnag, Banga, Aklan; bounded North by Concepcion Navarra; South by Diosdado Navarra; East by Gabriel Reloj; and West by National Road; covered by Tax Declaration No. 11079 in the name of Purificacion Seraspi, Series of 1984, and having an assessed value of P1,650.00. During his lifetime, Marcelino contracted three (3) marriages. At the time of his death in 1943, he had fifteen (15) children from his three marriages. In 1948, his intestate estate was partitioned into three parts by his heirs, each part corresponding to the share of the heirs in each marriage. In the same year, Patronicio Recasa, representing the heirs of the first marriage, sold the share of the heirs in the estate to Dominador Recasa, an heir of the second marriage. On June 15, 1950, Dominador, representing the heirs of the second marriage, in turn sold the share of the heirs to Quirico and Purificacion Seraspi whose heirs are the present petitioners. Included in this sale was the property sold by Patronicio to Dominador. Sdaad In 1958, the Seraspis obtained a loan from the Kalibo Rural Bank, Inc. (KRBI) on the security of the lands in question to finance improvements on the lands. However, they failed to pay the loan for which reason the mortgage was foreclosed and the lands were sold to KRBI as the highest bidder. Subsequently, the lands were sold by KRBI to Manuel Rata, brother-in-law of Quirico Seraspi. It appears that Rata, as owner of the property, allowed Quirico Seraspi to administer the property. In 1974, private respondent Simeon Recasa, Marcelinos child by his third wife, taking advantage of the illness of Quirico Seraspi, who had been paralyzed due to a stroke, forcibly entered the lands in question and took possession thereof. In 1983, the Seraspis purchased the lands from Manuel Rata and afterwards filed a complaint against Simeon Recasa for recovery of possession of the lands. The trial court ruled in favor of the Seraspis, stating that they had acquired the property through a sale and acquisitive prescription. However, on appeal, the Court of Appeals reversed on the ground that the action of the Seraspis was barred by the statute of limitations. Hence, this petition filed by Quirico Seraspi who, in the meantime, had passed away and was thus substituted by his heirs. Two issues are presented: (1) whether petitioners action is barred by extinctive prescription; and (2) whether private respondent Simeon Recasa acquired ownership of the properties in question through acquisitive prescription. We rule for petitioners. The Court of Appeals, while ruling that petitioners were able to establish the identity of the property as well as the credibility of their title the elements required to prove ones claim for recovery of property [2] nonetheless held that the action was barred by prescription. Citing Arradaza v. Court of Appeals,[3] it held that an action for recovery of title or possession of real property or an interest therein can only be brought within ten (10) years after the cause of action has accrued. Since the action for recovery of possession and ownership was filed by petitioners only on April 12, 1987, i.e., thirteen (13) years after their predecessor-ininterest had been allegedly deprived of the possession of the property by private respondent, it was held that the action had prescribed.Scsdaad Arradaza involves acquisitive, not extinctive, prescription. What is more, the facts in that case arose before the effectivity of the Civil Code. Accordingly, what was applied was 41 of the Code of Civil Procedure which

provides that title by prescription is acquired after ten (10) years, in whatever manner possession may have been commenced or continued, and regardless of good faith or with just title. On the other hand, what is involved here is extinctive prescription, and the applicable law is Art. 1141 of the Civil Code which provides: Real actions over immovables prescribe after thirty years. This provision is without prejudice to what is established for the acquisition of ownership and other real rights by prescription. The question, therefore, is whether private respondent has acquired the ownership of the two lands by prescription. On this point, the Civil Code provides: Art. 1117. Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law. Art. 1134. Ownership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years. Art. 1137. Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith. Thus, acquisitive prescription of dominion and other real rights may be ordinary or extraordinary, depending on whether the property is possessed in good faith and with just title for the time fixed by law.[4] Private respondent contends that he acquired the ownership of the questioned property by ordinary prescription through adverse possession for ten (10) years. The contention has no merit, because he has neither just title nor good faith. As Art. 1129 provides: Supremax For the purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. In the case at bar, private respondent did not acquire possession of the property through any of the modes recognized by the Civil Code, to wit: (1) occupation, (2) intellectual creation, (3) law, (4) donation, (5) succession, (6) tradition in consequence of certain contracts, and (7) prescription.[5] Private respondent could not have acquired ownership over the property through occupation since, under Art. 714 of the Civil Code, the ownership of a piece of land cannot be acquired by occupation. Nor can he base his ownership on succession for the property was not part of those distributed to the heirs of the third marriage, to which private respondent belongs. It must be remembered that in the partition of the intestate estate of Marcelino Recasa, the properties were divided into three parts, each part being reserved for each group of heirs belonging to one of the three marriages Marcelino entered into. Since the contested parcels of land were adjudicated to the heirs of the first and second marriages, it follows that private respondent, as heir of the third marriage, has no right over the parcels of land. While, as heir to the intestate estate of his father, private respondent was co-owner of all of his fathers properties, such co-ownership rights were effectively dissolved by the partition agreed upon by the heirs of Marcelino Recasa. Neither can private respondent claim good faith in his favor. Good faith consists in the reasonable belief that the person from whom the possessor received the thing was its owner but could not transmit the ownership thereof.[6] Private respondent entered the property without the consent of the previous owner. For all intents and purposes, he is a mere usurper. Jurissc Like private respondent, petitioners have not acquired the property through any of the modes recognized by law for the acquisition of ownership. The basis of petitioners claim of ownership is the contract of sale they had with Rata, but this by itself is insufficient to make them owners of the property. For while a contract of sale

57

is perfected by the meeting of minds upon the thing which is the object of the contract and upon the price,[7] the ownership of the thing sold is not transferred to the vendee until actual or constructive delivery of the property.[8] Hence, the maxim non nudis pactis, sed traditione dominia dominica rerum transferuntur (not mere agreements but tradition transfers the ownership of things). Consequently, petitioners are not the owners of the property since it has not been delivered to them. At the time they bought the property from Rata in 1983, the property was in the possession of private respondent. However, this does not give private respondent a right to remain in possession of the property. Petitioners title to the property prevails over private respondents possession in fact but without basis in law. As held in Waite v. Peterson,[9] when the property belonging to a person is unlawfully taken by another, the former has the right of action against the latter for the recovery of the property. Such right may be transferred by the sale or assignment of the property, and the transferee can maintain such action against the wrongdoer. WHEREFORE, the decision of the respondent Court of Appeals is hereby REVERSED, and private respondent Simeon Recasa is ordered to return the possession of the contested parcels of land to petitioners as heirs of Quirico and Purificacion Seraspi. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 110053 October 16, 1995 DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS, CELEBRADA MANGUBAT and ABNER MANGUBAT, respondents. REGALADO, J.: This appeal by certiorari sprouted from the judgment of respondent Court of Appeals promulgated on September 9, 1992 in CA-G.R. CV No. 28311, and its resolution dated April 7, 1993 denying petitioner's motion for reconsideration. 1 Said adjudgments, in turn, were rooted in the factual groundwork of this case which is laid out hereunder. On July 20, 1981, herein petitioner Development Bank of the Philippines (DBP) executed a "Deed of Absolute Sale" in favor of respondent spouses Celebrada and Abner Mangubat over a parcel of unregistered land identified as Lot 1, PSU-142380, situated in the Barrio of Toytoy, Municipality of Garchitorena, Province of Camarines Sur, containing an area of 55.5057 hectares, more or less. The land, covered only by a tax declaration, is known to have been originally owned by one Presentacion Cordovez, who, on February 4, 1937, donated it to Luciano Sarmiento. On June 8, 1964, Luciano Sarmiento sold the land to Pacifico Chica. On April 27, 1965, Pacifico Chica mortgaged the land to DBP to secure a loan of P6,000.00. However, he defaulted in the payment of the loan, hence DBP caused the extrajudicial foreclosure of the mortgage. In the auction sale held on September 9, 1970, DBP acquired the property as the highest bidder and was issued a certificate of sale on September 17, 1970 by the sheriff. The certificate of sale was entered in the Book of Unregistered Property on September 23, 1970. Pacifico Chica failed to redeem the property, and DBP consolidated its ownership over the same. On October 14, 1980, respondent spouses offered to buy the property for P18,599.99. DBP made a counteroffer of P25,500.00 which was accepted by respondent spouses. The parties further agreed that payment was to be made within six months thereafter for it to be considered as cash payment. On July 20, 1981, the deed of absolute sale, which is now being assailed herein, was executed by DBP in favor of respondent spouses. Said document contained a waiver of the seller's warranty against eviction. 2 Thereafter, respondent spouses applied for an industrial tree planting loan with DBP. The latter required the former to submit a certification from the Bureau of Forest Development that the land is alienable and disposable. However, on October 29, 1981, said office issued a certificate attesting to the fact that the said property was classified as timberland, hence not subject to disposition. 3 The loan application of respondent spouses was nevertheless eventually approved by DBP in the sum of P140,000.00, despite the aforesaid certification of the bureau, on the understanding of the parties that DBP would work for the release of the land by the former Ministry of Natural Resources. To secure payment of the loan, respondent spouses executed a real estate mortgage over the land on March 17, 1982, which document was registered in the Registry of Deeds pursuant to Act No. 3344. The loan was then released to respondent spouses on a staggered basis. After a substantial sum of P118,540.00 had been received by private respondents, they asked for the release of the remaining amount of the loan. It does not appear that their request was acted upon by DBP, ostensibly because the release of the land from the then Ministry of Natural Resources had not been obtained. On July 7, 1983, respondent spouses, as plaintiffs, filed a complaint against DBP in the trial court 4 seeking the annulment of the subject deed of absolute sale on the ground that the object thereof was verified to be timberland and, therefore, is in law an inalienable part of the public domain. They also alleged that petitioner,

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as defendant therein, acted fraudulently and in bad faith by misrepresenting itself as the absolute owner of the land and in incorporating the waiver of warranty against eviction in the deed of sale. 5 In its answer, DBP contended that it was actually the absolute owner of the land, having purchased it for value at an auction sale pursuant to an extrajudicial foreclosure of mortgage; that there was neither malice nor fraud in the sale of the land under the terms mutually agreed upon by the parties; that assuming arguendo that there was a flaw in its title, DBP can not be held liable for anything inasmuch as respondent spouses had full knowledge of the extent and nature of DBP's rights, title and interest over the land. It further averred that the annulment of the sale and the return of the purchase price to respondent spouses would redound to their benefit but would result in petitioner's prejudice, since it had already released P118,540.00 to the former while it would be left without any security for the P140,000.00 loan; and that in the remote possibility that the land is reverted to the public domain, respondent spouses should be made to immediately pay, jointly and severally, the total amount of P118,540.00 with interest at 15% per annum, plus charges and other expenses. 6 On May 25, 1990, the trial court rendered judgment annulling the subject deed of absolute sale and ordering DBP to return the P25,500.00 purchase price, plus interest; to reimburse to respondent spouses the taxes paid by them, the cost of the relocation survey, incidental expenses and other damages in the amount of P50,000.00; and to further pay them attorney's fees and litigation expenses in the amount of P10,000.00, and the costs of suit. 7 In its recourse to the Court of Appeals, DBP raised the following assignment of errors: 1. The trial court erred in declaring the deed of absolute sale executed between the parties canceled and annulled on the ground that therein defendant-appellant had no title over the property subject of the sale. 2. The trial court erred in finding that defendant-appellant DBP acted fraudulently and in bad faith or that it had misrepresented facts since it had prior knowledge that subject property was part of the public domain at the time of sale to therein plaintiffs-appellees. 3. The trial court erred in finding said plaintiffs-appellees' waiver of warranty against eviction void. 4. The trial court erred awarding to therein plaintiffs-appellees damages arising from an alleged breach of contract. 5. The trial court erred in not ordering said plaintiffs-appellees to pay their loan obligation to defendantappellant DBP in the amount of P118,540. 8 As substantially stated at the outset, respondent Court of Appeals rendered judgment modifying the disposition of the court below by deleting the award for damages, attorney's fees, litigation expenses and the costs, but affirming the same in all its other aspects. 9 On April 7, 1993, said appellate court also denied petitioner's motion for reconsideration. 10 Not satisfied therewith, DBP interposed the instant petition for review on certiorari, raising the following issues: 1. Whether or not private respondent spouses Celebrada and Abner Mangubat should be ordered to pay petitioner DBP their loan obligation due under the mortgage contract executed between them and DBP; and 2. Whether or not petitioner should reimburse respondent spouses the purchase price of the property and the amount of P11,980.00 for taxes and expenses for the relocation Survey. 11 Considering that neither party questioned the legality and correctness of the judgment of the court a quo, as affirmed by respondent court, ordering the annulment of the deed of absolute sale, such decreed nullification of the document has already achieved finality. We only need The Court of Appeals, after an extensive discussion, found that there had been no bad faith on the part of either party, and this r, therefore, to dwell on the effects of that declaration of nullity.emains uncontroverted as a fact in the case at bar. Correspondingly, respondent court correctly applied the rule that if both parties have

no fault or are not guilty, the restoration of what was given by each of them to the other is consequently in order. 12 This is because the declaration of nullity of a contract which is void ab initio operates to restore things to the state and condition in which they were found before the execution thereof. 13 We also find ample support for said propositions in American jurisprudence. The effect of an application of the aforequoted rule with respect to the right of a party to recover the amount given as consideration has been passed upon in the case of Leather Manufacturers National Bank vs. Merchants National Bank 14 where it was held that: "Whenever money is paid upon the representation of the receiver that he has either a certain title in property transferred in consideration of the payment or a certain authority to receive the money paid, when in fact he has no such title or authority, then, although there be no fraud or intentional misrepresentation on his part, yet there is no consideration for the payment, the money remains, in equity and good conscience, the property of the payer and may be recovered back by him." Therefore, the purchaser is entitled to recover the money paid by him where the contract is set aside by reason of the mutual material mistake of the parties as to the identity or quantity of the land sold. 15 And where a purchaser recovers the purchase money from a vendor who fails or refuses to deliver the title, he is entitled as a general rule to interest on the money paid from the time of payment. 16 A contract which the law denounces as void is necessarily no contract whatever, and the acts of the parties in an effort to create one can in no wise bring about a change of their legal status. The parties and the subject matter of the contract remain in all particulars just as they did before any act was performed in relation thereto. 17 An action for money had and received lies to recover back money paid on a contract, the consideration of which has failed. 18 As a general rule, if one buys the land of another, to which the latter is supposed to have a good title, and, in consequence of facts unknown alike to both parties, he has no title at all, equity will cancel the transaction and cause the purchase money to be restored to the buyer, putting both parties in status quo. 19 Thus, on both local and foreign legal principles, the return by DBP to respondent spouses of the purchase price, plus corresponding interest thereon, is ineluctably called for. Petitioner likewise contends that the trial court and respondent Court of Appeals erred in ordering the reimbursement of taxes and the cost of the relocation survey, there being no factual or legal basis therefor. It argues that private respondents merely submitted a "list of damages" allegedly incurred by them, and not official receipts of expenses for taxes and said survey. Furthermore, the same list has allegedly not been identified or even presented at any stage of the proceedings, since it was vigorously objected to by DBP. Contrary to the claim of petitioner, the list of damages was presented in the trial court and was correspondingly marked as "Exhibit P." 20 The said exhibit was, thereafter, admitted by the trial court but only as part of the testimonial evidence for private respondents, as stated in its Order dated August 16, 1988. 21 However, despite that admission of the said list of damages as evidence, we agree with petitioner that the same cannot constitute sufficient legal basis for an award of P4,000.00 and P7,980.00 as reimbursement for land taxes and expenses for the relocation survey, respectively. The list of damages was prepared extrajudicially by respondent spouses by themselves without any supporting receipts as bases thereof or to substantiate the same. That list, per se, is necessarily self-serving and, on that account, should have been declared inadmissible in evidence as the factum probans. In order that damages may be recovered, the best evidence obtainable by the injured party must be presented. Actual or compensatory damages cannot be presumed, but must be duly proved, and so proved with a reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered and on evidence of the actual amount thereof. If the proof is flimsy and unsubstantial, no damages will be awarded. 22 Turning now to the issue of whether or not private respondents should be made to pay petitioner their loan obligation amounting to P118,540.00, we answer in the affirmative.

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In its legal context, the contract of loan executed between the parties is entirely different and discrete from the deed of sale they entered into. The annulment of the sale will not have an effect on the existence and demandability of the loan. One who has received money as a loan is bound to pay to the creditor an equal amount of the same kind and quality. 23 The fact that the annulment of the sale will also result in the invalidity of the mortgage does not have an effect on the validity and efficacy of the principal obligation, for even an obligation that is unsupported by any security of the debtor may also be enforced by means of an ordinary action. Where a mortgage is not valid, as where it is executed by one who is not the owner of the property, 24 or the consideration of the contract is simulated 25 or false, 26 the principal obligation which it guarantees is not thereby rendered null and void. That obligation matures and becomes demandable in accordance with the stipulations pertaining to it. Under the foregoing circumstances, what is lost is only the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a personal obligation of the debtor, and the amount due to the creditor may be enforced in an ordinary personal action. 27 It was likewise incorrect for the Court of Appeals to deny the claim of petitioner for payment of the loan on the ground that it failed to present the promissory note therefor. While respondent court also made the concession that its judgment was accordingly without prejudice to the filing by petitioner of a separate action for the collection of that amount, this does not detract from the adverse effects of that erroneous ruling on the proper course of action in this case. The fact is that a reading of the mortgage contract 28 executed by respondent spouses in favor of petitioner, dated March 17, 1982, will readily show that it embodies not only the mortgage but the complete terms and conditions of the loan agreement as well. The provisions of said contract, specifically paragraphs 16 and 28 thereof, are so precise and clear as to thereby render unnecessary the introduction of the promissory note which would merely serve the same purpose. Furthermore, respondent Celebrada Mangubat expressly acknowledged in her testimony that she and her husband are indebted to petitioner in the amount of P118,000.00, more or less. 29 Admissions made by the parties in the pleadings or in the course of the trial or other proceedings do not require proof and can not be contradicted unless previously shown to have been made through palpable mistake. 30 Thus, the mortgage contract which embodies the terms and conditions of the loan obligation of respondent spouses, as well as respondent Celebrada Mangubat's admission in open court, are more than adequate evidence to sustain petitioner's claim for payment of private respondents' aforestated indebtedness and for the adjudication of DBP's claim therefor in the very same action now before us. It is also worth noting that the adjustment and allowance of petitioner's demand by counterclaim or set-off in the present action, rather than by another independent action, is favored or encouraged by law. Such a practice serves to avoid circuitry of action, multiplicity of suits, inconvenience, expense, and unwarranted consumption of the time of the court. The trend of judicial decisions is toward a liberal extension of the right to avail of counterclaims or set-offs. 31 The rules on counterclaim are designed to achieve the disposition of a whole controversy of the conflicting claims of interested parties at one time and in one action, provided all parties can be brought before the court and the matter decided without prejudicing the rights of any party. 32 WHEREFORE, the judgment appealed from is hereby MODIFIED, by deleting the award of P11,980.00 as reimbursement for taxes and expenses for the relocation survey, and ordering respondent spouses Celebrada and Abner Mangubat to pay petitioner Development Bank of the Philippines the amount of P118,540.00, representing the total amount of the loan released to them, with interest of 15% per annum plus charges and other expenses in accordance with their mortgage contract. In all other respects, the said judgment of respondent Court of Appeals is AFFIRMED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 91029 February 7, 1991 NORKIS DISTRIBUTORS, INC., petitioner, vs. THE COURT OF APPEALS & ALBERTO NEPALES, respondents. GRIO-AQUINO, J.:p Subject of this petition for review is the decision of the Court of Appeals (Seventeenth Division) in CA-G.R. No. 09149, affirming with modification the judgment of the Regional Trial Court, Sixth (6th) Judicial Region, Branch LVI. Himamaylan, Negros Occidental, in Civil Case No. 1272, which was private respondent Alberto Nepales' action for specific performance of a contract of sale with damages against petitioner Norkis Distributors, Inc. The facts borne out by the record are as follows: Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha motorcycles in Negros Occidental with office in Bacolod City with Avelino Labajo as its Branch Manager. On September 20, 1979, private respondent Alberto Nepales bought from the Norkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX with Engine No. L2-329401K Frame No. NL2-0329401, Color Maroon, then displayed in the Norkis showroom. The price of P7,500.00 was payable by means of a Letter of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan Branch, which Norkis' Branch Manager Labajo agreed to accept. Hence, credit was extended to Nepales for the price of the motorcycle payable by DBP upon release of his motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales Invoice No. 0120 (Exh.1) showing that the contract of sale of the motorcycle had been perfected. Nepales signed the sales invoice to signify his conformity with the terms of the sale. In the meantime, however, the motorcycle remained in Norkis' possession. On November 6, 1979, the motorcycle was registered in the Land Transportation Commission in the name of Alberto Nepales. A registration certificate (Exh. 2) in his name was issued by the Land Transportation Commission on November 6, 1979 (Exh. 2-b). The registration fees were paid by him, evidenced by an official receipt, Exhibit 3. On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was allegedly the agent of Alberto Nepales but the latter denies it (p. 15, t.s.n., August 2, 1984). The record shows that Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch (p. 12, Rollo). The motorcycle met an accident on February 3, 1980 at Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that the unit was being driven by a certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit was a total wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), was returned, and stored inside Norkis' warehouse. On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis in the total sum of P7,500. As the price of the motorcycle later increased to P7,828 in March, 1980, Nepales paid the difference of P328 (p. 13, Rollo) and demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for specific performance with damages against Norkis in the Regional Trial Court of Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI, where it was docketed as Civil Case No. 1272. He alleged that Norkis failed to deliver the motorcycle which he purchased, thereby causing him damages.

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Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, the risk of loss or damage had to be borne by him as owner of the unit. After trial on the merits, the lower court rendered a decision dated August 27, 1985 ruling in favor of private respondent (p. 28, Rollo.) thus: WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants. The defendants are ordered to pay solidarity to the plaintiff the present value of the motorcycle which was totally destroyed, plus interest equivalent to what the Kabankalan Sub-Branch of the Development Bank of the Philippines will have to charge the plaintiff on fits account, plus P50.00 per day from February 3, 1980 until full payment of the said present value of the motorcycle, plus P1,000.00 as exemplary damages, and costs of the litigation. In lieu of paying the present value of the motorcycle, the defendants can deliver to the plaintiff a brand-new motorcycle of the same brand, kind, and quality as the one which was totally destroyed in their possession last February 3, 1980. (pp. 2829,Rollo.) On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989, but deleted the award of damages "in the amount of Fifty (P50.00) Pesos a day from February 3, 1980 until payment of the present value of the damaged vehicle" (p35, Rollo). The Court of Appeals denied Norkis' motion for reconsideration. Hence, this Petition for Review. The principal issue in this case is who should bear the loss of the motorcycle. The answer to this question would depend on whether there had already been a transfer of ownership of the motorcycle to private respondent at the time it was destroyed. Norkis' theory is that: . . . After the contract of sale has been perfected (Art. 1475) and even before delivery, that is, even before the ownership is transferred to the vendee, the risk of loss is shifted from the vendor to the vendee. Under Art. 1262, the obligation of the vendor to deliver a determinate thing becomes extinguished if the thing is lost by fortuitous event (Art. 1174), that is, without the fault or fraud of the vendor and before he has incurred in delay (Art. 11 65, par. 3). If the thing sold is generic, the loss or destruction does not extinguish the obligation (Art. 1263). A thing is determinate when it is particularly designated or physically segregated from all others of the same class (Art. 1460). Thus, the vendor becomes released from his obligation to deliver the determinate thing sold while the vendee's obligation to pay the price subsists. If the vendee had paid the price in advance the vendor may retain the same. The legal effect, therefore, is that the vendee assumes the risk of loss by fortuitous event (Art. 1262) after the perfection of the contract to the time of delivery. (Civil Code of the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.) Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists that there was constructive delivery of the unit upon: (1) the issuance of the Sales Invoice No. 0120 (Exh. 1) in the name of the private respondent and the affixing of his signature thereon; (2) the registration of the vehicle on November 6, 1979 with the Land Transportation Commission in private respondent's name (Exh. 2); and (3) the issuance of official receipt (Exh. 3) for payment of registration fees (p. 33, Rollo). That argument is not well taken. As pointed out by the private respondent, the issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378). In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled with the intention of delivering the thing. The act, without the intention, is insufficient (De Leon, Comments and Cases on Sales, 1978 Ed., citing Manresa, p. 94).

When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet to transfer the title or ownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of the buyer's motorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor of a chattel mortgage over the purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP would not approve private respondent's loan application and, consequently, there would be no sale. In other words, the critical factor in the different modes of effecting delivery, which gives legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition (Abuan vs. Garcia, 14 SCRA 759). In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held: The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is "placed in the hands and possession of the vendee." (Civil Code, Art. 1462). It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality-the delivery has riot been effects .(Emphasis supplied.) The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated September 20, 1979 (Exh. B) and the registration of the vehicle in the name of plaintiff-appellee (private respondent) with the Land Registration Commission (Exhibit C) was not to transfer to Nepales the ownership and dominion over the motorcycle, but only to comply with the requirements of the Development Bank of the Philippines for processing private respondent's motorcycle loan. On March 20, 1980, before private respondent's loan was released and before he even paid Norkis, the motorcycle had already figured in an accident while driven by one Zacarias Payba. Payba was not shown by Norkis to be a representative or relative of private respondent. The latter's supposed relative, who allegedly took possession of the vehicle from Norkis did not explain how Payba got hold of the vehicle on February 3, 1980. Norkis' claim that Julian Nepales was acting as Alberto's agent when he allegedly took delivery of the motorcycle (p. 20, Appellants' Brief), is controverted by the latter. Alberto denied having authorized Julian Nepales to get the motorcycle from Norkis Distributors or to enter into any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n., February 6, 1985). This circumstances more than amply rebut the disputable presumption of delivery upon which Norkis anchors its defense to Nepales' action (pp. 33-34, Rollo). Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is applicable to this case, for there was neither an actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well-known doctrine of res perit domino. WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. No. 09149, we deny the petition for review and hereby affirm the appealed decision, with costs against the petitioner. SO ORDERED.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. L-66944 November 13, 1989 ALLIANCE TOBACCO CORPORATION, INC., petitioner, vs. PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, FARMER'S 'VIRGlNlA TOBACCO REDRYING COMPANY, INC. and INTERMEDIATE APPELLATE COURT, respondents. Clarence J. Villanueva for petitioner. The Government Corporate Counsel for Phil. Virginia Tobacco Administration. FERNAN, C.J.: The issue in the instant petition for review on certiorari of the decision of the then Intermediate Appellate Court is whether or not petitioner's delivery of 174 bales of tobacco to the Farmer's Virginia Tobacco Redrying Company, Inc. (FVTR), a contractee of the Philippine Virginia Tobacco Administration (PVTA) perfected the contract of sale between petitioner and the (PVTA) so as to hold the latter liable for the loss of said bales while in the possession of the FVTR. The PVTA a government corporation created under Republic Act No. 2265 to promote the tobacco industry, entered into a contract of procuring, redrying and servicing with the FVTR for the1963 tobacco trading operation.1 In June of that year, the PVTA also entered into a merchandising loan agreement with the petitioner, a duly incorporated and authorized tobacco trading entity, whereby the PVTA agreed to lend P25,500 to the petitioner for the purchase of flue-cured Virginia tobacco from bona fide Virginia tobacco former-producers. 2 The following month, petitioner shipped to the FVTR 96 bales of tobacco weighing 4,800 kilos covered by Guia No. 1 and 167 bales weighing 8,350 kilos covered by Guia No. 2. In the words of the lower court, the following transpired: ... Before shipping the tobacco to the Redrying Plant, the plaintiff (petitioner herein) obtained a Clearance issued by the Tobacco Inspector, authorizing the tobacco shipment to proceed to the Redrying Plant. Upon the arrival of the tobacco shipments in the Redrying Plant, defendant FVTR at Bauang, La Union (Bauang for short), they were listed in the Log Book, after which the tobacco were brought inside the Redying Compound. The Log Book was then submitted to the Marketing Department, formerly the Trading Department and kept by the Branch Manager, Bauang, Mr. Jovencio Pimentel, assisted by Mr. Pio Balagot. The documents submitted accompanying the tobacco shipments were the BIR clearance, Clearance from the Regional Tobacco Inspector at San Fernando, La Union (San Fernando for short) and Guias Nos. 1 and 2. After several days, the grading of the plaintiffs tobacco took place but only 89 bales from Guia No. 2 were graded, weighed and accepted. The remaining bales of tobacco in Guia No. 2 and the whole of Guia No. I were not graded and weighed because after grading and weighing 89 bales of Guia No. 2, some officers and employees in the premises of defendant FVTR asked money for the separate grading and weighed of the un-graded and un-weighed tobacco bales. Because the rest of the plaintiffs tobacco were not graded and weighed, Aldegunda Villanueva, Business Manager of the plaintiff, saw the Branch Manager of the defendant FVTR and asked him to have their tobacco graded and weighed. Since the grading and weighing of the plaintiffs tobacco was (sic) not resumed, in 1965, said Business Manager personally called on Atty. Eduardo

Bananal, Manager of the defendant PVTA in Manila and told the latter that some tobacco of the plaintiff were not graded and weighed and were no longer in the premises of defendant FVTR's Redrying Plant, Manager Bananal told her that the plaintiffs tobacco in question were considered accepted. The operations of defendant FVTR in Bauang, stopped in October 1963. The plaintiff asked that its ungraded and un-weighed tobacco be withdrawn from the Redrying Plant. The defendants PVTA and FVTR refused to allow the plaintiffs request because according to them the tobacco sought to be withdrawn were subject of a merchandising loan and owned by defendant, PVTA. 3 Unfortunately, the remaining un-graded and un-weighed 174 bales with a total value of P28,382 were lost while they were in the possession of the FVTR Having learned of such loss in 1965, petitioner demanded for its value and the application of the same to its merchandising loan with PVTA but both the latter and the FVTR refused to heed said demands. 4 Consequently, petitioner filed in the then Court of First Instance of La Union a complaint against PVTA and FVTR praying that the two defendants be ordered to pay it P4,443 representing the value of the 89 bales which were weighed, graded and accepted by the defendants, P28,382.00 representing the value of the lost bales of tobacco and/or that the said amount be applied to its loan with PVTA and P4,000 as attorney's fees and litigation expenses. 5 They prayed that interest be charged on the first two amounts. FVTR was declared in default. 6 Thereafter, petitioner and the PVTA submitted a stipulation of facts and agreed that a partial judgment be rendered as to the 89 bales of tobacco which had been weighed and graded. 7 In its decision, 8 the lower court, citing Santiago Virginia Tobacco Planters Association vs. PVTA ruled that the PVTA, 9 should not be held responsible for the lost bales of tobacco because they were not yet properly graded and weighed and that petitioner failed to present the weigher's tally sheets and warehouse receipts or quedans. The dispositive portion of the decision states: WHEREFORE, judgment is hereby rendered as follows: 1. Ordering the defendant PVTA to pay the plantiff the amount of P9,323.11 which is the agreed value of the plaintiffs uncontested 89 bales of tobacco, with interest at the legal rate, from the filing of the Complaint on December 27, 1968, up to its full payment; 2. Ordering the defendant PVTA to pay the plaintiff the amount of P1,000 as attorney's fee; Since the plaintiff admitted that it has a merchandising loan of P20,000 from defendant PVTA the amounts to be paid to the former may be applied by the latter to the payment of said loan and its interest at the agreed rate. 3. Dismissing the plaintiffs complaint regarding the 96 bales and 78 bales of tobacco under Guias Nos. 1 and 2, respectively. There is no pronouncement as to costs. SO ORDERED. 10 Petitioner appealed to the then Intermediate Appellate Court which, in its decision of March 20, 1984, 11 affirmedin toto the lower court's decision. Hence, petitioner interposed the instant petition for review on certiorari of the appellate court decision. It contends that the question of substance decided by the said court is not in accord with the decision of this Court in Philippine Virginia Tobacco Administration vs. De los Angeles, 12 and that the said "question of substance boils down (to) whether or not there is a perfected contract of sale between petitioner and respondent PVTA with respect to the aforesaid remaining bales of tobacco." 13

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On the other hand, the herein respondent alleges that, without having been weighed or graded, the tobacco shipment could not be deemed to have been accepted by FVTR much less the PVTA It insists that the Santiago Virginia Tobacco Planters Association, Inc. vs. PVTA case (Santiago case for brevity) should be applied. Furthermore, the petition having presented only the factual question of whether or not the tobacco shipment was indeed weighed and graded at the redrying plant, the same must be denied. 14 On January 13, 1986, this Court denied the petition for lack of merit, However upon petitioner's motion for reconsideration of the resolution denying the petition, the Court set aside said resolution of January 13, 1986 and gave due course to the petition. 15 At the outset, it should be emphasized that the lower court made a definitive factual finding on the actual and physical delivery of the lost bales of tobacco from the petitioner to the FVTR. 16 The parties, however, disagree as to the legal implications of such delivery. Petitioner contends that it bound not only FVTR but also the PVTA and perfected the contract of sale between petitioner and the PVTA On the other hand, the PVTA argues that the delivery was not valid and binding on it considering that, not having been weighed and graded by its agents, it had not duly accepted the shipments so as to perfect the contract of sale. Under the Santiago case, shipping documents and check-lists which are accomplished prior to delivery do not prove actual delivery. To prove such delivery, documents such as the weigher's tally sheet and the warehouse receipts which are accomplished when the actual delivery is made are necessary. It should be noted, however, that the factual circumstances extant in this case are different from those in the Santiago case. In said case, there was a need to prove actual delivery because the petitioner therein demanded for the payment of tobacco shipments which were allegedly delivered to the FVTR. 17 In other words, the actual, physical delivery of the shipments was not proven. On the other hand, in this case, the lower court established from the testimonies of witnesses the fact that petitioner entrusted to the FVTR a total of 263 bales of tobacco 89 bales of which were even actually weighed and graded in the redrying plant. 18 However, for reasons beyond the control of the petitioner, the FVTR refused to weigh and grade the remaining 174 bales. On top of this, the FVTR also refused to grant petitioner's request to withdraw the un-weighed and un-graded shipments. As it turned out later, said shipments were lost while in the custody of FVTR thereby placing the petitioner in a "no win" situation. The Civil Code provides that ownerhip of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. 19 There is delivery when the thing sold is placed in the control and possession of the vendee. 20 Indeed, in tobacco trading, actual delivery plays a pivotal role. The peculiar procedure undergone in trading, which procedure was set out at length in both the Santiago and the PVTA vs. De los Angeles cases, reveals that delivery seals the contract of sale because the trader loses not only possession but also control over the shipment. Outlined by the PVTA pursuant to its power "to take over and assume, and therefore exclusively direct, supervise and control, all functions and operations with respect to the processing, warehousing, and trading of Virginia tobacco, the provisions of ally existing law to the contrary notwithstanding," 21 the procedure is observed by everyone involved in the trade. Verily, the tobacco trading procedure conceived and formulated by the PVTA is akin to a contract of adhesion wherein only one party has a hand in the determination of the terms. But observance of the procedure more often than not renders a trader at a disadvantage. The moment the shipment is placed in the hands of the PVTA or its representative and it is lost, the trader is left empty-handed. While the flaw may not really be in the procedure itself, the same may be found in the persons charged with the implementation of the procedure. Some personnel mishandle the shipment to the detriment of the trader. Some demand grease money to facilitate the trading process. Sadly, this is what happened in this case. Hence, while under an Ideal situation, we would have found merit in respondent PVTA's contention that the contract of sale could not have been perfected pursuant to Article 1475 22 of the Civil Code because to determine the price of the tobacco traded, the shipment should first be inspected, graded and weighed, we find said contention misplaced herein. A strict interpretation of the provision of Article 1475 may result in adverse effects to small planters who would not be paid for the lost products of their toil. Such situation was what the ruling in PVTA vs. De los Angeles sought to avoid.

Equity and fair dealing, the anchor of said case, must once more prevail. Since PVTA had virtual control over the lost tobacco bales, delivery thereof to the FVTR should also be considered effective delivery to the PVTA. WHEREFORE, the decision of the appellate court insofar as lt affirms the decision of the lower court directing the PVTA to pay petitioner the amount of P9,823.11 for the 89 bales of tobacco is hereby affirmed. Respondent PVTA is likewise ordered to pay petitioner's claim of P28,382.00 for the lost 174 bales of tobacco. Both amounts are subject to interest at the legal rate from the filing of the complaint on December 27, 1968 up to their full payment. Should the petitioner still owe respondent PVTA pursuant to the merchandising loan agreement between them, the same shall be offset by whatever amount the petitioner would receive from the respondent PVTA by virtue of this decision. No costs. SO ORDERED.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. Nos. 113472-73 December 20, 1994 ONG CHING PO, YU SIOK LIAN DAVID ONG and JIMMY ONG, petitioners, vs. COURT OF APPEALS and SOLEDAD PARIAN, respondents. Bautista, Salva, Arrieta, Salva for petitioner. Arthem Maceda Potian for private respondent. QUIASON, J.: This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the Decision of the Court of Appeals dated July 15, 1993, which dismissed the petition for certiorari in CA-G.R. CV Nos. 2839192. I On July 23, 1947, Ong Joi Jong sold a parcel of land located at Fundidor Street, San Nicolas to private respondent Soledad Parian, the wife of Ong Yee. The latter, the brother of petitioner Ong Ching Po, died in January 1983; while petitioner Ong Ching Po died in October 1986. The said sale was evidenced by a notarized Deed of Sale written in English. Subsequently, the document was registered with the Register of Deeds of Manila, which issued Transfer Certificate of Title No. 9260 dated September 2, 1947 in the name of private respondent. According to private respondent, she entrusted the administration of the lot and building to petitioner Ong Ching Po when she and her husband settled in Iloilo. When her husband died, she demanded that the lot be vacated because she was going to sell it. Unfortunately, petitioners refused to vacate the said premises. On March 19, 1984, private respondent filed a case for unlawful detainer against petitioner Ong Ching Po before the Metropolitan Trial Court of Manila, Branch 26. The inferior court dismissed her case. The dismissal was affirmed by the Regional Trial Court, Branch 10, Manila. The decision of the Regional Trial Court was, in turn, affirmed by the Court of Appeals, which dismissed the petition. The decision of the Court of Appeals became final and executory. Petitioners, on the other hand, claimed that on July 23, 1946, petitioner Ong Ching Po bought the said parcel of land from Ong Joi Jong. The sale was evidenced by a photo copy of a Deed of Sale written in Chinese with the letter head "Sincere Trading Co." (Exh. "B"). An English translation of said document (Exh. "C") read as follows: Deed of Sale I, Ong Joi Jong, a party to this Deed of Sale hereby sell in absolutely (sic) manner a lot located on No. 4 Fundidor Street, San Nicolas an (sic) area consisting 213 square meters including a one-story house erected thereon unto Mr. Ong Ching Po for the sum of P6,000.00 the receipt of which is hereby acknowledged by me and consequently I have executed and signed the government registered title (sic) the said lot inclusive of the house erected thereon, now belong (sic) to Mr. Ong Ching Po unequivocally. And the purpose of this document is to precisely serve as proof of the sale.

Addendum: I have acceded to the request of Mr. Ong Ching Po into signing another document in favor of Soledad Parian (She is the Filipino wife of Ong Yee, brother of Ong Ching Po) for the purpose of facilitating the issuance of the new title by the City Register of Deeds and for the reason that he is not yet a Filipino. I certify to the truthfulness of this fact. (Exhibits for the plaintiff, p. 4) On December 6, 1983, petitioner Ong Ching Po executed a Deed of Absolute Sale conveying to his children, petitioners Jimmy and David Ong, the same property sold by Ong Joi Jong to private respondent in 1947. On December 12 1985, petitioners Ong Ching Po, Jimmy Ong and David Ong filed an action for reconveyance and damages against private respondent in the Regional Trial Court, Branch 53, Manila, docketed as Case No. 85-33962. On July 26, 1986, private respondent filed an action for quieting of title against petitioners Ong Ching Po and his wife, petitioner Yu Siok Lian, in the Regional Trial Court, Branch 58, Manila, docketed as Civil Case No. 86-36818. Upon her motion, the case was consolidated with Civil Case No. 85-33962. On May 30 1990, the trial court rendered a decision in favor of private respondent. On appeal by petitioners to the Court of Appeals, the said court affirmed the decision of the Regional Trial Court. Hence, this petition. II According to petitioners, the Court of Appeals erred: (1) When it gave full faith and credit to the Deed of Sale (Exh. "A") in favor of private respondent, instead of the Deed of Sale (Exh. "B" and its translation, Exh. "C") in favor of petitioner Ong Ching Po. (2) When it concluded that the acts of petitioners were not acts of ownership; and (3) When it ruled that no express nor implied trust existed between petitioners and private respondent (Rollo, pp. 17-18). As stated by petitioners themselves, what is in dispute ". . . is not so much as to which between Exhibit "A" and "Exhibit "B" is more weighty, but whether this document is what it purports to be (i.e., a deed of conveyance in favor of Soledad Parian [private respondent] or it was only resorted to or executed as a subterfuge because the real buyer (Ong Ching Po) was an alien and it was agreed upon between Ong Ching Po and his brother (Ong Yee, Soledad Parian's husband) that the land be registered in the name of Soledad Parian in order to avoid legal complications and to facilitate registration and transfer and that the said title would be transferred by Soledad to Ong Ching Po or his successors-in-interest and that she would be holding the title in trust for him" (Rollo, pp. 19-20). We cannot go along with the claim that petitioner Ong Ching Po merely used private respondent as a dummy to have the title over the parcel of land registered in her name because being an alien he was disqualified to own real property in the Philippines. To sustain such an outrageous contention would be giving a high premium to a violation of our nationalization laws. Assuming that Exhibit "B" is in existence and that it was duly executed, still petitioners cannot claim ownership of the disputed lot by virtue thereof. Section 5, Article XIII of the 1935 Constitution provides, as follows: Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines. Section 14, Article XIV of the 1973 Constitution provides, as follows:

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Save in cases of hereditary succession, no private land shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands in the public domain. Section 7, Article XII of the 1987 Constitution provides: Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands in the public domain. The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the public domain" (II Bernas, The Constitution of the Philippines 439-440 [1988 ed.]). The 1935 Constitution reserved the right to participate in the "disposition, exploitation, development and utilization" of all "lands of the public domain and other natural resources of the Philippines" for Filipino citizens or corporations at least sixty percent of the capital of which was owned by Filipinos. Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands. Petitioner Ong Ching Po was a Chinese citizen; therefore, he was disqualified from acquiring and owning real property. Assuming that the genuineness and due execution of Exhibit "B" has been established, the same is null and void, it being contrary to law. On the other end of the legal spectrum, the deed of sale executed by Ong Joi Jong in favor of private respondent (Exh. "A") is a notarized document. To remove the mantle of validity bestowed by law on said document, petitioners claim that private respondent admitted that she did not pay anything as consideration for the purported sale in her favor. In the same breath, petitioners said that private respondent implied in her deposition that it was her husband who paid for the property. It appears, therefore, that the sale was financed out of conjugal funds and that it was her husband who handled the transaction for the purchase of the property. Such transaction is a common practice in Filipino-family affairs. It is not correct to say that private respondent never took possession of the property. Under the law, possession is transferred to the vendee by virtue of the notarized deed of conveyance. Under Article 1498 of the Civil Code of the Philippines, "when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred." If what petitioners meant was that private respondent never lived in the building constructed on said land, it was because her family had settled in Iloilo. There is no document showing the establishment of an express trust by petitioner Ong Ching Po as trustor and private respondent as trustee. Not even Exhibit "B" can be considered as such a document because private respondent, the registered owner of the property subject of said "deed of sale," was not a party thereto. The oral testimony to prove the existence of the express trust will not suffice. Under Article 1443 of the Civil Code of the Philippines, "No express trust concerning an immovable or any interest therein may be proved by parole evidence." Undaunted, petitioners argue that if they cannot prove an express trust in writing, they can prove an implied trust orally. While an implied trust may be proved orally (Civil Code of the Philippines, Art. 1457), the evidence must be trustworthy and received by the courts with extreme caution, because such kind of evidence may be easily fabricated (Salao v. Salao, 70 SCRA 65 [1976]). It cannot be made to rest on vague and uncertain evidence or on loose, equivocal or indefinite declarations (Cf. De Leon v. Molo-Peckson, et al., 116 Phil. 1267 [1962]). Petitioners do not claim that Ong Yee was not in a financial position to acquire the land and to introduce the improvements thereon. On the other hand, Yu Siok Lian, the wife of petitioner Ong Ching Po, admitted in her testimony in court that Ong Yee was a stockholder of Lam Sing Corporation and was engaged in business.

The Court of Appeals did not give any credence to Exhibit "B" and its translation, Exhibit "C", because these documents had not been properly authenticated. Under Section 4, Rule 130 of the Revised Rules of Court: Secondary Evidence when Original is lost or destroyed. When the original writing has been lost or destroyed, or cannot be produced in court, upon proof of its execution and lost or destruction, or unavailability, its contents may be proved by a copy, or by a recital of its contents in some authentic document, or by the recollection of the witnesses. Secondary evidence is admissible when the original documents were actually lost or destroyed. But prior to the introduction of such secondary evidence, the proponent must establish the former existence of the document. The correct order of proof is as follows: existence; execution; loss; contents. This order may be changed if necessary in the discretion of the court (De Vera v. Aguilar, 218 SCRA 602 [1993]). Petitioners failed to adduce evidence as to the genuineness and due execution of the deed of sale, Exhibit "B". The due execution of the document may be established by the person or persons who executed it; by the person before whom its execution was acknowledged; or by any person who was present and saw it executed or who after its execution, saw it and recognized the signatures; or by a person to whom the parties to the instrument had previously confessed the execution thereof (De Vera v. Aguilar, supra). Petitioner Yu Siok Lian testified that she was present when said document was executed, but the trial court rejected her claim and held: If it is true that she was present, why did she not sign said document, even merely as a witness? Her oral testimony is easy to concoct or fabricate. Furthermore, she was married only on September 6, 1946 to the plaintiff, Ong Ching Po, in Baguio City where she apparently resided, or after the deed of sale was executed. The Court does not believe that she was present during the execution and signing of the deed of sale involved therein, notwithstanding her pretensions to the contrary (Decision p. 6, Records p. 414). As to the contention of petitioners that all the tax receipts, tax declaration, rental receipts, deed of sale (Exh. "B") and transfer certificate of title were in their possession, private respondent explained that she and her husband entrusted said lot and building to petitioners when they moved to Iloilo. As observed by the Court of Appeals: We find, however, that these acts, even if true, are not necessarily reflective of dominion, as even a mere administrator or manager may lawfully perform them pursuant to his appointment or employment (Rollo, p. 10). It is markworthy that all the tax receipts were in the name of private respondent and her husband. The rental receipts were also in the name of her husband. WHEREFORE, the petition is DISMISSED. SO ORDERED

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FIRST DIVISION [G.R. No. 132709. September 4, 2001] SPOUSES CAMILO L. SABIO, and MA. MARLENE A. LEDONIO-SABIO, petitioners, vs. THE INTERNATIONAL CORPORATE BANK, INC. (now UNION BANK OF THE PHILIPPINES), GOLDENROD, INC., PAL EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC., AYALA CORPORATION, LAS PIAS VENTURES, INC., FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.), AYALA PROPERTY VENTURES CORPORATION, and AYALA LAND, INC., respondents. DECISION YNARES-SANTIAGO, J.: Before us is a petition for review on certiorari assailing the decision of the Court of Appeals in CA-G.R. CV No. 48870 which affirmed and modified the judgment of the Regional Trial Court of Makati, Branch 65, in Civil Case No. 18540, an action for specific performance and damages. The object of the controversy is a portion of a vast tract of land measuring approximately 152,454 square meters, located at Tindig na Manga, Almanza, Las Pias City. Designated as Lots 2 and 3, and 6 (formerly covered by two Certificates of Title, namely: TCT Nos. 65161 and 65162), this vast estate was registered in the name of Las Pias Ventures, Incorporated (or LPVI).[1] In the early 1970s, the said property was the subject of several land registration, as well as civil, cases. On May 25, 1973, the spouses Gerardo and Emma Ledonio, one of the parties in LRC Case No. PN107 affecting the land, assigned to the spouses Camilo and Ma. Marlene Sabio (herein petitioners) all their rights, interests, title and participation over a contiguous portion of the subject property measuring 119,429 square meters, particularly that which was covered by TCT No. 65162.[2] For this purpose, a deed of assignment with assumption of mortgage was later executed by the Ledonio spouses in favor of the Sabio couple on November 23, 1981.[3] Similarly, while the subject property was still the object of several pending cases, the International Corporate Bank, Inc. (or Interbank) acquired from the Trans-Resource Management and Development Corporation all of the latters rights to the subject property by virtue of a deed of assignment executed between them on July 12, 1984.[4] Sometime thereafter, or on March 6, 1985, the Sabios and Interbank settled their opposing claims by entering into a Memorandum of Agreement (or MOA) whereby the Sabios assigned, conveyed and transferred all their rights over the parcel covered by TCT No. 65162 to Interbank, with the express exception of a 58,000 square meter contiguous portion of said lot. The MOA also provided, to wit: xxx xxx xxx 2. That for and in consideration of the aforementioned assignment, conveyance and transfer by the FIRST PARTY (i.e., the Sabios), the latter (SECOND PARTY, i.e., Interbank) shall: a. PAY to the FIRST PARTY the sum of SEVEN HUNDRED FIFTY THOUSAND PESOS (P750,000.00), Philippine Currency, receipt of which in full is hereby acknowledged by the FIRST PARTY from the SECOND PARTY; b. Subject to the rights of the SECOND PARTY under the provisions of No. 4 hereunder, COMPLETE and PERFECT its ownership and title to the afore-described three (3) parcels of land with all the improvements thereon, situated at Tindig Na Manga (Almanza), Las Pias, Rizal (now Metro Manila), covered by Transfer Certificate of Title No. S-65161-Metro Manila, Book T-328, Page 161 (formerly No. 190713-Rizal, Book T1227, Page 113) and Transfer Certificate of Title No. S-65162-Metro Manila, Book T-328, Page 162 (formerly No. 190714-Rizal, Book T-1227, Page 114), AND, ASSIGN, CONVEY and TRANSFER unto and in favor of the FIRST PARTY a CONTIGUOUS PORTION of the afore-described parcel of land, with all the improvements thereon, covered by the aforementioned Transfer Certificate of Title No. S-65162-Metro Manila, Book T-328, Page 162 (formerly No. 190714-Rizal, Book T-1227, Page 114). The aforementioned CONTIGUOUS PORTION referred to in paragraph 1 hereof with an area of FIFTY EIGHT THOUSAND

(58,000) SQUARE METERS, the exact location of which is, as far as practicable, as indicated in the sketch plan, which is hereto attached as Annex D and made an integral part hereof, LOT 6-B; c. Bear and defray all costs, fees and expenses incidental to and/or connected with the segregation, survey, registration and delivery to the FIRST PARTY of a new transfer certificate of title in the name of the FIRST PARTY, free from all liens and encumbrances, over the afore-described parcel of land herein assigned, conveyed and transferred by the SECOND PARTY; d. Constitute and grant and by these presents has CONSTITUTED and GRANTED without indemnity whatsoever in favor of the FIRST PARTY and of said parcel of land to be covered by a new transfer certificate of title in the name of the FIRST PARTY with an area of FIFTY EIGHT THOUSAND (58,000) SQUARE METERS, a permanent and perpetual RIGHT OF WAY sufficient for all the needs of said parcel of land through out the properties already owned and/or to be acquired by the SECOND PARTY, particularly the parcels of land covered by Transfer Certificate of Title No. 85717, Transfer Certificate of Title No. S-65161Metro Manila, Book T-328, Page 161 (formerly No. 190703-Rizal, Book T-127, Page 113) and Transfer Certificate of Title No. S-65162-Metro Manila, Book T-328, Page 162 (formerly No. 190714-Rizal, Book T1227, Page 114), it being understood that the right of way herein contemplated shall not be less than TEN (10) meters in WIDTH.[5] The said MOA was annotated on TCT Nos. 65161 and 65162 on March 8, 1985 pursuant to paragraph 4 thereof. The same paragraph also granted Interbank the right to assign all its rights and interests outlined in the MOA, provided that all the obligations of Interbank specified in the aforequoted paragraphs 2.b, 2.c and 2.d shall also bind all of its assigns, heirs and successors. Subsequently, Interbank transferred all its rights and interests to the Las Pias Ventures, Incorporated (or LPVI). In turn, the portion covered by TCT No. 65161 designated as Lot Nos. 2 and 3 were acquired from LPVI by the Ayala Group of Companies (herein respondents) through a merger between LPVI and Ayala Land, Incorporated (or ALI), in whose favor TCT Nos. T-41263 and T-41262 were issued on April 25, 1994. Lot No. 6, then covered by TCT No. S-65162, was also subsequently transferred first to LPVI, then to ALI, and a new title, TCT No. T-41261, was issued also on April 25, 1994. Another contiguous parcel, then covered by TCT No. 85717, was acquired by the Ayala Group sometime in 1993, which was eventually subdivided and retitled in favor of ALI. This entire property became the site of what was known then as Ayala Las Pias Subdivision. Years later, this first class residential subdivision was renamed Ayala Southvale. Thereafter, a dispute arose concerning the 58,000 square meter contiguous portion subject of the MOA that was to be conveyed and transferred back to the Sabios by Interbank. Also in controversy was the permanent and perpetual right of way that Interbank was obligated to constitute in favor of the Sabios 58,000 square meter portion. The Sabios were thereby constrained to institute an action for Specific Performance and Damages against Interbank, Goldenrod Incorporated, PAL Employees Savings and Loan Association, Incorporated or (PESALA) and the Ayala Group of Companies comprised of the Ayala Corporation, LPVI, Insular Life Assurance Company, Ltd., Filipinas Life Assurance Company, ALI, Ayala Property Ventures, Incorporated (or APVI), and the Bank of the Philippine Islands (or BPI). BPI was later dropped as a partydefendant. The Regional Trial Court of Makati, Branch 64, in Civil Case No. 1854, summarized the Sabios claims in their complaint, thus: Plaintiffs claimed that defendant Interbank was obligated to complete and perfect its ownership and title to the parcels of land so that Interbank could transfer to plaintiffs the absolute ownership and title over the contiguous portion. They also claimed that one of the commitments of defendant Interbank which induced plaintiffs to execute the agreement without which plaintiffs would not have executed was that defendant Interbank would clear the contiguous portion of all occupants and wall-in the same, together with the parcels of land belonging to defendants. Allegedly, the property had already been cleared, by defendant Ayala Group, of occupants except for the contiguous portion thereof.

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Plaintiffs alleged that defendants, particularly Ayala Group, failed to comply with their commitments and obligations in the MOA specifically those arising from the abovementioned provisions thereof. Hence, plaintiffs have been prevented from utilizing for productive purposes the land. They further alleged that they were constrained to obtain a loan from Interbank (Exhs. E, E-1, F, F-1, G and G-1) where the contiguous portion of the property was used as collateral (Exhs. H, H-1, I, I-1, J and J-1) and this loan is now deemed paid (Exhs. K, L, M-2, N, O, P to P-2) and plaintiffs are now considered released. Plaintiffs claimed Actual and Compensatory damages in the amount of P500,000.00 and Exemplary Damages in the amount of P250,000.00.[6] The defendants answer was summed up by the trial court as follows: Defendants disclaimed liability. Defendants Ayala Corp., Ayala Life, ALI, APVI (collectively referred to as Ayala Group), PESALA, and LPVI, claimed that they were not privy to the MOA, the contract from which the alleged obligations arose. In the transactions they were each involved in, subsequent to the MOA, pursuant to which they each acquired the property which was originally transferred by the plaintiffs to defendant Interbank, said property acquired did not include the contiguous portion which plaintiffs claimed was the subject of noncompliance of the obligations agreed upon. On the contrary, in each transaction, the contiguous portion was expressly excluded in the corresponding contracts (Exhs. C-1, D-2, 2-Ayala, 5-6, 2-A-PESALA), hence, plaintiffs have no cause of action against them and even assuming that defendants were privy to the MOA, they would still have no obligation to clear the contiguous portion of the property as there was no express or implied provision in the MOA that the party to whom the property was transferred would clear the same.[7] Sometime thereafter, the defendants submitted a Notice of Confession of Judgment and Motion for Partial Decision Against Answering Defendant for the alleged purpose of securing an entry of judgment against them while avoiding the formality, time and expense of ordinary proceedings. In particular, the defendants confessed judgment with regard to the plaintiff spouses prayer emanating from the MOA, and asked that judgment be rendered directing the defendants to comply with their obligations as defined in the pertinent provisions of the MOA. Moreover, the defendants signified willingness to abide by the MOA, and complete and perfect title to the parcel of land, including that portion which was to be assigned to the plaintiff spouses. With regard to that 58,000 square meter parcel, the defendants also acknowledged the obligation to segregate that contiguous portion and deliver title thereto to the plaintiff spouses free from liens and encumbrances. However, the defendants also averred that fulfillment of its obligation under the MOA became impossible due to the plaintiff spouses own acts. First, defendants posited that they were ready to deliver the title to the 58,000 square meter parcel and had, in fact, prepared the Deed of Conveyance [8] required by the Register of Deeds, but the plaintiffs themselves refused to sign the said deed unless the subject property was cleared of all squatters and other illegal occupants. The defendants nevertheless repudiated plaintiffs claim that they (defendants) were obligated to clear the said property of all squatters and occupants, much less to fence the said property, arguing that no such obligation was imposed in the MOA. Secondly, the defendants noted that the property in question became the subject of an action for recovery of ownership filed by the Ledonio spouses against the Sabios. Consequently, the annotation of the notice of lis pendens caused to be registered by the Ledonios on the titles hampered the delivery of the title covering the 58,000 square meter portion to the Sabios. The defendants further admitted the obligation to grant an easement of right of way under the MOA, manifesting that not only did the defendants constitute and grant such right of way, but that they were also willing and prepared to provide an alternative choice at the pleasure of the plaintiff spouses. [9] Moreover, the mortgage obligations of the plaintiff spouses annotated on the titles covering the 58,000 square meter portion had already been paid off by the defendants,[10] prompting the latter to seek a court order cancelling the Notice of Lis Pendens and annotation of the MOA on the titles covering the subject parcel of land. The issues having been joined, the trial court focused on the primordial matter of contention, that is: Whether or not the defendants had the obligation to clear the subject 58,000 square meter portion of all occupants and to fence the said premises, before conveyance of the property can be considered as full compliance with the obligation imposed upon the defendants under the MOA. The trial court also sought to

address the preliminary issue of whether or not an order directing the cancellation of the annotation of the MOA and notices of lis pendens on the titles covering the subject property was warranted. The trial court ruled in favor of the defendants, finding that the MOA did not impose, whether expressly or impliedly, on Interbank and its transferees the obligation to clear the subject 58,000 square meter portion of squatters and other illegal occupants. Be that as it may, the trial court awarded actual and exemplary damages to the plaintiff spouses for losses they incurred due to the defendants delay in complying with the MOA, considering that the defendants filed their confession of judgment only after the lapse of six (6) years from the filing of the action. More particularly, the trial court disposed as follows: In view of the foregoing, Defendant Ayala Group is ordered to pay plaintiffs Camilo and Marlene Sabio P500,000.00 in actual damages and P250,000.00 in exemplary damages. Plaintiffs, however, are directed to specifically comply with the obligations under the MOA by executing a Deed of Conveyance upon payment by the defendant of the foregoing amount. The Register of Deeds is directed to cancel the notice of lis pendens as regards this case, and the annotation of the subject Memorandum of Agreement, both of which are annotated on TCTs Nos. T-5331 to T-5334, the TCTs covering the contiguous portion of the property. Costs against defendant Ayala Group.[11] The opposing parties filed their respective motions for reconsideration, but both were denied by the trial court. Consequently, all the parties filed separate appeals before the Court of Appeals. Nevertheless, the trial court issued an order granting the defendants motion for partial immediate execution pending appeal by directing the Register of Deeds to immediately cancel and/or cause the cancellation of the notice of lis pendens and other annotations as regards this case and the annotation of the Memorandum of Agreement on TCT Nos. T-5331 to T-5334 and titles derived therefrom.[12] Meanwhile, in their appeal before the Court of Appeals, the Sabios (plaintiffs-appellants) ascribed the following errors to the trial court: I. The trial court erroneously disregarded the other provisions and parts of the MOA which could have evinced the reasons for, and the circumstances attendant to, the execution of the said MOA. II. The trial court erred in not finding that the defendants-appellants (Ayala Group of Companies) are obligated to perfect and complete ownership and title to the entire property covered by TCT No. T-5331, including that portion which the defendant-appellants must assign, convey and transfer to the plaintiffs-appellants (Sabio spouses). III. The trial court erred in failing to appreciate the testimony of plaintiff-appellant Camilo L. Sabio to the effect that Interbank and Ayala Investment and Development Corporation would enter into a joint venture to develop the entire parcel, including the surrounding real estate, into a first class residential subdivision, necessitating the removal of all illegal occupants and enclosing the perimeters of the said property with a wall that would include the 58,000 square meter portion pertaining to the Sabio spouses. IV. The trial court erred in its interpretation of the phrase free from all liens and encumbrances as appearing in the MOA, by invoking inapplicable jurisprudence when it is the intention of the parties to the MOA, in using said phrase, that should prevail. V. The trial court erred in not finding that all eighteen (18) parcels of land, comprising what was then known as the Ayala Las Pias Subdivision, covered by eighteen (18) titles in the name of LPVI, are all servient estates referred to in paragraph 2.d of the MOA. VI. The trial court erred in not ordering the defendants-appellants to cause the annotation of the easement of right of way on all eighteen (18) titles. VII. The trial court erred in ordering the cancellation of the annotation of the MOA and Notices of Lis Pendens on LPVIs TCT Nos. T-5331 to 5334. VIII. The trial court erred in compelling the plaintiffs-appellants Sabios to sign the draft deed of conveyance when said document was a gross violation of paragraphs 2.b, 2.c, and 2.d of the MOA.

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IX. While the trial court was right in concluding that the Sabio spouses suffered damages, their losses could not be compensated as actual damages, the same being incapable of accurate pecuniary estimation. X. The trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the order dated September 21, 1994 directing the cancellation of the annotation of the MOA and the Notices of Lis Pendens on LPVIs titles.[13] In contrast, the defendants-appellants merely impugned the trial courts judgment for having awarded actual and exemplary damages to the plaintiffs-appellants Sabio spouses, while failing to award damages in their (defendants-appellants) favor. On April 30, 1997, the Court of Appeals rendered the decision subject of the instant petition for review, affirming with modification the trial courts ruling. The Court of Appeals affirmed the trial courts conclusion that under the MOA, the Interbank and the defendants-appellants did not assume the obligation to clear the subject contiguous portion of the land of occupants and to wall in the same.[14] The Court of Appeals further agreed with the trial courts ruling that since the intentions of the parties to the MOA were clearly worded in the provisions they expressly stipulated on, there was no reason to interpret the MOA differently.[15] The Court of Appeals also rejected the Sabios position that the purpose and spirit of the establishment of a right of way in their favor under paragraph 2.d was to grant them the same rights as any homeowner would have to freely pass through all the roads in the proposed subdivision. The Court of Appeals ruled that the phrase permanent and perpetual right of way must be construed in its ordinary and accepted signification, that is, to provide ingress to, and egress from, the dominant estate, as well as to provide adequate and convenient passage to and from the nearest highway. The defendants-appellants having complied with the obligation to establish the right of way, the Court of Appeals determined that there was no need to annotate the easement on the titles not affected by said road right of way. In fact, while the MOA mentioned only TCT Nos. 65161 and 65162, which were later replaced by TCT Nos. 5333 and 5331, no other titles were mentioned. Finally, while the Court of Appeals ruled that the defendants-appellants are not entitled to damages, the said court reversed the trial courts award of damages to the Sabios, concluding that their claim for damages, whether actual or exemplary, was unsubstantiated and devoid of legal basis. Hence, the Court of Appeals rendered judgment decreeing: WHEREFORE, the judgment appealed from is AFFIRMED with the MODIFICATION that the awards for actual and exemplary damages in favor of the plaintiffs are hereby SET ASIDE. SO ORDERED.[16] After a careful and thorough disquisition of the facts of this case and the arguments raised in this petition, we find no reversible error on the part of the Court of Appeals. In this petition for review before us, petitioner attributed to the Court of Appeals ten (10) alleged errors: I. The Court of Appeals acted contrary to law and jurisprudence in affirming the decision of the trial court directing the petitioners to affix their signatures to the draft deed of conveyance (Exhibits CC thru CC-4, EEEE thru EEEE-4 and 4-Ayala), and in releasing respondents from their obligations under paragraphs 2.b, 2.c, and 2.d of the MOA. Petitioners are justified in refusing to affix their signatures to said draft. II. The Court of Appeals acted contrary to law and jurisprudence in affirming the ruling of the trial court that the mere execution of the draft deed of conveyance (Exhibits CC thru CC -4, EEEE thru EEEE-4 and 4-Ayala) prepared sometime in January 1990 by respondents Ayala Group of Companies, successors-in-interest of respondent The International Corporate Bank, Inc. (now Union Bank of the Philippines), pursuant to paragraph 4 of the MOA, as second party, for the signature of the petitioners as first party, constitutes sufficient and valid compliance with the commitment and obligation of the second party to assign, convey and transfer unto and in favor of the first party the aforementioned contiguous

portion --- Lot 6-B, Psu-80886 (Exhibits A-34, II-1, 1-A-Ayala and 6-A-Ayala) --- with all the improvements thereon as mandated by the provisions of paragraph 2.b of the MOA, despite the fact that, admittedly, said Lot 6-B, Psu 80886 (Exhibits A-34, II-1, 1-A-Ayala and 6-A-Ayala) is still in the hostile and adverse actual occupation and possession of third parties. More so, because paragraph 2.b of the MOA mandates that respondents Ayala Group of Companies shall assign, convey and transfer unto and in favor of the petitioners not only the aforementioned Lot 6-B, Psu 80886 (Exhibits A-34, II-1, 1-A-Ayala and 6A-Ayala) but also all the improvements thereon. III. The Court of Appeals acted contrary to law and jurisprudence in utterly disregarding the import and significance of the premises or Whereases of the MOA and the various annexes thereto forming integral parts thereof (Exhibits A-6 thru A-9, A-10 thru A-15, A-16 thru A-22, A-23 thru A-26, A-27 thru A-30, A-31 thru A-33, and, A-35 thru A-46), evidencing the reasons behind and the circumstances surrounding the execution thereof, so that the court may be placed in the position/situation of the parties thereto at the time the agreement was executed. IV. The Court of Appeals acted contrary to law and jurisprudence in not holding that --- as expressly agreed and stipulated in paragraph 2.b of the MOA (Exhibits A thru A -5 and 1Ayala) Psu-80886 (Exhibits A-34, II-1, 1-A-Ayala and 6-A-Ayala) with all the improvements thereon, respondents Ayala Group of Companies are mandated to first complete and perfect their ownership and title to the entirety to the afore-described Lot 6, Psu 80886 with all the improvements thereon, earlier covered by T.C.T. No. S-65162-Metro Manila, Book T-328, Page 162, in the name of CPJ Corporation, later by T.C.T. No. T-5331Las Pias, Metro Manila, Book 27, Page 131 in the name of respondent Las Pias Ventures, Inc. (Exhibits KK thru KK-3 and 3-Ayala) and now covered by T.C.T. No. T-41261-Las Pias, Metro Manila, Book 207, Page 61 in the name of respondent Ayala Land, Inc., including the aforementioned Lot 6-B, Psu-80886 (Exhibits A-34, II-1, 1-A-Ayala and 6A-Ayala) which respondents Ayala Group of Companies are committed and obligated to assign, convey and transfer unto and in favor of petitioners. V. The Court of Appeals acted contrary to law and jurisprudence in disregarding the legal effect upon paragraph IV of the second amended and supplemental complaint dated 23 April 1990 of the confession of judgment made on 18 June 1993 and the statement made by respondents Ayala Group of Companies on 05 November 1993 --- the first day of the hearing of the above-entitled case --- both of which constitute judicial admissions contemplated by Section 4, Rule 129, Part IV (New Rules of Evidence) of the Rules of Court. VI. The Court of Appeals acted contrary to law and jurisprudence in disregarding the following intention of the parties to the MOA as evidenced by the annexes thereto (Exhibits A-6 thru A-9; A-10 thru A-15; A-16 thru A-22; A-23 thru A-26; and A-35 thru A-46) in the use of the phrase free from all liens and encumbrances in paragraph 2.c thereof: --free from any and all liens/encumbrances and/or problems of whatever kind and nature, including adverse claims, notices of lis pendens, and/or claims of occupants/possessors who were not parties to any of the cases mentioned in the aforementioned documents referred to in the aforementioned annexes. VII. The Court of Appeals acted contrary to law and jurisprudence in holding that the two roads right of way (Exhibits 6-B and 6-C) --- confined and limited to Lot 10, Psu-80886 --- then covered by T.C.T. No. 85717 and later by T.C.T. No. T-5332-Las Pias, Metro Manila, Book 27, Page 132 (Exhibits LL thru LL-2 and 3-Ayala) in the name of respondent Las Pias Ventures, Inc., --- proposed by respondents Ayala Group of Companies constitute sufficient and valid compliance with the mandate of paragraph 2.d of the MOA, and, in releasing respondents Ayala Group of Companies from their commitment and obligation of complying therewith.

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VIII. The Court of Appeals acted contrary to law and jurisprudence in affirming the decision of the trial court directing the cancellation of the annotation of the MOA and of the notices of lis pendens on the following Transfer Certificates of Title: T.C.T. No. T-5331-Las Pias, Metro Manila, Book 27, Page 131 (Exhibits KK thru KK-3 and 3-Ayala); T.C.T. No. T-5332-Las Pias, Metro Manila, Book 27, Page 132 (Exhibits LL thru LL -2 and 3-A-Ayala); T.C.T. No. T-5333 (Exhibits MM thru MM-2 and 3-B-Ayala); and T.C.T. No. T-5334-Las Pias, Metro Manila, Book 27, Page 134 (Exhibits NN thru NN-2 and 3-C-Ayala); and, in not directing that the judgment in the above-entitled case be annotated on all the eighteen (18) Transfer Certificates of Title covering a total of eighteen (18) parcels of land earlier known as the Ayala Las Pias Subdivision and now as Ayala Southvale. IX. The Court of Appeals acted contrary to law and jurisprudence in disregarding the legal effect upon paragraphs IV, XII, XIII and XIV of the second amended and supplemental complaint dated 23 April 1990 of the confession of judgment made on 18 June 1993 by respondents Ayala Group of Companies and their statement made on 05 November 1993 --- the first hearing of the above-entitled case --- both of which constitute judicial admissions contemplated by Section 4, Rule 129, Part IV (New Rules of Evidence) of the Rules of Court. X. In affirming the order issued by the trial court on 21 September 1994, acting with grave abuse of discretion amounting to lack or excess of jurisdiction, the Court of Appeals likewise acted with grave abuse of discretion amounting to lack or excess of jurisdiction. We shall deal with these alleged errors, not in numerical order, but by subject matter, for clarity and better articulation of the issues involved. The first matter of contention is the Memorandum of Agreement (MOA) between the petitioners (spouses Sabio) and Interbank.[17] The petitioners posit that while the MOA is explicit in requiring Interbank, and the respondents as its transferees, to complete and perfect ownership and title to the entire estate, including improvements thereon, the court a quo and the Court of Appeals failed to compel the respondents to abide by their commitment to assign, convey and transfer the subject 58,000 square meter portion to the petitioners free from all liens and encumbrances. It is their contention that the presence of illegal occupants and the existence of unauthorized improvements on the subject parcel negates the respondents claim that they have completed and perfected their ownership and title over said property. The fact that the subject parcel is possessed and occupied by squatters is a clear indication that the respondents were never in possession. Before the respondents can assign, convey and transfer title to the subject parcel, they must also be able to place the petitioners in possession thereof since possession is a necessary attribute of ownership.[18] Thus, for the petitioners, there must first be removal of the illegal occupants and unauthorized structures, and the subject parcel should be walled-in before said property is transferred by the respondents to them. Otherwise, such transfer and conveyance would be meaningless, illusory and impracticable. The petitioners also contend that under the circumstances, any conveyance of the subject parcel by the respondents would not be free from all liens and encumbrances as stipulated in paragraph 2.c of said MOA. Their premise is that the presence of squatters and unauthorized improvements should be considered a lien or encumbrance on the subject parcel, even including such other problems as adverse claims, notices of lis pendens, and claims of other occupants and possessors who were not parties to the cases involving the subject parcel. Consequently, the petitioners assail the alleged failure of the court a quo and the Court of Appeals to: (1) consider the intention of the parties as manifested in the annexes to the MOA; and (2) to give significance to the premises and whereas clauses of the MOA in the interpretation of the phrase free from all liens and encumbrances in paragraph 2.c of the MOA.[19] These related matters concerning the intention of the parties to the MOA, the stipulations in the annexed documents, and the interpretation of the phrase free from all liens and encumbrances were earlier raised by the petitioners in their appeal before the Court of Appeals,[20] advancing the same arguments and premises already discussed in the case below.

The trial court dealt exhaustively on these issues, finding that: However, defendant Interbank has no obligation to clear the contiguous portion of the land of occupants and to wall-in the same for nothing in the MOA obligates Interbank to do so. Plaintiffs alleged that the clearing and walling-in of occupants was a principal commitment and inducement without which plaintiffs would not have executed the MOA. If such were the case, a provision to that effect should have been expressly stipulated in the MOA or at least implied therein. Plaintiff Camilo Sabio is a member of the bar who engaged in the practice of law for over twenty years and is currently holding public office. In drafting the MOA and/or agreeing to the stipulations in the same, a person of his stature could have been more circumspect. The occupants were already in the contiguous portion of the property when the MOA was executed and if plaintiffs had wanted to ensure that defendant Interbank would take responsibility for clearing the property of occupants, they could have specifically provided for it. Plaintiffs claimed that the obligation to clear and wall-in the occupants was implied in the provisions of the MOA, to complete and perfect ownership and title to the land and to (transfer) to plaintiffs the contiguous portion with all improvements and to deliver the new TCT free from all liens and encumbrances. This court finds that there is no implication of that sort. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of the stipulations shall control. If the words appear contrary to the evident intention of the parties, the latter shall prevail over the former. (Art. 1370, Civil Code of the Philippines). The evidence does not show that the parties had intentions other than those commonly understood from the aforementioned terms in the MOA. The plaintiffs have failed to prove that the intention of the parties was other than that expressed by the literal meaning of the terms of the MOA. Plaintiffs further alleged that the obligations to clear and wall-in occupants and to secure the cancellation of the Notice of Lis Pendens regarding the case of Ledonio v. Sabio annotated on the TCTs of the contiguous portion of the property are included in the obligation to deliver the new TCT free from all liens and encumbrances, and that the obligation to clear the occupants shanties is deemed included in the obligation to complete and perfect ownership and title to the land and to transfer to plaintiffs the contiguous portion with all improvements, the shanties being deemed included in the term improvements. This allegation is untenable. Words which may have different significations shall be understood in that which is most in keeping with the nature and object of the contract (Art. 1375, Civil Code of the Philippines), otherwise, it is presumed the words were used in their primary and general acceptation. Occupation by the occupants of the contiguous portion of the property is not an encumbrance which defendant Interbank is obligated to clear the property from. The meaning of the words, free from all encumbrance does not include adverse possession of a third person. (Yuson and De Guzman v. Diaz, 42 Phil. 22 [1921]). An adverse possession by another is not an encumbrance in law and does not contradict the condition that the property be free from encumbrances; nor is it a lien which connotes security for a claim. Likewise, a Notice of Lis Pendens is not a lien or encumbrance. It is a mere cautional notice to a prospective buyer or mortgagee of a parcel of land under litigation, and cannot conceivably be the lien or encumbrance contemplated by law. (Underscoring ours)[21] On appeal, the Court of Appeals affirmed and quoted with approval the above-stated findings and conclusion of the trial court, while adding that: Indeed, an assiduous examination of the MOA and its WHEREAS clauses yields no basis for a necessary inference that the Interbank undertook to clear the 58,000 sq. m. portion to be assigned to plaintiffs of occupants/squatters, and to wall-in the same before turning over the title thereto. The MOA was negotiated for more than one year (see TSN, December 3, 1993, pp. 17-19), and during the negotiations one hundred (100) to two hundred (200) squatter families were already occupying the 58,000 sq. m. portion (TSN, December 10, 1993, p. 15). Plaintiffs assert that unless the squatters are removed from the contiguous portion and the area is properly walled in to make their removal effective, the predominant purpose of paragraph 2-b to transfer ownership and title without plaintiffs having to spend a single cent would be illusory and meaningless; thus the complaint alleges that the removal of the occupants and the walling in of the 58,000 sq. m. portion was one of the principal commitments made by Interbank which induced plaintiffs to execute the MOA.

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In light of the above circumstances, it is highly inconceivable and illogical that the plaintiffs did not insist on expressly providing the necessary stipulations and in words that leave nothing to further interpretation. Plaintiff Sabio, a lawyer, took part personally and with the assistance of another lawyer, in the drafting of the MOA, and the negotiations took about a year, and no reason is suggested why he refrained from including therein specific language containing what he considers the principal commitment of the second party to remove the squatters and wall-in the 58,000 portion to be conveyed to him. That the commitment must be implied, or inferred by interpretation or be shown by evidence outside of the document convinces us that the plaintiffs expectations were an afterthought. (Underscoring ours)[22] It is a long-held cardinal rule that when the terms of an agreement are reduced to writing, it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the contents of the agreement itself.[23] Accordingly, the trial court and the Court of Appeals referred to no other document but the MOA itself, the stipulations of which are deemed the law between the contracting parties. The lower courts found that nowhere in the MOA did Interbank commit to clear the subject parcel of squatters or illegal occupants. Neither was Interbank obliged to remove whatever unauthorized improvements were introduced in the said property. Nor is there any stipulation that would constrain the respondents to fence or wall-in the subject parcel along its perimeters. There being no such obligation on the part of the respondents, they cannot be compelled by the courts, even on the petitioners adamant insistence, to first rid the subject parcel of squatters, remove all improvements and fence the perimeter thereof, before conveyance or transfer can be effected. Indeed, it is not the province of the courts to amend a contract by construction, or to make a new contract for the parties by interjecting material stipulations, or even to read into the contract words which it does not contain.[24] Since the MOA of the parties was reduced to writing, such agreement is deemed to contain all its terms and there cannot be, between the parties and their successors-in-interest, any evidence of the terms of the written agreement other than the contents of the agreement itself.[25] Nevertheless, petitioners invoke the whereas clauses of the MOA, as well as the other documents that preceded the execution of the MOA, arguing that these will provide proof of the real intention of the parties when they executed the MOA. They strongly contend that these documents reflect their true intentions that Interbank, and its successors-in-interest, are obligated to clear the subject parcel of illegal occupants and structures, then fence its boundaries. At the outset, however, we note that petitioners, in their pleadings, never put in issue the allegation that the MOA failed to express the true intent of the parties thereto. Instead, they adopt inconsistent positions in regard to the MOA, that by itself, it is valid and binding on the parties and their successors-in-interest on the one hand, while they also seek the courts cognizance of extraneous documents to radically modify or add to the terms of the written agreement on the other hand. We have uniformly held that it is only where a party puts in issue in the pleadings the failure of the written agreement to express the true intent of the parties thereto that said party may present evidence to modify, explain or add to the terms of the written agreement.[26] The fact that the terms of the MOA are explicit and leave no doubt as to the intention of the parties, coupled with petitioners failure to contest the contract for failing to express the true intention of the parties, behooves the courts not to read into the MOA any other intention that would contradict its apparent import,[27] such that the literal meaning of its stipulations must control.[28] Be that as it may, we shall, for the sake of discussion, peruse the documents referred to by petitioners as allegedly containing the factual and legal bases for their claim that respondents are obligated to first clear the subject parcel of all illegal occupants and structures, and then wall-in said property before there can be fulfillment of the stipulation to assign, transfer and convey the same to petitioners. Going by chronological order, the first document is a Deed of Assignment [29] dated May 25, 1973 between the Ledonio spouses and petitioners, whereby the Ledonios absolutely assigned and transferred to the Sabios three (3) parcels of land for and in consideration of services rendered. There is no reference therein to illegal occupants, structures, and other obligations such as fencing in these properties. The second document dated April 14, 1980 is an Agreement[30] between the CPJ Corporation, the spouses Epifanio and Cecilia Alano, and Trans-Resource Management and Development Corporation (or

TRMDC), whereby CPJ Corporation sold to the Alanos and TRMDC, as financier of the Alanos, three (3) parcels of property, one of which later became the subject of the MOA between Interbank and petitioners. In the said document, the Alanos and TRMDC agreed to buy the property on an As Is basis, without warranty of any kind as to title and possession on the part of the seller, CPJ Corporation. The Alanos and TRMDC thereby admitted: full knowledge of all the legal incidents and adverse claims affecting the said properties which have been and are being asserted by opposing parties in the pending cases/litigations involving the subject properties, i.e., LRC Cases Nos. PN-107 (LRC Rec. No. N-30603) and N-6336 (LRC Rec. No. N34761), and Civil Case No. 187222, of the Court of First Instance of Rizal, as well as by other third persons not parties in the said pending cases/litigations, in respect of which the SECOND PARTY hereby agree(s) to and will assume full and sole responsibility for the settlement or removal thereof and save free and harmless the FIRST PARTY from any and all liability resulting and arising therefrom; x x x.[31] A related document was the Contract to Buy and Sell[32] between the Alano spouses and TRMDC arising from the agreement between CPJ Corporation, the Alanos and TRMDC. Therein, the Alanos committed to free the titles from all liens and encumbrances on or before a certain date, but with particular reference to the litigation of any and all cases affecting the properties, x x x especially those cases mentioned under the Deed of Cession and Assignment dated April 14, 1980 executed by the same parties. Contrary to petitioners suppositions, there is no mention of the presence and clearing of squatters from the premises as a condition. In both documents, instead, there are definite references to the pending cases/litigations as the source of the liens and encumbrances on the subject property, not including therein any other extrajudicial claims of ownership or possession. The fourth contract is a Deed of Assignment with Assumption of Mortgage[33] between Gerardo and Emma Ledonio as assignors, and the Sabio couple as assignees, executed by said parties on November 23, 1981. By the very nature of the contract, the only obligation that the Sabios assumed from the Ledonios were those under the mortgage in favor of the Philippine National Bank. Again, there was no mention of illegal occupants and structures, and therefore, no imposition to rid the property subject of the said mortgage of such persons and structures. Then, there were executed on June 28, 1984, by and between TRMDC and Interbank, the Memorandum of Agreement[34] and the Addendum thereto.[35] In the former, the property subject of this petition was among those assigned, transferred and conveyed to Interbank (covered by TCT Nos. S-65161 and 65162), on the condition that there be settlement within one (1) year of all the attending liens and problems enumerated as follows: LIENS Entry No. 67527/L.P. No. 1753: NOTICE OF LIS PENDENS: By virtue of the notice of lis pendens presented and filed by Camilo L. Sabio, counsel for the plaintiffs, notice is hereby given that an action/petition for review has been commenced and is now pending in the Court of First Instance of Rizal in Civil/LRC Rec. No. 19722, entitled Gerardo G. Ledonio, et al. versus Eduardo C. Guico, involving the property described herein. Entry No. 69433/L.P. No. 1763: NOTICE OF LIS PENDENS: By virtue of the notice of lis pendens presented and filed by Camilo L. Sabio, counsel for the intervenor, notice is hereby given that an action/petition for intervention has been commenced and is now pending in the Court of First Instance of Rizal in Civil/LRC Rec. No. 657, 758, 976 entitled E. Mayuga, F. Baltazar, et al. vs. F. Baltazar, S. Ledonio, et al., involving the property described herein. Entry No. 69434/L.P. No. 1762: NOTICE OF LIS PENDENS: By virtue of the notice of lis pendens presented and filed by Camilo L. Sabio, counsel for the plaintiff/defendants, notice is hereby given that an action/petition for review has been commenced and is now pending in the Court of First Instance of Rizal in Civil/LRC Rec. No. 657, 758, 976 entitled E. Mayuga, F. Baltazar, et al. versus F. Baltazar, G. Ledonio, et al., involving the property described herein.

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Entry No. 25081/T-190713: ADVERSE CLAIM - In an affidavit duly subscribed and sworn to, the spouses EPIFANIO J. ALANO and CECILIA P. ALANO, claim among other things, that the property described in this certificate of title is the subject of a Letter-Agreement executed by the herein owner and the adverse claimants. Entry No. 65120/L.P. No. 1140: LIS PENDENS: By virtue of a notice of lis pendens, presented and filed by Camilo L. Sabio, counsel for the Respondent-Counter-Petitioners, notice is hereby given that an action has been commenced and is now pending in the Court of First Instance of Rizal in LRC Case No. P-107, LRC Rec. No. N-30603, entitled GERARDO G. LEDONIO, et al. versus CPJ CORPORATION, et al., involving the land described in this certificate of title. Entry No. 38000/S-65161: AGREEMENT - In favor of SPS. EPIFANIO J. ALANO, SR. and CECILIA P. ALANO and TRANS-RESOURCE MANAGEMENT & DEVELOPMENT CORPORATION, in an instrument duly executed by the herein registered owner agrees to sell, transfer and convey unto SPS. EPIFANIO J. ALANO, SR. and CECILIA P. ALANO and TRANS-RESOURCE MANAGEMENT & DEVELOPMENT CORPORATION for the sum of P5,250,000.00 subject to the terms and conditions set forth in Doc. No. 133, Page No. 28, Book No. II; Series of 1980 of Notary Public for Makati, Metro Manila, Ma. Cynthia Q. Halaquea. Entry No. 40608/S-65161: CONTRACT TO BUY AND SELL - By virtue of an instrument duly executed by and between EPIFANIO J. ALANO and CECILIA P. ALANO and TRANS-RESOURCE MANAGEMENT & DEVELOPMENT CORPORATION, the former have agreed to sell unto the latter the property described herein for a total consideration of FOURTEEN MILLION FOUR HUNDRED SIXTY SEVEN THOUSAND SEVEN HUNDRED TEN PESOS (P14,467,710.00) subject to the terms and conditions set forth in Doc. No. 148, Page 31, Book II; Series of 1980 of Notary Public for Makati, Metro Manila, Ma. Cynthia Q. Halaquea.[36] In paragraph 2.c of the MOA, the parties stipulated that Interbank shall render full and free assistance to TRMDC in exploring, negotiating and consummating appropriate settlement agreements with the parties/claimants concerned, including defraying the required cost of such settlements with view to cleaning/settling all of said liens/problems within the prescribed period, but with specific reference to the liens and problems enumerated in the preceding paragraph. Clearly, the claims of third parties such as squatters were not among those enumerated as liens or problems affecting the subject property. Neither was Interbank obligated under the terms of said agreement to clear the subject property of illegal occupants, there being no specific mention of their presence therein. On the other hand, the Addendum to the MOA between TRMDC and Interbank is a mere amendment to the computations of the principal debt and interests of TRMDC loan with Interbank. There is nothing in said document that even touches on the subject of claims, liens and problems affecting the property. In furtherance of their stipulations in the MOA and Addendum thereto, TRMDC executed a Deed of Assignment[37] on July 12, 1984 in favor of Interbank involving, among others, the parcel subject of this petition. Said documents cited the MOA entered into by the same parties, reiterating TRMDCs undertaking to assign, transfer and convey absolute ownership and title in fee simple over the properties described therein free from any and all liens/encumbrances and/or problems of whatever kind and nature within a specified period of time. While the phrase, problems of whatever kind and nature may be broadly construed, the succeeding paragraph stressed that TRMDC is obligated to execute a Deed of Assignment pending its accomplishment and/or compliance with its obligations under the MOA and Addendum to the MOA. Thus, the obligations of TRMDC were effectively limited to those specifically enumerated in the two preceding documents which, as mentioned earlier, did not include clearing the property of squatters and unauthorized structures. Finally, the MOA between petitioners and Interbank, as previously discussed, did not make mention of squatters and illegal structures. Neither did they stipulate that Interbank was obligated to clear the subject property of such occupants and structures, and neither did the said MOA impose on Interbank the obligation to wall-in the subject property.

In fine, there is no factual or legal basis for petitioners claim that the respondents are obligated to rid the subject property of squatters and unauthorized structures. Neither is there any provision in the cited documents that sustains petitioners contention. Consequently, the court a quo and the Court of Appeals did not err in finding that respondents were not under compulsion to clear the subject property of squatters and unauthorized structures under the MOA, inasmuch as there was no obligation to fence the perimeter of the subject property. The terms of the MOA and the preceding contracts are clear and leave no doubt as to their meaning; hence, they cannot be interpreted in a way that would please the petitioners, but should rather be fulfilled according to the literal sense of their stipulations.[38] However, petitioners would argue that there was no necessity to make specific provisions with respect to the removal of the occupants and structures from, and walling-in of, the subject property. To them, it was sufficient that both parties knew the actual condition of the property. Petitioner Camilo Sabio testified to that effect, stating that the real intention or agreement of the parties was that the obligation to complete and perfect ownership and title included the removal of all squatters and unauthorized structures, and to fence the perimeter of the subject property. However, the Court of Appeals correctly concluded that petitioner Camilo Sabios testimony in this regard cannot be taken advantage of to inject into the agreement any understanding which is contradictory to or at variance with the terms thereof without violating the parol evidence rule x x x. The rule is that when the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement.[39] There are exceptions to said rule, however, such as when: 1. There is an intrinsic ambiguity, mistake or imperfection in the writing; 2. The written agreement fails to express the true agreement and intent of the parties thereto; 3. The validity of the written agreement is in question; and 4. There exists other terms agreed by the parties or their successors-in-interest after the execution of the written agreement.[40] In the instant case, the MOA between the Sabios and Interbank was never assailed for any intrinsic ambiguity, mistake or imperfection in the writing by any of the parties. More importantly, petitioners never alleged in any of their pleadings that the MOA failed to express the true agreement and intent of the parties thereto. In fact, petitioner Camilo Sabio would be hard put to question the very contents of the MOA since he admittedly participated in the drafting of the MOA with the assistance of legal counsel. [41] Even if he would belatedly complain that the MOA did not state the true intentions of the parties, he is estopped from doing so. Indeed, the Court of Appeals noted, it is highly inconceivable and illogical that petitioner Camilo Sabio, an experienced lawyer who personally took part in the preparation of the MOA with the assistance of another lawyer, in the course of negotiations that lasted about a year, did not insist on expressly providing the necessary stipulations and in words that leave nothing to further interpretation.[42] He cannot now insist that the court should accept his bare testimony that there was a verbal understanding between the parties to the MOA, such that there was no necessity to make specific provisions concerning the removal of illegal occupants and structures, nor even to fence the subject parcel of land. His testimony may have been unrebutted, but unsubstantiated testimony offered as proof of verbal agreements which tend to vary the terms of a written agreement is inadmissible under the parol evidence rule.[43] Furthermore, the validity of the MOA was never questioned. In fact, the petitioners are vigorously pursuing its execution, albeit in a manner that departs from the stipulations contained therein. Since no fraud or mistake that would vitiate the validity of the MOA has been alleged, parol evidence cannot be admitted to incorporate additional contemporaneous conditions which are not mentioned at all in the written agreement.[44]Neither have petitioners shown that after the execution of the MOA, the parties and their successors-in-interest agreed to terms other than those appearing in the MOA.

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In sum, there is no justification in the instant case to admit parol evidence to support the petitioners claims. It is a cardinal rule of evidence, not just one of technicality but of substance, that the written document is the best evidence of its own contents. It is also a matter of both principle and policy that when the written contract, by agreement of the parties, is established as the repository of their stipulations, any other evidence is excluded and the same cannot be used as a substitute for such contract, nor even to alter or contradict them. Although the parol evidence rule is inflexible, it admits of four (4) exceptions, as earlier discussed. Since none of these exceptions was ever put in issue in the pleadings, in accordance with Rule 130, Section 9 of the Rules of Court, the parol evidence rule must be strictly adhered to in this instant case. Therefore, the stipulations of the contract being the law between the parties, the courts have no recourse but to enforce them as they were agreed upon and written.[45] With more reason do we agree with the findings of the Court of Appeals that the existence of squatters and unauthorized structures in the subject property is not covered by the phrase liens and encumbrances. The word lien, by common acceptation, refers to a legal claim or charge on property to secure the payment of a debt or obligation, and which may often be used interchangeably with the word encumbrance. We adopt this Courts definition of the words lien and encumbrance as set forth in People v. RTC,[46] and quoted in the impugned decision of the Court of Appeals, viz:[47] In People v. RTC (178 SCRA 299), the Supreme Court held that not all claims against a property can be considered a lien within the contemplation of law; it was held: x x x. A lien is a qualified right or a propriety interest, which may be exercised over the property of another. It is a right which the law gives to have a debt satisfied out of a particular thing. It signifies a legal claim or charge on property, either real or personal, as a collateral or security for the payment of some debt or obligation. Similarly, an encumbrance is a burden upon land, depreciative of its value, such as lien, easement, or servitude, which, though adverse to (the) interest of (the) landowner, does not conflict with his conveyance of (the) land in fee. The following are considered encumbrances: A claim, lien, charge, or liability attached to and binding real property; e.g., a mortgage, judgment lien, lease, security interest, easement or right of way, accrued and unpaid taxes. A lien is already an existing burden or charge on the property while a notice of lis pendens, as the very term connotes, is only a notice or warning that a claim or possible charge on the property is pending determination by the court.[48] Petitioners have failed to show how squatters and unauthorized structures can fall under the definition of liens and encumbrances. The documents relied upon by petitioners themselves enumerate the liens and encumbrances and other claims on the subject property. However, no such burdens on the property concerning the squatters appear in said documents. The courts cannot supply or read into these documents words which they clearly do not contain. All things considered, the Court of Appeals did not err in concluding that the possession of squatters or any other persons occupying the subject property without any legal right whatsoever, cannot and should not be considered a lien or encumbrance as commonly defined and accepted. The second object of contention is the Deed of Conveyance proposed by respondents, but rejected by petitioners.[49] In said document, respondents Ayala Corporation, in accordance with the pertinent provisions of the MOA between Interbank and the Sabios, stipulated that: WHEREAS, the FIRST PARTY had already completed the segregation of the said 58,000-square meter portion of Lot 6 (Psd80888) in accordance with the Bureau of Lands approved survey plan, a copy of which is hereto attached as Annex C. As such, the FIRST PARTY is now in a position to comply with its obligation under Section 5 of the said Deed of Sale (Annex B) to convey the property to the SECOND PARTY, now described as follows: Lot 6-B, Psd-13-008573, TCT No. T-5331 of Las Pias Registry of Deeds

A PARCEL OF LAND (Lot 6-B of the subdivision plan Psd-13-008573, being a portion of Lot 6, Psu-80886, (Swo-20609), LRC Record No. 43516), situated in Barrio Almanza Dos, Las Pias, Metro Manila. Bounded on the NW., & NE., along lines 1 to 6 by Lot 8; on the SE., along line 6-7 by Lot 10 both of plan Psu-80886); and on the S., & W., along lines 7-8-1 by Lot 6-A of the subdivision plan. x x x containing an area of FIFTY EIGHT THOUSAND (58,000) SQ. METERS. NOW, THEREFORE, for and in consideration of the foregoing, the FIRST PARTY Transfers, Assigns, Cedes and Conveys unto the SECOND PARTY the said 58,000-square-meter portion of Lot 6-B, Psd-13-008573, covered by TCT No. T-5331 of Las Pias Registry of Deeds and described in the above fourth WHEREAS clause. That as part of the consideration of this Conveyance, the SECOND PARTY binds himself to file a Notice of Withdrawal of the case entitled Sps. Camilo and Ma. Marlene A. Ledonio vs. The International Corporate Bank, et al., docketed as Civil Case No. 18540 of the Regional Trial Court of Makati, Branch 145.[50] The Sabios, however, refused to sign said deed of conveyance on the ground that it was grossly violative of the law and the MOA,[51] more particularly arguing that: I. Mere execution of the deed of conveyance does not constitute sufficient and valid compliance with par. 2.b of the MOA; II. Ayala Corporation failed to complete and perfect ownership and title to the subject property since it was never in actual occupation, possession, control and enjoyment of said property; III. Under the law, symbolic delivery by mere execution of the deed of conveyance is not sufficient since actual possession, control and enjoyment is a main attribute to ownership.

We do not agree, for the law is clear on this matter. Under Article 1498 of the Civil Code, when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if from the deed the contrary does not appear or cannot be inferred. Possession is also transferred, along with ownership thereof, to the petitioners by virtue of the deed of conveyance.[52] Parallel to our ruling in Dulay Enterprises, Inc. v. Court of Appeals ,[53] we find that petitioners contention that respondents never acquired ownership over the subject property since the latter was never in possession of the subject property nor was the property ever delivered is totally without merit. Under the aforementioned Article 1498, the mere execution of the deed of conveyance in a public document is equivalent to the delivery of the property. Since the execution of the deed of conveyance is deemed equivalent to delivery, prior physical delivery or possession is not legally required. It is well-established that ownership and possession are two entirely different legal concepts.[54] Just as possession is not a definite proof of ownership, neither is non-possession inconsistent with ownership.[55] Thus, it is of no legal consequence that respondents were never in actual possession or occupation of the subject property. They, nevertheless, perfected and completed ownership and title to the subject property. Notwithstanding the presence of illegal occupants on the subject property, transfer of ownership by symbolic delivery under Article 1498 can still be effected through the execution of the deed of conveyance. As we held in Power Commercial and Industrial Corp. v. Court of Appeals,[56] the key word is control, not possession, of the subject property. Considering that the deed of conveyance proposed by respondents did not stipulate or infer that petitioners could not exercise control over said property, delivery can be effected through the mere execution of said deed. Petitioners, as owners, have several options. Among these, they could file ejectment suits against the occupants, or to amicably secure the latters evacuation of the premises. Whatever mode petitioners choose, it signifies their control and their intention as owners to obtain for themselves and to terminate said occupants actual possession thereof.[57] It is sufficient that there are no legal impediments to prevent petitioners from gaining physical possession of the subject property. As stated above, prior physical delivery or possession is not legally required and the execution of the deed of sale or conveyance is deemed

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equivalent to delivery. This deed operates as a formal or symbolic delivery of the property sold and authorizes the buyer or transferee to use the document as proof of ownership. Nothing more is required. Petitioners cannot deny that the deed of conveyance can effectively transfer ownership as it constitutes symbolic or constructive delivery of the subject property. Neither can they negate the fact that as owners, they can exercise control over the said property. Respondents are not obligated to remove the occupants before conveying the subject property to petitioners. Petitioners argue that for them to have to spend to clear the subject property of illegal occupants and structures would violate par. 2.c of the MOA, which imposed on Interbank and its successors-in-interest the burden to bear all costs, fees and expenses incidental to segregation, survey, registration and delivery of a new title to the petitioners. It is patently clear that expenses for removal of illegal occupants and structures are not among those listed in said paragraph 2.c. The Court of Appeals noted that the obligation to defray all the costs and fees was connected with the delivery to petitioners of a new certificate of title, free from all liens and encumbrances. Had the parties to the MOA intended for Interbank and its successors-in-interest to be obligated to shoulder the expense of clearing the subject property of squatters and illegal structures, language to that effect could have easily and logically have been employed. As it happened, petitioners omitted to include this as a condition when they drafted the MOA. If the parties thereto really intended to impose on Interbank and its successors-in-interest the obligation to eject the squatters from the subject property and defray the cost therefor, it should have been stated in the MOA. The terms of the MOA are so clear as to leave no room for any other interpretation.[58] There is also no truth to petitioners allegation that the deed of conveyance merely transferred to the Sabios all the rights and participation of respondents over the subject property. The Deed of Conveyance clearly states that the FIRST PARTY (respondent Ayala Corporation) Transfers, Assigns, Cedes and Conveys unto the SECOND PARTY (Sabios) the said 58,000 square-meter portion of Lot 6-B, Psd-13008573, covered by TCT No. T-5331 of Las Pias Registry of Deeds and described in the above fourth WHEREAS clause. Thus, the deed of conveyance complied with par. 2.b of the MOA, which provided that the said property shall be assigned and conveyed after Interbank and its successors-in-interest shall complete and perfect ownership and title to said property. Another object of contention is the stipulated permanent and perpetual right-of-way, which under par. 2.d of the MOA shall be sufficient for all the needs of said parcel of land throughout the pro perties already owned and/or to be acquired by the SECOND PARTY (Interbank) particularly the parcels of land covered by TCT No. 85717, TCT No. S-65161, and TCT No. S-65162, which right-of-way shall not be less than ten (10) meters wide. Petitioners contend that it is the purpose and spirit of the MOA that (they) shall have the same right to pass through the Ayala Corporations proposed subdivision like any other homeowner therein.[59] Respondents counter that the right-of-way it has proposed is one with a definite lane and width and which is the most convenient route to the main access road that connects Ayala-Las Pias to the AyalaAlabang Road. Moreover, at petitioners option, respondents were willing to provide another access road to service the subject property.[60] The proposed right-of-way is particularly described in TCT No. T-5332, containing an area of approximately 370,868 square meters.[61] We agree with the Court of Appeals that the phrase permanent and perpetual right of way should be construed in its ordinary and accepted signification, i.e., to provide ingress to and egress from the dominant estate, or to provide passage in going to the highway from the dominant estate and back. The MOA itself does not provide that petitioners shall have free access to all the roads within the proposed subdivision that respondents would establish on the estate. Had the parties intended that petitioners be given such access, the same should have been incorporated in the MOA. Once again, the courts cannot read into the MOA any other intention that would contradict the apparent agreement. The courts cannot embellish the precise stipulations of the MOA just for the convenience of petitioners. An easement is an abnormal restriction on respondents property rights, and the imposition thereof must be tempered and limited to the ordinary needs of petitioners property, not to satisfy their caprices. The law requires that the right-of-way must be at the point least prejudicial to the servient estate, and when applicable, where the distance from the dominant estate to a public highway may be the shortest. [62]

While the proposed right-of-way traversed respondents properties, the same should not encroach into the latters proposed subdivision roads. Petitioners access to all the subdivision roads like any homeowner therein is not a necessity and goes beyond mere convenience on their part. Otherwise, that would be stretching the purpose and meaning of a right-of-way beyond its legal and general acceptation. The fact is that respondents did not lack in satisfying the requirements in par. 2.d of the MOA. Instead of the minimum width of 10 meters, the proposed right-of-way is twenty-five (25) meters wide,[63] more than double the stipulated minimum width. There is really no reason for petitioners to complain and want for more. While this may already be moot and academic, petitioners raise the issue that respondents confession of judgment[64] did not deny certain allegations contained in paragraphs IV, XII, XIII, and XIV of the formers second amended and supplemental complaint;[65] hence, they constitute express judicial admissions which the courts should have considered.[66] While respondents denominated their pleading as a confession of judgment, it is more in the nature of a motion for partial judgment on the pleadings or a summary judgment. Indeed, respondents asked the court a quoto render partial judgment based on their admission of the genuineness and contents of certain documentary evidence offered by both parties. It is clear that respondents made no admission that would support any of petitioners contentions that deviate from the very stipulations in the MOA. There can be no implied admission of allegations which are extraneous to the contents of the documents expressly admitted by respondents. Their specific denials of certain allegations in petitioners complaint still stand in their answer. In fact, respondents did not state anything that would contradict their earlier defenses and arguments already on record. It was a mere reiteration of their stand that the MOA, as worded, be implemented literally and without further delay. It cannot also be said that respondents are deemed to have admitted the allegations in Camilo Sabios testimony as to the circumstances surrounding the execution of the MOA. As petitioners themselves noted, respondents counsel declared in open court that: (a) they were ready to agree and admit all the documentary evidence that the counsel (Atty. Sabio) has anyway enumerated in his pre-trial brief x x x; (b) its very clear that this case could be decided based on the pleadings and documentary evidence x x x; and (c) it is admitted by the defendants and we are ready to admit the documentary evidence that theyll be presenting.[67] Clearly, respondents only admitted all the documentary evidence, not the testimonial evidence offered by petitioners. We stated earlier that this issue is already moot and academic for the supposed judicial admissions referred to by petitioners, had they been considered by the lower court, would not alter the outcome of this case. The lower courts conclusions, insofar as the implementation of the MOA is concerned, are more than amply supported by documentary evidence. Apart from those matters expressly admitted by respondents, there can be no implied admissions which the lower court could properly recognize. Besides, as earlier discussed, the documents themselves are the best evidence of the agreements between the parties in the absence of compelling evidence to the contrary. Related to the issue of the confession of judgment is petitioners claim for damages. The trial court found that petitioners are entitled to P500,000.00 in actual damages and P250,000.00 in exemplary damages. On appeal, however, the Court of Appeals reversed the trial courts ruling, finding the awards for actual and exemplary damages in favor of petitioners unwarranted, and setting the same aside. Petitioners have failed, in this petition, to present any persuasive proof that they are entitled to the damages awarded by the trial court. As found by the Court of Appeals, the claim for actual damages remained unsubstantiated and unproven. It is well-settled that actual or compensatory damages must be duly proved and proved with reasonable degree of certainty.[68] It is the fundamental principle of the law on damages that while one injured by a breach of contract shall be awarded fair and just compensation commensurate with the loss sustained as a consequence of the defendants acts or omission, a party is entitled only to such compensation for the pecuniary loss that he has duly proven. Actual damages cannot be presumed and cannot be based on just flimsy, remote, speculative and nonsubstantial proof.[69] Petitioners also failed to establish that the delay in the implementation of the MOA was the sole responsibility of respondents. In fact, no factual basis was presented to support the claim for not only actual

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or compensatory damages, but also for exemplary damages. Petitioners failed to show that respondents acted in a wanton, fraudulent, reckless or malevolent manner that would warrant the award of exemplary damages.[70] Anent the directive to cancel the annotation of the MOA and the Notices of Lis Pendens on TCT Nos. T5331, T-5332, T-5333 and T-5334,[71]petitioners argue that the maintenance of the annotation of the MOA and the notices of lis pendens is necessary to protect their rights should the property be sold to third persons for value. They also stress that the MOA expressly mandates the annotation of the MOA on TCT Nos. S-65161 and S-65162.[72] The Court of Appeals found that: With respect to the annotation of the MOA, paragraph 4 of the MOA itself expressly provides that the obligations assumed under paragraphs 2.b, 2.c and 2.d thereof (par. 2.d contains the right of way provision) shall be binding upon all the assigns, heirs and successors of the parties, and that the MOA shall be annotated on TCT No. 65161 and TCT No. 65162, which became eventually TCT No. 5333 and TCT No. 5331. No mention is made of the other titles to be owned and/or acquired by defendant-appellant, and the omission cannot be supplied by construction.[73] We agree. Indeed, the MOA only require that it be annotated on TCT Nos. 65161 (now 5333) and 65162 (now 5331). Thus, there should be no reason to extend this requirement to other titles not mentioned in the MOA. Petitioners also take exception to the refusal of the lower court to annotate the judgment in the case below on all eighteen (18) titles covering the parcels of land comprising Ayala Southvale Subdivision. The underlying intention of petitioners is to have the easement of right-of-way annotated on all of the titles. Respondents counter that there is no such need because the right-of-way has been delineated and segregated and, hence, there is no reason to annotate the same on the titles that are not affected thereby. Again, we find no merit in petitioners contention, especially since the easement of right-of-way as offered by respondent is more than adequate for the needs of the subject property, and that it was properly constituted without imposing unnecessary burden on the other properties of respondents. There can really be no justification for annotation on the titles that are not subject to the easement. Finally, we come to the tenth and last error assigned by petitioners, i.e., that the trial court erred in ordering the cancellation of the notice of lis pendens on TCT Nos. T-5331 to T-5334 and all titles derived therefrom. In its Resolution,[74] the Court of Appeals held that: Nevertheless, the appellants argument that the trial court committed grave abuse of discretion in ordering the cancellation of the notices of lis pendens before finality of the assailed judgment in the absence of good reasons to justify execution pending appeal is untenable. The order of cancellation of the notices of lis pendens was not issued by the trial court under Section 2, Rule 38 of the Rules of Court regarding execution pending appeal which requires the existence of good reasons, but under Section 24 of Rule 14 and Section 77 of PD 1529 which allow the trial court to cancel notice of lis pendens even before final resolution of the case on the merits upon finding that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be registered. (Underscoring ours) We find no cogent reason to disturb the ruling of the Court of Appeals in this regard. In light of the foregoing discussion, the trial court did not abuse, gravely or otherwise, its discretion when it allowed the cancellation of the annotations. Accordingly, neither did the Court of Appeals err when it affirmed the order of the trial court on the finding that there was no longer any necessity to protect the rights of petitioners over the titles that were either not affected by the easement or not mentioned in the MOA. WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED and the Decision of the Court of Appeals dated April 30, 1997 in CA-G.R. CV No. 48870 is AFFIRMED in toto. No pronouncement as to costs. SO ORDERED. G.R. No. L-38085

Republic of the Philippines SUPREME COURT Manila EN BANC November 13, 1933 ANGELA MONTENEGRO, plaintiff-appellee, vs. CONSUELO ROXAS DE GOMEZ, ET AL., defendant-appellants. Ramirez and Ortigas for appellant. Victoriano Yamson for appellee. IMPERIAL, J.: The plaintiff brought this action against the defendants to rescind a contract of lease entered into by them, to have both parties render an accounting of the monies each party might have collected of lease in question, mutually reimbursing what is due to each other, and to obtain an indemnity for damages amounting to P10,000 from the aforesaid defendants. The defendants herein appealed from the judgment rendered by the Court of First Instance of Manila declaring the contract in question rescinded, and ordering the plaintiff herein to render an accounting of all the rentals she might have collected from the tenants and of all the expenses incurred by her in the upkeep of the building, fifteen days after the date the judgment became final, with the costs against the aforesaid defendants. The defendant Consuelo Roxas de Gomez was and is the present owner of the property known at the "Paris Building" situated at Nos. 26 to 36 Escolta, Manila. It was leased by B.A. Green but his contract of leased expired on May 31, 1930. On June 5th of the same year, the plaintiff and the defendant, represented by her attorney in fact Manuel Martinez Llanos, executed the building in question to the plaintiff for the period of three (3) years from June 1, 1930, at a monthly rental of P4,000, payable at the end of every calendar month. At that time the building was being occupied by various tenants among whom were B.A. Green, G.C. Sellner and Sta. Ana Subdivision of the Manila Improvement Co., Inc., of which said B.A. Green was the president who, for a long time had leased and occupied the rooms of the upper floor facing the Escolta, and a small room between the lavatory and the main stairway. The defendant's attorney in fact should have delivered to the said lessee until the 20th of the said month. On this last date, however, the whole building was not delivered to the plaintiff herein because B.A. Green, G.C. Sellner and Manila Improvement Co., Inc., stubbornly opposed the delivery of the rooms they were then occupying. The lessee informed the defendant's attorney in fact of this difficulty, who, addressed communications to B.A. Green requiring him to deliver the rooms which, Sellner and Manila Improvement Co. Inc., were detaining. Green remained firm in this opposition thereto on the ground that he was the former lessee and that he had applied by letter for a renewal of his contract of lease, which was denied him. Considering Green's attitude as a disturbing factor, the plaintiff herein instituted ejectment proceedings against him in the municipal court of the City of Manila. She likewise instituted similar actions against other tenants thereof. Notwithstanding all these difficulties, the plaintiff herein, desiring perhaps not to violate the terms of her contract of lease, continued paying the monthly rental of P4,000 corresponding to the months of June, 1930, to October, 1931, inclusive, to the defendants herein was filed did she fail to pay the rent corresponding to the months of November and December, 1931, amounting to P8,000. The defendant herein, or rather her attorney in fact, also instituted judicial proceedings against the plaintiff herein for the purpose of ejecting her from the building in question and recovering the rents due and unpaid. The trial court rendered judgment in favor of the plaintiff based on the ground that inasmuch as the whole building was not delivered to her, the contract should be rescinded.

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In their brief, the appellants assign the following alleged errors, to wit: I. The trial court erred in not giving the public instrument of lease, Exhibit B, conclusive probatory value evidencing delivery of the property in question from the date of the execution thereof. II. The trial court erred in holding that the lessors did not deliver the possession of the property, which is the subject matter of the lease, to the lessee. III. The trial court erred in holding that the plaintiff is not estopped from asking the rescission of her contract of lease with the defendants.lawphil.net IV. The trial court erred in declaring the contract of lease, Exhibit B, rescinded. V. The trial court erred in denying the defendants' motion for a new trial and in not dismissing the instant complaint, with the costs against the plaintiff. We are of the opinion that the resolution of the present case depends particularly upon whether or not the whole building under lease was delivered to the lessee in order that she might have the full enjoyment thereof to which she was entitled. The records show that the greater portion of the building in question was delivered to and received by the lessee not later than June 20, 1930, but that the rooms or offices occupied by B.A. Green, G.C. Sellner and Manila Improvement Co., Inc., have never been placed in the possession of the said lessee. If this is true, it is evident that the plaintiff herein has the right to the remedy of rescission prayed for in her complaint in accordance with the express provisions of article 1556 of the Civil Code which grants to the lessee, among other things, the right to rescind the contract of lease when he is not placed in the material possession of the property which is the subject matter of the lease. The appellants, however, contend that the execution of the contract is equivalent to delivery of the possession thereof. This would be true if the records did not show that in reality the lessee did not obtain the material possession of the whole building. It should be noted that the Civil Code does not provide that the execution of the deed is a conclusive presumption of the delivery of possession, but confines itself to providing that the execution thereof shall be equivalent to delivery, which means that the disputable presumption established therein can be rebutted by means of clear and convincing evidence, as in the case under consideration. The other point raised by the assignments of error is that referring to the alleged estoppel attributed to the lessee herein, It is contended that she cannot consistently question the fact of the consummation of the contract of lease nor ask for the rescission thereof on the ground that, even granting that she had not been placed in the material possession of the whole building in question, she had been paying the stipulated rent until November 1, 1931. Without indulging in a lengthy discussion of the merits of such contention, we are of the opinion that such acts do not constitute the defense invoked. A preponderance of the evidence shows that if the lessee continued paying the rent as she in fact did, it was only for the sole purpose of not violating any of the terms of the contract affecting her. However, her acts cannot, in justice, be construed as a waiver of her right to ask for the rescission of the contract on the grounds hereinbefore stated. Wherefore, all the important questions raised in the present appeal are deemed definitely settled, and finding that the judgment appealed from is in accordance with the law and the findings of the court, it is hereby affirmed, with the costs against the appellants. So ordered. G.R. No. L-19545 April 18, 1975

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, petitioner, vs. THE AUDITOR GENERAL, PEDRO M. GIMENEZ, respondent. ANTONIO, J.:+.wph!1 Appeal by certiorari from the decision dated December 11, 1961, of then Auditor General Pedro M. Gimenez, disallowing the request of petitioner for the refund of real estate tax in the amount of P30,460.90 paid to the Provincial Treasurer of Bulacan. The facts of the case are as follows: On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on the reports of the Committee created to survey suitable lots for relocating squatters in Manila and suburbs, and of the Social Welfare Administrator together with the recommendation of the Manager of the Government Service Insurance System, approved in principle the acquisition by the People's Homesite and Housing Corporation of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for relocating the squatters who desire to settle north of Manila, and of another area either in Las Pias or Paraaque, Rizal, or Bacoor, Cavite for those who desire to settle south of Manila. The project was to be financed through the flotation of bonds under the charter of the PHHC in the amount of P4.5 million, the same to be absorbed by the Government Service Insurance System. The President, through the Executive Secretary, informed the PHHC of such approval by letter bearing the same date (Annex "B"). On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700 (Annex "C") authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at P0.45 per square meter "subject to the following conditions precedent: t.hqw 1. That the confirmation by the OEC and the President of the purchase price of P0.45 per sq. m. shall first be secured, pursuant to OEC Memorandum Circular No. 114, dated May 6, 1957. 2. That the portion of the estate to be acquired shall first be defined and delineated. 3. That the President of the Philippines shall first provide the PHHC with the necessary funds to effect the purchase and development of this property from the proposed P4.5 million bond issue to be absorbed by the GSIS. 4. That the contract of sale shall first be approved by the Auditor General pursuant to Executive Order dated February 3, 1959. 5. The vendor shall agree to the dismissal with prejudice of Civil Case No. Q-3332 C.F.I. Quezon City, entitled "Phil. Suburban Dev. Corp. V. Ortiz, et al." On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per sq. meter. On December 29,1960, after an exchange of communications, Petitioner Philippine Suburban Development Corporation, as owner of the unoccupied portion of the Sapang Palay Estate (specifically two parcels covered by TCT Nos. T-23807 and T-23808), and the People's Homesite and Housing Corporation, entered into a

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contract embodied in a public instrument entitled "Deed of Absolute Sale" (Annex "F") whereby the former conveyed unto the latter the two parcels of land abovementioned, under the following terms and conditions, among others: t.hqw 1. That for and in consideration of the sum of THREE MILLION THREE HUNDRED EIGHTY-SIX THOUSAND TWO HUNDRED TWENTY THREE (P3,386,223.00) PESOS, Philippine currency, to be paid by the VENDEE to the herein VENDOR in the manner outlined hereinbelow, the VENDOR by these presents does hereby sell, transfer and convey by way of absolute sale unto the VENDEE, its successors, administrators or assigns, the above described two (2) parcels of land, together with all the improvements existing thereon; 2. That the payment of the consideration mentioned in paragraph 1 above shall be made as follows: (a) The vendee is presently negotiating or securing from the GOVERNMENT SERVICE INSURANCE SYSTEM, by virtue of a directive of the President of the Philippines, a loan for the purchase of the above described two (2) parcels of land in anticipation of the purchase by the said GOVERNMENT SERVICE INSURANCE SYSTEM of the bonds to be floated by the National Government to enable the VENDEE to make this purchase, and from whatever amount may be granted as loan by the GOVERNMENT SERVICE INSURANCE SYSTEM to the VENDEE, ONE MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS shall be retained by the said VENDEE for the purpose of paying and clearing the existing lien annotated at the back of the aforesaid Transfer Certificates of Title Nos. T-23807 and T-23808, said payment to be made directly to the MORTGAGEES and the difference shall be paid to the VENDOR, provided that this first payment shall not be less than ONE MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS and the VENDOR is hereby constituted as Attorney-in-fact and authorized to receive from, and the GOVERNMENT SERVICE INSURANCE SYSTEM is directed to pay the balance of the loan direct to the herein VENDOR chargeable against VENDEE's loan from the GOVERNMENT SERVICE INSURANCE SYSTEM; provided, however, That should this amount be more than sufficient to cover the said mortgage lien, the VENDEE shall pay the difference to the VENDOR; and provided, further, That the VENDOR shall take charge of the preparation and registration of the documents necessary in clearing the above referred to mortgage lien, with the understanding that the expenses for preparation, notarization, registration, including documentary stamps, and other expenses for the cancellation of said mortgage lien shall be for the account of the VENDOR and shall be advanced by the VENDEE to the VENDOR; (b) That out of the sum of P1,710,000.00 to be retained by the VENDEE mentioned in the immediately preceding paragraph 2(a) for the purpose of discharging the said mortgage lien, the VENDEE shall deduct and further retain or keep as a trust fund the amount of FORTY THOUSAND (P40,000) PESOS, Philippine Currency, to answer for the remaining Notice of Lis Pendens annotated at the back of Transfer Certificate of Title Nos. T-23807 and T-23808 until such lien shall have been discharged or cancelled, the VENDEE binding itself to deliver forthwith the said amount of P40,000.00 unto the successful party involved in said Notice of Lis Pendens; (c) The remaining balance of the total consideration in the amount of ONE MILLION SIX HUNDRED SEVENTY-SIX THOUSAND TWO HUNDRED TWENTY-THREE PESOS (P1,676,223.00), Philippine Currency, or whatever amount is not paid by virtue of the first payment mentioned in paragraph (a) above, shall be paid by the VENDEE unto the VENDOR immediately upon the VENDEE's obtaining sufficient funds from proceeds of bonds floated by the VENDEE or the Government for the purchase of the properties subject of this transaction; provided, however, That full and complete payment of the

balance mentioned in this particular paragraph 2(c) shall be made or paid by the VENDEE within a period of sixty (60) days from date of delivery of title by the VENDOR in the name of the VENDEE; and provided, further, That this sixty (60) days period may be extended for another period of sixty (60) days upon written request by the VENDEE at least five (5) days prior to the expiration of the said sixty (60) days period. Should there be instituted any legal action, however, for the collection of any amounts due from the VENDEE in favor of the VENDOR, the VENDEE binds itself to pay unto the VENDOR a sum equivalent to twenty-five (25%) per centum of the total balance due from the, VENDEE in favor of the VENDOR as and by way of attorney's fees, and the costs of suit; 3. That the VENDOR hereby warrants to defend the title and ownership of the VENDEE to the two (2) parcels of land above described from any claim or claims of third parties whomsoever; (4.) That all expenses for the preparation and notarization of this document shall be for the account of the VENDOR; provided, however, That registration and issuance of certificates of title in the name of the VENDEE shall be for the account of the VENDEE." (Annex "F") The above document was not registered in the Office of the Register of Deeds until March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once advance the money needed for registration expenses. In the meantime, the Auditor General, to whom a copy of the contract had been submitted for approval in conformity with Executive Order No. 290, expressed objections thereto and requested a reexamination of the contract, in view of the fact that from 1948 to December 20, 1960, the entire hacienda was assessed at P131,590.00, and reassessed beginning December 21, 1960 in the greatly increased amount of P4,898,110.00. Said objections were embodied in a letter to the President, dated January 9, 1961, but this notwithstanding, the President, through the Executive Secretary, approved the Deed of Absolute Sale on February 1, 1961. It appears that as early as the first week of June, 1960, prior to the signing of the deed by the parties, the PHHC acquired possession of the property, with the consent of petitioner, to enable the said PHHC to proceed immediately with the construction of roads in the new settlement and to resettle the squatters and flood victims in Manila who were rendered homeless by the floods or ejected from the lots which they were then occupying (Annexes "D" and "D-1"). On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from the purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount represented the realty tax due on the property involved for the calendar year 1961 (Annex "G"). Petitioner, through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance Dominador Aytona to order a refund of the amount so paid. Petitioner claimed that it ceased to be the owner of the land in question upon the execution of the Deed of Absolute Sale on December 29, 1960. Upon recommendation of the Provincial Treasurer of Bulacan, said request was denied by the Secretary of Finance in a letter-decision dated August 22, 1961. Pertinent portions of this decision are quoted hereunder: t.hqw .... the records show that the deed of sale executed on December 29, 1960 ... was approved by the President upon favorable recommendation of the Cabinet and the Committee created for the purpose of surveying suitable lots which may be acquired for relocating squatters in Manila on February 1, 1961 only and that said instrument of sale was registered with the Register of Deeds on March 14, 1961. That Corporation, as vendor, maintains that in view of the execution of the deed of sale on December 29, 1960 it ceased to be the owner of the property involved and that consequently it was under no obligation to pay the real property tax thereon effective January 1, 1961. In support of its stand, that Corporation cites Article 1498 of the New

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Civil Code of the Philippines which provides that "when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred" and Article 1496 of the same Code which states that "the ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee." On the other hand, the Provincial Treasurer contends that, as under the Land Registration Act (Act No. 496) the Philippine Suburban Development Corporation is still the owner of the property until the deed of sale covering the same has been actually registered, the vendor is still liable to the payment of real property tax for the calendar year 1961. It is now claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate tax in the amount of P30,460.90 because aside from the presumptive delivery of the property by the execution of the deed of sale on December 29, 1960, the possession of the property was actually delivered to the vendee prior to the sale, and, therefore, by the transmission of ownership to the vendee, petitioner has ceased to be the owner of the property involved, and, consequently, under no obligation to pay the real property tax for the year 1961. Respondent, however, argues that the presumptive delivery of the property under Article 1498 of the Civil Code does not apply because of the requirement in the contract that the sale shall first be approved by the Auditor General, pursuant to the Executive Order dated February 3, 1959 and later by the President, and that the petitioner should register the deed and secure a new title in the name of the vendee before the government can be compelled to pay the balance of P1,676,223.00 of the purchase price. Respondent further contends that since the property involved is a land registered under the Land Registration Act (Act No. 496), until the deed of sale has been actually registered, the vendor remains as the owner of the said property, and, therefore, liable for the payment of real property tax. We find the petition meritorious. I. It cannot be denied that the President of the Philippines, on June 8, 1960, at his Cabinet meeting, approved and authorized the purchase by the national government, through the PHHC, of the unoccupied portion of the property of petitioner; that on June 10, 1960, the PHHC, acting pursuant to the aforecited approval of the President, passed its Resolution No. 700 approving and authorizing the purchase of the unoccupied portion of said property; and that after the PHHC took possession of the aforementioned property on the first week of June, 1960 to use it as a resettlement area for squatters and flood victims from Manila and suburbs, the President of the Philippines at his Cabinet meeting on June 13, 1960, approved and authorized the purchase by the PHHC of the entire property consisting of 752.4940 hectares, instead of only the unoccupied portion thereof as was previously authorized. Considering the aforementioned approval and authorization by the President of the Philippines of the specific transaction in question, and the fact that the contract here involved which is for a special purpose to meet a special situation was entered into precisely to implement the Presidential directive, the prior approval by the Auditor General envisioned by Administrative Order No. 290, dated February 3, 1959, would therefore, not be necessary. As We held in Federation of the United NAMARCO Distributors v. National Marketing the approval by the Auditor General contemplated by Administrative Order No. 290 dated February 3, 1959, refers to contracts in general, ordinarily entered into by government offices and government-owned or controlled corporations, and not to a contract for a special purpose, to meet a special situation and entered into in implementation of a Presidential directive to solve and emergency. In other words, where the contract already bears the approval of the President, the action of the Auditor General would no longer be necessary because under the said Administrative Order, the President has, at any rate, the final say. Corporation, 1

II Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or constructive (constructive tradition). 2 When the sale of real property is made in a public instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. 3 In other words, there is symbolic delivery of the property subject of the sale by the execution of the public instrument, unless from the express terms of the instrument, or by clear inference therefrom, this was not the intention of the parties. Such would be the case, for instance, when a certain date is fixed for the purchaser to take possession of the property subject of the conveyance, or where, in case of sale by installments, it is stipulated that until the last installment is made, the title to the property should remain with the vendor, or when the vendor reserves the right to use and enjoy the properties until the gathering of the pending crops, 4 or where the vendor has no control over the thing sold at the moment of the sale, and, therefore, its material delivery could not have been made. 5 In the case at bar, there is no question that the vendor had actually placed the vendee in possession and control over the thing sold, even before the date of the sale. The condition that petitioner should first register the deed of sale and secure a new title in the name of the vendee before the latter shall pay the balance of the purchase price, did not preclude the transmission of ownership. In the absence of an express stipulation to the contrary, the payment of the purchase price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes by the delivery of the goods. 6 III . We fail to see the merit in respondent's insistence that, although possession was transferred to the vendee and the deed of sale was executed in a public instrument on December 29, l960, the vendor still remains as owner of the property until the deed of sale is actually registered with the Office of the Register of Deeds, because the land sold is registered under the Torrens System. In a long line of cases already decided by this Court, the constant doctrine has been that, as between the parties to a contract of sale, registration is not necessary to make it valid and effective, for actual notice is equivalent to registration. 7 Indeed, Section 50 of the Land Registration Act provides that, even without the act of registration, a deed purporting to convey or affect registered land shall operate as a contract between the parties. The registration is intended to protect the buyer against claims of third persons arising from subsequent alienations by the vendor, and is certainly not necessary to give effect to the deed of sale, as between the parties to the contract. 8 The case of Vargas v. Tancioco, 9 cited by respondent, refers to a case involving conflicting rights over registered property and those of innocent transferees who relied on the clean titles of the properties in question. It is, therefore, not relevant to the case at bar. In the case at bar, no rights of third persons are involved, much less is there any subsequent alienation of the same property. It is undisputed that the property is in the possession of the vendee, even as early as the first week of June, 1960, or six (6) months prior to the execution of the Deed of Absolute Sale on December 29, 1960. Since the delivery of possession, coupled with the execution of the Deed of Absolute Sale, had consummated the sale and transferred the title to the purchaser, 10 We, therefore, hold that the payment of the real estate tax after such transfer is the responsibility of the purchaser. However, in the case at bar, the purchaser PHHC is a government entity not subject to real property tax. 11 WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban Development Corporation, in the amount of P30,460,90, is hereby ordered refunded. Without any pronouncement as to costs.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 95937 August 16, 1991 FORTUNE TOBACCO CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION & EDGARDO DE LA CRUZ, ET AL respondents. Pedro A. Revilla and Cesar V. Aguilar for petitioner. Evangelista, Mostrales & Associates for private respondents. GANCAYCO, J.:p The computation of the backwages to be paid to the herein private respondents is in issue in this petition for certiorari and prohibition. The record of the case discloses the following facts: On January 29, 1986, the private respondents filed a complaint for illegal dismissal against their employer, the herein petitioner Fortune Tobacco Corporation before the National Labor Relations Commission (NLRC) praying that they be reinstated in the company with full backwages and without loss of seniority rights. The case was docketed as NLRC Case No. 1381-86. The parties submitted their respective position papers with the petitioner maintaining that it had already sold its redrying plant as of October 17, 1985. In due time, the labor arbiter to whom the case was assigned rendered a decision, the dispositive portion of which reads as follows: WHEREFORE, respondent (herein petitioner) is hereby ordered to reinstate the individual complainants (herein private respondents) to their former position(s) with full backwages reckoned from October 5, 1985 up to actual reinstatement, or, in the alternative, to pay each of the complainants their separation pay equivalent at least to one month salary for every year of service, whichever is higher a fraction of six months being considered as one whole year, and for purposes of computing said benefit, the usual or normal seasonal period of one (1) calendar year shall be treated as one (1) whole year. xxx xxx xxx 1 The petitioner appealed the said decision of the labor arbiter to the NLRC. On July 31,1989, the NLRC promulgated its resolution modifying the decision appealed from, thus: And considering that as alleged by the respondent without any contravention from the complainants that the plant had already been sold, respondent-appellant must pay separation pay to all those who opt not to be rehired by the new owner of the plant. Respondent-appellant must also pay the complainants' backwages from October 5, 1985 up to the date the plant was actually sold. Such backwages must be computed by taking into consideration the nature of complainants work as seasonal period in one (1) calendar year should be treated as one (1) whole year (sic) wherefore, except for the above modification the decision sought to be reversed should be as it is hereby AFFIRMED. Costs against respondent-appellant. (Emphasis supplied .) 2 The petitioner went to this Court in G.R. No. 89477 by way of a petition. The same was, however, dismissed in a resolution dated September 4, 1989 issued by the Second Division of this Court. 3 Thus, the decision of the NLRC became final and executory. On August 21. 1990, the Research and Information Unit of the NLRC came up with its "Computation of Backwages and Separation Pay" pursuant to the decision dated July 31, 1989. 4 The amount stated in the computation is P3,863,464.89. The said amount was apparently reached by reckoning the computation period to start from October 5, 1985 up to August 1990. The research unit also stated that it took into account this period because the date of the actual sale of the plant is not ascertained.

On August 28, 1990, in a hearing set up for the purpose, the petitioner was given ample time to establish by way of competent proof the date of the actual sale of the plant and its facilities cited in the final and executory decision of the NLRC. On September 7, 1990, the petitioner filed its manifestation to which was attached a certified copy of the "Deed of Conditional Sale" executed by and between the petitioner and Premium Tobacco Redrying and Fluecuring Company, Inc. (PTRFC) dated October 17,1985. The petitioner also attached its own computation of the amounts which should be paid the private respondents. In fine, the petitioner has taken the position that the date of the actual sale of the plant and its facilities is October 17, 1985 and as such the amount stated in the computation of the research unit of the NLRC should be substantially reduced. On September 29, 1990, the private respondents filed their "Opposition to Manifestation" with annexes showing a certification from the Office of the Municipal Assessor of Marikina, Metro Manila, a copy of a Declaration of Real Property and an affidavit of one of the complainants in this case alleging that there was no actual sale of the plant and its facilities to the alleged vendee. The opposition alleges, among others, that there was no actual transfer or actual sale of the plant and its facilities in favor of the PTRFCI; that only a change in name and form has been undertaken by the petitioner; that the properties are still declared in the name of the petitioner; that the PTRFCI representative, a certain Mr. Angelo Ang, is the plant manager of the Vigan, Ilocos Sur plant of the petitioner; that the control, management, operation and funding of the plant are in the hands of the petitioner notwithstanding the alleged sale; and that the computation made by the NLRC is in order. The petitioner filed its comment/rejoinder on September 27, 1990, alleging therein that the sale on October 17, 1985 is valid and that the property remains in the name of the petitioner pending the full payment of the purchase price agreed upon by the vendor and the vendee . 5 On October 26, 1990, Labor Arbiter Ramon Reyes issued an order holding, among others, that there was no actual sale between the petitioner and the PTRFCI; that the Deed of Conditional Sale entered into by the said parties does not state any consideration; and that no actual sale has taken place. With this observations, the labor arbiter went on to declare that The computation of the research unit of the NLRC in the amount of P3,863,464.89 is in accord with the resolution of the said Commission. On October 30, 1990, the labor arbiter issued a writ of execution directing the Acting Sheriff of the NLRC to collect the aforestated amount of P3,863,464.89 from the petitioner in satisfaction of its obligation or to cause the full satisfaction of the same out of the chattels of the immovable properties of the petitioner. 6 The petitionee elevated the case to this Court by way of the instant petition with the same arguments raised before the NLRC recited therein. The petitioner prays for the issuance of a temporary restraining order and/or writ of preliminary injunction. The thrust of the petition is that the computation made by the NLRC is attended with grave abuse of discretion and thus, the writ of execution should not be enforced. The petitioner also argues that the award of damages should be limited to cover a three-year period only, in accordance with prevailing jurisprudence. On November 21, 1990, this Court resolved to issue a temporary restraining order enjoining the private respondents from enforcing the challenged writ of execution. The petitioner filed a bond in the amount of P100,000.00. The Office of the Solicitor General, as counsel for the NLRC, filed its comment praying therein for the dismissal of the petition on the ground that no jurisdictional infirmity attended the issuance of the challenged writ of execution because there is no actual sale of the plant and its facilities up to the present time. 7 The Court eventually resolved to give due course to the petition. After the parties filed the required pleadings, the case was deemed submitted for decision. Pursuant to the resolution of the NLRC dated July 31, 1989, which was for all intents and purposes sustained by this Court as explained earlier, the petitioner is required to, among others, pay the backwages of the private respondents for the period coveting October 5,1985 up to the time the plant and its facilities are actually sold. The petitioner maintains that the plant and its facilities were sold on October 17, 1985 by virtue of the Deed of Conditional Sale, bearing the same date, executed by the petitioner and the PTRFCI. Thus put, the petitioner contends that the amount of backwages to be paid to the private respondents should be based on the period covering October 5 to 17, 1985. On the other hand, the private respondents maintain that there has been no actual sale of the plant and its facilities up to the present time and as such the backwages to be paid should be computed accordingly. The NLRC shares the view of the private respondents. The Court finds that there is no actual sale of the plant and its facilities up to the present time. While the Deed of Conditional Sale was executed on October 17, 1985, it

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does not necessarily follow that the plant and its facilities were, ipso facto, sold on that very day. The pertinent portions of the said document are as follows: 1. Upon execution of this Deed the PROPERTIES shall be deemed transferred to the possession of the VENDEE. Ownership, however, over the PROPERTIES shall be retained by the VENDOR until the VENDEE shall have paid in full the purchase price stipulated in Article I hereof. The VENDEE shall not, in the meantime, sell, lease, let or otherwise encumber or dispose of the PROPERTIES or assign its rights under this Agreement without the prior written consent of the VENDOR. Any disposition made in violation of this article shall be void ab initio. 2. The VENDOR, upon full payment by the VENDEE of the unpaid balance of the purchase price inclusive of interest charges above specified will execute and deliver to the VENDEE a final or absolute deed of sale over the PROPERTIES. II. DEFAULT AND FORFEITURE 1. That in case the VENDEE fails to make timely payment as specified above, or fails to perform any of the covenants or agreements hereof, this contract shall, at the exclusive option of the VENDOR, be annulled and in such event, all payments made by the VENDEE by virtue of this contract shall be automatically forfeited and retained by the VENDOR as rental payments for the use of said PROPERTIES and/or liquidated damages sustained by it as a result of the VENDEE's default; and the VENDEE shall forthwith surrender the possession and custody of the PROPERTIES to the VENDOR. A careful evaluation of the stipulations of the said agreement will readily show that the petitioner has no intention to transfer ownership over the plant and its facilities to the vendee unless there is full payment of the purchase price on the part of the latter. In fact, it is clearly stipulated that ownership over the plant and its facilities will be transferred to the vendee by way of "a final and absolute deed of sale" only after such fun payment, inclusive of interest charges. The terms and conditions of the agreement speak for themselves. At any rate, even accepting that the plant and its facilities hive been sold on a conditional basis, there can be no actual sale thereof unless the plant and its facilities are unconditionally conveyed to the PTRFCI by virtue of "a final or absolute deed of sale" in accordance with the terms and conditions stated in the agreement between the parties. The Solicitor General manifests that the tax records of the petitioner as well as the certification issued by the Municipal Assessor of Marikina reveal that the plant is still registered in the name of the petitioner. 9 The Solicitor General points out that under these circumstances, the petitioner may not validly contend that there has been an actual sale of the plant and its facilities to the PTRFCI. These observations are well-taken. The petitioner, however, correctly asserts that the award of backwages should be limited to cover a three-year period, and, a fortiori, any award in excess of such period is null and void. The contention finds support in prevailing jurisprudence. 10 A modification is, therefore, in order. The backwages to be paid to the private respondents should not exceed a period covering three years, computed from October 5, 1985. WHEREFORE, the instant petition is hereby DISMISSED. The backwages to be paid to the private respondents should, however, not exceed a period covering three (3) years, computed from October 5, 1985. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-12342 August 3, 1918 A. A. ADDISON, plaintiff-appellant, vs. MARCIANA FELIX and BALBINO TIOCO, defendants-appellees. Thos. D. Aitken for appellant. Modesto Reyes and Eliseo Ymzon for appellees. FISHER, J.: By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana Felix, with the consent of her husband, the defendant Balbino Tioco, four parcels of land, described in the instrument. The defendant Felix paid, at the time of the execution of the deed, the sum of P3,000 on account of the purchase price, and bound herself to pay the remainder in installments, the first of P2,000 on July 15, 1914, and the second of P5,000 thirty days after the issuance to her of a certificate of title under the Land Registration Act, and further, within ten years from the date of such title P10, for each coconut tree in bearing and P5 for each such tree not in bearing, that might be growing on said four parcels of land on the date of the issuance of title to her, with the condition that the total price should not exceed P85,000. It was further stipulated that the purchaser was to deliver to the vendor 25 per centum of the value of the products that she might obtain from the four parcels "from the moment she takes possession of them until the Torrens certificate of title be issued in her favor." It was also covenanted that "within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of purchase and sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison, the net value of all the products of the four parcels sold, and I shall obliged to return to her, Marciana Felix, all the sums that she may have paid me, together with interest at the rate of 10 per cent per annum." In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila to compel Marciana Felix to make payment of the first installment of P2,000, demandable in accordance with the terms of the contract of sale aforementioned, on July 15, 1914, and of the interest in arrears, at the stipulated rate of 8 per cent per annum. The defendant, jointly with her husband, answered the complaint and alleged by way of special defense that the plaintiff had absolutely failed to deliver to the defendant the lands that were the subject matter of the sale, notwithstanding the demands made upon him for this purpose. She therefore asked that she be absolved from the complaint, and that, after a declaration of the rescission of the contract of the purchase and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid to him on account, together with the interest agreed upon, and to pay an indemnity for the losses and damages which the defendant alleged she had suffered through the plaintiff's non-fulfillment of the contract. The evidence adduced shows that after the execution of the deed of the sale the plaintiff, at the request of the purchaser, went to Lucena, accompanied by a representative of the latter, for the purpose of designating and delivering the lands sold. He was able to designate only two of the four parcels, and more than two-thirds of these two were found to be in the possession of one Juan Villafuerte, who claimed to be the owner of the parts so occupied by him. The plaintiff admitted that the purchaser would have to bring suit to obtain possession of the land (sten. notes, record, p. 5). In August, 1914, the surveyor Santamaria went to Lucena, at the request of the plaintiff and accompanied by him, in order to survey the land sold to the defendant; but he surveyed only two parcels, which are those occupied mainly by the brothers Leon and Julio Villafuerte. He did not survey the other parcels, as they were not designated to him by the plaintiff. In order to make this survey it was necessary to obtain from the Land Court a writ of injunction against the occupants, and for the purpose of the issuance of this writ the defendant, in June, 1914, filed an application with the Land Court for

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the registration in her name of four parcels of land described in the deed of sale executed in her favor by the plaintiff. The proceedings in the matter of this application were subsequently dismissed, for failure to present the required plans within the period of the time allowed for the purpose. The trial court rendered judgment in behalf of the defendant, holding the contract of sale to be rescinded and ordering the return to the plaintiff the P3,000 paid on account of the price, together with interest thereon at the rate of 10 per cent per annum. From this judgment the plaintiff appealed. In decreeing the rescission of the contract, the trial judge rested his conclusion solely on the indisputable fact that up to that time the lands sold had not been registered in accordance with the Torrens system, and on the terms of the second paragraph of clause (h) of the contract, whereby it is stipulated that ". . . within one year from the date of the certificate of title in favor of Marciana Felix, this latter may rescind the present contract of purchase and sale . . . ." The appellant objects, and rightly, that the cross-complaint is not founded on the hypothesis of the conventional rescission relied upon by the court, but on the failure to deliver the land sold. He argues that the right to rescind the contract by virtue of the special agreement not only did not exist from the moment of the execution of the contract up to one year after the registration of the land, but does not accrue until the land is registered. The wording of the clause, in fact, substantiates the contention. The one year's deliberation granted to the purchaser was to be counted "from the date of the certificate of title ... ." Therefore the right to elect to rescind the contract was subject to a condition, namely, the issuance of the title. The record show that up to the present time that condition has not been fulfilled; consequently the defendant cannot be heard to invoke a right which depends on the existence of that condition. If in the cross-complaint it had been alleged that the fulfillment of the condition was impossible for reasons imputable to the plaintiff, and if this allegation had been proven, perhaps the condition would have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but this issue was not presented in the defendant's answer. However, although we are not in agreement with the reasoning found in the decision appealed from, we consider it to be correct in its result. The record shows that the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was not even able to show them to the purchaser; and as regards the other two, more than two-thirds of their area was in the hostile and adverse possession of a third person. The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the execution of a public instruments is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality the delivery has not been effected. As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of the French Civil code, "the word "delivery" expresses a complex idea . . . the abandonment of the thing by the person who makes the delivery and the taking control of it by the person to whom the delivery is made." The execution of a public instrument is sufficient for the purposes of the abandonment made by the vendor; but it is not always sufficient to permit of the apprehension of the thing by the purchaser. The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this article "merely declares that when the sale is made through the means of a public instrument, the execution of this latter is equivalent to the delivery of the thing sold: which does not and cannot mean that this fictitious tradition necessarily implies the real tradition of the thing sold, for it is incontrovertible that, while its ownership still pertains to the vendor (and with greater reason if it does not),

a third person may be in possession of the same thing; wherefore, though, as a general rule, he who purchases by means of a public instrument should be deemed . . . to be the possessor in fact, yet this presumption gives way before proof to the contrary." It is evident, then, in the case at bar, that the mere execution of the instrument was not a fulfillment of the vendors' obligation to deliver the thing sold, and that from such non-fulfillment arises the purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the price. (Civ. Code, arts. 1506 and 1124.) Of course if the sale had been made under the express agreement of imposing upon the purchaser the obligation to take the necessary steps to obtain the material possession of the thing sold, and it were proven that she knew that the thing was in the possession of a third person claiming to have property rights therein, such agreement would be perfectly valid. But there is nothing in the instrument which would indicate, even implicitly, that such was the agreement. It is true, as the appellant argues, that the obligation was incumbent upon the defendant Marciana Felix to apply for and obtain the registration of the land in the new registry of property; but from this it cannot be concluded that she had to await the final decision of the Court of Land Registration, in order to be able to enjoy the property sold. On the contrary, it was expressly stipulated in the contract that the purchaser should deliver to the vendor one-fourth "of the products ... of the aforesaid four parcels from the moment when she takes possession of them until the Torrens certificate of title be issued in her favor." This obviously shows that it was not forseen that the purchaser might be deprived of her possession during the course of the registration proceedings, but that the transaction rested on the assumption that she was to have, during said period, the material possession and enjoyment of the four parcels of land. Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual agreement, it is not the conventional but the legal interest that is demandable. It is therefore held that the contract of purchase and sale entered into by and between the plaintiff and the defendant on June 11, 1914, is rescinded, and the plaintiff is ordered to make restitution of the sum of P3,000 received by him on account of the price of the sale, together with interest thereon at the legal rate of 6 per annum from the date of the filing of the complaint until payment, with the costs of both instances against the appellant. So ordered.

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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-40195 May 29, 1987 VICTORIA R. VALLARTA, petitioner, vs. THE HONORABLE COURT OF APPEALS and THE HONORABLE JUDGE FRANCISCO LLAMAS, Pasay City Court, respondents. Francisco G.H. Salva for petitioner. CORTES, J.: The petitioner seeks a reversal of the Court of Appeals decision dated December 13, 1974 affirming the Trial Court's judgment convicting her of estafa. We denied the petition initially but granted a motion for reconsideration and gave the petition due course. As found by the trial court and the Court of Appeals, Rosalinda Cruz, the private offended party, and accused Victoria Vallarta are long time friends and business acquaintances. On November 20, 1968, Cruz entrusted to Victoria Vallarta seven pieces of jewelry. In December of the same year, Vallarta decided to buy some items, exchanged one item with another, and issued a post-dated check in the amount of P5,000 dated January 30, 1969. Rosalinda Cruz deposited said check with the bank. However, upon presentment, the check was dishonored and Cruz was informed that Vallarta's account had been closed. Cruz apprised Vallarta of the dishonor and the latter promised to give another check. Later, Vallarta pleaded for more time. Still later, she started avoiding Cruz. Hence, this criminal action was instituted. Based on the foregoing facts, both the trial court and the Court of Appeals found Vallarta guilty beyond reasonable doubt of the crime of estafa. WE affirm. Petitioner is charged under Art. 315 (2) (d) as amended by Rep. Act No. 4885, of the Revised Penal Code, which penalizes any person who shall defraud another "(b)y postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check." By virtue of Rep. Act No. 4885, "(t)he failure of the drawer of the check to deposit the amount necessary to cover his check within three (3) days from receipt of notice from the bank and/or the payee or holder that said check has been dishonored for lack or insufficiency of funds" is deemed prima facie evidence of deceit constituting false pretense or fraudulent act. To constitute estafa under this provision the act of post-dating or issuing a check in payment of an obligation must be the efficient cause of defraudation, and as such it should be either prior to, or simultaneous with the act of fraud. The offender must be able to obtain money or property from the offended party because of the issuance of a check whether post-dated or not. That is, the latter would not have parted with his money or other property were it not for the issuance of the check. likewise, the check should not be, issued in payment of a pre-existing obligation (People v. Lilius, 59 Phil. 339 [1933]). In seeking acquittal, petitioner stresses that the transaction between her and Cruz was a "sale or return," perfected and consummated on November 20, 1968 when the seven pieces of jewelry were delivered. The check issued in December 1968 was therefore in payment of a pre-existing obligation. Thus, even if it was dishonored, petitioner claims that she can only be held civilly liable, but not criminally liable under Art. 315 (2) (d), Revised Penal Code. She also argues that at any rate, what prompted Cruz to deliver the jewelry was the social standing of petitioner Vallarta and not the postdated check.

She thus assigns as errors the finding of that Court a quo that the jewelries were entrusted on November 20, 1968, but the sale was perfected in December 1968, and the finding that there was deceit in the issuance of the postdated check. In order to arrive at the proper characterization of the transaction between Vallarta and Cruz, that is, whether it was a "sale or return" or some other transaction, it is necessary to determine the intention of the parties. The following excerpts from the transcript of stenographic notes are significant: I. Direct Examination of Rosalinda Cruz Q: Now, what happened with that business transaction of yours with Mrs. Vallarta? A: After that and after she finally agreed to buy two sets and changed the ruby ring with another ring, she gave me postdated check; I waited for January 30, 1969. 1 deposited the check in the Security Bank. And after that I knew (learned) that it was closed account (TSN, June 29, 1972, p. 9) (Emphasis supplied). II. Cross-Examination of Rosalinda Cruz Q: Now, you mentioned about certain jewelries in Exh. "A. Could you tell under your oath whether all the jewelries listed here (Exh. "A") were taken by Mrs. Vallarta at one single instance? A: Yes, Sir. It was on one (1) day when I entrusted them to her so she can select what she wants (Id at p. 22) (Emphasis supplied). III. Cross-Examination of Rosalinda Cruz COURT: But could you still recall or you cannot recall whether you agreed to reduce the cost to Five Thousand Eight Hundred ( P5,800.00) Pesos? A Yes, Sir. I agreed to reduce it to Five Thousand Eight Hundred (P5,800.00) Pesos, Sir, when I went to see her in her house to finalize what jewelries she wanted (Id. at p. 26). Note that Vallarta changed the ruby ring because it was not acceptable to her, and chose another ring. Likewise, the price to be paid for the jewelry was finally agreed upon only in December 1968. Thus, there was a meeting of the minds between the parties as to the object of the contract and the consideration therefore only in December 1968, the same time that the check was issued. The delivery made on November 20, 1968 was only for the purpose of enabling Vallarta to select what jewelry she wanted. Properly, then, the transaction entered into by Cruz and Vallarta was not a "sale or return." Rather, it was a "sale on approval " (also called " sale on acceptance, " "sale on trial." or "sale on satisfaction" [CIVIL CODE, art. 1502]). In a "sale or return," the ownership passes to the buyer on delivery (CIVIL CODE, art. 1502). (The subsequent return of the goods reverts ownership in the seller [CIVIL CODE, art. 1502]). Delivery, or tradition. as a mode of acquiring ownership must be in consequence of a contract (CIVIL CODE, art. 712), e.g. sale. If there was no meeting of the minds on November 20, 1968, then, as of that date, there was yet no contract of sale which could be the basis of delivery or tradition. Thus, the delivery made on November 20, 1968 was not a delivery for purposes of transferring ownership the prestation incumbent on the vendor. If ownership over the jewelry was not transmitted on that date, then it could have been transmitted only in December 1968, the date when the check was issued. In which case, it was a "sale on approval" since ownership passed to the buyer. Vallarta, only when she signified her approval or acceptance to the seller, Cruz, and the price was agreed upon.

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Thus, when the check which later bounced was issued, it was not in payment of a pre-existing obligation. Instead the issuance of the check was simultaneous with the transfer of ownership over the jewelry. But was the check issued simultaneously with the fraud? Republic Act No. 4885, amending Art. 315 (2) (d), Revised Penal Code, establishes a prima facie evidence of deceit upon proof that the drawer of the check failed to deposit the amount necessary to cover his check within three (3) days from receipt of notice of dishonor for lack or insufficiency of funds. Admittedly, (1) the check was dishonored as Vallarta's account had been earlier closed; (2) she was notified by Cruz of the dishonor: and, (3) Vallarta failed to make it good within three days. Deceit is therefore presumed. Petitioner lays stress on her being an alumna of a reputable school, on her having a husband who is a bank manager, and on the big land-holdings of her father, and argues that it was these qualifications and not the post-dated check which prompted Cruz to deliver the jewelry (Rollo, pp. 78-79: Motion for Reconsideration, pp. 10-11). Hence, there was no deceit. It is thus suggested that a person of petitioner's social standing cannot be guilty of deceit, at least in so far as issuing bouncing checks is concerned. This reasoning does not merit serious consideration. If accepted, it could result in a law that falls unequally on persons depending on their social position. Did Cruz part with the jewelry solely because she knew Vallarta to be rich, or did she do so because of the check issued to her? As the trial court and the Court of Appeals found, petitioner was able to obtain the jewelry because she issued the check. Her failure to deposit the necessary amount to cover it within three days from notice of dishonor created the prima facie presumption established by the amendatory law, Rep. Act No. 4885, which she failed to rebut. Petitioner, however, contends that Rep. Act No. 4885 is unconstitutional. She claims that even as the presumption of deceit established by Rep. Act No. 4885 is stated under the guise of being prima facie. It is in effect a conclusive presumption, because after the prosecution has proved that: (1) the check has been dishonored; (2) notice has been given to the drawer; and, (3) three days from notice, the check is not funded or the obligation is not paid, the accused is held guilty. Thus, it is alleged, the constitutional presumption of innocence is violated. Contrary to petitioner's assertion, the presumption of deceit under Rep. Act No. 4885 is not conclusive. It is rebuttable. For instance, We ruled in the case of People v. Villapando (56 Phil. 31 [1931]) that good faith is a defense to a charge of estafa by postdating a check, as when the drawer, foreseeing his inability to pay the check at maturity, made an arrangement with his creditor as to the manner of payment of the debt.* Moreover, it is now well settled that "there is no constitutional objection to the passage of a law providing that the presumption of innocence may be overcome by a contrary presumption founded upon the experience of human conduct, and enacting what evidence shall be sufficient to overcome such presumption of innocence" (People v. Mingoa, 92 Phil. 856 [1953] at 858-59, citing I COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that when certain facts have been proved they shall be prima facie evidence of the existence of the guilt of the accused and shift the burden of proof provided there be a rational connection between the facts proved and the ultimate fact presumed so that the inference of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the two in common experience" (People v. Mingoa, supra. See also US v. Luling, 34 Phil. 725 [1916]). There can be no doubt that the "postdating or issuing of a check in payment of an obligation when the offender had no funds in the bank, or his funds deposited therein were not sufficient to cover the amount of the check," is a false pretense or a fraudulent act. It is so characterized by Art. 315 (2) (d), Revised Penal Code. Republic Act No. 4885 does nothing more than limit the period within which the drawer/issuer must pay the creditor. Petitioner also argues that Rep. Act No. 4885 violates the constitutional injunction against imprisonment for non-payment of debt. Ironically, she does not question the constitutionality of Art. 315 (2) (d), Revised Penal

Code, which defines the crime she is being accused of, and provides for its punishment. In fact, she concedes the constitutionality of the latter statute. She further concedes that a person may be imprisoned for "criminal fraud" covered by Art. 315 (2) of the Revised Penal Code. In People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA 568), this Court ruled that Rep. Act No. 4885 has not changed the rule established in Art. 315 (2) (d) prior to the amendment; that Republic Act No. 4885 merely established the prima facie evidence of deceit, and eliminated the requirement that the drawer inform the payee that he had no funds in the bank or the funds deposited by him were not sufficient to cover the amount of the check. Thus, even with the amendment introduced by Rep. Act No. 4885 it is still criminal fraud or deceit in the issuance of a check which is made punishable under the Revised Penal Code, and not the non-payment of the debt. Petitioner also assigns as error the denial by the trial court of her motion for reconsideration. Her motion was directed at the finding of the trial court that no payments were made. Alleging that a check drawn by one Sison was given by petitioner to Cruz in payment of the rubber check, petitioner claims that had her motion for reconsideration been granted, she would have called to the witness stand the Branch Manager of Security Bank and Trust Company, Pasay City, where the check was allegedly deposited by Cruz, for said bank manager to Identify the owner-holder of the savings account to which the amount in Sison's check had been credited (Brief for Petitioner, p. 46). Granting that the bank manager's testimony would have been as alleged by petitioner, Our decision would remain. As correctly observed by both the trial court and the Court of Appeals (Court of Appeals Decision, pp. 2-3), the payments petitioner allegedly made were not shown to have any relevance to the obligation in question. WHEREFORE, finding no error in the assailed decision of the Court of Appeals, the same is AFFIRMED. Costs against the petitioner. SO ORDERED.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 66140 January 21, 1993 INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE PHILIPPINES, INC., petitioner, vs. LPJ ENTERPRISES, INC., respondent. Bengzon, Zarraga, Narciso, Cudala, Pecson, Azcuna & Bengzon Law Office for petitioner. MELO, J.: Before Us is a petition for review on certiorari seeking the reversal of the November 9, 1983 decision of the then Intermediate Appellate Court in CA-G.R. CV No. 68281, penned by the Honorable Justice Eduardo P. Caguioa, with Justices Gaviola and Quetulio-Losa concurring, which dismissed petitioner's complaint and absolved herein respondent from any liability to the former. It appears on record that respondent LPJ Enterprises, Inc. had a contract to supply 300,000 bags of cement per year to Atlas Consolidated Mining and Development Corporation (Atlas for short), a member of the Soriano Group of Companies. The cement was delivered packed in kraft paper bags, then as now, in common use. Sometime in October, 1970, Cesar Campos, a Vice-President of petitioner Industrial Textile Manufacturing Company of the Philippines (or Itemcop, for brevity), asked Lauro Panganiban, Jr., President of respondent corporation, if he would like to cooperate in an experiment to develop plastic cement bags. Panganiban acquiesced, principally because Itemcop is a sister corporation of Atlas, respondent's major client. A few weeks later, Panganiban accompanied Paulino Ugarte, another Vice-President of Itemcop, to the factory of respondent's supplier, Luzon Cement Corporation in Norzagaray, Bulacan, to test fifty (50) pieces of plastic cement bags. The experiment, however, was unsuccessful. Cement dust oozed out under pressure through the small holes of the woven plastic bags and the loading platform was filled with dust. The second batch of plastic bags subjected to trial was likewise a failure. Although the weaving of the plastic bags was already tightened, cement dust still spilled through the gaps. Finally, with three hundred (300) "improved bags", the seepage was substantially reduced. Ugarte then asked Panganiban to send 180 bags of cement to Atlas via commercial shipping. Campos, Ugarte, and two other officials of petitioner company followed the 180 bags to the plant of Atlas in Sangi, Toledo, Cebu where they professed satisfaction at the performance of their own plastic bags. On December 29, 1970, Campos sent Panganiban a letter proclaiming dramatic results in the experiment. Consequently, Panganiban agreed to use the plastic cement bags. Four purchase orders (P.O.s) were thereafter issued, to wit: DATE NUMBER OF BAGS UNIT COST AMOUNT 5 January 1971 53,800 P .83 P44,654.00 24 February 1971 11,000 .90 9,900.00 March 1971 41,000 .92 37,720.00 6 April 1971 10,000 .92 9,200.00 TOTAL: P101,474.00 Petitioner delivered the above orders consecutively on January 12, February 17, March 19, and April 17, 1971 (p. 74, Rollo). Respondent, on the other hand, remitted the amounts of P1,640.00, P2,480.00. and P13,230.00

on March 31, April 31, and May 3, 1971 respectively, thereby leaving a balance of P84,123.80 (p. 58, Ibid.). No other payments were made, thus prompting A. Soriano y Cia of petitioner's Legal Department to send demand letters to respondent corporation. Reiterations thereof were later sent by petitioner's counsel. A collection suit was filed on April 11, 1973 when the demands remained unheeded. At the trial on the merits, respondent admitted its liability for the 53,800 polypropylene lime bags covered by the first purchase order. (TSN, January 5, 1971, p. 131). With respect to the second, third, and fourth purchase orders, respondent, however, denied full responsibility therefor. Respondent said that it will pay, as it did pay for, only the 15,000 plastic bags it actually used in packing cement. As for the remaining 47,000 bags, the workers of Luzon Cement strongly objected to the use thereof due to the serious health hazards posed by the continued seepage of cement dust. Notwithstanding the measures adopted by respondent such as the use of masks, gloves. and conveyor system, the workers still refused to utilize the plastic bags. Respondent was, therefore, constrained to revert to the use of kraft paper bags in packing cement. Thereafter, petitioner was asked to take back the unused plastic bags. Considering however, that the bags were in the cement factory of respondent's supplier, petitioner maintained that it was respondent's obligation to return the bags to them. Apparently, this was not done and so petitioner demanded payment for the said bags. On May 25, 1981, the trial court rendered its decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered sentencing the defendant to pay the sum of P84,123.80 with l2% interest per annum from May, 1971 plus 15% of the total obligation as attorney's fees, and the costs. SO ORDERED. (p. 80, Ibid.) Respondent corporation's appeal was upheld by the appellate court when it reversed the trial court's decision and dismissed the case with costs against petitioner. (p. 28, Ibid.). Hence, the present recourse. The first issue to be resolved is the propriety of this petition as it calls for a re-examination of the factual findings of the appellate court. As asserted by herein respondent, it is well-entrenched in Our jurisprudence that this Court is not a trier of facts (Valdez v. CA, 194 SCRA 360 [1991]). As a rule, it is also settled that the factual findings of the appellate court are final and conclusive (Bustamante v. CA, 193 SCRA 603 [1991]; Radiowealth Finance Company v. Palileo, 197 SCRA 245 [1991]). However, in a long line of cases, We have pronounced certain exceptions, as when the inference made is manifestly mistaken or when the judgment is based on misapprehension of facts or when the appellate court overlooked relevant facts not disputed by the parties and which if properly considered, would justify a different conclusion (Aquino v. CA, 204 SCRA 247 [1991]; Manlapaz v. CA, 147 SCRA 236 [1987]; Sacay v. Sandiganbayan, 142 SCRA 593, [1986]; Moran v. CA, 133 SCRA 88 [1984]). A review of the record instantly reveals that the case at bar falls under the last exception. As earlier adverted to, respondent has repeatedly admitted its liability for the 53,800 plastic lime bags amounting to P44,654.00 yet the appellate court disregarded this fact and totally cleared respondent from all responsibility. On this point alone, the decision of the appellate court may be overturned, or at least modified. Let Us now turn to the crux of the controversy, which is whether or not respondent may be held liable for the 47,000 plastic bags which were not actually used for packing cement as originally intended. It is beyond dispute that prior to respondent's transaction with petitioner, the bags were already tested and the results thereof, albeit initially unsuccessful, were nevertheless favorably considered after due alterations were made. Verily, it is on the basis of such experimental findings that respondent agreed to use the plastic cement bags and thereafter issued the purchase orders heretofore mentioned. Significantly, the quantity of bags ordered by respondent also negates its position that the bags were still under experimentation. Indeed, if it were so, the bags ordered should have been considerably lesser in number and would normally increase as the suitability of the plastic bags became more definite. Likewise, it is worthy to note that as of the date of petitioner's third delivery on March 19, 1971, respondent has received a total of 52,000 bags. By then, it was very probable that the problems alluded to by respondent could no longer be resolved, thus, only 15,000 bags were actually used and 37,000 bags were already considered unfit for packing cement. Under such

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predicament, it was but logical for respondent to cancel then the fourth purchase order for another 10,000 bags. Surprisingly, respondent still accepted the same upon delivery on April 17, 1971 and remitted its payments until May 3, 1971. When petitioner sent letters demanding the full payment of the bags, respondent simply declared that it did not receive any because it transferred its offices to another place. In the meantime, the bags remained in the custody of Luzon Cement, respondent's supplier and virtually a stranger as far as petitioner is concerned. It is for this reason that petitioner may not be expected to just pull out its bags from Luzon Cement. Not to be overlooked also is the fact that Panganiban, respondent corporation's president, also collected due commissions for the four purchase orders issued in favor of petitioner. (p. 79, Rollo). Finally, the conditions which allegedly govern the transaction according to respondent may not be considered. The trial court correctly observed that such conditions should have been distinctly specified in the purchase orders and respondent's failure to do so is fatal to its cause. We find that Article 1502 of the Civil Code, invoked by both parties herein, has no application at all to this case. The provision in the Uniform Sales Act and the Uniform Commercial Code from which Article 1502 was taken, clearly requires an express written agreement to make a sales contract either a "sale or return" or a "sale on approval". Parol or extrinsic testimony could not be admitted for the purpose of showing that an invoice or bill of sale that was complete in every aspect and purporting to embody a sale without condition or restriction constituted a contract of sale or return. If the purchaser desired to incorporate a stipulation securing to him the right of return, he should have done so at the time the contract was made. On the other hand, the buyer cannot accept part and reject the rest of the goods since this falls outside the normal intent of the parties in the "on approval" situation. (67 Am Jur 2d, pp. 733, 748). In the light of these principles, We hold that the transaction between respondent and petitioner constituted an absolute sale. Accordingly, respondent is liable for the plastic bags delivered to it by petitioner. WHEREFORE, premises considered, the decision appealed from is hereby SET ASIDE and the decision of the trial court REINSTATED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 93397 March 3, 1997 TRADERS ROYAL BANK, petitioner, vs. COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES, respondents. TORRES, JR., J.: Assailed in this Petition for Review on Certiorari is the Decision of the respondent Court of Appeals dated January 29, 1990, 1 affirming the nullity of the transfer of Central Bank Certificate of Indebtedness (CBCI) No. D891, 2 with a face value of P500,000.00, from the Philippine Underwriters Finance Corporation (Philfinance) to the petitioner Trader's Royal Bank (TRB), under a Repurchase Agreement 3 dated February 4, 1981, and a Detached Assignment 4 dated April 27, 1981. Docketed as Civil Case No. 83-17966 in the Regional Trial Court of Manila, Branch 32, the action was originally filed as a Petition for Mandamus 5 under Rule 65 of the Rules of Court, to compel the Central Bank of the Philippines to register the transfer of the subject CBCI to petitioner Traders Royal Bank (TRB). In the said petition, TRB stated that: 3. On November 27, 1979, Filriters Guaranty Assurance Corporation (Filriters) executed a "Detached Assignment" . . ., whereby Filriters, as registered owner, sold, transferred, assigned and delivered unto Philippine Underwriters Finance Corporation (Philfinance) all its rights and title to Central Bank Certificates of Indebtedness of PESOS: FIVE HUNDRED THOUSAND (P500,000) and having an aggregate value of PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00); 4. The aforesaid Detached Assignment (Annex "A") contains an express authorization executed by the transferor intended to complete the assignment through the registration of the transfer in the name of PhilFinance, which authorization is specifically phrased as follows: '(Filriters) hereby irrevocably authorized the said issuer (Central Bank) to transfer the said bond/certificates on the books of its fiscal agent; 5. On February 4, 1981, petitioner entered into a Repurchase Agreement with PhilFinance . . ., whereby, for and in consideration of the sum of PESOS: FIVE HUNDRED THOUSAND (P500,000.00), PhilFinance sold, transferred and delivered to petitioner CBCI 4-year, 8th series, Serial No. D891 with a face value of P500,000.00 . . ., which CBCI was among those previously acquired by PhilFinance from Filriters as averred in paragraph 3 of the Petition; 6. Pursuant to the aforesaid Repurchase Agreement (Annex "B"), Philfinance agreed to repurchase CBCI Serial No. D891 (Annex "C"), at the stipulated price of PESOS: FIVE HUNDRED NINETEEN THOUSAND THREE HUNDRED SIXTY-ONE & 11/100 (P519,361.11) on April 27, 1981; 7. PhilFinance failed to repurchase the CBCI on the agreed date of maturity, April 27, 1981, when the checks it issued in favor of petitioner were dishonored for insufficient funds; 8. Owing to the default of PhilFinance, it executed a Detached Assignment in favor of the Petitioner to enable the latter to have its title completed and registered in the books of the respondent. And by means of said Detachment, Philfinance transferred and assigned all, its rights and title in the said CBCI (Annex "C") to petitioner and, furthermore, it did thereby "irrevocably authorize the said issuer (respondent herein) to transfer the said bond/certificate on the books of its fiscal agent." . . .

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9. Petitioner presented the CBCI (Annex "C"), together with the two (2) aforementioned Detached Assignments (Annexes "B" and "D"), to the Securities Servicing Department of the respondent, and requested the latter to effect the transfer of the CBCI on its books and to issue a new certificate in the name of petitioner as absolute owner thereof; 10. Respondent failed and refused to register the transfer as requested, and continues to do so notwithstanding petitioner's valid and just title over the same and despite repeated demands in writing, the latest of which is hereto attached as Annex "E" and made an integral part hereof; 11. The express provisions governing the transfer of the CBCI were substantially complied with the petitioner's request for registration, to wit: "No transfer thereof shall be valid unless made at said office (where the Certificate has been registered) by the registered owner hereof, in person or by his attorney duly authorized in writing, and similarly noted hereon, and upon payment of a nominal transfer fee which may be required, a new Certificate shall be issued to the transferee of the registered holder thereof." and, without a doubt, the Detached Assignments presented to respondent were sufficient authorizations in writing executed by the registered owner, Filriters, and its transferee, PhilFinance, as required by the above-quoted provision; 12. Upon such compliance with the aforesaid requirements, the ministerial duties of registering a transfer of ownership over the CBCI and issuing a new certificate to the transferee devolves upon the respondent; Upon these assertions, TRB prayed for the registration by the Central Bank of the subject CBCI in its name. On December 4, 1984, the Regional Trial Court the case took cognizance of the defendant Central Bank of the Philippines' Motion for Admission of Amended Answer with Counter Claim for Interpleader 6 thereby calling to fore the respondent Filriters Guaranty Assurance Corporation (Filriters), the registered owner of the subject CBCI as respondent. For its part, Filriters interjected as Special Defenses the following: 11. Respondent is the registered owner of CBCI No. 891; 12. The CBCI constitutes part of the reserve investment against liabilities required of respondent as an insurance company under the Insurance Code; 13. Without any consideration or benefit whatsoever to Filriters, in violation of law and the trust fund doctrine and to the prejudice of policyholders and to all who have present or future claim against policies issued by Filriters, Alfredo Banaria, then Senior Vice-President-Treasury of Filriters, without any board resolution, knowledge or consent of the board of directors of Filriters, and without any clearance or authorization from the Insurance Commissioner, executed a detached assignment purportedly assigning CBCI No. 891 to Philfinance; xxx xxx xxx 14. Subsequently, Alberto Fabella, Senior Vice-President-Comptroller are Pilar Jacobe, VicePresident-Treasury of Filriters (both of whom were holding the same positions in Philfinance), without any consideration or benefit redounding to Filriters and to the grave prejudice of Filriters, its policy holders and all who have present or future claims against its policies, executed similar detached assignment forms transferring the CBCI to plaintiff; xxx xxx xxx 15. The detached assignment is patently void and inoperative because the assignment is without the knowledge and consent of directors of Filriters, and not duly authorized in writing by the Board, as requiring by Article V, Section 3 of CB Circular No. 769;

16. The assignment of the CBCI to Philfinance is a personal act of Alfredo Banaria and not the corporate act of Filriters and such null and void; a) The assignment was executed without consideration and for that reason, the assignment is void from the beginning (Article 1409, Civil Code); b) The assignment was executed without any knowledge and consent of the board of directors of Filriters; c) The CBCI constitutes reserve investment of Filriters against liabilities, which is a requirement under the Insurance Code for its existence as an insurance company and the pursuit of its business operations. The assignment of the CBCI is illegal act in the sense of malum in se or malum prohibitum, for anyone to make, either as corporate or personal act; d) The transfer of dimunition of reserve investments of Filriters is expressly prohibited by law, is immoral and against public policy; e) The assignment of the CBCI has resulted in the capital impairment and in the solvency deficiency of Filriters (and has in fact helped in placing Filriters under conservatorship), an inevitable result known to the officer who executed assignment. 17. Plaintiff had acted in bad faith and with knowledge of the illegality and invalidity of the assignment. a) The CBCI No. 891 is not a negotiable instrument and as a certificate of indebtedness is not payable to bearer but is a registered in the name of Filriters; b) The provision on transfer of the CBCIs provides that the Central Bank shall treat the registered owner as the absolute owner and that the value of the registered certificates shall be payable only to the registered owner; a sufficient notice to plaintiff that the assignments do not give them the registered owner's right as absolute owner of the CBCI's; c) CB Circular 769, Series of 1980 (Rules and Regulations Governing CBCIs) provides that the registered certificates are payable only to the registered owner (Article II, Section 1). 18. Plaintiff knew full well that the assignment by Philfinance of CBCI No. 891 by Filriters is not a regular transaction made in the usual of ordinary course of business; a) The CBCI constitutes part of the reserve investments of Filriters against liabilities requires by the Insurance Code and its assignment or transfer is expressly prohibited by law. There was no attempt to get any clearance or authorization from the Insurance Commissioner; b) The assignment by Filriters of the CBCI is clearly not a transaction in the usual or regular course of its business; c) The CBCI involved substantial amount and its assignment clearly constitutes disposition of "all or substantially all" of the assets of Filriters, which requires the affirmative action of the stockholders (Section 40, Corporation [sic] Code. 7 In its Decision 8 dated April 29, 1988, the Regional Trial Court of Manila, Branch XXXIII found the assignment of CBCI No. D891 in favor of Philfinance, and the subsequent assignment of the same CBCI by Philfinance in favor of Traders Royal Bank null and void and of no force and effect. The dispositive portion of the decision reads: ACCORDINGLY, judgment is hereby rendered in favor of the respondent Filriters Guaranty Assurance Corporation and against the plaintiff Traders Royal Bank: (a) Declaring the assignment of CBCI No. 891 in favor of PhilFinance, and the subsequent assignment of CBCI by PhilFinance in favor of the plaintiff Traders Royal Bank as null and void and of no force and effect;

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(b) Ordering the respondent Central Bank of the Philippines to disregard the said assignment and to pay the value of the proceeds of the CBCI No. D891 to the Filriters Guaranty Assurance Corporation; (c) Ordering the plaintiff Traders Royal Bank to pay respondent Filriters Guaranty Assurance Corp. The sum of P10,000 as attorney's fees; and (d) to pay the costs. SO ORDERED. 9 The petitioner assailed the decision of the trial court in the Court of Appeals 10, but their appeals likewise failed. The findings of the fact of the said court are hereby reproduced: The records reveal that defendant Filriters is the registered owner of CBCI No. D891. Under a deed of assignment dated November 27, 1971, Filriters transferred CBCI No. D891 to Philippine Underwriters Finance Corporation (Philfinance). Subsequently, Philfinance transferred CBCI No. D891, which was still registered in the name of Filriters, to appellant Traders Royal Bank (TRB). The transfer was made under a repurchase agreement dated February 4, 1981, granting Philfinance the right to repurchase the instrument on or before April 27, 1981. When Philfinance failed to buy back the note on maturity date, it executed a deed of assignment, dated April 27, 1981, conveying to appellant TRB all its right and the title to CBCI No. D891. Armed with the deed of assignment, TRB then sought the transfer and registration of CBCI No. D891 in its name before the Security and Servicing Department of the Central Bank (CB). Central Bank, however, refused to effect the transfer and registration in view of an adverse claim filed by defendant Filriters. Left with no other recourse, TRB filed a special civil action for mandamus against the Central Bank in the Regional Trial Court of Manila. The suit, however, was subsequently treated by the lower court as a case of interpleader when CB prayed in its amended answer that Filriters be impleaded as a respondent and the court adjudge which of them is entitled to the ownership of CBCI No. D891. Failing to get a favorable judgment. TRB now comes to this Court on appeal. 11 In the appellate court, petitioner argued that the subject CBCI was a negotiable instrument, and having acquired the said certificate from Philfinance as a holder in due course, its possession of the same is thus free fro any defect of title of prior parties and from any defense available to prior parties among themselves, and it may thus, enforce payment of the instrument for the full amount thereof against all parties liable thereon. 12 In ignoring said argument, the appellate court that the CBCI is not a negotiable instrument, since the instrument clearly stated that it was payable to Filriters, the registered owner, whose name was inscribed thereon, and that the certificate lacked the words of negotiability which serve as an expression of consent that the instrument may be transferred by negotiation. Obviously, the assignment of the certificate from Filriters to Philfinance was fictitious, having made without consideration, and did not conform to Central Bank Circular No. 769, series of 1980, better known as the "Rules and Regulations Governing Central Bank Certificates of Indebtedness", which provided that any "assignment of registered certificates shall not be valid unless made . . . by the registered owner thereof in person or by his representative duly authorized in writing." Petitioner's claimed interest has no basis, since it was derived from Philfinance whose interest was inexistent, having acquired the certificate through simulation. What happened was Philfinance merely borrowed CBCI No. D891 from Filriters, a sister corporation, to guarantee its financing operations. Said the Court: In the case at bar, Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalf of Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to act for the latter. For lack of such authority, the assignment did not therefore bind

Filriters and violated as the same time Central Bank Circular No. 769 which has the force and effect of a law, resulting in the nullity of the transfer (People v. Que Po Lay, 94 Phil. 640; 3M Philippines, Inc. vs. Commissioner of Internal Revenue, 165 SCRA 778). In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer to Traders Royal Bank and which the latter can register with the Central Bank. WHEREFORE, the judgment appealed from is AFFIRMED, with costs against plaintiff-appellant. SO ORDERED. 13 Petitioner's present position rests solely on the argument that Philfinance owns 90% of Filriters equity and the two corporations have identical corporate officers, thus demanding the application of the doctrine or piercing the veil of corporate fiction, as to give validity to the transfer of the CBCI from registered owner to petitioner TRB. 14 This renders the payment by TRB to Philfinance of CBCI, as actual payment to Filriters. Thus, there is no merit to the lower court's ruling that the transfer of the CBCI from Filriters to Philfinance was null and void for lack of consideration. Admittedly, the subject CBCI is not a negotiable instrument in the absence of words of negotiability within the meaning of the negotiable instruments law (Act 2031). The pertinent portions of the subject CBCI read: xxx xxx xxx The Central Bank of the Philippines (the Bank) for value received, hereby promises to pay bearer, of if this Certificate of indebtedness be registered, to FILRITERS GUARANTY ASSURANCE CORPORATION, the registered owner hereof, the principal sum of FIVE HUNDRED THOUSAND PESOS. xxx xxx xxx Properly understood, a certificate of indebtedness pertains to certificates for the creation and maintenance of a permanent improvement revolving fund, is similar to a "bond," (82 Minn. 202). Being equivalent to a bond, it is properly understood as acknowledgment of an obligation to pay a fixed sum of money. It is usually used for the purpose of long term loans. The appellate court ruled that the subject CBCI is not a negotiable instrument, stating that: As worded, the instrument provides a promise "to pay Filriters Guaranty Assurance Corporation, the registered owner hereof." Very clearly, the instrument is payable only to Filriters, the registered owner, whose name is inscribed thereon. It lacks the words of negotiability which should have served as an expression of consent that the instrument may be transferred by negotiation. 15 A reading of the subject CBCI indicates that the same is payable to FILRITERS GUARANTY ASSURANCE CORPORATION, and to no one else, thus, discounting the petitioner's submission that the same is a negotiable instrument, and that it is a holder in due course of the certificate. The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchtone relating to the protection of holders in due course, and the freedom of negotiability is the foundation for the protection which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This freedom in negotiability is totally absent in a certificate indebtedness as it merely to pay a sum of money to a specified person or entity for a period of time. As held in Caltex (Philippines), Inc. v. Court of Appeals, 16: The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself. In the construction of a bill or note, the intention of the parties is to control, if it can be legally ascertained. While the writing may be read in the light of surrounding circumstance in order to more perfectly understand the intent and meaning

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of the parties, yet as they have constituted the writing to be the only outward and visible expression of their meaning, no other words are to be added to it or substituted in its stead. The duty of the court in such case is to ascertain, not what the parties may have secretly intended as contradistinguished from what their words express, but what is the meaning of the words they have used. What the parties meant must be determined by what they said. Thus, the transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed by the negotiable instruments law. The pertinent question then is, was the transfer of the CBCI from Filriters to Philfinance and subsequently from Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the CBCI registered in its name with the Central Bank? The following are the appellate court's pronouncements on the matter: Clearly shown in the record is the fact that Philfinance's title over CBCI No. D891 is defective since it acquired the instrument from Filriters fictitiously. Although the deed of assignment stated that the transfer was for "value received", there was really no consideration involved. What happened was Philfinance merely borrowed CBCI No. D891 from Filriters, a sister corporation. Thus, for lack of any consideration, the assignment made is a complete nullity. What is more, We find that the transfer made by Filriters to Philfinance did not conform to Central Bank Circular No. 769, series of 1980, otherwise known as the "Rules and Regulations Governing Central Bank Certificates of Indebtedness", under which the note was issued. Published in the Official Gazette on November 19, 1980, Section 3 thereof provides that any assignment of registered certificates shall not be valid unless made . . . by the registered owner thereof in person or by his representative duly authorized in writing. In the case at bar, Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalf of Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to act for the latter. For lack of such authority, the assignment did not therefore bind Filriters and violated at the same time Central Bank Circular No. 769 which has the force and effect of a law, resulting in the nullity of the transfer (People vs. Que Po Lay, 94 Phil. 640; 3M Philippines, Inc. vs. Commissioner of Internal Revenue, 165 SCRA 778). In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could assign or transfer to Traders Royal Bank and which the latter can register with the Central Bank Petitioner now argues that the transfer of the subject CBCI to TRB must upheld, as the respondent Filriters and Philfinance, though separate corporate entities on paper, have used their corporate fiction to defraud TRB into purchasing the subject CBCI, which purchase now is refused registration by the Central Bank. Says the petitioner; Since Philfinance own about 90% of Filriters and the two companies have the same corporate officers, if the principle of piercing the veil of corporate entity were to be applied in this case, then TRB's payment to Philfinance for the CBCI purchased by it could just as well be considered a payment to Filriters, the registered owner of the CBCI as to bar the latter from claiming, as it has, that it never received any payment for that CBCI sold and that said CBCI was sold without its authority. xxx xxx xxx We respectfully submit that, considering that the Court of Appeals has held that the CBCI was merely borrowed by Philfinance from Filriters, a sister corporation, to guarantee its (Philfinance's) financing operations, if it were to be consistent therewith, on the issued raised by TRB that there was a piercing a veil of corporate entity, the Court of Appeals should have ruled that such veil of corporate entity was, in fact, pierced, and the payment by TRB to Philfinance should be construed as payment to Filriters. 17 We disagree with Petitioner.

Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this merely an equitable remedy, and may be awarded only in cases when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is a mere alter ego or business conduit of a person. 18 Peiercing the veil of corporate entity requires the court to see through the protective shroud which exempts its stockholders from liabilities that ordinarily, they could be subject to, or distinguished one corporation from a seemingly separate one, were it not for the existing corporate fiction. But to do this, the court must be sure that the corporate fiction was misused, to such an extent that injustice, fraud, or crime was committed upon another, disregarding, thus, his, her, or its rights. It is the protection of the interests of innocent third persons dealing with the corporate entity which the law aims to protect by this doctrine. The corporate separateness between Filriters and Philfinance remains, despite the petitioners insistence on the contrary. For one, other than the allegation that Filriters is 90% owned by Philfinance, and the identity of one shall be maintained as to the other, there is nothing else which could lead the court under circumstance to disregard their corporate personalities. Though it is true that when valid reasons exist, the legal fiction that a corporation is an entity with a juridical personality separate from its stockholders and from other corporations may be disregarded, 19 in the absence of such grounds, the general rule must upheld. The fact that Filfinance owns majority shares in Filriters is not by itself a ground to disregard the independent corporate status of Filriters. In Liddel & Co., Inc. vs. Collector of Internal Revenue, 20 the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities. In the case at bar, there is sufficient showing that the petitioner was not defrauded at all when it acquired the subject certificate of indebtedness from Philfinance. On its face the subject certificates states that it is registered in the name of Filriters. This should have put the petitioner on notice, and prompted it to inquire from Filriters as to Philfinance's title over the same or its authority to assign the certificate. As it is, there is no showing to the effect that petitioner had any dealings whatsoever with Filriters, nor did it make inquiries as to the ownership of the certificate. The terms of the CBCI No. D891 contain a provision on its TRANSFER. Thus: TRANSFER. This Certificate shall pass by delivery unless it is registered in the owner's name at any office of the Bank or any agency duly authorized by the Bank, and such registration is noted hereon. After such registration no transfer thereof shall be valid unless made at said office (where the Certificates has been registered) by the registered owner hereof, in person, or by his attorney, duly authorized in writing and similarly noted hereon and upon payment of a nominal transfer fee which may be required, a new Certificate shall be issued to the transferee of the registered owner thereof. The bank or any agency duly authorized by the Bank may deem and treat the bearer of this Certificate, or if this Certificate is registered as herein authorized, the person in whose name the same is registered as the absolute owner of this Certificate, for the purpose of receiving payment hereof, or on account hereof, and for all other purpose whether or not this Certificate shall be overdue. This is notice to petitioner to secure from Filriters a written authorization for the transfer or to require Philfinance to submit such an authorization from Filriters. Petitioner knew that Philfinance is not registered owner of the CBCI No. D891. The fact that a non-owner was disposing of the registered CBCI owned by another entity was a good reason for petitioner to verify of inquire as to the title Philfinance to dispose to the CBCI. Moreover, CBCI No. D891 is governed by CB Circular No. 769, series of 1990 21, known as the Rules and Regulations Governing Central Bank Certificates of Indebtedness, Section 3, Article V of which provides that:

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Sec. 3. Assignment of Registered Certificates. Assignment of registered certificates shall not be valid unless made at the office where the same have been issued and registered or at the Securities Servicing Department, Central Bank of the Philippines, and by the registered owner thereof, in person or by his representative, duly authorized in writing. For this purpose, the transferee may be designated as the representative of the registered owner. Petitioner, being a commercial bank, cannot feign ignorance of Central Bank Circular 769, and its requirements. An entity which deals with corporate agents within circumstances showing that the agents are acting in excess of corporate authority, may not hold the corporation liable. 22 This is only fair, as everyone must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. 23 The transfer made by Filriters to Philfinance did not conform to the said. Central Bank Circular, which for all intents, is considered part of the law. As found by the courts a quo, Alfredo O. Banaria, who had signed the deed of assignment from Filriters to Philfinance, purportedly for and in favor of Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to act for the latter. As it is, the sale from Filriters to Philfinance was fictitious, and therefore void and inexistent, as there was no consideration for the same. This is fatal to the petitioner's cause, for then, Philfinance had no title over the subject certificate to convey the Traders Royal Bank. Nemo potest nisi quod de jure potest no man can do anything except what he can do lawfully. Concededly, the subject CBCI was acquired by Filriters to form part of its legal and capital reserves, which are required by law 24 to be maintained at a mandated level. This was pointed out by Elias Garcia, Manager-inCharge of respondent Filriters, in his testimony given before the court on May 30, 1986. Q Do you know this Central Bank Certificate of Indebtedness, in short, CBCI No. D891 in the face value of P5000,000.00 subject of this case? A Yes, sir. Q Why do you know this? A Well, this was CBCI of the company sought to be examined by the Insurance Commission sometime in early 1981 and this CBCI No. 891 was among the CBCI's that were found to be missing. Q Let me take you back further before 1981. Did you have the knowledge of this CBCI No. 891 before 1981? A Yes, sir. This CBCI is an investment of Filriters required by the Insurance Commission as legal reserve of the company. Q Legal reserve for the purpose of what? A Well, you see, the Insurance companies are required to put up legal reserves under Section 213 of the Insurance Code equivalent to 40 percent of the premiums receipt and further, the Insurance Commission requires this reserve to be invested preferably in government securities or government binds. This is how this CBCI came to be purchased by the company. It cannot, therefore, be taken out of the said funds, without violating the requirements of the law. Thus, the anauthorized use or distribution of the same by a corporate officer of Filriters cannot bind the said corporation, not without the approval of its Board of Directors, and the maintenance of the required reserve fund. Consequently, the title of Filriters over the subject certificate of indebtedness must be upheld over the claimed interest of Traders Royal Bank. ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated January 29, 1990 is hereby AFFIRMED. SO ORDERED.

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